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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-K
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<S> <C>
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 1-5706.
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THE ACTAVA GROUP INC.
(EXACT NAME OF REGISTRANT, AS SPECIFIED IN ITS CHARTER)
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<S> <C>
DELAWARE 58-0971455
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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4900 GEORGIA-PACIFIC CENTER, ATLANTA, GEORGIA 30303
(ADDRESS AND ZIP CODE OF PRINCIPAL EXECUTIVE OFFICES)
(404) 658-9000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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<CAPTION>
NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
<S> <C>
COMMON STOCK, $1 PAR VALUE NEW YORK STOCK EXCHANGE
PACIFIC STOCK EXCHANGE
9 1/2% SUBORDINATED DEBENTURES, DUE AUGUST 1, 1998 NEW YORK STOCK EXCHANGE
9 7/8% SENIOR SUBORDINATED DEBENTURES, DUE MARCH 15,
1997 NEW YORK STOCK EXCHANGE
10% SUBORDINATED DEBENTURES, DUE OCTOBER 1, 1999 NEW YORK STOCK EXCHANGE
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
--- ---
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K. / /
THE AGGREGATE MARKET VALUE OF VOTING STOCK OF THE REGISTRANT HELD BY
NONAFFILIATES OF THE REGISTRANT AT MARCH 24, 1994 COMPUTED BY REFERENCE TO THE
LAST REPORTED SALE PRICE OF THE COMMON STOCK ON THE COMPOSITE TAPE ON SUCH DATE
WAS $127,855,099.
THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF MARCH 24, 1994 WAS
17,635,186 SHARES.
DOCUMENTS INCORPORATED BY REFERENCE:
NONE
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PART I
ITEM 1. BUSINESS.
The Actava Group Inc. ("Actava" or the "Company") provides high quality,
brand-name products through distribution channels to retail markets across the
United States. Actava operates in three distinct businesses: photofinishing,
lawn and garden equipment and sporting goods. A description of each segment
appears below.
Actava was organized in 1929 under Pennsylvania law and reincorporated in
1968 under Delaware law. On July 19, 1993, the Company changed its name from
Fuqua Industries, Inc. to The Actava Group Inc. Actava's principal executive
offices are located at 4900 Georgia-Pacific Center, Atlanta, Georgia 30303 and
its telephone number is (404) 658-9000.
PHOTOFINISHING
Actava owns 51% of the voting stock and 50% of the equity of Qualex Inc.
("Qualex"). Qualex, the largest wholesale photofinishing company in the United
States, was created in 1988 through a combination of Actava's photofinishing
subsidiary, Colorcraft Corporation, and the United States photofinishing
operations of Eastman Kodak Company ("Kodak"). Kodak owns all of the voting
stock and equity interest of Qualex not owned by Actava. Both Actava and Kodak
have granted to the other a right of first refusal for the purchase of their
respective interests in Qualex.
Qualex is engaged in the processing of photographic film for consumer use
throughout the United States. Qualex primarily processes color film to produce
prints and slides, but also processes black and white and movie film. Qualex is
a wholesale photofinisher, obtaining over 98% of its sales from independent
retailers in 1993. Qualex's business also includes a limited amount of direct
sales to consumers through owned and operated retail photographic stores and
mail order operations.
Qualex offers nonbranded photofinishing products which are sold to major
retailers, largely drug, mass merchant and grocery operators, who market these
products under their own retail brands. In addition, Qualex offers certain
branded photofinishing products, including premium-quality photofinishing
through its Kodalux(R) Processing Services ("KPS"). KPS is available to all
Qualex customers and is currently offered from ten Qualex processing plants.
Kodalux(R) is a Kodak-owned trademark licensed to Qualex under an agreement
which expires on April 15, 1997. In addition to color roll processing, KPS
includes chrome processing (slides and movies) and ancillary work such as
reprints, enlargements and other services.
Qualex provides pickup and delivery services for over 41,000 retail stores
in all 50 states. These pickup and delivery services are provided by either
Qualex-owned vehicles or through third party contract delivery services. Qualex
provides 24-hour (next day) processing services, often on a seven-day-a-week
basis, to all major metropolitan areas it serves. The film to be processed is
picked up throughout the day and then delivered to Qualex's plants for
processing. Consequently, Qualex plants perform the majority of their processing
work at night.
Plants are located as close to customers as possible to minimize the
delivery constraints inherent in next-day service. Qualex currently operates 50
plants located in 33 states. The combination of Colorcraft and Kodak initially
permitted Qualex to consolidate plants and other distribution systems which
serviced overlapping geographic areas. The consolidation of redundant services
has allowed and will continue to allow Qualex to enjoy the benefits of economies
of scale and cost savings.
In early 1987, Colorcraft Corporation entered into long-term arrangements
to purchase a significant portion of its photofinishing materials from Kodak.
Upon its formation, Qualex assumed these arrangements on substantially the same
terms and conditions. Additionally, all of Qualex's photofinishing plants which
offer nonbranded products participate in the Kodak Colorwatch(R) photofinishing
marketing program and, therefore, use exclusively Kodak consumable materials. As
a result of the long-term arrangements and the fact that substantially all of
Qualex's plants are on the Kodak Colorwatch(R) program, Qualex purchases
substantially all
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of its photofinishing material from Kodak. SEE "CONSOLIDATED STATEMENTS OF
OPERATIONS" IN CONSOLIDATED FINANCIAL STATEMENTS.
In addition to its traditional photofinishing services, Qualex also
provides microlabs and related maintenance and supplies to customers who desire
to offer on-site processing. Because of the continuing development of the
microlab, the ultimate level of acceptance by retail stores and consumers cannot
be determined. Management believes the new microlabs will allow both Qualex and
its retail customers to participate in the well established on-site processing
market. SEE ITEM 3. "LEGAL PROCEEDINGS."
Qualex has not incurred significant research and development costs. In
order to deliver high-quality pictures in a brief period of time at a
competitive price, Qualex utilizes high-speed printers, paper processors and
other sophisticated equipment which require significant ongoing capital
expenditures. Capital expenditures in 1993 were approximately $44 million.
Competition in the photofinishing industry is aggressive and is based upon
price, quality processing, dependable delivery time and convenience. There are
many processors in each market, including mini-labs and microlabs which offer
"one-hour" on-site developing. In 1993, Qualex's largest account constituted 11%
of its sales volume, its five largest accounts produced approximately 31% of its
sales volume and its 10 largest accounts produced approximately 43% of its sales
volume. Due to the next day processing nature of the business, there is no
material backlog.
Actava and Kodak are parties to a Shareholders' Agreement (as amended, the
"Qualex Shareholders' Agreement") which sets forth certain rights of and
limitations on Actava and Kodak with regard to their Qualex stock. The Qualex
Shareholders' Agreement provides that certain decisions regarding Qualex's
operations are to be approved by a majority of the members of the Qualex Board
of Directors, including at least one of Kodak's representatives on the Board.
The declaration of dividends by Qualex merely requires the approval of a
majority of the Qualex directors. Actava has control over the distribution of
dividends from Qualex because its appointees constitute a majority of the Qualex
directors.
Upon any change of control of Actava, as defined in the Qualex
Shareholders' Agreement ("Qualex Control Event"), the Qualex Shareholders'
Agreement provides for changes in the stock ownership and the composition and
voting requirements of the Qualex Board of Directors that would eliminate
Actava's ability, among other things, unilaterally to cause the declaration of
dividends by Qualex. Pursuant to the terms of an amendment to the Qualex
Shareholders' Agreement (the "Amendment"), the parties have stipulated that the
election of Mr. Charles R. Scott as president and chief executive officer of
Actava on February 6, 1991 constituted a Qualex Control Event. Under the terms
of the Amendment, Kodak initially waived its Qualex Control Event rights under
the Qualex Shareholders' Agreement with respect to such Qualex Control Event,
but Kodak reserved the right to withdraw its waiver and enforce such rights on
March 1, 1992 or any subsequent March 1, by providing Actava with at least 30
days' prior written notice. Kodak did not withdraw its waiver and seek to
enforce its rights as a result of such Qualex Control Event on March 1, 1992,
March 1, 1993 or March 1, 1994. Kodak also retained its rights to require the
changes permitted by the Qualex Shareholders' Agreement if any other Qualex
Control Event occurs. If Kodak in the future elects to enforce its Qualex
Control Event rights, Actava would lose the ability to control the declaration
of dividends by Qualex, and therefore, any distribution of profits by Qualex.
The results of Qualex are consolidated with the results of Actava. In 1993,
Qualex accounted for 62% of Actava's consolidated sales. SEE ITEM 7.
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS." If Actava in the future is deemed to be no longer in control of
Qualex, then Actava would cease to consolidate the accounts of Qualex. In that
event, Actava would account for its ownership of Qualex using the equity method
of accounting. SEE "PHOTOFINISHING TRANSACTION" IN NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS.
LAWN AND GARDEN EQUIPMENT
Actava's Snapper Division manufactures Snapper(R) brand power lawnmowers,
lawn tractors, garden tillers, snow throwers, and related parts and accessories
and distributes blowers, string trimmers and edgers.
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The lawnmowers include rear engine riding mowers, front engine riding mowers or
lawn tractors, and self-propelled and push-type walk-behind mowers. Snapper also
manufactures a line of commercial lawn and turf equipment, a Blackhawk(TM) line
of mowers and markets a fertilizer line under the Snapper(R) brand.
Snapper products are premium priced, generally selling at retail from $250
to $8,200. They are sold exclusively through 54 independent distributors and to
approximately 7,800 dealers throughout the United States. In addition, Snapper
products are exported to 27 independent distributors and four company-owned
distributors covering 41 foreign countries. Snapper does no private label
manufacturing of lawn and garden equipment and does not sell directly to
multi-unit retailers or mass merchandisers. While the ultimate consumers
generally purchase lawnmowers in the spring and early summer, Snapper sells to
its distributors nearly year-round utilizing accounts receivable dating
programs, with the greatest volume of production and shipment preceding ultimate
consumer purchasing periods. Accounts receivable dating programs establish the
due dates for distributor accounts receivable to coincide with the anticipated
sales to the ultimate consumer. Therefore, Snapper's cash flow needs are
seasonal, with the greatest need for funds being in the first quarter of the
year. SEE ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS."
Snapper makes available, through General Electric Credit Corporation, a
retail customer revolving credit plan which allows consumers to pay for Snapper
products in installments. Consumers also receive Snapper credit cards which can
be used to purchase additional Snapper products.
In addition, Snapper has an agreement with a financial institution which
makes available to dealers floor plan financing for Snapper products. This
agreement provides financing for dealer inventories and accelerates cash flow to
Snapper's distributors and to Snapper. Under the terms of the agreement, a
default in payment by one of the dealers on the program is non-recourse by the
financial institution to both the distributor and Snapper. However, the
distributor is obligated to repurchase any equipment recovered from the dealer
and Snapper is obligated to repurchase the recovered equipment if the
distributor defaults.
Snapper manufactures its products in McDonough, Georgia at facilities
totaling approximately 1,000,000 square feet. A substantial portion of the
component parts for Snapper products is manufactured by Snapper, excluding
engines and tires.
During the three years ended December 31, 1993, Snapper has expended an
average of $4.9 million per year for research and development. While it holds
several design and mechanical patents, Snapper is not dependent upon any one or
more patents, nor does it consider that patents play a material role in its
business. Snapper does believe, however, that its registered trademark
Snapper(R) is an important asset in its business. Snapper walk-behind mowers are
subject to Consumer Product Safety Commission safety standards and are designed
and manufactured in accordance therewith.
The lawn and garden business is highly competitive, with the competition
being based upon price, image, quality and service. While no one company
dominates the market, Actava believes Snapper is one of the significant
manufacturers of lawn and garden products. There are approximately 50
manufacturers in competition with Snapper. Snapper's principal brand name
competitors in the sale of power lawnmowers include The Toro Company, Lawn-Boy
(a product group of The Toro Company), Sears, Roebuck and Co., Deere & Company,
Ariens Company, Honda Corporation, Murray Ohio Manufacturing Co., American Yard
Products, Inc. (a subsidiary of AB Electrolux), MTD Products, Inc. and
Simplicity Manufacturing, Inc.
The Company announced in March 1993 that it had retained Merrill Lynch to
assist in exploring alternatives for realizing value from the Company's
investment in Snapper. These efforts have not been successful and management
believes they have resulted in a substantial distraction for Snapper's
management, distributors and dealers. As a result, the Company has suspended its
efforts to find alternatives for Snapper and has instructed Snapper's management
to devote their full time and attention to improving operating results.
At December 31, 1993, Snapper had approximately $122 million in backlog
orders believed to be firm as compared to approximately $114 million at December
31, 1992. In 1993, Snapper accounted for 18% of
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Actava's consolidated sales. SEE ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
SPORTING GOODS
The companies which comprise Actava Sports manufacture, import and
distribute products for a broad cross section of the sporting goods and leisure
time markets. Products are sold under a variety of Actava's own brand names,
including DP(R), Hutch(R), Reach(R), Weather-Rite(R) and American Camper(R).
Actava also sells exercise equipment under a license for the Body By Jake(R)
trademark and various other products under licenses from the National Football
League, National Basketball Association, National Hockey League, Major League
Baseball, The Walt Disney Company, Inc., Remington Arms Company, Inc. and
numerous colleges and universities. In addition, Actava has a nationally
distributed line of hosiery and is a licensee for the officially licensed socks
of the National Football League, Major League Baseball, Keds(R) and Pro-Keds(R)
(copyrights and registered trademarks which are held by third parties) and
various colleges and universities.
On June 8, 1993, Actava acquired substantially all of the assets of
Diversified Products Corporation ("DP"), a fitness and recreation equipment
company based in Opelika, Alabama, for a net purchase price consisting of
$11,629,500 in cash, the issuance of 1,090,909 shares of the Company's Common
Stock valued at $12,000,000 and the assumption or payment of certain liabilities
including trade payables and a revolving credit facility. Actava also entered
into an agreement which may provide the seller with the right to receive
additional payments, or additional shares of Actava Common Stock, depending upon
the value of the issued shares over a period of not longer than one year from
the purchase. SEE ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS." The transaction has been accounted for
using the purchase method of accounting; accordingly, the purchased assets and
liabilities have been recorded at their estimated fair value at the date of the
acquisition. The results of operations of the acquired business have been
included in the consolidated financial statements of Actava since the date of
acquisition.
Approximately 57% of the sales of Actava Sports consists of products
manufactured or purchased domestically by Actava. These include hosiery,
footballs, uniforms and related equipment. The remaining 43% of sales comes from
imported merchandise, including fitness and camping equipment, soccer balls,
volleyballs, basketballs, footballs, rainwear and other related sports items.
Imported products come from a large number of suppliers, located primarily in
the Far East. Analyzed by product lines, camping and outdoor equipment comprised
approximately 26% of the Actava Sports sales in 1993, exercise equipment
represented 36% and products for team and other recreational activities
comprised approximately 38%.
International buying is an important part of the Actava Sports operations.
Actava World Trade Corporation maintains offices in The People's Republic of
China, Taiwan, Hong Kong and South Korea to facilitate purchasing in the Pacific
Rim.
To the extent the business of Actava Sports is dependent upon imports,
factors affecting foreign trade (such as dock and carrier strikes, tariff rates,
import and export quotas, currency fluctuations and revaluations, local economic
conditions in foreign countries, foreign relations between the United States and
other countries and international political and economic situations) are
significant in determining the general availability and prices paid by Actava
Sports for purchases abroad. Actava Sports has not encountered a shortage of raw
materials or finished goods and is generally not dependent upon any sole
supplier, although in 1993 DP was adversely affected by delays experienced in
receiving electronic components for DP treadmills. SEE ITEM 7. "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
Sporting goods are sold by Actava Sports through manufacturers'
representatives and directly to mass merchandisers and other retailers. The
sporting goods market is highly competitive. Actava Sports does not spend a
significant amount of funds for research and development. The trademarks used by
Actava Sports in the aggregate are considered to be of material importance, but
no single patent or trademark is of material importance to consolidated
operations. The loss of certain significant patents or trademarks could have a
material effect on the affected individual Actava Sports company.
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Actava Sports had approximately $34 million in backlog orders believed to
be firm as of December 31, 1993 as compared to approximately $19 million at
December 31, 1992. This increase is primarily due to the acquisition of DP. In
1993, Actava Sports accounted for 19% of Actava's consolidated sales. SEE ITEM
7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS."
ENVIRONMENTAL PROTECTION
Actava's manufacturing and processing plants are subject to federal, state
and local pollution laws and regulations. Compliance with such laws and
regulations has not, and is not expected to, materially affect Actava's
competitive position. Actava's capital expenditures for environmental control
facilities and incremental operating costs in connection therewith were not
material in 1993, and are not expected to be material in future years for
compliance relating to facilities owned by Actava in 1993. The Company is
involved in various environmental matters including clean-up efforts at landfill
or refuse sites and groundwater contamination. The Company's participation in
three existing superfund sites has been quantified and its remaining exposure is
estimated to be less than $300,000 for all three sites. The Company is
participating with the Federal and Ohio Environmental Protection Agencies in
initial investigations of a potential environmental contamination site involving
a divested subsidiary. DP is also complying with various requirements under a
compliance order under the Resource Conservation Recovery Act as administered by
the State of Alabama. Upon the acquisition of DP, a reserve of approximately
$1.5 million was established for expected clean-up costs.
EMPLOYEES
At December 31, 1993, Actava, including Qualex, had approximately 11,200
employees, of whom approximately 1,400 were represented by unions under various
collective bargaining agreements. In general, Actava believes its employee
relations to be good.
INDUSTRY SEGMENT DATA
Industry Segment Data is included in ITEM 7. "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
ITEM 2. PROPERTIES.
The following is a list of Actava's principal properties. Certain of the
properties are subject to mortgages securing indebtedness, which, as of December
31, 1993, aggregated approximately $1.8 million, including mortgages on
machinery and equipment. SEE "NOTES PAYABLE AND LONG-TERM DEBT" IN NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
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NUMBER
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DESCRIPTION OWNED LEASED LOCATION
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<S> <C> <C> <C>
Lawn and Garden:
Manufacturing plant............................ 1 -- 1 state
Distribution facility.......................... -- 1 1 state
Photofinishing:
Processing plants.............................. 19 31 33 states
Retail photographic stores..................... -- 5 5 states
Sporting Goods:
Distribution facility.......................... -- 4 4 states
Manufacturing Plant............................ 1 -- 1 state
</TABLE>
The management of Actava believes that the above listed facilities are
generally adequate and satisfactory for their present usage. In addition, Actava
owns or leases miscellaneous real estate, offices and warehouse facilities,
machinery and equipment at various locations which are not currently utilized in
Actava's current operations and are, or may be, offered for sale or other
disposal.
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ITEM 3. LEGAL PROCEEDINGS.
Qualex
On February 18, 1994, Photographic Concepts Inc. (PCI), a Florida
corporation, sued Qualex in the United States District Court for the Middle
District of North Carolina, in a lawsuit captioned Photographic Concepts, Inc.
v. Qualex, Inc., Civil Action No. 1:94-CV-00081. PCI's claims arise out of
allegations that Qualex entered into and then breached an agreement with PCI
relating to the marketing of on-site microlab photofinishing services. During
1993, Qualex's microlab business resulted in $33.3 million in revenues and $7.3
million in gross profits, and Qualex expects such business to increase in the
future. PCI alleges, among other things, that Qualex breached an agreement to
purchase an interest in PCI, violated a confidentiality agreement with PCI, and
misappropriated trade property and other information from PCI. PCI is seeking
both monetary and injunctive relief. Qualex is currently gathering the
information and documents necessary to file its response to PCI's Complaint.
That response must be filed by April 25, 1994. Qualex intends to defend the case
vigorously, but the Company is unable to determine the probable impact of the
suit at this early stage in the proceeding.
Divested Subsidiary
On November 30, 1993, a lawsuit was filed by the Department of Justice
("DOJ") against American Seating Company ("American Seating"), a former
subsidiary of Actava, in the United States District Court for the Western
District of Michigan. The lawsuit is captioned United States v. American Seating
Co., Civil Action No. 1:93-CV-956. Pursuant to an asset purchase agreement
between Actava and Amseco Acquisition, Inc., dated July 15, 1987, Actava assumed
the obligation for certain liabilities incurred by American Seating arising out
of litigation or other dispute, involving events occurring on or before June 22,
1987.
The DOJ alleges that American Seating failed to disclose certain
information relating to its price discount practices that it contends was
required in an offer submitted by American Seating to the General Services
Administration for possible contracts for sales of systems furniture and related
services. The complaint seeks recovery of unspecified single and treble damages,
penalties, costs and prejudgment and post-judgment interest. The parties have
engaged in settlement discussions but have not agreed on a disposition of the
case. A trial, if necessary, has been scheduled for June 1995. Management
believes that American Seating has meritorious defenses to the allegations and
intends to vigorously defend the action. Since the suit is still in the early
stages, management is unable to determine the probable impact of the suit.
Because the DOJ has previously asserted damages of approximately $3.5 million,
the lawsuit could have a material effect on results of operations and financial
condition of the Company, if adversely determined, on a number of disputed
issues as to liability, damages and penalties.
Shareholder Litigation
In 1991, Virginia E. Abrams and Fuqua Industries, Inc. v. J. B. Fuqua, et
al., Civil Action No. 11974, was filed in the Delaware Chancery Court. The named
defendants are certain current and former members of Actava's Board of Directors
and Intermark, Inc., a predecessor of Triton Group Ltd., which currently owns
25.0% of the Company's Common Stock. The Company was named as a nominal
defendant. The action is brought derivatively in the right of and on behalf of
the Company and was purportedly brought as a class action on behalf of all
common stockholders of the Company other than the defendants. The complaint
alleges, among other things, a long-standing pattern and practice by the
defendants of misusing and abusing their power as directors and insiders of the
Company by manipulating the affairs of the Company to the detriment of the
Company's past and present stockholders. The complaint seeks (i) monetary
damages from the director defendants, including a joint and several judgment for
$15.7 million for alleged improper profits obtained by Mr. J. B. Fuqua in
connection with the sale of his shares in the Company to Intermark; (ii)
injunctive relief against the Company, Intermark and its current directors,
including a prohibition against
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approving or entering into any business combination with Intermark without
specified approval; and (iii) costs of suit and attorneys' fees.
In 1991, two additional complaints, Behrens and Harris v. Fuqua Industries,
Inc., et al., Civil Action No. 11988 and Freberg and Lewis v. Fuqua Industries,
Inc., et al., Civil Action No. 11989, were filed in the Delaware Chancery Court
by plaintiffs who allege that they are stockholders of the Company. Each of
these complaints purport to be brought on behalf of a class of stockholders of
the Company other than the named defendants. The named defendants are the
Company and certain of its current and former directors. The complaints allege,
among other things, that members of the Company's Board of Directors presently
contemplate either a sale, a merger or other business combination involving
Intermark and the Company or one or more of its subsidiaries or affiliates. The
complaints seek costs of suit and attorneys' fees and preliminary and permanent
injunctive relief and other equitable remedies, ordering the director defendants
to carry out their fiduciary duties to the plaintiffs and other members of the
class and to take all appropriate steps to enhance the Company's value as a
merger or acquisition candidate.
On motion by the defendants in all three class action suits, the Delaware
Chancery Court ordered the consolidation of the three suits in re Fuqua
Industries, Inc. Shareholder Litigation, Civil Action No. 11974 on May 1, 1991.
The action is in the discovery stage and no significant events occurred in
regard to these legal proceedings in 1993.
Other Litigation
Actava is the defendant in various other legal proceedings. Actava is not
aware, however, of any other action which, in the opinion of management, would
materially and adversely affect liquidity, results of operations or the
financial position of Actava. SEE ITEM 1. "ENVIRONMENTAL PROTECTION."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
Each of the executive officers of Actava as of the date hereof was elected
to serve until the next annual meeting of the Board of Directors of Actava or
until his successor is elected and qualified:
<TABLE>
<CAPTION>
POSITION
NAME AGE OFFICE HELD SINCE
- ----------------------------------- --- ------------------------------------- -------------
<S> <C> <C> <C>
Charles R. Scott 66 President and Chief Executive Officer February 1991
Frederick B. Beilstein, III 46 Senior Vice President -- Treasurer &
Chief Financial Officer May 1991
Walter M. Grant 49 Senior Vice President, General
Counsel and Secretary July 1993
</TABLE>
On February 6, 1991, Mr. Charles R. Scott was elected to the office of
president and chief executive officer. Mr. Scott had previously not held an
office with Actava although he had been a member of the Board of Directors since
January 16, 1989 and served as chairman from July 1, 1989 to February 6, 1991.
Prior to being elected as Actava's president and chief executive officer, Mr.
Scott served as chairman and chief executive officer of Intermark, Inc., which,
through its wholly owned subsidiary, Triton Group Ltd., owned approximately
25.0% of the outstanding shares of Actava's common stock. In 1992, Intermark
filed for protection under Chapter 11 of the Bankruptcy Act and was merged into
Triton Group Ltd. upon confirmation of its Plan of Reorganization on June 25,
1993. On March 3, 1994, Actava announced that an independent committee of its
Board of Directors had been appointed to select a successor to Mr. Scott.
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On May 30, 1991, Mr. Frederick B. Beilstein was elected to the office of
senior vice president-treasurer and chief financial officer. Prior to joining
Actava, Mr. Beilstein served as executive vice president and chief financial
officer of Edgcomb Metals Company from January 1990 through March 1991. Prior to
March 1991, Mr. Beilstein served as senior executive vice president and chief
financial officer of Days Inns Corp. and as president of Days Inns Management
Company, Inc.
Mr. Walter M. Grant was elected to the office of senior vice president and
general counsel in July 1993 and to the position of corporate secretary in March
1994. Mr. Grant served as senior vice president and general counsel for the
North American operations of Smith & Nephew plc, an international health care
company, from October 1991 through June 1993. Prior to October 1991, Mr. Grant
served as vice president, general counsel and secretary of Contel Corporation, a
telecommunications company.
8
<PAGE> 10
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
Actava's Common Stock is listed and traded on the New York and Pacific
Stock Exchanges. The following table summarizes the high and low market prices
according to the New York Stock Exchange Composite Tape and cash dividends
declared for 1993 and 1992:
<TABLE>
<CAPTION>
MARKET PRICE OF COMMON
STOCK
----------------------------
CASH
1993 1992 DIVIDENDS
------------ ------------ ------------
QUARTERS ENDED HIGH LOW HIGH LOW 1993 1992
--------------------------------------------- ---- --- ---- --- ---- ----
<S> <C> <C> <C> <C> <C> <C>
March 31..................................... 14 1/2 11 5/8 16 3/4 12 1/2 $.09 $.09
June 30...................................... 14 9 1/2 14 1/4 11 1/4 $.09 $.09
September 30................................. 9 5/8 7 1/4 12 3/8 9 7/8 $.09 $.09
December 31.................................. 8 1/4 6 5/8 13 3/4 9 3/8 $.09 $.09
</TABLE>
Actava's debt agreements, including subordinated debt, contain covenants
which, among other things, place restrictions upon the amount of dividends it
may pay. SEE ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS."
On March 3, 1994, the Company reported the suspension of the dividend on
its Common Stock. SEE ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS."
As of March 24, 1994, there were approximately 6,878 holders of record of
Common Stock. The last reported sale price of the Common Stock on the composite
tape on such date was $7 1/4 per share.
9
<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Net sales......................................... $1,241 $1,149 $ 925 $ 972 $ 926
Income (loss) from continuing operations.......... (43) 11 (51) (1) 7
Discontinued operations........................... -- -- -- -- (1)
Extraordinary item................................ -- -- -- 1 --
Cumulative effect of change in accounting
principle....................................... (4) 1 -- -- --
Net income (loss)................................. (47) 12 (51) -- 6
Total assets...................................... 1,275 1,218 1,090 1,016 1,148
Long-term debt.................................... 221 220 157 43 81
Subordinated debt................................. 191 194 195 200 220
------ ------ ------ ------ ------
Total long-term and subordinated debt............. $ 412 $ 414 $ 352 $ 243 $ 301
Per common share:
Primary earnings
Continuing operations........................ $(2.52) $ .64 $(3.08) $ (.06) $ .34
Discontinued operations...................... -- -- -- -- (.04)
Extraordinary item........................... -- -- -- .05 --
Cumulative effect of change in accounting
principle.................................. (.25) .06 -- -- --
------ ------ ------ ------ ------
Net income (loss)....................... $(2.77) $ .70 $(3.08) $ (.01) $ .30
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Fully diluted earnings
Continuing operations........................ $(2.52) $ .64 $(3.08) $ (.06) $ .34
Discontinued operations...................... -- -- -- -- (.04)
Extraordinary item........................... -- -- -- .05 --
Cumulative effect of change in accounting
principle.................................. (.25) .06 -- -- --
------ ------ ------ ------ ------
Net income (loss)....................... $(2.77) $ .70 $(3.08) $ (.01) $ .30
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Cash dividends declared........................... $ .36 $ .36 $ .36 $ .32 $ .26
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
10
<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Actava provides high-quality, brand name consumer products through
distribution channels to retail markets across the United States. The Company's
businesses encompass the broad leisure industry, including photofinishing,
fitness equipment and sporting goods, as well as lawn and garden equipment.
Actava owns 51% of the voting stock of Qualex, the largest photofinisher in
the United States, processing approximately 20% of all color print rolls of
film. Qualex also processes black and white and movie film. Qualex is a
wholesale photofinisher, obtaining substantially all of its sales from
independent retailers in 1993. Qualex's business also includes a limited amount
of direct sales to consumers through owned and operated retail photographic
stores and mail-order operations.
Actava's Snapper Division manufactures Snapper(R) brand power lawnmowers,
lawn tractors, garden tillers, snow throwers, and related products, parts and
accessories and distributes blowers, string trimmers and edgers. The lawnmowers
include rear engine riding mowers, front engine riding mowers or lawn tractors,
and walk-behind mowers. Snapper also manufactures a line of commercial lawn and
turf equipment and a Blackhawk(TM) line of mowers and markets a fertilizer line
under the Snapper(R) brand.
Actava Sports companies manufacture, import and distribute products for a
broad cross-section of the sporting goods, fitness and leisure markets. Products
are sold under a variety of Actava companies' own brand names, as well as under
licenses from the National Football League, National Basketball Association,
Major League Baseball, The Walt Disney Company, Inc., Remington Arms Company,
Inc., The Keds Corporation (Keds(R) and Pro-Keds(R)), Body by Jake Licensing
Corporation (Body by Jake(R)), and numerous colleges and universities.
Actava's long-range strategy is to maximize stockholder wealth by
concentrating its capital resources on its companies which offer the highest
potential returns. As a result, the Company continues to analyze its businesses
with a view toward enhancing their value through marketing alliances, licensing
arrangements and joint ventures, with particular emphasis on cost efficiencies
through plant consolidations or product-line expansions or improvements.
The following is a discussion of the operating results and financial
position of the Company on a consolidated basis and the operating results of
each of these business segments.
CONSOLIDATED CONTINUING OPERATIONS
The Company's consolidated sales for 1993 increased $92.4 million, or 8.0%
from 1992 principally because of the acquisition of DP. Gross profit as a
percentage of sales for 1993 of 22.9% is a decrease from 29.2% while gross
profit dollars decreased by $52.1 million to $283.7 million. This is primarily
due to gross profit declines suffered by Snapper and Qualex, but partially
offset by an increase in gross profits by Actava Sports companies. The Snapper
gross profit decline is primarily attributable to manufacturing problems
associated with new product introductions during 1993.
In 1992, sales increased $224.1 million, or 24.2%, from 1991, primarily as
a result of the resumption of production and shipment to distributors at
Snapper, the impact of the acquisitions at Qualex in the fourth quarter of 1991
and the first quarter of 1992 as well as increased market share with certain
Qualex customers and the expansion of business with existing customers for each
of the companies comprising Actava Sports.
The gross profit for 1992 of $335.8 million compared to the gross profit
for 1991 of $255.5 million, an increase of $80.3 million. This increase was
primarily attributable to the increased production and shipment levels at
Snapper for 1992 which resulted in significantly higher sales and absorption of
fixed manufacturing costs and the additional gross profit at Qualex attributable
to acquisition activities. During 1991, certain inventory quantities at Snapper
were reduced, resulting in a liquidation of LIFO inventory quantities which were
carried at lower costs prevailing in years prior to 1991 as compared with the
cost of 1991 purchases. The effect of this decreased the 1991 net loss by
approximately $1.5 million and decreased loss per share of common stock by $.09.
11
<PAGE> 13
Selling, general and administrative expenses, which include provisions for
doubtful accounts, decreased by $9.9 million, or 3.8%, to $253.7 million for
1993 in comparison to 1992. The reductions in selling, general and
administrative expenses are primarily attributable to cost reductions at Qualex
achieved through plant and administrative restructuring and consolidations.
Selling, general and administrative expenses, which include provisions for
doubtful accounts, increased by $1.7 million in 1992 in comparison to 1991. The
1992 increase is related to the additional costs at Qualex associated with the
increased volume of prints processed as well as higher promotional and
advertising expenses partially offset by reductions at Snapper due to the
curtailment of special promotional programs and the positive impact of other
administrative cost savings as a result of plant restructuring and a decrease in
unallocated corporate expenses principally because of the downsizing of the
corporate staff.
In 1993, Actava recorded an operating profit of $26.7 million, compared to
an operating profit from 1992 of $72.1 million. The 1993 operating profit
includes provisions of $3.2 million for plant relocations and consolidations and
an additional $4.0 million for a change in estimate of future warranty costs at
Snapper due to increased warranty claims. Also negatively impacting operating
profits for 1993 in comparison to 1992 was underutilization of plant capacity
and manufacturing inefficiencies at Snapper and DP, lower gross margins on
initial product introductions by Snapper, and an increase in corporate expenses
of approximately $4.0 million. The corporate expense increase is primarily
attributable to additional self-insurance reserves, as well as an increase in
insurance administrative expense, and the impact of reduced expense for 1992 due
to the reversal in 1992 of certain reserves previously established for
settlement of employee agreements and office relocations.
The 1992 operating profit of $72.1 million compares to an operating loss of
$35.7 million for 1991. The operating loss for 1991 included provisions for
plant relocations and consolidations totaling $19.0 million and provisions for
the settlement of employee agreements and related costs of $6.8 million.
Operating profit for 1991 was adversely affected by production costs at Snapper.
Interest expense for 1993 of $43.3 million is an increase of $9.8 million
from 1992. This increase is primarily attributable to higher average borrowings
at both Qualex and Snapper and the addition of interest associated with DP. The
increased borrowing resulted from the Qualex $200 million Senior Note private
placement completed in the second quarter of 1992 and the revolving credit
facilities established to provide working capital for Snapper and the Actava
Sports companies, including DP. These credit lines have substantially reduced
subsidiary reliance on Actava for working capital needs.
Interest expense for 1992 of $33.5 million is an increase of $9.9 million
from 1991. This increase is primarily attributable to higher average borrowings
at both Qualex and Snapper. The increased borrowing resulted from the financing
required for the acquisitions made by Qualex in the fourth quarter of 1991 and
January 1992, borrowings in excess of debt repayments from the Qualex Senior
Note private placement, and the revolving credit facilities established in 1992
to provide working capital for Snapper.
Other income (net of other deductions) decreased $9.0 million for 1993 when
compared to 1992. This is primarily due to a decrease in investment income from
lower levels of investment, increases in early payment interest credit expense
at Snapper, losses on asset sales at Qualex and an increase of $3.0 million in a
valuation allowance for a real estate investment due to an accelerated plan of
disposition.
Other income (net of other deductions) in 1992 increased $2.6 million in
comparison to 1991. This increase is the result of a decrease in early payment
interest credit expenses at Snapper, partially offset by reduced investment
income due to lower average investment levels and rates of return.
During the year, the Company provides for income taxes using anticipated
effective annual tax rates for Qualex and for all other company operations. The
rates are based on expected operating results for the year and estimated
permanent differences between book and taxable income. Due to the recognition of
net operating loss benefits to the extent possible through a reduction in
deferred income tax liabilities in a prior year, Actava, excluding Qualex,
recognizes the benefit of current net operating losses only to the extent of
potential refunds from carrybacks. SEE "INCOME TAXES" IN NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS.
The Company has net deferred taxes of approximately $24.3 million composed
of deferred tax liabilities of approximately $78.1 million offset by deferred
tax assets of approximately $53.8 million. Deferred income
12
<PAGE> 14
taxes reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. Included in the approximate $53.8 million
of deferred tax assets is approximately $16.2 million as recognized by Qualex,
which is not included in the Actava consolidated federal income tax return. The
remaining approximate $37.6 million of deferred assets have been recognized by
Actava due to available income tax carrybacks and the company's determination
that available net operating losses should not be allowed to expire, as the tax
savings represent significant amounts. The Company plans to implement actions to
create sufficient taxable income to utilize the carryover prior to any
expiration. In order to implement its tax planning strategy to utilize its tax
carryforwards, the Company would pursue the sale of certain corporate assets,
including its investment in Qualex. SEE "INCOME TAXES" IN NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS.
The minority interest shown on Actava's Consolidated Statements of
Operations represents Kodak's portion of the earnings of Qualex. In accordance
with the Shareholders' Agreement, the Company and Kodak are each entitled to 50%
of Qualex's net income for income reporting purposes. Although Qualex accounted
for 62% of Actava's 1993 revenues and had pre-tax profits of $33.7 million in
1993, only approximately 25% of its pre-tax profits ($8.5 million in 1993) is
reported in Actava's consolidated net income due to Qualex's income tax
provision at an effective rate of 49% and the 50% minority interest effect. SEE
"PHOTOFINISHING TRANSACTION" IN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
Effective January 1, 1992, Qualex changed its method of accounting for the
cost of its proof advertising program to recognize advertising expense as it is
incurred rather than at the time of the initial sale to the customer. SEE
"SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- ACCOUNTING CHANGES -- CHANGE IN
ACCOUNTING FOR CERTAIN ADVERTISING COSTS" IN NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". The Company adopted
the new method of accounting for income taxes as of January 1, 1993. Statement
No. 109 affects the manner and rates at which deferred income taxes are
reflected on the balance sheet and the amount of taxes reflected in the
statement of operations. The adoption of Statement No. 109 did not result in a
material effect on net income for 1993. SEE "SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES ACCOUNTING CHANGES -- CHANGE IN METHOD OF ACCOUNTING FOR INCOME TAXES"
IN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions". Statement No. 106 requires the cost of postretirement
benefits to be recognized in the financial statements over an employee's active
working career. The Company adopted the new method of accounting for these
benefits as of January 1, 1993. The adoption of Statement No. 106 resulted in a
charge to net income of $4.4 million and was reported as the cumulative effect
of change in accounting principle in the first quarter of 1993. SEE "SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES -- ACCOUNTING CHANGES -- CHANGE IN METHOD OF
ACCOUNTING FOR POSTRETIREMENT BENEFITS" IN NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS.
The Company and its subsidiaries provide benefits to former or inactive
employees after employment, but before retirement, such as severance benefits,
continuation of health care benefits and life insurance coverage. The costs of
these are currently accounted for on a pay-as-you-go (cash) basis. The Financial
Accounting Standards Board has issued Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits," which
requires employers to recognize the obligation to provide these benefits when
certain conditions are met. The Company is required to adopt the new method of
accounting for these benefits no later than January 1, 1994. The adoption of
Statement No. 112 will not have a significant effect on the Company's financial
position or results of operations.
The Company and its subsidiaries invest in various debt and equity
securities. The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," which requires certain debt securities to be
reported at amortized cost, certain debt and equity securities to be reported at
market with current recognition of unrealized gains and losses, and certain debt
and equity securities to be reported at market with unrealized gains and losses
as a separate component of shareholders' equity. The Company is required to
adopt the new method of accounting
13
<PAGE> 15
no later than January 1, 1994. The adoption of Statement No. 115 will not have a
significant impact on the Company's financial position or results of operations.
As a result of the items described above, Actava reported a net loss in
1993 of $47.6 million in comparison to net income in 1992 of $11.6 million and a
net loss in 1991 of $50.8 million, respectively.
