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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
<TABLE>
<C> <S>
(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, 1994
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
---------------
</TABLE>
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.)
</TABLE>
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:
<TABLE>
<S> <C>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
REGISTERED
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 15, 1995 COMPUTED BY REFERENCE TO THE
LAST REPORTED SALE PRICE OF THE COMMON STOCK ON THE COMPOSITE TAPE ON SUCH DATE
WAS $116,409,216.
THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF MARCH 15, 1995 WAS
17,308,258 SHARES.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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PART I
ITEM 1. BUSINESS
The Actava Group Inc. ("Actava" or the "Company") was organized in 1929
under Pennsylvania law and was reincorporated in 1968 under Delaware law. On
July 19, 1993, the Company changed its name from Fuqua Industries, Inc. to The
Actava Group Inc. The Company's principal executive offices are located at 4900
Georgia-Pacific Center, Atlanta, Georgia 30303, and its telephone number is
(404) 658-9000.
Since the late 1960's, the Company has owned, operated and sold dozens of
companies in many diverse industries, including photofinishing, recreation,
sporting goods, yacht and sailboat manufacturing, outdoor power equipment,
manufactured housing, petroleum distribution, movie theaters, retailing,
broadcasting, trucking, food and beverages, grain storage bins, taxicabs,
seating and banking. At the beginning of 1994, the Company owned and operated
businesses in three industries: photofinishing, lawn and garden equipment, and
sporting goods. The Company sold its photofinishing subsidiary and its four
sporting goods subsidiaries during 1994. As a result of these transactions, the
Company presently operates only one business, Snapper Power Equipment Company
("Snapper"), which is a division of the Company and is engaged in the
manufacture and sale of lawn and garden equipment. In addition to operating
Snapper, the Company owns 19,169,000 shares of the Common Stock of Roadmaster
Industries, Inc. ("Roadmaster"). These shares were issued to the Company in
connection with the sale of the Company's four sporting goods subsidiaries to
Roadmaster. See "Major Developments During 1994 -- Sale of Sporting Goods
Subsidiaries." The Company is presently evaluating new opportunities and
strategies for enhancing stockholder value, including a proposal that the
Company enter into a business combination with three other companies in order to
create a global media, entertainment and communications company. See "Major
Developments During 1994 -- Proposed Metromedia Transaction."
MAJOR DEVELOPMENTS DURING 1994
A number of major developments affecting the Company occurred during 1994.
These developments are described below.
Election of John D. Phillips as Chief Executive Officer
On April 19, 1994, the Board of Directors of the Company elected John D.
Phillips as President, Chief Executive Officer and a director of the Company.
The Company on the same date sold 700,000 shares of its $1.00 par value Common
Stock ("Actava Common Stock") to Renaissance Partners, a partnership for which
Mr. Phillips serves as a general partner, for a cash price of $4,462,500, and
the Company issued to Mr. Phillips seven-year options for the purchase of
300,000 additional shares of Actava Common Stock at a price of $6.375 per share.
As a result of these transactions, Mr. Phillips, as of March 15, 1995, was the
beneficial owner of 5.8% of the outstanding shares of Actava Common Stock. From
1989 to 1993, Mr. Phillips was President and a director of Resurgens
Communications Group, Inc., which transmitted operator-assisted long distance
telephone calls and provided operator services and billing and collection
services to other long distance telephone companies. Resurgens Communications
Group, Inc. merged with Metromedia Communications Corporation and LDDS
Communications, Inc. in September 1993, and the combined company now operates as
a long distance telecommunications company under the name LDDS Communications,
Inc.
Mr. Phillips was given a mandate by the Company's Board of Directors to
improve the Company's operations and to increase stockholder value. As a result
of this mandate, the Company sold its photofinishing subsidiary and its four
sporting goods subsidiaries during 1994. These transactions have strengthened
the financial condition of the Company and have enabled the Company to pursue
other business opportunities.
Sale of Qualex
The Company was engaged in the photofinishing business from 1967 through
August 12, 1994. In 1988, the Company combined its photofinishing subsidiary,
Colorcraft Corporation, with the United States
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photofinishing operations of Eastman Kodak Company ("Kodak"). The company
resulting from this combination was named Qualex Inc. ("Qualex") and was jointly
owned by the Company and Kodak. Qualex is the largest wholesale photofinishing
company in the United States.
On August 12, 1994, the Company sold its 50% interest in Qualex to Kodak
and, as a result, is no longer engaged in the photofinishing business. In
exchange for the Company's ownership interest in Qualex, as well as a covenant
not to compete and related releases from the Company, Kodak paid the Company $50
million in cash and agreed to pay the Company an additional $100 million without
interest in two equal installments on February 13, 1995 and August 11, 1995. The
cash received and to be received by the Company from the sale of Qualex improved
the Company's liquidity and the Company's ability to take advantage of future
business opportunities. In connection with the sale of Qualex, the Company
reclassified Qualex as a discontinued operation. During 1994, the Company
recorded a loss of $40.7 million from discontinued operations. This loss
included a loss of $37.9 million on the sale of the Company's interest in Qualex
and a loss of $2.8 million relating to the operations of Qualex in 1994.
Prior to June 30, 1994, the Company owned 51% of the voting stock of
Qualex, was entitled to and elected a majority of the members of the Board of
Directors of Qualex, and had the ability through its control of the Board of
Directors to declare dividends, remove the executive officers of Qualex and
otherwise direct the management and policies of Qualex, except for policies
relating to certain designated actions requiring the consent of at least one
member of the Board of Directors of Qualex designated by Kodak. Because of these
rights, the Company believes that, under generally accepted accounting
principles, it had effective unilateral control of Qualex which was not
temporary during the period from 1988 until the second quarter of 1994. As a
result, the Company consolidated the results of operations of Qualex with the
results of operations of the Company for periods ending prior to June 30, 1994.
Upon the formation of Qualex in 1988, the Company and Kodak entered into a
Shareholders Agreement (the "Qualex Shareholders Agreement") that provided,
among other things, for a reduction in the Company's voting control of Qualex
from 51% to 50% and for changes in the composition of the Board of Directors of
Qualex in the event of a "change of control" of the Company. The Qualex
Shareholders Agreement defined the term "change of control" to include a
"transaction or occurrence the effect of which is to give a person or group of
affiliated persons or entities the power to direct the management and policies"
of the Company.
In 1991, Charles R. Scott was elected President and Chief Executive Officer
of the Company. At the time of his election, Mr. Scott was also serving as
Chairman and Chief Executive Officer of a company that owned approximately 25%
of the Company's voting stock and was the Company's single largest stockholder.
Because Mr. Scott was serving at the same time as the Chief Executive Officer of
both the Company and the Company's single largest stockholder, the Company and
Kodak agreed that a "change of control" of the Company had occurred for purposes
of the Qualex Shareholders Agreement. Despite this "change in control" of the
Company, Kodak agreed that the Company would continue to own 51% of the voting
control of Qualex and to elect a majority of the directors of Qualex. The Qualex
Shareholders Agreement, however, was amended to provide that Kodak had the right
to change the Company's control of Qualex on March 1, 1992 or on any subsequent
March 1. During the period from 1991 until the second quarter of 1994, the
Company did not believe that Kodak would exercise the right to change the
Company's control of Qualex, and Kodak, in fact, did not exercise this right on
March 1, 1992, 1993, or 1994.
Mr. Phillips was elected as President and Chief Executive Officer of the
Company on April 19, 1994. In late April 1994, the Company's management became
aware of Kodak's position that the election of Mr. Phillips as President and
Chief Executive Officer of the Company resulted in a "change of control" of the
Company under the Qualex Shareholders Agreement. The Company, however, did not
believe that the election of Mr. Phillips constituted a "change in control" of
the Company as defined in the Qualex Shareholders Agreement. This belief was
based in part on the fact that (i) Mr. Phillips owned less than 4% of the
Company's voting stock at the time of his election, (ii) Delaware corporate law,
under which the Company is governed, provides that the business and affairs of a
corporation shall be managed by and under the direction of the Board of
Directors -- not the president, and (iii) eight of the nine members of the Board
of Directors of the Company after the election of Mr. Phillips were serving as
directors before the election of
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Mr. Phillips. Although Kodak had informed the Company of its position that a
"change in control" of the Company had occurred, the Company believed that the
issue would be resolved without a change in control of Qualex. At a meeting held
on June 8, 1994, Kodak restated its position that the election of Mr. Phillips
constituted a "change in control" of the Company under the Qualex Shareholders
Agreement and requested that changes be made in the Company's voting control of
Qualex and in the composition of the Board of Directors of Qualex. The
disagreement between the Company and Kodak as to whether or not a "change in
control" had occurred was resolved at this meeting when the Company agreed that
it would not contest Kodak's interpretation of the Qualex Shareholders
Agreement. As a result, on June 30, 1994, the Company's ownership of the voting
stock of Qualex was reduced to 50% and the Company and Kodak each became
entitled to elect an equal number of members of the Board of Directors of
Qualex. Because of these changes affecting the Company's control of Qualex, the
Company discontinued its practice of consolidating the accounts of Qualex and
began accounting for its ownership in Qualex under the equity method effective
as of June 30, 1994. As a result, the Company's balance sheet, effective as of
June 30, 1994, no longer included approximately $771 million of Qualex's assets,
including approximately $367 million of intangible assets, and approximately
$399 million of Qualex's liabilities, including approximately $260 million of
long-term debt and approximately $21 million of working capital.
Sale of Sporting Goods Subsidiaries
The Company during 1994 transferred ownership of its four sporting goods
subsidiaries to Roadmaster in exchange for 19,169,000 shares of the $.01 par
value Common Stock of Roadmaster ("Roadmaster Common Stock"). The transaction
with Roadmaster (the "Exchange Transaction") was consummated pursuant to the
terms of an Agreement and Plan of Reorganization dated as of July 20, 1994 (the
"Agreement") by and among the Company, the Company's four sporting goods
subsidiaries, and Roadmaster. The Agreement and the Exchange Transaction were
approved by the Company's stockholders at a Special Meeting of the Stockholders
held on December 6, 1994, and the Exchange Transaction was closed effective as
of the same date (the "Closing Date").
As a result of the Exchange Transaction, the Company now owns approximately
39% of the issued and outstanding shares of Roadmaster Common Stock based on
49,289,529 shares of Roadmaster Common Stock outstanding as of March 15, 1995.
Shares of Roadmaster Common Stock are listed on the New York Stock Exchange. For
a description of the business of Roadmaster, see "Narrative Description of
Business -- Investment in Roadmaster Industries, Inc." below.
The four subsidiaries of the Company transferred to Roadmaster were
Diversified Products Corporation ("Diversified Products"), Hutch Sports USA Inc.
("Hutch"), Nelson/Weather-Rite, Inc. ("Nelson/ Weather-Rite"), and Willow
Hosiery Company, Inc. ("Willow") (collectively referred to as the "Sports
Subsidiaries"). On the Closing Date, the aggregate book value of the Sports
Subsidiaries was approximately $68.3 million. The market value of the shares of
Roadmaster Common Stock received by the Company in exchange for the Sports
Subsidiaries was approximately $76.7 million as of the Closing Date and
approximately $55.1 million as of March 15, 1995. Due to the nature of the
Exchange Transaction, the Company recorded its initial investment in Roadmaster
on its books at an amount equal to the aggregate book value of the Sports
Subsidiaries as of the Closing Date rather than recognizing a gain on the
transaction.
In connection with the consummation of the Exchange Transaction, Roadmaster
adopted certain amendments to its Certificate of Incorporation. Among other
things, these amendments (i) increased the number of authorized shares of
Roadmaster Common Stock to 100,000,000 shares, (ii) fixed the number of members
of the Board of Directors of Roadmaster at nine, (iii) required that all action
by the stockholders of Roadmaster be taken at an annual or special meeting, (iv)
provided for advance notice of nominations to the Board of Directors of
Roadmaster, (v) required a two-thirds vote of the members of the Board of
Directors of Roadmaster to terminate Roadmaster's existing Chief Executive
Officer and Chief Operating Officer, except that the Board of Directors of
Roadmaster will have the right to terminate such officers by a majority vote if
Roadmaster has not reported positive net income from continuing operations for
the fiscal year preceding the year in which the Board of Directors elects to
terminate such officers, and (vi) required super-majority voting by the
stockholders to amend certain provisions of Roadmaster's Certificate of
Incorporation and Bylaws.
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On the Closing Date, the Company, Roadmaster, Henry Fong, the Chief
Executive Officer and a director of Roadmaster, and Edward E. Shake, the Chief
Operating Officer and a director of Roadmaster, entered into a Shareholders
Agreement (the "Roadmaster Shareholders Agreement") providing, among other
things, for the composition of the Board of Directors of Roadmaster. The
Roadmaster Shareholders Agreement expires on the fifth anniversary of the
Closing Date unless it is earlier terminated in accordance with its terms. The
parties to the Roadmaster Shareholders Agreement have agreed to take all action
necessary to cause Roadmaster's Board of Directors to be fixed at nine
directors, four of whom will be designated by the Company (the "Actava
Designated Directors") and five of whom will be designated by Roadmaster (the
"Roadmaster Designated Directors"). Two of the four persons initially elected to
serve as Actava Designated Directors were required to be persons who are not
employees, officers or affiliates of Roadmaster or the Company. In addition,
three of the five persons who serve as Roadmaster Designated Directors must be
persons who are not employees, officers or affiliates of Roadmaster or the
Company. The Actava Designated Directors were elected to the Board of Directors
of Roadmaster on December 16, 1994. They are Mr. Phillips, President and Chief
Executive Officer of the Company, Carl E. Sanders, a member of the Board of
Directors of the Company and the Chairman of the Atlanta law firm Troutman
Sanders, Clay C. Long, Chairman of Long, Aldridge & Norman, an Atlanta law firm,
and Michael P. Marshall, a private investor and the former Chairman of the Board
of Directors of Resurgens Communications Group, Inc. Mr. Phillips and Mr.
Marshall are both general partners in Renaissance Partners, a Georgia general
partnership which owns 700,000 shares of Actava Common Stock. Mr. Sanders and
Mr. Long are both partners in law firms that provide legal services to the
Company. The Roadmaster Shareholders Agreement obligates the parties to use
their best efforts to cause at least one of the Actava Designated Directors to
serve on each committee of Roadmaster's Board of Directors and to cause at least
two Actava Designated Directors to serve on any committee consisting of five or
more members.
The Roadmaster Shareholders Agreement provides for a reduction in the
number of Actava Designated Directors in the event that the Company sells,
transfers or assigns a portion of the shares of Roadmaster Common Stock owned by
the Company. If the number of shares of Roadmaster Common Stock owned by the
Company is reduced to a number less than 12,000,000 but equal to or more than
8,000,000, then the Company will become entitled to designate only three members
to Roadmaster's Board of Directors. If the number of shares of Roadmaster Common
Stock owned by the Company is reduced to less than 8,000,000 but equal to or
more than 5,000,000, then the Company will be entitled to designate only two
members to Roadmaster's Board of Directors. If the number of shares of
Roadmaster Common Stock owned by the Company is reduced to less than 5,000,000
but equal to or more than 2,000,000, then the Company will be entitled to
designate only one member to Roadmaster's Board of Directors.
Subject to the limitations described above, the parties to the Roadmaster
Shareholders Agreement have agreed that they will at all times and upon every
opportunity affirmatively vote all of their shares of Roadmaster Common Stock to
cause the Board of Directors to be composed of five Roadmaster Designated
Directors and four Actava Designated Directors. In addition, Mr. Fong is
obligated to use his best efforts to cause Equitex, Inc. to support the
nomination and election of the Actava Designated Directors. Mr. Fong is the
President and Chief Executive Officer and a director of Equitex, Inc., which
currently owns 10.5% of the outstanding shares of Roadmaster Common Stock.
The Company's obligation to support the nomination and election of the
Roadmaster Designated Directors will terminate if (i) Roadmaster has not
reported positive net income from continuing operations for its last fiscal
year, (ii) the Actava Designated Directors have not been nominated and supported
by the other parties to the Roadmaster Shareholders Agreement, or (iii) the
Actava Designated Directors have not been elected to, and are not then serving
on, the Roadmaster Board of Directors. The obligation of Roadmaster, Mr. Fong
and Mr. Shake to support the nomination and election of the Actava Designated
Directors will terminate if the Roadmaster Designated Directors have not been
supported by the Company or if the Roadmaster Designated Directors have not been
elected to, and are not then serving on, the Roadmaster Board of Directors.
In addition to the voting provisions, the Roadmaster Shareholders Agreement
grants to Roadmaster a right of first refusal with respect to any proposed sale
of the shares of Roadmaster Common Stock issued to
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the Company in the Exchange Transaction for as long as the Actava Designated
Directors have been nominated and elected to the Board of Directors of
Roadmaster. Such right of first refusal will not apply to any proposed sale,
transfer or assignment of such shares to any persons who would, after
consummation of such transaction, own less than 10% of the outstanding shares of
Roadmaster Common Stock or to any sale of such shares pursuant to a registration
statement filed under the Securities Act of 1933, as amended (the "Securities
Act"), if the Company has used its reasonable best efforts not to make any sale
pursuant to such registration statement to any single purchaser or "Acquiring
Person" who would own 10% or more of the outstanding shares of Roadmaster Common
Stock after the consummation of such transaction. "Acquiring Person" generally
is defined to mean any person or group which together with all affiliates is the
beneficial owner of 5% or more of the outstanding shares of Roadmaster Common
Stock. The right of first refusal also would not apply to any proposed sale,
transfer or assignment of the Company's shares of Roadmaster Common Stock to an
affiliate of the Company.
The shares of Roadmaster Common Stock issued to the Company in connection
with the Exchange Transaction have not been registered for resale under the
Securities Act. On the Closing Date, however, the Company and Roadmaster entered
into a Registration Rights Agreement (the "Registration Rights Agreement") under
which Roadmaster agreed to register such shares ("Registrable Stock") at the
request of the Company or its affiliates or any transferee who acquires at least
1,000,000 of the shares of Roadmaster Common Stock issued to the Company. Under
the Registration Rights Agreement, registration may be required at any time
during a ten-year period beginning as of the Closing Date (the "Registration
Period") by the holders of at least 50% of the Registrable Stock if a
"long-form" registration statement (i.e., a registration statement on Form S-1,
S-2 or other similar form) is requested or by the holders of Registrable Stock
with a value of at least $500,000 if a "short-form" registration statement
(i.e., a registration statement on Form S-3 or other similar form) is requested.
Roadmaster is required to pay all expenses incurred (other than the expenses of
counsel, if any, for the holders of Registrable Stock, the expenses of
underwriter's counsel, and underwriting fees) for any two registrations
requested by the holders of Registrable Stock during the Registration Period.
Roadmaster will become obligated to pay the expenses of up to two additional
registrations if Roadmaster is not eligible to use a short-form registration
statement to register the Registrable Stock at any time during the Registration
Period. All other registrations will be at the expense of the holders of the
Registrable Stock.
In addition to the demand registration rights described above, if
Roadmaster at any time proposes to register under the Securities Act any of its
securities for sale for its own account or for the account of any person,
subject to certain exceptions, it is required to provide the holders of
Registrable Stock with the opportunity to sell some or all of their Registrable
Stock pursuant to such registration. Roadmaster, however, is not required to
grant any concession or additional rights to any other person to secure the
right of any holder of Registrable Stock to participate in such registration. In
addition, Roadmaster will have the right at least once during each twelve-month
period to defer the filing of a demand registration statement for a period of up
to 90 days after request for registration by the holders of the requisite number
of shares of Registrable Stock.
Any future registration rights granted by Roadmaster may not impair the
priority of the registration rights granted to the holders of Registrable Stock,
but Roadmaster may grant registration rights that are substantially similar to
or that rank on a parity with the registration rights granted under the
Registration Rights Agreement.
Sale of Real Estate Investment
The Company during 1994 entered into an agreement, subject to certain
conditions, to sell to an investment group a parcel of real property located
near Houston, Texas, and the related industrial revenue bonds owned by the
Company, for $9 million in cash, which approximates the Company's book value in
the property and the bonds. The property, which is known as Sienna Plantation,
was purchased by the Company as an investment in 1973. This transaction will
enable the Company to recover its book value in the property and the bonds and
to be relieved of the recurring costs of owning and maintaining the property.
The Company anticipates that this transaction will be closed on or before June
30, 1995.
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Proposed Metromedia Transaction
On August 31, 1994, the Company entered into letters of intent providing
for a proposed combination of the Company with Orion Pictures Corporation
("Orion"), MCEG Sterling Incorporated ("Sterling"), and Metromedia International
Telecommunications Inc. ("MITI") (the "Proposed Metromedia Transaction"). It is
contemplated that the surviving entity of the Proposed Metromedia Transaction
would be a global media, entertainment and communications company named
"Metromedia International Group, Inc." Metromedia Company ("Metromedia") and its
affiliates, including John W. Kluge, presently control in excess of 50% of the
voting power of both Orion and MITI.
The consummation of the Proposed Metromedia Transaction is subject, among
other things, to the successful negotiation and execution of definitive
agreements, approval of the Proposed Metromedia Transaction by the Boards of
Directors and stockholders of the Company, Orion, Sterling, and MITI, the
completion of satisfactory due diligence investigations by each of the parties
to the Proposed Metromedia Transaction, the receipt of all required lender
consents, the successful refinancing of the currently outstanding indebtedness
of Orion, and the receipt of all required regulatory approvals. There can be no
assurance that the parties will negotiate and enter into definitive agreements
or, even if definitive agreements are executed, that the various conditions to
the transaction will be satisfied and that the Proposed Metromedia Transaction
will be consummated. The Board of Directors of the Company has retained CS First
Boston Corporation to serve as its financial adviser in connection with the
Proposed Metromedia Transaction and to render an opinion on the fairness of the
transaction to the Company's stockholders from a financial point of view.
Although the Board of Directors of the Company has met on several occasions to
consider the Proposed Metromedia Transaction, it has not approved the Proposed
Metromedia Transaction. If the Proposed Metromedia Transaction is approved by
the Company's Board of Directors and if definitive agreements are executed by
the parties thereto, then the Company will call a special meeting of
stockholders for the purpose of considering the Proposed Metromedia Transaction.
In this event, detailed information regarding the Proposed Metromedia
Transaction, including pro forma financial information, will be presented to the
Company's stockholders in a proxy statement relating to the Proposed Metromedia
Transaction.
The letters of intent relating to the Proposed Metromedia Transaction
provide that (i) each outstanding share of Orion common stock would be exchanged
for 0.57143 shares of Actava Common Stock or its equivalent in the entity that
survives the combination, (ii) each share of Sterling common stock would be
converted into 1,000,000 shares of Orion common stock which would then be
exchanged for Actava Common Stock or its equivalent in the entity that survives
the combination at the same 0.57143 exchange ratio, and (iii) each share of MITI
common stock would be exchanged for 5.5614 shares of Actava Common Stock or its
equivalent in the entity that survives the combination. The foregoing exchange
ratios will be subject to certain adjustments depending on the trading range of
Actava Common Stock. Approximately 17,308,258 shares of Actava Common Stock were
issued and outstanding as of March 15, 1995. If the Proposed Metromedia
Transaction is consummated, it is currently anticipated that the Company (based
on the market price of Actava Common Stock as of March 15, 1995 and assuming the
Company is the surviving entity of the Proposed Metromedia Transaction) would
issue approximately 23,481,000 additional shares of Actava Common Stock. The
letters of intent provide that all of the shares of common stock of the
surviving entity in the Proposed Metromedia Transaction will be identical to the
shares of Actava Common Stock currently outstanding, except that the shares of
common stock issued to Metromedia and its affiliates (including Mr. Kluge) will
be entitled to three votes per share. If the Proposed Metromedia Transaction is
consummated, it is currently anticipated that Metromedia and its affiliates
would control in excess of 50% of the voting power of the surviving entity in
the transaction.
The letters of intent further provide that Metromedia International Group,
Inc. would be managed by a three-person Office of the Chairman consisting of Mr.
Kluge, the current Chairman of Orion, as Chairman, Stuart Subotnick, Orion's
current Vice Chairman, as Vice Chairman, and Mr. Phillips, the current President
and Chief Executive Officer of the Company, as President. When the letters of
intent were executed and announced, Mr. Phillips did not have a business
relationship with Metromedia or Mr. Kluge. Mr. Phillips, however, has had
previous business relationships with Metromedia and Mr. Kluge. Mr. Kluge or
companies
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controlled by him, including Metromedia, have previously made investments in two
companies for which Mr. Phillips was then serving as chief executive officer or
chief operating officer.
The letters of intent relating to the Proposed Metromedia Transaction
contemplate that the Company will provide up to $55 million of interim financing
on a secured basis to Orion, Sterling and MITI prior to consummation of the
Proposed Metromedia Transaction. Pursuant to the letters of intent, the Company
and Metromedia entered into a Credit Agreement dated as of October 11, 1994 (the
"Credit Agreement") under which the Company agreed to make loans to Metromedia
in an amount not to exceed an aggregate of $55 million. Under the terms of the
Credit Agreement, Metromedia will use the proceeds of the loans to make advances
to or to pay obligations on behalf of Orion, Sterling and MITI. All loans made
by the Company to Metromedia under the Credit Agreement are secured by shares of
stock of Orion and MITI owned by Metromedia and its affiliates. In addition, Mr.
Kluge, a general partner of Metromedia, has personally guaranteed the loans. The
Credit Agreement provides that interest will be due on the principal amount of
all loans at an annual rate equal to the prime rate announced from time to time
by Chemical Bank (9% as of March 15, 1995). Interest will be increased to prime
plus three percent per annum if a party other than the Company terminates
discussions relating to the Proposed Metromedia Transaction. Loans totalling
$44.9 million had been made by the Company to Metromedia under the Credit
Agreement as of March 15, 1995. All loans are due and payable on April 12, 1995,
but Metromedia has requested the Company to extend the loans as long as the
Proposed Metromedia Transaction is still pending. The Board of Directors of the
Company has not acted on this request.
Although the Proposed Metromedia Transaction has not been approved by the
Company's Board of Directors, a stockholder of the Company has filed a class
action lawsuit against the Company and each of its directors seeking to block
the Proposed Metromedia Transaction. See Item 3. "Legal Proceedings --
Litigation Relating to Proposed Metromedia Transaction." In addition, Triton
Group Ltd. ("Triton"), which owns approximately 25% of the issued and
outstanding shares of Actava Common Stock, has publicly announced that it is
opposed to the Proposed Metromedia Transaction and that it "is encouraging
Actava's Board of Directors and management to evaluate other alternative
business strategies and to exercise their obligations diligently under Delaware
law relating to the sale of the Company." In response to Triton's opposition to
the Proposed Metromedia Transaction, TAC, Inc., a newly formed Delaware
corporation ("TAC"), has announced a tender offer to purchase all of the issued
and outstanding shares of common stock of Triton. The purpose of the tender
offer is to acquire control of Triton and thereafter to cause Triton to vote its
shares of Actava Common Stock in favor of the Proposed Metromedia Transaction.
TAC is owned by Mr. Phillips and by Met Tac, Inc., a company owned by Mr. Kluge,
as trustee, and Mr. Subotnick.
NARRATIVE DESCRIPTION OF BUSINESS
The Company currently engages in the lawn and garden equipment industry
through a division of the Company doing business under the name "Snapper Power
Equipment Company". In addition, the Company is indirectly engaged in the
sporting goods business through its ownership interest in Roadmaster.
Snapper Power Equipment Company
Snapper manufactures Snapper(R) brand power lawnmowers, lawn tractors,
garden tillers, snowthrowers, and related parts and accessories and distributes
edgers. 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 and
markets a fertilizer line under the Snapper(R) brand.
Snapper products are premium priced, generally selling at retail from $250
to $8,600. They are sold exclusively through 52 independent distributors to
approximately 7,300 dealers throughout the United States. In addition, Snapper
products are exported to 26 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. Although the ultimate consumers
generally purchase lawnmowers in the spring and early summer, Snapper sells to
its distributors
7
<PAGE> 9
nearly year-round, with the greatest volume of production and shipment preceding
the ultimate consumer purchasing periods. Historically, Snapper has provided its
distributors with accounts receivable redating programs under which the due
dates for distributor accounts receivable were set to coincide with the
anticipated sales to the ultimate consumer. During 1994, Snapper revised its
redating programs for lawn and garden equipment in order to accelerate the
collection of its accounts receivable from distributors and thereby reduce
Snapper's working capital debt and improve its cash flow. As a result of the
revision of these programs, Snapper's distributors and dealers postponed orders
for new products during most of 1994 in order to reduce their inventory levels.
During December of 1994, however, Snapper's distributors accelerated their
purchases of Snapper products in order to build their inventories prior to the
implementation of price increases by Snapper in 1995. Snapper anticipates that
its distributors in the future will continue their previous effort to match
retail inventories to consumer demand. 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 floor plan financing for
Snapper products available to dealers. 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. The distributor, however, is obligated to repurchase
any unused 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. Snapper also manufactures a
substantial portion of the component parts for its products, excluding engines
and tires. Although most of the parts and materials for Snapper's products are
commercially available from a number of sources, Snapper has substantially
reduced the number of suppliers that it uses for parts and materials. In many
cases, Snapper has agreed to use a single supplier for a specific part or
material in order to obtain more favorable price, delivery and performance
terms. Snapper believes, however, that alternative suppliers are available for
all of the parts and materials that it needs in connection with the manufacture
of its products.
During the three years ended December 31, 1994, Snapper has spent an
average of $5 million per year for research and development. Although 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 the 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. Although no one company
dominates the market, the Company believes that Snapper is one of the
significant manufacturers of lawn and garden products. There are approximately
50 manufacturers who produce products that compete with Snapper's products.
Snapper's principal brand name competitors in the sale of power lawnmowers
include The Toro Company, Lawn-Boy (a product 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. Some of Snapper's
competitors have greater financial resources than Snapper.
At December 31, 1994, Snapper had approximately $94 million in backlog
orders believed to be firm as compared to approximately $122 million in backlog
orders at December 31, 1993.
The Company is actively seeking to identify synergistic business
combinations for Snapper and would ultimately like for Snapper to operate as, or
as part of, a publicly held company in which the Company has an interest.
Although the Company would prefer to own an interest in a publicly held Snapper,
the Company is exploring other alternatives for Snapper, including a possible
sale or joint venture or the continued operation of Snapper as a division or
subsidiary. The Company currently is not a party to any agreements with respect
to
8
<PAGE> 10
any acquisitions or business combinations regarding Snapper nor does it have any
immediate plans or agreements that would cause Snapper to become publicly owned.
No assurances can be given that the Company in the future will engage in such a
transaction or effect such a plan.
Investment in Roadmaster Industries, Inc.
The Company owns approximately 39% of the outstanding shares of Roadmaster
Common Stock as a result of the Exchange Transaction. Roadmaster, through its
operating subsidiaries, is one of the largest manufacturers of bicycles and is a
leading manufacturer of fitness equipment and toy products in the United States.
The following is certain information concerning the business and operations of
Roadmaster which was furnished to the Company by Roadmaster.
Roadmaster's major product lines consist of bicycles for the adult, teen
and juvenile markets, fitness equipment, including stationary aerobic equipment,
multi-station weight systems and benches, and toy products such as tricycles,
wagons, toy horses, bulk plastic toys, sleds and swing sets, and team sports and
camping equipment. Roadmaster markets its products, primarily through mass
merchandisers, under trade names with widespread consumer recognition and long
operating histories, including Roadmaster(R), Vitamaster(R), Flexible Flyer(R),
MacGregor(R), DP(R), Hutch(R), Reach(R), Weather-Rite(R), and American
Camper(R). In 1994, Roadmaster had sales greater than $1 million to each of more
than 20 leading mass merchandisers including Toys "R" Us Inc. ("Toys "R" Us"),
Wal-Mart Stores, Inc. ("Wal-Mart") and Target Stores, Inc. ("Target").
Roadmaster received Vendor of the Year awards from Toys "R" Us in 1992 and 1993,
Wal-Mart in 1991 and Target in 1990.
As a result of the Exchange Transaction, Roadmaster now owns and operates
the four sporting goods companies formerly owned and operated by the Company.
These companies are Diversified Products, Hutch, Nelson/Weather-Rite, and
Willow. These companies manufacture, import and distribute products for a broad
cross-section of the sporting goods, fitness, camping, and leisure markets. The
companies also sell 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.
Bicycle and fitness products together accounted for 78% of Roadmaster's net
sales in 1994. Roadmaster has experienced sales growth in bicycles and fitness
products of 540% and 144%, respectively, from 1990 through 1994. Roadmaster's
management believes that Roadmaster's share of bicycles sold through mass
merchandisers, who sell approximately 80% of all bicycles in the United States,
has grown from 5% in 1990 to 25% in 1994. Roadmaster's total sales for the year
ended December 31, 1994 increased by 46% to $455.7 million from the year ended
December 31, 1993, primarily due to increased sales in Roadmaster's existing
product lines. Due to the seasonality of its business, Roadmaster's fourth
quarter sales over the past four years have accounted for approximately 35% of
its total annual sales.
Although international sales are not currently a significant part of
Roadmaster's consolidated operations, Roadmaster plans to expand its existing
distribution in Canada and Europe. In addition, Roadmaster intends to continue
to pursue acquisitions of complementary product lines in order to achieve
economies of scale and to leverage its existing relationships with mass
merchandisers.
Prior to consummation of the Exchange Transaction, the manufacturing
facility operated by Diversified Products in Opelika, Alabama was underutilized.
Diversified Products used approximately 60% of its production space during its
peak manufacturing season and approximately 30% of its production space during
non-peak periods. As a result of the Exchange Transaction, Roadmaster has opened
a new bicycle production line at Diversified Products' manufacturing facility,
which has substantially increased the utilization of this facility. Roadmaster
plans to add additional production lines at this facility in the future.
Roadmaster's principal executive offices are located at the International
Sports Plaza, 250 Spring Street, N.W., Suite 3 South, Atlanta, Georgia 30303,
and its telephone number is (404) 586-9000. Roadmaster and each of its domestic
subsidiaries are incorporated under Delaware law.
9
<PAGE> 11
ENVIRONMENTAL PROTECTION
Snapper's manufacturing plant is 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 Snapper's competitive position.
Snapper's capital expenditures for environmental control facilities and
incremental operating costs in connection therewith were not material in 1994
and are not expected to be material in future years for compliance relating to
facilities owned by Snapper in 1994.
The Company is involved in various environmental matters involving property
owned or operated by a former subsidiary of the Company, including clean-up
efforts at landfill sites and the remediation of groundwater contamination. The
Company's participation in two existing superfund sites has been quantified and
its remaining exposure is estimated to be less than $400,000 for both sites. The
Company is also participating in the initial investigation of a potential
environmental contamination site involving a divested operation. This site is
not presently designated as a superfund site.
The Company, through a wholly-owned subsidiary, owns approximately 17 acres
of real property located in Opelika, Alabama (the "Opelika Property"). The
Opelika Property was formerly owned by Diversified Products and was transferred
to a wholly owned subsidiary of the Company in connection with the Exchange
Transaction. Diversified Products previously used the Opelika Property as a
storage area for stockpiling cement, sand, and mill scale materials needed for
or resulting from the manufacture of exercise weights. In June 1994, Diversified
Products discontinued the manufacture of exercise weights and no longer needed
to use the Opelika Property as a storage area. In connection with the
negotiation of the Exchange Transaction, Roadmaster and the Company agreed that
the Company, through a wholly-owned subsidiary, would acquire the Opelika
Property, together with any related permits, licenses, and other authorizations
under federal, state and local laws governing pollution or protection of the
environment. In connection with the closing of the Exchange Transaction, the
Company and Roadmaster entered into an Environmental Indemnity Agreement (the
"Indemnity Agreement") under which the Company agreed to indemnify Roadmaster
for costs and liabilities resulting from the presence on or migration of
regulated materials from the Opelika Property. The Indemnity Agreement does not
cover environmental liabilities relating to any property now or previously owned
by Diversified Products except for the Opelika Property. The Company has a
reserve of approximately $1.9 million to cover any environmental liabilities
resulting from its ownership of the Opelika Property or its obligations under
the Indemnity Agreement.
EMPLOYEES
At December 31, 1994, the Company, including Snapper, had approximately
1,225 employees. Approximately 900 of Snapper's employees were represented by a
union under a collective bargaining agreement. In general, the Company believes
that its employee relations are good.
INDUSTRY SEGMENT DATA
Industry Segment Data is included in Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
10
<PAGE> 12
ITEM 2. PROPERTIES
The following table contains a list of the Company's principal properties.
Certain of the properties are subject to mortgages securing indebtedness, which,
as of December 31, 1994, aggregated approximately $1.1 million, including
mortgages on machinery and equipment. See "Notes Payable and Long-Term Debt" in
Notes to Consolidated Financial Statements.
<TABLE>
<CAPTION>
NUMBER
----------------
DESCRIPTION OWNED LEASED LOCATION
--------------------------------------------------- ----- ------ --------------------
<S> <C> <C> <C>
Snapper:
Manufacturing Plant.............................. 1 -- McDonough, Georgia
Distribution Facility............................ -- 1 McDonough, Georgia
General Corporate:
Office Space..................................... -- 2 Atlanta, Georgia
</TABLE>
The Company's management believes that the facilities listed above are
generally adequate and satisfactory for their present usage and are generally
well utilized.
The lease covering the property utilized by Snapper for its distribution
facility expires in September of 1995. The Company's corporate staff employees
are currently divided between two offices. The lease for one of such offices
expires in August of 1995. The other office is currently being leased on a
month-to-month basis.
ITEM 3. LEGAL PROCEEDINGS
Divested Subsidiary
On November 30, 1993, a lawsuit was filed by the United States Department
of Justice ("DOJ") against American Seating Company ("American Seating"), a
former subsidiary of the Company, 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 the Company and Amseco Acquisition, Inc., dated July 5, 1987,
the Company assumed the obligation for certain liabilities incurred by American
Seating arising out of litigation or other disputes involving events occurring
on or before June 22, 1987. The DOJ alleges, among other things, 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 of 1995. The DOJ has asserted damages of approximately
$3,500,000. If such damages were awarded and then trebled, the total damages,
excluding penalties, costs and interest, could exceed $10,000,000. In addition,
penalties, if assessed, could range from several thousand dollars to several
million dollars. As a result, this lawsuit could have a material effect on the
results of operations and financial condition of the Company. The Company's
management, however, believes that American Seating has meritorious defenses to
the allegations made by the DOJ and does not expect the Company to incur any
material liability as a result of this lawsuit.
Shareholder Litigation
On February 25, 1991, a lawsuit styled 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 the Company's Board of Directors and certain former members of the
Board of Directors of Intermark, Inc. ("Intermark"). Intermark is a predecessor
to Triton, which currently owns approximately 25% of the outstanding shares of
Actava Common Stock. The Company was named as a nominal defendant in this
lawsuit. The action was brought derivatively in the right of and on behalf of
the Company and purportedly was filed as a class action lawsuit on behalf of all
holders of Actava Common Stock 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
11
<PAGE> 13
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 $15,700,000 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 former directors, including a prohibition against approving or
entering into any business combination with Intermark without specified
approval; and (iii) costs of suit and attorneys' fees.
As of March 4, 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, had been filed in the
Delaware Chancery Court by plaintiffs who allege that they are stockholders of
the Company. Each of these complaints purported 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 alleged, 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 sought costs of suit and attorneys'
fees and preliminary and permanent injunctive relief and other equitable
remedies, including an order requiring 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 lawsuits, the Delaware Chancery
Court ordered the consolidation of the three lawsuits in In re Fuqua Industries,
Inc. Shareholder Litigation, Civil Action No. 11974, on May 1, 1991. These
lawsuits continue to be in the discovery stage. No significant events occurred
with respect to these lawsuits during 1994.
Litigation Relating to Proposed Metromedia Transaction
On September 23, 1994, a stockholder of the Company filed a class action
lawsuit against the Company and each of its directors seeking to block the
Proposed Metromedia Transaction. The lawsuit was filed in the Chancery Court for
New Castle County, Delaware and is styled James F. Sweeney, Trustee of Frank
Sweeney Defined Benefit Pension Plan Trust v. John D. Phillips, et. al., Civil
Action No. 13765. The Company and its directors were served with this lawsuit on
September 28, 1994. The complaint alleges that the terms of the Proposed
Metromedia Transaction constitute an overpayment for the assets being acquired
and consequently would result in a waste of the Company's assets. The complaint
further alleges that the directors of the Company would be breaching their
fiduciary duties to the Company's stockholders by approving the Proposed
Metromedia Transaction. The Company and its directors have filed a motion to
dismiss this lawsuit. The stockholder who filed the lawsuit has not responded to
the motion to dismiss. Management believes that the allegations contained in the
complaint are without merit for a variety of reasons, including the fact that
the Company has not entered into a definitive agreement with respect to the
Proposed Metromedia Transaction and the Proposed Metromedia Transaction has not
been approved by the Board of Directors of the Company.
Other Litigation
The Company is the defendant in various other legal proceedings. Except as
described herein, the Company is not aware, however, of any other action that,
in the opinion of management, would materially and adversely affect the
Company's liquidity, results of operations or financial position. See Item 1.
"Environmental Protection."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A Special Meeting of Stockholders of the Company was held on December 6,
1994 for the purpose of enabling stockholders to consider and vote upon the
Exchange Transaction. The holders of 11,422,091 shares of Actava Common Stock
voted in favor of the Exchange Transaction, the holders of 140,696 shares voted
against the Exchange Transaction, and the holders of 66,976 shares abstained
from voting. See "Major Developments During 1994 -- Sale of Sporting Goods
Subsidiaries."
12
<PAGE> 14
EXECUTIVE OFFICERS OF THE REGISTRANT
Each of the executive officers of the Company as of the date hereof was
elected to serve until the next annual meeting of the Board of Directors of the
Company or until his successor is elected and qualified:
<TABLE>
<CAPTION>
POSITION
NAME AGE OFFICE HELD SINCE
---------------------------- --- --------------------------------- -------------
<S> <C> <C> <C>
John D. Phillips............ 52 President and Chief Executive April 1994
Officer
Frederick B. Beilstein, 47 May 1991
III....................... Senior Vice
President -- Treasurer and Chief
Financial Officer
W. Tod Chmar................ 41 Senior Vice President June 1994
Walter M. Grant............. 49 Senior Vice President, General July 1993
Counsel and Secretary
Michael A. Lustig........... 39 Vice President -- Corporate February 1995
Development
</TABLE>
Mr. Phillips was elected to the position of President and Chief Executive
Officer of the Company on April 19, 1994. Mr. Phillips served as President and
Chief Executive Officer of Resurgens Communications Group, Inc. ("Resurgens")
from May 1989 until Resurgens was merged with Metromedia Communications
Corporation and LDDS Communications, Inc. in September 1993.
On May 30, 1991, Mr. Beilstein was elected to the office of Senior Vice
President -- Treasurer and Chief Financial Officer. Prior to joining the
Company, 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. Chmar was elected to the position of Senior Vice President of the
Company on June 10, 1994. Mr. Chmar served as a partner in the law firm of Long,
Aldridge & Norman from January 1985 until September 1993.
Mr. Grant was elected to the office of Senior Vice President and General
Counsel in July 1993 and to the position of 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.
Mr. Lustig, who has been an employee of the Company since 1979, was elected
to the position of Vice President -- Corporate Development effective as of
February 15, 1995. Mr. Lustig had previously served in this same position from
January 1992 until November 1993. In November 1993, Mr. Lustig was elected to
the office of Executive Vice President and Chief Financial Officer of
Diversified Products, which was then a wholly-owned subsidiary of the Company.
Mr. Lustig served as an officer of Diversified Products until Diversified
Products was acquired by Roadmaster on December 6, 1994. Mr. Lustig served as
Vice President -- Research of the Company during 1991 and served as an Assistant
Vice President of the Company prior to 1991.
13
<PAGE> 15
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
Actava Common Stock is listed and traded on the New York and Pacific Stock
Exchanges. The following table summarizes the high and low market prices for
Actava Common Stock according to the New York Stock Exchange Composite Tape and
the cash dividends declared by the Company for 1994 and 1993:
<TABLE>
<CAPTION>
MARKET PRICE OF COMMON STOCK
--------------------------------
CASH
1994 1993 DIVIDENDS
------------- -------------- ------------
QUARTERS ENDED HIGH LOW HIGH LOW 1994 1993
---------------------------------------- ----- ---- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C>
March 31................................ $9 1/4 $5 7/8 $14 1/2 $11 5/8 -0- $.09
June 30................................. 9 3/8 5 3/4 14 9 1/2 -0- $.09
September 30............................ 13 3/4 8 1/4 9 1/2 7 1/4 -0- $.09
December 31............................. 10 3/8 8 3/8 8 1/4 6 5/8 -0- $.09
</TABLE>
Holders of Actava Common Stock are entitled to such dividends as may be
declared by the Board of Directors and paid out of funds legally available for
the payment of dividends. The Company paid a quarterly dividend in varying
amounts per share from 1976 through the fourth quarter of 1993. On March 2,
1994, the Company announced that its Board of Directors had suspended the
dividends on Actava Common Stock. The Company intends to retain earnings to
finance the development and expansion of its business and does not anticipate
paying cash dividends in the foreseeable future. The decision of the Board of
Directors as to whether or not to pay cash dividends in the future will depend
upon a number of factors, including the Company's future earnings, capital
requirements, and financial condition, and the existence or absence of any
contractual limitations on the payment of dividends. See Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
As of March 15, 1995, there were approximately 6,400 record holders of
Actava Common Stock. The last reported sale price for Actava Common Stock on
such date was $9.625 per share according to the New York Stock Exchange
Composite Tape.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1994 1993(A) 1992(A) 1991(A) 1990(A)
----- ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net sales.............................................. $ 552 $ 466 $ 378 $ 275 $ 348
Income (loss) from continuing operations............... (23) (52) -- (56) (10)
Income (loss) from discontinued operations............. (41) 9 11 5 9
Extraordinary items.................................... (2) -- -- -- 1
Cumulative effect of changes in accounting
principles........................................... -- (4) 1 -- --
Net income (loss)...................................... (66) (47) 12 (51) --
Total assets........................................... 487 1,275 1,218 1,090 1,016
Long-term debt......................................... 3 221 220 157 43
Subordinated debt...................................... 157 191 194 195 200
----- ------ ------ ------ ------
Total long-term and subordinated debt........ 160 412 414 352 243
===== ====== ====== ====== ======
Redeemable common stock................................ 12 12 -- -- --
</TABLE>
14
<PAGE> 16
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1994 1993(A) 1992(A) 1991(A) 1990(A)
----- ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Per common share:
Primary earnings
Continuing operations................................ (1.29) (3.01) (.02) (3.38) (.59)
Discontinued operations.............................. (2.24) .49 .66 .30 .53
Extraordinary item................................... (.09) -- -- -- .05
Cumulative effect -- accounting change............... -- (.25) .06 -- --
----- ------ ------ ------ ------
Net income (loss).................................... (3.62) (2.77) .70 (3.08) (.01)
===== ====== ====== ====== ======
Fully diluted earnings
Continuing operations................................ (1.29) (3.01) (.02) (3.38) (.59)
Discontinued operations.............................. (2.24) .49 .66 .30 .53
Extraordinary item................................... (.09) -- -- -- .05
Cumulative effect -- accounting change............... -- (.25) .06 -- --
----- ------ ------ ------ ------
Net income (loss).................................... (3.62) (2.77) .70 (3.08) (.01)
===== ====== ====== ====== ======
Cash dividends declared................................ $ -- $ .36 $ .36 $ .36 $ .32
===== ====== ====== ====== ======
</TABLE>
---------------
(a) Reclassified for discontinued operations.