OPERATING SEGMENTS
SEGMENT PERFORMANCE
THE ACTAVA GROUP INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
NET SALES
Photofinishing............................. $ 775.3 $ 770.8 $649.7 $623.9 $629.9
Lawn and Garden............................ 225.0 248.2 158.5 237.7 190.8
Sporting Goods............................. 240.8 129.7 116.4 110.7 105.0
-------- -------- ------ ------ ------
Total............................... $1,241.1 $1,148.7 $924.6 $972.3 $925.7
-------- -------- ------ ------ ------
-------- -------- ------ ------ ------
PRE-TAX EARNINGS (LOSS)(A)
Photofinishing............................. $ 51.3(c) $ 54.6 $ 28.0(c) $ 44.1(c) $ 43.7(c)
Lawn and Garden............................ (17.1)(d) 17.8 (50.6) (.3)(d) 2.3
Sporting Goods............................. 2.7 5.9 4.3 3.6 2.9
-------- -------- ------ ------ ------
Operating profit (loss) -- segments(b)... 36.9 78.3 (18.3) 47.4 48.9
Unallocated corporate expenses............... (10.2) (6.2) (10.6) (9.6) (12.3)
Settlement of employee agreements and related
costs...................................... -- -- (6.8) -- --
-------- -------- ------ ------ ------
Operating profit (loss)...................... 26.7 72.1 (35.7) 37.8 36.6
Interest expense............................. (43.3) (33.4) (23.5) (25.7) (27.8)
Other income (expense) -- net................ (2.9) 6.1 3.5 9.9 14.7
-------- -------- ------ ------ ------
Total pre-tax earnings (loss)....... $ (19.5) $ 44.8 $(55.7) $ 22.0 $ 23.5
-------- -------- ------ ------ ------
-------- -------- ------ ------ ------
</TABLE>
- ---------------
(a) Pre-Tax Earnings include the minority interest of Eastman Kodak Company in
Qualex Inc.
(b) Operating profit represents total sales less costs of products sold and
selling, general and administrative expenses including goodwill
amortization. There were no significant intersegment sales or transfers.
(c) Includes a provision of $4.1 million in 1993, $17.0 million in 1991, $15.7
million in 1990, and $2.9 million in 1989 before tax for the relocation or
consolidation of certain photofinishing plants.
(d) Includes warranty expense of $4.0 million before tax in 1993 due to a change
in accounting estimate and provisions in 1990 of $13.7 million before tax
for the consolidation of lawn and garden manufacturing facilities and $4.8
million before tax for the write-off of excess inventory created as a result
of the elimination of certain models from lawn and garden product lines.
Photofinishing: In 1988, the Company combined its photofinishing
operations, with the domestic photofinishing operations of Eastman Kodak Company
in a transaction accounted for as a purchase, forming a jointly owned company,
Qualex Inc. SEE "PHOTOFINISHING TRANSACTION" IN NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS.
In October, 1993, Qualex entered into an Agreement of General Partnership
with JVQ Capital One, Inc. for the purpose of acquiring, owning, holding,
leasing, and selling on-site microlab equipment. In the future, Qualex intends
to sell to this partnership qualifying leases of microlab equipment with the
result that Qualex will record income upon the sale of the lease rather than
over the life of the lease. Qualex will continue to service the equipment under
an agreement with the lessee of the equipment and will pay fees for management
and leasing services to the parent corporation of JVQ Capital One, Inc., a
general partner.
Actava, which owns 51% of the voting shares of Qualex, consolidates the
accounts of Qualex with its accounts. Kodak's interest in the earnings and
equity of Qualex are reflected as minority interest.
14
<PAGE> 16
Photofinishing sales increased $4.4 million or .6% in 1993 as compared to
1992 due primarily to the conversion of former microlab operating leases to
salestype financing leases as a result of the expiration of early cancellation
periods for certain of such leases. An overall increase in equivalent prints
processed from 1992 to 1993 partially offset continued per print price declines.
Photofinishing sales increased $121.1 million or 18.6% in 1992 as compared to
1991. Generally, Qualex experienced price declines of 4% to 5% during the 1992
year while sales increased. These price decreases occurred due to the effect of
price reductions offered by competitors and the associated demand for similar
prices from Qualex customers. The primary reasons for the sales increase were
the added print volume resulting from acquisitions finalized in the last quarter
of 1991 and in January 1992 (SEE "ACQUISITIONS" IN NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS), and an overall increase in rolls processed through
comparable 1991 plants, partially offset by continued price declines. Although
sales increased in 1993, per print price continued to decline, resulting in a
decrease in gross profit as a percent of sales from 31.3% for 1992 to 28.3% for
1993, with 1992 restated to include route distribution costs as a cost of sales
component. Gross profit dollars decreased $22.2 million in 1993 from 1992
levels. Gross profit as a percentage of sales was 31.3% for 1992 and 1991.
However, because of the increase in sales, gross profit dollars rose $38.4
million or 18.9% in 1992 in comparison to 1991. The 1991 increase, however, was
partially offset by increases in selling, general and administrative expenses.
As a result of the additional sales volume, selling expense increased $8.1
million or 16.4% and route pick-up and delivery costs increased by $9.0 million
or 14.7% for 1992 in comparison to 1991. In addition, advertising and
promotional expenses decreased $1.7 million or 5.5% as a result of an accounting
principle change which resulted in the deferral of $3.5 million of advertising
expenses to later periods. If the accounting principle for the recognition of
certain advertising expenses had not been changed, advertising and promotional
expenses would have increased by $1.8 million or 5.8% in 1992. Qualex also
incurred increased administrative expenses of $19.3 million or 24.8% for 1992 in
comparison to 1991. This increase was primarily due to acquired administrative
offices, amortization of intangibles associated with the 1991 and 1992
acquisitions and the increased volume of prints processed, even though the cost
per print has decreased. As a result, operating profit before charges for plant
relocations and consolidations increased $807,000 in 1993 and $9.6 million in
1992 when compared to respective prior periods. Charges for plant relocations
and consolidations of $4.1 million for 1993 and $17.0 million for 1991 were
provided, while no provision was made for 1992. This contributed to the increase
in operating profit of $26.6 million, or 95%, from 1991 to 1992, and to a
decrease in operating profit of $3.3 million, or 6%, from 1992 to 1993.
In 1993 and 1991 Qualex recorded charges of $4.1 million and $17.0 million
before tax benefits, respectively, primarily for the expenses associated with
the relocation and consolidation of certain photofinishing plants and, in 1992,
$725,000 for the consolidation of certain marketing and sales and operations
functions. During 1992 and 1993, $33.3 million was charged against these
reserves for the direct costs associated with plant and administrative
relocations and consolidations and the reserve balance available for future
charges was $6.8 million at December 31, 1993.
As a result of the above factors, Qualex recorded an operating profit of
$51.3 million for 1993, a decrease of $3.3 million or 6.0% from 1992. The
operating profit for 1992 of $54.6 million was an increase of $26.6 million from
1991.
Management anticipates lower pricing trends in the wholesale photofinishing
industry to continue in 1994. Qualex will attempt to offset the effects of lower
pricing with improved product mix, lower prices for paper and chemicals, the
sale of certain microlab leases and continuing consolidations of plant
facilities and administrative offices.
Lawn and Garden: Snapper's sales to distributors decreased by $23.2
million, or 9.4% for 1993 in comparison to 1992, despite a strong retail sales
year for lawn and garden equipment, as Snapper continued to control production
to estimated retail sales by reducing production and shipments to distributors
in order to decrease retail inventories. Sales for 1993 and 1992 were $225.0
million and $248.2 million, respectively. Gross profit as a percentage of sales
decreased to 13.9% for 1993 as compared to 27.5% in 1992. Gross profit in
dollars decreased by $37.0 million from $68.2 million to $31.2 million for these
same respective periods. These decreases resulted from continuing manufacturing
problems such as unfavorable manufacturing variances and cost over-runs for
newly introduced products as well as an increase in product related expenses
such as
15
<PAGE> 17
warranty. The start-up costs, overall product mix and delays associated with
these new products negatively impacted Snapper's cost of sales. In addition,
because Snapper's new Blackhawk(TM) line of mowers, which represented sales of
approximately $10.9 million in 1993, is a lower price-point and margin product
than the Snapper(TM) brand line, per unit gross margin has been lower when
compared to last year's margins. Management does not expect sales of
Blackhawk(TM) line to be as significant in 1994 as in 1993. A $4.0 million
warranty expense was charged to operations in the fourth quarter of 1993 due to
recent unanticipated increases in warranty claims. Also, gross profit was lower
because of inventory shortages and shut-down costs for a company owned foreign
distributor. Snapper's sales to distributors and gross profit increased $89.7
million and $40.2 million or 56.5% and 143.7%, respectively, for 1992 in
comparison to 1991. 1991 sales to distributors were purposely reduced as a
result of the decision to decrease retail inventories by producing and shipping
less product than that sold at retail. Production and shipment to distributors
was increased for the 1992 model year. In addition, in 1992 Snapper redesigned
and reengineered its product offerings, with particular emphasis on recycling
and mulching capability.
Because sales were down for 1993, selling, general and administrative
expenses, including sales volume related expenses such as co-operative
advertising, decreased by 2.5% in comparison to 1992. Income of $849,000 was
provided by reducing a reserve for plant relocation and consolidation in
recognition of finalizing a plant closing. During 1993, Snapper's management
extended the due dates of certain receivables for terms beyond one year and as a
result recorded unearned discounts in the amount of approximately $1.8 million
as a charge to other expense. The decreased gross profit, partially offset by
reduced selling, general and administrative expenses, resulted in an operating
loss of $17.1 million at Snapper in 1993 as compared to an operating profit of
$17.8 million for 1992. Operating profit decreased $34.9 million in 1993,
compared to 1992, because selling, general and administrative expenses remained
relatively constant whereas gross profit decreased by $37.0 million. In 1991,
Snapper initiated an aggressive retail marketing campaign in order to further
accelerate the reduction of inventory. Snapper reduced its expenditures for
marketing promotions and advertising campaigns in 1992 in comparison to 1991,
concentrating its 1992 programs on the new product offerings with particular
emphasis on mulching capabilities as well as quality and service. As a result,
selling, general and administrative expenses decreased $28.1 million or 35.8% in
1992, in comparison to 1991. In addition, certain cost reductions were achieved
as a result of the 1991 closing of two of the three Snapper manufacturing
facilities. Management believes these savings were approximately $10.0 million.
As a result of the factors discussed above, Snapper recorded an operating profit
of $17.8 million in 1992 in comparison to an operating loss of $50.6 million for
1991.
The Company announced in March, 1993, that it had retained Merrill Lynch to
assist in exploring alternatives for realizing value from the Company's
investment in Snapper. These efforts have not been successful and management
believes they have resulted in a substantial distraction for Snapper's
management, distributors and dealers. As a result, the Company has suspended its
efforts to find alternatives for Snapper and has instructed Snapper's management
to devote their full time and attention to improving operating results.
On August 9, 1993, the Company announced that a new Chief Executive Officer
had been employed for Snapper.
Sporting Goods: Sales for Actava Sports increased by $111.2 million, or
85.7% for 1993 when compared to 1992. This increase is primarily due to the
acquisition of DP in June, 1993. In addition to the increase resulting from the
acquisition, sales increased for other Actava Sports companies during 1993.
Gross profit as a percent of sales decreased from 20.1% to 13.8% for 1993 but
gross profit in dollars increased by $7.2 million, or 27.4%, from $26.0 million
to $33.2 million, when compared to 1992. Selling, general and administrative
expenses increased by $10.3 million for 1993 as compared to 1992, from $20.1
million to $30.4 million. This was due to $8.6 million of DP selling, general
and administrative expense incurred from the acquisition date to year-end 1993.
Operating profit decreased from $5.9 million in 1992 to $2.7 million in 1993.
The decrease in operating profit is primarily attributable to DP, which recorded
a loss for the six months ended December 31, 1993 due to the cautious retail
environment and production problems caused by late delivery of electronic
components for treadmill equipment. Actava announced on October 26, 1993, that a
new President and Chief Executive Officer had been appointed for DP.
16
<PAGE> 18
Sales for Actava Sports increased $13.2 million or 11.4% in 1992 as
compared to 1991. Each of the three subsidiaries that comprised this segment in
1992 had increased net sales in 1992 to their major multi-unit retail customers.
The Actava Sports operating profit of $5.9 million for 1992 was an increase of
33.3% from 1991. Operating profit as a percent of net sales was 4.5% and 3.7%,
respectively, for 1992 and 1991. In addition, operating profit for 1991 included
the impact of provisions for plant consolidations of $500,000 before tax
benefits for the costs of consolidating the manufacturing and warehouse
facilities of one of the companies in Actava Sports.
FINANCIAL POSITION
Actava's working capital was $103.4 million at December 31, 1993 as
compared to $176.1 million at December 31, 1992. The decrease reflects the loss
incurred by the Company for 1993, repayment by Qualex of long-term debt using
cash realized through collections and sales of accounts receivable, the payment
of certain sinking fund requirements, the use of approximately $11.6 million of
cash in the DP acquisition and $23.0 million of additional cash provided to DP.
Increases in accounts receivable and increases in inventory are principally
financed by borrowings from working capital lines of credit.
Cash and short-term investments at Actava, excluding Qualex, decreased by
$31.6 million in 1993, to $44.3 million. The primary reasons for this decrease
were the cash requirements for the DP acquisition, plus a $15.0 million equity
contribution and an $8.0 million working capital advance made by Actava to DP
following the acquisition. Increased inventory also contributed to the decrease
in cash. At December 31, 1993, approximately $5.0 million of Actava's cash and
short-term investments were pledged to secure a Snapper credit line and
approximately $20.7 million of cash and short-term investments were pledged to
support outstanding letters of credit. Due to the seasonal nature of its
businesses, the Company has the greatest need for funds in the first and last
quarters of the year.
For 1993, consolidated cash flows of $12.9 million were used by operations,
investing activities used $25.0 million of cash, and financing activities
provided $35.9 million of cash. Cash flow used by operations included
depreciation of $44.7 million and amortization of $25.8 million. Investing
activities used $25.0 million of cash, including payments for property, plant
and equipment (net of disposals) of $39.5 million, payments for purchases of
businesses of $9.4 million, representing the acquisition of DP, and net sales of
investments of $34.2 million. Financing activities provided $35.9 million during
the year with borrowings under short-term bank agreements of $52.3 million, net
payments of $311,000 under longterm debt agreements, payments of subordinated
debt of $1.8 million, and payments of dividends by Qualex and the Company of
$8.6 million and $6.3 million, respectively.
Actava's senior long-term debt increased slightly from $220.4 million at
December 31, 1992 to $220.9 million at December 31, 1993. This increase is
primarily attributable to borrowings by Qualex, partially offset by the
termination of capitalized lease obligations for Snapper.
Actava's long-term subordinated debt position of $190.6 million at December
31, 1993 is a decrease of $3.0 million from year-end 1992. Subordinated debt is
46.5% of Actava's total long-term debt, including the current portion, with the
first significant maturity due in 1996.
The Company has a currency swap agreement with a financial institution in
order to eliminate exposure to foreign currency exchange rates for its 6% Senior
Subordinated Swiss Franc Bonds. A default by the financial institution that is a
party to the swap agreement would expose the Company to potential currency
exchange risk on the remaining bond interest and principal payments. SEE
"SUBORDINATED DEBENTURES" IN NOTES TO FINANCIAL STATEMENTS.
On June 8, 1993, the Company acquired substantially all the assets of DP
for a net purchase price consisting of $11.6 million in cash, the issuance of
1,090,909 shares of the Company's Common Stock valued at $12 million, and the
assumption or payment of certain liabilities including trade payables and a
revolving credit facility. SEE "ACQUISITIONS" IN NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS. The Company also entered into an agreement which may provide the
seller with the right to receive additional payments of cash, or additional
shares of Company Common Stock, depending upon the value of the issued shares
over a period of
17
<PAGE> 19
not longer than one year from the purchase date. The agreement gives the seller
the right under certain circumstances, to require the Company to purchase the
1,090,909 shares issued to the seller in connection with the acquisition (the
"Acquisition Shares") at a price equal to $11.00 per share. The payment of
additional cash or the issuance of additional shares will not increase the cost
recorded by Actava for DP, but will affect the manner in which the total
purchase price is recorded by Actava. The right of the seller to receive
additional payments of cash or additional shares of Company Common Stock becomes
exercisable after June 8, 1994. In the event that a registration statement under
the Securities Act of 1933, as amended, is in effect with respect to the
Acquisition Shares, the Company may require the seller to sell the Acquisition
Shares to purchasers other than the Company and pay to the seller the difference
between the price received and $11.00 per share. The Company has filed a
Registration Statement under the Securities Act of 1933, as amended, with
respect to the Acquisition Shares. If the Registration Statement is not declared
effective on or before June 8, 1994, the Company will be required to repurchase
the Acquisition Shares for $12.0 million in cash. Any such repurchase would
violate covenants in the Company's credit and subordinated debt agreements.
Actava's debt agreements contain covenants which, among other things, place
restrictions upon the amount of stock the Company may repurchase and dividends
it may pay. Under the terms of Actava's 6% Senior Subordinated Swiss Franc Bonds
due 1996, Actava may not make any cash redemptions (in excess of the aggregate
net cash proceeds from the sale of Common Stock) of its Common Stock or declare
any cash dividends after September 30, 1985 in excess of $25 million plus (or
minus) the net income (or loss) of Actava subsequent to September 30, 1985. As
of December 31, 1993 Actava had approximately $3.4 million available for
dividends or redemptions pursuant to this covenant. The Qualex credit agreement
and the Shareholders' Agreement with Eastman Kodak Company also restrict the
amount of net assets of Qualex which may be transferred to the Company or Kodak
by dividend or other means. In addition, the DP credit agreement requires that
Actava maintain, at all times, an unrestricted cash and short-term investment
position of $20 million after September 30, 1994. Non-compliance with this
requirement subjects this agreement to termination by the lender upon
seventy-five days notice to Actava.
In November 1991, the Company entered into a Loan Agreement with its 25.0%
stockholder, Triton Group Ltd. ("Triton"), whereby Triton could borrow up to
$32.0 million from the Company secured by the stock in the Company owned by
Triton (the "Triton Loan"). SEE "TRITON GROUP LTD." IN NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS. The Triton Loan Agreement was modified in June 1993,
pursuant to the Plan of Reorganization filed by Triton in its Chapter 11
bankruptcy proceeding. The modification reduced the interest rate on the Triton
Loan, extended the maturity date from November 1994 to April 1997 and modified
the mandatory payment (margin call) provisions and the Stockholder Agreement
between Actava and Triton, as described in the Notes to the Consolidated
Financial Statements. As modified, the Triton Loan provided for quarterly
payments of interest only with no scheduled principal payments due until final
maturity in April 1997. In December 1993, Triton and Actava entered into a
further amendment to the Loan Agreement pursuant to which Triton made a
principal payment of $5.0 million plus accrued interest on the Triton Loan,
reducing the loan balance to approximately $26.7 million. In addition, the
December 1993 amendment provided for quarterly principal payments of $1.25
million commencing March 31, 1994 and modified the mandatory payment (margin
call) provisions of the loan, as described in the Notes to Consolidated
Financial Statements. Triton has announced that it is seeking to make
arrangements to prepay the remaining balance of approximately $26.7 million due
under the Triton Loan and has obtained a bank commitment, subject to certain
conditions, that would enable Triton to prepay its obligations in full. Triton
has also announced, however, that it may seek to impose additional requirements
on Actava as a condition to Triton's repayment of the loan.
On December 31, 1993, the Company, excluding its subsidiaries and Snapper,
had $9.3 million of unrestricted cash and short-term investments. The Company's
subsidiaries, excluding Qualex, had unused borrowing capacity of approximately
$36.5 million at December 31, 1993 under credit agreements secured by assets
such as accounts receivable and inventory. Such subsidiaries, however, are
restricted by financial covenants in their credit agreements from paying the
Company more than 70% of their net income as dividends. Qualex is subject to
similar restrictions under its credit agreements. In addition, Qualex is subject
18
<PAGE> 20
to the Change of Control provisions in the Shareholders Agreement between the
Company and Kodak. These Change of Control provisions could have the effect of
eliminating the Company's ability to control the payment of dividends by Qualex.
During 1994, the Company will be entitled, under these covenants, to receive
approximately $8.8 million in cash dividends from its subsidiaries, including
Qualex and Snapper, based on their earnings in 1993 plus an additional dividend
of approximately $4.7 million from Qualex pursuant to a waiver of the dividend
restrictions by the lender to Qualex. These subsidiary dividends are usually
paid in the first three months of the year. The Company uses its existing cash
and short-term investments, as well as dividends from its subsidiaries and
payments on the Triton Loan, to provide for items such as operating expense
payments, debt service, and dividend payments to shareholders. On March 3, 1994,
the Company announced it was suspending dividend payments to shareholders, which
will result in approximately $6.3 million of cash savings in 1994. The Company,
excluding its subsidiaries and Snapper, has debt service payments scheduled in
1994 of approximately $21.3 million, and the Company anticipates that its total
cash needs in 1994 will exceed the anticipated amount of additional cash to be
received by the Company, including dividends from its subsidiaries. As a result,
if the Company does not receive additional cash through either a refinancing,
the repayment of the Triton Loan or the realization of value from the sale or
partial sale of one of its operating entities, the Company will end 1994 with
less unrestricted cash and short-term investments than it held at the end of
1993.
The amended credit agreements (SEE "NOTES PAYABLE AND LONG-TERM DEBT" IN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS), with Snapper and one of the
Company's sporting goods subsidiaries contain financial covenants (involving
tangible net worth, book net worth and other matters) which the Company must
comply with to prevent a default. A default under these credit agreements would
have serious adverse consequences, including the elimination of funding for the
operations of Snapper and the sporting goods company, as well as the prohibition
on payment of any dividends to the Company by these businesses. As a result of
the net loss for 1993, it was necessary for the Company to obtain financial
covenant amendments from the lenders in order for the Company to be in
compliance with these covenants at December 31, 1993. Management expects the
Company to remain in compliance with these covenants, as amended, for the first
and second quarters of 1994 and thereafter if certain events take place,
including increased earnings. Management expects that the Company would continue
to be in compliance after the second quarter of 1994 without regard to increased
earnings if the $26.7 million Triton Loan is repaid because the Triton Loan is
excluded for purposes of determining compliance with certain covenants in the
credit agreements. If existing cash, dividends from subsidiaries and payments on
the Triton Loan are not sufficient to meet its cash requirements, the Company
will seek to generate additional cash by selling or pledging certain assets, and
will consider additional options to reduce its cash expenditures.
OTHER ITEMS
On March 28, 1991, the Qualex Shareholders Agreement between Actava and
Eastman Kodak Company was amended. The amendment stipulates that a change of
control of Actava, as defined in the Shareholders' Agreement ("Change of
Control"), occurred on February 6, 1991. However, in the amendment, Kodak waived
its Change of Control rights under the Shareholders' Agreement with respect to
the February 6, 1991 Change of Control. Kodak may withdraw its waiver and
enforce its rights under the agreement as of each March 1, by providing Actava
with 30 days written notice. Kodak did not give the notice required to exercise
its Change of Control rights on March 1, 1994. The amendment also provides that
the Board of Directors of Qualex would be increased to nine members, comprised
of five representatives of Actava, three representatives of Kodak and the chief
executive officer of Qualex.
Since the formation of Qualex in March, 1988, Actava has consolidated the
accounts of Qualex as Actava has a controlling interest in the entity. Actava's
controlling interest includes ownership of 51% of the voting securities of
Qualex and majority representation on Qualex's Board of Directors. SEE
"PHOTOFINISHING TRANSACTION" IN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
While the March, 1991 amendment does not change Actava's controlling interest in
Qualex, if Kodak were to withdraw its waiver, or if an additional Change of
Control of Actava were to occur, the Shareholders' Agreement, as amended,
provides for the redemption of certain of Qualex's preferred stock, including
the voting preferred stock owned by Actava. Upon
19
<PAGE> 21
redemption, Actava would own 50% of the voting securities of Qualex. While
Actava's voting stock would be reduced from 51% to 50%, this change would not
alter Actava's and Kodak's current equal interest in the equity, earnings and
cash dividends of Qualex. In addition, the Board of Directors of Qualex would be
composed of 11 members, comprised of five representatives of Actava, five
representatives of Kodak and the chief executive officer of Qualex and all
actions of the board would require the affirmative vote of at least seven board
members. In the event these changes were to occur, Actava may possibly be deemed
to no longer control Qualex and Actava would no longer be in a position to
unilaterally control, among other things, the declaration of dividends to Actava
and Kodak by Qualex as the declaration would require the concurrence of Kodak.
If Actava were deemed in the future to no longer be in control of Qualex,
Actava would cease to consolidate the accounts of Qualex. In that event, Actava
would account for its ownership of Qualex using the equity method of accounting.
Such a development would not affect the net income and shareholders' equity of
Actava. However, Actava's consolidated total assets, liabilities, sales and
costs and expenses would be reduced as they would no longer include specific
accounts of Qualex. If Actava had accounted for Qualex using the equity method
during all of 1993, Actava's total assets and liabilities at December 31, 1993
would have been $696.4 million and $500.5 million, respectively, and sales and
total costs and expenses would have been $465.8 million and $519.0 million,
respectively.
Actava's manufacturing and processing plants are subject to federal, state
and local pollution laws and regulations. Compliance with such laws and
regulations has not, and is not expected to, materially affect Actava's
competitive position. Actava's capital expenditures for environmental control
facilities and incremental operating costs in connection therewith were not
material in 1993, and are not expected to be material in future years for
compliance in regard to its 1993 facilities. The Company is involved in various
environmental matters including clean-up efforts at landfill or refuse sites and
groundwater contamination. The Company's participation in three existing
superfund sites has been quantified and its remaining exposure is estimated to
be less than $300,000 for all three sites. The Company is participating with the
Federal and Ohio Environmental Protection Agencies in initial investigations of
a potential environmental contamination site involving a divested subsidiary. DP
is also complying with various requirements under a compliance order under the
Resource Conservation Recovery Act as administered by the State of Alabama. Upon
the acquisition of DP, a reserve of approximately $1.5 million was established
for expected clean-up costs.
20
<PAGE> 22
OTHER SEGMENT DATA
THE ACTAVA GROUP INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
(IN MILLIONS)
ASSETS
Photofinishing............................................... $ 778.2 $ 787.8 $ 702.2
Lawn and Garden.............................................. 230.7 236.8 186.3
Sporting Goods............................................... 165.7 47.2 45.3
-------- -------- --------
Segments.................................................. 1,174.6 1,071.8 933.8
Corporate(a).............................................. 100.5 146.1 155.8
-------- -------- --------
Total................................................ $1,275.1 $1,217.9 $1,089.6
-------- -------- --------
-------- -------- --------
DEPRECIATION AND AMORTIZATION
Photofinishing............................................... $ 58.3 $ 50.3 $ 35.7
Lawn and Garden.............................................. 8.9 8.1 7.6
Sporting Goods............................................... 3.1 .4 .4
-------- -------- --------
Segments.................................................. 70.3 58.8 43.7
Corporate................................................. .1 .2 .3
-------- -------- --------
Total................................................ $ 70.4 $ 59.0 $ 44.0
-------- -------- --------
-------- -------- --------
CAPITAL EXPENDITURES
Photofinishing............................................... $ 43.9 $ 68.5 $ 45.5
Lawn and Garden.............................................. 6.4 13.0 13.7
Sporting Goods............................................... .3 .2 .2
-------- -------- --------
Segments.................................................. 50.6 81.7 59.4
Corporate................................................. -- .1 .1
-------- -------- --------
Total................................................ $ 50.6 $ 81.8 $ 59.5
-------- -------- --------
-------- -------- --------
</TABLE>
- ---------------
(a) Corporate assets consist primarily of short-term investments, land, notes
receivable and certain property and equipment.
ACCOUNTING PRINCIPLE DEVELOPMENTS
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Actava adopted the
new method of accounting for income taxes on January 1, 1993. Statement No. 109
affects the manner and rates at which deferred income taxes are reflected on the
balance sheet and therefore, possibly the amount of taxes reflected in the
statement of operations. The adoption of Statement No. 109 did not result in a
significant impact to net income when reported as the cumulative effect of a
change in accounting principle in the first quarter of 1993. SEE "SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES -- INCOME TAXES" IN NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions." Statement No. 106 requires the cost of postretirement
benefits to be recognized in the financial statements over an employee's active
working career. Actava adopted the new method of accounting for these benefits
on January 1, 1993. The adoption of Statement No. 106 resulted in a $4.4 million
charge to net income and was reported as the cumulative effect of a change in
accounting principle in the first quarter of 1993. SEE "SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES -- POSTRETIREMENT BENEFITS OTHER THAN PENSIONS" IN NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
The Company and its subsidiaries provide benefits to former or inactive
employees after employment, but before retirement, such as severance benefits,
continuation of health care benefits and life insurance coverage.
21
<PAGE> 23
The costs of these are currently accounted for on a pay-as-you-go (cash) basis.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits," which requires employers to recognize the obligation to provide these
benefits when certain conditions are met. The Company is required to adopt the
new method of accounting for these benefits no later than January 1, 1994. The
adoption of Statement No. 112 will not have a significant effect on the
Company's financial position or results of operations.
The Company and its subsidiaries invest in various debt and equity
securities. The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," which requires certain debt securities to be
reported at amortized cost, certain debt and equity securities to be reported at
market with current recognition of unrealized gains and losses, and certain debt
and equity securities to be reported at market with unrealized gains and losses
as a separate component of shareholders' equity. The Company is required to
adopt the new method of accounting no later than January 1, 1994. The adoption
of Statement No. 115 will not have a significant impact on the Company's
financial position or results of operations.
22
<PAGE> 24
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required under this item is submitted as a separate section
in this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
23
<PAGE> 25
PART III
Incorporated by reference to the Proxy Statement for the 1994 annual
meeting of stockholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements
INDEX OF FINANCIAL STATEMENTS
The following consolidated financial statements of The Actava Group Inc.
and subsidiaries are included in Item 8:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors................................................ F-3
Consolidated Balance Sheets as of December 31, 1993 and 1992.................. F-4
Consolidated Statements of Operations for the years ended December 31, 1993,
1992 and 1991............................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1993,
1992 and 1991............................................................... F-6
Consolidated Statements of Stockholders' Equity for the years ended December
31, 1993, 1992 and 1991..................................................... F-7
Notes to Consolidated Financial Statements -- December 31, 1993............... F-8
Summary of Quarterly Earnings and Dividends................................... F-30
</TABLE>
(a)(2) Schedules
INDEX OF FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statement schedules of The Actava
Group Inc. and subsidiaries are included in Item 14(d):
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
Schedule II -- Amounts Receivable From Related Parties and Underwriters,
Promoters, and Employees Other Than Related Parties........... S-2
Schedule III -- Condensed Financial Information of The Actava Group Inc....... S-3
Schedule V -- Property, Plant and Equipment................................. S-7
Schedule VI -- Accumulated Depreciation, Depletion and Amortization of
Property, Plant and Equipment................................. S-8
Schedule VIII -- Valuation and Qualifying Accounts............................. S-9
Schedule IX -- Short-term Borrowings......................................... S-12
Schedule X -- Supplementary Income Statement Information.................... S-13
</TABLE>
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have been
omitted.
24
<PAGE> 26
(a)(3) Listing of Exhibits.
<TABLE>
<CAPTION>
EXHIBITS INCORPORATED HEREIN BY REFERENCE
---------------------------------------------------
DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH
OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT
THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT
- --------------- ----------------------------- ----------------------------- --------------------
<S> <C> <C> <C>
3(a)(i) Restated Certificate of
Incorporation of Actava
3(b)(i) Restated By-laws of Actava
4(a) Reference is made to Exhibit
3(a)(i)
4(b)(i) Indenture dated as of August Application on Form T-3 for Exhibit T3C
1, 1973, with respect to Qualification of Indenture
9 1/2% Subordinated under the Trust Indenture Act
Debentures due August 1, of 1939 (File No. 22-7615)
1998, between Actava and
Chemical Bank, as Trustee
4(b)(ii) Agreement among Actava, Chem- Registration Statement on Exhibit 4(d)(ii)
ical Bank and Manufacturers Form S-14 (Registration No.
Hanover Trust Company, dated 2-81094)
as of September 26, 1980,
with respect to successor
trusteeship of the 9 1/2%
Subordinated Debentures due
August 1, 1998
4(b)(iii) Instrument of resignation, Annual Report on Form 10-K Exhibit 4(d)(iii)
appointment and acceptance for the year ended December
dated as of June 9, 1986 31, 1986
among Actava, Manufacturers
Hanover Trust Company and
Irving Trust Company, with
respect to successor trustee-
ship of the 9 1/2%
Subordinated Debentures due
August 1, 1998
4(c)(i) Indenture dated as of March Registration Statement on Exhibit 2(d)
15, 1977, with respect to Form S-7 (Registration No.
9 7/8% Senior Subordinated 2-58317)
Debentures due March 15,
1997, between Actava and The
Chase Manhattan Bank, N.A.,
as Trustee
4(c)(ii) Agreement among Actava, The Registration Statement on Exhibit 4(e)(ii)
Chase Manhattan Bank, N.A. Form S-14 (Registration No.
and United States Trust 2-81094)
Company of New York, dated as
of June 14, 1982, with
respect to successor
trusteeship of the 9 7/8%
Senior Subordinated
Debentures due March 15, 1997
4(d)(i) Indenture between National Post-Effective Amendment No. Exhibit T3C
Industries, Inc. and First 1 to Application on Form T-3
National City Bank, dated for Qualification of
October 1, 1974, for the 10% Indenture Under The Trust
Subordinated Debentures, due Indenture Act of 1939 (File
October 1, 1999 No. 22-8076)
</TABLE>
25
<PAGE> 27
<TABLE>
<CAPTION>
EXHIBITS INCORPORATED HEREIN BY REFERENCE
---------------------------------------------------
DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH
OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT
THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT
- --------------- ----------------------------- ----------------------------- --------------------
<S> <C> <C> <C>
4(d)(ii) Agreement among National In- Registration Statement on Exhibit 4(f)(ii)
dustries, Inc., Actava, Form S-14 (Registration No.
Citibank, N.A., and Marine 2-81094)
Midland Bank, dated as of
December 20, 1977, with
respect to successor trustee-
ship of the 10% Subordinated
Debentures due October 1,
1999
4(d)(iii) First Supplemental Indenture Registration Statement on Exhibit 2(q)
among Actava, National Indus- Form S-7 (Registration No.
tries, Inc. and Marine 2-60566)
Midland Bank, dated January
3, 1978, supplemental to the
Indenture dated October 1,
1974 between National and
First National City Bank for
the 10% Subordinated
Debentures due October 1,
1999
4(e) Public Bond Issue Agreement Annual Report on Form 10-K Exhibit 4(h)
dated February 19, 1986, with for the year ended December
respect to 6% Senior 31, 1985
Subordinated Swiss Franc
Bonds due March 6, 1996,
among Actava, Soditic S.A.
and certain other
institutions named therein
4(f) Indenture dated as of August Annual Report on Form 10-K Exhibit 4(i)
1, 1987 with respect to for the year ended December
6 1/2% Convertible 31, 1987
Subordinated Debentures due
August 4, 2002, between Ac-
tava and Chemical Bank, as
Trustee
4(g) Loan and Security Agreement, Amendment No. 1 to Registra- Exhibit 4(i)
dated as of April 30, 1992, tion Statement on Form S-3
with respect to $35 million (Registration No. 33-48202)
secured revolving credit
facility, among Actava,
certain of its subsidiaries
and Barclays Business Credit,
Inc.
4(h) Senior Note Agreement, dated Amendment No. 1 to Registra- Exhibit 4(j)
as of June 8, 1992, with tion Statement on Form S-3
respect to private placement (Registration No. 33-48202)
of $200 million of Senior
Notes due 1997, 1999 and
2002, among Qualex Inc. and
the purchasers listed
therein.
</TABLE>
26
<PAGE> 28
<TABLE>
<CAPTION>
EXHIBITS INCORPORATED HEREIN BY REFERENCE
---------------------------------------------------
DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH
OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT
THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT
- --------------- ----------------------------- ----------------------------- --------------------
<S> <C> <C> <C>
4(i) Credit Agreement, dated as of
October 30, 1992, with
respect to a $115 million
revolving credit facility,
among Qualex Inc. and the
eight participants thereto. A
copy of this agreement is not
filed as the debt does not
exceed 10% of the total
assets of total assets of
registrant; however,
registrant hereby agrees to
furnish a copy of such
agreement to the Commission
upon request.
4(j)(i) Finance and Security
Agreement, dated as of
October 30, 1992, with
respect to a revolving credit
facility of up to $100
million, between Actava
Industries, Inc. and ITT
Commercial Finance Corp. A
copy of this agreement is not
filed as the debt does not
exceed 10% of the total
assets of registrant; how-
ever, registrant hereby
agrees to furnish a copy of
such agreement to the
Commission upon request.
4(j)(ii) Amendment, dated as of March
29, 1994, to Finance and
Security Agreement, dated as
of October 30, 1992, with
respect to a revolving credit
facility of up to $100
million, between Actava In-
dustries, Inc. and ITT
Commercial Finance Corp. A
copy of this agreement is not
filed as the debt does not
exceed 10% of the total
assets of registrant;
however, registrant hereby
agrees to furnish a copy of
such agreement to the
Commission upon request.
4(k) Loan and Security Agreement,
dated as of December 29,
1992, with respect to a
revolving credit facility of
up to $35 million between
Nelson/Weather-Rite, Inc. and
BA Business Credit, Inc. A
copy of this agreement is not
filed as the debt does not
exceed 10% of the total
assets of registrant; how-
ever, registrant hereby
agrees to furnish a copy of
such agreement to the
Commission upon request.
</TABLE>
27
<PAGE> 29
<TABLE>
<CAPTION>
EXHIBITS INCORPORATED HEREIN BY REFERENCE
---------------------------------------------------
DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH
OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT
THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT
- --------------- ----------------------------- ----------------------------- --------------------
<S> <C> <C> <C>
4(l)(i) Finance and Security
Agreement, dated as of
December 15, 1993, with
respect to a revolving credit
facility of up to $50
million, between Diversified
Products Corporation and ITT
Commercial Finance Corp. and
the Provident Bank. A copy of
this agreement is not filed
as the debt does not exceed
10% of the total assets of
registrant; however,
registrant hereby agrees to
furnish a copy of such
agreement to the commission
upon request.
4(l)(ii) Amendment, dated as of March
29, 1994, to Finance and
Security Agreement, dated as
of December 15, 1993, with
respect to a revolving credit
facility of up to $50
million, between Diversified
Products Corporation and ITT
Commercial Finance Corp. and
the Provident Bank. A copy of
this agreement is not filed
as the debt does not exceed
10% of the total assets of
registrant; however, regis-
trant hereby agrees to
furnish a copy of such
agreement to the commission
upon request.
4(m) Revolving Loan and Security
Agreement, dated as of April
29, 1993, with respect to a
revolving credit facility of
up to $10 million between
Willow Hosiery Company, Inc.
and Sterling National Bank
and Trust Company of New
York. A copy of this
agreement is not filed as the
debt does not exceed 10% of
the total assets of
registrant; however,
registrant hereby agrees to
furnish a copy of such
agreement to the Commission
upon request.
</TABLE>
28
<PAGE> 30
<TABLE>
<CAPTION>
EXHIBITS INCORPORATED HEREIN BY REFERENCE
---------------------------------------------------
DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH
OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT
THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT
- --------------- ----------------------------- ----------------------------- --------------------
<S> <C> <C> <C>
4(n) Amended and Restated $5
Million Revolving Note,
Amended and Restated $3
Million Letter of Credit
Note, and First Amendment to
the Revolving Loan Agreement
dated as of August 31, 1993,
and Revolving Loan Agreement
dated as of August 24, 1992,
between Hutch Sports USA Inc.
and the Fifth Third Bank.
Copies of these agreements
are not filed as the debt
does not exceed 10% of the
total assets of the
registrant; however,
registrant hereby agrees to
furnish copies of such agree-
ments to the Commission upon
request.
10(a)(i) 1982 Stock Option Plan of Proxy Statement dated March Exhibit A
Actava 31, 1982
10(a)(ii) 1989 Stock Option Plan of Proxy Statement dated March Exhibit A
Actava 31, 1989
10(a)(iii) 1969 Restricted Stock Plan of Annual Report on Form 10-K Exhibit 10(a)(iii)
Actava for the year ended December
31, 1990
10(a)(iv) 1991 Non-Employee Director Annual Report on Form 10-K Exhibit 10(a)(iv)
Stock Option Plan for the year ended December
31, 1991
10(a)(v) Amendment to 1991 Non-Em- Annual Report on Form 10-K Exhibit 10(a)(v)
ployee Director Stock Option for the year ended December
Plan 31, 1992
10(b) Form of Severance Agreement Annual Report on Form 10-K Exhibit 10(c)
between officers of Actava for the year ended December
and Actava dated May 20, 1985 31, 1985
10(c) Snapper Power Equipment Annual Report on Form 10-K Exhibit 10(c)
Profit Sharing Plan for the year ended December
31, 1987
10(f)(iii) Termination Agreement between Annual Report on Form 10-K Exhibit 10(f)(iii)
J. B. Fuqua and Actava dated for the year ended December
March 18, 1991 31, 1990
10(h)(i) Retirement Plan executed No- Annual Report on Form 10-K Exhibit 10(h)(i)
vember 1, 1990 as amended to for the year ended December
be effective January 1, 1989 31, 1990
10(h)(ii) Supplemental Retirement Plan Annual Report on Form 10-K Exhibit 10(j)
of Actava for the year ended December
31, 1983
10(h)(iii) Supplemental Executive Annual Report on Form 10-K Exhibit 10(h)(iii)
Medical Reimbursement Plan for the year ended December
31, 1990
</TABLE>
29
<PAGE> 31
<TABLE>
<CAPTION>
EXHIBITS INCORPORATED HEREIN BY REFERENCE
---------------------------------------------------
DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH
OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT
THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT
- --------------- ----------------------------- ----------------------------- --------------------
<S> <C> <C> <C>
10(h)(iv) Amendment to Supplemental Re- Annual Report on Form 10-K Exhibit 10(h)(iv)
tirement Plan of Actava for the year ended December
effective April 1, 1992 31, 1991
10(i)(i) Shareholders' Agreement dated Annual Report on Form 10-K Exhibit 10(j)
as of December 7, 1987 by and for the year ended December
between Eastman Kodak Company 1, 1987
and Actava
10(i)(ii) Amendment No. 1, dated as of Current Report on Form 8-K Exhibit 2(b)
March 29, 1988 to the dated April 12, 1988
Shareholders' Agreement dated
as of June 7, 1987 between
Eastman Kodak Company and
Actava
10(i)(iii) Amendment No. 2, dated as of Annual Report on Form 10-K Exhibit 10(i)(iii)
March 28, 1991 to the for the year ended December
Shareholders' Agreement dated 31, 1990
as of June 7, 1987 between
Eastman Kodak Company and
Actava
10(j) Stockholder Agreement dated Quarterly Report on Form 10-Q Exhibit 3
as of May 22, 1989 by and for the three months ended
between Actava and Triton June 30, 1989
Group Ltd.
10(j)(ii) Loan Agreement dated Novem- Annual Report on Form 10-K Exhibit 10(j)(ii)
ber 27, 1991 between Actava for the year ended December
and Triton Group Ltd. 31, 1991
10(k)(i) Form of Post Employment Con- Annual Report of Form 10-K Exhibit 10(k)
sulting Agreement between of- for the year ended December
ficers of Actava and Actava 31, 1991
10(k)(ii) Form of First Amendment to
Post-employment Consulting
Agreement between officers of
Actava and Actava
10(l) 1992 Officer and Director Annual Report on Form 10-K Exhibit 10(l)
Stock Purchase Plan for the year ended December
31, 1991
10(m) Director Group Medical Plan Annual Report on Form 10-K Exhibit 10(m)
for the year ended December
31, 1991
10(n) Form of Restricted Stock Annual Report on Form 10-K Exhibit 10(n)
Purchase Agreement between for the year ended December
certain officers of Actava 31, 1991
and Actava
10(o) Incentive Bonuses for Certain Annual Report on Form 10-K Exhibit 10(o)
Corporate Officers for the year ended December
31, 1991
10(p)(i) Forbearance Agreement dated Amendment No. 1 Registration Exhibit 10(o)
June 30, 1992 between Actava, Statement on Form S-3 (Regis-
Triton Group Ltd. and tration No. 33-48202)
Intermark, Inc.
</TABLE>
30
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBITS INCORPORATED HEREIN BY REFERENCE
---------------------------------------------------
DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH
OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT
THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT
- --------------- ----------------------------- ----------------------------- --------------------
<S> <C> <C> <C>
10(p)(ii) Amendment, dated July 13, Quarterly Report on Form 10-Q Exhibit 5
1992, to Forbearance for the three months ended
Agreement dated June 30, 1992 June 30, 1992
between Actava, Triton Group
Ltd. and Intermark, Inc.
10(p)(iii) Amendment, dated July 30, Quarterly Report on Form 10-Q Exhibit 6
1992, to Forbearance for the three months ended
Agreement dated June 30, 1992 June 30, 1992
between Actava, Triton Group
Ltd. and Intermark, Inc., as
amended by Amendment to
Forbearance Agreement dated
July 13, 1992.
10(p)(iv) Amendment, dated September Quarterly Report on Form 10-Q Exhibit 4
23, 1992, to Forbearance for the three months ended
Agreement dated June 30, 1992 September 30, 1992
between Actava Industries,
Inc., Triton Group Ltd. and
Intermark, Inc., as amended
by Amendments to Forbearance
Agreement dated July 13, 1992
and July 30, 1992.
10(p)(v) Amendment, dated October 7, Quarterly Report on Form 10-Q Exhibit 5
1992, to Forbearance for the three months ended
Agreement dated June 30, 1992 September 30, 1992
between Actava Industries,
Inc., Triton Group Ltd. and
Intermark, Inc., as amended
by Amendments to Forbearance
Agreement dated July 13, July
30, and September 23, 1992.
10(q) Agreement between The Actava Annual Report on Form 10-K Exhibit 10(q)
Group Inc. and J.B. Fuqua for the year ended December
regarding sale by The Actava 31, 1992
Group, Inc. of rights in the
name "Actava".
10(r) Amended and Restated Loan Quarterly report on Form 10-Q Exhibit 19
Agreement between The Actava for the three months ended
Group Inc. and Triton Group June 30, 1993.
Ltd. dated June 25, 1993.
10(s) First Amendment, dated Au- Quarterly Report on Form 10-Q Exhibit 19
gust 19, 1993 to Amended and for the three months ended
Restated Loan Agreement be- September 30, 1993
tween The Actava Group Inc.
and Triton Group Ltd. dated
June 5, 1993
10(t) Second Amendment, dated De-
cember 7, 1993 to Amendment
and Restated Loan Agreement
between The Actava Group Inc.
and Triton Group Ltd. dated
June 25, 1993
</TABLE>
31
<PAGE> 33
<TABLE>
<CAPTION>
EXHIBITS INCORPORATED HEREIN BY REFERENCE
---------------------------------------------------
DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH
OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT
THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT
- --------------- ----------------------------- ----------------------------- --------------------
<S> <C> <C> <C>
10(u) Form of Indemnification
Agreement between Actava and
each of its directors and
executive officers
10(v) 1993 Incentive Bonus Plan for Confidential Treatment Re-
certain corporate officers quested by the Company. Filed
separately with the
Commission.
11 Statement of computation of
earnings per share
18 Letter regarding change in Annual Report on Form 10-K Exhibit 18
accounting principle for the for the year ended December
costs associated with proof 31, 1992
advertising program.
22 Subsidiaries of Actava
23 Consent of Ernst & Young
24 Powers-of-Attorney
</TABLE>
- ---------------
(b) Reports on Form 8-K filed in the fourth quarter of 1993:
None.
(c) The response to this portion of Item 14 is submitted as a separate section
in this report.
(d) The response to this portion of Item 14 is submitted as a separate section
in this report.
32
<PAGE> 34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE ACTAVA GROUP INC.
By: /s/ FREDERICK B. BEILSTEIN, III
--------------------------------
Frederick B. Beilstein, III
Senior Vice President and
Chief Financial Officer
Dated: March 31, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant ad in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------------- ---------------
<C> <S> <C>
/s/ CHARLES R. SCOTT President and Chief Executive March 31, 1994
- --------------------------------------------- Officer and Director
Charles R. Scott (Principal Executive Officer)
/s/ FREDERICK B. BEILSTEIN, III Senior Vice President -- Chief March 31, 1994
- --------------------------------------------- Financial Officer (Principal
Frederick B. Beilstein, III Financial and Accounting
Officer)
* Director March 31, 1994
- ---------------------------------------------
John E. Aderhold
Director March 31, 1994
- ---------------------------------------------
Michael E. Cahr
* Director March 31, 1994
- ---------------------------------------------
J. M. Darden III
* Director March 31, 1994
- ---------------------------------------------
John P. Imlay, Jr.
* Director March 31, 1994
- ---------------------------------------------
Clark A. Johnson
* Director March 31, 1994
- ---------------------------------------------
Anthony F. Kopp
* Director March 31, 1994
- ---------------------------------------------
Richard Nevins
* Director March 31, 1994
- ---------------------------------------------
Carl E. Sanders
*By: /s/ FREDERICK B. BEILSTEIN, III
------------------------------------
Frederick B. Beilstein, III
Attorney-in-fact
</TABLE>
33
<PAGE> 35
THE ACTAVA GROUP INC.
ANNUAL REPORT ON FORM 10-K
ITEM 14(A)(1) AND (2), (C) AND (D)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1993
F-1
<PAGE> 36
FORM 10-K-ITEM 14(A)(1) AND (2)
The Actava Group Inc. and Subsidiaries
List of Financial Statements and Financial Statement Schedules
The following consolidated financial statements of The Actava Group Inc.
and subsidiaries are included in Item 8:
Consolidated balance sheets -- December 31, 1993 and 1992
Consolidated statements of operations -- Years ended December 31, 1993, 1992
and 1991
Consolidated statements of cash flows -- Years ended December 31, 1993, 1992
and 1991
Consolidated statements of stockholders' equity -- Years ended December 31,
1993, 1992 and 1991
Notes to consolidated financial statements -- December 31, 1993
The following consolidated financial statement schedules of The Actava
Group Inc. and subsidiaries are included in Item 14(d)
<TABLE>
<S> <C> <C>
Schedule II -- Amounts receivable from related parties and underwriters, promoters, and
employees other than related parties
Schedule III -- Condensed financial information of registrant
Schedule V -- Property, plant and equipment
Schedule VI -- Accumulated depreciation, depletion, and amortization of property, plant and
equipment
Schedule VIII -- Valuation and qualifying accounts
Schedule IX -- Short-term borrowings
Schedule X -- Supplementary income statement information
</TABLE>
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have been
omitted.
F-2
<PAGE> 37
REPORT OF INDEPENDENT AUDITORS
To The Stockholders
The Actava Group Inc.
We have audited the accompanying consolidated balance sheets of The Actava
Group Inc. and subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1993. Our audits also
included the financial statement schedules listed in the Index at Item 14(a).
These financial statements and schedules 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
The Actava Group Inc. and subsidiaries at December 31, 1993 and 1992, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
As discussed in the notes to consolidated financial statements, in 1993
Actava changed its method of accounting for income taxes and postretirement
benefits, and in 1992 Actava changed its method of accounting for the cost of
its proof advertising program.
ERNST & YOUNG
Atlanta, Georgia
March 3, 1994,
except for the
Notes Payable
and Long-Term Debt Note
as to which the date
is March 29, 1994
F-3
<PAGE> 38
THE ACTAVA GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1993 1992
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets
Cash.......................................................................... $ 18,770 $ 20,792
Short-term investments........................................................ 29,635 63,842
Receivables (less allowance for doubtful accounts of $10,227 in 1993 and
$12,805 in 1992)............................................................ 276,018 243,368
Inventories................................................................... 108,439 63,987
Prepaid expenses.............................................................. 43,809 38,365
Income tax benefits........................................................... 32,434 45,790
---------- ----------
Total Current Assets................................................... 509,105 476,144
Property, Plant and Equipment
Land.......................................................................... 8,303 8,700
Buildings and improvements.................................................... 72,289 57,490
Machinery and equipment....................................................... 393,643 343,140
---------- ----------
474,235 409,330
Less allowances for depreciation.............................................. (198,881) (165,720)
---------- ----------
Total Property, Plant and Equipment.................................... 275,354 243,610
Notes Receivable from Triton Group Ltd.......................................... 26,726 31,726
Other Assets (less allowance for doubtful notes and accounts of $3,988 in 1993
and $3,104 in 1992)........................................................... 50,702 45,754
Long-term investments........................................................... 26,611 24,719
Intangibles (less accumulated amortization of $88,281 in 1993 and $65,219 in
1992)......................................................................... 386,626 395,913
---------- ----------
Total Assets........................................................... $1,275,124 $1,217,866
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable.............................................................. $ 86,163 $ 69,665
Accrued expenses and other current liabilities................................ 177,720 160,810
Notes payable................................................................. 135,114 64,795
Current portion of long-term debt............................................. 6,665 10,013
---------- ----------
Total Current Liabilities.............................................. 405,662 305,283
Deferred Income Taxes........................................................... 56,715 53,431
Long-Term Debt.................................................................. 220,887 220,357
Subordinated Debt............................................................... 190,551 193,566
Minority Interest in Photofinishing Subsidiary.................................. 205,395 205,382
Stockholders' Equity
Common Stock (22,767,744 shares in 1993 and 1992)............................. 22,768 22,768
Additional capital............................................................ 37,056 46,362
Retained earnings............................................................. 236,334 292,266
Less treasury stock -- at cost (5,132,558 shares in 1993 and 6,223,467 shares
in 1992).................................................................... (100,244) (121,549)
---------- ----------
Total Stockholders' Equity............................................. 195,914 239,847
---------- ----------
Contingent Liabilities and Commitments
Total Liabilities and Stockholders' Equity............................. $1,275,124 $1,217,866
---------- ----------
---------- ----------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE> 39
THE ACTAVA GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1993 1992 1991
---------- ---------- --------
<S> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
Net sales................................................. $1,241,111 $1,148,743 $924,635
Costs, expenses and other costs of products sold (includes
$219,825 in 1993, $202,360 in 1992 and $172,652 in 1991
purchased from Eastman Kodak Company)................... 957,440 812,932 669,129
Selling, general and administrative....................... 246,465 260,256 259,904
Interest expense.......................................... 43,299 33,454 23,534
Provision for doubtful accounts........................... 7,262 3,419 5,485
Other (income) expense-net................................ 2,915 (6,099) (3,537)
Provision for plant relocations and consolidations........ 3,231 -- 18,969
Provision for employee agreements and related costs....... -- -- 6,839
---------- ---------- --------
Total costs, expenses and other........................... 1,260,612 1,103,962 980,323
Income (Loss) before Income Taxes, Minority Interest and
Cumulative Effect of Change in Accounting
Principle............................................ (19,501) 44,781 (55,688)
Income tax expense (benefit).............................. 15,163 23,328 (10,033)
---------- ---------- --------
Income (Loss) before Minority Interest and Cumulative
Effect of Change in Accounting Principle............. (34,664) 21,453 (45,655)
Minority interest......................................... (8,526) (10,888) (5,166)
---------- ---------- --------
Income (Loss) before Cumulative Effect of Change in
Accounting Principle................................. (43,190) 10,565 (50,821)
Cumulative effect of change in accounting principle....... (4,404) 1,034 --
---------- ---------- --------
Net Income (Loss)....................................... $ (47,594) $ 11,599 $(50,821)
---------- ---------- --------
---------- ---------- --------
Earnings (Loss) Per Share of Common Stock
Primary
Continuing operations..................................... $ (2.52) $ .64 $ (3.08)
Cumulative effect of change in accounting principle....... (.25) .06 --
---------- ---------- --------
Net Income (Loss)......................................... $ (2.77) $ .70 $ (3.08)
---------- ---------- --------
---------- ---------- --------
Pro forma Effect Assuming the Changes in Accounting
Principles are Applied Retroactively:
Net Income (Loss)......................................... $ (43,190) $ 10,565 $(50,667)
---------- ---------- --------
---------- ---------- --------
Net Income (Loss) Per Share............................... $ (2.77) $ .64 $ (3.07)
---------- ---------- --------
---------- ---------- --------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE> 40
THE ACTAVA GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1993 1992 1991
-------- --------- ---------
(IN THOUSANDS)
INCREASE (DECREASE) IN CASH
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss)............................................ $(47,594) $ 11,599 $ (50,821)
Cumulative effect of change in accounting principle.......... (4,404) 1,034 --
-------- --------- ---------
Income (loss) before cumulative effect of change in
accounting principle....................................... (43,190) 10,565 (50,821)
Items providing cash from operating activities............... 30,243 13,714 95,965
-------- --------- ---------
Net Cash Provided (Used) by Operating Activities............. (12,947) 24,279 45,144
-------- --------- ---------
Cash Flows from Investing Activities:
Purchases of investments (maturities over 90 days)........... (99,510) (99,198) (288,996)
Sales of investments (maturities over 90 days)............... 111,851 107,932 284,980
Net sales of other investments............................... 21,866 6,143 50,739
Purchase of long-term investments............................ -- (24,719) --
Payments for property, plant and equipment................... (55,554) (81,800) (59,499)
Proceeds from disposals of property, plant and equipment..... 16,024 10,230 6,018
Payments for purchases of businesses......................... (9,415) (30,560) (90,019)
Loans to Triton Group Ltd.................................... 5,000 (1,426) (30,300)
Other investing activities -- net............................ (15,221) (3,604) 5,801
-------- --------- ---------
Net Cash Used by Investing Activities........................ (24,959) (117,002) (121,276)
-------- --------- ---------
Cash Flows from Financing Activities:
Net borrowings (payments) under short-term bank agreements... 52,284 51,107 (4,013)
Borrowings under long-term debt agreements................... 21,503 817,000 774,740
Payments on long-term debt agreements........................ (21,192) (771,136) (653,895)
Payments of subordinated debt................................ (1,847) (200) (5,824)
Proceeds from issuance of Actava Common Stock................ -- 365
Cash dividends paid by Qualex to minority interest........... (8,614) (3,886) (5,884)
Cash dividends paid by Actava................................ (6,250) (5,956) (5,947)
-------- --------- ---------
Net Cash Provided by Financing Activities.................. 35,884 86,929 99,542
-------- --------- ---------
Increase (Decrease) in Cash............................. (2,022) (5,794) 23,410
Cash at beginning of year.................................... 20,792 26,586 3,176
-------- --------- ---------
Cash at End of Year..................................... $ 18,770 $ 20,792 $ 26,586
-------- --------- ---------
-------- --------- ---------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE> 41
THE ACTAVA GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
---------------- ADDITIONAL RETAINED ------------------
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT TOTAL
------ ------- ---------- -------- ------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Balance -- January 1, 1991........................ 22,768 $22,768 $ 46,276 $344,622 6,254 $(122,136) $291,530
Net (loss) for the year......................... (50,821) (50,821)
Cash dividends on Common Stock, $.36 per
share......................................... (5,947) (5,947)
Common Stock issued under employee stock
options....................................... (220) (30) 585 365
Common Stock purchased and other................ 306 (2) 304
------ ------- ---------- -------- ------ --------- --------
Balance -- December 31, 1991...................... 22,768 22,768 46,362 287,854 6,224 (121,553) 235,431
Net income for the year......................... 11,599 11,599
Cash dividends on Common Stock, $.36 per
share......................................... (5,956) (5,956)
Common Stock issued under employee stock
options....................................... (1) 4 4
Other, principally foreign currency translation
adjustment.................................... (1,231) (1,231)
------ ------- ---------- -------- ------ --------- --------
Balance -- December 31, 1992...................... 22,768 22,768 46,362 292,266 6,223 (121,549) 239,847
Net income for the year......................... (47,594) (47,594)
Cash dividends on Common Stock, $.36 per
share......................................... (6,250) (6,250)
Common Stock issued from Treasury............... (9,305) (1,090) 21,305 12,000
Other, principally foreign currency translation
adjustment.................................... (1) (2,088) (2,089)
------ ------- ---------- -------- ------ --------- --------
Balance -- December 31, 1993...................... 22,768 $22,768 $ 37,056 $236,334 5,133 $(100,244) $195,914
------ ------- ---------- -------- ------ --------- --------
------ ------- ---------- -------- ------ --------- --------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-7
<PAGE> 42
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Actava and
its majority-owned subsidiaries. All significant intercompany transactions and
accounts have been eliminated in consolidation.
Accounting Changes
Change in Method of Accounting for Certain Advertising Costs
Effective January 1, 1992, Qualex changed its method of accounting for the
cost of its proof advertising program to recognize these costs at the time the
advertising is placed by the customer. Under the proof advertising program,
Qualex reimburses certain advertising costs incurred by its customers up to a
percentage of sales to that customer. Qualex previously accrued such costs at
the time of the initial sale. Qualex believes that this new method is preferable
because it recognizes advertising expense as it is incurred rather than at the
time of the initial sale to the customer. The 1992 adjustment of $1,034,000, net
of income taxes of $1,437,000 and minority interest of $1,033,000, was included
in income for 1992 to apply retroactively the new method. The 1992 adjustment
before income taxes and minority interest was $3,504,000. The pro forma amounts
presented in the consolidated statements of operations for 1992 and 1991 reflect
the effect of the retroactive application of applying the new method and related
taxes and minority interest.
Change in Method of Accounting for Income Taxes
Effective January 1, 1993, the Company adopted FASB Statement No. 109,
"Accounting for Income Taxes." Under Statement 109, the liability method is used
in accounting for income taxes: deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse. Prior to
the adoption of Statement 109, income tax expense was determined using the
deferred method: deferred tax expense was based on items of income and expense
that were reported in different years in the financial statements and tax
returns and were measured at the tax rate in effect in the year the difference
originated.
As permitted by Statement 109, the Company has elected not to restate the
financial statements of any prior years. The presentation of some items, such as
depreciation, has changed; however, the cumulative effect of the change in
accounting principle on pre-tax income from continuing operations, net income
and financial position was not material.
Change in Method of Accounting for Postretirement Benefits
Effective January 1, 1993, the Company adopted FASB Statement No. 106,
"Accounting for Postretirement Benefits Other Than Pensions." The Company and
its subsidiaries provide group medical plans and life insurance coverage for
certain employees subsequent to retirement. The plans have been funded on a
pay-as-you-go (cash) basis. The plans are contributory, with retiree
contributions adjusted annually, and contain other cost-sharing features such as
deductibles, coinsurance and life-time maximums. The plan accounting anticipates
future cost-sharing changes that are consistent with the Company's expressed
intent to increase the retiree contribution rate annually for the expected
medical trend rate for that year. The Company funds the excess of the cost of
benefits under the plans over the participants' contributions as the costs are
incurred. The coordination of benefits with medicare uses a supplemental, or
exclusion of benefits, approach.
As permitted by Statement 106, the Company elected to immediately recognize
the effect in the statement of operations for the first quarter of 1993 as a
$4,404,000 charge to net income as the cumulative effect of a change in
accounting principle. The annual net periodic postretirement benefit expense for
1993 decreased by $38,000 as a result of adopting the new rules. Postretirement
benefit expense for 1992 and 1991,
F-8
<PAGE> 43
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
recorded on a cash basis, has not been restated. The pro forma amounts presented
in the consolidated statements of operations reflect no effect of the
retroactive application of applying the new method as it is not material. The
assumed health care cost trend rate used to measure the expected cost of
benefits covered by the plan for 1993 is 14%. This trend rate is assumed to
decrease in 1% decrements to 6% in 2001 and years thereafter. A 7% discount rate
per year, compounded annually, was assumed to measure the accumulated
postretirement benefit obligation as of December 31, 1993, as compared to 9% for
January 1, 1993. A 1% increase in the assumed health care cost trend rate would
increase the accumulated postretirement benefit obligations as of December 31,
1993, by 16% and the net periodic postretirement benefit cost by 18%.
The following table presents the plans' funded status reconciled with
amounts recognized in the Company's consolidated balance sheet:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1993 1992
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees....................................................... $(1,094) $ (990)
Fully eligible active plan participants........................ (788) (932)
Other active plan participants................................. (1,149) (2,482)
------- -------
(3,031) (4,404)
Plan assets...................................................... -- --
------- -------
Accumulated postretirement benefit obligation in excess of plan
assets......................................................... (3,031) (4,404)
Unrecognized prior service cost.................................. (1,995) --
Unrecognized net (gain) or loss.................................. 544 --
Unrecognized transition obligation............................... -- 4,404
------- -------
Accrued postretirement benefit cost.............................. $(4,482) $ --
------- -------
------- -------
</TABLE>
Net periodic postretirement benefit cost includes the following components:
<TABLE>
<CAPTION>
1993 1992
------- -------
(IN THOUSANDS)
<S> <C> <C>
Service cost..................................................... $ 96 $ --
Interest cost.................................................... 296 --
Amortization of unrecognized prior service cost.................. (154) --
Cash basis expense............................................... -- 102
------- -------
$ 238 $ 102
------- -------
------- -------
</TABLE>
Change in Accounting Estimate
During 1993, Snapper revised its estimate of accrued product warranty
expense to reflect an increase in the amount of future warranty expense to be
incurred due to increased warranty claims. This change in accounting estimate
resulted in an additional $4,000,000 charge to net income in 1993.
Short-Term Investments
Short-term investments which are classified as current assets are carried
at the lower of aggregate cost or market value. These investments consist of
interest bearing obligations and other obligations whose return is based upon
market rates of interest. There is no significant concentration of short-term
investments in any single issuer.
F-9
<PAGE> 44
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Marketable equity securities which are classified as long-term investments
are carried at the lower of aggregate cost or market value. Marketable debt
securities which are classified as long-term investments are carried at cost
which approximates market value. Market values for these securities are based on
quoted market prices. Interest income is accrued as earned, while dividend
income is recorded on the exdividend date. The cost of marketable securities
sold is determined on the specific identification method and realized gains and
losses are reflected in income.
Inventories
Inventories of finished goods, work in process and raw materials are stated
at the lower of cost or market. The Last-In, First-Out (LIFO) method of
determining cost is used for a substantial portion of these inventories.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost and are depreciated over
their expected useful lives. Generally, depreciation is provided on the
straight-line method for financial reporting purposes and on accelerated methods
for tax purposes. Amortization associated with capitalized leases is included in
depreciation expense.
Intangibles
Intangibles consist of the excess of the purchase price over the net asset
of businesses acquired, customer lists and covenants not to compete. Amounts
relating to the excess of the purchase price over the net assets of businesses
acquired are amortized over a 40-year period using the straight-line method.
Amounts relating to customer lists and covenants not to compete are amortized
over two to five years or the life of the agreement, respectively. Management
continuously evaluates intangible assets to determine that no diminishment in
value has occurred.
Intangible assets are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1993 1992
-------- --------
<S> <C> <C>
(IN THOUSANDS)
Excess of purchase price over net assets of businesses
acquired....................................................... $349,546 $344,948
Customer lists................................................... 29,847 40,912
Covenants not to compete......................................... 7,233 10,053
-------- --------
$386,626 $395,913
-------- --------
-------- --------
</TABLE>
Income Taxes
Income taxes are provided for all taxable items in the statement of
operations regardless of when these items are reported for federal income tax
purposes. Actava elects to utilize certain provisions of the federal income tax
laws to reduce current taxes payable. Deferred income taxes are provided for
temporary differences in recognition of income and expenses for tax and
financial reporting purposes.
Effective January 1, 1993, the Company adopted FASB Statement No. 109,
"Accounting for Income Taxes." Under Statement 109, the liability method is used
in accounting for income taxes: deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.
F-10
<PAGE> 45
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Postemployment Benefits
The Company and its subsidiaries provide benefits to former or inactive
employees after employment, but before retirement, such as severance benefits,
continuation of health care benefits and life insurance coverage. The costs of
these are currently accounted for on a pay-as-you-go (cash) basis. The Financial
Accounting Standards Board has issued Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits," which
requires employers to recognize the obligation to provide these benefits when
certain conditions are met. The Company is required to adopt the new method of
accounting for these benefits no later than January 1, 1994. The adoption of
Statement No. 112 will not have a significant effect on the Company's financial
position or results of operations.
Certain Investments in Debt and Equity Securities
The Company and its subsidiaries invest in various debt and equity
securities. The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," which requires certain debt securities to be
reported at amortized cost, certain debt and equity securities to be reported at
market with current recognition of unrealized gains and losses, and certain debt
and equity securities to be reported at market with unrealized gains and losses
as a separate component of shareholders' equity. The Company is required to
adopt the new method of accounting no later than January 1, 1994. The adoption
of Statement No. 115 will not have a significant impact on the Company's
financial position or results of operations.
Earnings Per Share of Common Stock
Primary earnings per share are computed by dividing net income (loss) by
the average number of common and common equivalent shares outstanding during the
year. Common equivalent shares include shares issuable upon the assumed exercise
of stock options using the treasury stock method when dilutive. Computations of
common equivalent shares are based upon average prices during each period.
Fully diluted earnings per share are computed using such average shares
adjusted for any additional shares which would result from using end-of-year
prices in the above computations, plus the additional shares that would result
from the conversion of the 6 1/2% Convertible Subordinated Debentures. Net
income (loss) is adjusted by interest (net of income taxes) on the 6 1/2%
Convertible Subordinated Debentures. The computation of fully diluted earnings
per share is used only when it results in an earnings per share number which is
lower than primary earnings per share.
Revenue Recognition
Sales from the lawn and garden and sporting goods segments are recognized
when the products are shipped to their customers. Sales from the photofinishing
segment are recognized when the products are delivered to their customer.
Index Protection Agreements
The Company uses index protection agreements to hedge interest rate risk
associated with its borrowings and to hedge the risk or market price
fluctuations of commodities bought and sold in the normal course of business.
These contracts are accounted for as hedges and any gains or losses are deferred
and included in the basis of the underlying transactions. Cash flows from the
contracts are accounted for in the same categories as the cash flows from the
items being hedged.
During 1993, Qualex entered into a $100,000,000 notional amount interest
rate swap agreement which expires in 1996. Under the agreement, Qualex pays a
variable interest rate based on the London interbank offered rate (LIBOR) and
receives a variable amount based on the difference between LIBOR and prime
F-11
<PAGE> 46
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
rate. At December 31, 1993, termination of this interest rate swap agreement
would require a cash payment by Qualex of $1,158,000 based on market quotes.
Qualex also entered into various commodity swaps to provide protection for
silver recoveries from photofinishing processes. During 1993 and 1992, Qualex
received $835,000 and $12,335,000, respectively, from the termination of such
swap agreements. These gains were deferred and are being amortized over the
original agreement terms. During 1993 and 1992, $2,928,000 and $1,683,000 of
these gains were amortized as reductions of cost of sales while $1,961,000 and
$782,000 of gain amortization reduced interest expense in 1993 and 1992,
respectively. At December 31, 1993 and 1992, respectively, $7,422,000 and
$11,476,000 of these gains were recorded as deferred income. At December 31,
1993, termination of the commodity swap agreements would require cash payments
by Qualex of $18,688,000 based on market quotes.
Self-Insurance
The Company is primarily self-insured for workers' compensation, health,
automobile, product and general liability costs. The self-insurance claim
liability is determined based on claims filed and an estimate of claims incurred
but not yet reported.
Reclassifications
Certain reclassifications were made in prior years' financial statements to
conform to current presentations.
F-12
<PAGE> 47
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CASH FLOW INFORMATION
The following tables provide additional information related to the
Consolidated Statements of Cash Flows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
(IN THOUSANDS)
Items providing (not providing) cash from continuing
operations:
Minority interest............................................ $ 8,526 $ 11,922 $ 5,166
Depreciation................................................. 44,665 35,030 30,896
Amortization................................................. 25,780 24,006 13,118
Provision for doubtful accounts.............................. 7,262 3,419 5,485
Provision for plant relocations and consolidations........... 3,231 -- 18,969
Changes in operating assets and liabilities, net of effects
from purchases and dispositions:
Accounts receivable.......................................... (30,665) (25,464) 41,399
Inventories.................................................. (31,435) (4,763) 27,336
Prepaid expenses and other assets............................ (13,912) (23,621) (2,965)
Accounts payable, accrued expenses and other current
liabilities............................................... 299 (22,129) (12,603)
Current and deferred taxes................................... 16,118 16,332 (24,336)
Other operating activities -- net............................ 374 (1,018) (6,500)
-------- -------- --------
Net items providing cash from continuing operations............ $ 30,243 $ 13,714 $ 95,965
-------- -------- --------
-------- -------- --------
Net assets of business sold:
Total assets................................................. $ -- $ -- $ 2,696
Total liabilities............................................ -- -- 871
-------- -------- --------
Net assets................................................... $ -- $ -- $ 1,825
-------- -------- --------
-------- -------- --------
Net assets of businesses purchased:
Total assets................................................. $ 71,693 $ 58,040 $127,825
Total liabilities............................................ 48,063 27,448 37,437
-------- -------- --------
Net assets................................................... $ 23,630 $ 30,592 $ 90,388
-------- -------- --------
-------- -------- --------
Interest paid................................................ $ 44,570 $ 27,279 $ 23,142
Income taxes paid............................................ $ 11,406 $ 3,334 $ 11,060
-------- -------- --------
-------- -------- --------
</TABLE>
PHOTOFINISHING TRANSACTION
Photofinishing operations are conducted by Qualex Inc., which was formed in
March 1988 by the combination of Actava's photofinishing subsidiary with the
domestic photofinishing operations of Eastman Kodak Company. While Actava and
Kodak currently share Qualex's equity, income and dividends equally, Actava has
51% voting control by virtue of its ownership of 50% of Qualex's common stock
and 100% of Qualex's voting preferred stock. Actava also has majority
representation on the Qualex Board of Directors, although certain decisions, not
including the declaration of dividends, require the concurrence of Kodak's Board
representatives.
Actava consolidates the accounts of Qualex and presents Kodak's portion of
ownership and equity in the income of Qualex as minority interest.
The Qualex Shareholders' Agreement between Actava and Eastman Kodak Company
stipulates that upon a change of control at Actava certain Qualex preferred
stock, including the voting preferred owned by
F-13
<PAGE> 48
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Actava, will be redeemed. On March 28, 1991, the Qualex Shareholders' Agreement
between Actava and Kodak was amended. The amendment stipulates that a change of
control of Actava, as defined in the Shareholders' Agreement, occurred on
February 6, 1991. However, in the amendment Kodak waived its change of control
rights under the Shareholders' Agreement with respect to the February 6, 1991
change of control. As of March 1, 1992, and each subsequent March 1, Kodak may
withdraw its waiver, and enforce its rights under the Agreement by providing
Actava with 30 days written notice. At March 3, 1994, Kodak had not provided
notice to Actava of an election to withdraw its waiver. The Board of Directors
of Qualex was increased from seven to nine members, comprised of five
representatives of Actava, three representatives of Kodak and the chief
executive officer of Qualex, pursuant to the amendment.
Should Kodak withdraw its waiver or if an additional change in control of
Actava were to occur and if the Qualex preferred stock were redeemed, Actava
would own 50% of the voting securities of Qualex. While Actava's voting stock
would be reduced from 51% to 50%, this change would not alter Actava's and
Kodak's current equal interest in the equity, earnings and cash dividends of
Qualex. In addition, the Board of Directors of Qualex would be composed of 11
members, comprised of five representatives of Actava, five representatives of
Kodak and the chief executive officer of Qualex, and all actions of the Board
would require the affirmative vote of at least seven board members. In the event
these changes were to occur, Actava may possibly be deemed to no longer control
Qualex and Actava would no longer be in a position unilaterally to control,
among other things, the declaration of dividends to Actava and Kodak by Qualex.
If Actava were deemed in the future to no longer be in control of Qualex,
Actava would cease to consolidate the accounts of Qualex. In that event, Actava
would account for its ownership of Qualex by using the equity method of
accounting. Such a development would not affect the net income or shareholders'
equity of Actava. However, Actava's consolidated total assets, liabilities,
sales and costs and expenses would be reduced as they would no longer include
the specific accounts of Qualex. If Actava had accounted for Qualex using the
equity method during all of 1993, Actava's total assets and liabilities would
have been $696,374,000 and $500,460,000, respectively, and sales and total costs
and expenses would have been $465,812,000 and $518,963,000, respectively.
ACQUISITIONS
On June 8, 1993, the Company acquired substantially all the assets of
Diversified Products Corporation ("DP") for a net purchase price consisting of
$11,629,500, the issuance of 1,090,909 shares of the Company's Common Stock
valued at $12,000,000, and the assumption or payment of certain liabilities
including trade payables and a revolving credit facility. The Company also
entered into an agreement which may provide the seller the right to additional
payments depending upon the value of the issued shares over a period of not
longer than one year from the purchase date. The issuance of additional payments
of cash or additional shares will not increase the cost to DP; any subsequent
issuance will only affect the manner in which the total purchase price is
recorded for Actava. This transaction was accounted for using the purchase
method of accounting; accordingly, the purchased assets and liabilities have
been recorded at their estimated fair value at the date of the acquisition. The
purchase price resulted in an excess of costs over net assets acquired of
approximately $11,417,000. The results of operations of the acquired business
have been included in the consolidated financial statements since the date of
acquisition.
The following data represents the combined unaudited operating results of
Actava on a pro forma basis as if the above transaction had taken place at the
beginning of 1992. The pro forma information does not necessarily reflect the
results of operations as they would have been had the transaction actually taken
place at
F-14
<PAGE> 49
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
that time. Adjustments include amounts of depreciation to reflect the fair value
and economic lives of property, plant and equipment and amortization of
intangible assets:
<TABLE>
<CAPTION>
PRO FORMA
YEAR ENDED
DECEMBER 31,
-------------------------
1993 1992
---------- ----------
(IN THOUSANDS EXCEPT PER
SHARE AMOUNTS)
UNAUDITED
<S> <C> <C>
Sales....................................................... $1,294,776 $1,304,993
Net income (loss)........................................... (56,988) 1,352
Income (loss) per share -- primary.......................... (3.23) .08
</TABLE>
During 1992, Qualex acquired Samiljan Foto, L.P. and certain other
photofinishing operations for $21,228,000 and $22,997,000 respectively,
including expenses. For one of the businesses in which Qualex purchased a
majority interest in 1992, the sellers have the right to require Qualex to
purchase the remaining interest, beginning in 1997, at an amount not to exceed
$18,000,000. During 1991, Qualex acquired Guardian Photo Inc. and Phototron
Corporation for $73,785,000 and $16,137,000, respectively, including expenses.
In a concurrent transaction with the acquisition of Phototron Corporation,
Actava, Kodak and Qualex settled the litigation brought against them by
Phototron Corporation.
These transactions were accounted for using the purchase method of
accounting, accordingly; the assets and liabilities of the purchased businesses
have been recorded at their estimated fair value at the dates of acquisition.
The purchase price resulted in an excess of costs over net assets acquired of
approximately $23,321,000 and $53,848,000 during 1992 and 1991, respectively, in
addition to $19,215,000 and $30,300,000 attributed to customer lists,
respectively. The results of operations of the businesses acquired have been
included in the consolidated financial statements since the dates of
acquisition.
The following data represents the combined unaudited operating results of
Actava on a pro forma basis as if the 1991 transactions had taken place at the
beginning of 1991. Pro forma information for 1992 acquisitions would not be
significantly different from the results reported. The pro forma information
does not necessarily reflect the results of operations as they would have been
had the transaction actually taken place at that time. Adjustments include
amounts of depreciation to reflect the fair value and economic lives of
property, plant and equipment and amortization of intangible assets.
<TABLE>
<CAPTION>
PRO FORMA
YEAR ENDED
DECEMBER 31,
1991
----------------
(IN THOUSANDS
EXCEPT PER SHARE
AMOUNTS)
UNAUDITED
<S> <C>
Sales......................................................................... $1,029,676
Net (loss).................................................................... (53,538)
(Loss) per share -- primary................................................... (3.24)
</TABLE>
ACCOUNTS AND NOTES RECEIVABLE
Receivables from sales of Actava's lawn and garden products amounted to
$146,994,000 and $157,605,000 at December 31, 1993 and 1992, respectively. The
receivables are primarily due from independent distributors located throughout
the United States. Amounts due from distributors are supported by a security
interest in the inventory or accounts receivable of the distributors. The
receivables generally have extended due dates which correspond to the seasonal
nature of the products' retail selling season. Concentrations of credit risk due
to the common business of the customers are limited due to the number of
customers
F-15
<PAGE> 50
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
comprising the customer base and their geographic location. Ongoing credit
evaluations of customer's financial condition are performed and reserves for
potential credit losses are maintained. Such losses, in the aggregate, have not
exceeded management's expectations.
Photofinishing sales are made to national, regional and local retailers
located throughout the United States, including mass merchants, grocery store
chains and drug store chains. Photofinishing receivables, which were $70,744,000
and $76,202,000 at December 31, 1993 and 1992, respectively, are unsecured and
generally due within 20 days following the end of each month. Included in
accounts receivable at December 31, 1993 and 1992 are $54,711,000 and
$47,564,000, respectively, due from national retail chains. Of these amounts,
$9,812,000 and $9,465,000 at December 31, 1993 and 1992, respectively, were
receivable from one such customer on net sales of $84,297,000 and $86,611,000,
respectively. The Company provides an allowance for doubtful accounts equal to
the estimated losses expected to be incurred in the collection of accounts
receivable. Such losses have consistently been within management's expectations.
Receivables from the sale of sporting goods are primarily from mass
merchants and sporting goods retailers located throughout the United States. The
receivables, which are unsecured, were $71,836,000 and $19,781,000 at December
31, 1993 and 1992, respectively, and are generally due within 30 to 60 days. Of
these amounts, $23,362,000, and $4,686,000 are from the same four highest
balance customers for December 31, 1993 and 1992, respectively. The companies
which comprise the sporting goods group maintain allowances for potential credit
losses and such losses, in the aggregate, have not exceeded management's
expectations.