See Notes to Consolidated Financial Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
During 1994, Actava's management took several steps to redirect the
Company's focus in order to improve its operating results and financial
condition and to enable it to pursue new business opportunities. These steps
included the sale of the Sports Subsidiaries to Roadmaster for Roadmaster's
publicly traded stock valued at approximately $76.7 million on the date of the
sale and valued at approximately $55.1 million as of March 15, 1995, the sale of
the Company's 50% ownership interest in Qualex to Kodak for cash and short-term
notes totaling $150 million, the negotiation and execution of a contract to sell
a real estate investment for $9 million in cash, and the initiation of
negotiations for a business combination that would create a global media,
entertainment and communications company.
The Company's Snapper Division currently provides lawn and garden products
through distribution channels to domestic and foreign retail markets. In
addition, the Company is indirectly involved in the sporting goods business
through its ownership interest in Roadmaster.
On December 6, 1994, Actava transferred the Sports Subsidiaries to
Roadmaster in exchange for approximately 19.2 million shares of Roadmaster
Common Stock, which represented approximately 39% of the issued and outstanding
shares of Roadmaster Common Stock. Although the value of the shares of
Roadmaster Common Stock received by Actava on the transaction date exceeded
Actava's investment in the Sport Subsidiaries, a gain was not recognized for
financial reporting purposes because the transaction was classified as a
nonmonetary exchange which requires that the shares be recorded at the book
value of the assets exchanged. The results of operations for the Sports
Subsidiaries through December 6, 1994, are reflected in the consolidated results
of operations of Actava for the year ended December 31, 1994. The Sports
Subsidiaries were not classified as a discontinued operation because of the 39%
equity interest retained by Actava in Roadmaster. See "Investment in Roadmaster
Industries, Inc." in Notes to Consolidated Financial Statements.
On August 12, 1994, Actava sold its investment in Qualex to Kodak and
recognized a loss from discontinued operations of $40.7 million for 1994. This
loss included a loss of $37.9 million on the sale of the Company's interest in
Qualex and a loss of $2.8 million relating to the operations of Qualex in 1994.
Actava had consolidated the results of operations of Qualex with the results of
operations of Actava for periods ending prior to June 30, 1994. During the
second quarter of 1994, Actava began accounting for its investment in Qualex
under the equity method and then began accounting for Qualex as a discontinued
operation due to a
15
<PAGE> 17
decision to dispose of its interest in Qualex. Accordingly, the results of
Qualex for all periods presented are reported in the accompanying consolidated
statements of operations as discontinued operations. See "Photofinishing
Transaction and Discontinued Operation" in Notes to Consolidated Financial
Statements.
Actava is presently evaluating new opportunities and strategies for
enhancing stockholder value. On August 31, 1994, Actava entered into letters of
intent relating to the Proposed Metromedia Transaction. It is contemplated that
the surviving entity of the Proposed Metromedia Transaction would be a global
media, entertainment and communications company named Metromedia International
Group, Inc. Consummation of the Proposed Metromedia Transaction is subject to a
number of conditions, including completion of due diligence investigations by
each of the parties, negotiation and execution of definitive agreements, the
successful refinancing of the currently outstanding indebtedness of Orion, and
approval of the transaction by Actava's Board of Directors and stockholders.
There can be no assurance that the parties will negotiate and enter into
definitive agreements or, even if definitive agreements are executed, that the
various conditions to the transaction will be satisfied and that the Proposed
Metromedia Transaction will be consummated. The Company is currently continuing
its due diligence efforts regarding the Proposed Metromedia Transaction.
The following is a discussion of the operating results and financial
condition of the continuing operations of Actava on a consolidated basis, the
operating results and financial condition of the Company's lawn and garden
segment for all of 1994 and a discussion of the operating results and financial
condition of the sporting goods segment for the period ending December 6, 1994.
Financial information summarizing the results of operations for Qualex, which is
classified in discontinued operations, is presented in "Photofinishing
Transaction and Discontinued Operation" in Notes to Consolidated Financial
Statements. Summary financial information for the Company's equity investment in
Roadmaster is presented in "Investment in Roadmaster Industries, Inc." in Notes
to Consolidated Financial Statements.
CONSOLIDATED CONTINUING OPERATIONS
<TABLE>
<CAPTION>
INCREASE (DECREASE)
FISCAL YEAR -------------------
-------------------------------- 1994 VS. 1993 VS.
1994 1993 1992 1993 1992
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales......................... $551,828 $465,812 $377,890 $ 86,016 $ 87,922
Gross profit...................... 90,653 64,341 94,255 26,312 (29,914)
Gross profit %.................... 16.4% 13.8% 24.9% -- --
S, G & A.......................... $ 90,974 $ 88,975 $ 76,755 1,999 12,220
Operating profit (loss)........... (321) (24,634) 17,500 24,313 (42,134)
Interest expense.................. 28,434 26,811 20,811 1,623 6,000
Income from equity investment..... 365 -- -- 365 --
Other income (expense)............ 4,934 (1,706) 4,651 6,640 (6,357)
Income taxes (benefit)............ -- (1,435) 1,662 1,435 (3,097)
Loss from continuing operations... (23,456) (51,716) (322) 28,260 (51,394)
</TABLE>
The Company's consolidated sales increase of 18.5% for 1994 is primarily
the result of increases of $68.1 million at Diversified Products and $24.5
million at Snapper. The increase at Diversified Products, which was acquired in
June 1993, is the result of the mid-1993 acquisition date and increases in
treadmill sales. The increase at Snapper is due to increased snowthrower sales
and increases in distributor orders for such items as walk-behind mowers and
rear-engine riders and tractors made in anticipation of price increases by
Snapper in 1995. The increase in gross profit dollars in 1994 represents a 40.9%
increase as compared to 1993 and is primarily attributable to gross profit
increases at Snapper resulting from a change in product mix and improved
manufacturing cost experience.
The Company's consolidated sales for 1993 increased $87.9 million, or
23.3%, from 1992 principally because of the acquisition of Diversified Products.
Gross profit as a percentage of sales for 1993 of 13.8% reflects a decrease from
24.9% for 1992 while gross profit dollars decreased by $29.9 million to $64.3
million.
16
<PAGE> 18
This is primarily due to a gross profit decline suffered by Snapper, which was
partially offset by an increase in the gross profits recorded by the Sports
Subsidiaries excluding Diversified Products. The Snapper gross profit decline
was primarily caused by manufacturing problems associated with new product
introductions during 1993.
Selling, general and administrative expenses, which include provisions for
doubtful accounts, plant closure costs and employee termination costs, increased
by 2.2% for 1994 in comparison to 1993. This increase is primarily attributable
to a 1994 first quarter provision of $1.3 million for the settlement of an
employee agreement, additional salaries for newly hired executive officers and
decreases at Snapper which were partially offset by increases by the Sports
Subsidiaries.
Selling, general and administrative expenses increased by $12.2 million, or
15.9%, for 1993 in comparison to 1992. The increase in selling, general and
administrative expenses is primarily attributable to the effect of $8.6 million
of selling, general and administrative expenses incurred by Diversified Products
from the acquisition date to year-end 1993 and a $1.7 million increase in such
expenses for the other Sports Subsidiaries.
For 1994, Actava's operating loss of $321,000 represents a $24.3 million
improvement over the 1993 operating loss. This improvement is primarily
attributable to a $26.7 million reduction in Snapper's operating loss, which
resulted from higher sales volume, a change in product mix and improved
manufacturing costs. The 1994 operating profit for the Sports Subsidiaries
decreased by $383,000 as compared to 1993.
In 1993, Actava recorded an operating loss of $24.6 million compared to an
operating profit from 1992 of $17.5 million. The 1993 operating loss includes
income of $865,000 for plant relocations and consolidations and a $4 million
charge for a change in the estimate of future warranty costs at Snapper due to
increased warranty claims. Other factors negatively impacting operating profits
for 1993 in comparison to 1992 were underutilization of plant capacity and
manufacturing inefficiencies at Snapper and Diversified Products, lower gross
margins on initial product introductions by Snapper, and an increase in
corporate expenses of approximately $4 million. The corporate expense increase
was primarily attributable to additional self-insurance reserves, an increase in
insurance administrative expense, and the impact of reduced expenses for 1992
due to the reversal of certain reserves in 1992 for settlement of employee
agreements and office relocations.
Interest expense for 1994 represents an increase of $1.6 million as
compared to 1993. This increase is primarily attributable to the addition of
interest associated with a revolving credit facility established to provide
working capital for Diversified Products.
Interest expense for 1993 of $26.8 million represents an increase of $6
million from 1992. This increase is primarily attributable to higher average
borrowings at Snapper and the addition of interest associated with the revolving
credit facility established to provide working capital for Diversified Products.
The credit lines for Actava's subsidiaries and divisions substantially reduced
their reliance on Actava for their working capital needs.
Other income (net of other deductions) increased $6.6 million for 1994 when
compared to 1993. This is primarily due to an increase in investment income from
higher levels of investment and recognition of imputed interest income on the
note received from Kodak in connection with the sale of Qualex, partially offset
by increases in early payment interest credit expense at Snapper.
Other income (net of other deductions) decreased $6.4 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, and an increase of $3 million in a valuation allowance for a real
estate investment due to an accelerated plan of disposition.
During the year, the Company provides for income taxes using anticipated
effective annual tax rates 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 recognizes
the benefit of current net operating losses only to the extent of potential
refunds from carrybacks. Any income tax effect relating to Qualex is recognized
17
<PAGE> 19
in the loss from discontinued operations. Income taxes for the Sports
Subsidiaries are included in Actava's operations for the period for which they
were consolidated. See "Income Taxes" in Notes to Consolidated Financial
Statements.
The Company has a net deferred tax balance of zero, which is composed of
deferred tax liabilities of approximately $16.4 million and deferred tax assets
of approximately $59 million subject to a $42.6 million valuation allowance to
reflect limitations on the Company's ability to utilize net operating losses and
other tax benefits. Deferred income 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. See
"Income Taxes" in Notes to Consolidated Financial Statements.
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 value with current recognition of unrealized gains and losses, and
certain debt and equity securities to be reported at market value with
unrealized gains and losses as a separate component of shareholders' equity. The
Company adopted the provisions of the new standard for investments held as of or
acquired after January 1, 1994. In accordance with the Statement, prior period
financial statements have not been restated to reflect the change in accounting
principle. As of January 1, 1994, the effect of adopting Statement 115 was not
material. See "Summary of Significant Accounting Policies -- Investments" in
Notes to Consolidated Financial Statements.
During 1994, Actava reported a loss from continuing operations of $23.5
million, a loss from discontinued operations of $40.7, and a loss from an
extraordinary item of $1.6 million, resulting in a net loss of $65.8 million.
This compares to a net loss of $47.6 million for 1993 composed of a net loss
from continuing operations of $51.7 million, $8.5 million in net income from
discontinued operations, and a loss from the cumulative effect of a change in
accounting principle of $4.4 million. Net income of $11.6 million for 1992 was
composed of a net loss from continuing operations of $322,000, $10.9 million in
net income from discontinued operations, and income from the cumulative effect
of a change in accounting principle of $1 million.
OPERATING SEGMENTS
SEGMENT PERFORMANCE
THE ACTAVA GROUP INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
NET SALES
Lawn and garden............................... $249.5 $225.0 $248.2 $158.5 $237.7
Sporting goods................................ 302.3 240.8 129.7 116.4 110.7
------ ------ ------ ------ ------
Total................................. $551.8 $465.8 $377.9 $274.9 $348.4
====== ====== ====== ====== ======
PRE-TAX EARNINGS (LOSS)
Lawn and garden............................... $ 9.6 $(17.1)(3) $ 17.8 $(50.6) $ (.3)(4)
Sporting goods(1)............................. 2.6 2.7 5.9 4.3 3.6
------ ------ ------ ------ ------
Operating profit (loss) -- segments(2)........ 12.2 (14.4) 23.7 (46.3) 3.3
Unallocated corporate expenses................ (10.9) (10.2) (6.2) (10.6) (9.6)
Settlement of employee agreements and related
costs...................................... (1.3) -- -- (6.8) --
------ ------ ------ ------ ------
Operating profit (loss)....................... -- (24.6) 17.5 (63.7) (6.3)
Interest expense.............................. (28.4) (26.8) (20.8) (19.7) (21.9)
Other income (expense) -- net................. 4.9 (1.7) 4.6 2.9 11.2
------ ------ ------ ------ ------
Total pre-tax earnings (loss)......... $(23.5) $(53.1) $ 1.3 $(80.5) $(17.0)
====== ====== ====== ====== ======
</TABLE>
18
<PAGE> 20
---------------
(1) The Sporting Goods segment includes Actava's four sporting goods companies
through December 6, 1994 and Actava's equity income from Roadmaster of
$365,000 for the period from December 6, 1994 through December 31, 1994.
(2) 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.
(3) Includes warranty expense of $4 million before tax due to a change in
accounting estimate.
(4) Includes a provision 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.
LAWN AND GARDEN
<TABLE>
<CAPTION>
INCREASE (DECREASE)
FISCAL YEAR ---------------------
---------------------------------- 1994 1993
1994 1993 1992 VS. 1993 VS. 1992
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales............................ $249,502 $224,960 $248,198 $ 24,542 $(23,238)
Gross profit......................... 54,034 31,187 68,225 22,847 (37,038)
Gross profit %....................... 21.7% 13.9% 27.5% -- --
S, G & A............................. $ 44,473 $ 48,306 $ 50,430 (3,833) (2,124)
Operating profit (loss).............. 9,561 (17,119) 17,795 26,680 (34,914)
</TABLE>
Snapper's 10.9% increase in 1994 sales as compared to 1993 is the result of
increases in snowthrower sales and distributor orders made in anticipation of
new price increases. Snapper sold approximately 32,000 more snowthrowers in 1994
than in 1993 due to additional consumer demand resulting from abnormally severe
winter weather. Sales of other products increased primarily because distributors
accelerated their purchases of Snapper products during December of 1994 in order
to build their inventories prior to the implementation by Snapper of price
increases in 1995. The additional units sold in December of 1994 as compared to
December of 1993, excluding snowthrowers, included 13,600 walk-behind mowers,
6,000 rear-engine riders, and 3,000 tractors. Annual unit increases for these
items were 17,000 for walkmowers, 13,800 for rear-engine riders, and 3,000 for
tractors. Historically, Snapper has provided its distributors with accounts
receivable redating programs under which the due dates for distributor accounts
receivable were set to coincide with the anticipated sales to the ultimate
consumer. During 1994, Snapper revised its redating programs for lawn and garden
equipment in order to accelerate the collection of its accounts receivable from
distributors and thereby reduce Snapper's working capital debt and improve its
cash flow. As a result of the revision of these programs, Snapper's distributors
and dealers postponed orders for new products during most of 1994 in order to
reduce their inventory levels. As noted above, however, Snapper's distributors
accelerated their purchases of Snapper products in December of 1994 in
anticipation of 1995 price increases. Sales for the first quarter of 1995 are
expected to be lower than sales for the same 1994 quarter primarily due to the
acceleration of orders by distributors in December of 1994. Snapper anticipates
that its distributors in the future will continue their previous efforts to
match retail inventories to consumer demand.
Gross profit dollars increased by 73.3% in 1994 as compared to 1993 due to
the additional sales and improved manufacturing costs. Snapper reduced labor
manufacturing costs by producing fewer models, which reduced the required
training time, by implementing assembly line changes identified by assembly line
labor studies, and by allowing longer lead time between design and production
for testing and materials planning. Material costs were lower due to less
warranty cost for 1994 than experienced in 1993 and longer lead times for
obtaining competitive bids and testing. The 1994 LIFO charge was $2.9 million
less than in 1993 due to efforts by Snapper to reduce factory inventory levels.
Although 1993 retail sales were strong for lawn and garden equipment,
Snapper's sales to distributors in 1993 decreased by $23.2 million, or 9.4%,
compared to 1992. The primary reason for this decrease was that Snapper
continued to reduce production and shipments to distributors in order to
decrease retail inventories. Gross profit as a percentage of sales decreased to
13.9% for 1993 as compared to 27.5% in 1992 and gross profit
19
<PAGE> 21
in dollars decreased by $37.0 million. These gross profit decreases resulted
from unfavorable manufacturing variances and cost over-runs for newly introduced
products and from an increase in product related expenses such as 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, was a lower price-point and margin product
than the Snapper(TM) brand line, gross margin per unit was lower in 1993 when
compared to 1992. Sales of the Blackhawk(TM) line of mowers were not significant
in 1994. A $4 million warranty expense was charged to operations in the fourth
quarter of 1993 due to unanticipated increases in warranty claims in 1993. Also,
gross profit was lower because of inventory shortages and shut-down costs for a
company-owned foreign distributor.
Selling, general and administrative expenses for Snapper in 1994 were $3.8
million, or 7.9% lower than in 1993. The dollar decrease is primarily due to
reductions in special accessory programs, changes in promotion prices, and
elimination of some customer incentive programs. Also reflected is the
recognition of $1 million in 1994 of previously recorded unearned discounts
related to the extension of due dates for certain receivables in 1993.
Snapper's operating profit of $9.6 million in 1994 was $26.7 million higher
than the 1993 operating loss of $17.1 million due to the $22.8 million gross
profit increase and the $3.8 million selling, general and administrative
improvement.
Because of reduced sales for 1993, selling, general and administrative
expenses, including sales volume related expenses such as co-operative
advertising, decreased by $2.1 million in comparison to 1992. This decrease
included income of $849,000 recorded in 1993 by eliminating 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, which was 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 a profit of $17.8 million for 1992.
SPORTING GOODS
<TABLE>
<CAPTION>
FISCAL YEAR INCREASE (DECREASE)
-------------------------------- -----------------------------
1994(A) 1993 1992 1994 VS. 1993 1993 VS. 1992
-------- -------- -------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales.............................. $302,326 $240,852 $129,692 $61,474 $ 111,160
Gross profit........................... 36,619 33,154 26,030 3,465 7,124
Gross profit %......................... 12.1% 13.8% 20.1% -- --
S, G & A............................... $ 34,266 $ 30,418 $ 20,098 3,848 10,320
Operating profit....................... 2,353 2,736 5,932 (383) (3,196)
</TABLE>
---------------
(a) For the period January 1, 1994 through December 6, 1994.
On December 6, 1994, the Sports Subsidiaries were combined with Roadmaster
in exchange for approximately 19.2 million shares of Roadmaster Common Stock.
Actava consolidated the results of operations of the Sports Subsidiaries with
the results of operations of Actava for periods ending prior to December 6,
1994. See "Equity Investment in Roadmaster Industries, Inc." in Notes to
Consolidated Financial Statements.
The 25.5% increase in sales for the Sports Subsidiaries in 1994 primarily
represents sales from Diversified Products, which was acquired in June of 1993.
Sales from Diversified Products are included in 1993 sales during the period
from the acquisition date through December 31 and in 1994 sales during the
period from January 1 through December 6. Diversified Products also experienced
an increase in treadmill sales in 1994 due to increased consumer demand. The
1994 change is the result of a $68.1 million increase in sales from Diversified
Products and a $1.4 million increase in sales for Nelson/Weather-Rite as offset
by decreases of $3.7 million and $4.3 million for Hutch and Willow,
respectively. The 10.5% gross profit increase and 12.7%
20
<PAGE> 22
selling, general and administrative cost increase for 1994 are also attributable
to the effect of the mid-1993 acquisition date for Diversified Products.
The net effect on 1994 operating profit as compared to 1993 is a $383,000
decrease since the $3.5 million gross profit increase was offset by a $3.8
million increase in selling, general and administrative costs.
Sales for the Sports Subsidiaries increased by $111.2 million, or 85.7%,
for 1993 when compared to 1992. This increase is primarily due to the
acquisition of Diversified Products in June of 1993. In addition to the increase
resulting from the acquisition, sales increased for the other Sports
Subsidiaries during 1993.
Gross profit as a percent of sales decreased from 20.1% for 1992 to 13.8%
for 1993 but gross profit in dollars increased by $7.1 million, or 27.4%, from
$26 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 selling, general and administrative expense incurred by
Diversified Products 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 Diversified
Products, which recorded a loss for the six months ended December 31, 1993 due
to the cautious retail environment, excess manufacturing capacity and production
problems caused by late delivery of electronic components for treadmill
equipment.
Investment in Roadmaster Industries, Inc.
Equity income of $365,000 from the Company's investment in Roadmaster is
included in Actava's 1994 net income. This income represents Actava's
approximate 39% share of Roadmaster's net income during the period from December
6, 1994 through December 31, 1994. Roadmaster, through its operating
subsidiaries, is a manufacturer of bicycles, fitness equipment and toy products
in the United States.
Discontinued Operations
In 1988, Actava combined its photofinishing operations with the domestic
photofinishing operations of Kodak in a transaction accounted for as a purchase.
This combination created a new company, Qualex, which was jointly owned by
Actava and Kodak. Actava consolidated the results of operations of Qualex with
the results of operations of Actava for periods ending prior to June 30, 1994.
During the second quarter of 1994, Actava began accounting for its investment in
Qualex under the equity method. Also during the second quarter, Actava made a
decision to dispose of its interest in Qualex and began accounting for Qualex as
a discontinued operation. On August 12, 1994, Actava sold its investment in
Qualex to Kodak. Accordingly, the results of Qualex for all periods presented
are reported in the accompanying consolidated statements of operations as
discontinued operations. A loss of $37.9 million on the disposal of Qualex and a
loss of $2.8 million from the operations of Qualex prior to the decision to
dispose are reflected in Actava's net loss under discontinued operations. See
"Photofinishing Transaction and Discontinued Operation" in Notes to Consolidated
Financial Statements.
Financial Position
Actava's working capital was $155.4 million at December 31, 1994 as
compared to $94.9 million, excluding Qualex, at December 31, 1993. The increase
is primarily due to the receipt of cash and current notes receivable in the
amount of $146.5 million from the sale of Actava's interest in Qualex offset by
the reclassification of redeemable common stock as a current liability, the
reclassification of the 6% Senior Subordinated Swiss Franc Bonds as a current
liability, and the elimination of the positive working capital balance of the
Sports Subsidiaries as a result of the sale to Roadmaster. Cash and short-term
investments at Actava increased by $13.8 million in 1994 to $62.2 million at
December 31, 1994 from $48.4 million at the end of 1993. Actava had
approximately $45.2 million of available liquidity at December 31, 1994,
excluding $5 million of cash pledged to secure a Snapper credit line and $12
million of cash and short-term investments pledged to secure a letter of credit
relating to Actava's redeemable common stock. Current notes receivable increased
from $3.8 million at the end of 1993 to $135 million at the end of 1994,
primarily due to the note
21
<PAGE> 23
received from Kodak in connection with the sale of Actava's interest in Qualex
and the loans made by Actava to Metromedia Company ("Metromedia") as discussed
below.
On August 12, 1994, Actava sold its interest in Qualex to Kodak. As a
result of this sale, Actava received, on August 12, 1994, cash of $50 million
and a non-interest bearing note in the principal amount of $100 million. Actava
recorded a current note receivable of $92.8 million due to the non-interest
bearing nature of the note and will record the resulting imputed interest income
over the term of the note. Approximately $3.5 million of imputed interest income
was recorded during 1994. Actava received the first of two note payments of $50
million on February 13, 1995. The final note payment of $50 million is due on
August 11, 1995.
Actava has entered into a contract to sell a real estate investment near
Houston, Texas, which is known as Sienna Plantation. An investment group has
agreed to purchase the property from a partnership in which Actava has an
interest. The purchase is subject to several conditions. Actava is expected to
receive approximately $9 million in cash upon consummation of the transaction,
which is approximately equal to Actava's book value in this investment. The
transaction is expected to close on or before June 30, 1995.
For 1994, continuing operating activities provided $759,000 of cash flows
and discontinued operating activities used $2.8 million of cash. Cash flows of
$20.2 million and $11 million were provided by investing and financing
activities, respectively. For continuing operations, accounts receivable
increased by $8.6 million, inventories decreased by $13.9 million, prepaid
expenses increased by $2.7 million, and accounts payable and other similar items
increased by $3.2 million. Depreciation of $12.8 million and amortization of
$504,000 were included in determining cash flow used by continuing operations.
Investing activities provided $20.2 million of cash during 1994, including
the receipt of a $50 million payment from Kodak in connection with the sale of
Qualex, net sales of investments (maturities over 90 days) of $10.5 million,
collection on an advance to businesses sold of $10.5 million, and collections on
the loan to Triton of $3.8 million. These were offset by payments for property,
plant and equipment (net of disposals) of $20.5 million and by loans to
Metromedia of $32.4 million.
Financing activities provided $11 million during 1994, including net
payments under short-term bank agreements of $13.1 million, net borrowings of
$33.5 million under long-term debt agreements, payments of $3.8 million for
subordinated debt, payments of dividends by Qualex to Kodak of $10.5 million,
and $4.8 million received from the issuance of Actava Common Stock.
Long-term debt, including the current portion, decreased by $220.8 million
from $223.8 million at December 31, 1993 to $3 million at December 31, 1994,
primarily due to a decrease of $217.9 million resulting from the Company's sale
of Qualex.
Actava's subordinated debt, including the current portion, of $191 million
at December 31, 1994 reflects a decrease of $3.3 million from year-end 1993 due
to normal sinking fund payments made in 1994. Subordinated debt represents 98.5%
of Actava's total long-term debt, including the current portion. During December
1994, the Company reached an agreement to retire the entire outstanding balance
of $30.2 million plus accrued interest on its 6% Senior Subordinated Swiss Franc
Bonds in exchange for cash payments of $34.9 million. The Company recorded an
extraordinary loss of $1.6 million in 1994 related to this planned retirement.
These bonds were otherwise due to mature in 1996. In conjunction with the
retirement, the Company also unwound a currency swap agreement with a financial
institution which was initiated to eliminate exposure to changes in foreign
currency exchange rates for these bonds. On February 17, 1995, the Company
retired this debt.
Actava is subject to various contingent liabilities and commitments. These
include a floor plan agreement entered into by Snapper under which approximately
$29.5 million and $23 million was outstanding at December 31, 1994 and 1993,
respectively, various guaranties of debt totaling approximately $6 million,
various real estate leases with estimated future payments of approximately $3.4
million, and various pledges of cash and short-term investments. See "Contingent
Liabilities and Commitments" in Notes to Consolidated Financial Statements.
22
<PAGE> 24
Actava's manufacturing 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 1994
and are not expected to be material in future years. 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 $400,000 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. Actava may also be liable for remediation of
environmental damage relating to businesses previously sold in excess of amounts
accrued. In connection with the sale of the Sports Subsidiaries to Roadmaster,
the Company assumed environmental liabilities of approximately $1.9 million
relating to approximately 17 acres of real property formerly owned by
Diversified Products and located in Opelika, Alabama. See "Environmental
Protection" at Item 1. Business. It is management's opinion that cleanup costs
will not have a material effect on Actava's financial position or results of
operations.
On June 8, 1993, Actava acquired substantially all the assets of
Diversified Products for a net purchase price consisting of $11.6 million in
cash, the issuance of 1,090,909 shares of Actava Common Stock (the "Acquisition
Shares") valued at $12 million, and the assumption or payment of certain
liabilities including trade payables and a revolving credit facility. Actava
recorded redeemable common stock of $12 million for the issuance of the
Acquisition Shares. See "Acquisitions" and "Redeemable Common Stock" in Notes to
Consolidated Financial Statements. Actava also entered into an agreement
providing the holder of the Acquisition Shares (the "Holder") with the right to
receive additional payments depending upon the value of the Acquisition Shares
over a period of not longer than one year from the purchase date. The agreement
gave the Holder the right under certain circumstances, which have already
occurred, to require Actava to purchase the Acquisition Shares at a price equal
to $11.00 per share. On February 17, 1995, the Company purchased the Acquisition
Shares pursuant to this agreement for $12 million. The purchase of the
Acquisition Shares did not increase the cost recorded by Actava for Diversified
Products because the cost of Diversified Products was increased by the amount of
the cash payment and simultaneously reduced by the same amount due to a
corresponding adjustment to the redeemable common stock. The right of the Holder
to receive additional payments of cash became exercisable after June 8, 1994 and
would have expired if not exercised on or before August 7, 1994. On August 3,
1994, the Holder agreed to extend the exercise date to February 7, 1995 in
exchange for a $435,000 fee and an irrevocable letter of credit in the amount of
$12 million. The amount due under the letter of credit was paid to the Holder on
February 17, 1995 upon tender of the Acquisition Shares.
Actava and Metromedia entered into a Credit Agreement dated as of October
11, 1994 (the "Credit Agreement") under which Actava has made and will make
loans to Metromedia in an amount not to exceed $55 million. Under the terms of
the Credit Agreement, Metromedia used or will use the proceeds of the loans to
make advances to or pay obligations on behalf of Orion, MCEG Sterling, and MITI.
All loans made by Actava to Metromedia under the Credit Agreement are secured by
the shares of stock of Orion and MITI owned by Metromedia and its affiliates. In
addition, John W. Kluge, a general partner of Metromedia, has personally
guaranteed the loans. The Credit Agreement was contemplated by the letters of
intent relating to the Proposed Metromedia Transaction. The Credit Agreement,
however, is a separate transaction from the Proposed Metromedia Transaction,
which remains subject to a number of conditions, including due diligence, the
negotiation and execution of definitive agreements, the successful refinancing
of the currently outstanding Orion debt, approvals by the Boards of Directors
and stockholders of the parties involved in the transaction, and other customary
approvals and conditions. The Credit Agreement provides that interest will be
due on the principal amount of all loans made under the Credit Agreement at an
annual rate equal to the prime rate announced from time to time by Chemical
Bank. Interest will be increased to prime plus three percent per annum if a
party other than Actava terminates discussions relating to the Proposed
Metromedia Transaction. All loans under the Credit Agreement are due and payable
on April 12, 1995, but Metromedia has requested the Company to extend the loans
as long as the Proposed Metromedia Transaction is still pending. The Board of
Directors of the Company has not acted on this request. The outstanding balance
under the Credit Agreement was $32.4 million as of December 31, 1994 and $44.9
million as of March 15, 1995.
23
<PAGE> 25
In November 1991, Actava entered into a Loan Agreement with Triton, its
then 25% stockholder, under which Triton could borrow up to $32 million from
Actava secured by the stock in Actava owned by Triton (the "Triton Loan"). The
agreement relating to the Triton Loan was modified in June 1994, 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 the final maturity of the Triton
Loan in April 1997. In December 1993, Triton and Actava entered into a further
amendment to the agreement relating to the Triton Loan pursuant to which Triton
made a principal payment of $5 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 of December 31, 1994, the outstanding balance
under the Triton Loan was $23 million.
Actava has not paid a dividend to its stockholders since the dividend
declared for the fourth quarter of 1993.
Actava, excluding Snapper, had $38.5 million of unpledged cash and
short-term investments as of December 31, 1994 and $32.6 million of unpledged
cash and short-term investments as of March 15, 1995. The change in Actava's
unpledged cash and short-term investments from December 31, 1994 to March 15,
1995 is primarily due to the net effect of the collection of $50 million on the
Kodak note, collections of principal and interest of $1.9 million on the Triton
Loan, payments of $34.9 million for principal and interest in connection with
the retirement of Actava's 6% Senior Subordinated Swiss Franc Bonds, loans of
$12.5 million to Metromedia, and other debt related payments of $6.8 million.
The amount of unpledged cash and short-term investments referred to above at
March 15, 1995 excludes the amounts due to Actava from Kodak in connection with
the sale of Qualex and the amounts due to Actava from Metromedia under the
Credit Agreement.
Actava 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 and debt service. For 1995, Actava,
excluding Snapper, has debt service payments of approximately $10.3 million
scheduled after March 15, 1995.
During 1994, Actava received cash dividends from its subsidiaries of $13.3
million, including $2.8 million from the Sports Subsidiaries which were
subsequently combined with Roadmaster. Actava's Snapper Division is restricted
by financial covenants in its credit agreement from paying Actava more than 70%
of its net income.
Actava's Snapper Division had approximately $19 million of borrowing
capacity under a credit agreement which is secured by accounts receivable,
inventory and other assets as of December 31, 1994. 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; the assets potentially available as collateral total, in
the aggregate, $143.3 million. Snapper's credit agreement contains financial
covenants (involving tangible net worth, book net worth and other matters) with
which Actava must comply to prevent a default. A default under Snapper's credit
agreement would have serious adverse consequences, including the elimination of
funding for the operations of Snapper, as well as the prohibition on payments to
Actava by Snapper. As a result of the loss incurred by Actava in connection with
the sale of Qualex, Actava obtained financial covenant amendments from its
lenders so that Actava would remain in compliance with these covenants. Actava
was in compliance with these covenants as of December 31, 1994, and management
believes that Actava will remain in compliance with these covenants during the
term of Snapper's credit agreement.
On September 27, 1994, Actava announced that it had entered into an
agreement with NationsBank of Georgia, N.A. under which NationsBank would
provide up to $200 million in acquisition financing to Actava. If the Proposed
Metromedia Transaction is consummated, the agreement will extend to the
surviving
24
<PAGE> 26
corporation in the transaction. Advances for specific acquisitions will be
conditioned upon NationsBank's satisfaction with the general credit worthiness
of the borrower at that time, the structure and collateral being proposed, and
such other then existing matters as NationsBank deems appropriate. NationsBank
will have the right to include other financial institutions in any specific
financing. The specific terms of each financing will be subject to future
negotiation between Actava and NationsBank.
OTHER ITEMS
On April 19, 1994, John D. Phillips was elected President and Chief
Executive Officer of Actava. He was also elected to the Board of Directors of
Actava. Mr. Phillips succeeded Charles R. Scott, who had served as Actava's
President and Chief Executive Officer since 1991. In connection with the
election of Mr. Phillips, Renaissance Partners, an investment partnership in
which Mr. Phillips serves as a general partner, purchased from Actava 700,000
shares of Actava Common Stock for $4,462,500, representing a price of $6.375 per
share. Mr. Phillips also received an immediately vested option to purchase
300,000 shares of Actava Common Stock at a price of $6.375 per share. Actava has
entered into a Registration Rights Agreement with Renaissance Partners pursuant
to which Actava has agreed to register with the Securities and Exchange
Commission the 700,000 shares of Actava Common Stock purchased by Renaissance
Partners.
OTHER SEGMENT DATA
THE ACTAVA GROUP INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1994 1993 1992
------ -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
ASSETS
Lawn and garden................................................... $196.9 $ 224.2 $ 236.8
Sporting goods(1)................................................. 68.6 165.1 47.2
Corporate(2)...................................................... 228.3 111.4 146.1
------ -------- --------
Continuing businesses(3)........................................ 493.8 500.7 430.1
Discontinued operations........................................... -- 770.9 787.8
------ -------- --------
Total................................................... $493.8 $1,271.6 $1,217.9
====== ======= =======
DEPRECIATION AND AMORTIZATION
Lawn and garden................................................... $ 8.3 $ 8.9 $ 8.1
Sporting goods(1)................................................. 4.9 3.1 .4
Corporate(2)...................................................... .1 .1 .2
------ -------- --------
Continuing businesses(3)........................................ 13.3 12.1 8.7
Discontinued operations........................................... 28.4 58.3 50.3
------ -------- --------
Total................................................... $ 41.7 $ 70.4 $ 59.0
====== ======= =======
CAPITAL EXPENDITURES
Lawn and garden................................................... $ 5.9 $ 6.4 $ 13.0
Sporting goods(1)................................................. 2.7 .3 .2
Corporate(2)...................................................... .1 -- .1
------ -------- --------
Continuing businesses(3)........................................ 8.7 6.7 13.3
Discontinued operations........................................... 16.3 48.9 68.5
------ -------- --------
Total................................................... $ 25.0 $ 55.6 $ 81.8
====== ======= =======
</TABLE>
---------------
(1) The Sporting Goods segment includes Actava's four sporting goods companies
through December 6, 1994 and Actava's investment in Roadmaster.
25
<PAGE> 27
(2) Corporate assets consist primarily of short-term investments, land, notes
receivable and certain property and equipment.
(3) Restated to exclude discontinued operations.
Accounting Principle Developments
Actava 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
value with current recognition of unrealized gains and losses, and certain debt
and equity securities to be reported at market value with unrealized gains and
losses as a separate component of shareholders' equity. Actava adopted the
provisions of the new standard for investments held as of or acquired after
January 1, 1994. In accordance with the Statement, prior period financial
statements have not been restated to reflect the change in accounting principle.
The effect as of January 1, 1994, of adopting Statement 115 was not material.
See "Summary of Significant Accounting Policies -- Investments" in Notes to
Consolidated Financial Statements.
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
PART III
Incorporated by reference to the Proxy Statement for the Company's 1995
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, 1994 and 1993.................. F-4
Consolidated Statements of Operations for the years ended December 31, 1994,
1993 and 1992............................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1994,
1993 and 1992............................................................... F-6
Consolidated Statements of Stockholders' Equity for the years ended December
31, 1994, 1993 and 1992..................................................... F-7
Notes to Consolidated Financial Statements -- December 31, 1994............... F-8
Summary of Quarterly Earnings and Dividends................................... F-34
</TABLE>
26
<PAGE> 28
(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>
<S> <C>
Schedule VIII -- Valuation and Qualifying Accounts............................ S-2
</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.
(a)(3) Listing of Exhibits
<TABLE>
<CAPTION>
EXHIBITS INCORPORATED HEREIN BY REFERENCE
---------------------------------------------------------
DESIGNATION OF DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH
EXHIBIT IN THIS DESCRIPTION OF WAS PREVIOUSLY FILED EXHIBIT IN THAT
FORM 10-K EXHIBITS WITH COMMISSION DOCUMENT
---------------- ----------------------------------- ----------------------------------- --------------------
<S> <C> <C> <C>
2(a) Stock Purchase Agreement by and Current Report on Form 8-K filed on Exhibit 2(a)
among JCJ, Inc., Eastman Kodak August 25, 1994
Company and Actava dated August 12,
1994. Also filed as exhibits
thereto are: Exhibit
A -- Promissory Note; Exhibit
B -- Seller Release; and Exhibit
C -- Noncompetition Agreement. The
following is a list of omitted
schedules (or similar attachments)
which Actava as registrant agrees
to furnish supplementally to the
Commission upon request: Exhibit
D -- Certificate of Incorporation
of Qualex Inc.; Exhibit
E -- By-Laws of Qualex Inc.;
Exhibit F -- Buyer Release;
Schedule 1 -- Shares Owned by
Seller; Schedule
2.02 -- Capitalization of Qualex
Inc.; and Schedule 2.06 --
Agreements between Actava and
Qualex Inc.
2(b) Agreement and Plan of Quarterly Report on Form 10-Q for Exhibit 2
Reorganization dated as of July 20, the three months ended June 30,
1994 by and among, Actava, 1994
Diversified Products Corporation,
Hutch Sports USA Inc.,
Nelson/Weather-Rite, Inc., Willow
Hosiery Company, Inc. and
Roadmaster Industries, Inc.
3(a)(i) Restated Certificate of Annual Report on Form 10-K for the Exhibit 3(a)(i)
Incorporation of Actava year ended December 31, 1993
3(b)(i) Restated By-laws of Actava Annual Report on Form 10-K for the Exhibit 3(b)(i)
year ended December 31, 1993
4(a) Reference is made to Exhibit
3(a)(i)
4(b)(i) Indenture dated as of August 1, Application of Form T-3 for Exhibit T3C
1973, with respect to 9 1/2% Qualification of Indenture under
Subordinated Debentures due August the Trust Indenture Act of 1939
1, 1998, between Actava and (File No. 22-7615)
Chemical Bank, as Trustee
</TABLE>
27
<PAGE> 29
<TABLE>
<CAPTION>
EXHIBITS INCORPORATED HEREIN BY REFERENCE
---------------------------------------------------------
DESIGNATION OF DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH
EXHIBIT IN THIS DESCRIPTION OF WAS PREVIOUSLY FILED EXHIBIT IN THAT
FORM 10-K EXHIBITS WITH COMMISSION DOCUMENT
---------------- ----------------------------------- ----------------------------------- --------------------
<S> <C> <C> <C>
4(b)(ii) Agreement among Actava, Chemical Registration Statement on Form S-14 Exhibit 4(d)(ii)
Bank and Manufacturers Hanover (Registration No. 2-81094)
Trust Company, dated 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 for the Exhibit 4(d)(iii)
appointment and acceptance dated as year ended December 31, 1986
of June 9, 1986 among Actava,
Manufacturers Hanover Trust Company
and Irving Trust Company, with
respect to successor trusteeship of
the 9 1/2% Subordinated Debentures
due August 1, 1998
4(c)(i) Indenture dated as of March 15, Registration Statement on Form S-7 Exhibit 2(d)
1977, with respect to 9 7/8% Senior (Registration No. 2-58317)
Subordinated Debentures due March
15, 1997, between Actava and The
Chase Manhattan Bank, N.A., as
Trustee
4(c)(ii) Agreement among Actava, The Chase Registration Statement on Form S-14 Exhibit 4(e)(ii)
Manhattan Bank, N.A. and United (Registration No. 2-281094)
States Trust 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. 1 to Exhibit T3C
Industries, Inc. and First National Application on Form T-3 for
City Bank, dated October 1, 1974, Qualification of Indenture Under
for the 10% Subordinated The Trust Indenture Act of 1939
Debentures, due October 1, 1999 (File No. 22-8076)
4(d)(ii) Agreement National Industries, Registration Statement on Form S-14 Exhibit 4(f)(ii)
Inc., Actava, Citibank, N.A., and (Registration No. 2-81094)
Marine Midland Bank, dated as of
December 20, 1977, with respect to
successor trusteeship of the 10%
Subordinated Debentures due October
1, 1999
4(d)(iii) First Supplemental Indenture among Registration Statement on Form S-7 Exhibit 2(q)
Actava, National Industries, Inc. (Registration No. 2-60566)
and Marine 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 dated Annual Report on Form 10-K for the Exhibit 4(h)
February 19, 1986, with respect to year ended December 31, 1985
6% Senior Subordinated Swiss Franc
Bonds due March 6, 1996, among
Actava, Soditic S.A. and certain
other institutions named therein
</TABLE>
28
<PAGE> 30
<TABLE>
<CAPTION>
EXHIBITS INCORPORATED HEREIN BY REFERENCE
---------------------------------------------------------
DESIGNATION OF DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH
EXHIBIT IN THIS DESCRIPTION OF WAS PREVIOUSLY FILED EXHIBIT IN THAT
FORM 10-K EXHIBITS WITH COMMISSION DOCUMENT
---------------- ----------------------------------- ----------------------------------- --------------------
<S> <C> <C> <C>
4(f) Indenture dated as of August 1, Annual Report on Form 10-K for the Exhibit 4(i)
1987 with respect to 6 1/2% year ended December 31, 1987
Convertible Subordinated Debentures
due August 4, 2002, between Actava
and Chemical Bank, as Trustee
4(g)(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 and ITT Commercial
Finance Corp.
4(g)(ii) Amendment, dated as of September
27, 1993, to Finance and Security
Agreement, dated as of October 30,
1992, with respect a revolving
credit facility of up to $100
million, between Actava and ITT
Commercial Finance Corp.
4(g)(iii) 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 and ITT
Commercial Finance Corp.
4(g)(iv) Amendment dated as of April 15,
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 and ITT
Commercial Finance Corp.
4(g)(v) Amendment dated as of September 23,
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 and ITT
Commercial Finance Corp.
4(h) Agreement between NationsBank and Quarterly Report on Form 10-Q for Exhibit 4.1
Actava dated as of September 26, the quarter ended September 30,
1994, with respect to a $200 1994
million line of credit for the
financing of future acquisitions by
Actava.