TRITON GROUP LTD. LOAN
At December 31, 1993, the Company had a $26,726,000 million note receivable
from Triton Group Ltd. secured by 4,413,598 shares of Actava Common Stock. At
December 31, 1992, $31,726,000 was outstanding under the agreement and was
secured by 4,338,598 shares of Actava Common Stock.
Effective June 25, 1993, the Company and Triton modified the terms of the
loan as part of a plan of reorganization filed by Triton under Chapter 11 of the
U.S. Bankruptcy Code. The modifications, which became effective June 25, 1993,
included: extending the due date of the Loan to April 1, 1997; reducing the
interest rate to prime plus 1 1/2% for the first six months following June 25,
1993, to prime plus 2% for the next six months, and to prime plus 2 1/2% for the
remainder of the term of the note; revising collateral maintenance (margin call)
requirements; and providing for release of collateral under certain
circumstances. Under the modified agreements, Actava's right of first refusal
with respect to any sale by Triton of its Actava Common stock will continue in
effect until the loan is paid off. The Stockholder Agreement was amended to
permit Triton to designate two directors (who are not officers or employees of
Triton) on an expanded nine-member Board of Directors so long as Triton
continues to own 20% or more of Actava's outstanding Common Stock.
Triton filed a motion on July 30, 1993, with the United States Bankruptcy
Court for the Southern District of California seeking to modify Triton's
recently approved Plan of Reorganization. The modifications sought by Triton
would have amended or eliminated the collateral maintenance (margin call)
provisions that are an integral part of the Amended and Restated Loan Agreement.
On August 2, 1993, the Bankruptcy Court entered a temporary restraining order
suspending the effectiveness of the margin call provisions until the Court had
an opportunity to hear Triton's motion seeking preliminary injunction. The
motion seeking a preliminary injunction was heard on August 10, 1993, and was
denied. Triton then withdrew its motion to modify its Plan of Reorganization.
Therefore, the provisions of the Amended and Restated Loan Agreement continue to
remain in effect. On August 19, 1993, the Amended and Restated Loan agreement
was amended to allow Triton to satisfy certain margin call requirements by
making deposits to a Collateral Deposit Account in lieu of delivering
certificates of deposit. The margin call provisions for principal repayments and
transfers of shares of Company Common Stock were not amended. On December 7,
1993, the Amended and Restated Loan Agreement was amended, in connection with a
$5,000,000 prepayment of principal received on December 7, 1993, to provide for
quarterly principal payment installments of $1,250,000 due on the last day of
each quarter
F-16
<PAGE> 51
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of each year beginning March 31, 1994, with any unpaid principal and accrued
interest due on April 1, 1997. The Agreement was also amended to require 75,000
additional shares of Actava Common Stock to be pledged as collateral and to
modify the margin call provisions of the Agreement to provide a $7.50 minimum
per share value of Actava Common Stock for purposes of determining the amount of
any margin call mandatory payments. These modifications limit the circumstances
under which Triton must pledge additional collateral for the loan; however, the
4,413,598 shares of Actava Common Stock owned by Triton will continue to be
pledged to secure the loan until the loan is paid in full. At March 3, 1994, the
pledged shares had a market value of $30,895,000 as compared to the loan balance
of $26,726,000. In the opinion of management, the shares held as collateral are,
and will continue to be, sufficient to provide for realization of the loan.
INVENTORIES
Inventory balances are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1993 1992
-------- --------
<S> <C> <C>
(IN THOUSANDS)
Finished goods and goods purchased for resale.................. $ 82,559 $ 49,279
Raw materials and supplies..................................... 46,018 33,537
-------- --------
128,577 82,816
Reserve for LIFO cost valuation................................ (20,138) (18,829)
-------- --------
$108,439 $ 63,987
-------- --------
-------- --------
</TABLE>
Work in process is not considered significant.
During 1991, certain inventory quantities were reduced resulting in a
liquidation of LIFO inventory quantities which were carried at lower costs
prevailing in prior years as compared with the cost of current year purchases.
The utilization of this lower cost inventory decreased net loss by approximately
$1,487,000 and decreased loss per share of common stock by $.09.
LONG-TERM INVESTMENTS
Marketable securities are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1993 1992
------- -------
<S> <C> <C>
(IN THOUSANDS)
Marketable equity securities, at lower cost or market............ $15,850 $15,031
Bonds and commercial paper....................................... 3,003 7,430
U.S. Treasury bills.............................................. 7,758 2,258
------- -------
Total.................................................. $26,611 $24,719
------- -------
------- -------
</TABLE>
Net realized gains (losses) on the sale of these securities totaled
$(185,000) and $134,000 in 1993 and 1992, respectively, and have been included
in the determination of income. At December 31, 1993, the value of marketable
equity securities exceeded their cost by $265,000, while at December 31, 1992,
unrealized losses on these securities of $201,000 were recorded to a valuation
allowance and included in shareholders' equity. The market value of debt
securities approximates cost.
F-17
<PAGE> 52
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accounts payable, accrued expenses and other current liabilities, including
$31,392,000 in 1993 and $44,274,000 in 1992 due to Eastman Kodak Company, are
summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1993 1992
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Accrued salaries and wages....................................... $ 8,363 $ 10,211
Accrued interest................................................. 14,471 15,741
Accrued advertising and promotion................................ 25,238 15,039
Deferred income.................................................. 13,791 17,251
Self-insurance claims payable.................................... 35,070 35,683
Reserve for relocation and consolidation of photofinishing
operations..................................................... 6,754 15,286
Other............................................................ 74,033 51,599
-------- --------
$177,720 $160,810
-------- --------
-------- --------
</TABLE>
NOTES PAYABLE AND LONG-TERM DEBT
Qualex has three separate line of credit agreements for working capital
needs. These agreements are $5,000,000 each, for a total of $15,000,000. The
Company pays a facility fee of 1/4% per annum on the committed line of credit
agreements. At December 31, 1993, $3,200,000 was outstanding under these
agreements while no amounts were outstanding at December 31, 1992.
Included in Notes Payable at December 31, 1993 and 1992 is $87,359,000 and
$58,243,000, respectively, which was outstanding under a three year Finance and
Security Agreement which provides working capital to the Snapper division. The
Agreement, dated October 23, 1992, is for $75,000,000 (and may be increased
under certain circumstances up to $100,000,000 for a specified period of time).
Interest is payable at the prime rate plus 3/4% to 1 1/4%, depending upon the
prime rate in effect. The Agreement provides for the payment of an annual line
fee of $487,500 which is subject to increases in certain circumstances. The loan
is principally secured by Snapper assets and certain inventory of Snapper and
requires Actava to comply with various restrictive financial covenants. The
assets which serve as collateral are determined by reference to the outstanding
balance under the credit agreement and the qualification of the assets as
collateral is defined in the credit agreement; however, the assets potentially
available as collateral are, in the aggregate, $173,068,000. As of March 29,
1994, effective as of December 31, 1993, various provisions of the Agreement,
including the financial covenants, were amended.
During 1992, in order to provide additional working capital and for general
corporate purposes, an Actava Sports subsidiary entered into a three year Loan
and Security Agreement with a financial institution to provide up to $35,000,000
of working capital. Interest is payable at the prime rate plus 1 1/4%. The
Agreement provides for a facility fee of $350,000. The loan is principally
secured by certain receivables and inventory of the subsidiary and requires the
subsidiary to comply with various restrictive financial covenants. The assets
which serve as collateral are determined by reference to the outstanding balance
under the credit agreement and the qualification of the assets as collateral is
defined in the credit agreement; however, the assets potentially available as
collateral are, in the aggregate, $23,681,000. At December 31, 1993, $1,846,000
was outstanding under the agreement while no amounts were outstanding at
December 31, 1992.
During 1992, in order to provide additional working capital and for general
corporate purposes, an Actava Sports subsidiary entered into a one-year
Revolving Loan Agreement with a financial institution to provide up to
$6,500,000 for working capital. Interest is payable at the prime rate of the
financial institution. The loan is unsecured and requires the subsidiary to
comply with various restrictive financial covenants. In August, 1993, the
agreement was amended to increase the facility limit to $8,000,000 for a
six-month period beginning
F-18
<PAGE> 53
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
September 1, 1993, and to extend the term of the agreement until August 31,
1994. At December 31, 1993, $2,700,000 was outstanding under the Agreement while
no amounts were outstanding at December 31, 1992.
In April 1993, a Revolving Loan and Security Agreement with respect to a
revolving credit facility of up to $10,000,000 was entered into by an Actava
Sports subsidiary. Interest is payable at the prime rate plus 1%. The agreement
provides for a facility fee of $25,000. The loan is principally secured by
certain receivables and inventory of the subsidiary and requires the subsidiary
to comply with various restrictive financial covenants. The assets which serve
as collateral are determined by reference to the outstanding balance under the
credit agreement and the qualification of the assets as collateral is defined in
the credit agreement; however, the assets potentially available as collateral
are, in the aggregate, $12,881,000. At December 31, 1993 and 1992, no amounts
were outstanding under the agreement.
In December 1993, an Actava Sports subsidiary, DP, entered into a Finance
and Security Agreement with two financial institutions in order to provide up to
$50,000,000 of working capital under a revolving credit facility. The agreement
is secured by certain receivables, inventories, property, plant and equipment,
and intangibles, as well as DP's issued and outstanding common stock and
requires compliance with various restrictive financial covenants. The assets
which serve as collateral are determined by reference to the outstanding balance
under the credit agreement and the qualification of the assets as collateral is
defined in the credit agreement; however, the assets potentially available as
collateral are, in the aggregate, $109,000,000. As of March 29, 1994, effective
December 31, 1993, various provisions of the Agreement, including the financial
covenants, were amended. Interest is payable at the prime rate plus 1 1/2%. The
Agreement provides for an annual facility fee of $375,000. At December 31, 1993,
$36,178,000 was outstanding under the agreement.
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1993 1992
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Senior notes -- Qualex........................................... $200,000 $200,000
Revolving credit agreement -- Qualex............................. 10,000 --
Capitalized lease obligations.................................... 545 5,053
Other long-term debt:
Secured (4-9% notes due at various dates to 2002)................ 1,900 2,630
Unsecured (4-8% notes due at various dates to 2001).............. 8,442 12,674
-------- --------
$220,887 $220,357
-------- --------
-------- --------
</TABLE>
Qualex issued through a private placement $200,000,000 of Senior Notes in
1992 with September 1 maturities in 1997, 1999 and 2002 of $60,000,000,
$70,000,000 and $70,000,000, respectively, with interest rates of 7.99%, 8.45%
and 8.84%, respectively.
During 1992, Qualex entered into an unsecured $115,000,000 Revolving Credit
Agreement with eight financial institutions which will expire in May 1995.
Interest is payable under three rate options which are determined by reference
to the prime rate, the London interbank offered rate plus 1/2% to 3/4%, and
competitive bids. The Agreement provides for a participation fee of 1/8% and an
annual facility fee of 1/4%. At December 31, 1993, $10,000,000 was outstanding
under the agreement while no amounts were outstanding at December 31, 1992.
The Qualex Credit Agreement and the Shareholders' Agreement with Eastman
Kodak Company restrict the amount of net assets of Qualex which may be
transferred to Actava by dividend or other means. At December 31, 1993,
approximately $166,000,000 of the $194,000,000 representing Actava's share of
the net assets of Qualex was restricted under the terms of these agreements.
F-19
<PAGE> 54
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Collateral for certain of the long-term debt includes real property. Assets
pledged as collateral under the borrowings are not material. Maturities of
long-term and subordinated debt are $15,142,000 in 1995, $35,172,000 in 1996,
$75,783,000 in 1997 and $59,121,000 in 1998.
The fair value of Actava's long-term and subordinated debt, including the
current portion, at December 31, 1993 is estimated to be approximately
$445,000,000 and was estimated at $425,000,000 at December 31, 1992. This
estimate is based on a discounted cash flow analysis using Actava's current
incremental borrowing rates for similar types of agreements and on quoted market
prices for issues which are traded. Actava does not anticipate settlement of
long-term debt at fair value and currently does not intend to pay the debt prior
to maturity.
SUBORDINATED DEBT
Subordinated debt is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1993 1992
-------- --------
(IN THOUSANDS)
<S> <C> <C>
6% Senior Swiss Franc Bonds due 1996........................... $ 30,152 $ 30,152
6 1/2% Convertible Debentures due 2002......................... 75,000 75,000
9 1/2% Debentures due 1998, net of unamortized discount of
$1,308 in 1993 and $1,593 in 1992............................ 58,176 57,891
9 7/8% Senior Debentures due 1997, net of unamortized discount
of $468 in 1993 and $661 in 1992............................. 20,532 23,339
10% Debentures due 1999........................................ 6,691 7,184
-------- --------
$190,551 $193,566
-------- --------
-------- --------
</TABLE>
In 1986 Actava issued 6% Senior Subordinated Swiss Franc Bonds due 1996 for
100,000,000 Swiss francs. Simultaneously, in order to eliminate exposure to
fluctuations in the currency exchange rate over the life of the bonds, Actava
entered into a currency swap agreement with a financial institution whereby
Actava received approximately $48,000,000 in exchange for the Swiss Franc Bond
proceeds. As a result of the swap agreement, Actava will, in effect, make its
interest and principal bond repayments in U.S. dollars without regard for
changes in the currency exchange rate. A default by the counterparty to the swap
agreement would expose Actava to potential currency exchange risk on the
remaining bond interest and principal payments in that Actava would be required
to purchase Swiss francs at current exchange rates rather than at the swap
agreement exchange rate. The amount of this potential risk cannot be currently
calculated as the principal and interest payments will be made in future years
and alternative swap agreements could be entered into by Actava. At December 31,
1993, the swap agreement has an effective exchange rate over its remaining term
of .5459 Swiss francs per U.S. dollar while the U.S. dollar equivalent market
exchange rate was .6734. After considering the stated interest rate, the cost of
the currency swap agreement, taxes and underwriting commissions, the effective
cost of the bonds is approximately 11.3%. The fair value of the currency swap as
of December 31, 1993 and 1992, was $10,795,000 and $7,242,000, respectively;
however, this is subject to change as domestic interest rates and foreign
currency markets are determining factors.
Actava, at its option, may redeem the Senior Subordinated Swiss Franc Bonds
at 101.0% plus accrued interest for one year subsequent to March 6, 1994 and at
decreasing amounts thereafter. The Bonds include a covenant which restricts the
amount of stockholders' equity available for cash dividends and the cash
redemption of capital stock. At December 31, 1993, $3,412,000 was available for
these purposes pursuant to this covenant.
In 1987 Actava issued $75,000,000 of 6 1/2% Convertible Subordinated
Debentures due in 2002 in the Euro-dollar market. The Debentures are convertible
into Actava's Common Stock at a conversion price of
F-20
<PAGE> 55
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$41 5/8 per share. At Actava's option the Debentures may be redeemed at 101%
plus accrued interest prior to August 4, 1994 and at 100% thereafter.
The 9 7/8% Senior Subordinated Debentures are redeemable at the option of
Actava at 101.555% of the principal amount plus accrued interest if redeemed
prior to March 15, 1994, and at decreasing prices thereafter. Mandatory sinking
fund payments of $3,000,000 (which Actava may increase to $6,000,000 annually)
began in 1982 and are intended to retire, at par plus accrued interest, 75% of
the issue prior to maturity.
At the option of Actava, the 10% Subordinated Debentures are redeemable, in
whole or in part, at the principal amount plus accrued interest. Sinking fund
payments of 10% of the outstanding principal amount commenced in 1989; however,
Actava receives credit for Debentures redeemed or otherwise acquired in excess
of sinking fund payments.
CAPITAL STOCK
Preferred and Preference Stock
There are 5,000,000 authorized shares of Preferred Stock and 1,000,000
authorized shares of Preference Stock, none of which were outstanding or
designated as to a particular series at December 31, 1993.
Common Stock
There are 100,000,000 authorized shares of Common Stock, $1 par value. At
December 31, 1993, 1992 and 1991 there were 17,635,186, 16,544,277 and
16,544,027 shares issued and outstanding, respectively, after deducting
5,132,558, 6,223,467 and 6,223,717 treasury shares, respectively.
Actava has reserved the shares of Common Stock listed below for possible
future issuance:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1993 1992
--------- ---------
<S> <C> <C>
Stock options................................................. 761,000 871,375
6 1/2% Convertible Subordinated Debentures.................... 1,801,802 1,801,802
Restricted stock plan......................................... 102,800 102,800
--------- ---------
2,665,602 2,775,977
--------- ---------
--------- ---------
</TABLE>
F-21
<PAGE> 56
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock Options
Actava's stock option plans provide for the issuance of qualified incentive
stock options and nonqualified stock options. Incentive stock options may be
issued at a per share price not less than the market value of Actava's Common
Stock at the date of grant. Nonqualified options may be issued generally at
prices and on terms determined by the stock option committee. The following
table reflects changes in the incentive stock options issued under these plans:
<TABLE>
<CAPTION>
APPROXIMATE
PRICE RANGE
SHARES PER SHARE
-------- -----------
<S> <C> <C>
Options outstanding at January 1, 1991......................... 138,525 $ 20-28
Granted...................................................... 64,500 12
Exercised.................................................... (30,000) 12
Canceled..................................................... (13,000) 28
Expired...................................................... (104,775) 20
-------- -----------
Options outstanding at December 31, 1991....................... 55,250 12-28
Granted...................................................... 60,000 12-15
Exercised.................................................... (250) 12
Canceled..................................................... (17,125) 12-28
-------- -----------
Options outstanding at December 31, 1992....................... 97,875 12-28
Granted...................................................... 50,000 9-12
Canceled..................................................... (21,125) 12-28
-------- -----------
Options outstanding at December 31, 1993....................... 126,750 $ 9-28
-------- -----------
-------- -----------
</TABLE>
During 1993 nonqualified options for 75,500 shares at $13.75 per share were
granted.
At December 31, 1993, incentive stock options totaling 64,000 shares were
exercisable at prices ranging from $11.875 to $27.875 and nonqualified options
totaling 53,875 shares were exercisable at prices ranging from $13.75 to $14.50.
There were 591,550 and 696,300 shares under Actava's stock option plans at
December 31, 1993 and 1992, respectively, which were available for the granting
of additional stock options.
PROVISIONS FOR PLANT RELOCATION AND CONSOLIDATION
The 1993 and 1991 consolidated provisions for plant relocations and
consolidations include $4,096,000 and $17,037,000, respectively, before tax and
minority interest for the costs of relocating or consolidating certain of
Qualex's photofinishing plants. After tax benefit and minority interest, the
Qualex provisions amounted to $1,038,000 and $5,196,000 or $.06 and $.31 per
share for 1993 and 1991, respectively. In addition, the 1993 provision includes
reductions of $865,000, before and after tax, or $.05 per share, to reserves for
consolidating certain lawn and garden facilities and Actava Sports facilities.
The 1991 provision also includes $500,000 before tax ($315,000 net of tax or
$.02 per share) for consolidating facilities at a sporting goods subsidiary and
$1,432,000 before tax ($945,000 net of tax or $.06 per share) for reducing the
Actava corporate office facilities.
F-22
<PAGE> 57
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OTHER INCOME -- NET
Other income net of other (expenses) from continuing operations is
summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
(IN THOUSANDS)
Interest and investment income.......................... $ 8,731 $ 8,399 $ 7,459
Miscellaneous income (expense).......................... (11,646) (2,300) (3,922)
------- ------- -------
$(2,915) $ 6,099 $ 3,537
------- ------- -------
------- ------- -------
</TABLE>
Early payment interest credit expense which is the result of cash payments
received by Snapper from distributors prior to receivable due dates is included
in net miscellaneous income (expense). The early payment interest credit expense
was $4,322,000 for 1993, $2,522,000 for 1992, and $4,348,000 for 1991.
INCOME TAXES
Income tax expense (benefit) is composed of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
LIABILITY DEFERRED
METHOD METHOD
--------- -------------------
1993 1992 1991
--------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Current federal........................................ $ 7,620 $ 6,900 $ 7,366
Current state.......................................... 3,451 4,360 3,256
Deferred federal and state............................. 4,092 12,068 (20,655)
--------- ------- --------
$ 15,163 $23,328 $(10,033)
--------- ------- --------
--------- ------- --------
</TABLE>
Income tax expense (benefit) computed by applying federal statutory rates
to income (loss) before income taxes is reconciled to the actual income tax
expense (benefit) as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
LIABILITY DEFERRED
METHOD METHOD
--------- -------------------
1993 1992 1991
--------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Computed tax at statutory rates........................ $ (6,825) $15,226 $(18,934)
State tax, net of federal benefit...................... 2,243 2,877 2,149
Effect of tax rate changes on realization of timing
differences.......................................... 414 153 301
Amortization of goodwill............................... 3,123 3,235 2,753
Effect of nontax basis adjustments in connection with
acquisitions......................................... -- 914 1,037
Tax-exempt interest.................................... (26) (80) (70)
Dividends received deduction........................... (290) -- --
Undistributed earnings of majority-owned subsidiary.... 603 812 351
Over provision of current tax.......................... -- -- 1,675
Deferred tax valuation allowance....................... 16,227 -- --
Other.................................................. (306) 191 705
--------- ------- --------
$ 15,163 $23,328 $(10,033)
--------- ------- --------
--------- ------- --------
</TABLE>
F-23
<PAGE> 58
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of deferred tax assets and liabilities at December
31, 1993, are as follows:
<TABLE>
<CAPTION>
DEFERRED TAX DEFERRED TAX
ASSETS LIABILITIES
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Net operating loss carryforward........................ $ 30,383
Reserves for losses and write-down of certain assets... 14,885
Reserves for self-insurance............................ 11,781
Alternative minimum tax credit......................... 8,805
Provision for loss on loans and receivables............ 3,509
Tax amortizable intangible............................. 3,145
State tax accruals..................................... 2,676
Gain on hedge transaction.............................. 2,609
Obligation for postretirement benefits................. 1,966
Plant relocations and consolidations................... 1,541
Charitable contribution carryforward................... 1,053
Other.................................................. 1,913 $ 1,793
Investment in less than 80% owned subsidiary........... -- 37,627
Basis differences in fixed assets...................... -- 29,387
Purchase of safe harbor lease investment............... -- 9,783
Undistributed earnings of majority-owned subsidiary.... -- 1,282
------------ ------------
Subtotal............................................... 84,266 79,872
Valuation allowance.................................... 28,675 --
------------ ------------
Total deferred taxes................................... $ 55,591 $ 79,872
------------ ------------
------------ ------------
Net deferred taxes..................................... $ 24,281
------------
------------
</TABLE>
The components of deferred income tax expense (benefit) for the years ended
December 31, 1992 and 1991 are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1992 1991
------- --------
(IN THOUSANDS)
<S> <C> <C>
Accelerated depreciation.................................. $ 5,138 $ 3,273
Provision for loss on loans and receivables............... 366 (1,178)
Reserves for losses and write-down of certain assets...... 1,961 (1,337)
Plant relocations and consolidations...................... 9,148 (1,714)
Gain on hedge transaction................................. (3,356) 273
Difference in book and tax basis of assets disposed of.... (881) 197
Undistributed earnings of majority-owned subsidiary....... 547 (110)
Recognition of income tax net operating loss benefit...... -- (19,986)
Other..................................................... (855) (73)
------- --------
$12,068 $(20,655)
------- --------
------- --------
</TABLE>
Actava has a net operating loss carryforward for federal income tax
purposes of approximately $86,800,000 at December 31, 1993, which will expire in
years 2006 through 2008. Actava has an alternative minimum tax credit
carryforward of approximately $8,800,000, which may be carried forward
indefinitely, available to offset regular tax in certain circumstances.
PENSION PLANS
Actava and its subsidiaries have several noncontributory defined benefit
and other pension plans which are "qualified" under federal tax law and cover
substantially all employees. In addition Actava has a
F-24
<PAGE> 59
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
"nonqualified" supplemental retirement plan which provides for the payment of
benefits to certain employees in excess of those payable by the qualified plans.
Benefits under the qualified and nonqualified plans are based upon the
employee's years of service and level of compensation. Actava's funding policy
for the qualified plans is to contribute annually such amounts as are necessary
to provide assets sufficient to meet the benefits to be paid to the plans'
members and to keep the plans actuarially sound. Contributions are intended to
provide not only for benefits attributed to service to date but also for those
expected to be earned in the future.
The components of net periodic pension costs are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1993 1992 1991
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost -- benefits earned during the period......... $ 2,724 $ 3,234 $ 2,707
Interest cost on projected benefit obligation............. 1,892 1,712 1,378
Actual return on plan assets.............................. (2,318) (1,912) (2,304)
Net amortization and deferral............................. 454 298 1,001
------- ------- -------
$ 2,752 $ 3,332 $ 2,782
------- ------- -------
------- ------- -------
</TABLE>
Assumptions used in the accounting for the defined benefit plans are as
follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Weighted-average discount rates............................... 7.2 % 8.4 % 8.3 %
Rates of increase in compensation levels...................... 4.7 % 6.1 % 6.2 %
Expected long-term rate of return on assets................... 7.6 % 8.3 % 8.3 %
</TABLE>
These actuarial assumptions were changed during 1993 for accounting for the
defined benefit plans as of December 31, 1993. The change in discount rates from
8.4% for 1992 to 7.2% for 1993 increased projected benefit obligations by
approximately 12%.
F-25
<PAGE> 60
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following tables set forth the funded status and amount recognized in
the Consolidated Balance Sheets for Actava's defined benefit pension plans:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1993 1992
-------- --------
(IN THOUSANDS)
<S> <C> <C>
PLANS WHOSE ASSETS EXCEED ACCUMULATED BENEFITS
Actuarial present value of benefit obligations:
Vested benefit obligations................................... $ (4,652) $(11,717)
-------- --------
-------- --------
Accumulated benefit obligation............................... $ (5,232) $(13,100)
-------- --------
-------- --------
Projected benefit obligations................................ $ (5,232) $(15,035)
Plan assets at fair value.................................... 6,296 15,197
-------- --------
Funded status -- plan assets in excess of projected benefit
obligation................................................ $ 1,064 $ 162
-------- --------
-------- --------
Comprised of:
Accrued pension cost......................................... $ -- $ (2,265)
Prepaid pension cost......................................... 415 332
Unrecognized net gain (loss)................................. (523) 702
Unrecognized prior service cost.............................. 187 325
Unrecognized net assets at January 1, 1987, net of
amortization.............................................. 985 1,068
-------- --------
$ 1,064 $ 162
-------- --------
-------- --------
PLANS WHOSE ACCUMULATED BENEFITS EXCEED ASSETS
Actuarial present value of benefit obligations:
Vested benefit obligation.................................... $(21,174) $ (8,198)
-------- --------
-------- --------
Accumulated benefit obligation............................... $(22,224) $ (8,340)
-------- --------
-------- --------
Projected benefit obligation................................. $(25,320) $ (9,035)
Plan assets at fair value.................................... 18,615 5,594
-------- --------
Funded status -- projected benefit obligation in excess of
plan assets............................................... $ (6,705) $ (3,441)
-------- --------
-------- --------
Comprised of:
Accrued pension cost......................................... $ (4,637) $ (3,246)
Prepaid pension cost......................................... -- 596
Unrecognized net gain (loss)................................. (2,157) (1,098)
Unrecognized prior service cost.............................. (215) (215)
Unrecognized net obligation at January 1, 1987, net of
amortization.............................................. 304 522
-------- --------
$ (6,705) $ (3,441)
-------- --------
-------- --------
</TABLE>
Substantially all of the plan assets at December 31, 1993 and 1992 are
invested in governmental bonds, mutual funds and temporary investments.
Some of the Company's subsidiaries also have defined contribution plans
which provide for discretionary annual contributions covering substantially all
of their employees. Contributions from continuing operations of approximately
$5,900,000 in 1993, $7,000,000 in 1992, and $4,800,000 in 1991 were made to
these plans.
LEASES
Actava and its subsidiaries are lessees of warehouses, manufacturing
facilities and other properties under numerous noncancelable leases.
F-26
<PAGE> 61
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Capitalized leased property, which is not significant, is included in
property, plant and equipment and other assets.
Future minimum payments for the capital leases and noncancelable operating
leases with initial or remaining terms of one year or more are summarized as
follows:
<TABLE>
<CAPTION>
YEARS ENDING OPERATING CAPITAL
DECEMBER 31, LEASES LEASES
------------------------------------------------------------- --------- -------
(IN THOUSANDS)
<S> <C> <C>
1994......................................................... $12,976 $ 462
1995......................................................... 10,321 287
1996......................................................... 8,813 157
1997......................................................... 7,717 138
1998......................................................... 5,377 0
Thereafter................................................... 12,847 0
--------- -------
Total minimum lease payments................................. $58,051 1,044
---------
---------
Less amounts representing interest........................... (128)
-------
Present value of net minimum lease payments.................. 916
-------
-------
</TABLE>
Rental expense charged to continuing operations for all operating leases
was $19,729,000, $21,499,000 and $17,720,000 for the years ended December 31,
1993, 1992 and 1991, respectively.
Certain noncancelable leases have renewal options for up to 10 years, and
generally, related real estate taxes, insurance and maintenance expenses are
obligations of Actava. Certain leases have escalation clauses which provide for
increases in annual rentals in certain circumstances.
LITIGATION
On February 18, 1994, Photographic Concepts Inc. ("PCI"), a Florida
corporation, sued Qualex in the United States District Court for the Middle
District of North Carolina, in a lawsuit captioned Photographic Concepts, Inc.
v. Qualex, Inc., Civil Action No. 1:94-CV-00081. PCI's claims arise out of
allegations that Qualex entered into and then breached an agreement with PCI
relating to the marketing of on-site "microlab" photofinishing services. During
1993, Qualex's microlab business resulted in $33,300,000 in revenues and
$7,300,000 in gross profits, and Qualex expects such business to increase in the
future. PCI alleges, among other things, that Qualex breached agreement with
PCI, and misappropriated trade property and other information from PCI. PCI is
seeking both monetary and injunctive relief. Qualex is currently gathering the
information and documents necessary to file its response to PCI's Complaint.
That response must be filed by April 25, 1994. Qualex intends to defend the case
vigorously, but the Company is unable to determine the probable impact of the
suit at this early stage in the proceeding.
In 1991, three lawsuits were filed against Actava, certain of Actava's
current and former directors and Intermark, Inc., which owned approximately 26%
of Actava's Common Stock. One complaint alleged, among other things, a
long-standing pattern and practice by the defendants of misusing and abusing
their power as directors and insiders of Actava by manipulating the affairs of
Actava to the detriment of Actava's past and present stockholders. The complaint
sought monetary damages from the director defendants, injunctive relief against
Actava, Intermark and its current directors, and costs of suit and attorney's
fees. The other two complaints alleged, among other things that members of the
Actava Board of Directors contemplate either a sale, a merger, or other business
combination involving Intermark, Inc. and Actava or one or more of its
subsidiaries or affiliates. The complaints sought costs of suit and attorney's
fees and preliminary and permanent injunctive relief and other equitable
remedies, ordering the director defendants to carry out their fiduciary duties
and to take all appropriate steps to enhance Actava's value as a
merger/acquisition candidate.
F-27
<PAGE> 62
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
These three suits were consolidated on May 1, 1991. While these actions are in
their preliminary stages, management currently believes the actions will not
materially affect the operations or financial position of Actava.
Actava is a defendant in various other legal proceedings. However, Actava
is not aware of any action which, in the opinion of management, would materially
affect the financial position or results of operations of Actava.
CONTINGENT LIABILITIES AND COMMITMENTS
Actava, on behalf of its Snapper division, has an agreement with a
financial institution which makes available to dealers floor plan financing for
Snapper products. This agreement provides financing for dealer inventories and
accelerates cash flow to Snapper's distributors and to Snapper. Under the terms
of the agreement, a default in payment by one of the dealers on the program is
non-recourse to both the distributor and to Snapper. However, the distributor is
obligated to repurchase any equipment recovered from the dealer and Snapper is
obligated to repurchase the recovered equipment if the distributor defaults. At
December 31, 1993 and 1992, there was approximately $23,000,000 and $20,000,000,
respectively, outstanding under these floor plan financing arrangements.
Actava is contingently liable under various guarantees of debt totaling
approximately $8,600,000. The debt is primarily Industrial Revenue Bonds which
were issued by former subsidiaries to finance their manufacturing facilities and
equipment, and is secured by the facilities and equipment. In addition, upon the
sale of the subsidiaries, Actava received lending institution guarantees or bank
letters of credit to support Actava's contingent obligations. There are no
material defaults on the debt agreements.
Actava is contingently liable under various real estate leases of former
subsidiaries. The total future payments under these leases, including real
estate taxes, is estimated to be approximately $9,100,000. The leased properties
generally have financially sound subleases.
In January 1992, Qualex entered into an agreement whereby it sells an
undivided interest in a designated pool of trade accounts receivable on an
ongoing basis. The maximum allowable amount of receivables to be sold, initially
set at $50,000,000, was increased to $75,000,000 in August 1992. As collections
reduce the pool of sold accounts receivable, Qualex sells participating
interests in new receivables to bring the amount sold up to the desired level.
At December 31, 1993 and 1992, the uncollected balance of receivables sold
amounted to $60,000,000 and $30,000,000, respectively. The proceeds are reported
as operating cash flows in the statement of cash flows and a reduction of
receivables in Qualex's balance sheet. Total proceeds received by Qualex during
the year were $519,000,000 for 1993 and $220,000,000 for 1992. There has been no
adjustment to the allowance for doubtful accounts because Qualex has retained
substantially the same risk of credit loss as if the receivables had not been
sold. Qualex pays fees based on the purchaser's level of investment and
borrowing costs. During 1993 and 1992, Qualex recorded $2,200,000 and
$1,100,000, respectively, of these fees as other expenses.
Qualex has a supply contract with Kodak for the purchase of sensitized
photographic paper and purchases substantially all of the chemicals used in
photoprocessing from Kodak. Qualex also purchases various other production
materials and equipment from Kodak.
Qualex and DP handle and store various materials in the normal course of
business that have been classified as hazardous by various federal, state and
local regulatory agencies. As of December 31, 1993, Qualex and DP are continuing
to conduct tests at various sites and will perform any necessary cleanup where
and to the extent legally required. At those sites where tests have been
completed, cleanup costs have been immaterial. The Company may also be liable
for remediation of environmental damage relating to businesses previously sold
in excess of amounts accrued. At the sites currently being tested, it is
management's opinion that cleanup costs will not have a material effect on
Actava's financial position or results of operations.
F-28
<PAGE> 63
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In January 1993, Qualex signed a ten year agreement to purchase its
information systems services from an outside agency. Annual service charges
under this agreement are approximately $13,000,000.
At December 31, 1993, approximately $5,000,000 of Actava's cash and
short-term investments were pledged to secure a Snapper credit line and
approximately $20,700,000 of cash and short-term investments were pledged to
support outstanding letters of credit.
SEGMENT INFORMATION
A description of Actava's segments is presented in the first four
paragraphs of Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Additional segment information as of and
for the three years ended December 31, 1993 is presented in the tables captioned
"Segment Performance" and "Other Segment Data" which are included in Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
F-29
<PAGE> 64
THE ACTAVA GROUP INC. AND SUBSIDIARIES
SUMMARY OF QUARTERLY EARNINGS AND DIVIDENDS
<TABLE>
<CAPTION>
QUARTERS ENDED IN 1993
-----------------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
-------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net Sales............................................. $263,887 $313,261 $344,479 $319,484
Gross Profit.......................................... 61,402 82,210 85,632 54,427
Cumulative effect of change in accounting
principle(c)........................................ (4,404) -- -- --
Net income (loss)(a)(c)(d)(e)......................... $ (7,604) $ 43 $ (9,047) $(30,986)
-------- -------- -------- --------
-------- -------- -------- --------
Earnings (loss) per share before cumulative effect of
change in accounting principle...................... $ (.19) $ -- $ (.51) $ (1.76)
Cumulative effect of change in accounting principle... (.27) -- -- --
Net income (loss)..................................... $ (.46) $ -- $ (.51) $ (1.76)
-------- -------- -------- --------
-------- -------- -------- --------
Cash dividends........................................ $ .09 $ .09 $ .09 $ .09
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED IN 1992
-----------------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
-------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net Sales............................................. $276,284 $288,248 $307,585 $276,626
Gross Profit.......................................... 86,607 106,136 119,885 92,985
Cumulative effect of change in accounting
principle(b)........................................ 1,034 -- -- --
Net income (loss)(a)(b)............................... $ (772) $ 2,631 $ 4,713 $ 5,027
-------- -------- -------- --------
-------- -------- -------- --------
Earnings (loss) per share before cumulative effect of
change in accounting principle...................... $ (.11) $ .16 $ .28 $ .31
Cumulative effect of change in accounting principle... .06 -- -- --
Net income (loss)..................................... $ (.05) $ .16 $ .28 $ .31
-------- -------- -------- --------
-------- -------- -------- --------
Cash dividends........................................ $ .09 $ .09 $ .09 $ .09
</TABLE>
- ---------------
(a) Actava's lawn and garden division estimates certain sales related expenses
for the year and charges these expenses to income based upon estimated sales
for the year. Sales and expenses for 1993 were different than estimated in
the first three quarters. If the expenses had been charged to income based
upon actual sales for the year, net loss would have increased in the first
and second quarter by $4,500,000 and $7,450,000, respectively, and decreased
in the third and fourth quarters by $1,750,000 and $10,200,000,
respectively. Sales and expenses for the year were also different in 1992
than estimated in the first three quarters. If the expenses had been charged
to income based upon actual sales for the year, net income would have
increased in the first and third quarters by $3,500,000 and $700,000,
respectively, and decreased in the fourth quarter by $4,200,000.
(b) Effective January 1, 1992, Qualex changed its method of accounting for the
cost of its proof advertising program to recognize these costs at the time
the advertising is placed by the customer. Under the proof advertising
program, Qualex reimburses certain advertising costs incurred by its
customers up to a percentage of sales to that customer. Qualex previously
accrued such costs at the time of the initial sale. Qualex believes that
this new method is preferable because it recognizes advertising expense as
it is incurred rather than at the time of the initial sale to the customer.
Information for the first quarter of 1992, as previously reported, differs
from the above amounts as a result of this change. The effects of this
change do not have a significant effect on the other quarters.
(c) Effective January 1, 1993, Actava adopted FASB Statement No. 106,
"Accounting for Postretirement Benefits Other Than Pensions". Actava and its
subsidiaries provide group medical plans and life insurance coverage for
certain employees subsequent to retirement. In prior years, these benefits
had been charged to operations on a pay-as-you-go (cash) basis; effective as
of 1993 they are charged to operations
F-30
<PAGE> 65
on an accrual basis. Information for the first quarter of 1993, as
previously reported, differs from the above amounts because the cumulative
effect was originally reported net-of-tax.
(d) During the fourth quarter of 1993, Actava's lawn and garden division revised
its estimate of accrued product warranty expense to reflect an increase in
the amount of future warranty cost to be incurred due to increased warranty
claims. This change in accounting estimate resulted in an increase in the
net loss for the fourth quarter of approximately $4,000,000.
(e) During the fourth quarter of 1993, Actava increased its valuation allowance
for an investment in a real estate development from $1,425,000 to
$4,425,000, due to an accelerated plan for disposition. This change in
estimate resulted in an increase in the net loss for the fourth quarter of
approximately $3,000,000.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-31
<PAGE> 66
THE ACTAVA GROUP INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 1993
ITEM 14(D)
FINANCIAL STATEMENT SCHEDULES
S-1
<PAGE> 67
SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED PARTIES
AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
THE ACTAVA GROUP INC. AND SUBSIDIARIES
DECEMBER 31, 1993
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------------------- ------------------------
DEDUCTIONS BALANCE AT END OF PERIOD
-------------------- ------------------------
BALANCE AT (1) (2) (1) (2)
BEGINNING AMOUNTS AMOUNTS
NAME OF PERIOD ADDITIONS COLLECTED WRITTEN-OFF CURRENT NON-CURRENT
-------- ---------- --------- --------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Frederick B. Beilstein, III(A)... $ 376,986 $ -- $ -- $ -- $ -- $376,986(B)
</TABLE>
- ---------------
(A) Senior Vice-President, Treasurer and Chief Financial Officer
(B) Represents one note receivable in the amount of $117,000, with interest at
6.5%, due June 25, 2001, with interest payable annually, four notes
receivable each in the amount of $60,938, with interest at 6.5%, due August
1, 2001, with at least one-half of interest payable annually, and one note
receivable in the amount of $16,234, with interest at 6.5%, due August 1,
2002, with at least one-half of interest payable annually. All notes
receivable were issued in connection with purchases of The Actava Group Inc.
stock.
See "Triton Group Ltd. Loan" of Notes to Consolidated Financial Statements for
information regarding a note receivable from Triton Group Ltd.