10(a)(i) 1982 Stock Option Plan of Actava Proxy Statement dated March 31, Exhibit A
1982
10(a)(ii) 1989 Stock Option Plan of Actava Proxy Statement dated March 31, Exhibit A
1989
10(a)(iii) 1969 Restricted Stock Plan of Annual Report on Form 10-K for the Exhibit 10(a)(iii)
Actava year ended December 31, 1990
10(a)(iv) 1991 Non-Employee Director Stock Annual Report on Form 10-K for the Exhibit 10(a)(iv)
Option Plan year ended December 31, 1991
10(a)(v) Amendment to 1991 Non-Employee Annual Report on Form 10-K for the Exhibit 10(a)(v)
Director Stock Option Plan year ended December 31, 1992
10(b) Snapper Power Equipment Profit Annual Report on Form 10-K for the Exhibit 10(c)
Sharing Plan year ended December 31, 1987
</TABLE>
29
<PAGE> 31
<TABLE>
<CAPTION>
EXHIBITS INCORPORATED HEREIN BY REFERENCE
---------------------------------------------------------
DESIGNATION OF DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH
EXHIBIT IN THIS DESCRIPTION OF WAS PREVIOUSLY FILED EXHIBIT IN THAT
FORM 10-K EXHIBITS WITH COMMISSION DOCUMENT
---------------- ----------------------------------- ----------------------------------- --------------------
<S> <C> <C> <C>
10(c)(i) Retirement Plan executed November Annual Report on Form 10-K for the Exhibit 10(h)(i)
1, 1990 as amended to be effective year ended December 31, 1990
January 1, 1989
10(c)(ii) Supplemental Retirement Plan of Annual Report on Form 10-K for the Exhibit 10(j)
Actava year ended December 31, 1983
10(c)(iii) Supplemental Executive Medical Annual Report on Form 10-K for the Exhibit 10(h)(iii)
Reimbursement Plan year ended December 31, 1990
10(c)(iv) Amendment to Supplemental Annual Report on Form 10-K for the Exhibit 10(h)(iv)
Retirement Plan of Actava effective year ended December 31, 1991
April 1, 1992
10(d) Stockholder Agreement dated as of Quarterly Report on Form 10-Q for Exhibit 3
May 22, 1989 by and between Actava the three months ended June 30,
and Triton Group Ltd. 1989
10(d)(ii) Loan Agreement dated November 27, Annual Report on Form 10-K for the Exhibit 10(j)(ii)
1991 between Actava and Triton year ended December 31, 1991
Group Ltd.
10(e)(i) Form of Post-Employment Consulting Annual Report on Form 10-K for the Exhibit 10(k)
Agreement between officers of year ended December 31, 1991
Actava and Actava
10(e)(ii) Form of First Amendment to Post- Annual Report on Form 10-K for the Exhibit 10(k)(ii)
Employment Consulting Agreement year ended December 31, 1993
between officers of Actava and
Actava
10(f) 1992 Officer and Director Stock Annual Report on Form 10-K for the Exhibit 10(l)
Purchase Plan year ended December 31, 1991
10(g) Form of Restricted Purchase Annual Report on Form 10-K for the Exhibit 10(n)
Agreement between certain officers year ended December 31, 1991
of Actava and Actava
10(h) Agreement between Actava and J.B. Annual Report on Form 10-K for the Exhibit 10(q)
Fuqua regarding sale by Actava of year ended December 31, 1992
rights in the name "Actava".
10(i) Amended and Restated Loan Agreement Quarterly Report on Form 10-Q for Exhibit 19
between Actava and Triton Group the three months ended June 30,
Ltd. dated June 25, 1993 1993
10(j) First Amendment, dated August 19, Quarterly Report on Form 10-Q for Exhibit 19
1993 to Amended and Restated Loan the three months ended September
Agreement between Actava and Triton 30, 1993
Group Ltd. dated June 5, 1993
10(k) Second Amendment, dated December 7, Annual Report on Form 10-K for the Exhibit 10(t)
1993 to Amended and Restated Loan year ended December 31, 1993
Agreement between Actava and Triton
Group Ltd. dated June 25, 1993
10(l) Form of Idemnification Agreement Annual Report on Form 10-K for the Exhibit 10(u)
between Actava and each of its year ended December 31, 1993
directors and executive officers
10(m)(i) Employment Agreement between Actava Current Report on Form 8-K dated Exhibit 99(a)
and John D. Phillips dated April April 19, 1994
19, 1994
10(m)(ii) Option Agreement between Actava and Current Report on Form 8-K dated Exhibit 99(b)
John D. Phillips dated April 19, April 19, 1994
1994
10(m)(iii) Registration Rights Agreement among Current Report on Form 8-K dated Exhibit 99(c)
Actava, Renaissance Partners and April 19, 1994
John D. Phillips dated April 19,
1994
</TABLE>
30
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBITS INCORPORATED HEREIN BY REFERENCE
---------------------------------------------------------
DESIGNATION OF DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH
EXHIBIT IN THIS DESCRIPTION OF WAS PREVIOUSLY FILED EXHIBIT IN THAT
FORM 10-K EXHIBITS WITH COMMISSION DOCUMENT
---------------- ----------------------------------- ----------------------------------- --------------------
<S> <C> <C> <C>
10(n)(i) Shareholder Rights Agreement Current Report on Form 8-K dated Exhibit 2(c)
between Actava and Westinghouse June 8, 1993
Electric Corporation dated June 8,
1993
10(n)(ii) Amendment dated August 17, 1994 to Current Report on Form 8-K dated Exhibit 99
Shareholder Rights Agreement August 12, 1994
between Actava and Westinghouse
Electric Corporation dated June 8,
1993
10(o)(i) Letter of Intent regarding a Current Report on Form 8-K dated Exhibit 99(a)
contemplated business combination August 31, 1994
by and among Actava, Metromedia
International, Inc. and
International Telcell, Inc. dated
August 31, 1994
10(o)(ii) Letter of Intent regarding a Current Report on Form 8-K dated Exhibit 99(b)
contemplated business combination August 31, 1994
by and among Actava and Orion
Pictures Corporation dated as of
August 31, 1994
10(o)(iii) Letter of Intent regarding a Current Report on Form 8-K dated Exhibit 99(c)
contemplated business combination August 31, 1994
by and among Orion Pictures
Corporation, MCEG Sterling
Incorporated and Actava dated as of
August 31, 1994
10(p)(i) Credit Agreement dated as of Current Report on Form 8-K dated Exhibit 10(a)
October 11, 1994 by and between October 11, 1994
Actava and Metromedia Company with
respect to a revolving credit
facility of up to $55 million. The
following exhibits are omitted:
Exhibit A -- Form of Note; Exhibit
B -- Form of Pledge Agreement;
Exhibit C -- Form of Guaranty; and
Exhibit D -- Form of Opinion of
Paul, Weiss, Rifkind, Wharton and
Garrison. Registrant agrees to
furnish copies of such exhibits
upon request.
10(p)(ii) Revolving Credit Note dated as of Current Report on Form 8-K dated Exhibit 10(b)
October 11, 1994 with respect to a October 11, 1994
revolving credit facility of up to
$55 million between Actava and
Metromedia Company
10(p)(iii) Pledge Agreement dated as of Current Report on Form 8-K dated Exhibit 10(c)
October 11, 1994 by and between October 11, 1994
Metromedia Company; Met Telcell,
Inc.; Met International, Inc.; John
W. Kluge; Anita H. Subotnick and
Stuart Subotnick, as joint tenants,
and Actava with respect to a
revolving credit facility of up to
$55 million
10(p)(iv) Guaranty dated as of October 11, Current Report on Form 8-K dated Exhibit 10(d)
1994 by John W. Kluge in favor of October 11, 1994
Actava with respect to a revolving
credit facility of up to $55
million
10(q) Employment Agreement dated July 19, Quarterly Report on Form 10-Q for Exhibit 10
1994 between Actava and Charles R. the quarter ended June 30, 1994
Scott
</TABLE>
31
<PAGE> 33
<TABLE>
<CAPTION>
EXHIBITS INCORPORATED HEREIN BY REFERENCE
---------------------------------------------------------
DESIGNATION OF DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH
EXHIBIT IN THIS DESCRIPTION OF WAS PREVIOUSLY FILED EXHIBIT IN THAT
FORM 10-K EXHIBITS WITH COMMISSION DOCUMENT
---------------- ----------------------------------- ----------------------------------- --------------------
<S> <C> <C> <C>
10(r)(i) Shareholders Agreement dated as of
December 6, 1994 among Actava,
Roadmaster, Henry Fong and Edward
Shake
10(r)(ii) Registration Rights Agreement dated
as of December 6, 1994 between
Actava and Roadmaster
10(r)(iii) Environmental Indemnity Agreement
dated as of December 6, 1994
between Actava and Roadmaster
10(s) Lease Agreement dated October 21,
1994 between JDP Aircraft II, Inc.
and Actava
11 Statement of computation of
earnings per share
18 Letter regarding change in Annual Report on Form 10-K for the Exhibit 18
accounting principle for the costs year ended December 31, 1992
associated with proof advertising
program
21 Subsidiaries of Actava
23 Consent of Ernst & Young
24 Powers-of-Attorney
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K filed in the fourth quarter of 1994:
Three Current Reports on Form 8-K and three amendments on Form 8-K/A were
filed during the fourth quarter of 1994:
(i) On October 7, 1994, a Form 8-K/A was filed to amend the report
filed on June 22, 1993 to provide additional information in the pro forma
financial statement regarding the Company's acquisition of Diversified
Products.
(ii) On October 7, 1994, a Form 8-K/A was filed to amend the report
filed on August 25, 1994 to provide additional information in the pro forma
financial statements for the sale of Qualex.
(iii) On October 21, 1994, a Form 8-K was filed to report that on
October 11, 1994 Actava entered into a credit agreement with Metromedia
Company under which Actava will make loans to Metromedia in an amount not
to exceed $55 million.
(iv) On October 31, 1994, a Form 8-K was filed to provide restated
historical consolidated statements of operation and cash flow reflecting
Qualex as a discontinued operation.
(v) On November 4, 1994, a Form 8-K/A was filed to amend the report
filed on October 31, 1994 by providing revised restated historical
financial statements for the same periods covered by the previous report.
(vi) On December 21, 1994, a Form 8-K was filed to report that on
December 6, 1994 Actava transferred ownership of its four sporting goods
subsidiaries to Roadmaster Industries, Inc. in exchange for 19,169,000
shares of Roadmaster's Common Stock.
(c) The response to this portion of Item 14 is submitted as a separate
section of this report.
(d) The response to this portion of Item 14 is submitted as a separate
section of this report.
32
<PAGE> 34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
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 30, 1995
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 and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------------------------------------------- ------------------------------- ---------------
<C> <S> <C>
/s/ JOHN D. PHILLIPS President and Chief Executive March 30, 1995
--------------------------------------------- Officer and Director
John D. Phillips (Principal Executive Officer)
/s/ FREDERICK B. BEILSTEIN, III Senior Vice President -- Chief March 30, 1995
--------------------------------------------- Financial Officer (Principal
Frederick B. Beilstein, III Financial and Accounting
Officer)
/s/ JOHN E. ADERHOLD Director March 30, 1995
---------------------------------------------
John E. Aderhold
/s/ MICHAEL E. CAHR Director March 30, 1995
---------------------------------------------
Michael E. Cahr
/s/ J.M. DARDEN III Director March 30, 1995
---------------------------------------------
J.M. Darden III
/s/ JOHN P. IMLAY, JR. Director March 30, 1995
---------------------------------------------
John P. Imlay, Jr.
/s/ CLARK A. JOHNSON Director March 30, 1995
---------------------------------------------
Clark A. Johnson
/s/ ANTHONY F. KOPP Director March 30, 1995
---------------------------------------------
Anthony F. Kopp
/s/ RICHARD NEVINS Director March 30, 1995
---------------------------------------------
Richard Nevins
/s/ CARL E. SANDERS Director March 30, 1995
---------------------------------------------
Carl E. Sanders
</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, 1994
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, 1994 and 1993
Consolidated statements of operations -- Years ended December 31,
1994, 1993 and 1992
Consolidated statements of cash flows -- Years ended December 31,
1994, 1993 and 1992
Consolidated statements of stockholders' equity -- Years ended
December 31, 1994, 1993 and 1992
Notes to consolidated financial statements -- December 31, 1994
The following consolidated financial statement schedule of The Actava Group
Inc. and subsidiaries is included in Item 14(d):
Schedule VIII -- Valuation and qualifying accounts
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, 1994 and 1993, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1994. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule 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, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents 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 postretirement benefits, and in 1992
Actava changed its method of accounting for the cost of its proof advertising
program.
ERNST & YOUNG LLP
Atlanta, Georgia
March 10, 1995
F-3
<PAGE> 38
THE ACTAVA GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1993
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents......................................... $ 47,916 $ 18,770
Short-term investments............................................ 14,321 29,635
Receivables (less allowance for doubtful accounts of $6,851 in
1994 and $10,227 in 1993)...................................... 132,948 276,018
Note receivable from Eastman Kodak Co. (less allowance for
unearned discount of $3,635 in 1994)........................... 96,365 --
Note receivable from Metromedia Company........................... 32,395 --
Current portion of note receivable from Triton Group Ltd. ........ 6,250 3,750
Inventories....................................................... 13,403 108,439
Prepaid expenses and other assets................................. 7,384 43,809
Income tax benefits............................................... 6,911 28,894
--------- ----------
Total current assets...................................... 357,893 509,315
Investment in Roadmaster Industries, Inc............................ 68,617 --
Property, plant and equipment
Land.............................................................. 1,471 8,303
Buildings and improvements........................................ 11,802 72,289
Machinery and equipment........................................... 61,629 393,643
--------- ----------
74,902 474,235
Less allowances for depreciation.................................. (40,005) (198,881)
--------- ----------
Total property, plant and equipment....................... 34,897 275,354
Note receivable from Triton Group Ltd., less current portion........ 16,726 22,976
Other assets (less allowance for doubtful notes and accounts of
$3,988 in 1993)................................................... 15,013 50,702
Long-term investments............................................... -- 26,611
Intangibles (less accumulated amortization of $88,281 in 1993)...... 633 386,626
--------- ----------
Total assets.............................................. $ 493,779 $1,271,584
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable.................................................. $ 8,397 $ 86,163
Accrued expenses and other current liabilities.................... 83,256 186,515
Notes payable..................................................... 64,573 135,114
Current portion of long-term debt................................. 417 2,915
Current portion of subordinated debt.............................. 33,827 3,750
Redeemable common stock........................................... 12,000 --
--------- ----------
Total current liabilities................................. 202,470 414,457
Deferred income taxes............................................... 6,911 44,380
Long-term debt...................................................... 2,547 220,887
Subordinated debt................................................... 157,193 190,551
Minority interest in photofinishing subsidiary...................... -- 205,395
Redeemable common stock............................................. -- 12,000
Stockholders' equity
Common stock (22,767,485 shares in 1994 and 22,767,744 in 1993)... 22,768 22,768
Additional capital................................................ 35,482 46,362
Retained earnings................................................. 173,639 236,333
Less treasury stock -- at cost (5,490,327 shares in 1994 and
6,223,467 shares in 1993)...................................... (107,231) (121,549)
--------- ----------
Total stockholders' equity................................ 124,658 183,914
--------- ----------
Total liabilities and stockholders' equity................ $ 493,779 $1,271,584
========= =========
</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
1994 (RESTATED) (RESTATED)
-------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Net sales...................................................... $551,828 $465,812 $377,890
Costs, expenses and other costs of products sold............... 461,175 401,471 283,635
Selling, general and administrative............................ 86,470 85,179 74,946
Interest expense............................................... 28,434 26,811 20,811
Provision for doubtful accounts................................ 3,204 4,661 2,941
Income from equity investment in Roadmaster Industries,
Inc. ........................................................ (365) -- --
Other (income) expense -- net.................................. (4,934) 1,706 (4,651)
Provision for plant closure costs.............................. -- (865) (1,132)
Provision for employee agreements and related costs............ 1,300 -- --
-------- ---------- ----------
Total costs, expenses and other...................... 575,284 518,963 376,550
Income (loss) before income taxes, discontinued operations,
extraordinary loss and cumulative effect of changes in
accounting principles........................................ (23,456) (53,151) 1,340
Income tax expense (benefit)................................... -- (1,435) 1,662
-------- ---------- ----------
Loss from continuing operations................................ (23,456) (51,716) (322)
Income (loss) from discontinued operations..................... (40,693) 8,526 10,887
-------- ---------- ----------
Income (loss) before extraordinary loss and cumulative effect
of changes in accounting principles.......................... (64,149) (43,190) 10,565
Extraordinary loss related to Swiss Franc Bonds................ (1,601) -- --
-------- ---------- ----------
Income (loss) before cumulative effect of changes in accounting
principles................................................... (65,750) (43,190) 10,565
Cumulative effect of changes in accounting principles.......... -- (4,404) 1,034
-------- ---------- ----------
Net income (loss).............................................. $(65,750) $(47,594) $ 11,599
======== ======== ========
Earnings (loss) per share of common stock
Primary
Continuing operations........................................ $ (1.29) $ (3.01) $ (.02)
Discontinued operations...................................... (2.24) .49 .66
Extraordinary loss........................................... (.09) -- --
Cumulative effect of changes in accounting principles........ -- (.25) .06
-------- ---------- ----------
Net income (loss).............................................. $ (3.62) $ (2.77) $ .70
======== ======== ========
Pro forma effect assuming the changes in accounting principles
are applied retroactively:
Net income (loss).............................................. $(65,750) $(43,190) $ 10,565
======== ======== ========
Net income (loss) per share.................................... $ (3.62) $ (2.52) $ .64
======== ======== ========
</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
1994 (RESTATED) (RESTATED)
--------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss from continuing operations.......................... $ (23,456) $(56,120) $ (322)
Less: Cumulative effect of change in accounting
principle............................................... -- (4,404) --
--------- ---------- ----------
Loss before cumulative effect of change in accounting
principle and extraordinary item........................ (23,456) (51,716) (322)
Less: Items providing (using) cash from continuing
operating activities.................................... 24,215 (16,082) (44,181)
--------- ---------- ----------
Net cash provided by (used in) continuing operations....... 759 (67,798) (44,503)
--------- ---------- ----------
Income (loss) from discontinued operations................... (40,693) 8,526 11,921
Less: Cumulative effect of change in accounting
principle............................................... -- -- 1,034
--------- ---------- ----------
Income before cumulative effect of change in accounting
principle............................................... (40,693) 8,526 10,887
Less: Items providing cash from discontinued operations.... 37,862 46,325 57,895
--------- ---------- ----------
Net cash provided by (used in) discontinued operations..... (2,831) 54,851 68,782
--------- ---------- ----------
Net cash provided by (used in) all operations.............. (2,072) (12,947) 24,279
Cash Flows from Investing Activities:
Repayment of advance to businesses sold.................... 10,502 -- --
Purchases of investments (maturities over 90 days)......... (52,584) (99,510) (99,198)
Sales of investments (maturities over 90 days)............. 63,036 111,851 107,932
Net sales of other investments............................. 4,862 21,866 6,143
Purchase of long-term investments.......................... -- -- (24,719)
Payments for property, plant and equipment................. (25,022) (55,554) (81,800)
Proceeds from disposals of property, plant and equipment... 4,551 16,024 10,230
Proceeds from the sale of businesses....................... 50,000 -- --
Payments for purchases of businesses net of cash
required................................................ -- (9,415) (30,560)
Loans to Triton Group Ltd. ................................ 3,750 5,000 (1,426)
Loans to Metromedia Company................................ (32,395) -- --
Other investing activities -- net.......................... (6,515) (15,221) (3,604)
--------- ---------- ----------
Net cash provided by (used in) investing activities........ 20,185 (24,959) (117,002)
--------- ---------- ----------
Cash Flows from Financing Activities:
Net borrowings (payments) under short-term bank
agreements.............................................. (13,076) 52,284 51,107
Borrowings under long-term debt agreements................. 228,579 21,503 817,000
Payments on long-term debt agreements...................... (195,046) (21,192) (771,136)
Payments of subordinated debt.............................. (3,750) (1,847) (200)
Proceeds from issuance of Actava common stock.............. 4,776 -- --
Cash dividends paid by Qualex to minority interest......... (10,450) (8,614) (3,886)
Cash dividends paid by Actava.............................. -- (6,250) (5,956)
--------- ---------- ----------
Net cash provided by financing activities.................. 11,033 35,884 86,929
--------- ---------- ----------
Increase (decrease) in cash and cash equivalents........ 29,146 (2,022) (5,794)
Cash and cash equivalents at beginning of year............... 18,770 20,792 26,586
--------- ---------- ----------
Cash and cash equivalents at end of year................ $ 47,916 $ 18,770 $ 20,792
========= ======== =========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE> 41
THE ACTAVA GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
---------------- ADDITIONAL RETAINED -------------------
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT TOTAL
------ ------- ---------- -------- ------ --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance -- January 1, 1992............ 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 loss for the year............... (47,594) (47,594)
Cash dividends on Common Stock, $.36
per share......................... (6,250) (6,250)
Other, principally foreign currency
translation adjustment............ (2,089) (2,089)
------ ------- ---------- -------- ------ --------- --------
Balance -- December 31, 1993.......... 22,768 22,768 46,362 236,333 6,223 (121,549) 183,914
Net loss for the year............... (65,750) (65,750)
Common Stock issued................. (9,542) (733) 14,318 4,776
Net unrealized loss on
available-for-sale securities..... (609) (609)
Other, principally foreign currency
translation adjustment............ (1,338) 3,665 2,327
------ ------- ---------- -------- ------ --------- --------
Balance -- December 31, 1994.......... 22,768 $22,768 $ 35,482 $173,639 5,490 $(107,231) $124,658
====== ======== ======== ========= ===== ========== =========
</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. The equity method of accounting is used when
the Company has a 20% to 50% interest in other companies. Under the equity
method, original investments are recorded at cost and adjusted by the Company's
share of undistributed earnings or losses of these companies. All significant
intercompany transactions and accounts have been eliminated in consolidation.
Investments
The Company and its subsidiaries invest in various debt and equity
securities. In May, 1993, the Financial Accounting Standards Board 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 stockholders' equity. The
Company adopted the provisions of the new standard for investments held as of or
acquired after January 1, 1994. In accordance with the Statement, prior period
financial statements have not been restated to reflect the change in accounting
principle. The cumulative effect of adopting Statement 115 as of January 1, 1994
was not material.
Management determines the appropriate classification of investments as
held-to-maturity or available-for-sale at the time of purchase and reevaluates
such designation as of each balance sheet date. The Company has classified all
investments as available-for-sale. Available-for-sale securities are carried at
fair value, with the unrealized gains and losses, net of tax, reported in
stockholders' equity. The amortized cost of debt securities in this category is
adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization is included in investment income. Realized gains and losses
and declines in value judged to be other-than-temporary on available-for-sale
securities are included in investment income. The cost of securities sold is
based on the specific identification method. Interest and dividends on
securities classified as available-for-sale are included in investment 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.
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 was placed by the customer. Under the proof advertising program,
Qualex reimbursed 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 believed that this new method was
preferable because it recognized advertising expense as it was incurred rather
than at the time of the initial sale to the customer. The 1992 adjustment of
$1,034,000 was included in the cumulative effect of change in accounting
principle for 1992 to apply retroactively the new method. 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.
Production advertising costs are expensed in the period incurred. The costs
of communicating advertising are expensed at the time of communication. Amounts
paid in advance for communicating advertising are reported as prepaid expenses.
Total advertising expense was $15,178,000, $12,624,000 and $16,120,000 for
F-8
<PAGE> 43
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1994, 1993 and 1992, respectively. Total prepaid advertising was $4,751,000 at
December 31, 1994. There were no prepaid advertising costs at December 31, 1993.
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 assets
of businesses acquired and also included customer lists and covenants not to
compete in prior years. 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, unless acquired prior to November 1, 1970.
Amounts relating to customer lists and covenants not to compete were 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. Management evaluates intangible assets on the basis of the
operations of the particular entity to which the intangible relates to determine
whether any changes in the nature and expected benefits to be derived from the
intangible have occurred which would require an adjustment to its recorded
value. In the event management believes that the recorded value of the
intangible is greater than its actual value, the Company will write-down the
value of the intangible. In conjunction with the evaluation of any possible
impairment of its intangibles, the Company also similarly assesses whether a
change in the life of the intangible is required for amortization purposes.
Intangible assets are summarized as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1993
---- --------
<S> <C> <C>
Excess of purchase price over net assets of businesses acquired... $633 $349,546
Customer lists.................................................... -- 29,847
Covenants not to compete.......................................... -- 7,233
---- --------
$633 $386,626
==== ========
</TABLE>
Income Taxes
Income taxes are provided for all taxable items in the statements 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. 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.
F-9
<PAGE> 44
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As permitted by Statement 109, the Company elected not to restate the
financial statements of any prior years. The cumulative effect of the change in
accounting principle on pre-tax income from continuing operations, net income
and financial position was not material.
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 are recognized when the products are shipped to customers.
Index Protection Agreements
The Company used index protection agreements to hedge interest rate risk
associated with Qualex's borrowings and to hedge the risk of market price
fluctuations of commodities bought and sold in the normal course of business.
These contracts were accounted for as hedges and any gains or losses were
deferred and included in the basis of the underlying transactions. Cash flows
from the contracts were accounted for in the same categories as the cash flows
from the items being hedged. As of December 31, 1994, the Company did not have
any index protection agreements due to the sale of Qualex. See "Photofinishing
Transaction and Discontinued Operation."
During 1993, Qualex entered into a hedge agreement with a bank which was to
expire in 1996 related to Qualex's $200,000,000 of Senior Notes. The hedge
agreement included a Basic Transaction for a notional amount of $100,000,000
under which Qualex paid an interest rate based on the three-month London
Interbank Offered Rate (LIBOR) and received a fixed interest rate of 4.0587%
quarterly, and an Enhancement Transaction for a notional amount of $163,000,000
under which Qualex paid an interest rate based on the three-month LIBOR and
received a variable interest rate based on the prime rate less 2.49%. A net
settlement was calculated and paid on a quarterly basis. At December 31, 1993,
termination of this rate swap agreement would have required a cash payment by
Qualex of $1,158,000 based on market quotes.
Qualex had also entered into combined put/call agreements which provided
protection for silver recoveries from photofinishing processes. The outstanding
contracts at December 31, 1993 covered the sale of 2,900,000 troy ounces of
silver at index amounts of $3.85 to $4.67 per ounce in 1994 and 1,420,000 troy
ounces per year at index amounts of $4.23 to $5.10 per ounce from 1995 to 2005.
In 1997, Qualex had the sale of 4,300,000 troy ounces covered by such agreements
at an index amount of $5.15 per ounce. During 1993 and 1992, gain amortization
related to these contracts totaled $2,445,000 and $1,232,000, net of tax, and is
included in income from discontinued operations. At December 31, 1993 and 1992,
respectively, $7,442,000 and $11,476,000 of these gains were recorded as
deferred income. At December 31, 1993, termination of the combined put/call
agreements would have required cash payments by Qualex of $18,688,000 based on
market quotes.
F-10
<PAGE> 45
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Hedging Instruments
At December 31, 1994, the Company had entered into several forward exchange
contracts in the aggregate notional amount of $8,000,000 to effectively hedge
amounts due from foreign subsidiaries. The contracts are accounted for as hedges
and any gains or losses are deferred and included in the basis of the underlying
transaction. The contracts matured or will mature on various dates in 1995.
Termination of these forward exchange contracts at December 31, 1994 would
require the Company to make cash payments of $39,000, based on quoted market
prices of comparable contracts or current settlement values.
Research and Development Costs
Research and development expenditures are expensed when incurred. During
1994, 1993 and 1992 the Company expensed $5,972,000, $4,407,000 and $4,262,000,
respectively.
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.
Accrued Warranty
The Company provides an accrual for estimated future warranty costs related
to various product coverage programs, based on the historical relationship of
actual costs as a percentage of sales. 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.
Reclassifications
Certain reclassifications were made in prior years' financial statements to
conform to current presentations.
F-11
<PAGE> 46
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 (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1993 1992
1994 (RESTATED) (RESTATED)
-------- ---------- ----------
<S> <C> <C> <C>
Items providing (not providing) cash from continuing
operations:
Income from equity investment in Roadmaster
Industries, Inc. ................................. $ (365) $ -- $ --
Depreciation......................................... 12,832 11,472 8,638
Amortization......................................... 504 631 108
Provision for doubtful accounts...................... 3,204 4,661 2,941
Provision for plant closure costs.................... -- (865) (1,132)
Changes in operating assets and liabilities, net of
effects from purchases and dispositions:
Accounts receivable.................................. (8,607) (34,319) (45,283)
Inventories.......................................... 13,908 (17,529) (7,259)
Prepaid expenses and other assets.................... (2,742) 1,591 (1,616)
Accounts payable, accrued expenses and other current
liabilities....................................... 3,230 17,814 (14,350)
Current and deferred taxes........................... 574 88 14,790
Other operating activities -- net.................... 1,677 374 (1,018)
-------- ---------- ----------
Net items providing (using) cash from continuing
operations........................................... $ 24,215 $(16,082) $(44,181)
======== ======== ========
Items providing (not providing) cash from discontinued
operations:
Minority interest.................................... $ (2,835) $ 8,526 $ 11,922
Loss on disposal..................................... 37,858 -- --
Depreciation......................................... 16,780 33,193 26,392
Amortization......................................... 11,633 25,149 23,898
Provision for doubtful accounts...................... 1,263 2,601 478
Provision for plant closure costs.................... 930 4,096 --
Changes in operation of assets and liabilities, net of
effects from purchases and dispositions of
discontinued operations:
Accounts receivable.................................. (14,443) 3,654 19,819
Inventories.......................................... 1,303 (13,906) 2,496
Prepaid expenses and other assets.................... 3,552 (15,503) (22,005)
Accounts payable, accrued expenses and other current
liabilities....................................... (7,723) (17,515) (6,647)
Current and deferred taxes........................... (10,456) 16,030 1,542
-------- ---------- ----------
Net items providing cash from discontinued
operations........................................... $ 37,862 $ 46,325 $ 57,895
======== ======== ========
Net assets of business sold:
Total assets......................................... $770,901 $ -- $ --
Total liabilities.................................... 398,973 -- --
-------- ---------- ----------
Net assets........................................... $371,928 $ -- $ --
======== ======== ========
</TABLE>
F-12
<PAGE> 47
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1993 1992
1994 (RESTATED) (RESTATED)
-------- ---------- ----------
<S> <C> <C> <C>
Net assets of businesses purchased:
Total assets......................................... $ -- $ 71,693 $ 58,040
Total liabilities.................................... -- 48,063 27,448
-------- ---------- ----------
Net assets........................................... $ -- $ 23,630 $ 30,592
======== ======== ========
Interest paid........................................ $ 34,729 $ 44,570 $ 27,279
Income taxes paid.................................... $ 393 $ 11,406 $ 3,334
</TABLE>
PHOTOFINISHING TRANSACTION AND DISCONTINUED OPERATION
Qualex, Inc. is a photofinishing business formed in March 1988 by the
combination of Actava's photofinishing operations with the domestic
photofinishing operations of Eastman Kodak Company. Prior to June 30, 1994,
Actava owned 51% of the voting stock of Qualex, was entitled to and elected a
majority of the members of the Board of Directors of Qualex, and had the ability
through its control of the Board of Directors to declare dividends, remove the
executive officers of Qualex and otherwise direct the management and policies of
Qualex, except for policies relating to certain designated actions requiring the
consent of at least one member of the Board of Directors of Qualex designated by
Kodak. Because of these rights, the Company believes that it had effective
unilateral control of Qualex which was not temporary during the period from 1988
until the second quarter of 1994. As a result, the Company consolidated the
results of operations of Qualex with the results of operations of the Company
for periods ending prior to June 30, 1994 and presented Kodak's portion of
ownership and equity in the income of Qualex as a minority interest.
In June 1994, the Company decided to sell its interest in Qualex and
engaged in negotiations with Kodak regarding the sale of such interest.
Accordingly, the results of Qualex for all years presented are reported in the
accompanying reclassified statements of operations under discontinued
operations. In the second quarter of 1994, the Company provided for an
anticipated loss of $37,858,000 on the sale of its interest in Qualex and the
related covenant not to compete and release. No income tax expenses or benefits
were recognized due to the Company's net operating loss carryforwards and
recognition of tax benefits in prior periods.
On August 12, 1994, Kodak purchased all of the Company's interest in Qualex
and obtained a covenant not to compete and related releases from the Company in
exchange for $50,000,000 in cash and a promissory note in the principal amount
of $100,000,000. The promissory note is payable in installments of $50,000,000
each, without interest, on February 13, 1995 and August 11, 1995. Because the
principal amount due under the note does not bear interest, the Company
discounted the value of the note to $92,832,000 and will record imputed interest
income of $7,168,000 over the term of the note. Approximately $3,500,000 of
imputed interest income was recorded during 1994. All amounts received in
exchange for the covenant not to compete and release were included in the
computation of the anticipated loss on the sale of Qualex. The Company received
$50,000,000 under the promissory note on February 13, 1995.
F-13
<PAGE> 48
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following assets and liabilities of Qualex were included in the
Company's balance sheet at December 31, 1993; however, no assets and liabilities
are included in the Company's balance sheet at December 31, 1994 due to the sale
of the Company's interest in Qualex on August 12, 1994 (in thousands).
FINANCIAL POSITION OF QUALEX
<TABLE>
<CAPTION>
DECEMBER 31,
1993
------------
<S> <C>
Cash and short-term investments................................................. $ 4,060
Net accounts receivable......................................................... 69,015
Inventories..................................................................... 29,381
Other assets.................................................................... 38,153
------------
Total current assets.................................................. 140,609
Net property, plant and equipment............................................... 202,150
Other assets.................................................................... 30,413
Long-term investments........................................................... 26,611
Intangibles..................................................................... 371,106
------------
Total assets.......................................................... $770,889
==========
Current liabilities............................................................. $130,845
Deferred income taxes........................................................... 22,446
Long-term debt.................................................................. 217,987
Stockholders' equity............................................................ 399,611
------------
Total liabilities and stockholders' equity............................ $770,889
==========
</TABLE>
The Company's statements of operations for the three years in the period
ended December 31, 1994, have been restated to reflect Qualex as a discontinued
operation. The results of Qualex for these periods through August 12, 1994, the
date of sale of Qualex, are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Net sales.............................................. $333,970 $775,299 $770,853
Operating expenses..................................... 342,134 723,952 716,217
-------- -------- --------
Operating profit (loss)................................ (8,164) 51,347 54,636
-------- -------- --------
Interest expense....................................... (8,582) (16,488) (12,643)
Other income (expense)................................. (439) (1,209) 1,448
-------- -------- --------
Income (loss) before taxes............................. (17,185) 33,650 43,441
Income taxes (benefit)................................. (11,514) 16,598 21,666
-------- -------- --------
Net income (loss) from discontinued operations before
minority interest.................................... (5,671) 17,052 21,775
Minority interest...................................... 2,836 (8,526) (10,888)
-------- -------- --------
Net income (loss) from discontinued operations......... $ (2,835) $ 8,526 $ 10,887
======== ======== ========
</TABLE>
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
F-14
<PAGE> 49
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
could 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
would not increase the cost of DP; any subsequent issuance would only affect the
manner in which the total purchase price was recorded for Actava. This
transaction was accounted for using the purchase method of accounting;
accordingly, the purchased assets and liabilities were 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 were included in the consolidated
financial statements from the date of acquisition to the date the Company
transferred ownership of DP to Roadmaster Industries, Inc. See "Investment in
Roadmaster Industries, Inc."
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 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. (in thousands, except per share amounts):
<TABLE>
<CAPTION>
PRO FORMA
YEAR ENDED
DECEMBER 31,
-------------------
1993 1992
-------- --------
(UNAUDITED)
<S> <C> <C>
Sales............................................................ $519,477 $534,140
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 had the right to require Qualex to
purchase the remaining interest, beginning in 1997, at an amount not to exceed
$18,000,000.
These transactions were accounted for using the purchase method of
accounting, accordingly; the assets and liabilities of the purchased businesses
were 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 for 1992, in addition to $19,215,000 attributed to
customer lists. The results of operations of the businesses acquired were
included in the consolidated financial statements since the dates of
acquisition.
ACCOUNTS AND NOTES RECEIVABLE
Receivables from sales of Actava's lawn and garden products amounted to
$137,815,000 and $146,994,000 at December 31, 1994 and 1993, 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 comprising the customer base and their geographic location. Ongoing
credit evaluations of customers' financial condition are performed and reserves
for potential credit losses are maintained. Such losses, in the aggregate, have
not exceeded management's expectations.
During 1994, Actava sold its interest in its photofinishing business and
has reclassified the results of its operations as a discontinued operation.
Photofinishing sales in prior years included sales to national, regional and
local retailers located throughout the United States, including mass merchants,
grocery store chains and
F-15
<PAGE> 50
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
drug store chains. Photofinishing receivables were $70,744,000 at December 31,
1993 and were generally unsecured and due within 20 days following the end of
each month. Accounts receivable from photofinishing sales at December 31, 1993
included $54,711,000 due from national retail chains. At December 31, 1993,
$9,812,000 was receivable from one such customer on net sales of $84,297,000.
The Company provided an allowance for doubtful accounts equal to the estimated
losses expected to be incurred in the collection of accounts receivable. Such
losses were consistently within management's expectations.
During 1994, Actava combined its sporting goods companies with Roadmaster
Industries, Inc. in exchange for common stock of Roadmaster which is accounted
for under the equity method. Receivables in prior years from the sale of
sporting goods were primarily from mass merchants and sporting goods retailers
located throughout the United States. The receivables, which were unsecured,
were $71,836,000 at December 31, 1993, and were generally due within 30 to 60
days. At December 31, 1993, approximately $23,362,000 was due from four
customers. The sporting goods companies maintained allowances for potential
credit losses and such losses, in the aggregate, had not exceeded management's
expectations.
TRITON GROUP LTD. LOAN
At December 31, 1994, the Company had a $22,976,000 note receivable from
Triton Group Ltd. secured by 3,690,998 shares of Actava Common Stock. At
December 31, 1993, $26,726,000 was outstanding under the loan and was secured by
4,413,598 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 1/4% 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 in full. 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 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
F-16
<PAGE> 51
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
for the loan; however, 3,690,998 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 10, 1995, the pledged shares had a market value of $36,449,000 as
compared to the loan balance of $22,976,000. In the opinion of management, the
shares held as collateral are, and will continue to be, sufficient to provide
for realization of the loan.
METROMEDIA COMPANY LOAN
On August 31, 1994, the Company entered into letters of intent providing
for a proposed combination of the Company with Orion Pictures Corporation
("Orion"), MCEG Sterling Incorporated ("Sterling") and Metromedia International
Telecommunications Inc. ("MITI") (the "Proposed Metromedia Transaction").
Metromedia Company ("Metromedia") and its affiliates control in excess of 50% of
the voting power of both Orion and MITI. Pursuant to the letters of intent, the
Company and Metromedia entered into a Credit Agreement dated as of October 11,
1994 (the "Credit Agreement") under which the Company will make loans to
Metromedia in an amount not to exceed an aggregate of $55,000,000. Under the
terms of the Credit Agreement, Metromedia will use the proceeds of the loans to
make advances to or to pay obligations on behalf of Orion, Sterling and MITI.
All loans made by the Company to Metromedia under the Credit Agreement are
secured by shares of stock of Orion and MITI owned by Metromedia and its
affiliates. In addition, a general partner of Metromedia has personally
guaranteed the loans. The Credit Agreement provides that interest will be due on
the principal amount of all loans at an annual rate equal to the prime rate
announced from time to time by Chemical Bank. Interest will be increased to
prime plus three percent per annum if a party other than the Company terminates
discussions relating to the Proposed Metromedia Transaction. All loans are due
and payable on April 12, 1995. The outstanding balance under the Credit
Agreement as of December 31, 1994 was $32,395,000.
INVENTORIES
Inventory balances are summarized as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1993
-------- --------
<S> <C> <C>
Finished goods and goods purchased for resale.................. $ 12,618 $ 82,559
Raw materials and supplies..................................... 15,395 46,018
-------- --------
28,013 128,577
Reserve for LIFO cost valuation................................ (14,610) (20,138)
-------- --------
$ 13,403 $108,439
======== ========
</TABLE>
Work in process is not considered significant.
During 1994, 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 the net loss by
approximately $1,200,000 and decreased loss per share of common stock by $.07.
F-17
<PAGE> 52
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INVESTMENTS
All of the Company's investments are classified as available-for-sale and
are summarized as follows (in thousands):
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE SECURITIES
-----------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
DECEMBER 31, 1994
U.S. securities................................ $13,261 $ -- $559 $12,702
Other debt securities.......................... 1,669 -- 50 1,619
--------- ---------- ---------- ---------
Total debt securities................ $14,930 $ -- $609 $14,321
======= ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE SECURITIES
-----------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
DECEMBER 31, 1993
Short-term:
U.S. securities.............................. $26,460 $147 $ -- $26,607
Other debt securities........................ 3,175 -- -- 3,175
--------- ---------- ---------- ---------
Total short-term debt securities..... $29,635 $147 $ -- $29,782
======= ======== ======== =======
Long-term:
Equity securities............................ $15,850 $275 $ 10 $16,115
U.S. securities.............................. 7,758 -- 39 7,719
Other debt securities........................ 3,003 11 17 2,997
--------- ---------- ---------- ---------
Total long-term debt securities...... $26,611 $286 $ 66 $26,831
======= ======== ======== =======
</TABLE>
The gross realized gains for 1994 on sales of available-for-sale securities
totaled approximately $205,000 and the gross realized losses totaled
approximately $240,000. The net adjustment to unrealized holding losses on
available-for-sale securities included as a separate component of shareholders'
equity totaled $609,000 in 1994.
The amortized cost and estimated fair value of debt and marketable equity
securities at December 31, 1994 by contractual maturity, are shown below (in
thousands). Expected maturities will differ from contractual maturities because
the issuers of the securities may have the right to prepay obligations without
prepayment penalties.
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED FAIR
COST VALUE
--------- ---------
<S> <C> <C>
AVAILABLE-FOR-SALE
Due after one year through three years........................ $ 8,174 $ 7,872
Due after three years......................................... 6,756 6,449
--------- ---------
Total............................................... $14,930 $14,321
======= =======
</TABLE>
All available-for-sale securities are classified as current since they are
available for use in the Company's current operations.
F-18
<PAGE> 53
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INVESTMENT IN ROADMASTER INDUSTRIES, INC.
On December 6, 1994, the Company transferred ownership of its four sporting
goods subsidiaries to Roadmaster Industries, Inc. in exchange for 19,169,000
shares of Roadmaster's Common Stock. As of December 31, 1994, the Company owned
39% of the issued and outstanding shares of Roadmaster's Common Stock based on
approximately 48,600,000 shares of Roadmaster's Common Stock outstanding. The
four Actava subsidiaries transferred to Roadmaster were Diversified Products
Corporation, Hutch Sports USA Inc., Nelson/Weather-Rite, Inc. and Willow Hosiery
Company, Inc. No gain or loss was recognized for this nonmonetary transaction.
The Company's initial investment in Roadmaster was recorded at approximately
$68,300,000 and is accounted for by the equity method.
The excess of the Company's investment in Roadmaster over its share in the
related underlying equity in net assets is being amortized on a straight-line
basis over a period of 40 years. The remaining unamortized balance at December
31, 1994 was $28,855,000.
The quoted market value of the Company's investment in Roadmaster common
stock as of December 31, 1994, was $3.625 per share or a total value of
$69,488,000 and as of March 10, 1995, was $3.00 per share or a total value of
$57,507,000.
Summarized financial information for Roadmaster is shown below (in
thousands):
<TABLE>
<CAPTION>
ROADMASTER INDUSTRIES, INC.
YEAR ENDED DECEMBER 31,
------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Net sales.............................................. $455,661 $312,160 $226,201
Gross profit........................................... 66,790 48,129 35,250
Net income............................................. 5,000 7,633 3,697
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
-------- --------
<S> <C> <C>
Current assets................................................... $358,169 $223,541
Non-current assets............................................... 158,478 58,234
Current liabilities.............................................. 181,778 100,723
Non-current liabilities.......................................... 231,772 162,054
Minority interest................................................ -- 622
Redeemable common stock.......................................... 2,000 2,000
Total stockholders' equity....................................... 101,097 16,376
</TABLE>
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities, including $31,392,000 in
1993 due to Eastman Kodak Company, are summarized as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1993
------- --------
<S> <C> <C>
Accrued salaries and wages........................................ $ 1,370 $ 8,363
Accrued interest.................................................. 8,176 14,471
Accrued advertising and promotion................................. 987 25,238
Deferred income................................................... -- 13,791
Self-insurance claims payable..................................... 30,442 35,070
Reserve for relocation and consolidation of photofinishing
operations...................................................... -- 6,754
Other............................................................. 42,281 82,828
------- --------
$83,256 $186,515
======= ========
</TABLE>
F-19
<PAGE> 54
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, recorded on a cash basis, was not 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 1994 is 12%. This trend rate is assumed
to decrease in 1% decrements to 6% in 2001 and years thereafter. An 8% discount
rate per year, compounded annually, was assumed to measure the accumulated
postretirement benefit obligation as of December 31, 1994, as compared to 7% as
of December 31, 1993. A 1% increase in the assumed health care cost trend rate
would increase the accumulated postretirement benefit obligations as of December
31, 1994, by 10% and the net periodic postretirement benefit cost by 26%.
The following table presents the plans' funded status reconciled with
amounts recognized in the Company's consolidated balance sheet (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees....................................................... $ (913) $(1,094)
Fully eligible active plan participants........................ (360) (788)
Other active plan participants................................. (609) (1,149)
------- -------
(1,882) (3,031)
Plan assets...................................................... -- --
------- -------
Accumulated postretirement benefit obligation in excess of plan
assets......................................................... (1,882) (3,031)
Unrecognized prior service cost.................................. (1,687) (1,995)
Unrecognized net (gain) or loss.................................. (181) 544
------- -------
Accrued postretirement benefit cost.............................. $(3,750) $(4,482)
======= =======
</TABLE>
Net periodic postretirement benefit cost (benefit) includes the following
components (in thousands):
<TABLE>
<CAPTION>
1994 1993
----- -----
<S> <C> <C>
Service cost........................................................ $ 89 $ 96
Interest cost....................................................... 139 296
Amortization of unrecognized prior service cost..................... (308) (154)
Amortization of unrecognized gain................................... (30) --
----- -----
$(110) $ 238
===== =====
</TABLE>
F-20
<PAGE> 55
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTES PAYABLE AND LONG-TERM DEBT
Qualex had three separate line of credit agreements for working capital
needs for which $3,200,000 was outstanding at December 31, 1993. These
agreements were $5,000,000 each, for a total of $15,000,000. The Company paid a
facility fee of 1/4% per annum on the committed line of credit agreements.
Included in Notes Payable at December 31, 1994 and 1993 is $63,302,000 and
$87,359,000, 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 as defined in the credit agreement; however, the assets potentially
available as collateral are, in the aggregate, $143,343,000. Also included in
notes payable at December 31, 1994 and 1993 is $1,271,000 and $3,890,000,
respectively, under a short-term credit facility with a bank for the Company's
foreign subsidiaries. See Commitments and Contingencies. The interest rate on
the note varied between 5.9% and 7.0% during 1994.
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. The Agreement was transferred in the Roadmaster business
transaction. Interest was payable at the prime rate plus 1 1/4%. The Agreement
provided for a facility fee of $350,000. At December 31, 1994, no amount is
reflected in the balance sheet while $1,846,000 was outstanding at December 31,
1993.
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. The Agreement was transferred in the Roadmaster
business transaction. Interest was payable at the prime rate of the financial
institution. At December 31, 1994, no amount is reflected in the balance sheet
while $2,700,000 was outstanding at December 31, 1993.
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. The Agreement was transferred in the Roadmaster business
transaction. Interest was payable at the prime rate plus 1%. The Agreement
provided for a facility fee of $25,000. At December 31, 1994 no amount is
reflected in the balance sheet and at December 31, 1993 no amount was
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
was transferred in the Roadmaster business transaction. Interest was payable at
the prime rate plus 1 1/4%. The Agreement provided for an annual facility fee of
$375,000. At December 31, 1994, no amount is reflected in the balance sheet and
at December 31, 1993, $36,178,000 was outstanding under the Agreement.
The weighted average interest rate on short-term borrowings was 8.24% and
7.82% for the years ended December 31, 1994 and 1993, respectively.
F-21
<PAGE> 56
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Long-term debt is summarized as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
------ --------
<S> <C> <C>
Senior notes -- Qualex........................................... $ -- $200,000
Revolving credit agreement -- Qualex............................. -- 10,000
Capitalized lease obligations.................................... 452 545
Other long-term debt:
Secured (4-9% notes due at various dates to 2002).............. 1,095 1,900
Unsecured (4-8% notes due at various dates to 2001)............ 1,000 8,442
------ --------
$2,547 $220,887
====== ========
</TABLE>
Qualex issued through a private placement $200,000,000 of Senior Notes in
1992 with interest rates ranging from 7.99% to 8.84%.
During 1992, Qualex entered into an unsecured $115,000,000 Revolving Credit
Agreement with eight financial institutions with an expiration date in May 1995.
Interest was payable under three rate options which were determined by reference
to the prime rate, the London interbank offered rate plus 1/2% to 3/4%, and
competitive bids. The Agreement provided for a participation fee of 1/8% and an
annual facility fee of 1/4%. At December 31, 1994 no amount was reflected in
the balance sheet and at December 31, 1993, $10,000,000 was outstanding under
the agreement.
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 $4,057,000 in 1996, $15,733,000 in 1997,
$59,472,000 in 1998, $4,478,000 in 1999 and $76,000,000 in 2000 and years
thereafter.
The fair value of Actava's long-term and subordinated debt, including the
current portion, at December 31, 1994 is estimated to be approximately
$163,000,000 and was estimated at $436,000,000 at December 31, 1993. These
estimates are 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.
SUBORDINATED DEBT
Subordinated debt is summarized as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
-------- --------
<S> <C> <C>
6% Senior Swiss Franc Bonds due 1996
[redeemed February 17, 1995]................................... $ 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 $1,023
in 1994 and $1,308 in 1993..................................... 58,461 58,176
9 7/8% Senior Debentures due 1997, net of unamortized discount of
$296 in 1994 and $468 in 1993.................................. 20,704 23,532
10% Debentures due 1999.......................................... 6,703 7,441
-------- --------
191,020 194,301
Less current portion............................................. 33,827 3,750
-------- --------
$157,193 $190,551
======== ========
</TABLE>
F-22
<PAGE> 57
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, in effect, made its
interest and principal bond repayments in U.S. dollars without regard to changes
in the currency exchange rate. A default by the counterparty to the swap
agreement would have exposed Actava to potential currency exchange risk on the
remaining bond interest and principal payments in that Actava would have been
required to purchase Swiss francs at current exchange rates rather than at the
swap agreement exchange rate. At December 31, 1994, the swap agreement had an
effective exchange rate over its remaining term of .5255 Swiss francs per U.S.
dollar while the U.S. dollar equivalent market exchange rate was .7644. After
considering the stated interest rate, the cost of the currency swap agreement,
taxes and underwriting commissions, the effective cost of the bonds was
approximately 11.3%. The fair value of the currency swap as of December 31, 1994
and 1993, was $15,820,000 and $10,795,000, respectively; however, domestic
interest rates and foreign currency markets affect this value.
In December, 1994, Actava entered into an agreement to redeem the
outstanding Swiss Franc Bonds at par plus accrued interest and to terminate the
currency swap agreement on February 17, 1995. The Company recorded an
extraordinary loss of $1,601,000 in 1994 related to this early extinguishment of
debt.
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 $41 5/8 per share. At
Actava's option the Debentures may be redeemed at 100% plus accrued interest
until maturity.
The 9 7/8% Senior Subordinated Debentures are redeemable at the option of
Actava at 101.035% of the principal amount plus accrued interest if redeemed
prior to March 15, 1995, 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.
REDEEMABLE COMMON STOCK
Redeemable Common Stock represents 1,090,909 shares of common stock which
were issued in the acquisition of substantially all the assets and liabilities
of Diversified Products Corporation. See "Acquisitions." These shares were
redeemed for $12,000,000 on February 17, 1995.
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, 1994.
Common Stock
There are 100,000,000 authorized shares of Common Stock, $1 par value. At
December 31, 1994, 1993 and 1992 there were 18,368,067, 17,635,186 and
16,544,277 shares issued and outstanding, respectively, after
F-23
<PAGE> 58
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
deducting 5,490,327, 6,223,467 and 6,223,467 treasury shares, respectively, and
after the issuance of 1,090,909 shares of Redeemable Common Stock during the
year ended December 31, 1993.
Actava has reserved the shares of Common Stock listed below for possible
future issuance:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1993
---------- ----------
<S> <C> <C>
Stock options................................................... 1,049,750 761,000
6 1/2% Convertible Subordinated Debentures...................... 1,801,802 1,801,802
Restricted stock plan........................................... 102,800 102,800
---------- ----------
2,954,352 2,665,602
========== ==========
</TABLE>
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, 1992.......................... 55,250 $12 - 28
Exercised..................................................... (250) 12
Canceled...................................................... (17,125) 12 - 28
------- -----------
Options outstanding at December 31, 1992........................ 37,875 12 - 28
Granted....................................................... 20,000 9 - 12
Canceled...................................................... (1,125) 12 - 28
------- -----------
Options outstanding at December 31, 1993........................ 56,750 9 - 28
Granted....................................................... 228,223 8 - 9
Canceled...................................................... (13,750) 12 - 28
------- -----------
Options outstanding at December 31, 1994........................ 271,223 $8 - 28
======= =========
</TABLE>
During 1994 nonqualified options for 486,777 shares at price ranges of
approximately $6.37 to $9.00 per share were granted.
At December 31, 1994, incentive stock options totaling 124,538 shares were
exercisable at prices ranging from $8.31 to $12.19 and nonqualified options
totaling 569,712 shares were exercisable at prices ranging from $6.37 to $14.50.
There were 209,050 and 591,550 shares under Actava's stock option plans at
December 31, 1994 and 1993, respectively, which were available for the granting
of additional stock options.
PROVISIONS FOR PLANT CLOSURE COSTS
In 1994 loss from discontinued operations includes a provision of $311,600
($930,000 before income taxes and minority interest for discontinued operations)
or $.02 per share for plant closure costs. The 1993 income from discontinued
operations includes $1,038,000, ($4,096,000 before income taxes and minority
interest for discontinued operations) or $.06 per share for the costs of closing
three of Qualex's photofinishing plants. The provision for plant closure costs
for Qualex included in income from discontinued operations includes lease
termination costs and fixed asset and facility closure costs which may be
incurred over several years based on the remaining terms of the leases and
employee severance and termination costs.
F-24
<PAGE> 59
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The reserve for closing certain lawn and garden facilities was established
in 1990 by a provision for plant closure of approximately $13,700,000. Lawn and
garden production at these facilities ceased in early 1991; however, inventory
previously produced at these sites continued to be distributed from these sites
until 1992. Costs associated with this warehouse and distribution function
included in costs of sales in 1992 were immaterial. Due to market conditions and
the size of these lawn and garden facilities, the Company estimated in 1990 that
it would require approximately three years to dispose of these facilities and in
1993 this was accomplished. No plant closure costs were provided for in 1994.
During 1993 and 1992, costs of approximately $3,400,000 and $2,100,000,
respectively, were incurred related to employee severance, plant maintenance,
interest on capitalized lease obligations and the loss on disposal of equipment
and buildings. In 1993, the provision for plant closure costs included
reductions of $849,000, before and after tax, of $.05 per share, to the reserve
for closing the lawn and garden facilities as this disposal was completed.
The 1991 provision for plant closure costs also included $500,000 before
tax ($315,000 net of tax or $.02 per share) for closing 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. The costs related to
the planned reduction of corporate office facilities were estimated in 1991 when
management made the decision to move out of its corporate office. The Company
subleased a portion of its space in 1991 and utilized $300,000 of the original
reserve. However, in 1992, it became apparent that the remaining space could not
be subleased as anticipated in 1991 and the Company decided to reverse its
remaining reserve of approximately $1,100,000 through the provision for plant
closure costs and utilize its remaining space until the lease expires in 1995.
F-25
<PAGE> 60
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Changes in the reserve for plant closure costs are as follows (in
thousands):
<TABLE>
<CAPTION>
RECORDED
THROUGH PURCHASE
CHARGED CHARGED ACCOUNTING IN
TO PROVISION TO INCOME (LOSS) THE
FOR PLANT FROM DISCONTINUED YEAR OF
CLOSURE COSTS OPERATIONS ACQUISITION TOTAL
------------- ----------------- ---------------- --------
<S> <C> <C> <C> <C>
Balance at January 1, 1992................. $ 7,946 $ 32,482 $ 15,418 $ 55,846
Additions for:
Fixed asset and facility closure costs... -- -- 1,244 1,244
Reductions in reserves................... (1,132) (374) -- (1,506)
------------- ----------------- ---------------- --------
Total additions (reductions)...... (1,132) (374) 1,244 (262)
------------- ----------------- ---------------- --------
Costs incurred(b).......................... (2,360) (23,713) (11,755) (37,828)
------------- ----------------- ---------------- --------
Balance at December 31, 1992............... 4,454 8,395 4,907 17,756
Additions for:
Lease termination costs(a)............... -- 1,475 -- 1,475
Employee severance & termination of
benefits(a)............................ -- 1,294 -- 1,294
Fixed asset and facility closure costs... -- 1,327 906 2,233
Reduction in reserves.................... (865) -- -- (865)
------------- ----------------- ---------------- --------
Total additions (reductions)
net............................. (865) 4,096 906 4,137
------------- ----------------- ---------------- --------
Costs incurred(b).......................... (3,589) (7,437) (4,432) (15,458)
------------- ----------------- ---------------- --------
Balance at December 31, 1993............... -- 5,054 1,381 6,435
Additions for:
Employee severance & termination of
benefits(a)............................ -- 430 -- 430
Fixed asset and facility closure costs... -- 500 -- 500
------------- ----------------- ---------------- --------
Total additions (reductions)
net............................. -- 930 -- 930
------------- ----------------- ---------------- --------
Costs incurred(b).......................... -- (2,628) (670) (3,298)
Disposal of discontinued operations........ -- (3,356) (711) (4,067)
------------- ----------------- ---------------- --------
Balance at December 31, 1994............... $ -- $ -- $ -- $ --
=========== =============== ============== =========
</TABLE>
---------------
(a) Substantially all amounts accrued require future cash expenditures.
(b) Costs were generally incurred in accordance with line item categories as
presented above.
OTHER INCOME -- NET
Other income net of other (expenses) from continuing operations is
summarized as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Interest and investment income............................ $ 8,415 $ 6,167 $ 5,831
Miscellaneous income (expense)............................ (3,481) (7,873) (1,180)
------- ------- -------
$ 4,934 $(1,706) $ 4,651
======= ======= =======
</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 $4,729,000 for 1994, $4,322,000 for 1993 and $2,522,000 for 1992.
F-26
<PAGE> 61
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
Income tax expense (benefit) is composed of the following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
LIABILITY DEFERRED
METHOD METHOD
----------------- --------
1994 1993 1992
------- ------- --------
<S> <C> <C> <C>
Continuing operations:
Current Federal......................................... $ -- $(1,674) $ (1,316)
Current state........................................... -- 239 156
Deferred federal and state.............................. -- -- 2,822
------- ------- --------
$ -- $(1,435) $ 1,662
======= ======= =======
Discontinued operations................................... $ -- $16,598 $ 21,666
======= ======= =======
</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 (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
LIABILITY DEFERRED
METHOD METHOD
------------------- --------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Continuing operations:
Computed tax at statutory rates....................... $ (8,210) $(18,603) $ 457
State tax, net of Federal benefit..................... -- 155 103
Effect of tax rate changes on realization of timing
differences........................................ -- 414 153
Amortization of goodwill.............................. -- 52 51
Undistributed earnings of majority-owned subsidiary... -- 603 812
Deferred tax valuation allowance...................... 7,398 16,227 --
Other................................................. 812 (283) 86
-------- -------- --------
$ -- $ (1,435) $ 1,662
======== ======== =======
Discontinued operations:
Computed tax at statutory rates....................... $(14,243) $ 11,778 $ 14,769
State tax, net of Federal benefit..................... -- 2,088 3,000
Amortization of goodwill.............................. -- 3,071 3,184
Effect of non-tax basis adjustments in connection with
acquisitions....................................... -- -- 914
Tax-exempt interest................................... -- (26) (80)
Dividends received deduction.......................... -- (290) --
Deferred tax valuation allowance...................... 4,124 -- --
Change due to Qualex sale............................. 10,119 -- --
Other................................................. -- (23) (121)
-------- -------- --------
$ -- $ 16,598 $ 21,666
======== ======== =======
</TABLE>
F-27
<PAGE> 62
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of deferred tax assets and liabilities at December
31, 1994 and 1993, are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
--------------------------- ---------------------------
DEFERRED TAX DEFERRED TAX DEFERRED TAX DEFERRED TAX
ASSETS LIABILITIES ASSETS LIABILITIES
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net operating loss carryforward........ $ 10,873 $ 30,383
Reserves for losses and write-down of
certain assets....................... 11,306 14,885
Reserves for self-insurance............ 10,059 11,781
Alternative minimum tax credit......... 10,005 8,805
Provisions for loss on loans and
receivables.......................... 2,280 3,509
Tax amortizable intangible............. -- 3,145
State tax accruals..................... 551 2,676
Gain on hedge transaction.............. -- 2,609
Obligation for postretirement
benefits............................. 1,313 1,966
Reserves for plant relocations and
consolidations....................... -- 1,541
Charitable contribution carryforward... -- 1,053
Imputed interest on interest-free
note................................. 1,272
Investment in equity investee.......... 7,805
Other.................................. 3,567 $ 1,553 9,726 $ 6,670
Investment in less than 80% owned
subsidiary........................... -- -- -- 28,832
Basis differences in fixed assets...... -- 5,438 -- 29,387
Purchase of safe harbor lease
investment........................... -- 9,472 -- 9,783
Undistributed earnings of
majority-owned subsidiary............ -- -- -- 1,282
------------ ------------ ------------ ------------
Subtotal............................... 59,031 16,463 92,079 75,954
Valuation allowance.................... 42,568 -- 31,611 --
------------ ------------ ------------ ------------
Total deferred taxes................... $ 16,463 $ 16,463 $ 60,468 $ 75,954
========= ========= ========= =========
Net deferred taxes..................... $ -- $ 15,486
========= =========
</TABLE>
The components of deferred income tax expense (benefit) for the year ended
December 31, 1992 is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1992
-----------------------
<S> <C>
Accelerated depreciation........................................ $ 643
Provision for loss on loans and receivables..................... (281)
Reserves for losses and write-down of certain assets............ 1,030
Plant closure costs............................................. 1,077
Undistributed earnings of majority-owned subsidiary............. 547
Other........................................................... (194)
-------
$ 2,822
==================
</TABLE>
Actava has a net operating loss carryforward for Federal income tax
purposes of approximately $31,000,000 at December 31, 1994, which will expire in
the year 2008. Actava has an alternative minimum tax
F-28
<PAGE> 63
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
credit carryforward of approximately $10,000,000, 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 "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 (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1994 1993 1992
------- ----- ------
<S> <C> <C> <C>
Service cost -- benefits earned during the period............ $ 536 $ 374 $ 705
Interest cost on projected benefit obligation................ 1,074 961 1,015
Actual return on plan assets................................. (209) (996) (992)
Net amortization and deferral................................ (753) 76 (31)
------- ----- ------
$ 648 $ 415 $ 697
======= ===== ======
</TABLE>
Assumptions used in the accounting for the defined benefit plans are as
follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Weighted-average discount rates..................................... 7.1% 7.2% 8.4%
Rates of increase in compensation levels............................ 5.0% 4.7% 6.1%
Expected long-term rate of return on assets......................... 7.2% 7.6% 8.3%
</TABLE>
The following tables set forth the funded status and amount recognized in
the Consolidated Balance Sheets for Actava's defined benefit pension plans (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
-------- --------
<S> <C> <C>
PLANS WHOSE ASSETS EXCEED ACCUMULATED BENEFITS
Actuarial present value of benefit obligations:
Vested benefit obligations..................................... $ (3,972) $ (4,652)
======== ========
Accumulated benefit obligation................................. $ (4,360) $ (5,232)
======== ========
Projected benefit obligations.................................. $ (4,360) $ (5,232)
Plan assets at fair value...................................... 5,958 6,296
-------- --------
Funded status -- plan assets in excess of projected benefit
obligation.................................................. $ 1,598 $ 1,064
======== ========
Comprised of:
Prepaid pension cost........................................... $ 394 $ 415
Unrecognized net gain (loss)................................... 130 (523)
Unrecognized prior service cost................................ 172 187
Unrecognized net assets at January 1, 1987, net of
amortization................................................ 902 985
-------- --------
$ 1,598 $ 1,064
======== ========
</TABLE>
F-29
<PAGE> 64
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
-------- --------
<S> <C> <C>
PLANS WHOSE ACCUMULATED BENEFITS EXCEED ASSETS
Actuarial present value of benefit obligations:
Vested benefit obligation...................................... $(10,602) $(21,174)
======== ========
Accumulated benefit obligation................................. $(10,711) $(22,224)
======== ========
Projected benefit obligation................................... $(11,421) $(25,320)
Plan assets at fair value...................................... 6,287 18,615
-------- --------
Funded status -- projected benefit obligation in excess of plan
assets...................................................... $ (5,134) $ (6,705)
======== ========
Comprised of:
Accrued pension cost........................................... $ (3,388) $ (4,637)
Unrecognized net (loss)........................................ (1,824) (2,157)
Unrecognized prior service cost................................ (199) (215)
Unrecognized net obligation at January 1, 1987, net of
amortization................................................ 277 304
-------- --------
$ (5,134) $ (6,705)
======== ========
</TABLE>
Substantially all of the plan assets at December 31, 1994 and 1993 are
invested in governmental bonds, mutual funds and temporary investments.
The 1993 amounts for plans whose accumulated benefits exceed assets
includes a Qualex retirement plan, which is not included in 1994 due to the sale
of Qualex.
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
$186,000 in 1994, $400,000 in 1993 and $800,000 in 1992 were made to these
plans.
LEASES
Actava and its subsidiaries are lessees of warehouses, manufacturing
facilities and other properties under numerous noncancelable leases.
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 (in thousands):
<TABLE>
<CAPTION>
YEARS ENDING OPERATING CAPITAL
DECEMBER 31, LEASES LEASES
-------------------------------------------------------------------- --------- -------
<S> <C> <C>
1995................................................................ $ 828 $ 151
1996................................................................ 291 151
1997................................................................ 243 151
1998................................................................ 125 151
1999................................................................ -- 100
Thereafter.......................................................... -- --
--------- -------
Total minimum lease payments........................................ $ 1,487 704
=======
Less amounts representing interest.................................. (157)
-------
Present value of net minimum lease payments......................... $ 547
=====
</TABLE>
F-30
<PAGE> 65
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Rental expense charged to continuing operations for all operating leases
was $5,849,000, $4,641,000 and $3,454,000 for the years ended December 31, 1994,
1993 and 1992, 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards Number 107, "Disclosures about
Fair Value of Financial Instruments," requires disclosure of fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate that value. In cases
where quoted market prices are not available, fair values are based on
settlements using present value or other valuation techniques. Those techniques
are significantly affected by the assumptions used, including discount rate and
estimates of future cash flows. In that regard, the derived fair value estimates
cannot be substantiated by comparison to independent markets and, in many cases,
could not be realized in immediate settlement of the instrument. Statement 107
excludes certain financial instruments and all non-financial instruments from
its disclosure requirements. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
The following methods and assumptions were used in estimating the fair
value disclosures for financial instruments:
Cash and Cash Equivalents, Receivables, Notes Receivable and Accounts Payable
The carrying amounts reported in the balance sheet for cash and cash
equivalents, receivables, notes receivable and accounts payable approximate fair
values.
Short-term Investments
For short-term investments, fair values are based on quoted market prices.
If a quoted market price is not available, fair value is estimated using quoted
market prices for similar securities or dealer quotes. See "Investments" for
fair values on investment securities.
Long-term and Subordinated Debt
For long-term and subordinated debt, fair values are based on quoted market
prices, if available. If the debt is not traded, fair value is estimated based
on the present value of expected cash flows. See "Notes Payable and Long-term
Debt" for fair values of long-term and subordinated debt.
LITIGATION
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 or
acquisition
F-31
<PAGE> 66
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
candidate. These three suits were consolidated on May 1, 1991 into a lawsuit
captioned In re Fuqua Industries, Inc. Shareholders litigation, Civil Action No.
11974. While these actions are in their discovery stages, management currently
believes the actions will not materially affect the operations or financial
position of Actava.
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 disputes involving events occurring on or before June 22,
1987. The DOJ alleges among other things 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. The DOJ has asserted damages of approximately $3.5 million. If such
damages were awarded and then trebled, the total damages, excluding penalties,
costs and interest, could exceed $10 million. In addition, penalties, if
assessed, could range from several thousand dollars to several million dollars.
As a result, the lawsuit could have a material effect on the results of
operations and financial condition of the Company. Management, however, believes
that American Seating has meritorious defenses to the allegations made by the
DOJ and does not expect the Company to incur any material liability as a result
of this suit.
On September 23, 1994, a stockholder of the Company filed a class action
lawsuit against the Company and each of its directors seeking to block the
Proposed Metromedia Transaction. The lawsuit was filed in the Chancery Court for
New Castle County, Delaware and is styled James F. Sweeney, Trustee of Frank
Sweeney Defined Benefit Pension Plan Trust v. John D. Phillips, et. al., Civil
Action No. 13765. The Company and its directors were served with this lawsuit on
September 28, 1994. The complaint alleges that the terms of the Proposed
Metromedia Transaction constitute an overpayment for the assets being acquired
and as a result would result in a waste of the Company's assets. The complaint
further alleges that the directors of the Company would be breaching their
fiduciary duties to the Company's stockholders by approving the Proposed
Metromedia Transaction and that the transaction would result in a change of
voting control without giving stockholders an opportunity to maximize their
investment and the current stockholders of the Company would suffer a dramatic
dilution of their voting rights. The Company and its directors have filed a
motion to dismiss this lawsuit. The stockholder who filed the lawsuit has not
responded to the motion to dismiss. Management believes that the allegations
contained in the complaint are without merit for a variety of reasons, including
the fact that the Company has not entered into a definitive agreement with
respect to the Proposed Metromedia Transaction and the Proposed Metromedia
Transaction has not been approved by the Board of Directors of the Company.
Actava is a defendant in various other legal proceedings. Except as noted
above, 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
F-32
<PAGE> 67
THE ACTAVA GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, 1994 and 1993,
there were approximately $29,449,000 and $23,000,000, respectively, outstanding
under these floor plan financing arrangements.
Actava is contingently liable under various guarantees of debt totaling
approximately $6,000,000. The debt is primarily Industrial Revenue Bonds which
were issued to finance the manufacturing facilities and equipment of
subsidiaries disposed of prior to 1994, 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
subsidiaries sold prior to 1994. The total future payments under these leases,
including real estate taxes, is estimated to be approximately $3,400,000. The
leased properties generally have financially sound subleases.
In January 1992, Qualex entered into an agreement whereby it sold 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 $50,00,000, was increased to $75,000,000 in August 1992. As collections
reduced the pool of sold accounts receivable, Qualex sold participating
interests in new receivables to bring the amount sold up to the desired level.
At December 31, 1993, the uncollected balance of receivables sold amounted to
$60,000,000. The proceeds were reported as discontinued operations 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. There has been no adjustment to the allowance for doubtful accounts
because Qualex retained substantially the same risk of credit loss as if the
receivables had not been sold. Qualex paid 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 in
discontinued operations.
Through the date of sale, Qualex had a supply contract with Kodak for the
purchase of sensitized photographic paper and purchased substantially all of the
chemicals used in photoprocessing from Kodak. Qualex also purchased various
other production materials and equipment from Kodak.
Former subsidiaries of the Company handled and stored various materials in
the normal course of business that have been classified as hazardous by various
Federal, state and local regulatory agencies and for which the Company may be
liable. As of December 31, 1994, the Company is continuing to participate in
testing or to conduct tests at these 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. 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.
At December 31, 1994, approximately $5,000,000 of Actava's cash was pledged
to secure a Snapper credit line and approximately $12,000,000 of cash and
short-term investments were pledged to support outstanding letters of credit.
Snapper has entered into various long-term manufacturing and purchase
agreements with certain vendors for the purchase of manufactured products and
raw materials. At December 31, 1994, non-cancelable commitments under these
agreements amounted to approximately $16,800,000.
SEGMENT INFORMATION
A description of Actava's segments is presented in the "Operating Segments"
section 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, 1994 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-33
<PAGE> 68
THE ACTAVA GROUP INC. AND SUBSIDIARIES
SUMMARY OF QUARTERLY EARNINGS AND DIVIDENDS
<TABLE>
<CAPTION>
QUARTERS ENDED IN 1994
-----------------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
-------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net Sales............................................. $155,271 $123,943 $124,497 $148,117
Gross Profit.......................................... 27,200 18,526 18,786 26,141
Income (loss) from continuing operations.............. (8,090) (10,173) (5,266) 73
Income (loss) from discontinued operations............ (4,583) (36,110) -- --
Extraordinary item.................................... -- -- -- (1,601)
-------- -------- -------- --------
Net (loss)(a)......................................... $(12,673) $(46,283) $ (5,266) $ (1,528)
======== ======== ======== ========
Earnings (loss) per share:
Income (loss) from continuing operations.............. $ (.46) $ (.56) $ (.29) $ --
Income (loss) from discontinued operations............ (.26) (1.98) -- --
Extraordinary item.................................... -- -- -- (.09)
-------- -------- -------- --------
Net (loss)............................................ $ (.72) $ (2.54) $ (.29) $ (.09)
======== ======== ======== ========
Cash Dividends........................................ $ -- $ -- $ -- $ --
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED IN 1993
-----------------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
-------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(RESTATED)
<S> <C> <C> <C> <C>
Net Sales............................................. $ 99,701 $112,753 $113,746 $139,612
Gross Profit.......................................... 20,770 21,210 12,955 9,406
Income (loss) from continuing operations.............. (1,340) (3,669) (16,283) (30,424)
Income (loss) from discontinued operations............ (1,860) 3,712 7,236 (562)
Cumulative effect of change in accounting principle... (4,404) -- -- --
-------- -------- -------- --------
Net income (loss)(a)(b)(c)............................ $ (7,604) $ 43 $ (9,047) $(30,986)
======== ======== ======== ========
Earnings (loss) per share:
Income (loss) from continuing operations.............. $ (.08) $ (.22) $ (.92) $ (1.73)
Income (loss) from discontinued operations............ (.11) .22 .41 (.03)
Cumulative effect of change in accounting principle... (.27) -- -- --
-------- -------- -------- --------
Net income (loss)..................................... $ (.46) $ -- $ (.51) $ (1.76)
======== ======== ======== ========
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 1994 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 decreased in the first
and third quarters by $2,205,000 and $1,315,000, respectively, and increased
in the second and fourth quarters by $1,025,000 and $2,495,000,
respectively. Sales and expenses for the year were also different in 1993
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 quarters 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.
(b) 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.
F-34
<PAGE> 69
(c) 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-35
<PAGE> 70
THE ACTAVA GROUP INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 1994
ITEM 14(D)
FINANCIAL STATEMENT SCHEDULES
S-1
<PAGE> 71
ITEM 14(D)
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
THE ACTAVA GROUP INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------------------------------- ----------- ------------------------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
ADDITIONS (REDUCTIONS)
------------------------------
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER ACCOUNTS-- DEDUCTIONS -- BALANCE AT END
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE OF PERIOD
------------------------------- ----------- ----------- ---------------- ------------ --------------
Year ended December 31, 1994:
Allowances for doubtful $ 3,945,000 A
accounts, etc. (deducted $ 354,000 B
from current receivables... $10,227,000 $ 3,204,000 $1,182,000G $ 3,463,000 F $ 6,851,000
============ ============ ================ ============= ==============
Allowances for doubtful
accounts, etc. (deducted $ 1,717,000 A
from non-current notes $ (547,000)B
receivable)................ $ 3,988,000 $ -- $ -- $ 2,818,000 F $ --
============ ============ ================ ============= ==============
Reserve for loss on sales of
subsidiaries (included in
current liabilities)....... $ 2,152,000 $ (1,000) $ 895,000B $ 459,000 E $ 2,587,000
============ ============ ================ ============= ==============
Reserve for obsolete and
excess inventory (included $ 2,064,000 E
in inventories)............ $ 1,967,000 $ 3,701,000 $ -- $ 2,986,000 F $ 618,000
============ ============ ================ ============= ==============
Reserve for relocation and
consolidation of facilities
(included in current $ 3,298,000 D
liabilities)............... $ 6,435,000 $ 930,000 $ -- $ 4,067,000 F $ --
============ ============ ================ ============= ==============
Reserve for loss on sale of
partnership interest
(included in current
liabilities)............... $ 4,245,000 $ -- $ -- $ -- $ 4,245,000
============ ============ ================ ============= ==============
</TABLE>
S-2
<PAGE> 72
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------------------------------- ----------- ------------------------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
ADDITIONS (REDUCTIONS)
------------------------------
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER ACCOUNTS-- DEDUCTIONS -- BALANCE AT END
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE OF PERIOD
------------------------------- ----------- ----------- ---------------- ------------ --------------
Year ended December 31, 1993:
Allowances for doubtful
accounts etc. (deducted $ 9,123,000 A
from current $ 1,318,000 B
receivables)............... $12,805,000 $ 4,657,000 $2,601,000G $ (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 $ -- $ -- $ 266,000 E $ 2,152,000
============ ============ ================ ============= ==============
Reserve for obsolete and
excess inventory (included
in inventories)............ $ 1,206,000 $ 647,000 $4,909,000C $ 4,795,000 A $ 1,967,000
============ ============ ================ ============= ==============
Reserve for relocation and
consolidation of facilities
(included in current $ 2,712,000 B
liabilities)............... $13,168,000 $ 3,231,000 $ -- $ 7,252,000 D $ 6,435,000
============ ============ ================ ============= ==============
Reserve for loss on sale of
partnership interest
(included in current
liabilities)............... $ 1,245,000 $ 3,000,000 $ -- $ -- $ 4,245,000
============ ============ ================ ============= ==============
</TABLE>
S-3
<PAGE> 73
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------------------------------- ----------- ------------------------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
ADDITIONS (REDUCTIONS)
------------------------------
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER ACCOUNTS-- DEDUCTIONS -- BALANCE AT END
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE OF PERIOD
------------------------------- ----------- ----------- ---------------- ------------ --------------
Year ended December 31, 1992:
Allowances for doubtful
accounts etc. (deducted
from current $ 3,900,000 A
receivables)............... $13,953,000 $ 3,153,000 $1,056,000G $ 1,457,000 B $ 12,805,000
============ ============ ================ ============= ==============
Allowances for doubtful
accounts, etc. (deducted
from non-current notes $1,457,000B
receivable)................ $ 3,590,000 $ (212,000) $ (578,000)G $ 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 D $ 13,168,000
============ ============ ================ ============= ==============
Reserve for loss on sale of
partnership interest
(included in current
liabilities)............... $ 1,500,000 $ -- $ -- $ 255,000 E $ 1,245,000
============ ============ ================ ============= ==============
</TABLE>
---------------
A -- Uncollectible accounts charged off -- net of recoveries.
B -- Reclassifications and other changes.
C -- Acquisition of business.
D -- Costs incurred in consolidation of facilities.
E -- Costs incurred.
F -- Businesses sold.
G -- Charged to discontinued operations.
S-4
<PAGE> 74
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- ----------------------------------------------------------------------------
<S> <C> <C>
4(g)(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 and ITT
Commercial Finance Corp.
4(g)(ii) -- Amendment, dated as of September 27, 1993, to Finance and Security
Agreement, dated as of October 30, 1992, with respect a revolving credit
facility of up to $100 million, between Actava and ITT Commercial Finance
Corp.
4(g)(iii) -- 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 and ITT Commercial Finance Corp.
4(g)(iv) -- Amendment, dated as of April 15, 1994, to Finance and Security Agreement,
dated as of October 30, 1992, with respect a revolving credit facility of up
to $100 million, between Actava and ITT Commercial Finance Corp.
4(g)(v) -- Amendment, dated as of September 23, 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 and ITT Commercial Finance
Corp.
10(r)(i) -- Shareholders Agreement dated as of December 6, 1994 among Actava,
Roadmaster, Henry Fong and Edward Shake
10(r)(ii) -- Registration Rights Agreement dated as of December 6, 1994 between Actava
and Roadmaster
10(r)(iii) -- Environmental Indemnity Agreement dated as of December 6, 1994 between
Actava and Roadmaster
10(s) -- Lease Agreement dated October 21, 1994 between JDP Aircraft II, Inc. and
Actava
11 -- Statement of computation of earnings per share
21 -- Subsidiaries of Actava
23 -- Consent of Ernst & Young
24 -- Powers-of-Attorney
27 -- Financial Data Schedule
</TABLE>
S-5
<PAGE> 1
EXHIBIT 4(g)(i)
FINANCE AND SECURITY AGREEMENT
BETWEEN: ITT COMMERCIAL FINANCE CORP., a Nevada corporation,
whose address is 8251 Maryland Avenue, Clayton,
Missouri 63105 ("ITT")
AND: FUQUA INDUSTRIES, INC., a Delaware corporation
("Fuqua"), individually, and on behalf of SNAPPER
("Snapper"), a division thereof, whose addresses are
set forth herein.
EFFECTIVE DATE: October 23, 1992
1. RECITALS
Snapper has requested that ITT, doing business under the name
"Snapper Finance Company," provide wholesale inventory financing to
distributors of Snapper Products, and also provide a finished inventory and
parts revolving line of credit to Snapper. ITT has agreed to provide such
financing to such distributors and Snapper, subject to the terms and conditions
of this Agreement.
2. DEFINITIONS
Terms defined in this Agreement shall have initial capital
letters. Those terms are defined above, in this Section 2, and elsewhere in
this Agreement. All financial and accounting terms used herein and not
otherwise defined, shall be defined in accordance with GAAP.
Accounts. The term "Accounts" shall have the meaning given to that
term in the Uniform Commercial Code as set forth in the Missouri Revised
Statutes, as amended from time to time, and, to the extent not included
therein, shall also mean all leases, contract rights, and choses in action,
including any lien or other security interest that secures or may secure any of
the foregoing, plus all books, invoices, documents and other records in any form
evidencing or relating to any of the foregoing, whether now owned or hereafter
acquired by Snapper.
Account Debtor. The term "Account Debtor" shall mean any Person who
is or may become obligated under, with respect to, or on account of, an
Account, General Intangible, Instrument, Document or other item of Collateral.
Affiliates. The term "Affiliates" shall mean: (i) any individual who
is an officer, director or managing agent of Fuqua (collectively, the
"Affiliated Individuals"); and (ii) any person who directly or indirectly
controls, is controlled by, or is under common control or ownership with,
Fuqua. For the purposes of this definition, the term "control" shall mean the
ownership of 10% or more of the beneficial interest in the entity being
referred to.
Agreement. The term "Agreement" shall mean this Finance and Security
Agreement, and any amendments hereto.
Availability Certificate. The term "Availability Certificate" shall
mean a certificate substantially in the form of Exhibit 4.1 attached hereto or
such other similar form as may be required or approved by ITT from time to
time.
<PAGE> 2
Business. The term "Business" shall mean the manufacture and/or sale
of lawn, garden or outdoor power equipment and other products by Snapper.
Business Day. The term "Business Day" shall mean any day other than
Saturdays, Sundays, legal holidays designated by Federal law, and any other day
on which ITT's office is closed.
Chattel Paper, Documents, General Intangibles, Goods and Instruments.
The terms "Chattel Paper," "Documents," "Fixtures," "General Intangibles,
"Goods," and "Instruments" shall have the meanings given to those terms in the
Uniform Commercial Code as set forth in the Missouri Revised Statutes, as
amended from time to time.
Code. The term "Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
Collateral. The term "Collateral" shall mean all items described in
Sections 5.1 and 5.2.
Controlled Group. The term "Controlled Group" shall mean all members
of a controlled group of corporations and all trades or business (whether or
not incorporated) under common control which, toqether with Fuqua, are treated
as a single employer under Section 414(c) of the Code.
Default Interest Rate. The term "Default Interest Rate" shall have
the meaning set forth in Section 3.10.
Distributor. The term "Distributor" means a wholesale distributor of
Snapper Products.
Distributor Documents. The term "Distributor Documents" means all
Records, agreements, certificates, contracts, guaranties, mortgages, security
agreements, financing statements, instruments and other documents of any kind,
and all rights thereunder, relating to the wholesale inventory financing of
Snapper Products for any Distributor by Snapper or ITT.
Distributor Loans. The term "Distributor Loans" means all open
account advances made by Snapper to any of the Distributors and reflected in
the Distributor Receivables, and any subsequent advances made by ITT to any
Distributor after the Effective Date.
Distributor Receivables. The term "Distributor Receivables" shall
mean all Accounts owed by the Distributors to Snapper in respect of Snapper
Products as of the Effective Date which are being sold to ITT pursuant to this
Agreement.
Effectivo Date. The term "Effective Date" shall mean the date set
forth in the heading on page 1.
Eligible Dealer Accounts. The term "Eligible Dealer Accounts" shall
mean 100% of any Account arising from sales by any Distributor to any of its
dealers of new and unused Snapper Inventory, solely to the extent that such
accounts do not otherwise constitute Ineligible Dealer Accounts.
Eligible Inventory. The term "Eligible Inventory" shall mean
Inventory, other than parts, less any amount reserved on Snapper's or a Snapper
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<PAGE> 3
Subsidiary's books for surplus or obsolescence, consisting of factory whole
goods or accessories held for sale by Snapper or such Snapper Subsidiary
that meet all of the following specifications:
Documents. If it is represented or covered by documents
of title, Snapper or such Snapper Subsidiary is the owner
of the documents free of all tax liens and other liens,
encumbrances and security interests except the Excepted
Liens.
Location. It is stored at one of the locations listed in
Exhibit 7.21, or such other locations in the United
States of which Snapper or such Snapper Subsidiary has
given ITT notice, and is in the possession or control of
Snapper or such Snapper Subsidiary. If it is located on
leased premises, ITT has received a landlord's waiver of
rights with respect to such Inventory. If it is held by
a bailee, warehouseman or similar party, ITT shall have
received from such bailee, warehouseman or similar party
such acknowledgments of ITT's lien, warehouse receipts or
other agreements, each in form and substance acceptable
to ITT, as ITT may require in its reasonable discretion.
Miscellaneous. It is new and unused, and it has not, in
ITT's good faith judgment, been materially reduced in
market value by reason of age, obsolescence, surplus or
other factors.
Ownership. It is owned by Snapper or such Snapper
Subsidiary, free of all tax liens and other liens,
encumbrances and security interests except the Excepted
Liens, and ITT has a perfected first security interest
therein.
Other Financing. No financing statement is on file
covering such item or the products or proceeds thereof
except for ITT's financing statement.
WIP. It is not work-in-process.
Eligible Parts. The term "Eligible Parts" shall mean parts sold by
Snapper as replacement parts for its finished Inventory, less any amount
reserved on Snapper's books for surplus or obsolescence, and that meet all the
following specifications:
Documents. If it is represented or covered by documents of
title, Snapper is the owner of the documents free of all tax
liens and other liens, encumbrances and security interests
except the Excepted Liens.
Location. It is stored at one of the locations listed in
Exhibit 7.21, or such other locations in the United States of
which Snapper has given ITT notice, and is in the possesion or
control of Snapper. If it is located on leased premises, ITT
has received a landlord's waiver of rights with respect to
such Inventory. If it is held by a bailee, warehouseman or
similar party, ITT shall have received from such bailee,
warehouseman or similar party such acknowledgments of ITT's
lien, warehouse receipts or other agreements, each in form and
substance acceptable to ITT, as ITT may require in its
reasonable discretion.
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<PAGE> 4
Miscellaneous. It is new and unused, and it has not, in ITT's
good faith judgment, been materially reduced in market value
by reason of age, obsolescence, surplus or other factors.
Ownership. It is owned by Snapper, free of all tax liens and
other liens, encumbrances and security interests except the
Excepted Liens, and ITT has a perfected first security
interest therein.
Other Financinq. No financing statement is on file covering
such item or the products or proceeds there of except for
ITT's financing statement.
WIP. It is not work-in-process.
Environmental Laws. The term "Environmental Laws" shall mean the
Resource Conservation and Recovery Act, as amended, the Toxic Substance Control
Act, as amended, the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, the Superfund Amendments and Reauthorization Act of
1986, as amended, the Solid Waste Disposal Act, as amended, the Clean Air Act,
as amended, the Clean Water Act, as amended, and any comparable federal or
state statutes, now existing or later enacted, or any regulation promulgated
under any of such federal or state statutes relating to the protection of the
environment.
Equipment. The term "Equipment" shall have the meaning as given to
that term in the Uniform Commercial Code as set forth in the Missouri Revised
Statutes, as amended from time to time, and, to the extent not included
therein, shall also mean all equipment, machinery, trade fixtures, furnishings,
furniture, supplies, materials, tools, machine tools, office equipment,
appliances, apparatus, parts and all attachments, replacements, substitutions,
acceasions, additions and improvements to any of the foregoing.
ERISA. The term "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time.
Event of Default. The term "Event of Default" shall have the meaning
set forth in Section 9.
Excepted Liens. The term "Excepted Liens" shall mean: (a) liens for
taxes, assessments or other governmental charges or levies not yet delinquent or
which are being contested in good faith by appropriate action and as to which
adequate reserves shall have been set aside in conformity with GAAP;(b) liens
of mechanics, materialmen, landlord, warehousemen, carriers and similar liens
arising in the future in the ordinary course of business for sums not yet
delinquent or being contested in good faith, if a reserve or other appropriate
provision in accordance with GAAP shall have been made therefor; (c) liens
incurred in the ordinary course of business in connection with workers'
compensation, unemployment insurance, social security, and similar items for
sums not yet delinquent or being contested in good faith, if a reserve or other
appropriate provision in accordance with GAAP shall have been made therefor; (d)
lesor's liens arising from operating leases entered into in the ordinary course
of business; (e) liens arising from legal proceedings, so long as such
proceedings are being contested in good faith by appropriate proceedings,
appropriate reserves have been established therefor in accordance with GAAP, and
so long as execution is stayed on all judgments resulting from any such
proceedings; (f) easements, rights of way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements,
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<PAGE> 5
licenses, restrictions on the use of property or minor imperfections in
title there to which, in the aggregate, are not material in amount and which do
not materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the Business; (g) liens securing
Indebtedness incurred for the payment of all or any part of the purchase price
of any real property and fixed assets, and any renewals, extensions or
refinancings thereof; (h) liens upon the real property of Fuqua used in the
Business and located at 535 Macon Road, McDonough, Georgia that are expressly
permitted by the Deed to Secure Debt and security Agreement in favor of ITT
relating to such real property; (i) liens and security interest existing on the
Effective Date and set forth on Exhibit 7.5 hereto; and (j) liens in favor of
ITT granted hereunder.
Funding Date. The term "Funding Date" shall mean each date on which
a Loan or disbursement of Distributor Loan proceeds is funded hereunder.
GAAP. The abbreviation "GAAP" shall mean generally accepted
accounting principles, consistently applied.
Hazardous Substances. The term "Hazardous Substances" shall mean any
and all hazardous or toxic substances, materials or wastes as defined or
listed under the Environmental Laws.
Indebtedness. The term "Indebtedness" shall mean any sum for
borrowed money owed by Fuqua to any entity or person.