S-2
<PAGE> 68
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF THE ACTAVA GROUP INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1993 1992
------------- -------------
<S> <C> <C>
ASSETS
Current Assets
Cash.......................................................... $ 11,316,000 $ 11,432,000
Short-term investments........................................ 8,566,000 8,335,000
Receivables (less allowance for doubtful accounts of
$5,675,000 in 1993 and $9,390,000 in 1992)................. 142,607,000 150,398,000
Inventories................................................... 32,612,000 26,126,000
Prepaid expenses.............................................. 2,855,000 2,940,000
Income tax receivable and future benefits..................... 21,807,000 27,564,000
------------- -------------
Total Current Assets.................................. 219,763,000 226,795,000
Property, Plant and Equipment -- net............................ 37,332,000 39,999,000
Other Assets
Investment in and advances from wholly owned and majority
subsidiaries -- net........................................ 290,467,000 283,179,000
Notes receivable from Triton Group Ltd........................ 26,726,000 31,726,000
Notes receivable and other assets............................. 18,488,000 24,211,000
------------- -------------
Total Other Assets.................................... 335,681,000 339,116,000
Intangibles..................................................... 799,000 675,000
------------- -------------
Total Assets.......................................... $ 593,575,000 $ 606,585,000
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable, accrued expenses and other current
liabilities................................................ $ 167,548,000 $ 125,419,000
Current portion of long-term debt............................. 3,838,000 2,727,000
------------- -------------
Total Current Liabilities............................. 171,386,000 128,146,000
Deferred Income Taxes........................................... 34,144,000 38,850,000
Long-Term Debt.................................................. 1,580,000 6,176,000
Subordinated Debt............................................... 190,551,000 193,566,000
Stockholders' Equity
Common Stock.................................................. 22,768,000 22,768,000
Additional capital............................................ 37,056,000 46,362,000
Retained earnings............................................. 236,334,000 292,266,000
Less treasury stock........................................... (100,244,000) (121,549,000)
------------- -------------
Total Stockholders' Equity...................................... 195,914,000 239,847,000
------------- -------------
Total Liabilities and Stockholder's Equity............ $ 593,575,000 $ 606,585,000
------------- -------------
------------- -------------
</TABLE>
S-3
<PAGE> 69
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF
THE ACTAVA GROUP INC. -- (CONTINUED)
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Net Sales........................................ $224,960,000 $248,198,000 $158,500,000
Management fees from wholly owned subsidiaries... 8,181,000 3,837,000 6,958,000
------------ ------------ ------------
233,141,000 252,035,000 165,458,000
Costs, Expenses and Other
Costs of products sold......................... 193,773,000 179,973,000 130,510,000
Selling, general and administrative............ 59,048,000 56,411,000 87,587,000
Interest expense............................... 23,647,000 20,801,000 19,663,000
Interest paid to wholly owned subsidiaries..... 29,224,000 29,224,000 25,258,000
Other expense (income) -- net.................. 4,981,000 (1,040,000) 1,166,000
Provision for plant consolidations............. (849,000) -- 1,432,000
Settlement of employee agreements and
related costs............................... -- -- 6,839,000
------------ ------------ ------------
Total costs, expenses and other............. 309,824,000 285,369,000 272,455,000
(Loss) before Income Taxes, Equity in Net
Income of Subsidiaries, and Cumulative
Effect of Changes in Accounting
Principles................................ (76,683,000) (33,334,000) (106,997,000)
Income taxes (benefits).......................... (12,725,000) (10,316,000) (33,675,000)
Equity in net income of subsidiaries............. 20,768,000 34,617,000 22,501,000
Cumulative effect of change in accounting
principle...................................... (4,404,000) -- --
------------ ------------ ------------
Net Income (Loss)........................... $(47,594,000) $ 11,599,000 $(50,821,000)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
S-4
<PAGE> 70
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF
THE ACTAVA GROUP INC. -- (CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH
YEARS ENDED DECEMBER 31,
--------------------------------------------
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Net Cash Flows Used by Operating Activities........ $(42,287,000) $(63,153,000) $(26,738,000)
Cash Flows from Investing Activities:
Investment in subsidiaries....................... (15,000,000) (28,818,000) (1,228,000)
Dividends received from Qualex................... 8,614,000 3,886,000 6,782,000
Sales of investments (maturities over 90 days)... -- -- 10,000,000
Net sales (purchases) of other investments....... (76,000) (3,209,000) 42,300,000
Payments for property, plant and equipment....... (6,465,000) (13,003,000) (13,818,000)
Proceeds from disposals of property, plant and
equipment..................................... 401,000 754,000 373,000
Collections on notes receivable.................. 12,000 226,000 --
Payments for purchases of businesses............. (11,630,000) -- --
Loans to Triton Group Ltd........................ 5,000,000 (1,426,000) (30,300,000)
Other investing activities -- net................ (3,868,000) (2,120,000) 1,393,000
------------ ------------ ------------
Net Cash Provided (Used) by Investing
Activities.................................. (23,012,000) (43,710,000) 15,502,000
------------ ------------ ------------
Cash Flows from Financing Activities:
Borrowings under short-term financing
agreements.................................... 30,141,000 57,111,000 --
Borrowings under long-term debt agreements....... -- -- 5,000,000
Payments on long-term debt agreements............ (356,000) (204,000) (1,226,000)
Payments of subordinated debt.................... (1,847,000) (200,000) (5,824,000)
Proceeds from issuance of Actava Common Stock.... -- -- 365,000
Cash dividends paid.............................. (6,250,000) (5,956,000) (5,947,000)
Decrease in advance to subsidiaries.............. 43,495,000 61,426,000 21,970,000
------------ ------------ ------------
Net Cash Provided by Financing Activities..... 65,183,000 112,177,000 14,338,000
------------ ------------ ------------
Increase (Decrease) in Cash................. (116,000) 5,314,000 3,102,000
Cash at beginning of year.......................... 11,432,000 6,118,000 3,016,000
------------ ------------ ------------
Cash at End of Year......................... $ 11,316,000 $ 11,432,000 $ 6,118,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
S-5
<PAGE> 71
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF
THE ACTAVA GROUP INC. -- (CONTINUED)
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE A -- ACCOUNTING POLICIES
In the parent-company-only financial statements, Actava's investment in
subsidiaries is stated at cost plus equity in undistributed earnings of
subsidiaries since the date of acquisition. Actava's share of net income of its
unconsolidated subsidiaries in these financial statements is included in
consolidated income using the equity method. Parent-company-only financial
statements should be read in conjunction with Actava's consolidated financial
statements.
NOTE B -- DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1993 1992
---------- ----------
<S> <C> <C>
Capitalized lease obligations......................................... $ -- $4,508,000
Other long-term debt.................................................. 1,580,000 1,668,000
---------- ----------
$1,580,000 $6,176,000
---------- ----------
---------- ----------
</TABLE>
Subordinated debt of The Actava Group Inc. is described in "Subordinated
Debt" of Notes to Consolidated Financial Statements. Notes payable and long-term
debt of The Actava Group Inc. are described in "Notes Payable and Long-Term
Debt" of Notes to Consolidated Financial Statements.
Maturities of long-term and subordinated debt are $3,764,000 in 1995,
$33,849,000 in 1996, $15,171,000 in 1997 and $58,761,000 in 1998.
NOTE C -- DIVIDENDS FROM SUBSIDIARIES
Cash dividends paid by Qualex Inc. to Actava amounted to $8,614,000 in
1993, $3,886,000 in 1992 and $6,782,000 in 1991.
S-6
<PAGE> 72
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
THE ACTAVA GROUP INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- ------------------------------------------ ------------ ----------- ----------- --------------- -------------
<S> <C> <C> <C> <C> <C>
OTHER
BALANCE AT CHANGES --
BEGINNING ADDITIONS ADD (DEDUCT) -- BALANCE AT
CLASSIFICATION OF PERIOD AT COST RETIREMENTS DESCRIBE END OF PERIOD
- ------------------------------------------ ------------ ----------- ----------- --------------- -------------
Year ended December 31, 1993:
Land.................................... $ 8,700,000 $ 19,000 $ 1,836,000 $ 1,420,000A $ 8,303,000
Buildings and improvements................ 57,490,000 7,836,000 4,828,000 11,890,000A 72,289,000
(99,000)C
Machinery and equipment................... 343,140,000 42,782,000 21,267,000 28,988,000A 393,643,000
------------ ----------- ----------- --------------- -------------
Totals............................ $409,330,000 $50,637,000B $27,931,000 $ 42,199,000 $474,235,000
------------ ----------- ----------- --------------- -------------
------------ ----------- ----------- --------------- -------------
Year ended December 31, 1992:
Land.................................... $ 10,977,000 $ 10,000 $ 2,443,000 $ 156,000C $ 8,700,000
Buildings and improvements.............. 51,804,000 6,470,000 3,615,000 273,000C 57,490,000
2,558,000C
Machinery and equipment................. 280,578,000 75,320,000 16,462,000 6,446,000A 343,140,000
(2,742,000)C
------------ ----------- ----------- --------------- -------------
Totals............................ $343,359,000 $81,800,000B $22,520,000 $ 6,691,000 $409,330,000
------------ ----------- ----------- --------------- -------------
------------ ----------- ----------- --------------- -------------
Year ended December 31, 1991:
Land.................................... $ 10,782,000 $ 675,000 $ 571,000 $ 761,000A $ 10,977,000
(73,000)D
(597,000)E
Buildings and improvements................ 52,033,000 6,969,000 3,173,000 3,165,000A 51,804,000
(1,849,000)D
(5,341,000)E
Machinery and equipment................... 257,081,000 51,855,000 12,705,000 8,713,000A 280,578,000
(2,359,000)C
(1,889,000)D
(20,118,000)E
------------ ----------- ----------- --------------- -------------
Totals............................ $319,896,000 $59,499,000B $16,449,000 $ (19,587,000) $343,359,000
------------ ----------- ----------- --------------- -------------
------------ ----------- ----------- --------------- -------------
</TABLE>
- ---------------
Note A -- Assets acquired in acquisitions of businesses.
Note B -- Purchases in the normal course of business.
Note C -- Reclassifications and other changes.
Note D -- Sale of businesses.
Note E -- Reclassification to other assets held for sale.
Note F -- The annual provisions for depreciation have been computed principally
in accordance with the following ranges of rates:
Buildings and improvements 2% to 10%
Machinery and equipment 7% to 33%
S-7
<PAGE> 73
SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION
AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
THE ACTAVA GROUP INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- ---------------------------------------- ------------ ----------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
OTHER
ADDITIONS CHANGES --
BALANCE AT CHARGED TO ADD
BEGINNING COSTS AND (DEDUCT) -- BALANCE AT
CLASSIFICATION OF PERIOD EXPENSES RETIREMENTS DESCRIBE END OF PERIOD
- ---------------------------------------- ------------ ----------- ----------- -------------- -------------
Year ended December 31, 1993:
Land improvements..................... $ 318,000 $ 29,000 $ -- $ -- $ 347,000
Buildings and improvements............ 17,300,000 3,317,000 1,317,000 151,000A 19,451,000
Machinery and equipment............... 148,102,000 41,319,000 10,590,000 252,000A 179,083,000
------------ ----------- ----------- -------------- -------------
Totals.......................... $165,720,000 $44,665,000 $11,907,000 $ 403,000 $198,881,000
------------ ----------- ----------- -------------- -------------
------------ ----------- ----------- -------------- -------------
Year ended December 31, 1992:
Land improvements..................... $ 293,000 $ 25,000 $ -- $ -- $ 318,000
Buildings and improvements............ 16,541,000 2,591,000 1,832,000 -- 17,300,000
Machinery and equipment............... 125,509,000 32,414,000 11,448,000 1,627,000A 148,102,000
------------ ----------- ----------- -------------- -------------
Totals.......................... $142,343,000 $35,030,000 $13,280,000 $ 1,627,000 $165,720,000
------------ ----------- ----------- -------------- -------------
------------ ----------- ----------- -------------- -------------
Year ended December 31, 1991:
Land improvements..................... $ 326,000 $ 25,000 $ -- $ (58,000)C $ 293,000
Buildings and improvements............ 17,691,000 2,481,000 1,603,000 (329,000)B 16,541,000
(1,699,000)C
Machinery and equipment............... 126,049,000 28,390,000 8,828,000 (452,000)A 125,509,000
(836,000)B
(18,814,000)C
------------ ----------- ----------- -------------- -------------
Totals.......................... $144,066,000 $30,896,000 $10,431,000 $(22,188,000) $142,343,000
------------ ----------- ----------- -------------- -------------
------------ ----------- ----------- -------------- -------------
</TABLE>
- ---------------
Note A -- Reclassifications and other changes.
Note B -- Sale of businesses.
Note C -- Reclassification to other assets held for sale.
S-8
<PAGE> 74
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
THE ACTAVA GROUP INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- --------------------------------- ----------- ------------------------------ ------------ -------------
ADDITIONS (REDUCTIONS)
------------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER ACCOUNTS-- DEDUCTIONS -- AT END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
- --------------------------------- ----------- ----------- ---------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Allowances for doubtful $ 9,123,000 A
accounts etc (deducted from $ 1,322,000 B
current receivables)......... $12,805,000 $ 7,262,000 $ -- $ (605,000 )C $ 10,227,000
----------- ----------- ---------------- ------------ -------------
----------- ----------- ---------------- ------------ -------------
Allowances for doubtful
accounts, etc. (deducted from
non-current notes $ 1,054,000 A
receivable).................. $ 3,104,000 $ 4,000 $ -- $(1,934,000 )B $ 3,988,000
----------- ----------- ---------------- ------------ -------------
----------- ----------- ---------------- ------------ -------------
Reserve for loss on sales of
subsidiaries (included in
current liabilities)......... $ 2,418,000 $ -- $ -- $ 265,000 F $ 2,152,000
----------- ----------- ---------------- ------------ -------------
----------- ----------- ---------------- ------------ -------------
Reserve for obsolete and excess
inventory (included in
inventories)................. $ 1,206,000 $ 647,000 $4,909,000 C $ 4,795,000 A $ 1,967,000
----------- ----------- ---------------- ------------ -------------
----------- ----------- ---------------- ------------ -------------
Reserve for relocation and
consolidation of facilities
(included in current $ 2,393,000 B
liabilities)................. $13,168,000 $ 3,231,000 $ -- $ 7,252,000 E $ 6,754,000
----------- ----------- ---------------- ------------ -------------
----------- ----------- ---------------- ------------ -------------
Reserve for loss on sale of
partnership interest
(included in current
liabilities)................. $ 1,245,000 $ 3,000,000 $ -- $ -- $ 4,245,000
----------- ----------- ---------------- ------------ -------------
----------- ----------- ---------------- ------------ -------------
</TABLE>
S-9
<PAGE> 75
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS -- (CONTINUED)
THE ACTAVA GROUP INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- --------------------------------- ----------- ------------------------------ ------------ -------------
ADDITIONS (REDUCTIONS)
------------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER ACCOUNTS-- DEDUCTIONS -- AT END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
- --------------------------------- ----------- ----------- ---------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1992:
Allowances for doubtful
accounts etc (deducted from $ 3,900,000 A
current receivables)......... $13,953,000 $ 4,209,000 $ -- $ 1,457,000 B $ 12,805,000
----------- ----------- ---------------- ------------ -------------
----------- ----------- ---------------- ------------ -------------
Allowances for doubtful
accounts, etc. (deducted from
non-current notes
receivable).................. $ 3,590,000 $ (790,000) $1,457,000 B $ 1,153,000 B $ 3,104,000
----------- ----------- ---------------- ------------ -------------
----------- ----------- ---------------- ------------ -------------
Reserve for loss on sales of
subsidiaries (included in
current liabilities)......... $ 3,268,000 $ -- $ -- $ 850,000 A $ 2,418,000
----------- ----------- ---------------- ------------ -------------
----------- ----------- ---------------- ------------ -------------
Reserve for obsolete and excess
inventory (included in
inventories)................. $ 1,397,000 $ -- $ -- $ 191,000 A $ 1,206,000
----------- ----------- ---------------- ------------ -------------
----------- ----------- ---------------- ------------ -------------
Reserve for relocation and
consolidation of facilities
(included in current
liabilities)................. $40,747,000 $(1,506,000) $ -- $26,073,000 E $ 13,168,000
----------- ----------- ---------------- ------------ -------------
----------- ----------- ---------------- ------------ -------------
Reserve for loss on sale of
partnership interest
(included in current
liabilities)................. $ 1,500,000 $ -- $ -- $ 255,000 F $ 1,245,000
----------- ----------- ---------------- ------------ -------------
----------- ----------- ---------------- ------------ -------------
</TABLE>
S-10
<PAGE> 76
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS -- (CONTINUED)
THE ACTAVA GROUP INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- --------------------------------- ----------- ------------------------------ ------------ -------------
ADDITIONS (REDUCTIONS)
------------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER ACCOUNTS-- DEDUCTIONS -- AT END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
- --------------------------------- ----------- ----------- ---------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1991:
Allowances for doubtful
accounts, etc. (deducted from
current receivables)......... $ 9,912,000 $ 5,401,000 $ (231,000)B $ 1,129,000 A $ 13,953,000
----------- ----------- ---------------- ------------ -------------
----------- ----------- ---------------- ------------ -------------
Allowances for doubtful
accounts, etc. (deducted from
non-current notes
receivable).................. $ 4,103,000 $ 84,000 $ 479,000B $ 1,076,000 A $ 3,590,000
----------- ----------- ---------------- ------------ -------------
----------- ----------- ---------------- ------------ -------------
Reserve for loss on sales of
subsidiaries (included in
current liabilities)......... $ 3,468,000 $ -- $ -- $ 200,000 A $ 3,268,000
----------- ----------- ---------------- ------------ -------------
----------- ----------- ---------------- ------------ -------------
Reserve for obsolete and excess
inventory (included in
inventories)................. $ 5,008,000 $ -- $ -- $ 3,611,000 F $ 1,397,000
----------- ----------- ---------------- ------------ -------------
----------- ----------- ---------------- ------------ -------------
Reserve for relocation and
consolidation of facilities
(included in current
liabilities)................. $29,853,000 $18,969,000 $ -- $ 8,075,000 E $ 40,747,000
----------- ----------- ---------------- ------------ -------------
----------- ----------- ---------------- ------------ -------------
Reserve for loss on sale of
partnership interest
(included in current
liabilities)................. $ -- $ 1,500,000 $ -- $ -- $ 1,500,000
----------- ----------- ---------------- ------------ -------------
----------- ----------- ---------------- ------------ -------------
</TABLE>
- ---------------
Note A -- Uncollectible accounts charged off -- net of recoveries.
Note B -- Reclassifications and other changes.
Note C -- Acquisition of business
Note D -- Losses of subsidiaries held for disposition and discontinued
operations.
Note E -- Costs incurred in consolidation of facilities.
Note F -- Costs incurred.
S-11
<PAGE> 77
SCHEDULE IX -- SHORT-TERM BORROWINGS
THE ACTAVA GROUP INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- ----------------------------- ------------ -------- ------------ ------------ -------------
MAXIMUM AVERAGE WEIGHTED
WEIGHTED AMOUNT AMOUNT AVERAGE
BALANCE AT AVERAGE OUTSTANDING OUTSTANDING INTEREST RATE
CATEGORY OF AGGREGATE END OF INTEREST DURING THE DURING THE DURING THE
SHORT-TERM BORROWINGS PERIOD RATE PERIOD PERIOD(B) PERIOD(C)
- ----------------------------- ------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Notes payable to
banks(A)................ $135,114,000 7.29% $189,927,149 $116,784,706 7.82%
Year ended December 31, 1992:
Notes payable to
banks(A)................ 64,795,000 7.24 123,114,000 61,027,000 7.74
Year ended December 31, 1991:
Notes payable to
banks(A)................ 10,000,000 5.66 20,650,000 2,401,000 6.14
</TABLE>
- ---------------
Note A -- Notes payable to banks represent borrowings under lines of credit
arrangements that are reviewed and renewed periodically.
Note B -- The average amount outstanding during the period was computed by
dividing the total of daily outstanding principal balances by 360, or
by the number of days the lines of credit were available.
Note C -- The weighted-average interest rate during the period was computed by
dividing the actual interest expense by average short-term debt
outstanding.
S-12
<PAGE> 78
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
THE ACTAVA GROUP INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
COL. A COL. B
- ------------------------------------------------------ -----------------------------------------
CHARGED TO COSTS AND EXPENSES
-----------------------------------------
CHARGED TO CONTINUING OPERATIONS
YEAR ENDED DECEMBER 31,
-----------------------------------------
ITEM 1993 1992
- ------------------------------------------------------ ----------- -----------
<S> <C> <C> <C>
Depreciation of fixed assets.......................... $44,665,000 $35,030,000 $30,896,000
Advertising........................................... 41,398,000 45,509,000 47,642,000
Maintenance and repairs............................... 20,178,000 18,864,000 17,872,000
Amortization of intangibles........................... 25,780,000 24,007,000 13,118,000
</TABLE>
Amounts for taxes, other than payroll and income taxes, and royalties are
not presented as such amounts are less than 1% of total sales and revenues.
S-13
<PAGE> 79
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS INCORPORATED HEREIN BY REFERENCE
---------------------------------------------------
DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH
OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT
THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT
- --------------- ----------------------------- ----------------------------- --------------------
<S> <C> <C> <C>
3(a)(i) Restated Certificate of
Incorporation of Actava
3(b)(i) Restated By-laws of Actava
4(a) Reference is made to Exhibit
3(a)(i)
4(b)(i) Indenture dated as of August Application on Form T-3 for Exhibit T3C
1, 1973, with respect to Qualification of Indenture
9 1/2% Subordinated under the Trust Indenture Act
Debentures due August 1, of 1939 (File No. 22-7615)
1998, between Actava and
Chemical Bank, as Trustee
4(b)(ii) Agreement among Actava, Chem- Registration Statement on Exhibit 4(d)(ii)
ical Bank and Manufacturers Form S-14 (Registration No.
Hanover Trust Company, dated 2-81094)
as of September 26, 1980,
with respect to successor
trusteeship of the 9 1/2%
Subordinated Debentures due
August 1, 1998
4(b)(iii) Instrument of resignation, Annual Report on Form 10-K Exhibit 4(d)(iii)
appointment and acceptance for the year ended December
dated as of June 9, 1986 31, 1986
among Actava, Manufacturers
Hanover Trust Company and
Irving Trust Company, with
respect to successor trustee-
ship of the 9 1/2%
Subordinated Debentures due
August 1, 1998
4(c)(i) Indenture dated as of March Registration Statement on Exhibit 2(d)
15, 1977, with respect to Form S-7 (Registration No.
9 7/8% Senior Subordinated 2-58317)
Debentures due March 15,
1997, between Actava and The
Chase Manhattan Bank, N.A.,
as Trustee
4(c)(ii) Agreement among Actava, The Registration Statement on Exhibit 4(e)(ii)
Chase Manhattan Bank, N.A. Form S-14 (Registration No.
and United States Trust 2-81094)
Company of New York, dated as
of June 14, 1982, with
respect to successor
trusteeship of the 9 7/8%
Senior Subordinated
Debentures due March 15, 1997
4(d)(i) Indenture between National Post-Effective Amendment No. Exhibit T3C
Industries, Inc. and First 1 to Application on Form T-3
National City Bank, dated for Qualification of
October 1, 1974, for the 10% Indenture Under The Trust
Subordinated Debentures, due Indenture Act of 1939 (File
October 1, 1999 No. 22-8076)
</TABLE>
<PAGE> 80
<TABLE>
<CAPTION>
EXHIBITS INCORPORATED HEREIN BY REFERENCE
---------------------------------------------------
DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH
OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT
THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT
- --------------- ----------------------------- ----------------------------- --------------------
<S> <C> <C> <C>
4(d)(ii) Agreement among National In- Registration Statement on Exhibit 4(f)(ii)
dustries, Inc., Actava, Form S-14 (Registration No.
Citibank, N.A., and Marine 2-81094)
Midland Bank, dated as of
December 20, 1977, with
respect to successor trustee-
ship of the 10% Subordinated
Debentures due October 1,
1999
4(d)(iii) First Supplemental Indenture Registration Statement on Exhibit 2(q)
among Actava, National Indus- Form S-7 (Registration No.
tries, Inc. and Marine 2-60566)
Midland Bank, dated January
3, 1978, supplemental to the
Indenture dated October 1,
1974 between National and
First National City Bank for
the 10% Subordinated
Debentures due October 1,
1999
4(e) Public Bond Issue Agreement Annual Report on Form 10-K Exhibit 4(h)
dated February 19, 1986, with for the year ended December
respect to 6% Senior 31, 1985
Subordinated Swiss Franc
Bonds due March 6, 1996,
among Actava, Soditic S.A.
and certain other
institutions named therein
4(f) Indenture dated as of August Annual Report on Form 10-K Exhibit 4(i)
1, 1987 with respect to for the year ended December
6 1/2% Convertible 31, 1987
Subordinated Debentures due
August 4, 2002, between Ac-
tava and Chemical Bank, as
Trustee
4(g) Loan and Security Agreement, Amendment No. 1 to Registra- Exhibit 4(i)
dated as of April 30, 1992, tion Statement on Form S-3
with respect to $35 million (Registration No. 33-48202)
secured revolving credit
facility, among Actava,
certain of its subsidiaries
and Barclays Business Credit,
Inc.
4(h) Senior Note Agreement, dated Amendment No. 1 to Registra- Exhibit 4(j)
as of June 8, 1992, with tion Statement on Form S-3
respect to private placement (Registration No. 33-48202)
of $200 million of Senior
Notes due 1997, 1999 and
2002, among Qualex Inc. and
the purchasers listed
therein.
</TABLE>
<PAGE> 81
<TABLE>
<CAPTION>
EXHIBITS INCORPORATED HEREIN BY REFERENCE
---------------------------------------------------
DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH
OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT
THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT
- --------------- ----------------------------- ----------------------------- --------------------
<S> <C> <C> <C>
4(i) Credit Agreement, dated as of
October 30, 1992, with
respect to a $115 million
revolving credit facility,
among Qualex Inc. and the
eight participants thereto. A
copy of this agreement is not
filed as the debt does not
exceed 10% of the total
assets of total assets of
registrant; however,
registrant hereby agrees to
furnish a copy of such
agreement to the Commission
upon request.
4(j)(i) Finance and Security
Agreement, dated as of
October 30, 1992, with
respect to a revolving credit
facility of up to $100
million, between Actava
Industries, Inc. and ITT
Commercial Finance Corp. A
copy of this agreement is not
filed as the debt does not
exceed 10% of the total
assets of registrant; how-
ever, registrant hereby
agrees to furnish a copy of
such agreement to the
Commission upon request.
4(j)(ii) Amendment, dated as of March
29, 1994, to Finance and
Security Agreement, dated as
of October 30, 1992, with
respect to a revolving credit
facility of up to $100
million, between Actava In-
dustries, Inc. and ITT
Commercial Finance Corp. A
copy of this agreement is not
filed as the debt does not
exceed 10% of the total
assets of registrant;
however, registrant hereby
agrees to furnish a copy of
such agreement to the
Commission upon request.
</TABLE>
<PAGE> 82
<TABLE>
<CAPTION>
EXHIBITS INCORPORATED HEREIN BY REFERENCE
---------------------------------------------------
DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH
OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT
THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT
- --------------- ----------------------------- ----------------------------- --------------------
<S> <C> <C> <C>
4(k) Loan and Security Agreement,
dated as of December 29,
1992, with respect to a
revolving credit facility of
up to $35 million between
Nelson/Weather-Rite, Inc. and
BA Business Credit, Inc. A
copy of this agreement is not
filed as the debt does not
exceed 10% of the total
assets of registrant; how-
ever, registrant hereby
agrees to furnish a copy of
such agreement to the
Commission upon request.
4(l)(i) Finance and Security
Agreement, dated as of
December 15, 1993, with
respect to a revolving credit
facility of up to $50
million, between Diversified
Products Corporation and ITT
Commercial Finance Corp. and
the Provident Bank. A copy of
this agreement is not filed
as the debt does not exceed
10% of the total assets of
registrant; however,
registrant hereby agrees to
furnish a copy of such
agreement to the commission
upon request.
4(l)(ii) Amendment, dated as of March
29, 1994, to Finance and
Security Agreement, dated as
of December 15, 1993, with
respect to a revolving credit
facility of up to $50
million, between Diversified
Products Corporation and ITT
Commercial Finance Corp. and
the Provident Bank. A copy of
this agreement is not filed
as the debt does not exceed
10% of the total assets of
registrant; however, regis-
trant hereby agrees to
furnish a copy of such
agreement to the commission
upon request.
</TABLE>
<PAGE> 83
<TABLE>
<CAPTION>
EXHIBITS INCORPORATED HEREIN BY REFERENCE
---------------------------------------------------
DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH
OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT
THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT
- --------------- ----------------------------- ----------------------------- --------------------
<S> <C> <C> <C>
4(m) Revolving Loan and Security
Agreement, dated as of April
29, 1993, with respect to a
revolving credit facility of
up to $10 million between
Willow Hosiery Company, Inc.
and Sterling National Bank
and Trust Company of New
York. A copy of this
agreement is not filed as the
debt does not exceed 10% of
the total assets of
registrant; however,
registrant hereby agrees to
furnish a copy of such
agreement to the Commission
upon request.
4(m) Amended and Restated $5
Million Revolving Note,
Amended and Restated $3
Million Letter of Credit
Note, and First Amendment to
the Revolving Loan Agreement
dated as of August 31, 1993,
and Revolving Loan Agreement
dated as of August 24, 1992,
between Hutch Sports USA Inc.
and the Fifth Third Bank.
Copies of these agreements
are not filed as the debt
does not exceed 10% of the
total assets of the
registrant; however,
registrant hereby agrees to
furnish copies of such agree-
ments to the Commission upon
request.
10(a)(i) 1982 Stock Option Plan of Proxy Statement dated March Exhibit A
Actava 31, 1982
10(a)(ii) 1989 Stock Option Plan of Proxy Statement dated March Exhibit A
Actava 31, 1989
10(a)(iii) 1969 Restricted Stock Plan of Annual Report on Form 10-K Exhibit 10(a)(iii)
Actava for the year ended December
31, 1990
10(a)(iv) 1991 Non-Employee Director Annual Report on Form 10-K Exhibit 10(a)(iv)
Stock Option Plan for the year ended December
31, 1991
10(a)(v) Amendment to 1991 Non-Em- Annual Report on Form 10-K Exhibit 10(a)(v)
ployee Director Stock Option for the year ended December
Plan 31, 1992
10(b) Form of Severance Agreement Annual Report on Form 10-K Exhibit 10(c)
between officers of Actava for the year ended December
and Actava dated May 20, 1985 31, 1985
</TABLE>
<PAGE> 84
<TABLE>
<CAPTION>
EXHIBITS INCORPORATED HEREIN BY REFERENCE
---------------------------------------------------
DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH
OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT
THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT
- --------------- ----------------------------- ----------------------------- --------------------
<S> <C> <C> <C>
10(c) Snapper Power Equipment Annual Report on Form 10-K Exhibit 10(c)
Profit Sharing Plan for the year ended December
31, 1987
10(f)(iii) Termination Agreement between Annual Report on Form 10-K Exhibit 10(f)(iii)
J. B. Fuqua and Actava dated for the year ended December
March 18, 1991 31, 1990
10(h)(i) Retirement Plan executed No- Annual Report on Form 10-K Exhibit 10(h)(i)
vember 1, 1990 as amended to for the year ended December
be effective January 1, 1989 31, 1990
10(h)(ii) Supplemental Retirement Plan Annual Report on Form 10-K Exhibit 10(j)
of Actava for the year ended December
31, 1983
10(h)(iii) Supplemental Executive Annual Report on Form 10-K Exhibit 10(h)(iii)
Medical Reimbursement Plan for the year ended December
31, 1990
10(h)(iv) Amendment to Supplemental Re- Annual Report on Form 10-K Exhibit 10(h)(iv)
tirement Plan of Actava for the year ended December
effective April 1, 1992 31, 1991
10(i)(i) Shareholders' Agreement dated Annual Report on Form 10-K Exhibit 10(j)
as of December 7, 1987 by and for the year ended December
between Eastman Kodak Company 1, 1987
and Actava
10(i)(ii) Amendment No. 1, dated as of Current Report on Form 8-K Exhibit 2(b)
March 29, 1988 to the dated April 12, 1988
Shareholders' Agreement dated
as of June 7, 1987 between
Eastman Kodak Company and
Actava
10(i)(iii) Amendment No. 2, dated as of Annual Report on Form 10-K Exhibit 10(i)(iii)
March 28, 1991 to the for the year ended December
Shareholders' Agreement dated 31, 1990
as of June 7, 1987 between
Eastman Kodak Company and
Actava
10(j) Stockholder Agreement dated Quarterly Report on Form 10-Q Exhibit 3
as of May 22, 1989 by and for the three months ended
between Actava and Triton June 30, 1989
Group Ltd.
10(j)(ii) Loan Agreement dated Novem- Annual Report on Form 10-K Exhibit 10(j)(ii)
ber 27, 1991 between Actava for the year ended December
and Triton Group Ltd. 31, 1991
10(k)(i) Form of Post Employment Con- Annual Report of Form 10-K Exhibit 10(k)
sulting Agreement between of- for the year ended December
ficers of Actava and Actava 31, 1991
10(k)(ii) Form of First Amendment to
Post-employment Consulting
Agreement between officers of
Actava and Actava
</TABLE>
<PAGE> 85
<TABLE>
<CAPTION>
EXHIBITS INCORPORATED HEREIN BY REFERENCE
---------------------------------------------------
DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH
OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT
THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT
- --------------- ----------------------------- ----------------------------- --------------------
<S> <C> <C> <C>
10(l) 1992 Officer and Director Annual Report on Form 10-K Exhibit 10(l)
Stock Purchase Plan for the year ended December
31, 1991
10(m) Director Group Medical Plan Annual Report on Form 10-K Exhibit 10(m)
for the year ended December
31, 1991
10(n) Form of Restricted Stock Annual Report on Form 10-K Exhibit 10(n)
Purchase Agreement between for the year ended December
certain officers of Actava 31, 1991
and Actava
10(o) Incentive Bonuses for Certain Annual Report on Form 10-K Exhibit 10(o)
Corporate Officers for the year ended December
31, 1991
10(p)(i) Forbearance Agreement dated Amendment No. 1 Registration Exhibit 10(o)
June 30, 1992 between Actava, Statement on Form S-3 (Regis-
Triton Group Ltd. and tration No. 33-48202)
Intermark, Inc.
10(p)(ii) Amendment, dated July 13, Quarterly Report on Form 10-Q Exhibit 5
1992, to Forbearance for the three months ended
Agreement dated June 30, 1992 June 30, 1992
between Actava, Triton Group
Ltd. and Intermark, Inc.
10(p)(iii) Amendment, dated July 30, Quarterly Report on Form 10-Q Exhibit 6
1992, to Forbearance for the three months ended
Agreement dated June 30, 1992 June 30, 1992
between Actava, Triton Group
Ltd. and Intermark, Inc., as
amended by Amendment to
Forbearance Agreement dated
July 13, 1992.
10(p)(iv) Amendment, dated September Quarterly Report on Form 10-Q Exhibit 4
23, 1992, to Forbearance for the three months ended
Agreement dated June 30, 1992 September 30, 1992
between Actava Industries,
Inc., Triton Group Ltd. and
Intermark, Inc., as amended
by Amendments to Forbearance
Agreement dated July 13, 1992
and July 30, 1992.
10(p)(v) Amendment, dated October 7, Quarterly Report on Form 10-Q Exhibit 5
1992, to Forbearance for the three months ended
Agreement dated June 30, 1992 September 30, 1992
between Actava Industries,
Inc., Triton Group Ltd. and
Intermark, Inc., as amended
by Amendments to Forbearance
Agreement dated July 13, July
30, and September 23, 1992.
</TABLE>
<PAGE> 86
<TABLE>
<CAPTION>
EXHIBITS INCORPORATED HEREIN BY REFERENCE
---------------------------------------------------
DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH
OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT
THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT
- --------------- ----------------------------- ----------------------------- --------------------
<S> <C> <C> <C>
10(q) Agreement between The Actava Annual Report on Form 10-K Exhibit 10(q)
Group Inc. and J.B. Fuqua for the year ended December
regarding sale by The Actava 31, 1992
Group, Inc. of rights in the
name "Actava".
10(r) Amended and Restated Loan Quarterly report on Form 10-Q Exhibit 19
Agreement between The Actava for the three months ended
Group Inc. and Triton Group June 30, 1993.
Ltd. dated June 25, 1993.
10(s) First Amendment, dated Au- Quarterly Report on Form 10-Q Exhibit 19
gust 19, 1993 to Amended and for the three months ended
Restated Loan Agreement be- September 30, 1993
tween The Actava Group Inc.
and Triton Group Ltd. dated
June 5, 1993
10(t) Second Amendment, dated De-
cember 7, 1993 to Amendment
and Restated Loan Agreement
between The Actava Group Inc.
and Triton Group Ltd. dated
June 25, 1993
10(u) Form of Indemnification
Agreement between Actava and
each of its directors and
executive officers
10(v) 1993 Incentive Bonus Plan for Confidential Treatment Re-
certain corporate officers quested by the Company. Filed
separately with the
Commission.
11 Statement of computation of
earnings per share
18 Letter regarding change in Annual Report on Form 10-K Exhibit 18
accounting principle for the for the year ended December
costs associated with proof 31, 1992
advertising program.
22 Subsidiaries of Actava
23 Consent of Ernst & Young
24 Powers-of-Attorney
</TABLE>
- ---------------
(b) Reports on Form 8-K filed in the fourth quarter of 1993:
None.
(c) The response to this portion of Item 14 is submitted as a separate section
in this report.
(d) The response to this portion of Item 14 is submitted as a separate section
in this report.
<PAGE> 1
EXHIBIT 3(a)(i)
STATE OF DELAWARE
PAGE 1
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED
CERTIFICATE OF "THE ACTAVA GROUP INC.", FILED IN THIS OFFICE ON THE
TWENTY-EIGHTH DAY OF MARCH, A.D. 1994, AT 1:50 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW
CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ WILLIAM T. QUILLEN
--------------------------------------
WILLIAM T. QUILLEN, SECRETARY OF STATE
AUTHENTICATION: 7072077
DATE: 03-29-94
<PAGE> 2
RESTATED
CERTIFICATE OF INCORPORATION
OF
THE ACTAVA GROUP INC.
This is the Restated Certificate of Incorporation of The Actava Group Inc.
(hereinafter called the Corporation), which was originally incorporated under
the name "F.I., Inc." The original Certificate of Incorporation was filed with
the Secretary of State of the State of Delaware on March 15, 1968. Prior
Restated Certificates of Incorporation were filed with the Secretary of State
of the State of Delaware on September 13, 1974, November 23, 1982 and May 17,
1985, respectively. A Certificate of Amendment was filed with the Secretary of
State of the State of Delaware on May 27, 1987 and a Certificate of Ownership
and Merger was filed with the Secretary of State of the State of Delaware on
July 19, 1993. This Restated Certificate of Incorporation was duly adopted by
the Board of Directors of the Corporation in accordance with the provisions of
Section 245 of the General Corporation Law of the State of Delaware and only
restates and integrates and does not further amend the provisions of the
Corporation's Certificate of Incorporation as heretofore amended or
supplemented. There is no discrepancy between the provisions of the
Corporation's Certificate of Incorporation as heretofore amended or
supplemented and the provisions of this Restated Certificate of Incorporation,
which are as follows:
FIRST: The name of the corporation (hereinafter called the
Corporation) is
THE ACTAVA GROUP INC.
SECOND: The address of the Corporation's registered office in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, City of
Wilmington, County of New Castle. The name of the Corporation's registered
agent at such address is The Corporation Trust Company.
THIRD: The nature of the business or purposes of the Corporation are
as follows:
(1) To engage in the business of broadcasting, televising,
transmitting and otherwise communicating by closed circuit, radio, television,
microwave and any and all other lawful means; to engage in the business of
producing, selling, licensing and otherwise generally trading and dealing in
entertainment and advertising of every kind and description; to construct and
to engage in the business of constructing buildings and structures of all kinds
including, without limitation, grain storage bins and related equipment and
metal buildings; to engage in the business of developing, printing and other
processing of, and selling and distributing, photographic film; to manufacture,
buy, sell, fabricate, process and deal in lawn mowing equipment and garden
<PAGE> 3
tools and earth moving and tillage equipment and machinery; to engage in the
business of forming, joining, fabricating and bending tin, steel, and other
metals and products constructed thereof; and to buy, sell, mortgage, lease,
manage, hold, partition and deal in real estate, land and buildings.
(2) To manufacture, fabricate, import, export, purchase, sell,
mortgage, lease, manage, hold, trade and deal in manufactured products,
materials, processes, systems, goods, wares and merchandise of every kind and
description; and to hold the stock and other securities issued by subsidiary
and other corporations engaged in any and every lawful kind of business or
enterprise.