Ineligible Dealer Accounts The term "Ineligible Dealer Accounts"
shall mean any of the following, as determined by ITT in its reasonable
discretion:
(a) Accounts which are past due by more than 90 days;
(b) all Accounts of any Account Debtor if fifty percent
(50%) or more of the aggregate outstanding balance of all such Account
Debtor's accounts shall be described in clause (a) above;
(c) Accounts with respect to which the Account Debtor is
an officer, employee, agent, parent, subsidiary or affiliate of the
Distributor or is related or has common shareholders, officers or
directors with the Distributor;
(d) consignment sales;
(e) Accounts with respect to which the payment by the
Account Debtor is or may be conditional (other than by reason of the
normal return policy of the Distributor creating such account) or
subject to any right of offset, counterclaim or other reduction, to
the extent of such offset, counterclaim or reduction;
(f) Accounts with respect to which (i) the Account Debtor
is not a commercial or institutional entity, or (ii) the Account
Debtor is not a resident (if an individual) or incorporated or
chartered in (if a corporation) North America;
(g) Accounts with respect to which, and to the extent
that, the representations provided in Section 7.23(a), (b) and (c), if
applied to such account, would not be true and correct, whether or not
such representation is, or is not, within the best of Snapper's
knowledge;
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<PAGE> 6
(h) Accounts which represent goods purchased for a
personal, family or household purpose;
(i) Accounts with respect to which the Account Debtor is
not Solvent.
(j) Accounts with respect to which the Account Debtor is
in default of any material provision of the financing or security
agreement governing such Account, including, without limitation,
Accounts paid with checks returned and marked Insufficient Funds,
Accounts relating to Inventory sold out of trust, or Accounts which
are otherwise in dispute and in each case not resolved within 90 days;
Inventory. The term "Inventory" shall have the meaning given to that
term in the Uniform Commercial Code as set forth in the Missouri Revised
Statutes, as amended from time to time, and, to the extent not included
therein, shall also mean all of Snapper's inventory, goods, merchandise,
materials, finished goods, whole goods, work-in-process, component materials,
packaging, shipping materials, Parts and other tangible personal property, now
owned or hereafter acquired and held for sale or which contribute to the
finished products or the sale, promotion, storage and shipment thereof, whether
located at facilities owned or leased by Snapper, or in the course of transport
to or from facilities owned or leased by Snapper.
Inventory Credit Limit. The term "Inventory Credit Limit" shall have
the meaning set forth in Section 3.2(a).
Inventory Line of Credit. The term "Inventory Line of Credit" shall
mean the revolving credit facility described in Section 3.2.
Inventory Loan. The term "Inventory Loan" shall have the meaning set
forth in Section 3.2(a).
Loan. The term "Loan" shall mean any advance made to Snapper pursuant
to the Inventory Line of Credit or any Distributor Loan.
Loan Documents. The term "Loan Documents" shall mean all documents
executed by Fuqua and/or Snapper and all documents otherwise executed for the
benefit of ITT in connection herewith. The term "Loan Documents" includes, but
is not limited to, this Agreement, all financing statements, all pledges,
mortgages, deeds of trust, leasehold mortgages, security agreements,
guaranties, assignments, subordination agreements, and any future or additional
documents or writings executed under the terms of this Agreement or any
amendments or modifications hereto.
Maturity Date. The term "Maturity Date" shall mean October 23, 1995,
and any extension thereof pursuant to Section 11.22.
Obligations. The term "Obligations" shall mean all obligations to pay
to ITT: (a) any and all sums due ITT under this Agreement, including without
limitation, the Inventory Line of Credit, and required repayment of the
Proceeds Balance, and the guaranty set forth in Sections 3.6, or under the
terms of any of the other Loan Documents; (b) any and all sums reasonably
advanced by ITT to preserve or protect the Collateral or the value of the
Collateral or to preserve, protect, or perfect ITT's security interests in the
Collateral: (c) in the event of any proceeding to enforce the collection of
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<PAGE> 7
the Obligations after an Event of Default, the reasonable expenses of retaking,
holding, preparing for sale, selling or otherwise disposing of or realizing on
the Collateral, or expenses of any exercise by ITT of its rights, together with
reasonable attorneys' fees, expenses of collection and court costs, as provided
in the Loan Documents; and (d) any other indebtedness or liability of Snapper
or Fuqua to ITT, whether direct or indirect, absolute or contingent, now or
hereafter arising, as provided in the Loan Documents.
PBGC. The term "PBGC" shall mean the Pension Benefit Guaranty
Corporation or any entity succeeding to any or all of its functions under
ERISA.
Pension Plan. The term "Pension Plan" shall mean an "employee pension
benefit plan" (as such term is defined in ERISA) from time to time maintained
by Snapper or a member of the Controlled Group.
Person. The term "Person" shall mean an individual, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, and a
government or any department or agency thereof.
Plan. The term "Plan" shall mean, at any time, an employee pension
benefit plan which is covered by Title IV of ERISA or subject to the minimum
funding standards under section 412 of the Code and is either (a) maintained
by Fuqua or any member of a Controlled Group for employees of Fuqua or any
member of such Controlled Group or (b) maintained pursuant to a collective
bargaining agreement or any other arrangement under which more than one
employer makes contributions and to which Fuqua or any member of a Controlled
Group is then making or accruing an obligation to make contributions or has
within the preceding five plan years made contributions.
Portfolio Purchase Price. The term "Portfolio Purchase Price" shall
have the meaning set forth in Section 3.3(a).
Prime Rate. The term "Prime Rate" shall mean a fluctuating interest
rate per annum equal to the rate of interest announced publicly from time to
time (whether or not charged in each instance) by The Chase Manhattan Bank
(National Association), New York, New York (or any successor thereof) as the
bank's prime, base, or general reference rate. Each change in the Prime Rate
shall become effective, without notice to Snapper, on the effective date of each
such change. Should the banks listed above discontinue the practice of
announcing or publishing a Prime Rate during the term of this Agreement, the
Prime Rate used during the remaining term of this Agreement shall be that
interest rate or other general reference rate then in effect at such bank or at
another comparable bank, which, in the reasonable judgment of ITT, most
effectively approximates the initial definition of the "Prime Rate." Fuqua and
Snapper acknowledge that the bank listed above may extend credit at rates of
interest less than the Prime Rate.
Proceeds Balance. The term "Proceeds Balance" shall have the meaning
set forth in Section 3.3(c).
Receivables. The term "Receivables" shall mean all of Snapper's cash,
Instruments, Documents, Chattel Paper, notes, notes receivable, General
Intangibles, drafts, acceptances, choses in action, or payments due from any
Account Debtor, whether now existing or hereafter created or acquired, and all
proceeds and products thereof, and all rights thereto, arising from the sale of
or providing of Inventory, goods or services by Snapper to Distributors, as
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well as all rights of any kind of Snapper to receive payment or credit from any
person.
Records. The term "Records" shall mean correspondence, memoranda,
tapes, disks, papers, books and other documents, or transcribed information of
any type, whether expressed in ordinary or machine language.
Snapper Equipment. The term "Snapper Equipment" means Equipment used
primarily in the conduct of the Business, and includes, without limitation, each
of the items listed in Exhibit 5.1, and any item of Equipment now or hereafter
located in any of the locations listed in Section 7.21, even if its use in the
Business ceases, or if it is hereafter moved from such locations.
Snapper Products. The term "Snapper Products" shall mean the lawn,
garden and outdoor power equipment and other products manufactured and/or sold
by Snapper.
Snapper Subsidiaries. The term "Snapper Subsidiaries" shall mean any
and all domestic Subsidiaries of Fuqua which is primarily used in the domestic
operation of the Business or in the sale of Snapper Products.
Solvent. The term "Solvent" shall mean, when used with respect to any
Person, that: (a) the present fair saleable value of such Person's assets is in
excess of the total amount of such Person's liabilities; (b) such Person is
able to pay its debts as they generally become due; and (c) such Person does
not have unreasonably small capital to carry on such Person's business as
therefore operated and all businesses in which such Person is about to engage.
Subsidiaries. The term "Subsidiaries" shall mean any corporation in
which Fuqua owns or controls greater than 50% of the voting securities, or any
partnership or joint venture in which Fuqua owns or controls greater than 50% of
the aggregate equitable interest.
Total Outstandings. The term "Total Outstandings" shall mean, as of any
date, the sum of the then current Proceeds Balance, plus the then current
outstanding principal balance of all Inventory Loans.
3. TERMS OF THE CREDIT FACILITIES
3.1 Total Outstandings. Unless ITT shall, in its sole
discretion, elect to provide such additional funding, in no event shall Total
Outstandings at any time exceed the lesser of (a) $75,000,000 or (b) 80% of the
then current aggregate outstanding principal balance of all Distributor Loans;
provided, however, that the limitation set forth in clause (a) above shall be
automatically increased to $100,000,000 (or such higher amount as may be agreed
by the parties from time to time) once during each calendar year for the period
that commences on the first date in such calendar year that the Total
Outstandings exceed $75,000,000 and ending on that date which is forty-five
(45) days after the first date in such calendar year that the Total
Outstandings exceeds $78,750,000. At the end of such forty-five (45) day
period, the Total Outstandings in excess of $75,000,000 shall not, subject to
the limitation set forth in clause (b) above, constitute an Over-Advance and
may remain outstanding, subject to the terms of Section 3.7 hereof, until
repaid pursuant to Section 3.12 hereof.
3.2 Inventory Loans.
(a) Inventory Line of Credit. ITT agrees to lend
to Snapper on a revolving basis from the Effective Date until the
Maturity
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Date such sums as Snapper may from time to time request ("Inventory
Loans"), not to exceed at any time the smallest of (i) $10,000,000,
(ii) the sum of 75% of Snapper's or a Snapper Subsidiary's Eligible
Inventory, and 50% of Snapper's Eligible Parts, in each case measured
at cost or market value, whichever is lower, as determined on a
"first-in, first-out" basis, and (iii) 15% of the aggregate outstanding
principal amount of the then current Total Outstandings (after giving
effect to the Inventory Loans then being contemplated). Such maximum
amount is called the "Inventory Credit Limit". Within such limitation,
Snapper may borrow, repay and reborrow under the Inventory Line of
Credit subject to the continued observance by Snapper and Fuqua
of the terms and conditions hereof.
(b) Inventory Loan Interest. All Inventory Loans
shall bear interest at a fluctuating rate per annum that shall vary
depending upon the Prime Rate in effect from time to time, in
accordance with the following schedule:
If the Prime Rate The rate per annum
shall be: shall be:
-------- --------
less than 7% Prime Rate + 1.25%
7% - 7.4% Prime Rate + 1.00%
7.5% or greater Prime Rate + .75%
Interest shall be computed on the basis of the actual days elapsed and
a year of 360 days, even if the Prime Rate is based upon a 365-day
year. Interest for each calendar month shall be due and payable to ITT
by Snapper as of the first day of the nest succeeding month, and, at
ITT's option, may be debited to Snapper's Loan Account Ledger.
(c) Mandatory Prepayment. In addition to other
required payments, Snapper shall immediately pay ITT whatever sums may
be necessary from time to time to remain in compliance with the
Inventory Credit Limit, as it may change from time to time, including,
without limitation, as a result of any item no longer being deemed an
item of Eligible Inventory or Eligible Parts.
3.3 Distributor Loans.
(a) Existing Portfolio. ITT agrees to purchase,
and Fuqua agrees to sell, as of the Effective Date, all Snapper's
right, title and interest in and to all its Distributor
Receivables and all Distributor Documents, for an aggregate purchase
price equal to (i) the aggregate unpaid principal balance thereof;
MINUS (ii) all collected but unapplied funds relating to the
Distributor Receivables; in each case all calculated as of the
Effective Date (the "Portfolio Purchase Price"). Such purchase shall
be with full recourse against Fuqua, except as limited by Section 10.6
hereof.
(b) Subsequent Advances. During the term of this
Agreement ITT shall, pursuant to the terms and conditions of the
Distributor Documents, extend wholesale inventory financing to the
Distributors in order to enable the Distributors to purchase Snapper
Product from Snapper. In connection therewith, Snapper shall, upon
receipt of a purchase order from any Distributor, promptly send to ITT
Snapper's invoice to Distributor reflecting the Snapper Product being
purchased, the
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wholesale invoice price thereof, and such other information as ITT may
from time to time reasonably request, to ITT. Snapper acknowledges that
ITT shall have made a Distributor Loan to a Distributor in an amount
equal to the wholesale invoice price of Snapper Product ordered by
such Distributor upon ITT's acceptance of the invoice relating thereto,
notwithstanding any deferral by ITT in the payment of the proceeds of
such Distributor Loan to Snapper pursuant to clause (c) below. By
delivery of an invoice Snapper warrants the following:
(i) That it transfers to the Distributor
all right, title and interest in and to the Snapper Product so
described contingent upon ITT's approval to finance the
transaction;
(ii) That Snapper's title to the Snapper
Product is free and clear of all liens and encumbrances, other
than those to ITT, when transferred to the Distributor;
(iii) That the Snapper Product is in
salable condition, free of any material defects;
(iv) That the Snapper Product is the
subject of a bona fide order by the Distributor placed with
and accepted by Snapper and such Distributor has consented to
the financing of the transaction by ITT; and
(v) That the Snapper Product subject to
the transaction has been shipped to the Distributor not more
than 10 days prior to the original invoice date for such
Snapper Product (excluding redated or rebilled invoices).
In no event shall ITT be obligated to extend inventory financing to
any Distributor (A) in material default of its obligations under the
Distributor Documents, (B) which is the subject of any bankruptcy
proceeding or which is not Solvent, or (C) whose credit history with
Snapper or ITT includes repeated material defaults. This Agreement
represents financing accommodations between ITT and Snapper only, and
shall not create any third party beneficiary rights in any other party,
including any Distributor.
(c) Proceeds Disbursement. To induce ITT to
acquire the Distributor Portfolio, and to make additional Distributor
Loans, and to provide a reserve against Snapper's and Fuqua's
obligations hereunder, Snapper agrees that ITT may defer paying the
proceeds of the Portfolio Purchase Price, and the proceeds of
subsequent Distributor Loans made by ITT, until a Request (as defined
in section 4.1) is made by Snapper for payment thereof, subject to
satisfaction of the following payment conditions: The cumulative
amount of all such proceeds paid to, and retained by, Snapper, minus
the cumulative amount of all principal repayments of Distributor Loans
received by ITT, is called the "Proceeds Balance." In no event shall
the Proceeds Balance at any time exceed the sum of:
(i) 80% of all net and unused Snapper
Product in the possession of each Distributor ("Distributor
Inventory"), as measured by the wholesale invoice price
thereof; and
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(ii) 25% of all Eligible Dealer Accounts
owed to each Distributor by its dealers, reflecting sales of
Snapper Product by the Distributors to such dealers, up to an
amount equal to the lesser of $10,000,000 and 10% of Total
Outstandings (after giving effect to the proceeds payment then
being contemplated).
In addition to other required payments, Snapper shall immediately
repay ITT whatever Distributor Loan proceeds may be necessary to keep
the Proceeds Balance in compliance with the limitations set forth
above, as such limit may change from time to time, including, without
limitation, as a result of any amount no longer being deemed an
Eligible Dealer Account.
Within such limitation, Snapper may request such proceeds, in
increments of not less than $1,000,000, and may return such proceeds
to reduce Snapper's interest obligations under clause (d) below, and
re-request such proceeds, at any time or from time to time.
(d) Floorplan Program Terms The terms of all
Distributor Loans, whether acquired by ITT on the Closing Date
pursuant to Section 3.3(a), or subsequently advanced by ITT pursuant
to Section 3.3(b), are established from time to time by Snapper, and
presently provide for the scheduled repayment of principal, without
interest unless such payments are past due. In order to induce ITT to
purchase the Distributor Portfolio and to make additional Distributor
Loans, Snapper agrees to pay ITT interest on that portion of the
Distributor Loans which comprises the Proceeds Balance outstanding
from time to time. The average outstanding principal amount of the
Proceeds Balance shall, as to each month or portion thereof during the
term of this Agreement, bear interest at a fluctuating rate per annum
that shall vary depending upon the Prime Rate in effect from time to
time, in accordance with the following schedule:
If the Prime Rate The rate per annum
shall be: shall be:
-------- --------
less than 7% Prime Rate + 1.25%
7% - 7.4% Prime Rate + 1.00%
7.5% or greater Prime Rate + .75%
Interest shall be computed on the basis of actual days elapsed and a
year of 360 days even if the Prime Rate is based upon a 365-day year.
Interest for each calendar month shall be due and payable to ITT by
Snapper as of the first day of the next succeeding month and, at ITT's
option, may be debited to Snapper's Loan Account Ledger.
ITT shall, upon the request of Fuqua therefor made at any time when
there does not then exist an event of Default, assign to Fuqua any
Distributor Loan, and any Distributor Receivable and any collateral
security for such Distributor Loan or Distributor Receivable, provided
that any Proceeds Balance relating to such Distributor Loan or
Distributor Receivable shall have been repaid by Snapper.
3.4 Inventory Purchase Obligations. Whenever ITT deems it
necessary in its reasonable discretion to repossess or if it otherwise comes
into possession of any Snapper Product, Snapper shall purchase such Snapper
Product from ITT at the time of ITT's repossession or other acquisition or
possession thereof in accordance with the following terms and conditions:
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(a) Snapper shall purchase such Snapper Product,
regardless of its condition, at the point where ITT repossesses it or
where it otherwise comes into ITT's possession;
(b) The purchase price that Snapper shall pay to
ITT for such Snapper Product will be, five (5) Business Days after
invoice, due and payable immediately in full, and will be an amount
equal to (i) the total unpaid balance (being principal and finance
charges) owed to ITT with respect to such Snapper Product, and (ii)
all costs and expenses (including, without limitation, reasonable
attorney's fees) paid or incurred by ITT in connection with the
repossession of such Snapper Product, and payment of such purchase
price may be made by reducing the undisbursed portion of the
Distributor Loans which Snapper is entitled to have disbursed; and
(c) Snapper shall not assert or obtain any
interest in or to any Snapper Product acquired by it, until the
purchase price therefor described in clause (b) above is paid in full.
3.5 Inventory Loans. All amounts payable by ITT hereunder
shall be made by electronic funds transfers to Snapper's account pursuant to
electronic funds transfer instructions to be delivered by Snapper to ITT. The
parties intend that all indebtedness incurred hereunder shall be governed
exclusively by the terms of this Agreement and the other Loan Documents, and
shall not, unless requested by ITT, be evidenced by notes or other evidences of
indebtedness. Any fees, charges or expenses charged to ITT by any bank for
payments made by ITT at Snapper's request shall be payable by Snapper and
charged as a debit to the Loan Account Ledger. All advances and other
obligations of Snapper made hereunder shall constitute a single obligation.
3.6 Loan Account Ledger. ITT shall maintain a loan
account ledger for Snapper (the "Loan Account Ledger"). The debit balance of
the Snapper's Loan Account Ledger shall reflect from time to time the amount
any outstanding Inventory Loans and the then current Proceeds Balance. Each
month ITT shall render to Snapper a statement of account as of the last day of
the preceding month, which statement shall, absent manifest errors or
omissions, be considered correct and accepted by Snapper and conclusively
binding upon Snapper unless Snapper notifies ITT to the contrary within 30 days
from the date of receipt of said statement. The failure of ITT to provide a
statement, however, shall not relieve Snapper of its obligations to pay any
sums when due.
3.7 Annual Line Fee. Snapper agrees to pay ITT an annual
line fee in connection with the Inventory Line of Credit and all Distributor
Loans, payable in advance on the Effective Date, and on each anniversary
thereof through the term of this Agreement, each in an amount equal to
sixty-five hundredths of one percent (.65%) of $75,000,000. In the event that
the Total Outstandings exceed $75,000,000 for not less than 46 days during the
preceding twelve-month period, an additional annual line fee shall also be
payable in arrears on the first anniversary of the initial Effective Date, and
on each anniversary thereafter equal to the product of (a) the amount, if any,
by which Total Outstandings on each day during the preceding twelve months
exceeded $75,000,000 times (b) a daily rate of .0018056%, calculated on the
basis of the actual number of days, and the actual amount by which, Total
Outstandings exceeded $75,000,000. Once received by ITT, the annual line fee
payable on the Effective Date shall not be refundable by ITT for any reason
other than material default by ITT of its obligations hereunder. If following
the occurrence of an Event of Default, ITT elects to terminate this Agreement
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<PAGE> 13
prior to the Maturity Date, or if Fuqua elects to terminate this Agreement
prior to the Maturity Date pursuant to Section 11.22 for any reason other than
a material default by ITT of its obligations hereunder, Fuqua agrees that the
following amounts shall be payable as agreed liquidated damages for the early
termination of this Agreement:
<TABLE>
<CAPTION>
If such termination shall occur: The amount payable shall be:
-------------------------------- ----------------------------
<S> <C>
During the first year of this 75% of the annual line fee otherwise
Agreement. payable for the second year of this
Agreement, plus 50% of the annual
line fee otherwise payable for the
third year of this Agreement.
During the second year of this the greater of (i) 75%, or (ii) the
Agreement. actual percentage of the second year
which shall have elapsed at the time
of termination, in either case of the
annual line fee otherwise payable for
the second year of this Agreement,
plus 50% of the annual line fee
otherwise payable for the third year
of this Agreement.
During the third year of this the greater of (i) 50% or (ii) the
Agreement. actual percentage of the third year
which shall have elapsed at the time
of termination, in either case of the
annual line fee otherwise payable for
the third year of this Agreement.
</TABLE>
Any line fees previously paid to ITT in respect of the second or third
years of this Agreement in excess of the amounts provided above shall
be refunded by ITT. To the extent that the amount of liquidated
damages payable by Fuqua hereunder exceeds the amount of any refund
due to Fuqua hereunder, Fuqua shall be entitled to pay only the net
amount thereof.
3.8 Floorplan Guaranty.
(a) To induce ITT to acquire the Distributor
Receivables, and to make additional Distributor Loans, and for other
good and valuable consideration received, Fuqua, unconditionally and
absolutely guaranties to ITT subject to the provisions of Section 10.6
the immediate payment of all current and future liabilities owed by
the Distributors to ITT in connection with Distributor Loans when due,
whether such liabilities are direct or indirect, absolute or
contingent ("Liabilities"). Fuqua will pay ITT on demand the full
amount of all sums owed by Distributors to ITT in respect of
Distributor Loans, together with all costs and expenses (including,
without limitation, reasonable attorneys' fees).
(b) This guaranty will not be affected by any:
(i) change in the manner, place or terms of payment or performance in
any current or future agreement relating to the Distributor Loans
between ITT and any Distributor; (ii) any change in any Distributor's
financial condition; (iii) interruption of relations between any
Distributor and ITT or Fuqua;
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<PAGE> 14
(iv) claim or action by any Distributor against ITT; and/or (v)
increases or decreases in any credit ITT may provide to any
Distributor. Fuqua pay ITT even if ITT has not (A) notified
Distributors that it is in default of the Liabilities, and/or that ITT
has accelerated the payment of all or any part of the Liabilities, or
(B) exercised any of ITT's rights or remedies against any Distributor,
any other person or any current or future collateral. If any
Distributor hereafter undergoes any change in its ownership, identity
or organizational structure, this Guaranty will extend to all current
and future obligations owed to ITT by such new or changed legal
entity.
(c) Fuqua irrevocably waives: notice of ITT's
acceptance of this guaranty, presentment, demand, protest, nonpayment,
nonperformance, any right of contribution from other guarantors,
dishonor, the amount of indebtedness of any Distributor outstanding at
any time, the number and amount of advances made by ITT to
Distributors in reliance on this guaranty; notice and hearing as to
any prejudgment remedy; all other demands and notices required by law;
all rights of offset and counterclaims against ITT or any Distributor;
all notices or demands relating to, any collateral now or hereafter
securing any Liabilities (including, without limitation, all rights,
notices or demands directly or indirectly relating to the sale or
other disposition of such collateral or the manner of such sale or
other disposition).
(d) Fuqua has made an independent investigation
of the financial condition of the Distributors and gives this guaranty
based on that investigation and not upon any representation made by
ITT. Fuqua has access to current and future Distributors financial
information which enables it to remain continuously informed of
Distributors' financial condition. This guaranty will survive any
federal and/or state bankruptcy or insolvency action involving
Distributors. Fuqua is Solvent and our execution of this guaranty will
not make Fuqua insolvent. If ITT is required in any action involving
any Distributor to return or rescind any payment made to or value
received by ITT from or for the account of any Distributor, this
guaranty will remain in full force and effect and will be
automatically reinstated without any further action by ITT and
notwithstanding any termination of this Guaranty or ITT's release of
Fuqua. Any delay or failure by ITT, or ITT's successors or assigns, in
exercising any of ITT's rights or remedies hereunder will not waive
any such rights or remedies. Any oral or other amendment or waiver
made or claimed to be made to this guaranty that is not evidenced by a
written document signed by ITT's and Fuqua's authorized
representatives will be null, void and have no force or effect
whatsoever. This guaranty shall survive any termination of this
Agreement, until all the Distributor Loans shall have been paid in
full or have been reassigned to Fuqua.
3.9 Final Payment. On the Maturity Date, or upon demand
for payment made pursuant to Section 10, Snapper shall pay to ITT (a) the then
current Proceeds Balance, and all accrued and unpaid interest thereon, (b) the
then outstanding principal balance of all Inventory Loans and accrued and
unpaid interest thereon, and (c) accrued and unpaid line fees or other amounts
payable hereunder. Thereafter, ITT shall assign, without recourse and without
representation or warranty, other than as to ITT's title thereto not being
transferred or encumbered by any act of ITT, the then outstanding Distributor
Loans, Distributor Receivables, Parts Receivables, parts financing loans and
all collateral security for any of the foregoing.
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<PAGE> 15
3.10 Interest Rate After Judgment. If judgment is entered
against Snapper for sums due under any of the Obligations, as applicable, the
amount of the judgment entered (which may include principal, interest,
reasonable attorneys' fees and costs) shall bear interest at the Default
Interest Rate as of the date of entry of the judgment.
3.11 Default Interest Rate. If an Event of Default occurs,
and unless and until cured, ITT may, after the expiration of all applicable
notice and cure periods and without prior notice or demand, raise the rate of
interest accruing on the disbursed unpaid principal balance of any Loan by two
percentage points (2%) above the rate of interest otherwise applicable for
Inventory Loans or the Proceeds Balance, whether or not ITT elects to
accelerate the unpaid principal balances as a result of the Event of Default
(the "Default Interest Rate"). ITT shall promptly notify Snapper after imposing
the Default Interest Rate permitted by this Section.
3.12 Collections. Collections of Snapper's Receivables
shall be made in accordance with the provisions below:
(a) Receipt and Credit for Collections.
Simultaneously herewith, Snapper shall enter into a Lock Box Agreement
with ITT and a bank (the "Bank") pursuant to which the Bank will be
granted access to the post office box to which all Distributors shall
be instructed to forward payments with respect to all Collateral. All
checks, drafts, cash, notes, money orders, acceptances and other
remittances (including proceeds of Inventory financing) in part or
full payment with respect to the Collateral ("Collections") received
through the Lock Box shall be retained by the Bank and processed in
accordance with the Lock Box Agreement. All Collections received
directly by Snapper shall immediately be sent or delivered by Snapper
to the post office box that is part of the lock box arrangement. The
Bank shall, without further inquiry and without regard to any
instructions from Snapper, send all collections by electronic funds
transfer to ITT at such account or accounts as ITT shall direct in the
Lock Box Agreement, or otherwise in writing from time to time. Any
fees or expenses charged to ITT by the Bank or any other bank for
transfer of funds from Snapper's account shall be charged as accrued,
as a debit to the Loan Account Ledger.
(b) Verification of Receivables. Upon and during
the existence of any Event of Default, ITT may confirm and verify all
Receivables in any reasonable manner. In such circumstance, Snapper
shall assist ITT in confirmation and verification of the Receivables.
If no Event of Default shall be in effect, ITT and Snapper shall in
good faith coordinate the verification of all Receivables and
Distributor Receivables. ITT may at any time after and during the
continuance of an Event of Default, notify or require Snapper to
notify, all of Snapper's Account Debtors or any of them to make
payment directly to ITT to the extent not already provided by the Lock
Box. ITT may enforce collection of, settle, compromise, extend or
renew the indebtedness of any or all of Snapper's Account Debtors
after the occurrence and during the continuance of an Event of
Default.
3.13 Authority to Perform for Borrower - Lock Box. Snapper
hereby appoints ITT as Snapper's attorney-in-fact in connection solely with
enforcement of ITT's rights under the Lock Box Agreement, (i) to endorse the
name of Snapper on any notes, acceptances, checks, drafts, money orders or
other instruments for the payment of money or any security interest that may
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<PAGE> 16
come into ITT's possession; (ii) after and during the continuance of an Event
of Default to sign Snapper's name on any invoice or bill of lading relating to
any of the Receivables, on drafts against Customers, and notices to Customers;
and (iii) to receive, open and dispose of all mail addressed to Snapper and
received at the lockbox established pursuant to Section 3.12(a) hereof. This
power, because it is coupled with an interest, is irrevocable during the term
of this Agreement. ITT is hereby authorized and empowered to accept the return
of goods represented by any of the Receivables, without notice to or the
consent of Snapper and without discharging or in any way affecting Snapper's
liability hereunder. Except in case of its gross negligence or intentional
misconduct, neither ITT nor its appointee shall be liable for any acts of
commission or omission, nor for any error of judgment or mistake of fact or
law.
3.14 Other Authority to Perform for Snapper. Snapper also
hereby appoints ITT as Snapper's attorney-in-fact, during the continuation of
an Event of Default relating to the safety of the Collateral, or the perfection
or priority of ITT's lien therein, in order to undertake and perform such
actions in the name of Snapper as ITT shall reasonably deem necessary in order
to protect the Collateral and ITT's security interest therein, including,
without limitation, the filing of financing statements, providing for insurance
coverage, and protecting the Collateral from loss, theft or damage. This power
(as expressly limited herein), because it is coupled with interest is
irrevocable during the term of this Agreement. Except in the case of its gross
negligence or intentional misconduct, neither ITT nor its appointee shall be
liable for any acts of commission or omission, nor for any error of judgment or
mistake of fact or law.
3.15 Trade Name License. In consideration of the
agreements herein contained, Snapper hereby licenses to ITT the non-exclusive
and non-transferable right to use its registered trade name "Snapper," and
related registered logos described in Exhibit 3.15 (the "Marks"), in connection
solely with the name "Snapper Finance Company." ITT may use such name solely in
connection with its provision of wholesale inventory finance services to the
Distributors, as described in Section 3.3. Snapper agrees that it shall not
use, and shall not license or permit any third party to use, the trade name
"Snapper" in connection with the word "Finance." This license shall
automatically terminate upon the termination of this Agreement, provided,
however that ITT may continue to use the "Snapper Finance Company" name in
connection with administering, collecting or enforcing of any Distributor Loans
outstanding on such termination date, until such loans are paid in full, or
transferred to Snapper. ITT agrees that it will not contest or challenge
Snapper's rights to the trade name "Snapper." ITT acknowledges Snapper's
substantial investment of goodwill in the trade name "Snapper," and agrees that
its use of the Marks in its wholesale inventory finance business shall be
conducted consistent with the high standards used by ITT in connection with its
own trademarks. Any reproduction or other use of the Marks shall be subject to
Snapper's approval, not to be unreasonably withheld. Snapper will cooperate
with ITT in registering ITT's use of such name in all appropriate
jurisdictions, at ITT's expense. ITT will cooperate with Snapper in terminating
such registrations upon the termination of this license, at Snapper's expense.
3.16 Parts Floorplan. Snapper presently provides open
account financing to its Distributors for the purchase of parts pursuant to the
Distributor Documents, and has requested that ITT acquire its portfolio of
Accounts reflecting such sales of parts, and continue to provide such parts
financing subsequently. Snapper has agreed to transfer such Accounts relating
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<PAGE> 17
to parts (the "Parts Receivables"), and ITT has agreed to acquire the Parts
Receivables, and to provide subsequent financing of parts for the Distributors,
in accordance with the following terms and conditions (the parties further
agree that the Parts Receivables and subsequent financing of parts shall not be
considered Distributor Loans or Distributor Receivables for purposes of Section
3.3):
(a) Simultaneously with ITT's acquisition of the
Distributor Receivables, Fuqua agrees to transfer, and ITT agrees to
accept, the Parts Receivables. The purchase price for the Parts
Receivables shall be the aggregate unpaid principal amount thereof,
payable solely upon collection thereof by ITT. ITT agrees, when, and
solely to the extent that, any principal or interest payment thereof
shall be received by ITT from the Distributors, to apply such proceeds
to repayment of the then outstanding Inventory Loans, or any then
outstanding Proceeds Balance, as directed by Snapper.
(b) Following the Effective Date, ITT agrees to extend
wholesale financing to Distributors for the purchase of parts pursuant
to the Distributor Documents. To induce ITT to extend such financing,
Snapper agrees that ITT's obligation to pay the proceeds of such loans
to Snapper shall be conditioned upon, and shall only apply to the
extent of, ITT's receipt of principal repayment for such parts
financing loans from the Distributors. ITT further agrees that any
interest payable thereon, to the extent received by ITT, shall also be
payable to Snapper.
(c) Snapper and ITT agree that the Distributor shall be
instructed to pay all amounts due and owing under the Distributor
Loans, or pursuant to the financing of parts, to the same lock box
provided in Section 3.12 for collection of the Distributor Loans. ITT
and Snapper further agree that all amounts collected by ITT through
such lock box shall be allocated as repayment of either the
Distributor Loans or the parts financing program provided in this
Section 3.16 in accordance with the remittance advice received with
each payment, to the extent such advice is reasonably determinable,
and reflective of payment made by such Distributor in the ordinary
course of business; in all other cases, amounts received shall be
allocated pro rata in accordance with the outstanding principal
balance as of the last day of the immediately preceding month of (i)
all Distributor Loans, and (ii) of all parts financings. The Company
shall provide to ITT, as of the last day of each month, with an
accounting of the outstanding principal balance of all outstanding
parts financing.
(d) ITT agrees that it shall pursue all collection
activities, including replevin and foreclosure actions, without
preference or priority between efforts to collect and enforce the
payment of Distributor Loans and the parts financing provided herein,
provided, however, that in lieu of commencing such actions, if there
shall then not be in effect an Event of Default, ITT shall assign to
Snapper any defaulted parts financing and/or Distributor Loan to
Snapper, and any collateral security therefor, provided that any
Proceeds Balance relating thereto, if any, shall have been repaid by
Snapper. Any parts repossessed by ITT pursuant to the Distributor
Documents shall, at the election of Snapper, be returned to Snapper
for disposition as Snapper shall determine. Snapper shall be entitled
to receive all proceeds of any such sale of such parts, and ITT shall
be entitled to receive all proceeds of all other Snapper inventory.
ITT shall not be liable to Snapper for any deficiency owing on the
parts financing program after allocation of such proceeds. ITT may
deduct from any amounts so collected in respect of any parts
financing, the pro rata
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<PAGE> 18
portion of all costs of collection, including reasonable attorney's
fees, expended in pursuing such collection and enforcement activities.
3.17 Billing Statements. Snapper agrees that it shall, in
the name of Snapper Finance Company, issue billing statements, and render
credit decisions regarding the wholesale financing of Parts purchase by the
Distributors, and shall keep and maintain all records relating thereto in
accordance with the same standards employed by Snapper prior to the date of
this Agreement. Snapper hereby expressly acknowledges and agrees that ITT shall
be under no obligation to maintain such records, or bill any amounts due and
payable for such Parts financings. The Company further agrees, until otherwise
requested by ITT, to also issue billing statements without charge in the name
of Snapper Finance Company, with respect to all Distributor Loans, and to
provide copies thereof, to ITT upon request. ITT and Snapper shall cooperate
and use their best efforts to ensure that all billing statements and ITT's and
Snapper's books and records reflecting amounts billed and owing in respect of
Distributor Loans and Parts financings shall be accurate and consistent.
3.18 Relationship of Parties. As described in the
introduction to this Agreement, Snapper is a division of Fuqua. Although this
Agreement makes numerous references to certain obligations, liabilities, or
indebtedness of Snapper, Fuqua acknowledges and agrees that, as owner of the
Snapper division, it is liable for any obligation, liability or indebtedness of
Snapper made or incurred hereunder, and that ITT has relied thereon in entering
into this Agreement, subject, however, to Section 10.6 hereof. The foregoing
statement shall not be construed, however, to expand the meaning hereunder of
the term "Collateral" beyond the specific terms set forth in Section 5.1
relating to items used in or arising from the Business, nor shall any
representation made herein specifically regarding Snapper or the Business be
construed, as a result of this Section 3.18, to be a representation regarding
Fuqua generally, or Fuqua's business operations. ITT hereby acknowledges and
agrees that any and all obligations owed by ITT to Snapper hereunder are owed
to Fuqua.
3.19 Management of Accounts. With respect to all matters
affecting the inventory financing of any Distributor, including without
limitation the size of any credit limit, payment terms, the release, settlement
or compromise of any party liable for our Distributor Receivables, the release
of any collateral thereunder, any amendment, modification or waiver of the
terms of any financing program with such Distributor, and any and all
termination and enforcement actions regarding any Distributor Receivable,
Snapper and ITT agree that they shall first attempt to mutually agree as to
all such issues. If Snapper or ITT are unable to so agree in good faith, then,
at Snapper's election (if Snapper shall fail to so elect within 2 Business Days
following notice to Snapper by ITT of their failure to mutually agree, Snapper
shall be deemed to have elected option (a) below; provided, further, however,
that if there is not then sufficient availability under Section 3.3 (c), then
choice (b) shall be deemed elected), either:
(a) ITT shall assign the Distributor Receivables
or Distributor Documents, and all collateral thereunder, to Snapper,
provided that there shall then be no event of Default hereunder, and
Snapper has repaid all outstanding Distributor Loans and the Proceeds
Balance relating to such Distributor, or there is sufficient
availability under Section 3.3 (c) hereof; or
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<PAGE> 19
(b) ITT shall have no further obligation to
extend inventory financing to such Distributor, and may exclude the
Distributor inventory and Eligible Dealer Accounts of such Distributor
from the availability provisions of Section 3.3 (c) hereof; in this
event, ITT may manage the inventory financing of such Distributor as
it shall determine in its sole discretion. Fuqua's guaranty of such
Distributor's obligations to ITT set forth in Section 3.8 shall,
however, continue only as to obligations incurred prior to the date of
Snapper's election.
4. BORROWING AND REPAYMENT PROCEDURES
4.1. Borrowing Procedures.
(a) Inventory Loans and requests for Distributor
Loan proceeds shall be requested in writing not less than one (1)
Business Day prior to the requested borrowing or disbursement date
(including telex or facsimile transmission with original to follow)
specifying the borrowing or disbursement date, the amount requested,
and whether the request is for an Inventory Loan or Distributor Loan
proceeds (a "Request").
(b) Snapper further agrees to provide to ITT a
current Availability Certificate simultaneously with each Request, and
at the end of each month with respect to the Inventory Line of Credit,
and in each case at such other times as ITT may request. Such
Availability Certificate shall be executed and certified as accurate
by such person or persons as Snapper designates in writing to ITT
under the authority of duly adopted resolutions of Fuqua's Board of
Directors.
(c) Snapper shall provide ITT with documentation
satisfactory to ITT indicating the names of those employees of Snapper
authorized by Snapper to sign Availability Certificates and Requests,
and/or to authorize disbursement of proceeds by wire transfer or
otherwise, and ITT shall be entitled to rely upon such documentation
until notified in writing by Snapper of any change(s) in the names of
persons so authorized.
4.2 Over Advances. ITT in its sole and absolute
discretion may elect to permit Loans under the Inventory Line of Credit at any
time to exceed the Inventory Credit Limit, to disburse Distributor Loan
proceeds in excess of the then maximum Proceeds Balance, or to permit Total
Outstandings to exceed the limits described in section 3.1, and no such event
or occurrence shall cause or constitute a waiver by ITT of its right to demand
payment of all or any part of the Inventory Loans or Proceeds Balance at any
time within the terms of this Agreement or to refuse, in its sole and absolute
discretion, to make further Over Advances. Any Over Advance shall be payable
five (5) Business Days after demand therefor, unless otherwise specifically
agreed to by ITT, and shall bear interest at the Default Interest Rate.
4.3 All Loans One Obligation. All Indebtedness and other
Obligations of Snapper to ITT under the Loan Documents shall constitute one
general obligation secured by the security interest granted in this Agreement,
or any Loan Document, and by all other liens heretofore, nos, or at any time or
times hereafter granted by Snapper. Snapper agrees that all of the rights of
ITT set forth in this Agreement shall apply to any modification of or
supplement to this Agreement, or Exhibits hereto, and the Loan Documents,
unless otherwise agreed in writing.
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4.4 Making of Payments: Application of Collections.
(a) Making of Payments. All payments hereunder by
Snapper shall be made without set-off or counterclaim and shall be
made to ITT in immediately available funds (except as ITT may
otherwise consent) prior to 2:00 p.m., Atlanta time, on the date due
at its office at 2859 Paces Ferry Road, Suite 920 (Zip: 30339), P.O.
Box 105080, Atlanta, GA 30348-5080 or at such other place as may be
designated by ITT to Snapper in writing. Any payments received after
such time shall be deemed received on the next Business Day. Whenever
any payment to be made hereunder shall be stated to be due on a date
other than a Business Day, such payment may be made on the next
succeeding Business Day, and such extension of time shall be included
in the computation of payment of interest or any fees.
(b) Application of Collections. Snapper
authorizes ITT, and ITT will, subject to the provisions of this
Section, apply the whole or any part of any amounts received by ITT
from collection, or from proceeds of any collateral against the
principal and/or interest of any Obligation, whether or not then due,
in such order of application as ITT may determine, unless such
payments or proceeds are, in ITT's sole and absolute discretion,
released to Snapper, provided, however, that no checks, drafts or
other instruments received by ITT shall constitute final payment to
ITT unless and until such item of payment has actually been collected.
All items or amounts which are delivered to ITT by or on behalf of
Snapper or any Account Debtor or other obligor on account of partial
or full payment or otherwise as proceeds of any of the Collateral may
from time to time in ITT's sole and absolute discretion be released to
Snapper or may be applied by ITT towards such of the Obligations,
whether or not then due, in such order of application as ITT may
reasonably determine. Notwithstanding anything to the contrary
herein, (i) all cash, checks, instruments and other items of payment,
solely for purposes of determining the occurrence of any Event of
Default, or under Section 3.2 or 3.3, whether there is availability
for Inventory Loans or Distributor Loans proceeds, shall be applied
against the Liabilities on the day of receipt thereof by ITT, and (ii)
solely for purposes of interest calculation hereunder, all amounts
received by ITT in cash or by federal wire transfer or ACH electronic
transfer shall be applied against Liabilities on the day of receipt,
and all amounts received in any other form shall be applied against
Liabilities on the nest Business Day.
4.5 Operations. Snapper shall provide secure, separate
office space, without additional charge, at its 535 Macon Road, McDonough,
Georgia place of business reasonably sufficient for the Distributor Documents
and three individuals, presently contemplated to conduct the business of ITT
operating as Snapper Finance Company. ITT shall reimburse Snapper for its
appropriate portion of telephone, telex, information processing, mailing or
other out-of-pocket expenses incurred by Snapper as a result of such operations.
Of the three individuals, Snapper agrees to provide the services of one full
time employee, at Snapper's expense, to perform Distributor billing and related
services. Anything in the foregoing to the contrary notwithstanding, Snapper
acknowledges that the office space to be provided hereunder shall be ITT's to
control, and that ITT shall have constant access thereto (subject to reasonable
building security procedures), and that ITT shall control the access of all
other parties to such space and the Distributor Documents, including Snapper.
ITT may, at any time, elect to remove all or any portion of the Distributor
Documents or other office records
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relating to ITT's inventory finance business. ITT shall provide the remaining
employees, at ITT's expense, including the supervisor for the business
conducted by Snapper Finance Company. Notwithstanding that Snapper's
contributed employee shall remain an employee of Snapper, Snapper agrees that
such employee may be supervised and directed in all work functions by ITT, and
its supervisory personnel. ITT and Snapper agree that they shall reasonably
consult with each other to determine the employees to be designated by them to
manage such operation.
5. SECURITY FOR THE OBLIGATIONS
The repayment of the Obligations, and the full, complete and
absolute performance by Snapper of each of the terms and conditions of the Loan
Documents, as amended from time to time, shall be secured by the security
interests, liens, assignments, guaranties and pledges described in this Section
5.
5.1 Grant of Security Interest. Fuqua collaterally
assigns to ITT as security and for the benefit of ITT all of Fuqua's right,
title and interest in and to, and grants to ITT for the benefit of ITT, a
continuing security interest in and to all of the following tangible and
intangible assets owned by Fuqua wherever located, whether now owned or
hereafter acquired by Fuqua, together with all substitutions therefor, and all
replacements and renewals thereof, and all accessions, additions, replacement
parts, manuals, warranties and packaging relating thereto:
(a) Accounts arising out of the conduct of the
Business;
(b) Chattel Paper arising out of the conduct of
the Business;
(c) Documents arising out of the conduct of the
Business;
(d) Snapper Equipment;
(e) Fixtures located at any place of business set
forth on Exhibit 7.21 hereof, or any other location which may, after
the date hereof, become primarily used in the conduct of the Business;
(f) General Intangibles arising out of the
conduct of, or used primarily as a part of, the Business;
(g) Goods held for sale or lease as a part of, or
used and consumed in the conduct of, the Business;
(h) Instruments arising out of the conduct of the
Business;
(i) Inventory held for sale or lease as a part
of, or used and consumed in the conduct of, the Business;
(j) Receivables arising out of the conduct of the
Business;
(k) Parts;
(l) contract rights, including without limitation
contracts with governmental bodies, contracts with Customers,
contracts with suppliers, deposits, prepayments, plans,
specifications, manuals, contracts with independent contractors,
personal property leases, and purchase orders, in each case arising
out of the conduct of the Business;
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(m) leases, leasehold rights and leasehold
improvements relating to the Business,
(n) all Records relating to or pertaining to any
of the Collateral, including but not limited to, all client and
customer lists, books and records, correspondence, files and other
data, wherever located, useful in the continuing operation of the
Business by Snapper;
(o) all of Snapper's rights as an unpaid vendor
or lienor, including stoppage in transit, replevin or reclamation;
(p) all guarantees, mortgages on real or personal
property, or other agreements or property relating to or acquired for
the purpose of securing and enforcing any debt arising out of the
conduct of the Business;
(q) trade secrets and other proprietary
information; trademarks, service marks and business names and the
goodwill of the Business relating thereto, used primarily in the
conduct of the Business; and
(r) copyrights (including, without limitation,
copyrights for computer programs) and all tangible property embodying
the copyrights, in each case used in the conduct of Business;
unpatented inventions (whether or not patentable); patents and patent
applications, in each case used in the conduct of the Business;
license agreements relating to any of the foregoing and income from
such license agreements; and the right to sue for all past, present
and future infringements of the foregoing.