(3) To conduct and carry on research work in, and to engage in any
activity pertaining or incidental to any scientific, technical or other field
or fields, and to render services of a scientific, technical, managerial,
administrative or other nature to any person, association, firm, corporation,
country, state, municipality or other governmental division or subdivision.
(4) To engage in any other lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.
FOURTH: The aggregate number of shares which the Corporation shall
have the authority to issue and have outstanding is:
(i) 100,000,000 shares of Common Stock, $1 par value (hereinafter
called the "Common Stock");
(ii) 1,000,000 shares of Preference Stock, no par value (hereinafter
called the "Preference Stock"); and
(iii) 5,000,000 shares of Preferred Stock, $1 par value (hereinafter
called the "Preferred Stock").
Each share of Common Stock shall have one vote. Each share of Preference Stock
and Preferred Stock shall have such voting powers, if any, as shall be fixed by
the Board of Directors as hereinafter provided. Except as expressly otherwise
hereinafter provided or as required by law, all shares having a vote shall vote
together and not as separate classes on all matters at meetings of
stockholders.
None of the holders of shares of stock of any class shall have any
preemptive rights to subscribe to any additional issue of stock of any class.
(A) PREFERRED STOCK
Shares of Preferred Stock may be issued from time to time in
one or more series as may from time to time be determined by the Board
of Directors, each of said series to be
2
<PAGE> 4
distinctly designated. All shares of any one series of Preferred
Stock shall be alike in every particular, except that there may be
different dates from which dividends, if any, thereon shall be
cumulative, if made cumulative. The voting powers and the preferences
and relative, participating, optional and other special rights of each
such series, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at
any time outstanding; and the Board of Directors of the Corporation is
hereby expressly granted authority to fix the voting powers and the
designations, preferences and relative, optional and other special
rights, and the qualifications, limitations and restrictions of such
series, including, without limitation, the following:
(1) The distinctive designation of, and the number
of shares which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares
thereof then outstanding) from time to time by like action of
the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on shares of such
series shall be paid, the extent of the preference or
relation, if any, of such dividends to the dividends payable
on any other series of Preferred Stock (all of which shall be
preferred to all Preference Stock and the Common Stock) and
whether such dividends shall be cumulative or non-cumulative;
(3) The right, if any, of the holders of shares of
such series to convert the same into or exchange the same for,
shares of any other class or classes or of any series of the
same or any other class or classes of stock of the Corporation
and the terms and conditions of such conversion or exchange;
(4) Whether or not shares of such series shall be
subject to redemption, and the redemption price or prices and
the time or times at which, and the terms and conditions on
which shares of such series may be redeemed;
(5) The rights, if any, of the holders of shares of
such series (all of which shall be preferred to all Preference
Stock and the Common Stock) upon the voluntary or involuntary
liquidation, merger, consolidation, distribution or sale of
assets, dissolution or winding-up, of the Corporation;
3
<PAGE> 5
(6) The terms of the sinking fund or redemption or
purchase account, if any, to be provided for shares of such
series; and
(7) The voting powers, if any, of the holders of
such series which may, without limiting the generality of the
foregoing, include the right, voting as a series or by itself
or together with other series of Preferred Stock or all series
of Preferred Stock as a class, to elect one or more directors
of the Corporation if there shall have been a default in the
payment of dividends on any one or more series of Preferred
Stock or under such other circumstances and on such conditions
as the Board of Directors may determine.
The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case, be
as fixed from time to time by the Board of Directors and the consent,
by class or series vote or otherwise, of the holders of any series of
Preferred Stock outstanding shall not be required for the issuance by
the Board of Directors of any other series of Preferred Stock whether
or not the powers, preferences and rights of such other series shall
be fixed by the Board of Directors as senior to, or on a parity with,
the powers, preferences and rights of such outstanding series;
provided, however, that the Board of Directors may provide as to any
series of Preferred Stock that the consent of the holders of a
majority (or such greater proportion as shall be fixed) of the
outstanding shares of such series voting thereon shall be required for
the issuance of any or all other series of Preferred Stock. Subject
to the provisions hereof, shares of any series of Preferred Stock may
be issued from time to time as the Board of Directors of the
Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
Shares of Preferred Stock from time to time acquired by the
Corporation upon redemption, purchase, conversion or otherwise shall
be restored to the status of authorized but unissued shares of
Preferred Stock without serial designation.
(B) PREFERENCE STOCK
Subject to the provisions of Section (A) of this Article
Fourth relating to the Preferred Stock, shares of Preference Stock may
be issued from time to time in one or more series as may from time to
time be determined by the Board of Directors, each of said series to
be distinctly designated. All shares of any one series of Preference
Stock shall be alike in every particular, except that there may be
different dates from which dividends, if any, thereon shall be
cumulative, if made
4
<PAGE> 6
cumulative. The voting powers and the preferences and relative,
participating, optional and other special rights of each such series,
and the qualifications, limitations or restrictions thereof, if any,
may differ from those of any and all other series at any time
outstanding; and the Board of Directors of the Corporation is hereby
expressly granted authority to fix the voting powers and the
designations, preferences and relative, optional and other special
rights and the qualifications, limitations and restrictions of such
series, including, without limitation, the following:
(1) The distinctive designation of, and the number
of shares which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares
thereof then outstanding) from time to time by like action of
the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on shares of such
series shall be paid, the extent of the preference or
relation, if any, of such dividends to the dividends payable
on any other series of Preference Stock (all of which shall be
subordinate to the Preferred Stock but preferred to the Common
Stock) and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of shares of
such series to convert the same into or exchange the same for,
shares of any other class or classes or of any series of the
same or any other class or classes of stock of the Corporation
and the terms and conditions of such conversion or exchange;
(4) Whether or not shares of such series shall be
subject to redemption, and the redemption price or prices and
the time or times at which, and the terms and conditions on
which shares of such series may be redeemed;
(5) The rights, if any, of the holders of shares of
such series (all of which shall be subordinate to the
Preferred Stock but preferred to the Common Stock) upon the
voluntary or involuntary liquidation, merger, consolidation,
distribution or sale of assets, dissolution or winding-up, of
the Corporation;
(6) The terms of the sinking fund or redemption or
purchase account, if any, to be provided for shares of such
series; and
(7) The voting powers, if any, of the holders of
such series which may, without limiting the generality of
5
<PAGE> 7
the foregoing, include the right, voting as a series or by
itself or together with other series of Preference Stock or
all series of Preference Stock as a class, to elect one or
more directors of the Corporation if there shall have been a
default in the payment of dividends on any one or more series
of Preference Stock or under such other circumstances and on
such conditions as the Board of Directors may determine.
The relative powers, preferences and rights of each series of
Preference Stock in relation to the relative powers, preferences and
rights of each other series of Preference Stock shall, in each case,
be as fixed from time to time by the Board of Directors and the
consent, by class or series vote or otherwise, of the holders of any
series of Preference Stock outstanding shall not be required for the
issuance by the Board of Directors of any other series of Preference
Stock whether or not the powers, preferences and rights of such other
series shall be fixed by the Board of Directors as senior to, or on a
parity with, the powers, preferences and rights of such outstanding
series; provided, however, that the Board of Directors may provide as
to any series of Preference Stock that the consent of the holders of a
majority (or such greater proportion as shall be fixed) of the
outstanding shares of such series voting thereon shall be required for
the issuance of any or all other series of Preference Stock. Subject
to the provisions hereof, shares of any series of Preference Stock may
be issued from time to time as the Board of Directors of the
Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
Shares of Preference Stock from time to time acquired by the
Corporation upon redemption, purchase, conversion or otherwise shall
be restored to the status of authorized but unissued shares of
Preference Stock without serial designation.
(C) COMMON STOCK
Each share of Common Stock issued and outstanding shall be
identical in all respects one with the other, and no dividend shall be
paid on any shares of Common Stock unless the same dividend is paid on
all shares of Common Stock outstanding at the time of such payment.
Except for and subject to those rights expressly granted to the
holders of the Preferred Stock and of the Preference Stock, or except
as may be provided by the laws of the State of Delaware, the holders
of the Common Stock shall have exclusively all other rights of
stockholders including but not by way of limitation (i) the right to
receive dividends, when and as declared by the Board of Directors out
of assets lawfully available therefor, and (ii) in the event of any
distribution of assets
6
<PAGE> 8
upon liquidation, dissolution or winding up of the Corporation or
otherwise, the right to receive ratably and equally all of the assets
and funds of the Corporation remaining after the payment to the
holders of other classes of stock of the Corporation of the specific
amounts which they are entitled to receive upon such liquidation,
dissolution or winding up of the Corporation as hereinbefore provided.
Before any sum or sums shall be set aside for or applied to
the purchase of Common Stock and before any dividend shall be declared
or paid or any distribution ordered or made upon the Common Stock
(other than a dividend payable in Common Stock), the Corporation shall
comply with any sinking fund provisions applicable to Preferred Stock
and to Preference Stock of all series then outstanding.
FIFTH: Unless and except to the extent that the By-laws of the
Corporation shall so require, the election of directors of the Corporation need
not be by written ballot.
SIXTH: The Board of Directors is expressly authorized and empowered
to make, alter and repeal the By-laws of the Corporation, subject to the power
of the stockholders of the Corporation to alter or repeal any or all By-laws
made by the Board of Directors.
SEVENTH: Any director or any officer of the Corporation elected or
appointed by the stockholders of the Corporation or by its Board of Directors
may be removed at any time in such manner as shall be provided in the By-laws
of the Corporation.
EIGHTH: The Corporation reserves the right at any time and from time
to time to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, and other provisions authorized by the laws of
the State of Delaware at the time in force may be added or inserted, in the
manner now or hereafter prescribed by law; and all rights, preferences and
privileges of whatsoever nature conferred upon stockholders, directors or any
other persons whomsoever by and pursuant to this Certificate of Incorporation
in its present form or as hereafter amended are granted subject to the right
reserved in this Article.
NINTH:
(A) Except as expressly permitted in paragraph (B) hereof, any
purchase by the Corporation, or any subsidiary of the
Corporation, of shares of Voting Stock (as hereinafter
defined) from a person or persons known by the Board of
Directors of the Corporation to be an Interested Stockholder
(as hereinafter defined), and who has beneficially owned such
Voting Stock for less than 24 months prior to the date of such
purchase, at a price in excess of the interested Stockholder's
Average Price (as hereinafter defined), shall require the
affirmative vote
7
<PAGE> 9
of not less than a majority of the votes cast by the holders,
voting together as a single class, of all then outstanding
shares of capital stock of the Corporation entitled to vote
generally on matters relating to the Corporation, excluding
for this purpose the votes by the Interested Stockholder,
unless a greater vote shall be required by law.
(B) The provisions of paragraph (A) hereof shall not be applicable
to any purchase of shares of Voting Stock if such purchase is
pursuant to (i) an offer of substantially the same value to
all holders of the outstanding shares of the same class as
those purchased, (ii) a tender offer or exchange offer by the
Corporation for some or all of the outstanding shares of a
class of Voting Stock made on the same terms to all holders of
such shares, or (iii) any purchase effected on the open market
and not the result of a privately-negotiated transaction.
(C) For the purposes of this Article NINTH:
(i) "Voting Stock" shall mean any stock of the
Corporation having the right to vote generally on
matters relating to the Corporation and any security
which is convertible into such stock.
(ii) "Interested Stockholder" shall mean any person who or
which is the beneficial owner, directly or
indirectly, of Voting Stock possessing 5% or more of
the aggregate vote of all outstanding shares of
Voting Stock, excluding from the foregoing:
(a) The Corporation or any subsidiary of the
Corporation;
(b) Any profit sharing, employee stock ownership
or other employee benefit plan of the
Corporation or any subsidiary thereof, or any
trustee or other fiduciary with respect to
any such plan when acting in such capacity;
or
(c) any person who was the owner of 5% or more of
the Voting Stock on March 15, 1985 (or the
estate of such person).
(iii) A person shall be a "beneficial owner" of any
Voting Stock of the Corporation:
(a) which such person or any of its Affiliates or
Associates beneficially owns, directly or
indirectly; or
8
<PAGE> 10
(b) which such person or any of its Affiliates or
Associates has (i) the right to acquire
(whether such right is exercisable
immediately or only after the passage of
time), pursuant to any agreement, arrangement
or understanding or upon the exercise of
conversion rights, exchange rights, warrants
or options, or otherwise, or (ii) any right
to vote pursuant to any agreement,
arrangement or understanding; or
(c) which are beneficially owned, directly or
indirectly, by any other person with which
such person or any of its Affiliates or
Associates has any agreement, arrangement or
understanding for the purpose of acquiring,
holding, voting or disposing any Voting Stock
of the Corporation.
(iv) For the purposes of determining whether a person is
an Interested Stockholder pursuant to subparagraph
(ii) hereof, Voting Stock outstanding shall be deemed
to comprise all Voting Stock deemed owned through
application of subparagraph (iii) hereof, but shall
not include other Voting Stock which may be issuable
pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights,
warrants or options, or otherwise.
(v) "Affiliate" or "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Securities
Exchange Act of 1934, as in effect on March 15, 1985.
(vi) "Interested Stockholder's Average Price" shall mean
as to each class of stock or other security which
constitutes Voting Stock the average price per unit
thereof paid for all such stock or other securities
purchased within 24 months prior to the date of
determination by the Interested Stockholder to all
persons (other than persons who at the time of
purchase were Interested Stockholders or Affiliates
or Associates thereof), excluding all brokerage
commissions, dealers' fees and other expenses of the
Interested Stockholder relating to the acquisition of
such Voting Stock.
(D) The Board of Directors shall have the power and duty to
determine, for purposes of this Article, on the basis of
information known to the Board:
9
<PAGE> 11
(i) the amount of Voting Stock beneficially owned by any
person;
(ii) when such person acquired a beneficial interest in
such Voting Stock;
(iii) whether such person owns 5% or more of the Voting
Stock;
(iv) the aggregate number of shares of stock and the
aggregate amount of any other security outstanding at
any time;
(v) whether a person is an Affiliate or Associate of
another;
(vi) whether paragraphs (A) or (B) above are or have
become applicable in respect of a proposed purchase
of Voting Stock by the Corporation; and
(vii) if so, the Interested Stockholder's Average Price of
any Voting Stock owned by a person;
and any such determination made in good faith shall be
conclusive and binding for all purposes of this Article.
TENTH: A director of the Corporation shall not be personally liable
to the Corporation 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 Corporation 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, or (iv) for any transaction from which the director derived an
improper personal benefit.
IN WITNESS WHEREOF, The Actava Group Inc. has caused its corporate
seal to be hereunto affixed and this certificate to be signed by Frederick B.
Beilstein, III, its Senior Vice President, Treasurer and Chief Financial
Officer, and attested by Walter M. Grant, its Senior Vice President, this 24th
day of March, 1994.
THE ACTAVA GROUP INC.
(Corporate Seal)
By: /s/ Frederick B. Beilstein, III
- ----------------------------- ---------------------------
Frederick B. Beilstein, III
Senior Vice President,
Treasurer and Chief
Financial Officer
10
<PAGE> 12
ATTEST:
/s/ Walter M. Grant
- -----------------------------
Walter M. Grant
Senior Vice President
Secretary and General Counsel
11
<PAGE> 1
EXHIBIT 3(b)(i)
AMENDED AND RESTATED
BYLAWS
OF
THE ACTAVA GROUP INC.
as of November 23, 1993
ARTICLE I
MEETINGS OF STOCKHOLDERS
SECTION 1. Annual Meetings. The annual meeting of the stockholders
of The Actava Group Inc. (herein called the Corporation) shall be held each
year on such date and at such time as may be designated by the Board of
Directors (herein called the Board) and stated in the notice thereof, for the
purpose of electing directors and for the transaction of any other proper
business.
SECTION 2. Special Meetings. A special meeting of the stockholders
of the Corporation (herein called the Stockholders) may be called at any time
by the Chairman of the Board, the President, the Board, or by Stockholders
holding of record in the aggregate at least 25 percent of the outstanding stock
of the Corporation entitled to vote at such meeting, or otherwise as provided
by law.
SECTION 3. Place of Meetings. All meetings of Stockholders shall be
held at such places, within or without the State of Delaware, as may be
designated in the respective notices or waivers of notice thereof.
SECTION 4. Notice of Meetings. Unless otherwise required by law, the
Certificate of Incorporation or these Bylaws, written notice of each meeting of
Stockholders shall be given by the Company not less than ten nor more than
sixty days before the date of the meeting to each Stockholder of record
entitled to vote at such meeting by delivering a written notice thereof to him
personally or by depositing such notice in the United States mail, in a postage
prepaid envelope, directed to him at his last post-office address appearing on
the stock records of the Corporation. If mailed, such notice shall be deemed
to be given when deposited in the mail, postage prepaid, directed to the
Stockholder at his address as it appears in the records of the Corporation.
Unless otherwise required by law, the Certificate of Incorporation or these
Bylaws, no publication of any notice of a meeting of Stockholders shall be
required. Every notice of a meeting of Stockholders shall state the place,
date and hour of the meeting and, in the case of a special meeting, the purpose
or purposes for which the meeting is called. Notice of any meeting of
Stockholders need not be given to any Stockholder who attends such meeting in
person or by proxy, except a Stockholder who attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of
any business because the meeting is not lawfully called or convened. If any
Stockholder shall, in person or by attorney thereunto authorized, in writing or
by
<PAGE> 2
telegraph, cable, wireless or other form of recorded communication, waive
notice of any meeting of Stockholders, notice thereof need not be given to him.
Except as otherwise required by law, notice of any adjourned meeting of
Stockholders need not be given if the time and place thereof are announced at
the meeting at which the adjournment is taken and the adjournment is for not
more than thirty days.
SECTION 5. Quorum. Except as otherwise provided by law, the
Certificate of Incorporation or these Bylaws, at each meeting of Stockholders
the presence in person or by proxy of Stockholders holding of record shares of
stock of the Corporation having a majority of the votes which could be cast by
the holders of all outstanding shares of stock entitled to vote at the meeting
shall be necessary and sufficient to constitute a quorum for the transaction of
business. In the absence of a quorum at any such meeting or any adjournment or
adjournments thereof, a majority in voting interest of those present in person
or by proxy and entitled to vote thereat, or in the absence therefrom of all
Stockholders, any officer entitled to preside at, or to act as secretary of,
such meeting, may adjourn such meeting from time to time. At any such
adjourned meeting at which a quorum may be present any business may be
transacted which might have been transacted at the meeting as originally
called. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting. The absence from any meeting in person or by proxy of
Stockholders holding the number of shares of stock of the Corporation required
by law, by the Certificate of Incorporation or by these Bylaws for action upon
any given matter shall not prevent action at such meeting upon any other matter
or matters which may properly come before the meeting if there shall be present
thereat in person or by proxy Stockholders holding the number of shares of
stock of the Corporation required in respect of such other matter or matters.
SECTION 6. Organization. At each meeting of Stockholders, one of the
following shall act as Chairman of the meeting, in the following order of
precedence:
(a) the President;
(b) the Executive Vice President present at the meeting who has the
longest tenure in office;
(c) the Senior Vice President present at the meeting who has the
longest tenure in office;
(d) the Vice President present at the meeting who has the longest
tenure in office; or
(e) a Stockholder of record of the Corporation who shall be chosen
chairman of such meeting by a majority in voting interest of Stockholders
present in person or by proxy and entitled to vote at the meeting.
-2-
<PAGE> 3
The Secretary, or, if he shall be absent from such meeting, the person (who
shall be an Assistant Secretary, if an Assistant Secretary shall be present)
whom the Chairman of such meeting shall appoint, shall act as secretary of such
meeting and keep the minutes thereof.
SECTION 7. Order of Business. The order of business at each meeting
of Stockholders shall be determined by the chairman of the meeting, but such
order of business may be changed by the vote of a majority in voting interest
of those present in person or by proxy at such meeting and entitled to vote.
Business transacted at any special meeting of Stockholders shall be limited to
the purposes stated in the notice.
SECTION 8. Voting. Unless otherwise provided in the Certificate of
Incorporation or in an agreement among shareholders as permitted under the
General Corporation Law of the State of Delaware (the "Delaware Corporation
Law"), each Stockholder shall be entitled to one vote in person or by proxy for
each share of the stock of the Corporation which has voting power on the matter
in question and which shall have been held by him and registered in his name on
the books of the Corporation:
(a) on the date fixed pursuant to the provisions of Section 5 of
Article VI of these Bylaws as the record date for the determination of
Stockholders who shall be entitled to notice of and to vote at such meeting, or
(b) if no such record date shall have been so fixed, then (i) at
the close of business on the next day preceding the day on which notice of the
meeting shall be given or (ii) if notice of the meeting shall be waived, at the
close of business on the day next preceding the day on which the meeting shall
be held.
Shares of its own stock belonging to the Corporation or to another corporation,
if a majority of the shares entitled to vote in the election of directors of
such other corporation is held, directly or indirectly, by the Corporation,
shall neither be entitled to vote nor be counted for quorum purposes; provided,
however, that the foregoing shall not limit the rights of the Corporation to
vote stock, including but not limited to its own stock, held by it in a
fiduciary capacity. Persons holding stock of the Corporation in a fiduciary
capacity shall be entitled to vote such stock so held. Persons whose stock is
pledged shall be entitled to vote such stock, unless in the transfer by the
pledgor on the books of the Corporation he shall have expressly empowered the
pledgee to vote thereon, in which case only the pledgee, or his proxy, may
represent such stock and vote thereon. Stock having voting power standing of
record in the names of two or more persons, whether fiduciaries, members of a
partnership, joint tenants, tenants in common, tenants by the entirety or
otherwise, or with respect to which two or more persons have the same fiduciary
relationship, shall be voted in accordance with the provisions of the Delaware
Corporation Law. Each Stockholder entitled to vote at a meeting of
Stockholders or to express consent or dissent to action by the Corporation in
writing without a meeting may authorize another person or persons to act for
him by proxy appointed by an instrument in writing, subscribed by such
Stockholder or by his attorney thereunto authorized and delivered to the
secretary of the meeting in the case of a meeting or to the Secretary in the
case of an action by written consent; provided, however, that no proxy shall
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be voted or acted upon after three years from its date unless the proxy shall
provide for a longer period. A duly executed proxy shall be irrevocable only
if it states that it is irrevocable and only if, and as long as, it is coupled
with an interest in law sufficient to support an irrevocable power. The
attendance at any meeting of a Stockholder who may theretofore have given a
proxy shall not have the effect of revoking the same unless he shall in writing
so notify the secretary of the meeting prior to the voting of the proxy. At
all meetings of Stockholders all matters, except as otherwise provided in the
Certificate of Incorporation, in these Bylaws or by law, shall be decided by
the vote of a majority in voting interest of Stockholders present in person or
by proxy and actually voting thereon, a quorum being present. Except in the
case of votes for the election of directors, the vote at any meeting of
Stockholders on any question need not be by written ballot, unless so directed
by the chairman of the meeting. On a vote by ballot each ballot shall be
signed by the Stockholder voting, or by his proxy, if there be such proxy, and
it shall state the number of shares voted.
SECTION 9. List of Stockholders. The Secretary, either directly or
through another officer of the Corporation designated by him or through a
transfer agent or transfer clerk appointed by the Board, shall prepare and
make, at least ten days before every meeting of Stockholders, a complete list
of the Stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each Stockholder and the number of shares
registered in the name of each Stockholder. Such list shall be open to the
examination of any Stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where said meeting is to be held. The list shall also
be produced and kept at the time and place of said meeting during the whole
time thereof and may be inspected by any Stockholder who is present. The stock
ledger shall be the only evidence as to who are the Stockholders entitled to
examine the stock ledger, such list or the books of the Corporation, or to vote
in person or by proxy at any meeting of Stockholders.
SECTION 10. Inspectors or Judges. The Board, in advance of any
meeting of Stockholders, may appoint one or more inspectors or judges to act at
such meeting or any adjournment thereof. If the inspectors or judges shall not
be so appointed, or if any of them shall fail to appear, or act, the chairman
of such meeting shall appoint the inspectors or judges, or such substitute or
substitutes therefor, as the case may be. Such inspectors or judges, before
entering on the discharge of their duties, shall take and sign an oath or
affirmation faithfully to execute the duties of inspectors or judges at
meetings for which they are appointed. At such meeting, the inspectors or
judges shall receive and take charge of the proxies and ballots and decide all
questions relating to the qualification of voters and the validity of proxies
and the acceptance or rejection of votes. An inspector or judge need not be a
stockholder of the Corporation, and any officer of the Corporation may be an
inspector or judge on any question other than a vote for or against a proposal
in which he shall have a material interest.
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SECTION 11. Consent of Stockholders in Lieu of Meeting. Unless
otherwise restricted by the Certificate of Incorporation, any action required
or permitted to be taken at any annual or special meeting of Stockholders may
be taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of shares that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
Stockholders who have not consented in writing. In connection with any such
action without a meeting by consent in writing, (i) notice of the proposal to
take such action shall be given, as provided in Section 4 of this Article I, to
each Stockholder of record who would be entitled to notice if such action were
to be taken at a meeting; (ii) such action shall be deemed to have been taken
upon the later of receipt by the Corporation of the requisite consents or the
record date for determining the Stockholders entitled to express consent to
such corporate action without a meeting determined in accordance with Article
VI, Section 5 of these Bylaws; (iii) the Stockholder list provided for in
Section 9 of this Article I shall be opened to the examination of any
Stockholder, for purposes germane to such action to be taken, during ordinary
business hours, from the time of giving notice of the meeting until the action
shall have been taken; and (iv) inspectors or judges shall be appointed as
provided in Section 10 of this Article I. The requirements of Section 1 of
this Article I shall be deemed to be satisfied in any year if action required
to be taken at an annual meeting shall have been taken without a meeting by
consent in writing during such year.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. General Powers. The property, business and affairs of the
Corporation shall be managed by or under the direction of the Board which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
Bylaws directed or required to be exercised or done by the Stockholders.
SECTION 2. Number and Term of Office. Subject to the requirements of
laws, the Board may from time to time by the vote of the majority of the whole
Board determine the number of directors. The term "whole Board" as used in
these Bylaws shall mean the number of positions on the Board regardless of the
number of directors then in office. Until the Board or the Stockholders shall
otherwise so determine, the number of directors shall be eight. Each of the
Directors shall hold office until the annual meeting next after his election
and until his successor shall be elected and shall qualify, or until his death
in office or his earlier resignation or removal in the manner hereinafter
provided. Directors need not be stockholders.
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SECTION 3. Election of Directors. At each annual meeting of
Stockholders for the election of directors at which a quorum is present and
unless otherwise provided in the Certificate of Incorporation or these Bylaws
the persons receiving the greatest number of votes, up to the number of
directors to be elected, shall be the directors. Such election shall be by
ballot.
SECTION 4. Organization and Order of Business. At each meeting of
the Board, one of the following shall act as chairman of the meeting and
preside thereat, in the following order of precedence:
(a) the Chairman of the Board;
(b) the President, if a member of the Board; or
(c) a Vice President of the Board; or
(d) any director chosen by a majority of the directors present at
the meeting.
The Secretary, or, if he shall be absent from such meeting, the person (who
shall be an Assistant Secretary, if an Assistant Secretary shall be present)
whom the Chairman of such meeting shall appoint, shall act as secretary of such
meeting and keep the minutes thereof. The order of business at each meeting of
the Board shall be determined by the chairman of such meeting.
SECTION 5. Resignations. Any director may resign at any time by
giving written notice of his resignation to the Chairman of the Board, the
President or the Secretary. Any such resignation shall take effect at the time
specified therein or, if the time when it shall become effective shall not be
specified therein, it shall take effect immediately upon its receipt. Except
as specified therein, the acceptance of such resignation shall not be necessary
to make it effective.
SECTION 6. Vacancies, etc. Notwithstanding Section 11 of this
Article II, in case of any vacancy on the Board or in case of any newly created
directorship, a director to fill the vacancy for the unexpired portion of the
term being filled or the newly created directorship may be elected by the
holders of shares of stock of the Corporation entitled to vote in respect
thereof at an annual or special meeting of said holders or by a majority of the
directors of the Corporation then in office though less than a quorum.
SECTION 7. Place of Meeting. The Board may hold its meetings at such
place or places, within or without the State of Delaware, as the Board may from
time to time by resolution determine or as shall be designated in the
respective notices or waivers of notice thereof.
SECTION 8. Annual Meeting. As soon as practicable after each annual
election of directors, the Board shall meet for the purpose of organization,
the election of officers and
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the transaction of other business. If the Board shall have provided for the
holding of regular meeting, unless the Board shall by resolution otherwise
determine, such meeting shall be held at the time and place theretofore fixed
by the Board for the next regular meeting of the Board, and no notice thereof
need be given. If the Board shall determine that such meeting shall be held at
a different place and time than the next regular meeting, or if the Board shall
not have provided for regular meetings, notice thereof shall be given in the
manner hereinafter provided for special meetings of the Board.
SECTION 9. Regular Meetings. Regular meetings of the Board shall be
held at such places, within or without the State of Delaware, and at such times
as the Board shall from time to time determine. Notices of regular meetings
need not be given. If any day fixed for a regular meeting shall be a legal
holiday at the place where the meeting is to be held, then the meeting which
would otherwise be held on that day shall be postponed until the same hour of
the next succeeding business day.
SECTION 10. Special Meetings; Notice. Special meetings of the Board
shall be held whenever called by the Chairman of the Board or the President and
shall be called by one of them on the request of any three of the directors in
office unless the Board consists of fewer than three directors; in which case
special meetings shall be called by the Chairman of the Board or the President
on the written request of all of the directors then in office. A notice of
each such special meeting shall be given as hereinafter provided and shall
specify the time and place of such meeting. Except as otherwise provided by
law, the purposes of the meeting need not be stated in the notice. Notice of
each such meeting shall be mailed to each director, addressed to him at his
residence or usual place of business, at least two days before the day on which
such meeting is to be held or shall be sent addressed to him at such place by
facsimile, telegraph, cable, wireless or other form of recorded communication
or be delivered personally or by telephone not later than the day before the
day on which such meeting is to be held. Notice of any meeting of the Board
need not, however, be given to any director if waived by him in writing or by
facsimile, telegraph, cable, wireless of other form of recorded communication
before, during or after such meeting or if he shall be present at such meeting;
and any meeting of the Board shall be a legal meeting without any notice
thereof having been given if all the directors of the Corporation then in
office shall be present.
SECTION 11. Quorum and Manner of Acting. A majority of the directors
in office shall be present at any meeting of the Board in order to constitute a
quorum for the transaction of business at such meeting; provided, however, in
no case shall a quorum be present if there is present less than 1/3 of the
whole Board. Except as otherwise provided in these Bylaws, the Certificate of
Incorporation or by law, the vote of a majority of the directors present at any
such meeting at which a quorum is present shall be the act of the Board. In
the absence of a quorum, a majority of the directors present may adjourn such
meeting from time to time until a quorum shall be present. Notice of any
adjourned meeting need not be given. The directors shall act only as a board
and individual directors shall have no power as such.
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SECTION 12. Action by Consent. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board, or of any committee thereof, may be
taken without a meeting if prior to such action a written consent thereto is
signed by all members of the Board or of such committee, as the case may be,
and such written consent is filed with the minutes of proceedings of the Board
or committee.
SECTION 13. Telephone Meetings Permitted. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, members of the
Board, or any committee designated by the Board, may participate in a meeting
thereof by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at the
meeting.
SECTION 14. Removal of Directors. Unless otherwise provided by the
Certificate of Incorporation or by law, any director may be removed, either
with or without cause, at any time, by the affirmative vote of a majority in
interest of the Stockholders of record of the Corporation entitled to vote at
an election of directors, given at a special meeting of the Stockholders called
for the purpose; and the vacancy in the Board caused by such removal may be
filled by the Stockholders at such meeting or otherwise as provided in Section
6 of this Article.
SECTION 15. Remuneration. Unless otherwise expressly provided by
resolution adopted by the Board, none of the directors or of the members of any
committee of the Corporation contemplated by these Bylaws or otherwise provided
for by resolution of the Board shall, as such, receive any stated remuneration
for his services; but the Board may at any time or from time to time by
resolution provide that a specified sum shall be paid to any director of the
Corporation or to any member of any such committee who shall not otherwise be
in the employ of the Corporation or any of its subsidiary companies, either as
his annual remuneration as such director or member or as remuneration for his
attendance at each meeting of the Board or of such committee, including, if the
Board so chooses, a specified sum to any director who may serve as the Chairman
of the Board or chairman of any such committee. The Board may also likewise
provide that the Corporation shall reimburse each such director or member of
such committee for any expenses paid by him on account of his attendance at any
such meeting. Nothing in this Section contained shall be construed to preclude
any director from serving the Corporation in any other capacity and receiving
remuneration therefor.
SECTION 16. Chairman of the Board. The Chairman of the Board shall,
if present, preside at all meetings of the Board. In general, he shall perform
all duties incident to the office of Chairman of the Board and such other
duties as from time to time may be assigned to him by the Board.
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SECTION 17. Senior Chairman of the Board. The Corporation may have a
Senior Chairman of the Board, who shall have such powers and duties as may be
assigned to him from time to time by the Board or the Chairman of the Board.
SECTION 18. Vice Chairman of the Board. The Corporation may have one
or more Vice Chairmen of the Board. Each Vice Chairman of the Board shall have
such powers and duties as may be assigned to him from time to time by the Board
or the Chairman of the Board. At the request of the Chairman of the Board, or
in case of both his absence or inability to act and that of the President, and
unless or until the Board or the Executive Committee shall otherwise determine,
the Vice Chairman of the Board having the greatest seniority in that office who
is present and able to act shall perform the duties of the Chairman of the
Board, and, when so acting, shall have all the powers of, and be subject to all
the restrictions upon, the Chairman of the Board.
ARTICLE III
COMMITTEES
SECTION 1. Executive Committee; Number, Appointment, Term of Office,
Etc. The Board, by resolution adopted by a majority of the whole Board, may
designate an Executive Committee consisting of not less than three (3) members
of the Board of Directors then in office. Each member of the Executive
Committee shall continue to be a member thereof only so long as he remains a
director and at the pleasure of a majority of the whole Board. The term "whole
Executive Committee" as used in these Bylaws shall mean the number of positions
on the Executive Committee regardless of the number of members thereof then in
office.
SECTION 2. Functions and Powers. The Executive Committee, between
meetings of the Board, shall have and may exercise the powers of the Board,
except those lodged in any other Committee of the Board, in the management of
the property, business and affairs of the Corporation, may authorize the seal
of the Corporation to be affixed to all papers which may require it, may
authorize the issuance of shares of stock of the Corporation in connection with
the acquisition by the Corporation, or one of its subsidiaries, of the stock,
assets or business of another corporation, provided that the number of shares
to be issued for any one such acquisition shall not exceed 2-1/2 percent of the
issued and outstanding shares of the class to be issued, and, if the proposed
action has been approved by the Board in principle, may declare dividends upon
the shares of stock of the Corporation and may otherwise authorize the issuance
of shares of stock of the Corporation.
SECTION 3. Organization. At each meeting of the Executive Committee,
one of the following shall act as chairman of the meeting in the following
order of precedence:
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(a) the Chairman of the Executive Committee, who shall be
appointed from among the members of the Executive Committee by the
Board;
(b) the Chairman of the Board, if a member of the
Executive Committee;
(c) the President, if a member of the Executive Committee;
(d) a Vice Chairman of the Board, if a member of the
Executive Committee;
(e) the Executive Vice President present at the meeting
who has the longest tenure in office and who is a member of the
Executive Committee;
(f) the Senior Vice President present at the meeting who
has the longest tenure in office and who is a member of the Executive
Committee;
(g) the Vice President present at the meeting who has the
longest tenure in office and who is a member of the Executive
Committee; or
(h) any member of the Executive Committee chosen by a
majority of the members present.
The Secretary, or if the shall be absent from such meeting, the person (who
shall be an Assistant Secretary, if an Assistant Secretary shall be present)
whom the chairman of such meeting shall appoint, shall act as secretary of such
meeting and keep the minutes thereof.
SECTION 4. Meetings. Regular meetings of the Executive Committee, of
which no notice shall be necessary, shall be held on such days and at such
places, within or without the State of Delaware, as shall be fixed by
resolution adopted by a majority of the whole Executive Committee. Special
meetings of the Executive Committee shall be held whenever called by the
Chairman of the Board, the President, or the Chairman of the Executive
Committee and shall be called by one of them on the request of two members of
the Executive Committee then in office. Notice of each special meeting of the
Executive Committee shall be given to each member thereof, addressed to him at
his residence or usual place of business at least two days before the day on
which such meeting is to be held, by mail, facsimile, telegraph, cable,
wireless or other form of recorded communication or be delivered personally or
by telephone not later than the day before the day on which such meeting is to
be held. Notice of any such meeting need not, however, be given to any member
of the Executive Committee if waived by him in writing or by facsimile,
telegraph, cable, wireless or other form of recorded communication before,
during or after such meeting or if he shall be present at such meeting; and any
meeting of the Executive Committee shall be a legal meeting without any notice
thereof having been given if all the members of the Executive Committee shall
be present. The purposes of a meeting need not be specified in the notice or
waiver of notice of any meeting. Subject to the provisions of
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these Bylaws, by resolution adopted by a majority of the whole Executive
Committee, the Executive Committee shall fix its own rules of procedures, and
it shall keep a record of its proceedings and report them to the Board at the
next regular meeting thereof after such proceedings shall have been taken. All
such proceedings shall be subject to revision or alteration by the Board.
SECTION 5. Quorum and Manner of Acting. At all meetings of the
Executive Committee a majority of the Executive Committee shall constitute a
quorum for the transaction of business at such meeting. Except as otherwise
provided in these Bylaws or by law, the act of a majority of those present at a
meeting thereof at which quorum is present shall be the act of the Executive
Committee. The members of the Executive Committee shall act only as a
committee, and the individual members shall have no power as such.
SECTION 6. Resignations. Any member of the Executive Committee may
resign therefrom at any time by giving written notice of his resignation to the
Chairman of the Board, the President or the Secretary. Any such resignation
shall take effect at the time specified therein or, if the time when it shall
become effective shall not be specified therein, it shall take effect
immediately upon its receipt; and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 7. Other Committees. The Board, by resolution adopted by a
majority of the whole Board, may designate one or more other committees, which
shall in each case consist of such number of directors and shall have and may
exercise such powers of the Board for such periods as the Board may determine
in the respective resolutions designating such committees or from time to time
but no such committee shall have the power or authority in reference to
amending the Certificate of Incorporation (except that a committee may, to the
extent authorized in the resolution or resolutions adopted by the Board as
provided in the Delaware Corporation Law Section 151(a), providing for the
issuance of shares of stock, fix any of the preferences or rights of such
shares relating to dividends, redemptions, dissolution, any distribution of
assets of the corporation or the conversion into, or the exchange of such
shares for, shares of any other class or classes or any other series of the
same or any other class or classes of stock of the corporation) adopting an
agreement of merger or consolidation, recommending to the stockholders the
sale, lease or exchange of all or substantially all of the corporation's
property or assets, recommending to the stockholders a dissolution of the
corporation or a revocation of a dissolution, or amending the Bylaws of the
corporation. A majority of all the members of any such committee may fix its
rules of procedure, determine its action, fix the time and place, whether
within or without the State of Delaware, of its meetings and specify what
notice thereof, if any, shall be given, unless the Board shall by resolution
otherwise provide. Each member of any such committee shall continue to be a
member thereof only so long as he remains a director and at the pleasure of a
majority of the whole Board. Any vacancies on any such committee may be filled
by a majority of the whole Board.
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ARTICLE IV
OFFICERS
SECTION 1. Election and Term of Office. The Corporation shall have
the following officers: a President, one or more Vice Presidents (one or more
of whom may be designated Executive or Senior Vice Presidents), a Treasurer and
a Secretary. The Board may also elect a Controller, Assistant Vice Presidents,
Assistant Secretaries, Assistant Treasurers and such other officers as it may
deem necessary, who shall have such authority and perform such duties as may be
prescribed from time to time by the Board. All officers of the Corporation
shall be elected annually by the Board at the first meeting thereof held after
each annual meeting of Stockholders for the election of directors and shall
hold office until their successors shall have been duly elected and shall
qualify. Any vacancies in any offices may be filled by a majority of the whole
Board. Any officer elected by the Board shall be subject to removal, either
with or without cause, at any time by a majority of the whole Board.