Fuqua acknowledges and agrees that all of the types of assets listed
above, to the extent located as of the date of this Agreement at any location
set forth on Exhibit 7.21 hereof, are used in the conduct of the Business and
comprise Collateral hereunder; provided, however, that none of the types of
assets described above (other than books and records relating to the Business),
to the extent located at 4900 Georgia Pacific Center, Atlanta, Georgia or to
the extent consisting of stock or other securities held by Fuqua shall
constitute Collateral hereunder and are specifically excluded from any lien and
security interest in favor of ITT.
5.2 Proceeds and Products. ITT's security interests
shall apply to the proceeds of the Collateral, including but not limited to
proceeds of any insurance received or receivable with respect to any lost,
stolen, damaged or destroyed items of Collateral. ITT's security interests
shall also apply to the products of the Collateral.
5.3 Financing Statements. Fuqua shall execute and deliver
to ITT for the benefit of ITT such financing statements, certificates of title
and original documents as may be required by ITT with respect to ITT's
security interests.
5.4 Patent and Trademark Assignment. Fuqua shall grant
ITT a Collateral Patent and Trademark Assignment, in form and substance
satisfactory to ITT, to secure the repayment of the Obligations and the full,
complete and absolute performance by Snapper of each of the terms and
conditions of the Loan Documents.
5.5 Future Advances. ITT's security interests shall
secure all current and all future advances to Snapper made by ITT under the
Loan Documents.
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5.6 Mortgage. Fuqua shall, not more than thirty (30) days
after the Effective Date, grant to ITT a first priority mortgage in the real
property described in Exhibit 5.7 and shall provide, at Snapper's expense, a
standard form ALTA lenders title insurance policy, bearing only standard
exceptions, and otherwise in form and substance satisfactory to ITT. In
connection therewith, Snapper shall cause ITT to receive, at Snapper's expense,
a phase I environmental survey of such real property, in form and substance
satisfactory to ITT.
5.7 Guaranties. Fuqua shall cause the Snapper
Subsidiaries to execute and deliver collateralized guaranties of Fuqua's
obligations hereunder secured by the assets described therein.
6. CONDITIONS PRECEDENT
All duties and obligations of ITT under the Loan Documents on
the Effective Date, on each Funding Date and at all times during the term of
this Agreement, are specifically subject to the full and continued satisfaction
by Snapper of the conditions precedent set forth below.
6.1 Conditions Precedent for Initial Funding. The
following conditions must be satisfied as of the initial Funding Date:
(a) ITT's Counsel. ITT's counsel must approve of
all matters pertaining to (a) title to the Collateral; (b) the form,
substance and due execution of all Loan Documents; (c) Fuqua's
organizational documents; and (d) all other legal matters, including
the application of any laws relating to usury.
(b) Material Change. There must not have been any
material adverse change, between December 31, 1991 and the Funding
Date, in the condition of Fuqua, the condition of the Business, the
value and condition of the Collateral, the structure of Fuqua and
Snapper other than as contemplated herein, or in the financial
information, audits and the like obtained by ITT.
(c) Perfected Liens. Snapper shall provide
evidence that ITT has a perfected first priority lien and security
interest in the Collateral, subject only to the Excepted Liens.
(d) Insurance. Snapper shall provide ITT with
certificates of insurance evidencing that Snapper has obtained the
insurance as required in Section 8.1.2.
(e) Laws. Snapper and its Subsidiaries shall be
in compliance with all applicable laws and governmental regulations,
including, but not limited to, all requirements of the Environmental
Protection Agency and similar state agencies having jurisdiction, the
failure to comply with which would have a material adverse effect on
Snapper, its Subsidiaries or the Business, except for any violation of
law disclosed in the Environmental Report.
(f) Other Loan Documents. Executed originals of
all other Loan Documents, in form and substance satisfactory to ITT,
shall be delivered to ITT.
(g) Availability Certificate. Snapper shall have
delivered to ITT an initial Availability Certificate.
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(h) Articles of Incorporation. A certified copy
of Fuqua's Articles of Incorporation and Bylaws.
(i) Certificate of Good Standing. A certificate
of good standing (or other similar certificate) for Fuqua, from the
appropriate governmental authority of the state of Delaware and other
jurisdictions in which Snapper does business dated not earlier than 30
days prior to the Effective Date.
(j) Opinion of Borrower's Counsel. A written
opinion to ITT from counsel for Fuqua dated the Effective Date, and
addressed to and for the benefit of ITT, in form and substance
satisfactory to ITT.
(k) Retirement of Debt. In connection with
Snapper's contemplated repayment of the indebtedness of Snapper (i) a
pay-off letter from Barclays Business Credit, Inc. setting forth the
amount to be paid to completely repay all such indebtedness, and
acknowledging or making satisfactory arrangements for the termination
of any and all security interests held by such creditor in the assets
of Snapper upon receipt of such amount, and (ii) UCC-3 termination
statements executed by such lender and appropriate for filing relating
to the financing statements perfecting the security interest of such
lender, shall be available for filing upon such lender's receipt of
such pay-off amount.
6.2 Conditions Precedent For All Fundings. The following
conditions must be satisfied as of each Funding Date, including the initial
Funding Date:
(a) Each of Fuqua's representations and
warranties provided herein shall be true and correct in all material
respects, as of each such Funding Date (or, if any such representation
or warranty is limited to a specific date, as of such specific date).
In connection therewith, Fuqua agrees that both Snapper's Request for,
and acceptance of, any Inventory Loans or Proceeds Balance hereunder
shall be deemed to constitute Fuqua's representation and warranty that
the representations and warranties set forth in this Agreement are
true, correct, and restated as of the dates of such request, and such
acceptance (or, if any such representation or warranty is limited to a
specific date, as of such specific date).
(b) There shall not have occurred and be
continuing any Event of Default, or any other event or occurrence
which, with the passage of time, or notice, or both, would be an Event
of Default.
(c) With respect to any Requests, the amount
requested for such Funding Date, if any, together with the then
current Total Outstandings, shall not exceed the then maximum amount
available for Inventory Loans or Proceeds Balance, as applicable,
described in Sections 3.2 and 3.3.
6.3 Required Documents. Before this Agreement is executed
by ITT, Fuqua shall have delivered to ITT (or, if acceptable to ITT, shall have
made available to ITT) the following:
(a) A certificate by a provider of financing
statement searches acceptable to ITT of all financing statements of
public record that pertain to the Collateral.
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(b) A certificate by Fuqua acceptable to ITT as
to the absence of any judgments, tax liens, bankruptcy filings, or
reorganization or arrangement proceedings of public record against
Snapper.
(c) Such other documents, submissions, insurance
policies and other matters as reasonably requested by ITT relating to
the results of ITT's due diligence or Fuqua's representations made
hereunder.
(d) Snapper's certification of compliance with
all of the terms and conditions in the Loan Documents to be supplied
at such closing.
(e) A certified copy of the Articles of
Incorporation, By-Laws and the resolutions of the directors of Snapper
authorizing the transactions contemplated by this Agreement.
(f) A certificate of incumbency for the officers
and directors of Snapper.
7. REPRESENTATIONS AND WARRANTIES
To induce ITT to enter into this Agreement, Fuqua makes the
representations and warranties set forth below, all of which shall remain true
in all material respects during the term of the Revolving Line of Credit. Fuqua
acknowledges ITT's justifiable right to rely upon the representations and
warranties set forth below.
7.1 Financial Statements. Fuqua's audited consolidated
financial statements as at December 31, 1991 and Snapper's unaudited
consolidated financial statement as at June 30, 1992, copies of which have been
previously submitted to ITT, have been prepared in conformity with GAAP and
present fairly the financial condition of Fuqua and its consolidated
Subsidiaries as at such dates and the results of their operations for the
periods then ended, subject (in the case of the June 30, 1992 financial
statements) to year-end audit adjustments and omission of footnotes.
7.2 Non-Existence of Defaults. As of the date hereof,
neither Fuqua nor any of its Subsidiaries is in default with respect to any
material amount of its existing Indebtedness. The making and performance of
this Agreement and the Loan Documents, will not immediately, or with the
passage of time, the giving of notice, or both: (a) violate the provisions of
the bylaws or any other corporate document of Fuqua; (b) violate any laws: (c)
result in a material default under any contract, agreement, or instrument to
which Fuqua is a party or by which Fuqua or its properties are bound; or (d)
result in the creation or imposition of any security interest in, or lien or
encumbrance upon, any of the Collateral of Snapper except in favor of ITT.
7.3 Litigation. Set forth on Exhibit 7.3 is a list of all
material actions, suits, investigations or proceedings pending or, in the
knowledge of Fuqua, threatened against Fuqua or any of its Snapper
Subsidiaries, as of the date hereof in which there is a reasonable probability
of an adverse decision which would materially and adversely affect Fuqua, the
Business, the Collateral, or the conditions, financial or otherwise, of Fuqua.
7.4 Material Adverse Changes. As of the date hereof Fuqua
does not know of or expect any material adverse change in the Business, or in
Fuqua's assets, liabilities, properties, or condition, financial or otherwise,
including changes in Snapper's financial condition from June 30, 1992 through
the Effective Date.
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7.5 Title to Collateral. Fuqua has good and marketable
title to all of the Collateral, free and clear of any and all liens, claims and
encumbrances, other than the Excepted Liens.
7.6 Corporate Status. Fuqua is a duly organized Delaware
corporation, in good standing, with perpetual corporate existence. Fuqua and
its Subsidiaries have the corporate power and authority to own their properties
and to transact the Business in which it is engaged and presently proposes to
engage. The Business is transacted through an operating division, other than
the Snapper Subsidiaries operating as Distributors. The Snapper Subsidiaries
are each duly qualified as a foreign corporation and in good standing in all
states where the nature of its Business or the ownership or use of its property
requires such qualification, and where failure to so qualify would have a
material adverse effect on its Business, operations or financial condition.
Each of the Snapper Subsidiaries is a corporation duly organized and validly
existing under the laws of its respective jurisdiction of formation.
7.7 Subsidiaries. Exhibit 7.7 hereto lists the Snapper
Subsidiaries and all Fuqua's other directly and indirectly held Subsidiaries
used in the Business as of the Effective Date. All such Snapper Subsidiaries
presently operate as Distributors on the date hereof.
7.8 Corporate Power and Authority. Fuqua has the
corporate power to borrow and to execute, deliver and carry out the terms and
provisions of the Loan Documents. Fuqua has taken or caused to be taken all
necessary corporate action to authorize the execution, delivery and performance
of the Loan Documents and the borrowing thereunder (including, but not limited
to, the obtaining of any consent of shareholders required by law or by
Snapper's Articles of Incorporation or Bylaws).
7.9 Place of Business. As of the date hereof Fuqua's
chief executive office is at 4900 Georgia Pacific Center, Atlanta, Georgia
30303, and the primary place of business and chief executive office of Snapper
is at 535 Macon Road, McDonough, GA 30253. With the exception of certain
Snapper owned tools and dies permitted by Snapper to be used by certain of
Snapper's suppliers, the Collateral is maintained as of the date hereof solely
at the locations listed in Exhibit 7.21, and all assets used in the Business
are in such locations.
7.10 Place Where Records Maintained. As of the date hereof
Snapper's Records concerning the Collateral are kept at the chief executive
office of Snapper referenced above, or will be kept at such other place that
Snapper or Fuqua informs ITT of in advance of relocation.
7.11 Validity, Binding Nature and Enforceability of the
Loan Documents. The Loan Documents executed by Fuqua are the valid and binding
obligations of Fuqua and are enforceable against Fuqua in accordance with their
terms, except as limited by bankruptcy, insolvency, or other laws of general
application relating to the enforcement of creditors' rights.
7.12 Taxes. As of the date hereof, Fuqua has (a) filed all
federal and all material state and local tax returns and other reports that it
is required by law to file prior to the Effective Date, (b) paid or caused to
be paid all taxes, assessments and other governmental charges that are due and
payable prior to the Effective Date, the failure of which to pay would have a
material adverse effect on the Business, except those contested in good faith
and in accordance with accepted procedures, and for which adequate reserves
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have been established in accordance with GAAP, and (c) made adequate provision
for the payment of such taxes, assessments or other charges accruing but not
yet payable. Except as set forth in Exhibit 7.12, Fuqua has no knowledge of any
deficiency or additional assessment in a material amount in connection with any
taxes, assessments or charges.
7.13 Compliance with Laws. As of the date hereof, Fuqua
has complied, and shall cause each Snapper Subsidiary to comply, in all
material respects with all applicable laws, including any Environmental Laws
and any zoning laws, the failure of which to comply with would have a material
adverse effect on Snapper individually, or Fuqua and its Subsidiaries on a
consolidated basis.
7.14 Consents. As of the date hereof, Snapper has duly
obtained all material consents, permits, licenses, approvals or authorization
of, or effected the filing, registration or qualification with, any
governmental entity which is required to be obtained or effected by Snapper or
Fuqua in connection with the Business or the execution and delivery of this
Agreement and the other Loan Documents the failure of which to obtain or effect
would have a material adverse effect on Snapper, individually, or on Fuqua and
its Subsidiaries, on a consolidated basis.
7.15 Purpose. The proceeds of all Inventory Loans and
disbursements of Distributor Loans shall be used by Snapper solely for (a)
capital expenditures and the working capital needs of Snapper; (b) to repay the
net working capital advanced to Snapper by Fuqua since September 30, 1991; and
(c) to retire certain indebtedness relating to said division owed to Barclays
Business Credit, Inc.
7.16 Condition of the Business. All material assets used
in the conduct of the Business are in good operating condition and repair and
are fully usable in the ordinary course thereof, reasonable wear and tear
excepted.
7.17 Labor Contracts. As of the date hereof, neither
Fuqua, nor any Snapper Subsidiary is a party to or bound by any collective
bargaining agreements, nor are there any petitions to certify a collective
bargaining organization or notices of intention to organize pursuant to the
National Labor Relations Act, other than as described in Exhibit 7.17.
7.18 Capital. All issued shares and all outstanding shares
in the Snapper Subsidiaries as reflected in Fuqua's financial statements are
validly issued pursuant to proper authorization of board of directors of such
Subsidiary, fully paid, and nonassessable.
7.19 ERISA. As of the date hereof, except as set forth on
Exhibit 7.19, neither Fuqua, nor any Snapper Subsidiary has any employee
benefit plans covered by Title IV of ERISA and no qualified or nonqualified
retirement plans or deferred compensation plans.
7.20 Patents and Trademarks. As of the date hereof Fuqua
owns no registered patents, trademarks or service marks, and has no pending
registration applications with respect to patents, trademarks or service marks,
in either case relating to the Business, other than those listed on the
attached Exhibit 7.20.
7.21 Location of Collateral. Exhibit 7.21 describes the
locations where any of the Collateral is located or stored as of the date
hereof.
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7.22 Real Property. As of the date hereof, neither Fuqua
nor any Snapper Subsidiary own or lease any real property used in the Business,
except as set forth on Exhibit 7.22 attached hereto.
7.23 Distributor Receivables. With respect to each
Distributor Receivable being acquired from Snapper by ITT, Snapper warrants and
represents to ITT that, except as may be disclosed to ITT from time to time
(including in any aging report delivered to ITT), to the best of Snapper's
knowledge: (a) such Account is genuine, in all respects what it purports to be
and is not evidenced by a judgment or promissory note or similar instrument or
agreement which is not being specifically endorsed to the order of ITT; (b) it
represents undisputed bona fide transactions completed in accordance with the
terms and conditions contained in the invoices and purchase orders relating
thereto, nor is Snapper in default thereunder; (c) the goods sold (or services
rendered) which resulted in the creation of such Account have been delivered or
rendered to and accepted by the Distributor; (d) the amounts shown on the
respective Availability Certificates, Snapper's books and records and all
invoices and statements delivered to ITT with respect thereto are absolutely
owing to Snapper and are not contingent for any reason, other than by reason of
the return of goods, the sale of which resulted in the creation of the
Distributor Receivable, in accordance with Snapper's return policy and as may
be required under applicable statute; (e) no payments have been or will be made
thereon except payments turned over to ITT; (f) there are no set-offs,
counterclaims or disputes existing or asserted with respect thereto and Snapper
has not made any agreement with any Distributor for any deduction or discount
of the sum payable thereunder except regular discounts and credits allowed by
Snapper in the ordinary course of its business not in excess of $50,000 per
Distributor; (g) there are no facts, events or occurrences which in any way
impair the validity or enforcement thereof or tend to reduce the amount payable
thereunder from the amount thereof as shown on the respective Availability
Certificates, Snapper's books and records and the invoices and statements
delivered to ITT with respect thereto; (h) the goods sold or transferred or the
services furnished giving rise thereto are not subject to any lien, claim,
encumbrance or security interest except that of ITT, and except for liens which
are subordinate to the lien of ITT either by law or pursuant to subordination
or intercreditor agreements entered into in the ordinary course of business;
(i) there are no proceedings or actions known to Snapper which are threatened
or pending against any obligor thereon which might result in any material
adverse change in its financial condition; and (j) the related Distributor is
not in material default of its obligations relating thereto.
8. BORROWER'S COVENANTS.
Fuqua covenants and agrees, during the term of the this
Agreement and while any Obligations are outstanding and unpaid, to perform all
the acts and promises required by the Loan Documents and all the acts and
promises set forth below.
8.1 Payment and Performance. Fuqua shall pay and perform
all Obligations in full when and as due under the terms of the Loan Documents.
8.2 Insurance.
(a) Type of Insurance. Fuqua shall at all times
cause the Business and the Collateral to be insured by reputable
insurers of reasonable financial soundness and having an A. M. Best
rating of A or
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better, with such policies, against such risks (including, but not
limited to, products liability) and in such amounts as are appropriate
for reasonably prudent businesses in Snapper's industry and of
Snapper's size and financial strength.
(b) Requirements as to Insurance Policies. The
policies of insurance which Snapper is required to carry pursuant to
the provisions of Section 8.2(a) shall comply with the requirements
listed below:
(i) Each such policy shall provide that
it may not be cancelled or allowed to lapse at the end of a
policy period without at least 30 days' prior written notice
to ITT;
(ii) Each liability and hazard insurance
policy shall name ITT as an additional insured; and
(iii) Each insurance policy required under
Section 8.2(a) shall contain a standard lender's loss payable
clause in favor of ITT. Such insurance policies shall also
contain lender's loss payable endorsements satisfactory to ITT
providing, among other things, that any loss shall be payable
in accordance with the terms of such policy notwithstanding
any act of Fuqua which might otherwise result in forfeiture of
such insurance;
(c) Collection of Claims. Snapper agrees that it
shall promptly advise ITT of any insured casualty in excess of
$100,000 and, if such loss represents the destruction of any
Collateral which causes an Over-Advance, Snapper agrees that ITT may
direct all insurance proceeds therefrom to be paid directly to ITT,
and hereby appoints ITT its attorney-in-fact for such purpose.
(d) Blanket Policies. Any insurance required by
this Section 8.2 may be supplied by means of a blanket or umbrella
insurance policy.
(e) Delivery of Policies or Certificates of
Insurance. Fuqua shall deliver to ITT certificates of insurance issued
by insurers to evidence that the insurance maintained by Snapper
complies with the requirements of this Section 8.2.
8.3 Collection of Receivables: Sale of Inventory. Snapper
shall collect its Receivables and sell its Inventory only in the ordinary
course of business, unless written permission to the contrary is obtained from
ITT.
8.4 Notice of Litigation and Proceedings. Fuqua shall
give prompt notice to ITT of (a) any litigation or proceeding (including fines
and penalties of any public authority) in which it, or any of the Snapper
Subsidiaries is a party in which there is a reasonable probability of an
adverse decision which would require it or any of the Snapper Subsidiaries to
pay more than $500,000, or deliver assets the value of which exceeds $500,000,
whether or not the claim is considered to be covered by insurance; (b) any
class action litigation against it, regardless of size; and (c) the institution
of any other suit or proceeding that might materially and adversely affect its
or any of its Snapper Subsidiary's operations, financial condition, property or
the Business.
8.5 Payment of Indebtedness to Third Persons. Snapper
shall, and shall cause each Snapper Subsidiary to, pay, when due, all
Indebtedness due
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third persons, except when the amount thereof is being contested in good faith
by appropriate proceedings and with adequate reserves therefor in accordance
with GAAP being set aside by Snapper or such Snapper Subsidiary.
8.6 Notice of Change of Business Location. Snapper shall
notify ITT 30 days in advance of: (a) any change in or discontinuation of the
location of the Collateral, Fuqua's or Snapper's principal place of business,
or any of the Snapper Subsidiaries' existing offices or places of business, (b)
the establishment of any new places of business relating to the Business, and
(c) any change in or addition to the locations where Snapper's Inventory or
Records are kept.
8.7 Pension Plans. Fuqua shall, and shall cause each
Subsidiary to, (a) fund all of its defined benefit or defined contribution
pension plans, if any, in accordance with, and in amounts not less than that
required by, the minimum funding standards of Section 302 of ERISA, as amended,
(b) make available for inspection and copying by ITT, all audit reports and
Forms 5500, filed with the United States Department of Labor or the Internal
Revenue Service with respect to all such plans promptly after filing, and any
other related information as may be reasonably requested from time to time by
ITT, and (c) promptly advise ITT of the occurrence of any reportable event or
non-exempt prohibited transaction (as defined in ERISA) with respect to any
such plan.
8.8 Payment of Taxes. Fuqua shall, and shall cause each
Snapper Subsidiary to, pay or cause to be paid when and as due, all taxes,
assessments and charges or levies imposed upon it or on any of its property or
that it is required to withhold and pay over to the taxing authority or that it
must pay on its income, the failure of which to pay would have a material
adverse effect on Snapper individually, or on Fuqua on a consolidated basis,
except where contested in good faith by appropriate proceedings with adequate
reserves therefor, as determined in accordance with GAAP, having been set aside
by Fuqua or such Snapper Subsidiary. Fuqua shall, however, and shall cause each
Snapper Subsidiary to, pay or cause to be paid all such taxes, assessments,
charges or levies immediately whenever foreclosure of any lien that attaches on
the Collateral or the Real Property appears imminent.
8.9 Further Assurances. Snapper and Fuqua agree to,
execute such other and further documents, including, without limitation,
confirmatory deeds, deeds of trust, promissory notes, security agreements,
financing statements, continuation statements, certificates of title, and the
like as may from time to time in the reasonable opinion of ITT be necessary to
perfect, confirm, establish, reestablish, continue, or complete the security
interests, collateral assignments and liens in the Collateral, and the purposes
and intentions of this Agreement.
8.10 Advancements. If Snapper and/or Fuqua fail to (i)
perform any of the affirmative covenants contained in Section 8.1, (ii) protect
or preserve the Collateral or (iii) protect or preserve the status and priority
of the liens and security interest of ITT in the Collateral, ITT may make
advances to perform those obligations. All sums so advanced shall immediately
upon advancement become secured by the security interests created by this
Agreement and shall be subject to the terms and provisions of this Agreement
and all of the Loan Documents. ITT may add all sums so advanced, plus any
expenses or costs incurred by ITT, including reasonable attorney's fees, as
outstanding Inventory Loans, or the Proceeds Balance, as ITT may designate in
its sole discretion, and they shall bear interest at the applicable rate.
Snapper shall repay within 5 Business Days after demand therefor all sums so
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advanced on its behalf, with interest as described in the previous sentence,
that result in an Over-Advance. Subject to the provisions of Section 10.5, the
provisions of this Subsection shall not be construed to prevent the institution
of rights and remedies of ITT upon the occurrence of an Event of Default. Any
provisions in this Agreement to the contrary notwithstanding, the
authorizations contained in this Subsection shall impose no duty or obligation
on ITT to perform any action or make any advancement on behalf of Snapper and
are for the sole benefit and protection of ITT.
8.11 Maintenance of Status. Fuqua shall take all necessary
steps to (i) preserve its existence as a corporation, (ii) preserve Snapper's
and the Snapper Subsidiaries' franchises and permits the loss of which would
have a material adverse effect on the Business, and (iii) comply with all
present and future material agreements to which Snapper's, or any of the
Snapper Subsidiaries, is subject. Snapper shall not change the nature of the
Business during the term of this Agreement.
8.12 Financial Statements; Reporting Requirement;
Certification as to Events of Defaults. During the term of this Agreement,
Fuqua shall furnish two copies of the following to ITT:
(a) within thirty (30) days of each month, the Fuqua
Industries monthly financial package, consisting of financial
operating results summary, together with consolidated and
consolidating operating summaries for Fuqua, each of its Subsidiaries
and Snapper for the month and year to date then ended, subject to
year-end audit adjustments, and certified by the Chief Financial
Officer of Fuqua to have been prepared in accordance with GAAP and to
accurately reflect the financial condition of Fuqua;
(b) within 90 days of each fiscal year, annual
financial statements for Fuqua and its consolidated Subsidiaries as of
the end of such fiscal year, consisting of a consolidated balance
sheet, consolidated statement of operations, consolidated statements
of cash flows and consolidated statement of stockholder's equity, in
comparative form, in each case in the form prepared for inclusion in
Fuqua's Form 10-K to be filed with the Securities and Exchange
Commission in respect of such fiscal year. The statements and balance
sheet shall be audited by Ernst and Young or another independent firm
of certified public accountants selected by Fuqua and acceptable to
ITT , and certified by that firm of certified public accountants to
have been prepared in accordance with GAAP. The certified public
accountants shall render an unqualified opinion as to such statements
and balance sheets; provided, however, if the opinion is qualified,
the accountants shall provide a precise and full explanation of the
reasons for any such qualification together with all papers upon which
any such qualification is based. ITT shall have the absolute and
irrevocable right, from time to time, to discuss the affairs of
Snapper directly with the independent certified public accountant
after prior notice to Snapper and the reasonable opportunity of
Snapper to be present at any such discussions;
(c) within 45 days after the close of each fiscal
quarter beginning with the fiscal quarter ending December 31, 1992, a
certificate of the President, Chief Financial Officer, or Director of
Taxes of Fuqua or Snapper stating that he has revised the provisions
of the Loan Documents and that a review of the activities of Snapper
and Fuqua during such quarter has been made by or under his
supervision with a view to determining whether Snapper and Fuqua have
observed and performed all of Snapper's or Fuqua's (as the case may
be) obligations under the Loan
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Documents, and that, to the best of his knowledge, information
and belief, Snapper and Fuqua have observed and performed each
and every undertaking contained in the Loan Documents and is not
at the time in default in the observance or performance of any of
the terms and conditions thereof or, if Snapper and/or Fuqua
shall be so in default, specifying all of such defaults and
events of which he may have knowledge;
(d) by January 31st of each fiscal year, an
operating plan for such fiscal year prepared for each month,
including projected income statements, balance sheets, cash flow
budgets, and capital expenditure budgets for each month supported
by a narrative describing the assumptions upon which the plan is
based:
(e) promptly upon receipt thereof, copies of all
final reports and final management letters submitted to Fuqua
or any of the Snapper Subsidiaries by independent accountants in
connection with any annual or interim audit of the books of Fuqua
or such Subsidiaries made by such accountants;
(f) copies of any and all reports, filings and other
documentation delivered to the Securities and Exchange
Commission, and/or Fuqua's shareholders promptly after the
delivery thereof.
(g) any other statements, reports and other
information as ITT may reasonably request concerning the
financial condition of Snapper.
8.13 Notice of Existence of Default. Fuqua shall, and shall
cause its Snapper Subsidiaries to, promptly notify ITT of: (i) the existence
of any known condition or event, which is or which will be with notice or the
passage of time or both an Event of Default of (ii) the actual or threatened
termination, suspension, lapse or relinquishment of any material license,
authorization, permit or other right granted Snapper or for Snapper's benefit
and used in the Business, or granted to any of its Snapper Subsidiaries or for
any such Subsidiaries' benefit, by any governmental agency material to the
Business.
8.14 Compliance with Laws. Fuqua shall, and shall cause its
Snapper Subsidiaries to, comply in all material respects with all applicable
laws, rules, regulations and orders the noncompliance with which would have a
material adverse effect on Snapper individually, or on Fuqua and its
Subsidiaries on a consolidated basis.
8.15 Maintenance of Collateral. Fuqua shall maintain the
Collateral and every part thereof in good condition and repair. Fuqua shall not
permit the value of the Collateral to be materially impaired. Fuqua shall
defend the Collateral against all claims and legal proceedings by persons other
than ITT. Fuqua shall not transfer the Collateral from the premises where now
located (other than Inventory sold in the ordinary course of business and other
Collateral transferred in the ordinary course of business), or permit the
Collateral to become a fixture or accession (unless so affixed on the Effective
Date) to any goods which are not items of Collateral, without the prior written
approval of ITT. Fuqua shall not permit the Collateral to be used in violation
of any applicable law, regulations, or policy of insurance. As to Collateral
consisting of instruments and chattel paper, Fuqua shall preserve rights in it
against prior parties.
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8.16 Collateral Records and Statements. Snapper shall keep
such accurate and complete books and records pertaining to the Collateral in
such detail and form as ITT reasonably requires, including, but not limited to:
schedules of inventory; original orders; invoices; shipping documents;
floorplan billing settlements and receivables; sold receivables; market and
inventory listing containing model, serial number, location and parts inventory
by location. Monthly or at such other times as ITT may reasonably require,
Snapper shall furnish to ITT a statement, certified by Snapper, showing the
current status and value of the Inventory. Snapper shall also provide ITT with
weekly sales reports in form and detail reasonably satisfactory to ITT. The
statements shall be in the form and shall contain the information as is
prescribed by ITT. Other reporting shall be available upon request by ITT,
including, but not be limited to, inventory reporting showing the cost
(determined on a "first-in, first-out" basis) and market value thereof, and
accounts payable agings in such form as ITT reasonably requires.
8.17 Inspection of Collateral. ITT may examine the
Collateral at any time, and from time to time. ITT shall have full access to,
and the right to audit, inspect and make abstracts and copies from Snapper's
and Fuqua's books and records pertaining to the Collateral, wherever located,
at any time during reasonable business hours, and from time to time. Snapper
and Fuqua shall assist ITT in so doing.
8.18 Change of Name, Etc. Fuqua shall not change its, or the
Business' name, or begin to trade under any assumed names or trade names in
connection with the Business without thirty (30) days' prior written notice to
ITT, other than the trade name "Blackhawk," of which ITT is hereby given notice
may be applied to certain Snapper Products. Fuqua shall not change Snapper's
organization as a division, or transfer the Business to any other division or
entity, without the prior written consent of ITT.
8.19 Sale or Transfer of Assets. Except in the ordinary
course of business, and except as consented to in writing by ITT, Fuqua shall
not sell, transfer, lease (including sale-leaseback) or otherwise dispose of
all or any material part of the assets of the Business, including to other
divisions, units or Subsidiaries of Fuqua, except that Fuqua may sell Snapper's
Ft. Worth, Texas facility, and the stock of any Snapper Subsidiary; any
Snapper Subsidiary may sell all or substantially all of its assets, provided
that the net cash proceeds received from such sale are delivered to ITT for
application to the Obligations; and Snapper may sell or otherwise dispose of
other Collateral having an aggregate book value of not more than $500,000 in
any fiscal year or aggregate fair market value of not more than $250,000 in any
fiscal year. This provision shall not apply to any sale if the proceeds of
such sale pay the Obligations in full.
8.20 Encumbrance of Assets. Fuqua shall not mortgage,
pledge, grant or permit to exist a security interest in or lien upon any of
the Collateral, now owned or hereafter acquired except for the Excepted Liens.
8.21 Acquisitions of Stocks of Third Person. Fuqua shall not
enter into any agreement, commitment letter or letter of intent to acquire any
equity interest or stocks in another business whose assets or operations are
intended to be combined or consolidated, on an operational basis, with the
Business.
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8.22 False Certificates or Documents. Fuqua shall not, and
shall not permit any Subsidiary to, furnish ITT with any certificate or other
document that contains any untrue statement of material fact or that omits to
state a material fact necessary to make it not misleading in light of the
circumstances under which it was furnished.
8.23 Transactions with Affiliates. Without the prior written
consent of ITT, which shall not be unreasonably withheld, Snapper shall not
enter into any contracts, leases, sales or other transactions relating to the
Business with any division or Affiliate on terms less favorable than could be
obtained generally by Snapper from a nonaffiliate if such contract, lease, sale
or other transaction, individually or in the aggregate, would have a material
adverse effect on the Collateral or on the Business, other than with respect to
sales to European Affiliates which sales may not be on terms more favorable
than the sales to any Distributor in such countries.
8.24 Net Income. Fuqua shall not cause Snapper to transfer,
contribute or otherwise relinquish control and possession of more than 70% of
each fiscal year's Net Income (as hereafter defined) to any other division or
group within Fuqua, or to any Subsidiary or Affiliate of Fuqua. The 30% of Net
Income required to be retained by Snapper will be applied solely (a) as working
capital for the operations of Snapper, (b) to acquire capital assets to be used
in the Business and which will become a part of the Collateral, (c) to be held
in bank accounts segregated from any other account of Fuqua, or (d) to be used
to pay all or any portion of the Obligations. As used herein, "Net Income"
shall mean the net income of Snapper, determined in accordance with GAAP as if
Snapper were a corporation distinct from Fuqua, after payment or provision for
payment of intercompany charges imposed on Snapper by Fuqua for taxes,
insurance and other expenses incurred by Fuqua on behalf of Snapper in the
ordinary course of business, and of a type consistent with expenses charged to
Fuqua's Subsidiaries generally, but excluding any net gains or losses from the
sale or disposition of capital assets, or other extraordinary or nonrecurring
charges or items of income.
8.25 Loan. Fuqua shall not permit any Snapper Subsidiary to,
make any loan to any Person, except for loans in anticipation of reasonable and
normally reimbursable business expenses, trade credit extended in the ordinary
course of Business and loans to employees in a principal amount not to exceed
$300,000 at any one time outstanding. In no event shall Fuqua extend, or
permit any Subsidiary to extend, any loan to Intermark, Inc. or any of its
subsidiaries in a principal amount in excess of $32,000,000 at any one time
outstanding.
8.26 Financial Covenants.
(a) Tangible Net Worth. Fuqua shall at all times
maintain a Tangible Net Worth of at least $165,000,000.
(b) Debt to Tangible Net Worth. Fuqua shall at all
times maintain a ratio of debt to Tangible Net Worth of not more than
one and one-tenth to one (1.1:1.0). (1.5:1.0) effective for August per
Brent Layton.
"Tangible Net Worth" means the net book value of
assets less liabilities, plus Subordinated Debt in accordance with GAAP,
excluding from such assets all Intangibles and excluding Fuqua's investment in
Qualex, Inc. calculated in accordance with the net equity method of accounting.
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"Intangibles" means and includes (without
duplication) general intangibles (as that term is defined in the Uniform
Commercial Code), advances and accounts receivable due from officers,
directors, employees and stockholders, licenses, goodwill, prepaid expenses,
income tax receivables, covenants not to compete, franchise fees,
organizational costs, research and development costs, and such similar items as
may from time to time be determined in the reasonable discretion of ITT
(including leasehold improvements net of depreciation and deposits to the
extent such items are material and separately identified in Fuqua's audited
financial statements).
"Subordinated Debt" means the Indebtedness of Fuqua
under (a) the 9-1/2% Subordinated Debentures due August 1, 1998, issued
pursuant to that certain Indenture dated as of August 1, 1973, between Fuqua
and Chemical Bank, as Trustee; (b) the 6-1/2% Convertible Subordinated
Debentures due August 4, 2002, issued pursuant to that certain Indenture, dated
as of August 1, 1987, between Fuqua and Chemical Bank, as Trustee; (c) the
9-7/8% Senior Subordinated Debentures due March 15, 1997, issued pursuant to
that certain Indenture, dated as of March 15, 1977, between Fuqua and The Chase
Manhattan Bank (National Association), as Trustee; (d) the 10% Subordinated
Debentures due October 1, 1999, issued pursuant to that certain Indenture,
dated as of October 1, 1974 between National Industries, Inc. and First
National City Bank, as Trustee; (e) the 6% Senior Subordinated Swiss Bank Bond
due March 6, 1996, issued pursuant to that certain Prospectus, dated February
19, 1986 relative to Fuqua's issuance of Swiss Bank bonds in the authorized
aggregate principal amount of $100,000,000; and (f) other Indebtedness
subordinated to the Obligations pursuant to subordination terms reasonably
acceptable to ITT. Except as may otherwise be provided above, for purposes of
these financial covenant calculations, assets and current assets shall reflect
appropriate deductions for depreciation, depletions, obsolescence,
amortization, valuation, or other reserves according to GAAP.
8.27 ERISA Compliance. Neither Fuqua nor any member of the
Controlled Group nor any Plan of any of them will:
(a) engage in any "prohibited transaction"
(as such term is defined in Section 406 or Section 2003 (a) of
ERISA) which is not subject to a legal exemption:
(b) incur any "accumulated funding
deficiency" (as such term is defined in Section 302 of ERISA)
whether or not waived;
(c) terminate any Pension Plan in a manner
which could result in the imposition of a Lien on any property
of Snapper or any member of the Controlled Group pursuant to
Section 4068 of ERISA; or
(d) violate state or federal securities laws
applicable to any Plan.
8.28 Fiscal Year. Fuqua shall not, and shall not permit any
Snapper Subsidiary to, change its fiscal year-end without sixty days prior
written notice to ITT.
9. EVENTS OF DEFAULT
The following shall constitute Events of Default and shall entitle ITT
to exercise the rights and remedies under Section 10 and under the other Loan
Documents.
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9.1 Failure to Pay. Snapper shall fail to pay any sum of
money owed to ITT in connection with the Obligations, whether principal,
interest, penalty, fee, charge or assessment, as provided in the Loan
Documents, within five (5) Business Days when due.
9.2 Failure of Warranty or Representation to be True. Any
representation or warranty provided by Fuqua in the Loan Documents shall fail
to be materially true when made and such default, if capable of cure, continues
for thirty (30) calendar days after notice of such default to Fuqua from ITT,
or, if such failure is capable of cure but not within thirty (30) days, such
longer period of time (but in no event to exceed an additional sixty (60) days)
upon request as may be required to effect such cure provided that Fuqua shall
diligently with its best efforts work to achieve such cure throughout such
period.
9.3 Violation of Covenants. Snapper shall violate any
covenant provided in Section 8 and such default, if capable of cure, continues
for thirty (30) calendar days after notice of such default to Fuqua from ITT,
or, if such failure is capable of cure but not within thirty (30) days, such
longer period of time (but in no event to exceed an additional sixty (60) days)
upon request as may be required to effect such cure provided that Fuqua shall
diligently with its best efforts work to achieve such cure throughout such
period.
9.4 Default Under Loan Documents. Snapper or any of its
Subsidiaries shall breach any of the terms, covenants or conditions set forth
in the Loan Documents and such default, if capable of cure, continues for
thirty (30) calendar days after notice of such default to Fuqua from ITT, or,
if such failure is capable of cure but not within thirty (30) days, such longer
period of time (but in no event to exceed an additional sixty (60) days) upon
request as may be required to effect such cure provided that Fuqua shall
diligently with its best efforts work to achieve such cure throughout such
period. It is expressly understood and agreed that a breach or default by
Snapper or any of its Subsidiaries under any of the Loan Documents shall be a
breach or default by Snapper under all of the Loan Documents.
9.5 False Statements. Any financial statement,
representation, warranty or certificate made or furnished by Fuqua to ITT in
connection with the Agreement, or as an inducement to enter into this
Agreement, or in any separate statement or document to bs delivered to ITT,
shall be materially false or incomplete when made.
9.6 Judgements. Fuqua shall suffer uninsured final
judgments for payment of money aggregating in excess of $2,000,000 and shall
not discharge the same with in a period of thirty (30) days unless execution
has been effectively stayed, whether by appeal, the posting of a bond, or
otherwise.
9.7 Cross Default. Fuqua or any Subsidiary shall breach,
after the expiration of any applicable grace or cure periods, any of the terms
of any agreement, loan, guarantee or other transaction relating to Indebtedness
for money borrowed in a principal amount in excess of $2,000,000 if the payment
or the maturity of such Indebtedness for borrowed money is accelerated in
consequence of such breach and such Indebtedness is not reinstated within
thirty (30) calendar days after notice of such default to Fuqua from ITT, or,
if such failure is capable of cure but not within thirty (30) days, such longer
period of time (but in no event to exceed an additional sixty (60) days) upon
request as may be required to effect such cure provided that Fuqua shall
diligently with its best efforts work to achieve such cure throughout such
period.
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9.8 Involuntary Bankruptcy. A decree or order shall be
entered for relief by a court having jurisdiction against or with respect to
Fuqua in an involuntary case (or the failure of any such case to be dismissed
within sixty (60) days of its commencement) under the federal bankruptcy laws
or any state insolvency or similar laws requiring (a) the liquidation of Fuqua,
(b) a reorganization of Fuqua or the Business, or (c) the appointment of a
receiver, liquidator, assignee, custodian, trustee, or similar official for
Fuqua or any of the properties of Fuqua.
9.9 Voluntary Bankruptcy. Fuqua shall (a) commence a
voluntary case under the federal bankruptcy laws or any state insolvency or
similar laws; (b) consent to the appointment for taking possession by a
receiver, liquidator, assignee, custodian, trustee or similar official for
Fuqua of any of its property; (c) make any assignment for the benefit of
creditors; or (d) fail generally to pay its debts as they become due, either as
to the amount of such debts or the number of such debts.
9.10 ERISA. Fuqua or any member of the Controlled Group
shall fail to pay when due an amount or amounts aggregating in excess of
$2,000,000 which it shall have become liable to pay to the PBGC or to a Plan
under Section 515 of ERISA or Title IV of ERISA: or notice of intent to
terminate a Plan or Plans (other than a multi-employer plan, as defined in
Section 4001(3) of ERISA), having aggregate benefit commitments or vested
liabilities in excess of assets by an amount in excess of $2,000,000 shall be
filed under Title IV of ERISA by Fuqua, any member of the Controlled Group, any
plan administrator or any combination of the foregoing, or the PBGC shall
institute proceedings under Title IV of ERISA to terminate any such Plan or
Plans and such default, if capable of cure, continues for thirty (30) calendar
days after notice of such default to Fuqua from ITT, or, if such failure is
capable of cure but not within thirty (30) days, such longer period of time
(but in no event to exceed an additional sixty (60) days) upon request as may
be required to effect such cure provided that Fuqua shall diligently with its
best efforts work to achieve such cure throughout such period.
10. REMEDIES
10.1 ITT's Specific Rights and Remedies. In addition to
all other rights and remedies provided by applicable laws and the Loan
Documents, on the happening of any Event of Default, subject to the provisions
of Section 10.5, ITT may do any or all of the foregoing:
(a) accelerate and call due the unpaid principal
balance of all outstanding Inventory Loans, and demand the immediate
repayment of the then current Proceeds Balance, and all accrued
interest and other sums due thereunder;
(b) impose the Default Interest Rate provided in
this Agreement in place of all interest otherwise payable hereunder;
(c) refuse to advance further sums under the
Inventory Line of Credit, and refuse to pay any further disbursements
of Distributor Loan proceeds;
(d) foreclose all or any of the security
interests or liens created by, and exercise all other rights and
remedies created under, any of the Loan Documents;
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(e) file suit against Fuqua on any of the Loan
Documents;
(f) seek specific performance or injunctive
relief to enforce performance of the undertaking, duties and
agreements provided in the Loan Documents, whether or not a remedy
exists at law or is adequate;
(g) exercise any rights of a secured creditor
under the Uniform Commercial Code as set forth in the Missouri Revised
Statutes, as amended, or under any other applicable laws, including
the right to take possession of the Collateral without the use of
judicial process, the right to require Fuqua to assemble the
Collateral at such place or places as ITT may specify from time to
time, and the right to sell the Collateral at public or private sale
or otherwise realize upon it. Fuqua authorizes ITT to enter the
premises of Snapper, or any other premises where the Collateral may be
located and which are controlled by Fuqua, for the purpose of
removing, assembling, or taking possession of the Collateral without
liability for trespass or any other right of action (unless arising
out of ITT's negligence or intentional misconduct) by reason of ITT's
taking possession of the Collateral. After deduction of the fees and
expenses described in Section 10.3, ITT may apply the proceeds of
disposition of the Collateral in such order and to such parts of the
Obligations as it elects; and
(h) terminate this Agreement.
10.2 Automatic Acceleration. Upon the occurrence of an
Event of Default described in Section 9.8 or 9.9, all Inventory Loans and the
current Proceeds Balance shall be automatically accelerated and due and payable
and the Default Interest Rate provided for in this Agreement shall
automatically apply as of the date of the first occurrence of such Event of
Default, without any notice, demand or action of any type on the part of ITT
(including any action evidencing the acceleration or imposition of the Default
Rate of Interest). The fact that ITT has, prior to the filing of the voluntary
or involuntary petition under the United States Bankruptcy Code acted in a
manner that is inconsistent with the acceleration and imposition of the default
rate of interest provided for in this Agreement shall not constitute a waiver
of this Section 10.2 or estop ITT from asserting or enforcing its rights.
10.3 Collection Costs. If suit or action is instituted to
enforce any of the terms of this Agreement or any other Loan Documents the
prevailing party shall be entitled to recover from the other party such sum as
the court may adjudge reasonable as attorneys' fees at trial or on appeal of
such suit or action, in addition to all other sums provided by law. Fuqua shall
immediately reimburse ITT for any reasonable costs or expenses, including
reasonable attorneys' fees, paralegal fees, and allocated costs of ITT's
in-house counsel, incurred by ITT as a result of the occurrence of an Event of
Default, even if the Event of Default is subsequently cured and even though no
suit or action is commenced.
10.4 Remedies Cumulative. The rights and remedies provided
in this Agreement and in the other Loan Documents or otherwise under applicable
laws shall be cumulative and the exercise of any particular right or remedy
shall not preclude the exercise of any other rights or remedies in addition to,
or as an alternative of, such right or remedy.
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10.5 Obligations of Borrower Hereunder Unconditional. The
payment and performance of the obligations under this Agreement and under the
other Loan Documents shall be the absolute and unconditional obligation of
Fuqua and shall be independent of any defense or any rights of setoff,
recoupment or counterclaim which Fuqua might otherwise have against ITT. Fuqua
shall pay during the term of this Agreement the payments of principal and
interest to be made hereunder and all other payments required under the Loan
Documents, free of any deductions and without abatement, diminution or setoff.
10.6 Agreement Regarding Certain Remedies. Notwithstanding
anything to the contrary contained in the Agreement or any of the other Loan
Documents, if ITT shall obtain any judgment against Fuqua on account of any of
the Obligations, ITT shall not levy or execute such judgment upon any asset of
Fuqua not included in the Business prior to the earliest of (i) 540 days after
the date on which ITT first makes demand for possession of the Collateral
following the occurrence of an Event of Default, (ii) 365 days after the date
on which ITT has received possession of all or substantially all the Collateral
following the occurrence of an Event of Default, and (iii) the date on which
ITT has, with respect to all or substantially all the Collateral, either
completed the sale thereof or, with respect to either the real property
described in Section 5.7, or other items of Collateral which ITT, in the
exercise of reasonable business judgement deems uncollectible without undue
cost or expense, and abandons to Fuqua; and provided, however, that the
foregoing should not be construed to prohibit ITT in any say from (a) seeking
adequate protection or relief from the automatic stay in any bankruptcy case of
Fuqua: (b) filing a proof of claim in any such bankruptcy case; (c) asserting
entitlement to any proceeds derived from any sale or disposition of the
Collateral in any sheriff's sale, bankruptcy sale, receivership sale or other
court-ordered sale thereof; (d) enforcing other rights ITT may have as the
holder of a judgment lien, vis-a-vis any other creditor of Fuqua or, upon any
dissolution or liquidation of Fuqua, vis-a-vis any shareholder of Fuqua, or (e)
enforcing any other right or remedy against Snapper or the Collateral, or
enforcing any injunctive remedy against Fuqua.
11. MISCELLANEOUS TEEMS
11.1 Amendment, Changes and Modifications. The Loan
Documents may be amended, changed or modified only as may be agreed upon in
writing by Fuqua and ITT from time to time. Snapper shall pay all costs and
expenses, including legal fees, in connection with any amendment, modification
or extension of this Agreement or the Loan Documents.
11.2 Binding Effect. The Loan Documents shall be binding
upon the parties, their successors and assigns. Fuqua's rights and benefits
under the Loan Documents may not be assigned with out ITT 's prior written
consent, which consent may be granted or withheld in ITT 's sole and absolute
discretion.
11.3 Broker Fee. Neither party is obligated to pay any
premium or other charge, brokerage fee or commission in connection with the
agreements set forth herein. Each party shall indemnify the other and hold it
harmless from any such claim arising out of such party's acts or those of its
representatives.
11.4 Entire Agreement. The Loan Documents embody the
entire agreement of the parties relating to the Lines of Credit. There are no
promises, terms, conditions, obligations or warranties other than those
contained in the Loan Documents. The Loan Documents supersede all prior
communications, representations or agreements, verbal or written, between the
parties relating to the Lines of Credit.
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11.5 Governing Law. The validity, meaning, enforceability
and effect of the Loan Documents and the rights and liabilities of the Parties
shall be determined in accordance with the laws of Missouri. All parties
acknowledge and hereby stipulate for the purpose of any future proceedings that
the Loan Documents and all subsequent writings or documents relating or
pertaining thereto are to be considered for all purposes, including but not
limited to choice of law determinations, to have been executed and delivered by
all parties within the actual geographic boundaries of Missouri, even if such
loan documents were, in fact, executed and delivered elsewhere.
11.6 Headings. The Headings to the sections of this
Agreement are included only for the convenience of the parties and shall not
have the effect of defining, diminishing or enlarging the rights of the parties
or affecting the construction or interpretation of any portion of this
Agreement.
11.7 Conflict with Loan Documents. This Agreement controls
in the event of any conflict with the terms of the Loan Documents.
11.8 Interpretation. For the purpose of construing this
Agreement, unless the context otherwise requires, words in the singular shall
be deemed to include words in the plural, and vice versa.
11.9 Notices. Any notice under the Loan Documents, shall
be in writing. Any notice to be given or document to be delivered under the Loan
Documents shall be deemed to have been duly given upon delivery, if delivered in
person or by any expedited delivery service which provides proof of delivery,
upon tested telex or facsimile transmission, or on the fifth Business Day after
mailing, if mailed by certified mail, return receipt requested, postage prepaid
mail, addressed to ITT or Snapper at the appropriate addresses. The addresses
for notices are those set forth below or such other addresses as may be
hereafter specified by written notice by the parties:
to ITT: ITT Commercial Finance Corp.
8251 Maryland Avenue
Clayton, MO 63105
Attention: General Counsel
Facsimile No.:(314) 863-7936
to Snapper and Fuqua: Snapper
535 Macon Road
McDonough, GA 30253
Attention: Jimmie W. Jones
Facsimile No.: (404) 954-2786
Fuqua Industries, Inc.
4900 Georgia Pacific Center
Atlanta, Georgia 30303
Attention: Frederick B. Beilstein, III
Facsimile No.: (404) 524-4713
Troutman Sanders
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216
Attention: Hazen H. Dempster, Esq.
Facsimile No.: (404) 885-3947
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11.11 Notice of Disposition. Written notice, when required by
law, sent to the address of Snapper and Fuqua in Section 11.12, at least 10
calendar days (counting the day of sending) before the date of a proposed
disposition of the Collateral is reasonable notice.
11.12 No Third Party Beneficiary Rights and Reliance. No
person not a party to this Agreement shall have any benefit under this
Agreement nor have third-party beneficiary rights as a result of any of the
Loan Documents, nor shall any party be entitled to rely on any actions or
inactions of ITT or its agents, all of which are done for the sole benefit and
protection of ITT.
11.13 Payment of Fees. Any fees, costs or expenses of any
type that ITT is entitled to receive from Fuqua pursuant to the terms of the
Loan Documents may be charged against the Inventory Line of Credit, or as a
disbursement of Distributor Loan proceeds, as accrued, as a debit to the Loan
Account Ledger.
11.14 Protection or Preservation of Collateral. ITT has no
contractual duty to protect, insure, collect or realize upon the Collateral or
preserve rights in it against prior parties. ITT shall not be responsible or
liable for any shortage, discrepancy, damage, loss or destruction of any part
of the Collateral regardless of the cause unless caused by its gross negligence
or intentional misconduct.
11.15 Relationship of the Parties. Neither ITT on the one
hand nor Fuqua or Snapper on the other hand shall be deemed a partner, joint
venturer or related entity of the other by reason of the Loan Documents.
11.16 Reversal of Payments. To the extent that Snapper or
Fuqua makes a payment or payments to ITT, which payment or payments or proceeds
or any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, receiver or any
other party under any bankruptcy law, state or federal law, common law, or
equitable cause, then to the extent of such payment or proceeds received, the
Inventory Line of Credit or Proceeds Balance intended to be satisfied shall be
revived and continue in full force and effect, as if such payment or proceeds
had not been received by ITT.
11.17 Severability. If any provision of this Agreement shall
be held to be invalid, illegal or unenforceable, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision never had been included in this Agreement.
11.18 Usury. It is the intention of Fuqua and ITT to comply
with applicable usury laws. Therefore, notwithstanding any provision to the
contrary in this Agreement or in any other Loan Document, neither this
Agreement or any other Loan Document shall require the payment or permit the
collection of interest in excess of the maximum amount permitted by law. If
compliance with this Agreement or any other Loan Document would result in a
violation of applicable usury law, the amount of the payment obligation imposed
by this Agreement or any other Loan Document shall be reduced to the maximum
amount permitted by law. If ITT receives any payment of interest, or receives
any payment or transfer that is deemed to be interest by applicable law, in an
amount that exceeds applicable law, the amount in excess of the limit imposed
by law shall be applied to reduce the principal amount owing under this
Agreement or the other Loan Document. If the amount received in excess of the
limit imposed by law exceeds the unpaid principal balance due to ITT under this
Agreement, the excess amount shall be refunded to Fuqua.
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<PAGE> 42
11.19 Waivers. ITT may at any time or from time to time
waive all or any rights under any of the Loan Documents, but any waiver or
indulgence at any time or from time to time shall not constitute, unless
specifically so expressed by ITT in writing, a future waiver by ITT of
performance by Snapper or Fuqua.
11.20 Survival. The grant of security in Section 5 to
secure, among other Obligations, the recourse provisions under Section 3.8 and
all provisions relating to the Collateral shall survive termination of this
Agreement and shall remain in full force and effect until all Obligations have
been paid in full and this Agreement has been terminated.
11.21 Participation; Assignments; Information. ITT may,
without the consent of Fuqua, grant participations in, at any time and from time
to time hereafter, its interest in this Agreement or any Loan Document, or of
any portion thereof; provided that (a) ITT's obligations under this Agreement
(including, without limitation, its obligations to make Inventory Loans and to
purchase Distributor Receivables) shall remain unchanged; (b) ITT shall remain
solely responsible to Fuqua and Snapper for the performance of such
Obligations; (c) Fuqua and Snapper shall continue to deal solely and directly
with ITT in connection with ITT's rights and Obligations under this Agreement;
and (d) such participant's right to agree or to restrict ITT's ability to agree
to the modification, waiver, release of any of the terms of this Agreement or
the Loan Documents or to the release of any Collateral covered by the Loan
Documents, to consent to any action or failure to act by any party to any of
the Loan Documents or any of their respective Affiliates, or to exercise or
refrain from exercising any powers or rights which ITT may have under or in
respect of the Loan Documents or any Collateral, shall be limited to the right
to consent to (x) the reduction of the principal of, or rate or amount of
interest on, the Obligations subject to such participation (other than by
payment or prepayment); (y) the postponement of any date fixed for any payment
of principal of, or interest on, the Obligations subject to such participation
except with respect to the modification of the provisions relating to
prepayments of the Obligations); and (z) the release of any guarantor of the
Obligations or all or a substantial portion of the Collateral, except to the
extent Fuqua and/or Snapper are entitled to the release of such Collateral in
accordance with the terms of this Agreement and the Loan Documents. ITT may
not, without the prior written consent of Fuqua, sell, transfer or assign all
or any portion of its interest, in this Agreement or any Loan Document in any
manner that transfers ITT's duties and obligations hereunder. ITT may furnish
any information concerning Fuqua in the possession of ITT from time to time to
its participants and permitted assignees (including prospective assignees and
participants) and may furnish information in response to credit inquiries
consistent with general business practice provided that such participant,
permitted assignee or prospective participant or assignee first agrees to be
bound by the terms of section 11.24 hereof. ITT shall promptly notify Fuqua of
its grant of any participation in this Agreement or any Loan Document. Fuqua
agrees that any participant may apply any collateral or asset of Fuqua in such
participant's possession, upon the occurrence of an Event of Default, to
payment of the Obligations, as though such participant were a lender directly
under this Agreement. Fuqua further agrees that representatives of any Snapper
participant or permitted assignee may, at their own expense, take part in any
audits, inspections or other reviews of Snapper's assets which ITT performs
from time to time pursuant to this Agreement. In no event may Fuqua assign its
rights or interests hereunder without the prior written consent of ITT.
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<PAGE> 43
11.22 Renewal of Agreement. The initial term of this
Agreement shall be for three (3) years, and shall be subject to automatic one
(1) year renewal periods thereafter unless at least 180 days prior to any
Maturity Date, either party hereto shall have addressed the other in writing of
its intention not to renew this Agreement. Fuqua may terminate this Agreement
at any time; provided, however, that (a) Fuqua gives ITT not less than 90 days
notice of its intent to seek to repay the Obligations in full and terminate the
Agreement; (b) Fuqua gives ITT at least 10 Business Days notice of the date of
such repayment and termination; and (c) no such termination shall become
effective until the Obligations have been paid in full.
11.23 Indemnification.
(a) Fuqua hereby agrees to indemnify and hold ITT
and its officers, directors, employees and agents harmless from and
against any and all losses, costs, claims, expenses (including
reasonable attorneys fees) and other charges arising from any act or
omission of Fuqua or Snapper performed in the conduct of its business
(including the financing of Distributors prior to the Effective Date,
and all Parts financing) and the transactions herein contemplated,
other than those costs, claims, expenses and charges arising solely
from the gross negligence or willful misconduct of such indemnified
parties.
(b) ITT hereby agrees to indemnify and hold Fuqua
and its officers, directors, employees and agents harmless from and
against any and all losses, costs, claims, expenses (including
reasonable attorneys fees) and other charges arising from any act or
omission of ITT performed in the conduct of its business, and the
transactions herein contemplated, other than those costs, claims,
expenses and charges arising solely from the gross negligence or
willful misconduct of such indemnified parties.
11.24 Confidentiality. ITT agrees (on behalf of itself and
each of its Affiliates, directors, officers, employees and representatives) to
keep confidential, in accordance with their usual procedures for handling
confidential information of this nature and in accordance with safe and sound
lending practices, any non-public information supplied to it by Fuqua or
Snapper pursuant to this Agreement or the Loan Documents, provided that nothing
herein shall limit the disclosure of any such information (a) to the extent
required by statute, rule, regulation or judicial process; (b) to counsel,
accountants or other professional consultants to ITT having a need to know; (c)
to any participant or permitted assignee (or prospective participant or
permitted assignee) so long as such participant or permitted assignee (or
prospective participant or permitted assignee) agrees to keep such non-public
information confidential to the same extent as provided in this Section 11.24
with respect to ITT; or (d) if such information becomes publicly disclosed by
other than by a breach of this Section 11.24.
12. BINDING ARBITRATION. Except as otherwise specified below, all
actions, disputes, claims and controversies under common law, statutory law or
in equity of any type or nature whatsoever (including, without limitation, all
torts, whether regarding negligence, breach of fiduciary duty, restraint of
trade, fraud, conversion, duress, interference, wrongful replevin, wrongful
sequestration, fraud in the inducement, or any other tort, all contract
actions, whether regarding express or implied terms, such as implied covenants
of good faith, fair dealing, and the commercial reasonableness of any
Collateral disposition, or any other contract claim, all claims of deceptive
trade practices or lender liability, and all claims questioning the
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<PAGE> 44
reasonableness or lawfulness of any act), whether arising before or after the
date of this Agreement, and whether directly or indirectly relating to: (a)
this Agreement and/or any amendments and addenda hereto, or the breach,
invalidity or termination hereof; (b) any previous or subsequent agreement
between ITT and Fuqua; and/or (c) any other relationship, transaction or
dealing between ITT and Fuqua (collectively the "Disputes"), will be subject to
and resolved by binding arbitration.
12.1 All arbitration hereunder will be pursuant to either:
(a) the Code of Procedure in effect from time to time ("Code") of the National
Arbitration Forum ("NAF"), currently located at 2124 Dupont Avenue South,
Minneapolis, Minnesota 55405; or (b) the Commercial Arbitration Rules ("Rules")
in effect from time to time of the American Arbitration Association ("AAA"),
currently located at 140 West 51st Street, New York, New York 10020-1203. The
party first filing any claim for arbitration shall designate which arbitration
procedures are to be applied for all Disputes between Fuqua and ITT, although
if either the NAF or AAA is dissolved, the procedures of the remaining
arbitration body must be used. A copy of the Code, Rules and any fee schedule
of the NAF or AAA may be obtained by contacting the NAF or AAA, as applicable.
The parties agree that all arbitrators selected shall be attorneys. The
arbitrator(s) will decide if any inconsistency exists between the Code, or
Rules, as applicable, and the arbitration provisions contained herein. If any
such inconsistency exists, the arbitration provisions contained herein will
control and supersede the Code, or Rules, as applicable. The site of all
arbitration participatory hearings will be in the Division of the Federal
Judicial District of ITT's branch office closest to Fuqua. All procedural
issues will be governed by the Federal Arbitration Act ("FAA"). This Agreement
concerns transactions involving commerce among the several states. All
arbitration proceedings, including testimony or evidence at hearings, will be
kept confidential, although any award or order rendered by the arbitrator(s) or
director of arbitration pursuant to the terms of this Agreement may be entered
as a judgment or order and enforced by either party in any state or federal
court having competent jurisdiction.
12.2 Nothing herein will be construed to prevent ITT's or
Fuqua's use of bankruptcy, receivership, injunction, repossession, replevin,
claim and delivery, sequestration, seizure, attachment, foreclosure, dation
and/or any other prejudgment or provisional action or remedy relating to any
Collateral for any current or future debt owed by either party to the other.
Any such action or remedy will not waive ITT's or Fuqua's right to compel
arbitration of any Dispute. If either Fuqua or ITT brings any other action for
judicial relief with respect to any Dispute, the party bringing such action
will be liable for and immediately pay all of the other party's costs and
expenses (including attorneys' fees) incurred to stay or dismiss such action
and remove or refer such Dispute to arbitration. If either Fuqua or ITT brings
or appeals an action to vacate or modify an arbitration award and such party
does not prevail, such party will pay all costs and expenses, including
attorneys' fees, incurred by the other party in defending such action.
12.3 Any arbitration proceeding must be instituted: (a) with
respect to any Dispute for the collection of any debt owed by either party to
the other, within two (2) years after the date the last payment was received by
the instituting party; and (b) with respect to any other Dispute, within two
(2) years after the date the incident giving rise thereto occurred, whether or
not any damage was sustained or capable of ascertainment or either party knew
of such incident. Failure to institute an arbitration proceeding within such
period will constitute an absolute bar and waiver to the institution of any
proceeding with respect to such Dispute. Except as
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<PAGE> 45
otherwise stated herein, all notices, arbitration claims, responses, requests
and documents will be sufficiently given or served if mailed or delivered: (i)
to Fuqua at Fuqua's principal place of business specified above; and (ii) to
ITT at 8251 Maryland Avenue, Clayton, Missouri 63105, Attention: General
Counsel, or such other address as the parties may specify from time to time in
writing. No arbitration hereunder will include, by consolidation, joinder or
otherwise, any third party, unless such third party agrees to arbitrate
pursuant to the arbitration provisions contained herein and the Code, or Rules,
as applicable.
13. WAIVER OF JURY TRIAL; JURISDICTION AND VENUE. FUQUA AND ITT EACH
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
SUIT, ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATED TO THE
OBLIGATIONS OR ANY OF THE LOAN DOCUMENTS. FUQUA AND ITT EACH CONSENT TO THE
VENUE AND JURISDICTION OF ANY COURT, STATE OR FEDERAL LOCATED IN MISSOURI.
FUQUA AND ITT EACH AGREE THAT ANY ACTION, PROCEEDING, OR OTHER MATTER ARISING
DIRECTLY OR INDIRECTLY UNDER THIS AGREEMENT MAY BE BROUGHT BY THE OTHER IN ITS
SOLE DISCRETION IN ANY SUCH COURT AS HEREIN CONSENTED. FUQUA AND ITT EACH
CONSENT AND AGREE THAT ANY SERVICES OF PROCESS MAY BE MADE UPON IT WHEREVER IT
CAN BE LOCATED OR BY CERTIFIED MAIL DIRECTED TO IT AT THE ADDRESS SET FORTH IN
THIS AGREEMENT. THIS PROVISION IS PERMISSIVE, NOT MANDATORY, AND FUQUA AND ITT
EACH RESERVE THE RIGHT TO BRING ANY ACTION, PROCEEDING OR OTHER MATTER ARISING
DIRECTLY OR INDIRECTLY HEREUNDER AGAINST THE OTHER OR THE COLLATERAL WHEREVER
EITHER OF SUCH PARTIES OR THE COLLATERAL MIGHT BE FOUND OR MIGHT OTHERWISE BE
SUBJECT TO JURISDICTION.
THIS IS A LEGALLY BINDING CONTRACT. ALL PARTIES HAVE BEEN
REPRESENTED BY COUNSEL IN NEGOTIATION OF THE TERMS HEREOF AND HAVE BEEN ADVISED
BY COUNSEL OF THE LEGAL EFFECTS OF SIGNING IT.
This Agreement is executed by the parties on the dates
indicated by their names below for the convenience of the parties, but it is to
be effective on and from the Effective Date.
IN WITNESS WHEREOF, the parties have, by their duly authorized
officers, executed this Agreement as of the Effective Date.
ITT COMMERCIAL FINANCE CORP. FUQUA INDUSTRIES, INC.
By: /s/ Jerry W. Britton By: /s/ Frederick B. Beilstein, III
----------------------- -----------------------------------
Print Name: Jerry W. Britton Print Name: Frederick B. Beilstein, III
---------------- ----------------------------
Title: Division President Title: Senior Vice President
--------------------- ---------------------------------
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<PAGE> 1
EXHIBIT 4(g)(ii)
AMENDMENT TO FINANCE AND SECURITY AGREEMENT
This Amendment to Finance and Security Agreement ("Amendment") is made by and
between THE ACTAVA GROUP INC. (formerly known as Fuqua Industries, Inc.)
("Actava") individually, and on behalf of SNAPPER, a division thereof and ITT
COMMERCIAL FINANCE CORP. ("ITT").
WHEREAS, ITT and Actava entered into that certain Finance and
Agreement dated October 23, 1992 ("Agreement");
WHEREAS, ITT and Actava desire to amend the Agreement as provided
herein.
NOW, THEREFORE, for and in consideration of the premises, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, ITT and Actava agree as follows:
1. Section 8.26 is deleted and is amended to read in its entirety
as follows
"8.26 Financial Covenants.
(a) Tangible Net Worth. Actava shall at all times
maintain a Tangible Net Worth of at least One Hundred Sixty
Five Million Dollars ($165,000.00).
(b) Debt to Tangible Net Worth. Actava shall at all
times maintain a ratio of debt to Tangible Net Worth of not
more than One and One Half to One (1.5:1).
'Tangible Net Worth' means the net book value of
assets less liabilities, plus Subordinated Debt in accordance
with GAAP, excluding from such assets (i) all Intangibles,
(ii) the current balance of the Distributor Loans, and (iii)
Actava's investment in Qualex, Inc. calculated in accordance
with the net equity method of accounting, and excluding from
such liabilities the Floorplan Guaranty obligations of Actava
pursuant to Section 3.8 of this Agreement.
'Intangibles' means and includes (without duplication)
general intangibles (as that term is defined in the Uniform
Commercial Code), advances and accounts receivable due from
officers, directors, employees and stockholders, licenses,
goodwill, prepaid expenses, covenants not to compete,
franchise fees, organizational costs, research and development
costs, and such similar items as may from time to time be
determined in the reasonable discretion of ITT (including
leasehold improvements net of depreciation and deposits the
extent such items are material and separately identified in
Actava's audited financial statements).
'Subordinated Debt' means the Indebtedness of Actava
under (a) the 9-1/2% Subordinated Debentures due August 1,
1998, issued pursuant to that certain Indenture dated as of
August 1, 1973, between Actava and Chemical Bank, as Trustee;
(b) the 6-1/2% Convertible Subordinated Debentures due August
4, 2002, issued pursuant to that certain Indenture, dated as
of August 1, 1987,
<PAGE> 2
between Actava and Chemical Bank, as Trustee; (c) the
9-7/8% Senior Subordinated Debentures due March 15, 1997,
issued pursuant to that certain Indenture, dated as of March
15, 1977, between Actava and The Chase Manhattan Bank
(National Association), as Trustee (d) the 10% Subordinated
Debentures due October 1, 1999, issued pursuant to that
certain Indenture, dated as of October 1, 1974, between
National Industries, Inc. and First National City Bank, as
Trustee; (e) the 6% Senior Subordinated Swiss Bank Bond due
March 6, 1996, issued pursuant to that certain Prospectus,
dated February 19, 1986, relative to Actava's issuance of
Swiss Bank bonds in the authorized aggregate principal amount
of $100,000,OOO; and (f) other Indebtedness subordinated to
the Obligations pursuant to subordination terms reasonably
acceptable to ITT. Except as may otherwise be provided above,
for purposes of these financial covenant calculations, assets
and current assets shall reflect appropriate deductions for
depreciation, depletions, obsolescence, amortization,
valuation, or other reserves according to GAAP."
2. All references in the Agreement to "Fuqua Industries, Inc."
and/or "Fuqua" shall be deemed references to Actava, of which
Snapper remains a division.
3. ITT hereby waives any non-compliance or default by Actava
under the financial covenants set forth in Section 8.26 of the
Agreement as in effect prior to the date of this Amendment for
the period of June 1, 1993, through the date of this
Amendment, provided that Actava's Tangible Net Worth shall
have been at least $158,000,000.00, and Actava's ratio of debt
to Tangible Net Worth shall have been not more than One and
Two Tenths to One (1.2:1).
4. Except as expressly modified or amended herein, all other
terms and provisions of the Agreement will remain unmodified
and in full force and effect and the Agreement, as hereby
amended, is ratified, and confirmed by ITT and Actava.
5. Except as otherwise defined herein, all capitalized terms will
have the same meanings set forth in the Agreement.
IN WITNESS WHEREOF, ITT and Actava have executed this Amendment as of
the 27th day of September, 1993.
ITT COMMERCIAL FINANCE CORP.
By: /s/ Stephen C. Monahan
-----------------------------
Title: Vice-President
--------------------------
THE ACTAVA GROUP, INC.
By: F. B. Beilstein
-----------------------------
Title: Senior-Vice President
--------------------------
<PAGE> 1
EXHIBIT 4(g)(iii)
AMENDMENT TO FINANCE AND SECURITY AGREEMENT
(Actava/Snapper)
This Amendment to Finance and Security Agreement ("Amendment") is made by and
between THE ACTAVA GROUP INC. (formerly known as Fuqua Industries, Inc.)
("Actava") individually, and on behalf of SNAPPER, a division thereof and ITT
COMMERCIAL FINANCE CORP. ("ITT").
WHEREAS, ITT and Actava entered into that certain Finance and Security
Agreement dated October 23, 1992 ("Agreement");
WHEREAS, ITT and Actava desire to amend the Agreement as provided
herein.
NOW, THEREFORE, for and in consideration of the premises, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, ITT and Actava agree as follows:
1. Section 8.19 of the Agreement is deleted and amended to read
in its entirety as follows:
"8.19 Sale or Transfer of Assets. Except in the ordinary
course of business, and except as consented to in writing by
ITT, Actava shall not, and shall not permit any of the
Subsidiaries, including Qualex, Inc. (whether or not Qualex,
Inc. meets the definition of "Subsidiary") to, sell, transfer,
lease (including sale leaseback) or otherwise dispose of all
or a substantial part of its assets or of all or a substantial
part of the assets of the Business."
2. Section 8.26 of the Agreement is deleted and is amended to
read in its entirety as follows:
"8.26 Financial Covenants. Actava agrees that:
(a) for the period commencing December 31, 1993, through
April 30, 1994:
(1) Tangible Net Worth. Actava shall at all times
maintain a Tangible Net Worth of at least One
Hundred-Fifty Five Million Dollars ($155,000,000.00).
(2) Debt to Tangible Net Worth. Actava shall at all
times maintain a ratio of Adjusted Debt to Tangible
Net Worth of not more than Two to One (2.0:1).
(b) for the period commencing May 1, 1994, and thereafter:
(1) Tangible Net Worth. Actava shall at all times
maintain a Tangible Net Worth of at least One Hundred
Fifty-Five Million Dollars ($155,000,000.00).
(2) Debt to Tangible Net Worth. Actava shall at all
times maintain a ratio of Adjusted Debt to Tangible
Net Worth of not more than One and Eight Tenths to
One (1.8:1).
<PAGE> 2
Each of the foregoing financial convenants shall be calculated
accounting for Qualex, Inc. in accordance with the net equity method of
accounting.
'Tangible Net Worth' means the net book value of assets less
liabilities, plus Subordinated Debt in accordance with GAAP,
excluding from such assets (i) all Intangibles (although,
fifty percent (50%) of the note receivable principal balance
due from time to time from Triton Group Ltd. may be included
in the calculation of Tangible Net Worth (but only so long as
Triton Group Ltd. shall not be insolvent or bankrupt,
dissolved or in liquidation, or otherwise in default of its
obligations under said note receivable)), (ii) the current
balance, if any, of the Distributor Loans, and (iii) Actava's
investment in Qualex, Inc. calculated in accordance with the
net equity method of accounting, and excluding from such
liabilities the Floorplan Guaranty obligations, if any, of
Actava's obligations pursuant to Section 3.8 of the Agreement.
'Intangibles' means and includes (without duplication) general
intangibles (as that term is defined in the Uniform Commercial
Code), advances and accounts receivable due from officers,
directors, employees and stockholders, licenses, goodwill,
prepaid expenses, covenants not to compete, franchise fees,
organizational costs, research and development costs, and such
similar items as may from time to time be determined in the
reasonable discretion of ITT (including leasehold improvements
net of depreciation and deposits to the extent such items are
material and separately identified in Actava's audited
financial statements).
'Subordinated Debt' means the indebtedness of Actava under (a)
the 9-1/2% Subordinated Debentures due August 1, 1998, issued
pursuant to that certain Indenture dated as of August 1, 1973,
between Actava and Chemical Bank, as Trustee; (b) the 6-1/2%
Convertible Subordinated Debentures due August 4, 2002, issued
pursuant to that certain Indenture, dated as of August 1,
1987, between Actava and Chemical Bank, as Trustee; (c) the
9-7/8% Senior Subordinated Debentures due March 15, 1997,
issued pursuant to that certain Indenture, dated as of March
15, 1977, between Actava and The Chase Manhattan Bank
(National Association), as Trustee; (d) the 10% Subordinated
Debentures due October 1, 1999, issued pursuant to that
certain Indenture, dated as of October 1, 1974, between
National Industries, Inc. and First National City Bank, as
Trustee; (e) the 6% Senior Subordinated Swiss Bank Bond due
March 6, 1996, issued pursuant to that certain Prospectus,
dated February 19, 1986, relative to Actava's issuance of
Swiss Bank bonds in the authorized aggregate principal amount
of $100,000,000; and (f) other Indebtedness subordinated to
the Obligations pursuant to subordination terms reasonably
acceptable to ITT. Except as may otherwise be provided above,
for purposes of these financial covenant calculations, assets
and current assets shall reflect appropriate deductions for
depreciation, depletions, obsolescence, amortization,
valuation, or other reserves according to GAAP.
'Total Debt' means all liabilities in accordance with GAAP,
accounting for Qualex, Inc. in accordance with the net equity
method of accounting.
'Adjusted Debt' means Total Debt minus Subordinated Debt.
<PAGE> 3
Actava represents and warrants that the obligations hereunder
constitute senior indebtedness under the agreements relating
to the Subordinated Debt in clauses (a) through (e) in the
definition of "Subordinated Debt" above and is entitled to all
the benefits of senior debt thereunder."
3. A new Section 9.11 is incorporated into the Agreement as
though originally set forth therein as follows:
"9.11 Default DP. Diversified Products Corporation shall
breach, after the expiration of any applicable grace or cure
periods, any of the terms of any agreement, loan, guarantee or
other transaction relating to Indebtedness to ITT or the
maturity of such Indebtedness is accelerated as a consequence
of such breach and in such event no further notice or cure
period shall be required for a default to be declared
hereunder."
4. Except as expressly modified or amended herein, all other
terms and provisions of the Agreement will remain unmodified
and in full force and effect and the Agreement, as hereby
amended, is ratified, and confirmed by ITT and Actava.
5. Except as otherwise defined herein, all capitalized terms will
have the same meanings set forth in the Agreement.
IN WINTESS WHEREOF, ITT and Actava have executed this Amendment as of this
29th day of March,1994.
ITT COMMERCIAL FINANCE CORP.
By: /s/ Stephen C. Monahan
--------------------------------
Stephen C. Monahan
Vice President
THE ACTAVA GROUP INC.
By: /s/ F. B. Beilstein, III.
-------------------------------
Title: Senior-Vice President
---------------------------
-
<PAGE> 1
EXHIBIT 4(g)(iv)
AMENDMENT TO FINANCE AND SECURITY AGREEMENT
(Actava/Snapper - Temporary Overline)
This Amendment to Finance and Security Agreement ("Amendment") is made by and
between THE ACTAVA GROUP INC. ("Actava") individually, and on behalf of
SNAPPER, a division thereof ("Snapper") and ITT COMMERCIAL FINANCE CORP.
("ITT").
WHEREAS, ITT and Actava entered into that certain Finance and Security
Agreement dated October 23, 1992 ("Agreement");
WHEREAS, Actava has requested that ITT make available to Actava a
temporary overline of up to $2,000,000.00 ("Temporary Overline") through May
31, 1994, or such earlier date as ITT may in its sole discretion determine
("Overline Termination Date");
WHEREAS, Actava has agreed to pledge to ITT $2,000,000.00 in good
funds ("Pledged Funds") as additional collateral in connection with ITT's grant
of the Temporary Overline;
WHEREAS, ITT and Actava desire to amend the Agreement as provided
herein.
NOW, THEREFORE, for and in consideration of the premises, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, ITT and Actava agree as follows:
1. Temporary Overline. Upon the execution of this Amendment and the
receipt of the Pledged Funds, ITT agrees to make the Temporary
Overline available to Actava. The Temporary Overline increases
Actava's Inventory Credit Limit to the smallest of (i)
$12,000,000.00, (ii) the sum of 75% of Snapper's or a Snapper
Subsidiary's Eligible Inventory, and 50% of Snapper's Eligible
Parts, in each care measured at Cost or market value, whichever is
lower, as determined on a "first-in, first-out" basis, and (iii)
15% of the aggregate outstanding principal amount of the then
current Total Outstandings (after giving effect to the Inventory
Loans then being contemplated). The Temporary Overline is subject
to the terms and conditlons of the Agreement, and will
automatically expire without further notice from ITT on the
Overline Termination Date.
2. Pledge of Funds. As security for the obligations of Actava under
the Agreement, Actava pledges and grants to ITT a security interest
in the Pledged Funds previously delivered to ITT or to be delivered
to ITT by Actava simultaneously with the execution of this
Amendment. Actava acknowledges and agrees that ITT is not obligated
to place the Pledged Funds on deposit with any third party
financial institution and that the Pledged Funds will be commingled
with other ITT monies and will be invested in ITT's sole
discretion. ITT will not pay interest on the Pledged Funds to
Actava. ITT will at all times have the right to offset or deduct
from the Pledged Funds any monies due ITT from Actava.
3. Return of Pledged Funds. The Pledged Funds will be returned within
three (3) Business Days after the Overline Termination Date,
provided that Actava is in compliance with the Inventory Credit
Limit as in effect before this Amendment and that no Event of
Default exists.
<PAGE> 2
4. No Other Modifications. Except as expressly modified or amended
herein, all other terms and provisions of the Agreement will remain
unmodified and in full force and effect and the Agreement, as
hereby amended, is ratified, and confirmed by ITT and Actava.
5. Capitalized Terms. Except as otherwise defined herein, all
capitalized terms will have the same meanings set forth in the
Agreement.
IN WITNESS WHEREOF, ITT and Actava have executed this Amendment as of
this 15th day of April , 1994.
------- --------
ITT COMMERCIAL FINANCE CORP.
By: /s/ Jerry W. Britten
----------------------------
Jerry W. Britten
Executive Vice President
THE ACTAVA GROUP INC.
By: /s/ F.B. Beilstein, III
----------------------------
Title: Senior Vice President
-------------------------
<PAGE> 1
EXHIBIT 4(g)(v)
AMENDENT TO FINANCE AND SECURITY AGREEMENT
(Actava/Snapper)
This Amendment to Finance and Security Agreement ("Amendment") is made by and
between THE ACTAVA GROUP INC. (formerly known as Fuqua Industries, Inc.)
("Actava") individually, and on behalf of SNAPPER, a division thereof
("Snapper") and ITT COMMERCIAL FINANCE CORP. ("ITT").
WHEREAS, ITT and Actava entered into that certain Finance and
Agreement dated October 23, 1992 ("Agreement");
WHEREAS, ITT and Actava desire to amend the Agreement as provided
herein.
NOW, THEREFORE, for and in consideration of the premises, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, ITT and Actava agree as follows:
1. Section 8.26 of the Agreement is deleted and is amended to read in
its entirety as follows:
"8.26 Financial Covenants. Actava agrees that:
(a) for the period commencing December 31, 1993, through April 30,
1994:
(1) Tangible Net Worth. Actava shall at all times maintain a
Tangible Net Worth of at least One Hundred Fifty-Five Million
Dollars ($155,000,000.00).
(2) Debt to Tangible Net Worth. Actava shall at all times
maintain a ratio of Adjusted Debt to Tangible Net Worth of not
more than Two to One (2.0:1).
(b) for the period commencing May 1, 1994, and thereafter:
(1) Tangible Net Worth. Actava shall at all times maintain a
Tangible Net Worth of at least One Hundred Fifty-Five Million
Dollars (S155,000,000.00).
(2) Debt to Tangible Net Worth. Actava shall at all times
maintain a ratio of Adjusted Debt to Tangible Net Worth of not
more than One and Eight Tenths to One (1.8:1).
Each of the foregoing financial covenants shall be calculated
accounting for Qualex, Inc. in accordance with the net equity method of
accounting.
'Tangible Net Worth' means the net book value of assets less
liabilities, plus Subordinated Debt in accordance with GAAP, excluding
from such assets (i) all Intangibles (although fifty percent (50%) of
the note receivable principal balance due from time to time from
Triton Group Ltd. (but only so long as Triton Group Ltd. shall not be
insolvent or bankrupt, dissolved or in liquidation, or otherwise in
default of its obligations under said note receivable)),
<PAGE> 2
(ii) the current balance, if any, of the Distributor Loans, and (iii)
through June 30, 1994, Actava's investment in Qualex, Inc. calculated
in accordance with the net equity method of accounting, and excluding
from such liabilities the Floorplan Guaranty obligations, if any, of
Actava's obligations pursuant to Section 3.8 of the Agreement.
'Intangibles' means and includes (without duplication) general
intangibles (as that term is defined in the Uniform Commercial Code),
advances and accounts receivable due from officers, directors,
employees and stockholders, licenses, goodwill, prepaid expenses,
covenants not to compete, franchise fees, organizational costs,
research and development costs, and such similar items as may from
time to time be determined in the reasonable discretion of ITT
(including leasehold improvements net of depreciation and deposits to
the extent such items are material and separately identified in
Actava's audited financial statements).
'Subordinated Debt' means the indebtedness of Actava under (a) the
9-1/2% Subordinated Debentures due August 1, 1998, issued pursuant to
that certain Indenture dated as of August 1, 1973, between Actava and
Chemical Bank, as Trustee; (b) the 6-1/2~ Convertible Subordinated
Debentures due August 4, 2002, issued pursuant to that certain
Indenture, dated as of August 1, 1987, between Actava and Chemical
Bank, as Trustee; (c) the 9-7/8% Senior Subordinated Debentures due
March 15, 1997, issued pursuant to that certain Indenture, dated as of
March 15, 1977, between Actava and The Chase Manhattan Bank (National
Association), as Trustee; (d) the 10% Subordinated Debentures due
October 1, 1999, issued pursuant to that certain Indenture, dated as
of October 1, 1974, between National Industries, Inc. and First
National City Bank, as Trustee, (e) the 6% Senior Subordinated Swiss
Bank Bond due March 6, 1996, issued pursuant to that certain
Prospectus, dated February 19, 1986, relative to Actava's issuance of
Swiss Bank bonds in the authorized aggregate principal amount of
S100,000,000; and (f) other Indebtedness subordinated to the
Obligations pursuant to subordination terms reasonably acceptable to
ITT. Except as may otherwise be provided above, for purposes of these
financial covenant calculations, assets and current assets shall
reflect appropriate deductions for depreciation, depletions,
obsolescence, amortization, valuation, or other reserves according to
GAAP.
Actava represents and warrants that the obligations hereunder
constitute senior indebtedness under the agreements relating to the
Subordinated Debt in clauses (a) through (e) in the definition of
'Subordinated Debt' above and is entitled to all the benefits of
senior debt thereunder.
'Total Debt' means all liabilities in accordance with GAAP, accounting
for Qualex, Inc. in accordance with the net equity method of
accounting.
'Adjusted Debt' means Total Debt minus Subordinated Debt."
2. Except as expressly modified or amended herein, all other terms and
provisions of the Agreement will remain unmodified and in full force and effect
and the Agreement, as hereby amended, is ratified, and confirmed by ITT and
Actava.
<PAGE> 3
3. Except as otherwise defined herein, all capitalized terms will have
the same meanings set forth in the Agreement.
IN WITNESS WHEREOF, ITT and Actava have executed this Amendment as of
the 23 day of September, 1994.
------- ---------
ITT COMMERCIAL FINANCE CORP.
By: /s/ R.J. Woodruff
-----------------------------
Print Name: R.J. Woodruff
---------------------
Title: Regional Vice President
--------------------------
THE ACTAVA GROUP INC.
By: /s/ F.B. Beilstein III
-----------------------------
Print Name: F.B. Beilstein III
---------------------
Title: Senior Vice President
--------------------------
<PAGE> 1
EXHIBIT 10(r)(i)
SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT (this "Agreement"), dated as of the 6th day
of December, 1994, by and among The Actava Group Inc., a Delaware corporation
("Actava"), Roadmaster Industries, Inc., a Delaware corporation ("Roadmaster"),
Henry Fong, an individual resident of Palm Beach Gardens, Florida ("Fong"), and
Edward E. Shake, an individual resident of Olney, Illinois ("Shake"). Actava,
Fong and Shake are individually a "Shareholder" and collectively the
"Shareholders."
W I T N E S S E T H:
WHEREAS, pursuant to an Agreement and Plan of Reorganization dated as
of July 20, 1994, by and among Actava, Diversified Products Corporation, Hutch
Sports USA, Inc., Nelson/Weather-Rite, Inc., Willow Hosiery Company, Inc., and
Roadmaster (the "Reorganization Agreement"), Actava shall simultaneously with
the execution and delivery of this Agreement become a Shareholder of
Roadmaster;
WHEREAS, it is a condition precedent to the consummation of the
transaction contemplated in the Reorganization Agreement that the Shareholders
and Roadmaster enter into this Agreement; and
WHEREAS, the Shareholders wish to provide among themselves for the
future management of Roadmaster and for the composition of the Board of
Directors of Roadmaster (the "Board of Directors") and deem it in the best
interests of Roadmaster to make provision herein for such management;
NOW, THEREFORE, for and in consideration of the mutual COVENANTS
CONTAINED HEREIN AND OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY of which are hereby ACKNOWLEDGED, THE PARTIES HERETO AGREE AS
FOLLOWS:
SECTION 1. REPRESENTATIONS AND WARRANTIES.
(a) Roadmaster and each Shareholder represent and warrant to the
other parties hereto that all necessary action to authorize the execution and
delivery of this Agreement has been taken, that this Agreement has been duly
executed and delivered and that this Agreement constitutes a valid and legally
binding obligation of such party and is enforceable in accordance with its
terms.
<PAGE> 2
(b) Each Shareholder represents and warrants to the other
Shareholders that it has granted no proxy rights or other voting rights with
respect to such Shareholder's shares of Voting Stock.
SECTION 2. CERTAIN DEFINED TERMS. As used in this Agreement:
(a) "Affiliate" shall mean any individual, corporation,
partnership, unincorporated association or other entity that directly or
indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, another individual, corporation, partnership,
unincorporated association or other entity.
(b) "Voting Stock" shall mean Roadmaster stock of any class or
series entitled to vote in the election of directors.
(c) "Disinterested Director" shall mean any member of the Board of
Directors of Roadmaster who is not an employee, officer or Affiliate of
Roadmaster or any Shareholder.
(d) "Actava Designated Directors" shall mean persons who are
designated by Actava pursuant to this Agreement to serve on the Board of
Directors.
(e) "Roadmaster Designated Directors" shall mean persons who are
designated by the members of the Board of Directors, other than the Actava
Designated Directors, pursuant to this Agreement to serve on the Board of
Directors.
(f) "Exchange Shares" shall mean the 19,169,000 shares of
Roadmaster's Common Stock, $.01 par value ("Common Stock"), acquired by Actava
pursuant to the Reorganization Agreement.
SECTION 3. BOARD COMPOSITION.
(a) Number of Board Members. Roadmaster and each of the
Shareholders hereby agree that such party will take all necessary actions
INCLUDING, WITHOUT LIMITATION, VOTING SUCH PARTY'S VOTING Stock, to cause the
Board of Directors to remain at nine (9) members.
(b) Election of Actava Designated Directors. Concurrently with the
EXECUTION AND DELIVERY OF THIS AGREEMENT, FOUR (4) INDIVIDUALS DESIGNATED by
Actava SHALL BE ELECTED TO THE BOARD OF Directors; provided, however, that two
(2) of the total of four (4) Actava Designated Directors shall be Disinterested
Directors. Thereafter, during the term of this Agreement, if any Actava
Designated Director resigns, does not stand for reelection or otherwise ceases
to serve as a member of the Board of Directors for any reason, Actava may
designate another individual to serve as an
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<PAGE> 3
Actava Designated Director. Fong and Shake hereby agree that they shall at all
times and upon every opportunity affirmatively vote all of their Voting Stock
to cause the Board of Directors to be composed of four (4) Actava Designated
Directors. Roadmaster shall use its best efforts to cause the Chief Executive
Officer and Chief Operating Officer of Roadmaster to affirmatively support the
election of the Actava Designated Directors. The obligations of the parties
under this Section 3(b) shall terminate if (i) the Roadmaster Designated
Directors have not been elected to, and are not then serving on the Board of
Directors (unless the Board of Directors failed to nominate persons to serve as
Roadmaster Designated Directors or Fong or Shake failed to vote their shares of
Voting Stock for such persons) or (ii) Actava does not vote its shares of
Voting Stock for the Roadmaster Designated Directors.