SECTION 2. Resignations. Any officer may resign at any time by
giving written notice of his resignation to the Chairman of the Board, the
President or the Secretary. Any resignation shall take effect at the time
specified therein or, if the time when it shall become effective shall not be
specified therein, immediately upon its receipt; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
SECTION 3. President. The President shall be the chief executive
officer of the Corporation and shall have, subject to the control of the Board,
general and active supervision over the business and affairs of the Corporation
and over its several officers. He shall have the power to appoint and remove
all agents and employees of the Corporation, subject to the control of the
Board. He shall see that all orders and resolutions of the Board are carried
in effect. From time to time he shall report to the Stockholders and to the
Board all matters within his knowledge which, in his judgement, the interests
of the Corporation may require to be brought to their notice. At the request
of the Chairman of the Board, or in case of his absence or inability to act,
and unless or until the Board or the Executive Committee shall otherwise
determine, or as otherwise provided in these Bylaws, the President shall, if a
member of the Board, perform the duties of the Chairman of the Board, and, when
so acting, shall have all the powers of, and be subject to all the restrictions
upon, the Chairman of the Board. In general, he shall perform all duties
incident to the office of President and such other duties as from time to time
may be assigned to him by the Board.
SECTION 4. Vice Presidents. Each Vice President shall have such
powers and duties as shall be prescribed by the Board at the time of his
election and such other powers and duties as may be assigned to him from time
to time by the Board or the President. In the absence or disability of the
President, and unless or until the Board or the Executive Committee shall
otherwise determine, the Executive Vice President with the
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longest tenure in office or, if there shall be no Executive Vice President, the
Senior Vice President with the longest tenure in office or, if there shall be
no Senior Vice Presidents, the Vice President with the longest tenure in office
shall be vested with all the powers of the President.
SECTION 5. Treasurer. If required by the Board, the Treasurer shall
give a bond for the faithful discharge of his duties in such sum and with such
surety or sureties as the Board shall determine. To the extent determined by
the Board, he shall:
(a) have charge and custody of, and be responsible for,
all funds, securities, notes and valuable effects of the Corporation;
receive and give receipt for moneys due and payable to the Corporation
from any sources whatsoever; deposit all such moneys to the credit of
the Corporation or otherwise as the Board or the President shall
direct in such banks, trust companies or other depositaries as shall
be selected in accordance with the provisions of Section 2 of Article
V of these Bylaws; cause such funds to be disbursed by checks or
drafts on the authorized depositaries of the Corporation signed as
provided in Section 1 of said Article V; and be responsible for the
accuracy of the amounts of, and cause to be preserved proper vouchers
for, all moneys so disbursed;
(b) have the right to require from time to time reports
or statements giving such information as he may desire with respect to
any and all financial transactions of the Corporation from the
officers or agents transacting the same;
(c) render to the President, the Board or an Audit
Committee of the Board, whenever they, respectively, shall request him
to do so, an account of the financial condition of the Corporation and
of all his transactions as Treasurer;
(d) upon request, exhibit, or cause to be exhibited, at
all reasonable times his cash books and other records to the
President, an Audit Committee of the Board or any of the directors of
the Corporation; and
(e) in general, perform all duties incident to the office
of treasurer and such other duties as from time to time may be
assigned to him by the President or the Board.
SECTION 6. Assistant Treasurers. If required by the Board, each of
the Assistant Treasurers shall give a bond for the faithful discharge of his
duties in such sums and with such surety or sureties as the Board shall
determine. At the request of the Treasurer, or in case of his absence or
inability to act, the Assistant Treasurer, or, if there be more than one, any
of the Assistant Treasurers, shall perform the duties of the Treasurer, and
when so acting, shall have all the powers of, and be subject to all the
restrictions, upon, the Treasurer. Each of the Assistant Treasurers shall
perform such other duties as from time to time may be assigned to him by the
Treasurer, the President or the Board.
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SECTION 7. Secretary. The Secretary shall:
(a) record all the proceedings of the meetings and
written consents of the Stockholders, the Board, the Executive
Committee and any other committees of the Board in one or more books
kept for that purpose;
(b) see that all notices are duly given in accordance
with the provisions of these Bylaws or as required by law;
(c) be custodian of all contracts, deeds, documents, all
other indicia of title to properties owned by the Corporation and of
its other corporate records (except such records as are required by
these Bylaws to be held in the custody of the Treasurer or other
officers) and of the seal of the Corporation, and see that such seal,
or, if authorized by the Board, a facsimile thereof, is affixed to all
certificates for stock of the Corporation prior to the issuance
thereof and to all other documents the execution of which on behalf of
the Corporation under its seal is duly authorized in accordance with
the provisions of these Bylaws, and, except as the Board shall
otherwise direct, have power and authority to attest the seal of the
Corporation when so affixed;
(d) have charge, directly or through the transfer clerk
or transfer clerks, transfer agent or transfer agents and registrar or
registrars appointed as provided in Section 3 of Article VI of these
Bylaws, of the issuance, transfer and registration of certificates for
stock of the Corporation and of the records thereof, such records to
be kept in such manner as to show at any time the amount of the stock
of the Corporation issued and outstanding, the manner in which and the
time when such stock was paid for, the names, alphabetically arranged,
and the address of the holders of record thereof, the number of shares
held by each, and the time when each became a holder of record;
(e) upon request, exhibit or cause to be exhibited at all
reasonable times to any director such records of the issuance,
transfer and registration of the certificates for stock of the
Corporation;
(f) see that the books, reports, statements, certificates
and all other documents and records required by law are properly kept
and filed;
(g) see that the duties prescribed by Section 9 of
Article I of these Bylaws are performed; and
(h) in general, perform all duties incident to the office
of Secretary and such other duties as from time to time may be
assigned to him by the President or the Board.
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SECTION 8. Assistant Secretaries. At the request of the Secretary,
or in case of his absence or inability to act, the Assistant Secretary, or, if
there be more than one, any of the Assistant Secretaries, shall perform the
duties of the Secretary and, when so acting, shall have all the powers of, and
be subject to all the restrictions upon, the Secretary. Each of the Assistant
Secretaries shall perform such other duties as from time to time may be
assigned to him by the Secretary, the President or the Board.
SECTION 9. Salaries. The salaries of the officers of the Corporation
shall be fixed from time to time by the Board, by any one or more committees
(none of which shall consist of less than three members) appointed by a
resolution passed by a majority of the whole Board from among its members, with
power to fix such salaries, or by the President when so authorized by a
resolution passed by a majority of the whole Board; and none of such officers
shall be prevented from receiving a salary by reason of the fact that he is
also a member of the Board or of any such committee, but none of such officers
who shall also be a member of the Board or of any such committee shall have any
vote in the determination of the amount of salary that shall be paid to him.
ARTICLE V
CHECKS, BANK ACCOUNTS, ETC.
SECTION 1. Checks, Drafts, etc. All checks, drafts, orders for the
payment of money, bills of lading, warehouse receipts, obligations, bills of
exchange and insurance certificates shall be signed or endorsed by any one or
two officers or other persons designated by, or in accordance with, a
resolution of the Board, or, in the absence of such resolution, by any two of
the following officers: the President, any Vice President, the Secretary, the
Treasurer, and the Controller.
SECTION 2. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
or otherwise as the Board, the President, the Treasurer or other agent
designated by, or in accordance with, a resolution of the Board shall direct in
such banks, trust companies or other depositaries as the Board may select or as
may be selected by any officer or agent or agents of the Corporation to whom
power in that respect shall have been delegated by the Board. For purpose of
deposit and for the purpose of collection for the account of the Corporation,
checks, drafts and other orders for the payment of money which are payable to
the order of the Corporation may be endorsed, assigned and delivered by any
officer or agent of the Corporation.
SECTION 3. General and Special Bank Accounts. The Board may from
time to time authorize the opening and keeping of general and special bank
accounts with such banks, trust companies or other depositaries as the Board
may select, or as may be selected by any officer or officers or agent or agents
of the Corporation to whom power in that respect shall have been delegated by
the Board. The Board may make such special rules and regulations
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with respect to such bank accounts, not inconsistent with the provisions of
these Bylaws, as it may deem expedient.
SECTION 4. Proxies in Respect of Stock or Other Securities of Other
Corporations. Unless otherwise provided by resolution adopted by the Board,
the President, any Vice President or the Secretary may from time to time
appoint an attorney or attorneys or an agent or agents of the Corporation to
exercise in the name and on behalf of the Corporation the powers and rights
which the Corporation may have as the holder of stock or other securities in
any other corporation to vote or consent in respect of such stock or other
securities, and the President, any Vice President or the Secretary may instruct
the person or persons so appointed as to the manner of exercising such powers
and rights; and the President, any Vice President or the Secretary may execute
or cause to be executed in the name and on behalf of the Corporation and under
its corporate seal, or otherwise, all such written proxies or other instruments
as he may deem necessary or proper in order that the Corporation many exercise
its said powers and rights.
SECTION 5. Interested Directors; Quorum. No contract or transaction
between the Corporation and one or more of its directors or officers, or
between the Corporation and any other corporation, partnership, association or
other organization in which one or more of its directors or officers are
directors or officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer is present at
or participates in the meeting of the Board or committee thereof which
authorizes the contract or transaction, or solely because his or their votes
are counted for such purpose, if
(i) the material facts as to his interest and as to the
contract or transaction are disclosed or are known to the Board or the
committee, and the Board or committee in good faith authorizes the
contract or transaction by a vote sufficient for such purpose without
counting the vote of the interested director or directors; or
(ii) the material facts as to his interest and as to the
contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by a vote of the stockholders; or
(iii) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified by
the Board, a committee thereof, or the stockholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board or of a committee thereof which authorizes the
contract or transaction.
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ARTICLE VI
SHARES, THEIR TRANSFER AND RECORD DATES
SECTION 1. Certificates for Stock. Every owner of stock of the
Corporation shall be entitled to have a certificate or certificates, in such
form as the Board shall prescribe, certifying the number, class and series, if
any, of shares of stock of the Corporation owned by him. The certificates
representing shares of the respective classes and series, if any, of such stock
shall be numbered in the order in which they shall be issued and shall be
signed in the name of the Corporation by the person who was at the time of
signing the Secretary or an Assistant Secretary, and the seal of the
Corporation shall be affixed thereto; provided, however, that if any such
certificate is countersigned (a) by a transfer agent other than the Corporation
or its employee, the signatures thereon of such Chairman of the Board or
President or Vice President and of such Secretary or Assistant Secretary and
the seal of the Corporation affixed thereto may be facsimiles. In case any
officer or the officers of the Corporation who shall have signed, or whose
facsimile signature or signatures shall have been placed upon, any such
certificate or certificates shall cease to be such officer or officers before
such certificate or certificates shall have been issued, such certificate or
certificates may nevertheless be issued by the Corporation with the same effect
as though the person or persons who signed such certificate or certificates or
whose facsimile signature or signatures shall have been placed thereon were
such officer or officers at the date of issuance. A record shall be kept of
the respective names of the persons, firms or corporations owning the stock
represented by certificates for stock of the Corporation, and the number, class
and series, if any, of shares represented by such certificates. Every
certificate surrendered to the Corporation for exchange or transfer shall be
canceled, and a new certificate or certificates shall not be issued in exchange
for any existing certificate until such existing certificate shall have been so
canceled, except in cases provided for in Section 4 of this Article.
SECTION 2. Transfers of Stock. Transfers of the stock of the
Corporation shall be made only on the books of the Corporation by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer clerk or
a transfer agent appointed as in Section 3 of this Article provided, and upon
surrender of the certificate or certificates for such shares properly endorsed
and payment of all taxes thereon. The person in whose name shares of stock
stand on the books of the Corporation shall be deemed the owner thereof for all
purposes as regards the Corporation. Whenever any transfer of shares shall be
made for collateral security, and not absolutely, such fact shall be so
expressed in the entry of transfer if, when the certificates shall be presented
to the Corporation for transfer, both the transferor and the transferee request
the Corporation to do so.
SECTION 3. Regulations. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with these Bylaws,
concerning the issue, transfer and registration of certificates for stock of
the Corporation. The Board may appoint or authorize any officer or officers to
appoint one or more transfer clerks or one of more transfer agents
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and one or more registrars and may require all certificates for stock to bear
the signature or signatures of any of them.
SECTION 4. Lost, Stolen, Destroyed and Mutilated Certificates. The
Corporation may issue a new certificate of stock of the Corporation in the
place of any certificate heretofore issued by it alleged to have been lost,
stolen or destroyed, or which shall have been mutilated, and the Board, in its
discretion, may require the owner of such certificate, or his legal
representatives, to give the Corporation a bond in such sum, limited or
unlimited, in such form and with such surety or sureties as the Board shall in
its discretion determine to be sufficient to indemnify the Corporation, and any
transfer agent or registrar, against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate, or
the issuance of such new certificate.
SECTION 5. Fixing Date for Determination of Stockholders of Record.
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournments thereof, or to
express consent to corporate action in writing without a meeting, or entitled
to receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any other change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board may fix, in advance, a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted by
the Board and which record date: (1) in the case of determination of
Stockholders entitled to vote at any meeting of Stockholders or adjournment
thereof shall, unless otherwise required by law, be not more than sixty nor
less than ten days before the date of such meeting; (2) in the case of
determination of Stockholders entitled to express consent to corporate action
in writing without a meeting shall be not more than ten days from the date upon
which the resolution fixing the record date is adopted by the Board and (3) in
the case of any other action, shall be not more than sixty days prior to such
other action. If the Board shall not fix a record date with respect to a
meeting or action: (a) the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held; (b) the record date for determining stockholders
entitled to express consent to corporate action in writing without a meeting
when no prior action by the Board is required by law, shall be the first date
on which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the Corporation in accordance with applicable law, or,
if prior action by the Board is required by law, shall be at the close of
business on the day on which the Board adopts the resolution taking such prior
action; and (c) the record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board adopts
the resolution relating thereto. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the Board may fix a new
record date for the adjourned meeting.
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ARTICLE VII
OFFICES, ETC.
SECTION 1. Registered Office. The registered office of the
Corporation in the State of Delaware shall be in the City of Wilmington, County
of New Castle.
SECTION 2. Other Offices. The Corporation may also have an office or
offices other than said registered office at such place or places, either
within or without the State of Delaware, as provided in these Bylaws or as the
Board may from time to time determine or as the business of the Corporation may
require.
SECTION 3. Books and Records. Except as otherwise provided by law,
the Certificate of Incorporation or these Bylaws, the Corporation may keep its
books and records in such place or places within or without the State of
Delaware as the Board may from time to time by resolution determine or the
business of the Corporation may require.
ARTICLE VIII
DIVIDENDS
Subject to the provisions of law, of the Certificate of Incorporation
and of these Bylaws, the Board or the Executive Committee may declare and pay
dividends upon the shares of the Corporation's stock either (a) out of the
Corporation's surplus as defined in and computed in accordance with provisions
of law or (b) in case the Corporation shall not have any such surplus, out of
its net profits for the fiscal year in which the dividend is declared and/or
the preceding fiscal year, whenever and in such amounts as, in the opinion of
the Board or the Executive Committee, the condition of the affairs of the
Corporation shall render it advisable.
ARTICLE IX
SEAL
The Board shall provide a corporate seal, which shall be in the form
of a circle and shall bear the full name of the Corporation and the words and
figures "1968 Delaware", or words and figures of similar import. The seal or a
facsimile thereof may be impressed or affixed or reproduced or other use made
thereof by the Secretary, any Assistant Secretary or any other officer
authorized by the Board.
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ARTICLE X
FISCAL YEAR
The fiscal year of the Corporation shall end on December 31 of each
year.
ARTICLE XI
WAIVER OF NOTICES
Whenever notice is required to be given by these Bylaws or by the
Certificate of Incorporation or by law, a written waiver thereof, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent to notice. Attendance of a person
at a meeting shall constitute a waiver of notice of such meeting, except when
the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
stockholders, the Board or members of a committee of the Board may be specified
in written waiver of notice unless so provided by the Certificate of
Incorporation or these Bylaws.
ARTICLE XII
INDEMNIFICATION
SECTION 1. Right to Indemnification.
(a) The Corporation shall have power to indemnify and hold
harmless, to the fullest extent permitted by applicable law as it presently
exists or may hereafter be amended, any person who was or is a party or is
threatened to be made a party to or is otherwise involved in 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 the
Corporation) by reason of the fact that such person, or a person for whom he is
the executor, administrator, guardian or other legal representative, is or was
a director, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, other enterprise, or non-profit
entity 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 such person acted in good
faith and in a manner such person 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 such conduct was
unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not,
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of itself, create a presumption that the person did not act in good faith and
in a manner which 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 reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall have power to indemnify and hold
harmless, to the fullest extent permitted by applicable law as it presently
exists or may hereafter be amended, any person who was or is a party or is
threatened to be made a party to or is otherwise involved in any threatened,
pending or completed action or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that such person is or
was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, other
enterprise or non-profit entity, including service with respect to employee
benefit plans, against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit 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,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery of the
State of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such Court of Chancery or such
other court shall deem proper.
SECTION 2. Limitation and Standards.
(a) To the extent that a director, officer, employee or agent of
the Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in Section 1 of this Article, or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(b) Any indemnification under Section 1 of this Article (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met
the applicable standard of conduct set forth in Section 1 of this Article.
Such determination shall be made (1) by the Board by a majority vote of a
quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such quorum is not obtainable, or, even if obtainable, if
a quorum of disinterested directors so directs, by independent legal counsel in
a written opinion, or (3) by the stockholders.
SECTION 3. Advance of Expenses. Expenses incurred by an officer or
director in defending a civil or criminal action, suit or proceeding may be
paid by the Corporation in advance of the final disposition of such action,
suit or proceeding, upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount unless it shall
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ultimately be determined that such individual is entitled to be indemnified by
the Corporation. Such expenses incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the Board deems appropriate.
SECTION 4. Additional Rights. The rights of indemnification and
advancement of expenses provided in, or granted pursuant to, this Article shall
not be exclusive of any other right to which any person referred to in Section
1 of this Article may otherwise lawfully be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both
as to action in such individual's official capacity and as to action in another
capacity while holding such office, and shall be available whether or not the
claim asserted against such person is based on matters which antedate the
adoption of this Article.
SECTION 5. Additional Persons Covered. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article shall
continue as to a person who has ceased to be a director, officer, or employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such person. The term "Corporation" as used in this Article
includes F.I., Inc., a Delaware corporation, Fuqua Industries, Inc., a
Pennsylvania corporation, and Fuqua Industries, Inc., a Delaware corporation,
predecessor corporations or former names of the Corporation.
SECTION 6. Insurance. The Corporation, as authorized by the Board,
shall have power to purchase and maintain insurance on behalf of any person who
is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, other
enterprise or non-profit entity, against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article or otherwise.
SECTION 7. References. For purposes of this Article, references to
the "Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed
in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this Article with respect to
the resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued. For purposes
of this Article, references to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to any employee benefit plan; and references to "serving
at the request of the Corporation" shall include any service as a director,
officer, employee or agent of the Corporation which impose duties on, or
involves services by, such director, officer, employee, or agent with respect
to an employee benefit plan, its participants or beneficiaries;
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and a person who acted in good faith and in a manner he reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan shall be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to in this Article.
ARTICLE XIII
AMENDMENTS
Unless otherwise expressly provided for in the Certificate of
Incorporation or the Bylaws, all bylaws of the Corporation shall be subject to
alteration or repeal, and new bylaws may be made, either by the affirmative
vote of the holders of record of a majority of the outstanding stock of the
Corporation entitled to vote in respect thereof, given at an annual meeting or
at any special meeting, provided notice of the proposed alteration or repeal or
of the proposed new bylaws be included in the notice of such meeting, or by the
affirmative vote of a majority of the whole Board given at any regular or
special meeting of the Board. Except as otherwise provided by these Bylaws,
any bylaws made or altered by the Stockholders or by the Board shall be subject
to alteration or repeal by the Stockholders or by the Board.
=====================
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EXHIBIT 10(k)(ii)
FIRST AMENDMENT TO
POST-EMPLOYMENT CONSULTING AGREEMENT
THIS FIRST AMENDMENT TO POST-EMPLOYMENT CONSULTING AGREEMENT (the
"First Amendment") is made and entered into as of this _______ day of December,
1993, by and between THE ACTAVA GROUP INC. F/K/A FUQUA INDUSTRIES, INC., a
Delaware corporation with offices at 4900 Georgia-Pacific Center, Atlanta,
Georgia 30303 (the "Company"), and __________________________________, an
individual residing at _________________________________________ (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Company and the Executive entered into that certain
Post-Employment Consulting Agreement dated as of _________________________,
199___ (the "Original Agreement"); and
WHEREAS, the Company and the Executive wish to amend the Original
Agreement to provide for certain changes more fully set forth herein;
NOW, THEREFORE, for and in consideration of the premises, the terms
and conditions set forth herein and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:
1. DEFINED TERMS. Defined terms used herein, as indicated by the
initial capitalization thereof, shall have the same respective meanings
ascribed to such terms in the Original Agreement unless otherwise specifically
defined herein.
2. RELEASE AGREEMENT. The Release Agreement referred to in
Section 1(b)(i) and attached to the Original Agreement is hereby deleted in its
entirety and the Unconditional Release of all Claims and Liability attached
hereto as Exhibit A and incorporated herein by reference is hereby substituted
in lieu thereof.
3. AMENDMENT OF SECTION 3. Section 3 of the Original Agreement
is hereby deleted in its entirety and the following is substituted in lieu
thereof:
3. CONSULTING PERIOD.
(a) Subject to the possible extension set forth in
subparagraph (b) below, the Executive shall perform the Consulting
Services for a period of time (the "Consulting Period") commencing on
the day following a Qualifying Termination and continuing until the
expiration of twelve (12) months thereafter.
(b) At such time as the Executive is employed by the Company
as an officer for ten (10) years or at such time as the Board of
Directors designates the Executive
<PAGE> 2
as a senior executive officer, the Consulting Period shall be
increased to a period of twenty-four (24) months from the Qualifying
Termination.
4. AMENDMENT OF SECTION 4(A). Section 4(a) of the Original
Agreement is hereby deleted in its entirety and the following is substituted in
lieu thereof:
(a) Subject to the provisions of Sections 5, 6 and 11 hereof,
the Executive shall receive during the Consulting Period, as full
compensation for the Consulting Services, a monthly fee, payable on
the last business day of each calendar month during the Consulting
Period (a "Consulting Fee," and collectively, the "Consulting Fees"),
equal to the Executive's annual base salary immediately prior to the
Qualifying Termination divided by twelve (12). The Executive's annual
base salary for purposes of calculating the Consulting Fee shall
consist solely of the Executive's base salary, exclusive of any
bonuses, commissions, allowances or other means of compensation or
benefits made available to the Executive as an employee of the
Company. The Consulting Fee for any partial months during the
Consulting Period shall be reduced proportionately. The aggregate
amount of all Consulting Fees to be paid during the full Consulting
Period is sometimes hereinafter referred to as the "Total Consulting
Fees."
5. AMENDMENT OF SECTION 4(B). The first sentence of Section 4(b)
of the Original Agreement is hereby deleted in its entirety and the following
is substituted in lieu thereof:
Subject to the provisions of Section 5 hereof, during the Consulting
Period the Company shall also make available to the Executive such
medical, dental and vision insurance coverage as may be provided to
the Executive and his dependents by the Company immediately prior to
the Qualifying Termination (or such Company medical insurance coverage
which is consistent with the coverage in place from time to time for
comparable Company executives and their dependents).
6. AMENDMENT OF SECTION 5. Section 5 of the Original Agreement
is hereby deleted in its entirety and the following is substituted in lieu
thereof:
5. EFFECT OF RE-EMPLOYMENT/OTHER COMPENSATION.
(a) If at any time during the Consulting Period the Executive
enters into "Re-Employment" (as hereafter defined) or the Executive
earns or receives any "Earned
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<PAGE> 3
Income" (as hereafter defined) from any source other than pursuant to
this Agreement, the Executive shall immediately notify the Company in
writing of such occurrence, together with the amount of Earned Income
received or earned and any insurance coverage provided to the
Executive, and the following provisions shall apply:
(i) If the Executive notifies the Company that
the Executive will earn Earned Income from Re-Employment on a
monthly basis equal to or in excess of the Consulting Fee,
then, within ten (10) days after receipt of such notification
from the Executive, the Company shall pay the Executive, in
full satisfaction of all obligations to pay the Consulting
Fees hereunder, an amount equal to fifty percent (50%) of the
remainder of: (A) the Total Consulting Fees less (B) the
Consulting Fees actually paid to the Executive prior to
Re-Employment. Notwithstanding anything herein to the
contrary, upon payment by the Company of the amounts set forth
in this Section 5(a)(i), the Company shall cease to have any
obligations under the terms of this Agreement and the
Consulting Period shall be deemed to immediately expire.
(ii) If the Executive receives Earned Income
during the Consulting Period but the provisions of Section
5(a)(i) above are not applicable, then the Executive agrees to
make a complete and accurate report to the Company on or
before the tenth day of each month showing the amount of
Earned Income received by the Executive during the previous
month. The Executive shall report such Earned Income on a
Certificate Regarding Earned Income in the form attached
hereto as Exhibit B and incorporated herein by reference. The
Consulting Fee payable to the Executive in each month in which
the Company receives such a report shall be reduced by the
amount of Earned Income received by the Executive during the
previous calendar month. At the end of the Consulting Period
and only after the Executive has reported to the Company all
Earned Income theretofore received for services rendered
during the Consulting Period, the Company shall pay the
Executive an amount equal to fifty percent (50%) of the
remainder of: (A) the Total Consulting Fees less (B) the sum
of (i) the actual Consulting Fees paid to the Executive during
the Consulting Period and (ii) any Earned Income received by
the Executive during the Consulting Period and not subtracted
from the Consulting Fees
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pursuant to the previous sentence. The Executive shall
immediately notify the Company of any change in the level of
Earned Income from Re-Employment that the Executive is
entitled to receive during the Consulting Period. The
provisions of Section 5(a)(i) above shall apply if the Earned
Income from Re-Employment increases to a level equal to or in
excess of the Consulting Fee.
(b) If the Executive at any time during or after the
Consulting Period receives any Earned Income that has not previously
been reported to the Company pursuant to Section 5(a) hereof, then the
Executive shall reimburse the Company, within ten (10) days after
receipt of such Earned Income, for the amount by which the Consulting
Fees previously paid by the Company to the Executive exceed the
Consulting Fees that would have been paid if the amount of such Earned
Income had been known and had been applied to reduce the Consulting
Fees paid by the Company to the Executive for the period for which
such Earned Income was paid as required by Section 5(a) hereof. In
connection with such reimbursement, the Executive shall provide the
Company with a written notice setting forth the amount of such Earned
Income and the period for which such Earned Income was paid, and the
Executive thereafter shall provide the Company with any other
documentation relating to such Earned Income that the Company may
reasonably request.
(c) Provided COBRA requirements have been met, the Company's
obligation to provide insurance coverage to the Executive and his
dependents under Section 4(b) hereof shall terminate as to any
specific coverage if and when comparable coverage is made available to
the Executive in connection with Re-Employment.
(d) As used herein, the term "Re-Employment" shall mean any
engagement of the Executive's personal services by any one or more
individuals or entities on a full-time or substantially similar basis
which the Executive expects to continue on an ongoing basis. The term
"Earned Income" as used herein shall mean all compensation for
personal services rendered by the Executive during the Consulting
Period (other than pursuant to this Agreement), whether in the form of
salaries, wages, fees, commissions, bonuses, contingent compensation,
any amounts deferred from income, or similar items, but shall not
include any stock, stock options or any other fringe benefits.
Whenever this Agreement refers to the receipt by the Executive of any
Earned Income, such reference shall mean and include the
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<PAGE> 5
payment of Earned Income to the Executive, or the Executive's spouse,
or other members of the Executive's family or household, or an
"Entity" (as defined below), to the extent such Earned Income
represents personal services rendered by the Executive during the
Consulting Period. As used in this paragraph (d), the term "Entity"
shall mean any corporation, partnership or other legal entity in which
the Executive, the Executive's spouse or other members of the
Executive's family or household collectively own or possess more than
fifty percent (50%) of the equity or rights to profits or voting
rights. Any Earned Income paid to an Entity and subsequently paid to
the Executive, or the Executive's spouse, or another member of his
family or household shall be counted only once for the purposes of
Sections 5(a), 5(b), and 6 hereof.
(e) Within ten (10) days after receipt of written notice from
the Company, the Executive shall provide the Company with (i) a copy
of the Executive's filed tax return for any period included in the
Consulting Period and (ii) any other documentation relating to the
Executive's Earned Income reasonably requested by the Company.
(f) The obligations of the Executive to the Company to notify
the Company of the receipt of any Earned Income or Bonus and pay any
amount owed to the Company or submit any information requested by the
Company under Section 5 hereof shall remain in full force and effect
notwithstanding any termination or expiration of this Agreement.
7. AMENDMENT OF SECTION 6(A). Section 6(a) of the Original
Agreement is hereby deleted in its entirety and the following is inserted in
lieu thereof:
(a) If the Executive dies at any time during the Consulting
Period during which the Company remains obligated to pay Consulting
Fees to the Executive, the Company shall pay to the Executive's
estate, in full satisfaction of all obligations to the Executive
hereunder, an amount equal to one hundred percent (100%) of the
remainder of: (A) the Total Consulting Fees less (B) the actual
Consulting Fees paid to the Executive prior to the Executive's death
and less (C) any Earned Income received by the Executive during the
Consulting Period.
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<PAGE> 6
8. AMENDMENT OF SECTION 11. Section 11 of the Original Agreement
is hereby deleted in its entirety and the following is inserted in lieu
thereof:
Upon the occurrence of any breach or default in the performance of any
of the Executive's duties or responsibilities hereunder, and the
Executive's failure to cure such breach or default within thirty (30)
days after receipt of written notice thereof, all obligations of the
Company hereunder to compensate the Executive or to provide benefits
thereto shall immediately be terminated and rendered null, void and of
no further effect, after which the Company shall be entitled to pursue
any and all remedies available, at law or in equity, to address the
Executive's breach or default hereunder. Upon the occurrence of any
breach or default in the performance of any of the Company's
obligations hereunder and the Company's failure to cure such breach or
default within thirty (30) days after receipt of written notice
thereof, all of the Company's obligations hereunder shall be
immediately accelerated without any right of setoff by the Company for
any Earned Income received by the Executive subsequent to such breach
or default by the Company, and the Executive shall be entitled to
pursue any and all remedies available, at law or in equity, to address
the Company's breach or default hereunder.
9. LIMITATION OF FIRST AMENDMENT. Except as expressly set forth
herein, this First Amendment shall not be deemed to waive, amend or modify any
term or condition of the Original Agreement or to serve as a consent to any
matter prohibited by the terms and conditions thereof.
10. COUNTERPARTS. This First Amendment may be executed in any
number of counterparts, and any party hereto may execute any counterpart, each
of which, when executed and delivered, will be deemed to be an original and all
of which, taken together, will be deemed to be but one and the same agreement.
11. SUCCESSORS AND ASSIGNS. This First Amendment shall be binding
upon and inure to the benefit of the successors and permitted assigns of the
parties hereto.
12. GOVERNING LAW. This First Amendment shall be governed by and
construed in accordance with the laws of the State of Georgia.
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment as of the day and year first above written.
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<PAGE> 7
"Company"
THE ACTAVA GROUP INC.
f/k/a FUQUA INDUSTRIES, INC.
By:
----------------------------------
Its:
-------------------------------------
(CORPORATE SEAL)
"Executive"
(SEAL)
- -----------------------------------------
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<PAGE> 8
EXHIBIT A
UNCONDITIONAL RELEASE OF ALL CLAIMS AND LIABILITY
THIS UNCONDITIONAL RELEASE OF ALL CLAIMS AND LIABILITY (the "Release")
is made and entered into as of this ______ day of _________________, 199___, by
________________________ (the "Executive") in favor of THE ACTAVA GROUP INC.
F/K/A FUQUA INDUSTRIES, INC., a Delaware corporation (the "Company").
W I T N E S S E T H :
WHEREAS, the Company has, prior to the date hereof, employed the
Executive as a full-time employee of the Company, but as of this date the
Executive's status as an employee has terminated; and
WHEREAS, the Company desires to engage the Executive as a consultant
for the Company and the Executive desires to be engaged by the Company as a
consultant pursuant to the terms of the Post-Employment Consulting Agreement,
dated ________________, 19___, between the Company and the Executive, as
amended by the First Amendment to Post-Employment Consulting Agreement, dated
____________, between the Company and the Executive (collectively referred to
as the "Consulting Agreement"); and
WHEREAS, the Company has required, as a condition precedent to the
engagement of the Executive as a consultant for the Company, that the Executive
execute and deliver this Release in favor of the Company;
NOW, THEREFORE, for and in consideration of the premises, the
agreement of the Company to engage the Executive as a consultant and for other
good and valuable consideration, the receipt, adequacy and sufficiency of which
are hereby acknowledged, the Executive hereby agrees as follows:
1. RELEASE. Except with respect to the Company's obligations
pursuant to the Consulting Agreement, any vested retirement benefits applicable
to the Executive, those benefits, payments or other rights which the Executive
is entitled to receive under any plan, agreement or arrangement listed on
Schedule 1 hereto, and any benefits earned by the Executive prior to the date
hereof under any other employee benefit plan adopted in writing by the Company
after the date of the Consulting Agreement, the Executive hereby
unconditionally remises, releases and forever discharges, to the fullest extent
permitted by law, the Company, its employees, officers, directors, agents,
affiliates, subsidiaries and each of them from all manner of actions,
proceedings, causes of action, claims, counterclaims, suits, debts, sums,
monies, accounts, covenants, agreements, promises, damages, losses or demands
of whatever kind or nature from the beginning of time to the present, whether
known or unknown, in law or in equity, which in the past, now or in the future
arise, may arise or allegedly arise or are in
<PAGE> 9
any way resulting from or in any manner connected with the Executive's
employment by the Company and the termination of such employment by the
Company. In consideration of the additional benefits and consideration
provided to the Executive under the Consulting Agreement, the Executive waives
all claims and causes of action against the Company and all damages, if any,
that may be recoverable. This release and waiver of all claims and damages
includes, but is not limited to, any tort or claim of contractual restriction
relating to Executive's employment or termination thereof, any claim of
wrongful discharge, and all rights under federal, state or local law
prohibiting race, sex, age, religion, national origin, handicap, disability or
other forms of discrimination, including but not limited to, Title VII of the
Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act,
as amended, any state or local human rights laws, Workers' Compensation laws,
and the National Labor Relations Act, as amended. Notwithstanding anything
herein to the contrary, the Executive does not release any claims under the Age
Discrimination in Employment Act that may arise as a result of conduct
occurring after the execution of this Release.
2. MISCELLANEOUS. This Release and the Consulting Agreement
embody the entire agreement of the parties and supersede all prior agreements
between the parties hereto relating to the subject matter hereof. The
unenforceability or invalidity of any of the terms or provisions of this
agreement shall not affect the validity or enforceability of the remaining
terms or provisions which shall be interpreted and construed in such manner as
to carry out fully the intention of the parties hereto. This Release shall be
construed and enforced in accordance with the laws of the State of Georgia.
The Executive represents and warrants that the Executive has been
encouraged to seek advice from anyone of the Executive's choosing regarding
this Release, including the Executive's attorney, accountant, or tax advisor,
prior to the Executive's execution of this Release, the Executive has been
given the opportunity and sufficient time to seek such advice, and that the
Executive fully understands the meaning and contents of this Release. THE
EXECUTIVE UNDERSTANDS THAT HE MAY TAKE UP TO TWENTY-ONE (21) DAYS TO CONSIDER
WHETHER OR NOT HE DESIRES TO ENTER INTO THIS RELEASE. The Executive further
represents and warrants that he was not coerced, threatened or otherwise forced
to sign this Release, and that each signature appearing hereinafter is genuine.
THE EXECUTIVE UNDERSTANDS THAT HE MAY REVOKE THIS AGREEMENT BY
NOTIFYING THE COMPANY IN WRITING OF SUCH REVOCATION, WITHIN SEVEN (7) DAYS OF
HIS EXECUTION OF THIS AGREEMENT AND THAT THIS AGREEMENT IS NOT EFFECTIVE UNTIL
THE EXPIRATION OF SUCH SEVEN (7) DAY PERIOD. THE EXECUTIVE UNDERSTANDS THAT
UPON THE EXPIRATION OF SUCH SEVEN (7) DAY PERIOD THIS RELEASE WILL BE BINDING
UPON THE EXECUTIVE AND WILL BE IRREVOCABLE.
THE EXECUTIVE UNDERSTANDS THAT BY EXECUTING THIS RELEASE THE EXECUTIVE
IS GIVING UP POSSIBLE RIGHTS THAT HE MAY HAVE, AND THAT
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<PAGE> 10
THE EXECUTIVE DOES NOT HAVE TO SIGN THIS RELEASE. THIS RELEASE HAS BEEN
VOLUNTARILY AND KNOWINGLY EXECUTED BY THE EXECUTIVE WITH THE EXPRESS INTENTION
OF EFFECTING THE EXTINGUISHMENT OF ANY AND ALL OBLIGATIONS AND DAMAGES THAT THE
COMPANY MAY OWE TO THE EXECUTIVE AS PROVIDED HEREIN.
IN WITNESS WHEREOF, the Executive has duly executed this Release in
favor of the Company under seal as of the day and year first above written.
EXECUTIVE:
- -----------------------------------------
- -----------------------------------------
Print Name
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<PAGE> 11
SCHEDULE 1
RETAINED EMPLOYEE RIGHTS
(a) Benefits earned by the Executive prior to the date of the Executive's
termination of employment under the following plans or arrangements:
Employee Stock Purchase Plan
Employee Stock Option Plan
Days-Off Policy
The Executive's right to payment of expenses incurred on or
before the date of the Executive's termination of employment
under the medical, dental and vision reimbursement plans
maintained by the Company for the Executive, including the
executive reimbursement plan.
The Executive's right to payment of expenses incurred on or
before the date of the Executive's termination of employment
under the Company's executive financial and tax planning
program.
(b) Reimbursement of such business expenses incurred by Executive on or
before the date of the Executive's termination of employment that are
reimbursable under Company policies in effect on such date.
(c) Rights of the Executive to indemnification or payment of expenses
under any Indemnification Agreement, or any provision of the Company's
Certificate of Incorporation or Bylaws or any law applicable to
Executive.
<PAGE> 12
EXHIBIT B
CERTIFICATE REGARDING EARNED INCOME
I, ______________________________________ (the "Executive"), hereby
certify to The Actava Group Inc. f/k/a Fuqua Industries, Inc. (the "Company")
that the following constitutes all "Earned Income" (as such term is defined in
the Post-Employment Consulting Agreement dated as of _____________________,
199___, between the Executive and the Company) received by the Executive whether
directly or indirectly from any source during the period from
___________________________ to: ______________________________:
Amount of Earned Income: $______________________
Source: _____________________________________________
_____________________________________________
_____________________________________________
_____________________________________________
IN WITNESS WHEREOF, the undersigned has set his hand as of
this ________ day of _____________________, 199___.
"Executive"
_____________________________________
<PAGE> 1
EXHIBIT 10(t)
SECOND AMENDMENT TO THE AMENDED
AND RESTATED LOAN AGREEMENT
This Second Amendment to the Amended and Restated Loan Agreement
("Second Amendment") is made as of this 7th day of December, 1993, by and
between TRITON GROUP LTD, a Delaware corporation (hereinafter referred to as
"Borrower"), and THE ACTAVA GROUP INC., a Delaware corporation (formerly known
as Fuqua Industries, Inc.) (hereinafter referred to as "Lender");
W I T N E S S E T H:
WHEREAS, as of November 27, 1991 Borrower and Lender entered into a
Loan Agreement (the "Original Loan Agreement") providing that Lender would make
and loans and advances to the Borrower in the principal amount of up to
Thirty-Two Million Dollars ($32,000,000.00) at any one time outstanding; and
WHEREAS, in connection with Borrower's Plan of Reorganization Lender
and Borrower entered into an Amended and Restated Loan Agreement dated as of
June 25, 1993 whereby Lender and Borrower agreed to amend and restate the
Original Loan Agreement (the "Restated Agreement"); and
WHEREAS, Lender and Borrower entered into a letter agreement dated as
of August 19, 1993 (the "First Amendment") whereby Lender permitted Borrower to
make deposits in a deposit account in lieu of pledging additional Certificates
of Deposit as required by Section 2.4 of the Restated Agreement; and
WHEREAS, in connection with the First Amendment to the Amended and
Restated Stock Pledge Agreement, the prepayment by Borrower of Five Million
Dollars ($5,000,000.00) plus accrued interest on such amount, and Lender's
agreement that the Per Share Value of the Pledged Securities for purposes of
Section 2.4 hereof shall not be less than $7.50 per share, Borrower and Lender
desire to further amend the Restated Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereby agree as follows:
1. DEFINED TERMS. Defined terms used herein, as indicated by
the initial capitalization thereof, shall have the same effect and meaning
ascribed to such terms in the Restated Agreement, as amended by the First
Amendment, unless otherwise specifically defined herein.
2. PREPAYMENT. Simultaneously with the execution of the Second
Amendment, Borrower agrees to make a prepayment of the Loan in the amount of
$5,000,000.00 plus accrued interest on such amount through the date of the
Second Amendment. Such prepayment shall be made immediately available by wire
transfer to Lender's bank account in accordance with Lender's instruction.
<PAGE> 2
3. DEFINITIONS.
(a) Lender. Section 1.1 of the Restated Agreement is
hereby amended by deleting the definition of "Lender" in its entirety
and substituting the following in lieu thereof:
"Lender" shall mean The Actava Group Inc., a Delaware
corporation, formerly known as Fuqua Industries, Inc.
(b) Note. Section 1.1 of the Restated Agreement is
hereby further amended by deleting the definition of "Note" in its
entirety and substituting the following in lieu thereof:
"Note" shall mean that certain Amended and Restated Promissory
Note of Borrower of even date herewith in the principal face
amount of $26,726,000.00, together with any and all
amendments, modifications, extensions and renewals thereof, in
whole or in part in form of Exhibit A attached hereto.
(c) Pledge Agreement. Section 1.1 of the Restated
Agreement is hereby further amended by deleting the definition of
"Pledge Agreement" in its entirety and substituting the following in
lieu thereof:
"Pledge Agreement" shall mean that certain Amended and
Restated Stock Pledge Agreement dated as of June 25, 1993
executed by Borrower in favor of Lender in form of Exhibit B
attached hereto which amends and restates the Original Pledge
Agreement and confirms the security interest created by the
Original Pledge Agreement, as amended by that certain First
Amendment to the Amended and Restated Stock Pledge Agreement
dated as of December __, 1993 executed by Borrower in favor of
Lender.
4. THE LOAN. The Restated Agreement is hereby further amended by
deleting Section 2.1 thereof in its entirety and by substituting in lieu
thereof a new Section 2.1 to read as follows:
As of the date of the Second Amendment, the outstanding
principal balance of the "Advances" under, and as such term is
defined in, the Original Loan Agreement is $26,726,000.00.
Subject to the terms and conditions hereof, Lender agrees that
such Advances may remain outstanding and shall be repayable as
set forth in this Section 2.1. Such outstanding Advances
shall constitute the loan (the "Loan") hereunder. The Loan
outstanding hereunder shall be evidenced by the Note, and the
outstanding principal amount of the Note shall be repayable in
quarterly installments of principal with each installment
being in the aggregate
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<PAGE> 3
amount of $1,250,000.00, payable on March 31, June 30,
September 30 and December 31 of each year, commencing March
31, 1994, and the remaining aggregate principal balance of the
Loan shall be repaid by Borrower in full on April 1, 1997.
Lender is not obligated hereunder to make any further Advances
to Borrower. Borrower acknowledges and agrees that the Loan
no longer constitutes a revolving credit facility and agrees
that Borrower shall have no right, to repay and reborrow all
or any portion of the Loan.
5. MANDATORY PAYMENTS. Section 2.4 of the Restated Agreement is
hereby deleted in its entirety and a new Section 2.4 is substituted in lieu
thereof to read as follows:
(a) If at any time the average over any period of ten
(10) consecutive trading days (the "Payment Measuring Period") of the
Per Share Value of the Pledged Securities for each trading day within
the Payment Measuring Period multiplied by the number of shares then
constituting the Pledged Securities is less than 125% of the then
outstanding principal balance of the Loan, then Borrower shall, within
ten (10) Business Days after Lender notifies Borrower in writing of
such occurrence ("Lender's Notice"), comply with any one or a
combination of the following alternatives (as amended by the First
Amendment) at Borrower's option:
(i) make a prepayment of principal to Lender in
the amount (the "Payment Amount") necessary to cause 125% of
the reduced outstanding principal balance of the Loan to not
exceed the "Adjusted Collateral Value" which for purposes of
this Section 2.4, shall mean the sum of (A) the product of the
average of the Per Share Values of the Pledged Securities
during the Payment Measuring Period (the "Average Payment
Value") multiplied by the number of shares then constituting
the Pledged Securities plus (B) the face value of any and all
outstanding CDs purchased by Borrower and pledged to Lender
under any executed CD Agreements plus (C) any amounts
deposited in the Deposit Account and pledged in accordance
with the Deposit Agreement by and among Borrower, Lender and
The Bank of California, N.A. (the "Bank") dated as of August
19, 1993 (the "Deposit Agreement");or
(ii) purchase one or more negotiable Certificates
of Deposit from any bank reasonably satisfactory to Lender
(the "CD") in the aggregate face amount equal to the
difference between 125% of the outstanding principal balance
of the Loan and the Adjusted Collateral Value (including the
face amount of the CD pledged pursuant to Lender's Notice),
deliver such CD to
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<PAGE> 4
Lender and execute and deliver to Lender a CD Agreement
pledging such CD to Lender as Collateral for the Obligations
and take such other actions with respect to Lender's
perfection of such security interest as Lender may require; or
(iii) transfer to Lender (free and clear of any
and all liens, claims and encumbrances) as a prepayment of
principal on the outstanding loan hereunder the number of
shares of Pledged Securities necessary to cause the Adjusted
Collateral Value after such transfer to equal or exceed 125%
of the reduced principal balance outstanding under the Loan,
giving effect to the transferred Pledged Securities at the
Average Payment Value; provided, however, in the event that
the number of shares required to be transferred to Lender to
satisfy this Section 2.4(a)(iii) is within the amount
permitted to be sold without registration under SEC Rule 144
or could otherwise be sold in a public offering without
violating the registration requirements of the Securities Act
of 1933, as amended, at Lender's option set forth in Lender's
Notice, Borrower shall sell such number of shares of Pledged
Securities in lieu of transferring such shares to Lender and
apply all of the net proceeds of such sale (after payment of
reasonable and customary brokerage fees) to reduce the
principal balance of the Loan; or
(iv) make deposits in the deposit account established
with The Bank of California, N.A., a national banking
association (the "Deposit Account"), in the amounts required
by Section 2.4 (a) (ii) hereof (with the amount of any and all
funds on deposit in the Deposit Account being included in the
calculation of the "Adjusted Collateral Value" under and as
defined herein), and in accordance with the First Amendment,
grant a security interest in such Deposit Account and the
funds from time to time deposited therein.
(b) If Borrower has pledged one or more CDs to Lender in
accordance with Section 2.4(a)(ii) and/or made deposits in the Deposit
Account in accordance with Section 2.4(a)(iv) and the sum of the face
amount of such CDs and the total of such deposits plus the average
during any period of ten (10) consecutive trading days (the "CD
Release Measuring Period") of the Per Share Value of the Pledged
Securities for each trading day during the CD Release Measuring Period
multiplied by the number of shares then constituting the Pledged
Securities exceeds 125% of the then outstanding principal balance of
the Loan during the CD Release Measuring Period, Borrower may request
in writing a release or partial reduction of any CDs pledged pursuant
to Section 2.4(a)(ii) or request a release or partial release of any
funds deposited in the Deposit Account and
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<PAGE> 5
pledged pursuant to Section 2.4(a)(iv)to reduce the Adjusted
Collateral Value to an amount equal to 125% of the outstanding
principal balance of the Loan. Lender shall (i) notify the bank from
which the CD has been purchased to release such CDs and/or (ii) notify
the Bank to release funds deposited in the Deposit Account within five
(5) Business Days after receipt of such written request.
For purposes of Section 2.4(a) and (b), if the Per Share Value
as defined herein is less than $7.50, the Per Share Value for purposes
of this Section 2.4 shall be deemed to be $7.50, except that if, after
the date of the Second Amendment there shall have been a stock
dividend, stock split or reverse stock split increasing or decreasing
the number of outstanding shares of Lender's Common Stock, the $7.50
minimum Per Share Value shall be proportionally adjusted
6. INTEREST. The Restated Agreement is hereby further amended
by deleting the first sentence of Section 2.8 in its entirety and substituting
a new first sentence to Section 2.8 in lieu thereof to read as follows:
Subject to modification pursuant to Section 7.1, the
outstanding principal amount of the Obligations shall bear
interest, payable quarterly for the preceding quarter on March
31, June 30, September 30 and December 31 of each year
hereafter calculated daily on the basis of a 360-day year and
actual days elapsed, from the date hereof until paid in full
at a fluctuating rate per annum equal to the Prime Rate plus
(a) 1-1/2% from October 1, 1993 through and including December
25, 1993, (b) 2% from December 26, 1993, through and including
June 25, 1994, and (c) 2-1/2% at all times thereafter.
7. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. Borrower hereby
represents and warrants to Lender that all Borrower's representations and
warranties contained in the Restated Agreement, as amended, are true and
correct on and as of the date hereof as fully as though such representations
and warranties had been made on the date hereof and with specific reference to
this Second Amendment and any and all documents executed in connection
herewith.
8. DEFAULTS HEREUNDER. The failure of any representation or
warranty contained herein to be true and correct in all material respects as of
the date hereof or the breach of any covenant contained herein or in any
document executed in connection herewith, or the failure to serve or comply
with any term or agreement contained herein shall constitute a default or event
of default under the Restated Agreement and the Lender shall be entitled to
exercise all rights and remedies it may have under the Restated Agreement, the
Amended and Restated Stock Pledge Agreement, as amended from time to time, the
Deposit Account Agreement, any CD Agreement or any other documents executed in
connection therewith and applicable law.
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<PAGE> 6
9. REFERENCES. All references in the Restated Agreement to the
Amended and Restated Loan Agreement shall hereafter be deemed to be references
to the Amended and Restated Loan Agreement as amended hereby and as the same
may hereafter be amended from time to time.
10. NO NOVATION. The terms of this Second Amendment are not
intended to and do not serve to effect a novation as to the Original Pledge
Agreement, the Original Loan Agreement, the Restated Agreement or the Amended
and Restated Stock Pledge Agreement. The parties hereto expressly do not
intend to extinguish any debt or security created pursuant to the above
documents or the "Note" (as defined in the Original Loan Agreement) or any
document executed in connection with the foregoing. Instead it is the express
intention of the parties hereto to affirm the Restated Agreement and the
security created thereby.
11. LIMITATION OF SECOND AMENDMENT. Except as especially set
forth herein, this Second Amendment shall not be deemed to waive, amend or
modify any term or condition of the Restated Agreement which is hereby ratified
and reaffirmed and which shall remain in full force and effect, nor to serve as
a consent to any matter prohibited by the terms and conditions thereof.
12. COUNTERPARTS. This Second Amendment may be executed in any
number of counterparts, and any party hereto may execute any counterpart, each
of which, when executed and delivered, will be deemed to be an original and all
of which, taken together will be deemed to be but one and the same agreement.
13. FURTHER ASSURANCES. Borrower agrees to take such further
action as Lender shall reasonably request in connection herewith to evidence
the amendments herein contained to the Restated Agreement.
14. SUCCESSORS AND ASSIGNS. This Second Amendment shall be
binding upon and inure to the benefit of the successors and permitted assigns
of the parties hereto.
15. GOVERNING LAW. This Second Amendment shall be governed by,
and construed in accordance with, the laws of the State of Georgia, without
regard to principles of conflicts of law.
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<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment to the Amended and Restated Loan Agreement under seal at the date
first above written.
"BORROWER"
TRITON GROUP LTD.
By: /s/ John C. Stiska
---------------------------------
Name: John C. Stiska
----------------------------
Title: President & CEO
----------------------------
Attest: /s/ Barbara J. Flagg
-----------------------------
By: Barbara J. Flagg
-----------------------------
Its: Associate Accountant
-----------------------------
[CORPORATE SEAL]
"LENDER"
THE ACTAVA GROUP INC.
By: /s/ F.B. Beilstein III
---------------------------------
Name: Frederick B. Beilstein III
----------------------------
Title: Senior Vice President
----------------------------
Attest: /s/ Paul N. Kiel
-----------------------------
By: Paul N. Kiel
-----------------------------
Its: Secretary
-----------------------------
[CORPORATE SEAL]
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<PAGE> 1
EXHIBIT 10(u)
AGREEMENT
AGREEMENT, effective as of __________________, between FUQUA
INDUSTRIES, INC., a Delaware corporation (the "Company"), and
___________________________ (the "Indemnitee").
WHEREAS, it is essential to the Company to retain and attract as
directors the most capable persons available;
WHEREAS, both the Company and Indemnitee recognize the increased risk
of litigation and other claims being asserted against directors of public
companies in today's environment;
WHEREAS, there is a general awareness that competent and experienced
persons are becoming more reluctant to serve as directors of a corporation
unless they are protected by comprehensive insurance and/or indemnification,
especially since shareholder and derivative lawsuits against publicly-held
corporations and their directors for line-of-duty decisions and actions have
increased in number in recent years for damages in amounts which have no
reasonable or logical relationship to the amount of compensation received by
the directors from the corporation, and
WHEREAS, the vagaries of "public policy" and the interpretations of
ambiguous statutes, regulations and bylaws are too uncertain to provide
directors with adequate, reliable knowledge of legal risks to which they may be
exposed with these indeterminables multiplied a thousandfold for directors of
corporations such as the company with operations in most of the states in the
United States and in many foreign jurisdictions, and
WHEREAS, damages sought by class action plaintiffs in some cases
amount to tens of millions of dollars and, whether or not the case is
meritorious, the cost of defending them is enormous with few individual
directors having the resources to sustain such legal costs, not to mention the
risk of a judgment running into millions even in cases where the defendant was
neither culpable nor profited personally to the detriment of the corporation,
and
WHEREAS, Section 145 of the General Corporation Law of the State of
Delaware, under which the Company is organized, empowers corporations to
indemnify persons serving as a director, officer, employee or agent of the
corporation or a person who serves at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, and further specifies that the
indemnification set forth in said section "shall not be deemed exclusive of any
other rights to which those seeking indemnification may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or
otherwise", and
<PAGE> 2
WHEREAS, in recognition of Indemnitee's need for substantial
protection against personal liability in order to enhance Indemnitee's service
to the Company in an effective manner, the increasing difficulty in obtaining
satisfactory directors' and officers' liability insurance coverage, and in part
to provide Indemnitee with specific contractual assurance that protection will
be available to Indemnitee (regardless of, among other things, any amendment to
or revocation of the Certificate of Incorporation ("Certificate") or Bylaws
("Bylaws") of the Company or any change in the composition of the Company's
Board of Directors or acquisition transaction relating to the Company), the
Company wishes to provide in this Agreement for the indemnification of and the
advancing of expenses to Indemnitee to the full extent (whether partial or
complete) authorized or permitted by law and as set forth in this Agreement,
and for the continued coverage of Indemnitee under the Company's directors' and
officers' liability insurance policies, and
WHEREAS, Indemnitee is unwilling to serve or to continue to serve the
Company as a director without the assurances provided by this Agreement; and
the Company in order to induce Indemnitee to serve or continue to serve as a
director has agreed to provide Indemnitee with the benefits contemplated by
this Agreement;
NOW, THEREFORE, in consideration of the premises and of Indemnitee
agreeing to serve or to continue to serve the Company directly or, at its
request, another enterprise, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Basic Indemnification Arrangement.
(a) In the event Indemnitee was, is, or becomes a party
to or witness or other participant in, or is threatened to be made a party to
or witness or other participant in, a Claim by reason of (or arising in part
out of) an Indemnifiable Event, the Company shall indemnify Indemnitee to the
full extent authorized or permitted by law as soon as practicable but in any
event no later than thirty (30) days after written demand is presented to the
Company, against any and all Expenses, judgments, fines, penalties and amounts
paid in settlement (including all interest, assessments and other charges paid
or payable in connection with or in respect of such Expenses, judgments, fines,
penalties or amounts paid in settlement) of such claim; provided, however,
that, except for proceedings to enforce rights to indemnification, the Company
shall not be obligated to indemnify Indemnitee in connection with a proceeding
(or part thereof) initiated by Indemnitee unless such proceeding (or part
thereof) was authorized in advance, or unanimously consented to, by the Board
of Directors of the Company. If so requested by Indemnitee, the Company shall
advance (within two (2) business days of such request) any and all Expenses to
Indemnitee (an "Expense Advance").
-2-
<PAGE> 3
(b) Notwithstanding the foregoing, (i) the obligations of
the Company under Section 1(a) shall be subject to the condition that the
Reviewing Party shall not have determined (in a written opinion, in any case in
which the Independent Legal Counsel referred to in Section 2 hereof is
involved) that Indemnitee would not be permitted to be indemnified under
applicable law, and (ii) the obligation of the Company to make an Expense
Advance pursuant to Section 1(a) shall be subject to the condition that, if,
when and to the extent that the Reviewing Party determines that Indemnitee
would not be permitted to be so indemnified under applicable law, the Company
shall be entitled to be reimbursed by Indemnitee (who hereby agrees to
reimburse the Company) for all such amounts theretofore paid; provided,
however, that if Indemnitee has commenced or thereafter commences legal
proceedings in a court of competent jurisdiction to secure a determination that
Indemnitee should be indemnified under applicable law, any determination made
by the Reviewing Party that Indemnitee would not be permitted to be indemnified
under applicable law shall not be binding and Indemnitee shall not be required
to reimburse the Company for any Expense Advance until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefrom have been exhausted or lapsed). If there has not been a Change in
Control, the Reviewing Party shall be selected by the Company's Board of
Directors, and if there has been such a Change in Control, the Reviewing Party
shall be the Independent Legal Counsel referred to in Section 2 hereof. If
there has been no determination by the Reviewing Party or if the Reviewing
Party determines that Indemnitee substantively would not be permitted to be
indemnified in whole or in part under applicable law, Indemnitee shall have the
right to commence litigation in any court in the States of Georgia or Delaware
having subject matter jurisdiction thereof and in which venue is proper seeking
an initial determination by the court or challenging any such determination by
the Reviewing Party or any aspect thereof, including the legal or factual bases
therefor, and the Company hereby consents to service of process and to appear
in any such proceeding. Any determination by the Reviewing Party otherwise
shall be conclusive and binding on the Company and Indemnitee.
(c) No change in the Company's Certificate or Bylaws or
in the General Corporation Law of the State of Delaware subsequent to the date
of this Agreement shall have the effect of limiting or eliminating the
indemnification available under this Agreement as to any act, omission or
capacity for which this Agreement provides indemnification at the time of such
act, omission or capacity. If any change after the date of this Agreement in
any applicable law, statute or rule expands the power of the Company to
indemnify the Indemnitee, such change shall to the same extent expand the
Indemnitee's rights and the Company's obligations under this Agreement. If any
change in any applicable law, statute or rule diminishes the power of the
Company to Indemnify the Indemnitee, such change, except to the extent
otherwise required by law,
-3-
<PAGE> 4
statute or rule to be applied to this Agreement, shall have no effect on this
Agreement or the parties' rights and obligations hereunder.
2. Change in Control. The Company agrees that if there is a
Change in Control of the Company, then with respect to all matters thereafter
arising concerning the rights of Indemnitee to indemnity payments and Expense
Advances under this Agreement or any other agreement, or any Certificate or
Bylaw provision now or hereinafter in effect relating to Claims for
Indemnifiable Events, the Company shall seek legal advice only from Independent
Legal Counsel selected by Indemnitee and approved by the Company (which
approval shall not be unreasonably withheld). Such counsel, among other
things, shall render its written opinion to the Company and Indemnitee as to
whether and to what extent the Indemnitee would be permitted to be indemnified
under applicable law. The Company agrees to pay the reasonable fees of the
Independent Legal Counsel referred to above and to fully indemnify such counsel
against any and all expenses (including attorneys' fees), claims, liabilities
and damages arising out of or relating to this Agreement or its engagement
pursuant hereto.
3. Indemnification for Additional Expenses. The Company shall
indemnify Indemnitee against any and all expenses (including attorneys' fees)
and, if requested by Indemnitee, shall (within two (2) business days of such
request) advance such expenses to Indemnitee, which are incurred by Indemnitee
in connection with any action brought by Indemnitee for (i) indemnification or
advance payment of Expenses by the Company under this Agreement or any other
agreement, or any Certificate or Bylaw provision now or hereafter in affect
relating to Claims for Indemnifiable Events and/or (ii) recovery under any
directors' and officers' liability insurance policies maintained by the
Company; provided, however, that if there is a final judicial determination (as
to which all rights of appeal therefrom have been exhausted or lapsed) that
Indemnitee is not entitled to such indemnification, advance payment of expenses
or insurance recovery, Indemnitee shall reimburse the Company for all such
expenses theretofore paid under this Section 3.
4. Partial Indemnity, Etc. If indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the Expenses, judgments, fines, penalties and amounts paid in
settlement of a Claim but not, however, for all of the total amount thereof,
the Company shall nevertheless indemnify Indemnitee for the portion thereof to
which Indemnitee is entitled. Moreover, notwithstanding any other provision of
this Agreement, to the extent that Indemnitee has been successful on the merits
or otherwise in defense of any or all Claims relating in whole or in part to an
Indemnifiable Event or in defense of any Issue or matter therein, including
dismissal without prejudice,
-4-
<PAGE> 5
Indemnitee shall be indemnified against all Expenses incurred in connection
therewith.
5. Burden of Proof. In connection with any determination by the
Reviewing Party or otherwise as to whether Indemnitee is entitled to be
indemnified hereunder, the burden of proof shall be on the Company to establish
that Indemnitee is not so entitled.
6. No Presumptions. For purposes of this Agreement, the
termination of any claim, action, suit or proceeding, by judgment, order,
settlement (whether with or without court approval) or conviction, or upon a
plea of nolo contendere, or its equivalent, shall not create a presumption that
Indemnitee did not meet any particular standard of conduct or have any
particular belief or that a court has determined that indemnification is not
permitted by applicable law. In addition, neither the failure of the Reviewing
Party to have made a determination as to whether Indemnitee has met any
particular standard of conduct or had any particular belief, nor an actual
determination by a Reviewing Party that Indemnitee has not met such standard of
conduct or did not have such belief, prior to the commencement of legal
proceedings by Indemnitee to secure a judicial determination that Indemnitee
should be indemnified under applicable law shall be a defense to Indemnitee's
claim or create a presumption that Indemnitee has not met any particular
standard of conduct or did not have any particular belief.
7. Nonexclusivity, Etc. The rights of the Indemnitee hereunder
shall be in addition to any other rights Indemnitee may have under the
Certificate, the Bylaws, or the Delaware General Corporation Law or otherwise.
To the extent that a change in the Delaware General Corporation Law (whether by
statute or judicial decision) permits greater indemnification by agreement than
would be afforded currently under the Certificate, Bylaws and this Agreement,
it is the Intent of the parties hereto that Indemnitee shall enjoy by this
Agreement the greater benefits so afforded by such change.
8. Liability Insurance.
(a) The Company hereby represents and warrants that the
Company has purchased and maintains directors' and officers' liability
insurance consisting of a primary policy issued by Reliance Insurance Company
providing $5,000,000 in coverage and an excess policy issued by Continental
Insurance Company providing an additional $5,000,000 in coverage, and that such
policies are in full force and effect (the "D&O Insurance").
(b) The Company hereby covenants and agrees that, so long
as Indemnitee shall continue to serve as a director of the Company and
thereafter so long as Indemnitee shall be subject to any possible claim or
threatened, pending or completed action, suit
-5-
<PAGE> 6
or proceeding, whether civil, criminal or investigative, by reason of the fact
that Indemnitee was a director of the Company, the Company shall maintain in
full force and effect the D&O Insurance.
(c) In all policies of D&O Insurance, Indemnitee shall be
named as an insured in such manner as to provide Indemnitee the same rights and
benefits, subject to the same limitations, as are accorded to the Company's
directors or officers most favorably insured by such policy.
9. Period of Limitations. No legal action shall be brought and
no cause of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's spouse, heirs, executors or personal or legal
representatives after the expiration of two (2) years from the date of accrual
of such cause of action, and any claim or cause of action of the Company shall
be extinguished and deemed released unless asserted by the timely filing of a
legal action within such two (2) year period; provided, however, that if any
shorter period of limitations is otherwise applicable to any such cause of
action such shorter period shall govern.
10. Amendments, Etc. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
11. Subrogation. In the event of payment under this Agreement,
the Company shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all papers required and
shall do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Company effectively to
bring suit to enforce such rights.
12. No Duplication of Payments. The Company shall not be liable
under this Agreement to make any payment in connection with any Claim made
against Indemnitee to the extent Indemnitee has otherwise actually received
payment (under any insurance policy, the Certificate, Bylaws or otherwise) of
the amounts otherwise indemnifiable hereunder.
13. Binding Effect, Etc. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors, assigns, including any direct or indirect successor by
purchase, merger, consolidation or otherwise to all or substantially all of the
business and/or assets of the Company, spouses, heirs, executors and personal
and legal representatives. This Agreement shall continue in effect regardless
of whether Indemnitee continues to serve as a director of the Company.
-6-
<PAGE> 7
14. Severability. The provisions of this Agreement shall be
severable in the event that any of the provisions hereof (including any
provision within a single section, paragraph or sentence) is held by a court of
competent jurisdiction to be invalid, void or otherwise unenforceable in any
respect, and the validity and enforceability of any such provision in every
other respect and of the remaining provisions hereof shall not be in any way
impaired and shall remain enforceable to the full extent permitted by law.
15. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
applicable to contracts made and to be performed in such state without giving
effect to the principles of conflicts of laws.
16. Certain Definitions.
(a) Change in Control: A Change in Control shall be
deemed to have occurred if (i) during any period of two (2) consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors and any new directors, whose election by the Board of Directors or
nomination for election by the Company's stockholders was approved by a vote of
at least three quarters (3/4) of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election was previously so approved (the "Continuing Directors"), cease for
any reason to constitute a majority thereof; or (ii) any individual,
partnership, firm, corporation, association, trust, unincorporated organization
or other entity, or any syndicate or group deemed to be a person under Section
14(d)(2) of the Exchange Act (other than Triton Group, Ltd. or a trustee or
other fiduciary holding securities under an employee benefit plan of the
Company or a corporation owned directly or indirectly by the stockholders of
the Company in substantially the same proportions as their ownership of stock
of the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3
of the General Rules and Regulations under the Exchange Act), directly or
indirectly, of securities of the Company representing 20% or more of the total
voting power represented by the Company's then outstanding Voting Securities in
a transaction which has not been approved by the Continuing Directors; or (iii)
the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation which
(A) has been approved by the Continuing Directors or (B) would result in the
Voting Securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into Voting Securities of the surviving entity) at least 80% of the total
voting power represented by the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation; or
(iv) the stockholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the
-7-
<PAGE> 8
Company of (in one transaction or a series of transactions) all or
substantially all the Company's assets.
(b) Claim: any threatened, pending or completed action,
suit or proceeding, or any inquiry or investigation, whether instituted by or
in the right of the Company or any other party, that Indemnitee in good faith
believes might lead to the institution of any such action, suit or proceeding,
whether civil, criminal, administrative, investigative or other.
(c) Expenses: include attorneys' fees and all other
costs, expenses and obligations paid or incurred in connection with
investigating, defending, being a witness in or participating in (including on
appeal), or preparing to defend, be a witness in or participate in any Claim
relating to any Indemnifiable Event.
(d) Indemnifiable Event: any event or occurrence related
to the fact that Indemnitee is or was a director of the Company, or is or was
serving at the request of the Company as a director, officer, or trustee of
another corporation, trust or other enterprise, or by reason of anything done
or not done by Indemnitee in any such capacity.
(e) Independent Legal Counsel: an attorney or firm of
attorneys, selected in accordance with the provisions of Section 2, who shall
not have otherwise performed services for the Company or Indemnitee within the
last two (2) years.
(f) Reviewing Party: any appropriate person or body
consisting of a member of members of the Company's Board of Directors or any
other person or body appointed by the Board who is not a party to the
particular Claim for which Indemnitee is seeking indemnification, or
Independent Legal Counsel.
(g) Voting Securities: any securities of the Company
which vote generally in the election of directors.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this ____ day of _______________, 1993.
FUQUA INDUSTRIES, INC.
By:
---------------------------------
Name:
------------------------------
Title:
-----------------------------
- --------------------------------------
(Indemnitee)
-9-
<PAGE> 10
-10-
<PAGE> 1
EXHIBIT 10(v)
1993 INCENTIVE BONUS PLAN
FOR CERTAIN CORPORATE OFFICERS
Confidential Treatment Requested by the Company.
Filed Separately with the Commission.
<PAGE> 1
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
The Actava Group Inc. and Subsidiaries
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
PRIMARY
Weighted average Actava Stock outstanding
during the period, less stock in treasury . . . . . 17,163 16,544 16,527
========= ======= ========
Net income (loss) available for Common Stock
and Common Stock equivalents . . . . . . . . . . . . . . $ (47,594) $11,599 $(50,821)
========= ======= ========
Per share amount . . . . . . . . . . . . . . . . . . . . . . $ (2.77) $ .70 $ (3.08)
========= ======= ========
FULLY DILUTED
Common Stock and Common Stock equivalents . . . . . . . . . 17,163 16,544 16,527
Shares issuable on assumed conversion of
6 1/2% Convertible Debentures . . . . . . . . . . . . . 1,802 1,802 1,802
--------- ------- --------
TOTAL . . . . . . . . . . . . . . . . . 18,965 18,346 18,329
========= ======= ========
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . $ (47,594) $11,599 $(50,821)
Interest savings on assumed conversion of 6 1/2%
Convertible Debentures, net of income tax effect . . . . 3,308 3,308 3,308
--------- ------- --------
Net income available for Common Stock and
Common Stock equivalents assuming
full dilution . . . . . . . . . . . . . . . . . . . . . . $ (44,286) $14,907 $(47,513)
========= ======= ========
Per share amount (a) . . . . . . . . . . . . . . . . . . . . $ (2.34) $ .81 $ (2.59)
========= ======= ========
</TABLE>
(a) Fully diluted earnings per share is not used because it exceeds primary
earnings per share.
<PAGE> 1
EXHIBIT 22
THE ACTAVA GROUP INC.
CORPORATE DATA
March 28, 1994
<TABLE>
<CAPTION>
Federal
State of Date of Identification
Incorporation Incorporation Number
------------- ------------- -------------
Delaware 3-15-68 58-0971455
- -------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARIES
Percent of Voting Federal
State of Date of Power Owned by I.D.
Name Incorporation Incorporation Immediate Parent Number
- ----------------------------------- ------------- ------------- ---------------- -------
<S> <C> <C> <C> <C>
ACTAVA FINANCIAL CORPORATION Delaware 3-7-66 100% 58-1049305
ACTAVA INSURANCE COMPANY LIMITED Bermuda 12-12-75 100% 98-0092218
ACTAVA RISK RETENTION GROUP CAPTIVE
INSURANCE COMPANY OF GEORGIA, INC. Georgia 6-8-89 100% 58-1840772
ACTAVA SHL, INC. Georgia 8-26-83 100% 58-1532302
* Aliso Management Co., Inc. California 2-16-82 100% 58-1466150
AMERICAN SEATING CREDIT CORPORATION MICHIGAN 6-30-80 100% 38-2322388
DIVERSIFIED PRODUCTS CORPORATION Alabama 4-12-93 100% 58-2054222
Diversified Trucking Corp. Alabama 7-30-65 100% 63-0503336
HUTCH SPORTS USA INC. Delaware 5-28-71 100% 31-0828464
JCJ, INC. Delaware 6-8-89 100% 51-0317847
NELSON/WEATHER-RITE, INC. Delaware 1-28-72 100% 22-1945146
Actava World Trade Corporation Delaware 10-23-75 100% 58-1245785
QUALEX INC. Delaware 7-28-87 51% 16-1306019
Lerner Processing Labs, Inc. California 4-12-89 51% 33-0343478
Linn Photo Company Iowa 10-29-71 100% 42-0985077
Qualex Financial Corporation Delaware 4-4-90 100% 51-0326864
SNAPPER, INC. Georgia 4-7-82 100% 58-1473288
Snapper Deutschland, GmbH Federal Republic
of Germany 3-31-89 100% N/A
Snapper Europe SA/NV Belgium 2-22-89 100% N/A
Snapper France SARL France 8-8-90 100% N/A
Snapper Lawn Equipment (U.K.) United Kingdom 3-26-90 100% N/A
WILLOW HOSIERY COMPANY, INC. New York 7-2-46 100% 13-5524459
</TABLE>
- ------------------------------
* Inactive
<PAGE> 2
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
DIVISIONS
<S> <C> <C> <C> <C>
Snapper N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
NAME HOLDING CORPORATIONS
None
- -----------------------------------------------------------------------------------------------------------------------
LIMITED PARTNERSHIPS
Sienna Plantation, Ltd. Georgia 10-15-80 -- 58-1424695
Aliso Meadows, Ltd. California 6-27-80 -- 95-3531323
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Note that:
<TABLE>
<S> <C> <C> <C>
1. WCS Distributing, Inc. - sold May 31, 1993.
2. Name changes were made as follows:
----------------------------------
Fuqua Industries, Inc. The Actava Group Inc. July 19, 1993
Fuqua Financial Corporation Actava Financial Corporation June 23, 1993
Fuqua Foreign Sales Corporation Actava Foreign Sales Corporation August 4, 1993
Fuqua Insurance Company Limited Actava Insurance Company Limited August 6, 1993
Fuqua Risk Retention Group Captive Actava Risk Retention Group Captive June 23, 1993
Insurance Company of Georgia, Inc. Insurance Company of Georgia, Inc.
Fuqua SHL, Inc. Actava SHL, Inc. June 24, 1993
Fuqua World Trade Corporation Actava World Trade Corporation August 16, 1993
3. Diversified Trucking Corp. was added as a subsidiary of Diversified Products Corporation.
</TABLE>
CHANGES SINCE LAST REPORT:
The following companies were dissolved:
<TABLE>
<S> <C>
Actava Foreign Sales Corporation Dissolved December 10, 1993
Lone Star Snapper, Inc. Dissolved February 10, 1994
MMR Distributing, Inc. Dissolved December 16, 1993
Northeast Snapper Distributing, Inc. Requested to be dissolved 12/31/93
(not completed)
Shape-U.K. Acquisition Corp. Dissolved December 16, 1993
(a subsidiary of Diversified Products Corporation)
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Post-Effective Amendment Number
1 to Registration Statement Number 2-80499 on Form S-8 dated February 14, 1983,
Registration Statement Number 33-1038 on Form S-8 dated October 22, 1985,
Registration Statement Number 33-26000 on Form S-8 dated December 9, 1988 and
Registration Statement Number 33-30755 on Form S-8 dated August 28, 1989
pertaining to The Actava Group Inc. stock option plans and stock purchase
plans and Registration Statement Number 33-64774 on Form S-3 dated June 21,
1993, and their related prospectuses, of, our report dated March 3, 1994 with
respect to the consolidated financial statements and schedules of The Actava
Group Inc. and subsidiaries included in this Annual Report (Form 10-K) for the
year ended December 31, 1993.
Ernst & Young
Atlanta, Georgia
March 29, 1994
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Frederick B. Beilstein, III, and Walter M. Grant, and each of them,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for the undersigned and in his name, place and
stead, in any and all capacities, to sign the Annual Report on Form 10-K of The
Actava Group Inc. for the fiscal year ended December 31, 1993, and any or all
amendments or supplements thereto, and to file the same with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, with the undersigned hereby granting unto such
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing necessary or appropriate to be done with respect to the
Form 10-K Report or any amendments or supplements thereto as fully to all
intents and purposes as the undersigned might or could do in person, and the
undersigned hereby ratifies and confirms all acts that such attorneys-in-fact
and agents or their substitute or substitutes may lawfully do or cause to be
done by virtue hereof.
/s/ Charles R. Scott
------------------------------
Charles R. Scott
Dated: March 27, 1994
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Frederick B. Beilstein, III, and Walter M. Grant, and each of them,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for the undersigned and in his name, place and
stead, in any and all capacities, to sign the Annual Report on Form 10-K of The
Actava Group Inc. for the fiscal year ended December 31, 1993, and any or all
amendments or supplements thereto, and to file the same with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, with the undersigned hereby granting unto such
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing necessary or appropriate to be done with respect to the
Form 10-K Report or any amendments or supplements thereto as fully to all
intents and purposes as the undersigned might or could do in person, and the
undersigned hereby ratifies and confirms all acts that such attorneys-in-fact
and agents or their substitute or substitutes may lawfully do or cause to be
done by virtue hereof.
/s/ J.M. Darden III
-------------------------------
J. M. Darden III
Dated: March 26, 1994
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Frederick B. Beilstein, III, and Walter M. Grant, and each of them,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for the undersigned and in his name, place and
stead, in any and all capacities, to sign the Annual Report on Form 10-K of The
Actava Group Inc. for the fiscal year ended December 31, 1993, and any or all
amendments or supplements thereto, and to file the same with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, with the undersigned hereby granting unto such
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing necessary or appropriate to be done with respect to the
Form 10-K Report or any amendments or supplements thereto as fully to all
intents and purposes as the undersigned might or could do in person, and the
undersigned hereby ratifies and confirms all acts that such attorneys-in-fact
and agents or their substitute or substitutes may lawfully do or cause to be
done by virtue hereof.
/s/ John Imlay
--------------------------
John Imlay
Dated: March 29, 1994
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Frederick B. Beilstein, III, and Walter M. Grant, and each of them,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for the undersigned and in his name, place and
stead, in any and all capacities, to sign the Annual Report on Form 10-K of The
Actava Group Inc. for the fiscal year ended December 31, 1993, and any or all
amendments or supplements thereto, and to file the same with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, with the undersigned hereby granting unto such
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing necessary or appropriate to be done with respect to the
Form 10-K Report or any amendments or supplements thereto as fully to all
intents and purposes as the undersigned might or could do in person, and the
undersigned hereby ratifies and confirms all acts that such attorneys-in-fact
and agents or their substitute or substitutes may lawfully do or cause to be
done by virtue hereof.
/s/ Clark A. Johnson
------------------------------
Clark A. Johnson
Dated: March 28, 1994
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Frederick B. Beilstein, III, and Walter M. Grant, and each of them,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for the undersigned and in his name, place and
stead, in any and all capacities, to sign the Annual Report on Form 10-K of The
Actava Group Inc. for the fiscal year ended December 31, 1993, and any or all
amendments or supplements thereto, and to file the same with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, with the undersigned hereby granting unto such
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing necessary or appropriate to be done with respect to the
Form 10-K Report or any amendments or supplements thereto as fully to all
intents and purposes as the undersigned might or could do in person, and the
undersigned hereby ratifies and confirms all acts that such attorneys-in-fact
and agents or their substitute or substitutes may lawfully do or cause to be
done by virtue hereof.
/s/ Carl E. Sanders
------------------------------
Carl E. Sanders
Dated: March 26, 1994
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Frederick B. Beilstein, III, and Walter M. Grant, and each of them,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for the undersigned and in his name, place and
stead, in any and all capacities, to sign the Annual Report on Form 10-K of The
Actava Group Inc. for the fiscal year ended December 31, 1993, and any or all
amendments or supplements thereto, and to file the same with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, with the undersigned hereby granting unto such
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing necessary or appropriate to be done with respect to the
Form 10-K Report or any amendments or supplements thereto as fully to all
intents and purposes as the undersigned might or could do in person, and the
undersigned hereby ratifies and confirms all acts that such attorneys-in-fact
and agents or their substitute or substitutes may lawfully do or cause to be
done by virtue hereof.
/s/ Richard Nevins
-------------------------------
Richard Nevins
Dated: March 28, 1994
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Frederick B. Beilstein, III, and Walter M. Grant, and each of them,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for the undersigned and in his name, place and
stead, in any and all capacities, to sign the Annual Report on Form 10-K of The
Actava Group Inc. for the fiscal year ended December 31, 1993, and any or all
amendments or supplements thereto, and to file the same with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, with the undersigned hereby granting unto such
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing necessary or appropriate to be done with respect to the
Form 10-K Report or any amendments or supplements thereto as fully to all
intents and purposes as the undersigned might or could do in person, and the
undersigned hereby ratifies and confirms all acts that such attorneys-in-fact
and agents or their substitute or substitutes may lawfully do or cause to be
done by virtue hereof.
/s/ John E. Aderhold
-------------------------------
John E. Aderhold
Dated: March 28, 1994
<PAGE> 8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Frederick B. Beilstein, III, and Walter M. Grant, and each of them,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for the undersigned and in his name, place and
stead, in any and all capacities, to sign the Annual Report on Form 10-K of The
Actava Group Inc. for the fiscal year ended December 31, 1993, and any or all
amendments or supplements thereto, and to file the same with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, with the undersigned hereby granting unto such
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing necessary or appropriate to be done with respect to the
Form 10-K Report or any amendments or supplements thereto as fully to all
intents and purposes as the undersigned might or could do in person, and the
undersigned hereby ratifies and confirms all acts that such attorneys-in-fact
and agents or their substitute or substitutes may lawfully do or cause to be
done by virtue hereof.
/s/ Anthony F. Kopp
-------------------------------
Anthony F. Kopp
Dated: March 24, 1994