(c) Election of Roadmaster Designated Directors. Actava hereby
agrees that it shall at all times and upon every opportunity affirmatively vote
all of its Voting Stock to cause the Board of Directors to be composed of five
(5) Roadmaster Designated Directors in addition to the four (4) Actava
Designated Directors; provided, however, that three (3) of the total of five
(5) Roadmaster Designated Directors shall be Disinterested Directors. The
obligations of Actava pursuant to Section 3 hereof shall continue in full force
and effect for only so long as (i) the Roadmaster annual audited financial
statements prepared on a consolidated basis for Roadmaster and its consolidated
subsidiaries (the "Annual Roadmaster Financial Statements"), beginning with the
first Annual Roadmaster Financial Statements issued following the consummation
of the transactions contemplated in the Reorganization Agreement, reflect that
Roadmaster and its subsidiaries reported positive net income from continuing
operations calculated in accordance with generally accepted accounting
principles, and (ii) the number of members of the Board of Directors is nine
(9) and the number of directors Actava is entitled to designate pursuant to
this Section 3 have been nominated and supported by the other Shareholders and
elected to, and are then serving on, the Board of Directors and each committee
thereof; provided, however, that if the conditions SET FORTH IN THIS CLAUSE
(II) ARE not satisfied due to Actava's failure to designate persons to serve as
Actava Designated Directors or to vote its shares of Voting Stock for such
persons, then Actava's obligations under this Section 3 shall not terminate.
Upon the failure of any of the conditions set forth in (i) or (ii) above, the
obligations of Actava pursuant to this Section 3 shall immediately and forever
terminate.
(d) Nomination of Directors. Roadmaster and the Shareholders
shall, in connection with any election of a member or members of the Board of
Directors, use their best efforts to cause the nomination of individuals for
election so as to provide for the election of (i) four (4) Actava Designated
Directors and (ii) five (5) Roadmaster Designated Directors (three (3) of which
shall be
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<PAGE> 4
Disinterested Directors). Notwithstanding anything in this Agreement to the
contrary, any designation or selection by any party to this Agreement of
persons to serve on the Board of Directors or a committee thereof shall remain
effective until such time as such party shall specify otherwise in writing.
(e) Composition of Committees. Roadmaster and the Shareholders
shall use their best efforts to cause at least one (1) of the Actava Designated
Directors (as selected by Actava) to be elected to serve on each committee of
the Board of Directors; provided, however, that Roadmaster and the Shareholders
shall use their best efforts to cause at least two (2) Actava Designated
Directors (as selected by Actava) to be elected to serve on any committee of
the Board of Directors which consists of five (5) or more members.
(f) Certain Restrictions. If as a result of Actava's sale,
transfer or assignment of shares of Common Stock, Actava's ownership of Common
Stock is reduced to:
(i) less than 12,000,000 shares but equal to or more than
8,000,000 shares of the outstanding Common Stock, Actava shall
thereafter be entitled to designate only three (3) members of
the Board of Directors;
(ii) less than 8,000,000 shares but equal to or more than
5,000,000 shares of the outstanding Common Stock, Actava shall
thereafter be entitled to designate only two (2) members of
the Board of Directors; and
(iii) less than 5,000,000 shares but equal to or more than
2,000,000 shares of the outstanding Common Stock, Actava shall
thereafter be entitled to designate only one (1) member of the
Board of Directors.
The number of shares set forth in this Section 3(f) shall be automatically
adjusted as appropriate upon any subdivision or combination of the shares of
Common Stock.
SECTION 4. RIGHT OF FIRST REFUSAL. During the term of this
agreement and for only so long as the number of directors Actava is entitled to
designate pursuant to Section 3 have been nominated and elected to, and are
then serving on, the Board of Directors and each committee thereof (unless
Actava has failed to designate persons to serve as Actava Designated Directors
or to vote its shares of Voting Stock for such persons), Actava may not sell,
transfer or assign any of the Exchange Shares except pursuant to the following
terms and conditions:
(a) In the event that Actava desires to make an outright and
absolute sale of all or any portion of the Exchange Shares, Actava
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<PAGE> 5
shall first give written notice to Roadmaster (the "Notice of Proposed
Transfer") specifying the name of the proposed purchaser(s) of the Exchange
Shares, (the "Proposed Purchasers"), the total number of Exchange Shares which
the Actava desires to sell to the Proposed Purchaser(s) (the "Offered Shares"),
all of the material terms, including the price, upon which Actava proposes to
sell the Offered Shares to the Proposed Purchaser(s), and stating that
Roadmaster has the right to purchase all (but not less than all) of the Offered
Shares at said price and on such terms. If the Proposed Purchaser(s) has
offered consideration other than cash, the purchase price for any Exchange
Shares acquired pursuant to the right of first refusal granted herein shall
include the cash equivalent of the non-cash consideration (computed on a
current, present value basis). During the 30-day period following delivery of
the Notice of Proposed Transfer, Roadmaster shall have the option to exercise
its right to purchase all (but not less than all) of the Offered Shares before
the same shall be sold, transferred or assigned to the Proposed Purchaser(s).
Roadmaster shall give written notice of its election to Actava during such
30-day period. If Roadmaster has not exercised its right to acquire the Offered
Shares within the aforementioned 30-day period or consummated the acquisition
of the Offered Shares within the 120-day period following delivery of the
Notice of Proposed Transfer, then Actava shall have the right for a period of
180 days after the expiration of such applicable period to transfer the Offered
Shares to the Proposed Purchaser(s) at the price and on terms substantially the
same as specified in the Notice of Proposed Transfer.
(b) Notwithstanding anything to the contrary contained herein, the
right of first refusal granted to Roadmaster in this Section 4 shall not apply
to any proposed sale, transfer or assignment of Exchange Shares:
(i) to any person who would, after the consummation of
any such transaction, own less than ten percent (10 ) of the outstanding shares
of Voting Stock;
(ii) pursuant to a registration statement filed under the
Securities Act of 1933, as amended; provided, however, that Actava shall use
its reasonable best efforts to not make, and to cause any underwriter, dealer
or broker (as defined below) to not make, any sales pursuant to such
registration statement to any single purchaser or Acquiring Person who would,
after the consummation of such transaction, own ten percent (10 ) or more of
the outstanding shares of Voting Stock, excluding, any underwriter (as defined
in Section 2 of the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act")), broker (as defined
in Section 3 of the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder (the "Exchange Act")), or dealer
5
<PAGE> 6
(as defined in Section 3 of the Exchange Act). For purposes of this Section 4,
"Acquiring Person" means any person or group (as defined in Section 13(d)(3) of
the Exchange Act) which, together with all affiliates (as defined in Rule 12b-2
under the Exchange Act), is the owner or beneficial owner of more than five
percent (5 ) or more of the outstanding shares of Voting Stock; or
(iii) to an Affiliate of Actava.
SECTION 5. TERM. This Agreement shall continue in full force
and effect for a period of five (5) years from the date hereof.
SECTION 6. DIRECTOR OPTIONS. Roadmaster granted nonqualified
stock options for 25,000 shares of Common Stock to each of the non-employee
Roadmaster Designated Directors on July 6, 1994, at an exercise price of $3.625
per share (the "Exercise Price") pursuant to the 1994 Directors Stock Option
Plan for Non-Employee Directors. Roadmaster agrees to grant non-qualified stock
options for 25,000 shares of Common Stock to each of the Actava Designated
Directors immediately upon their election to the Board of Directors at an
exercise price equal to the fair market value of such shares on such date (the
"FMV Exercise Price"). Roadmaster agrees to pay to each of the Actava
Designated Directors the product of 25,000 times the excess of the FMV Exercise
Price over the Exercise Price as deferred compensation. Such deferred
compensation shall be paid to the Actava Designated Directors on or before the
first anniversary date of this Agreement.
SECTION 7. REMEDIES. The Shareholders and Roadmaster acknowledge
and agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof, this being in addition to any other remedy to
WHICH they may be entitled at law or equity.
SECTION 8. ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement of the parties with respect to all terms, restrictions and
limitations contained herein, and it supersedes and cancels any and all prior
agreements, communications, and representations, whether oral or written,
relating to the subject matter hereof.
SECTION 9. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which, taken
together, shall constitute one and the same instrument.
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<PAGE> 7
SECTION 10. NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given or made if delivered
personally, mailed by registered or certified mail (return receipt requested),
or sent via overnight courier to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) If to Actava:
The Actava Group Inc.
4900 Georgia-Pacific Center
Atlanta, Georgia 30303
Attention: Walter M. Grant, Esq.
With a Copy to:
Long, Aldridge & Norman
One Peachtree Center, Suite 5300
303 Peachtree Street, N.E.
Atlanta, Georgia 30308 Attention:
Clay C. Long, Esq.
(b) If to Roadmaster:
Roadmaster Industries, Inc.
7315 East Peakview Avenue
Englewood, Colorado 80111
Attention: Mr. Henry Fong
With a copy to:
Smith, Gambrell & Russell
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attention: David J. Harris, Esq.
(c) If to Henry Fong:
Mr. Henry Fong
3115 Miro Beach North
Palm Beach Gardens, Florida 33410
With a copy to:
Smith, Gambrell & Russell
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attention: David J. Harris, Esq.
(d) If to Edward E. Shake:
Mr. Edward E. Shake
7 Lakewood Drive
Olney, Illinois 62450
7
<PAGE> 8
With a copy to:
Smith, Gambrell & Russell
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attention: David J. Harris, Esq.
SECTION 11. GOVERNING LAW. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of Delaware
(excluding all rules concerning conflict of laws).
SECTION 12. AMENDMENTS. This Agreement may not be amended
orally, and no amendment or attempted waiver of any part or provision hereof
shall be valid unless in writing and signed by all parties.
SECTION 13. FURTHER ACTS. The parties agree to perform any
further acts and to execute and deliver any instruments or documents that may
be necessary to carry out the purposes of this Agreement. To the extent any
subsidiary of Roadmaster owns, directly or indirectly, any shares of Voting
Stock which are entitled to vote, Roadmaster shall cause such subsidiary to
comply with the terms of this Agreement, including, without limitation, causing
the Board of Directors to remain at nine (9) members and supporting the
nomination and election of the Acting Designated Directors to the Board of
Directors and each committee of the Board of Directors as provided in Section
3. Fong shall use his best efforts to cause Equitex, Inc. ("Equitex") at the
earliest possible time, to enter into a separate shareholders agreement with
Actava containing substantially the same terms as this Agreement. Fong shall
also, during any time that Equitex is not bound by such a shareholders
agreement, use his best efforts to cause Equitex to comply with the terms of
this Agreement, including, without limitation, causing the Board of Directors
to remain at nine (9) members and supporting the nomination and election of the
Actava Designated Directors to the Board of Directors and each committee
thereof as provided in Section 3.
SECTION 14. SEVERABILITY. In the event that any one or more of
the provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, the same shall not invalidate
or otherwise affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision or
portion thereof had never been contained herein.
SECTION 15. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and shall inure to the benefit of each party hereto, its
successors and permitted assigns. No party shall have the right to assign this
Agreement, or any interest under this Agreement, except in connection with an
assignment, sale or other
8
<PAGE> 9
transfer of Voting Stock subject to this Agreement to an Affiliate; in which
case, such Affiliate shall as a condition to any such transfer agree in writing
to be bound by the terms of this Agreement with respect to such shares of
voting Stock.
IN WITNESS WHEREOF, the Shareholders have caused this Agreement to be
duly executed as of the day and year first above written.
THE ACTAVA GROUP INC.
By: John D. Phillips
--------------------------------
Title: CEO/President
-----------------------------
ROADMASTER INDUSTRIES, INC.
By: Henry Fong
--------------------------------
Title: CEO
-----------------------------
Henry Fong
-----------------------------------
Henry Fong
Edward E. Shake
-----------------------------------
Edward E. Shake
9
<PAGE> 1
EXHIBIT 10(r)(ii)
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into as of the 6th day of December, 1994 by and between Roadmaster
Industries, Inc., a Delaware corporation (the "Company"), and The Actava Group
Inc., a Delaware corporation ( "Actava") .
In consideration of the following mutual covenants and agreements, and
subject to the terms and conditions set forth herein, the parties hereto agree
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. The following definitions shall be applicable
to the terms set forth below as used in this Agreement:
(a) "Affiliate." The term "Affiliate" shall mean, with
respect to any person or entity, any person or entity which directly, or
indirectly through one or more intermediaries, controls, is controlled by or is
under common control with such person or entity.
(b) "Board." The term "Board" shall mean the Board of
Directors of the Company.
(c) "Commission." The term "Commission" shall mean the
Securities and Exchange Commission or any other federal agency at the time
administering the Securities Act.
(d) "Common Stock." The term "Common Stock" shall mean
the Company's Common Stock, $.01 par value per share, as constituted on the
date hereof.
(e) "Company Misrepresentation or Omission." The term
"Company Misrepresentation or Omission" shall mean (i) any untrue statement (or
alleged untrue statement) of any material fact contained in any Registration
Statement under which Registrable Stock was or is proposed to be registered
under the Securities Act, any preliminary prospectus or final prospectus
contained therein, or any summary prospect issued in connection with any
securities being registered or offered for sale, or any amendment or supplement
thereto, or any other document prepared in connection wit sale, registration
or qualification of Registrable Stock, or (ii) any omission (or alleged
<PAGE> 2
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(f) "Company's Notice." The term "Company's Notice"
shall have the meaning set forth in Section 2.3 hereof.
(g) "Initiating Holders." The term "Initiating Holders"
shall have the meaning set forth in Section 2.1 of this Agreement.
(h) "Investors." The term "Investors" shall mean Actava,
its respective successors and assigns and any other holder of Registrable
Stock.
(i) "Investors' Notice." The term "Investors' Notice"
shall have the meaning set forth in Section 2.3 hereof.
(j) "Long-Form Registration Statement." The term
"Long-Form Registration Statement" shall mean a registration statement on Form
S-1, Form S-2, Form SB-1 or Form SB-2, or any similar form of registration
statement adopted by the Commission from and after the date hereof.
(k) "Prospective Sellers." The term "Prospective
Sellers" shall have the meaning set forth in Section 2.6(a)(ii) hereof.
(l) "Register." The terms "register," "registered" and
"registration" refer to a registration of securities under the Securities Act
effected by preparing and filing with the Commission a registration statement
in compliance with the Securities Act and the rules and regulations promulgated
thereunder.
(m) "Registrable Stock." The term "Registrable Stock" s
all mean (i) the Common Stock acquired by Investors pursuant to the Agreement
and Plan of Reorganization dated as of July 20, 1994, by and among Actava,
Diversified Products Corporation, Hutch Sports USA, Inc., Nelson/Weather-Rite
Inc., Willow Hoisery Company, and the Company (the "Reorganization Shares);
(ii) any Common Stock issued or issuable with respect to the Reorganization
Shares by reason of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization, (iii) any other shares of Common Stock now held by persons or
entities holding the securities described in clauses (i) and (ii) above and
(vi) any shares of Common Stock hereafter acquired by Actava or its successors.
A person or entity shall be deemed to be a holder of Registrable Stock when
such person or entity has a right to acquire such Registrable Stock (by
conversion or otherwise) regardless of whether such acquisition has actually
been effected. Each share of Registrable Stock shall continue to be Registrable
Stock in the hands of each subsequent holder thereof; provided that a share of
Registrable Stock shall cease to be Registrable Stock when such share is
transferred to any person or entity who is not
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<PAGE> 3
affiliated with the holder in connection with a registered public offering or
in accordance with Rule 144 promulgated by the Commission under the Securities
Act. For the purposes of this Agreement, it is expressly agreed that in
addition to the persons and entities described as Affiliates in Section l.l(a)
hereof, the officers, directors and stockholders, in the case of a corporation,
and the partners, in the case of a partnership, of a holder, without
limitation, shall be deemed to be affiliated with such holder.
(n) "Registration Expenses." The term "Registration
Expenses" shall have the meaning set forth in Section 2.7(a) hereof.
(o) "Registration Period." The term "Registration
Period" shall mean, with regard to any Investor and the shares of Registrable
Stock then held by such Investor, that period beginning on the date hereof and
ending on the earlier of (i) the date which is ten years after the date hereof,
and (ii) the dates on which such shares of Registrable Stock may be publicly
sold (without restriction as to the number of Shares that may be sold) pursuant
to Rule 144 of the Commission under the Securities Act.
(p) "Registration Statement." The term "Registration
Statement" shall mean a Long-Form Registration Statement or a Short-Form
Registration Statement, as the case may
(q) "Requested Jurisdiction." The term "Requested
Jurisdiction" shall have the meaning set forth in Section 2.6(a)(v) hereof.
(r) "Requesting Holders." The term "Requesting Holders"
shall have the meaning set forth in Section 2.1(c) hereof.
(s) "Rule 145 Transaction." The term "Rule 145
Transaction" shall mean a merger, acquisition or other transaction of the type
described in Rule 145 under the Securities Act, as such Rule may from time to
time be amended, or in any comparable Rule.
(t) "Securities Act." The term "Securities Act" shall
mean the Securities Act of 1933, as amended.
(u) "Selling Investor." The term "Selling Investor"
shall mean any Investor whose shares of Registrable Stock are included in a
Registration Statement pursuant to this Agreement.
(v) "Short-Form Registration Statement." The term
"Short-Form Registration Statement" shall mean a registration statement on Form
S-3 or any similar form of registration statement adopted by the Commission
from and after the date hereof.
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1.2 Additional Definitions. In addition to the foregoing, other
capitalized terms used in this Agreement shall have the meanings given to such
terms where they first appear herein.
ARTICLE II.
REGISTRATION RIGHTS
2.1 Required Registrations.
(a) If, at any time during the Registration Period,
holders of at least 50% of the Registrable Stock then outstanding propose to
dispose of, pursuant to a Long-Form Registration Statement (whether or not the
Company is eligible to use a Short Form Registration Statement), all or part of
their shares of the Registrable Stock, then such holders (the "Initiating
Holders") may request the Company in writing to effect such registration under
the Securities Act, stating the form of registration statement under the
Securities Act to be used, the number of shares of Registrable Stock to be
disposed of, the intended method of disposition of such shares and whether the
Company shall bear the expenses of the registration pursuant to Section 2.7
hereof.
(b) Notwithstanding the foregoing, if at any time at
which the Company is entitled to file a registration statement on a Short-Form
Registration Statement, holders of Registrable Stock propose to dispose of,
pursuant to a Short-Form Registration Statement, shares of Registrable Stock
which such holders in their good faith discretion determine would have an
anticipated aggregate offering price of at least $500,000, then such holders
(the "Initiating Holders") may request the Company in writing to effect such
registration, stating the number of shares of Registrable Stock to be disposed
of, the intended method of disposition of such shares and whether the Company
shall bear the expenses of the registration pursuant to Section 2.7 hereof.
(c) Upon receipt of the request of the Initiating Holders
pursuant to Section 2.1(a) or Section 2.1(b) above, the Company shall give
prompt written notice thereof to all other holders of Registrable Stock.
Subject to the provisions of Section 2.2 below, upon receipt of the request of
the Initiating Holders pursuant to Section 2.1(a) or (b) the Company shall use
its reasonable best efforts promptly to effect the registration under the
Securities Act of all shares of Registrable Stock specified in the requests of
the Initiating Holders and the requests (stating the number of shares of
Registrable Stock to be disposed of and the intended method of disposition of
such shares) of other holders of shares of Registrable Stock ("Requesting
Holders) given within 20 days after receipt of such notice from the Company all
to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Stock to be
registered.
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2.2 Limitations on Required Registration.
(a) Except as set forth below, for so long as the Company
is eligible for use of a Short-Form Registration Statement for the sale by a
Prospective Seller of Registrable Stock the Company shall not be required to
prepare and file at the request of holders of Registrable Stock pursuant to
Section 2.1(a) hereof more than two Long-Form Registration Statements, which
(i) actually become or are declared effective or (ii) which are filed with the
Commission and thereafter are abandoned or withdrawn at the request of (A) the
Prospective Sellers holding a majority of the shares of Registrable Stock
included in the registration or (B) the underwriters selected by the Initiating
Holders where such abandonment or withdrawal arises out of any reason other
than a Company Misrepresentation or Omission or the failure by the Company to
otherwise comply with this Agreement. Notwithstanding the foregoing, in the
event the Company is not eligible for use of a Short Form Registration
Statement for the sale by a Prospective Seller of Registrable Stock at any time
during the term of this Agreement the Company shall not be required to file at
the request of holders of Registrable Stock pursuant to Section 2.1(a) hereof
more than an aggregate of four Long-Form Registration Statements, which (i)
actually become or are declared effective or (ii) which are filed with the
Commission and thereafter are abandoned or withdrawn at the request of (A) the
Prospective Sellers holding a majority of the shares of Registrable Stock
included in the registration or (B) the underwriters selected by the Initiating
Holders where such abandonment or withdrawal arises out of any reason other
than a Company Misrepresentation or Omission or the failure by the Company to
otherwise comply in all material respects with this Agreement. Additionally, if
the Company is eligible to file a Short-Form Registration Statement for the
sale by Prospective Sellers of Registrable Stock, the Company shall not be
required to file more than an aggregate of two Short-Form Registration
Statements, which actually become or are declared effective, during any twelve
month period at the request of holders of Registrable Stock other than Actava
(or its successors) with respect to the sale of Registrable Stock pursuant to
Section 2.1(b) hereof. If the Company is eligible to file a Short-Form
Registration Statement for the sale by Prospective Sellers of Registrable
Stock, the limitations set forth in the immediately preceding sentence shall
not apply to any request by Actava for the registration of Registrable Stock on
a Short-Form Registration Statement and it is expressly understood and agreed
that nothing contained in this Section 2.2(a) shall limit the Company's
obligation from time to time to prepare and file a Short-Form Registration
Statement at the request of Actava (or its successors) with respect to the sale
of Registrable Stock pursuant to Section 2.1(b) hereof.
(b) Whenever a required registration requested by holders
of Registrable Stock is for a firmly underwritten offering, if the Initiating
Holders determine that the number of shares of Common Stock so included which
are to be sold by the holders of Registrable Stock is limited due to market
conditions, the holders (including both the Initiating Holders and the
Requesting Holders) of Registrable Stock proposing to sell their shares in such
underwriting and registration shall share pro rata in the available portion of
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the registration in question, such sharing to be based upon the number of
shares of Registrable Stock then held by such holders, respectively. In the
event it is determined that the number of shares that may be included in the
underwriting is limited due to market conditions and such limitation will
result in the exclusion of more than 15 % of the total number of Registrable
Shares proposed to be included in the registration, the Company shall give
written notice of such limitation to the Initiating Holders and the Requesting
Holders. If after receiving such notice any holder of Registrable Stock
disapproves of the terms of the underwriting as so limited, such holder may
elect to withdraw therefrom upon written notice to the Company, the underwriter
and the Initiating Holders delivered at least 5 business days after delivery of
such notice by the Company. The Registrable Stock so withdrawn shall also be
withdrawn from registration; provided, however, that, if by the withdrawal of
such Registrable Stock, a greater number of shares of Registrable Stock held by
other Initiating Holders or Requesting Holders may be included in such
registration (up to the maximum of any limitation imposed by the Initiating
Holders), then the Company shall offer to all holders of Registrable Stock who
have included Registrable Stock in the registration the right to include
additional Registrable Stock in the same proportion used in determining the
limitation imposed by the provisions of this Section 2.2(b).
(c) The Company shall not be required to file a
registration statement pursuant to Section 2.1 hereof within 90 days following
the effective date of a registration statement filed by the Company with the
Commission pertaining to an underwritten public offering of securities for cash
for the account of the Company or for the account of any other person or entity
if the Initiating Holders' request for registration is received by the Company
subsequent to such time as the Company in good faith gives written notice to
the holders of Registrable Stock that the Company is commencing to prepare a
Registration Statement and the Company is actively employing in good faith all
reasonable efforts to cause such Registration Statement to become effective.
(d) Notwithstanding the provisions of Section 2.1, if the
Company shall furnish to the Initiating and Requesting Holders a certificate
signed by the President of the Company stating that, in the good faith judgment
of the Board, it would be materially detrimental to the Company and its
stockholders for such Registration Statement to be filed and it is in the
reasonable best interests of the Company to defer the filing of such
Registration Statement or (ii) such filing would require the disclosure of
material information relating to the Company that has not been disclosed, and
is not available, to the public and that the Company has a reasonable and bona
fide business purpose for keeping confidential, the Company shall have the
right to defer such filing for a period of not more than 90 days after receipt
of the request of the Initiating Holders; provided, however, that the Company
may not utilize this right more than once in any 12-month period.
2.3 Incidental Registration. If the Company at any time proposes
to register any of its securities for sale for its own account or for the
account of any other person or entity (other than a registration relating
either to the sale of securities to employees of the Company
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<PAGE> 7
pursuant to a stock option, stock purchase or similar plan or a Rule 145
transaction), it shall each such time give written notice (the "Company's
Notice"), at its expense, to all holders of Registrable Stock of its intention
to do so at least 30 days prior to the filing of a registration statement with
respect to such registration with the Commission. If any holder of Registrable
Stock desires to dispose of all or part of its Registrable Stock, it may
request registration thereof in connection with Company's registration by
delivering to the Company, within 15 days after receipt of the Company's
Notice, written notice of such request (the "Investor's Notice") stating the
number of shares of Registrable Stock to be disposed of and the intended method
of disposition of such shares by such holder or holders. The Company shall use
its reasonable best efforts to cause all shares of Registrable Stock specified
in the Investors' Notice to be registered under the Securities Act so as to
permit the sale or other disposition (in accordance with the intended methods
thereof as aforesaid) by such holder or holders of the shares so registered.
subject, however, to the limitations set forth in Section 2.4 hereof; and,
provided, however, that the Company shall not be required to grant any
concession or additional rights to any other person to secure the right of any
holder of Registrable Stock to participate in such registration.
2.4 Limitations on Incidental Registration.
(a) If the registration of which the Company gives notice
pursuant to Section 2.3 above is for the purpose of permitting a disposition of
securities by the Company pursuant to a firm commitment underwritten offering,
the notice shall so state. If requested in writing to do so in good faith by
the managing underwriter of the offering, the Company shall have the right to
limit the aggregate size of the offering or decrease the number of shares to be
included therein by stockholders of the Company to the extent necessary to
reduce the number of securities to be included in the registration to the level
recommended by the managing underwriter, and only securities which are to be
included in the underwriting may be included in the registration. IF THE
Company's offering is underwritten, holders of Registrable Stock electing to
register all or part of their shares of Registrable Stock in the registration
shall sell such shares to or through the underwriter(s) of the securities being
registered for the account of the Company upon terms generally comparable to
the terms applicable to the Company (except that the Company shall bear all
Registration Expenses pursuant to Section 2.7 hereof) .
(b) Whenever the number of shares which may be registered
pursuant to Section 2.3 is limited by the provisions of Section 2.4(a) above,
the holders of Registrable Stock, together with the holders of Common Stock
that have the right to participate in the firm commitment underwritten offering
pursuant to registration rights granted by the Company prior to the date of
this Agreement, shall have priority as to sales over the other holders of the
Company's securities and the Company shall cause such other holders to withdraw
from such offering to the extent necessary to allow all requesting holders of
Registrable Stock and the holders of Common Stock that have the right to
participate in the film commitment underwritten offering pursuant to
registration rights granted by the
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Company prior to the date of this Agreement to include all of the shares so
requested to be included within such registration. Whenever the number of
shares which may be registered pursuant to Section 2.3 is still limited by the
provisions of Section 2.4(a) above, after the withdrawal of the other holders
of the Company s securities, the Company shall have priority as to sales over
the holders of Registrable Stock and each holder hereby agrees that it shall
withdraw its securities from such registration to the extent necessary to allow
the Company to include all the shares which the Company desires to sell for its
own account to be included within such registration. The holders of Registrable
Stock given rights by Section 2.3 above, together with the holders of Common
Stock that have the right to participate in the firm commitment underwritten
offering pursuant to registration rights granted by the Company prior to the
date of this Agreement, shall share pro rata in the available portion of the
registration in question, such sharing to be based upon the number of shares of
Common Stock then held by each of such holders, respectively. If as a result of
the proration provisions of this Section 2.4(b), any holder of Registrable
Stock is not entitled to include all such Registrable Stock in such
registration, such holder may elect to withdraw his request to include any
Registrable Stock in such registration (a "Withdrawal Election); provided,
however, that a holder of Registrable Stock who has made a Withdrawal Election
shall no longer have any right to include any Registrable Stock in the
registration as to which such Withdrawal Election was made unless the managing
underwriter of the offering agrees that the aggregate size of the offering may
be increased such that the registration could include all of the shares of
Registrable Stock that such holder requested be included in the registration.
In the event that a holder of Registrable Stock who previously filed a
Withdrawal Election elects to participate in the registration following an
increase in the aggregate size of the offering and such participation requires,
in the reasonable judgement of counsel to the Company or the underwriters, a
recirculation of the preliminary prospectus used in the offering, such holder
shall bear the printing and delivery expenses of such recirculation. The number
of shares of Registrable Stock required to satisfy any underwriters'
overallotment option in a firm commitment underwritten offering initiated by
the Company shall be allocated pro rata among the Company and all holders of
securities to be included in the offering on the basis of the relative number
of securities otherwise to be included by each of them in the registration.
(c) The Company may, for any reason and without the
consent of any Investor, deterrnine not to proceed with any registration which
is the subject of a Company's Notice and abandon the offering, whereupon the
Company shall be relieved of any further obligation hereunder to proceed with
such registration or offering.
2.5 Designation of Underwriter. In the case of any registration
initiated by the holders of Registrable Stock pursuant to the provisions of
Section 2.1 hereof which is proposed to be effected pursuant to a firm
commitment underwriting, the Initiating Holders shall have the right to
designate the managing underwriter, and all holders of Registrable Stock
participating in the registration shall sell their shares only pursuant to such
underwriting.
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2.6 Registration Procedures.
(a) If and when the Company is required by the provisions
of this Agreement to use its reasonable best efforts to effect the registration
of shares of Registrable Stock, the Company shall:
(i) prepare and file with the Commission a
registration statement (the form and substance of which shall be subject to the
reasonable approval of the holders of a majority of the Registrable Stock to be
included in such registration) with respect to such shares and use its
reasonable best efforts to cause such registration statement to become and
remain effective as provided herein;
(ii) prepare and file with the Commission such
amendments and supplements to such Registration Statement and the prospectuses
used in connection therewith (subject to the approval of the holders of a
majority of the Registrable Stock to be included in such registration) as may
be necessary to keep such Registration Statement effective and current and to
comply with the provisions of the Securities Act with respect to the sale or
other disposition of all shares covered by such Registration Statement,
including the filing of reports and financial statements with the Commission
and the filing of such amendments and supplements as may be necessary to
reflect the intended method of disposition from time to time of the Investors
who have requested that any of their shares be sold or otherwise disposed of in
connection with the registration (the "Prospective Sellers"), until the earlier
of (y) such time as all of the shares covered by such Registration Statement
have been disposed of and (z) 120 days after the effective date of such
Registration Statement or for such longer or shorter period of time as the
parties may agree; provided, that if the Company or the managing underwriter
requests that a Prospective Seller refrain from selling shares at any time
during the offering, the 120 day period shall be extended for a period of time
equal to the period for which such Prospective Seller so refrained;
(iii) furnish to each Prospective Seller such
number of copies of each prospectus, including preliminary prospectuses, in
conformity with the requirements of the Securities Act, and such other
documents, as the Prospective Seller may reasonably request in order to
facilitate the public sale or other disposition of the shares covered by the
Registration Statement;
(iv) promptly notify each Prospective Seller and
each underwriter participating in the offering of the occurrence of any event
(of which the Company has knowledge), as a result of which the Company's
prospectus as then in effect includes an untrue statement of material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements contained therein not misleading in light of the
circumstances then existing, and the Company will then prepare and furnish to
each Prospective Seller and participating underwriter an amendment or
supplement to the prospectus necessary so that, as thereafter delivered to any
purchaser of the securities, such
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prospectus shall not include an untrue statement of material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements contained therein not misleading in light of the circumstances then
existing;
(v) use its reasonable best efforts to register
or qualify the shares covered by such Registration Statement under such other
securities or blue sky or other applicable laws of such jurisdictions as each
Prospective Seller shall reasonably request (each, a "Requested Jurisdiction")
to enable such seller to consummate the public sale or other disposition of the
shares owned by such seller; provided that the Company shall not be required in
connection therewith or as an election thereto to qualify to do business or to
file a general consent to service of process in any such jurisdiction or to
take any action which could subject the Company to corporate income or assets
tax in any state where it is not subject thereto;
(vi) upon written request, furnish to each
Prospective Seller a signed counterpart, addressed to the Prospective Sellers
and their underwriters, if any, of: (A) an opinion of counsel for the Company,
dated the effective date of the registration statement; and (B) a "comfort"
letter signed by the independent public accountants who have certified the
Company's financial statements included in the registration statement; covering
substantially the same matters with respect to the registration statement (and
the prospectus included therein) and (in the case of the accountants' letter)
with respect to the events subsequent to the date of the financial statements,
as are customarily covered (at the time of such registration ) in the opinions
of issuers' counsel and in accountants' letters delivered to the underwriters
in connection with underwritten public offerings of securities; provided,
however, that the Company shall not be required to furnish to a Prospective
Seller a "comfort" letter signed by the independent accountants and addressed
to the Prospective Seller unless, at least five business days prior to the
earlier of the date of the underwriting agreement executed in connection with
the offering or the effective date of the Registration Statement filed in
connection with the offering, such Prospective Seller provides to the
independent accountants such representation letter or written opinion as may be
reasonably requested by the independent accountants pursuant to Statement of
Auditing Standards No. (the failure by a Prospective Seller to provide such a
representation letter or written opinion shall not relieve the Company of its
obligation to furnish such a comfort letter to the Prospective Seller's
underwriter);
(vii) use its reasonable best efforts to cause all
such Registrable Stock to be listed on each securities exchange or other
securities trading market or quotation system on which similar securities
issued by the Company are then listed or quoted if the listing of such
securities are then permitted under the rules of such exchange, trading market
or quotation system;
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<PAGE> 11
(viii) provide a transfer agent and registrar and a
CUSIP number for all such Registrable Stock covered by such Registration
Statement not later than the effective date of such Registration Statement;
(ix) cause its majority-owned subsidiaries to take
all actions reasonably necessary to effect the registration of the Registrable
Stock covered by such Registration Statement, including preparing and filing
any required financial or other information;
(x) enter into such customary agreements
(including an underwriting agreement) and take all such other customary actions
as the holders of a majority of the Registrable Stock being sold reasonably
request in order to reasonably expedite or facilitate the disposition of such
Registrable Stock; and
(xi) upon receipt of such reasonable
confidentiality agreement as the Company may reasonably request, make available
for inspection by any Prospective Seller, any underwriter participating in any
disposition pursuant to such Registration Statement, and any attorney,
accountant or other agent retained by any such seller or underwriter, all
financial and other records, pertinent corporate documents and properties of
the Company as may reasonably be requested, and cause the Company's officers,
directors and employees to supply all information as may reasonably be
requested by any Prospective Seller, underwriter, attorney, accountant or agent
in connection with the preparation of such Registration Statement.
(b) As a condition to including any Prospective Seller's
Registrable Stock in a registration, the Company may require (i) that such
Prospective Seller furnish to the Company such information regarding such
Prospective Seller and the contemplated distribution of such Prospective
Seller's Registrable Stock as is required to be included in the registration
statement by applicable federal or state securities laws and regulations, and
(ii) that such information be furnished to the Company in writing and signed by
such Prospective Seller and stated to be specifically for use in the related
registration statement.
(c) The Prospective Sellers shall not (until further
notice) effect sales of Registrable Stock after receipt of written notice from
the Company to suspend sales to permit the Company to correct or update a
registration statement or prospectus. The period during which the registration
statement remains effective pursuant to the Agreement shall be extended for a
period of time equal to the period for which Prospective Sellers refrained from
selling pursuant to this Section 2.6(c).
2.7 Expenses of Registration.
(a) Except as set forth below, all expenses incurred in
effecting any registration requested pursuant to Section 2.1 or 2.3 hereof,
including, without limitation, all registration and filing fees, printing
expenses, expenses of compliance with blue sky laws,
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fees and disbursements of counsel for the Company, expenses of any audits
incidental to or required by any such registration, and expenses of all
marketing and promotional efforts reasonably requested by the managing
underwriter customarily paid by issuers or sellers of securities and such other
fees and disbursements of underwriters customarily paid by issuers or sellers
of securities (but not the fees and disbursements of underwriters' counsel
other than fees or disbursements relating to state blue sky laws)
("Registration Expenses") shall be borne by the Company; provided, however.
that each Prospective Seller shall bear underwriting discounts or brokerage
fees or commissions relating to the sale of its Registrable Stock. It is
expressly understood and agreed that Prospective Sellers shall bear the expense
of their own counsel.
(b) Notwithstanding the provisions of Section 2.7(a)
hereof, the Company shall bear the Registration Expenses incurred in effecting
only two registrations (in which the Registration Statements (i) actually
become or are declared effective or (ii) are filed with the Commission and
thereafter are abandoned or withdrawn at the request of (A) the Prospective
Sellers holding a majority of the shares of Registrable Stock included in the
registration or (B) the underwriters selected by the Initiating Holders in
connection with the registration, and where such abandonment or withdrawal
arises out of any reason other than a Company Misrepresentation or Omission or
the failure by the Company to otherwise comply in all material respects with
this Agreement) effected upon the request of holders of Registrable Stock
pursuant to Section 2.1 hereof; provided, however, that in the event the
Company is not eligible for use of a Short-Form Registration Statement at any
time during the term of this Agreement, the Company shall be required to bear
the Registration Expenses of up to four registrations (in which the
Registration Statements (i) actually become or are declared effective or (ii)
are filed with the Commission and thereafter are abandoned or withdrawn at the
request of (A) the Prospective Sellers holding a majority of the shares of
Registrable Stock included in the registration or (B) the underwriters selected
by the Initiating Holders in connection with the registration, and where such
abandonment or withdrawal arises out of any reason other than a Company
Misrepresentation or Omission or the failure by the Company to otherwise comply
in all material respects with this Agreement) requested pursuant to Section 2.1
hereof. Actava (or its successors) shall be entitled to designate the
registrations with respect to which the Company shall bear the Registration
Expenses pursuant to Section 2.7(a) above. It is expressly agreed and
understood that regardless of the Company's eligibility to utilize a Long-Form
Registration Statement or a Short-Form Registration Statement for the
registration of Registrable Stock that the Company shall be liable for the
Registration Expenses of no more than a total of four registrations (in which
the Registration Statements (i) actually become or are declared effective or
(ii) are filed with the Commission and thereafter are abandoned or withdrawn at
the request of (A) the Prospective Sellers holding a majority of the shares of
Registrable Stock included in the registration or (B) the underwriters selected
by the Initiating Holders in connection with the registration, and where such
abandonment or withdrawal arises out of any reason other than a Company
Misrepresentation or Omission or the failure by the Company to otherwise comply
in all material respects with this Agreement) requested pursuant to Section 2.1
hereof. In the event
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the Company is not required to bear the Registration Expenses with respect to a
registration effected pursuant to Section 2.1 hereof, such expenses (including
reasonable expenses and disbursements of counsel to the Company) shall be borne
pro rata by the Selling Investors and any other holder of Common Stock included
in the registration based on the relative number of shares of each such Selling
Investor or other holder included in the registration.
2.8 Indemnification.
(a) In the event of any registration of any of its
securities under the Securities Act pursuant to this Agreement, the Company
shall indemnify and hold harmless each Selling Investor, each underwriter (as
defined in the Securities Act), each other selling agent who may be deemed to
be an underwriter, and each controlling person of any Selling Investor,
underwriter or other selling agent, if any (within the meaning of the
Securities Act), against any losses, claims, damages or liabilities, joint or
several (or actions in respect thereof), to which such Selling Investor,
underwriter, other selling agent or controlling person may be subject under the
Securities Act, under any other statute or at common law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon (i) any untrue statement (or alleged untrue statement)
of any material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus
or final prospectus contained therein, or any summary prospectus issued in
connection with any securities being registered or offered for sale, or any
amendment or supplement thereto, or any other document, or (ii) any omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading or (iii) any
violation by the Company of the Securities Act or any blue sky law of any
Requested Jurisdiction, or any rule or regulation promulgated under the
Securities Act or any such blue sky law, applicable to the Company in
connection with the sale, registration or qualification of any shares of
Registrable Stock, and shall reimburse each such Selling Investor, underwriter,
other selling agent or controlling person for any legal or other expenses
reasonably incurred by such Selling Investor, underwriter, other selling agent
or controlling person in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the Company
shall not be liable to any Selling Investor, underwriter, other selling agent
or controlling person in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any such untrue statement or
omission made in such Registration Statement, preliminary prospectus, summary
prospectus, prospectus, or amendment or supplement thereto, or any other
document, in reliance upon and in conformity with written information furnished
to the Company by such Selling Investor, underwriter, other selling agent or
controlling person, respectively, specifically for use therein and provided,
further, however that the Company shall not be liable to any Selling Investor
to the extent that such liability arises from the fact that (x) the final
prospectus filed with the Commission pursuant to Rule 424(b) under the
Securities Act was not sent or given to the purchaser of the Registrable Stock
in question at or prior to the time at which the written confirmation of the
sale of such Registrable Stock was sent or given to such person
-13-
<PAGE> 14
and (y) the failure to deliver such final prospectus was not the result of the
Company's noncompliance with its obligations to file the prospectus (or any
amendment thereto) with the Commission in the manner prescribed by the
Securities Act or the rules and regulations thereunder or noncompliance with
the provisions of this Agreement. The indemnity provided for herein shall
remain in full force and effect regardless of any investigation made by or on
behalf of such Selling Investor, underwriter, other selling agent or
controlling person, and shall survive the transfer of such securities by such
Selling Investor.
The Company may require, as a specific condition to including any
Registrable Stock of a Prospective Seller in any registration statement filed
pursuant to Section 2.1 or Section 2.3, that the Company shall have received an
undertaking satisfactory to it from such Prospective Seller of such securities,
severally and not jointly, to indemnify and hold harmless (in the same manner
and to the same extent as set forth in the immediately preceding paragraph of
this Section 2.8(a)) the Company, each director of the Company, each officer of
the Company who shall sign such Registration Statement and each other person,
if any, who controls the Company within the meaning of the Securities Act
(except the indemnifying holder, if such indemnifying holder so controls the
Company) and each underwriter participating in the offering, and, with respect
to any incidental registration within the meaning of Section 2.3 hereof, each
other selling security holder or controlling person thereof participating in
the offering who provides to the Prospective Seller a substantially similar
indemnity, in each case with respect to any untrue statement of material fact
in or omission of material fact from such Registration Statement, any
preliminary prospectus or final prospectus contained therein, any summary
prospectus issued in connection with any securities being registered or offered
for sale, or any amendment or supplement thereto, in each case if such
statement or omission was made in reliance on and in conformity with written
information furnished to the Company by such Prospective Seller specifically
for use in preparing any such Registration Statement, preliminary prospectus,
final prospectus, summary prospectus or amendment or supplement thereto. Each
Prospective Seller hereunder shall promptly provide such indemnification upon
request. The indemnity provided for herein shall remain in full force and
effect regardless of any investigation made by or on behalf of the indemnified
party and shall survive any transfer of the Registrable Stock held by the
indemnifying party. In no event shall a Prospective Seller's obligation to
indemnify any person or entity hereunder exceed the gross proceeds to the
Prospective Seller from the sale of the Prospective Seller's Registrable Stock
in the offering.
(b) If the indemnification provided for in Section 2.8(a)
above is unavailable to an indemnified party in respect of any losses, claims,
damages or liabilities referred to therein, then the intended indemnifying
party, in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities, in such proportion as is
appropriate to reflect the relative fault of the intended indemnifying party on
the one hand and of the indemnified parties on the other in connection with the
statements or omissions which
-14-
<PAGE> 15
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the intended
indemnifying party and of the indemnified parties shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by the intended indemnifying party, or by the
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Investors agree that it would not be just
and equitable if contribution pursuant to this Section 2.8(b) were determined
by pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages and liabilities or actions in respect
thereof referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 2.8(b), no Investor shall be required to contribute
any amount in excess of the amount by which the total price at which the
Registrable Stock sold by it exceeds the amount of any damages which such
Investor has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person or entity guilty of
fraudulent misrepresentations (within the meaning of Section II(f) of the
Securities Act) shall be entitled to contribution from any person or entity who
was not guilty of such fraudulent misrepresentation. The Company may require,
as a condition to including any Registrable Stock of a Prospective Seller in
any registration statement filed pursuant to Section 2.1 or Section 2.3, that
the Company shall have received an undertaking reasonably satisfactory to it
from such Prospective Seller of such securities, severally and not jointly, to
contribute to the amount paid or payable by an indemnified party hereunder as
and to the extent set forth in this Section 2.8(b), and each Investor hereunder
shall promptly provide such undertaking upon request.
(c) Promptly after receipt by an indemnified party under
Section 2.8(a) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made under such
Section, notify the indemnifying party in writing of the commencement thereof;
but the omission so to notify the indemnifying party shall not relieve the
indemnifying party from any liability which it may have to any indemnified
party otherwise than under such Section or to the extent that it has not been
prejudiced as a proximate result of such failure. In case any such action shall
be brought against an indemnified party, and the indemnified party shall notify
the indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate therein and, to the extent that it shall wish,
to assume the defense thereof, with counsel satisfactory to such indemnified
party; provided, however, that, if the defendants in any such action include e
both the indemnified party and the indemnifying party and the indemnified party
shall have
-15-
<PAGE> 16
reasonably concluded that there may be legal defenses available to it and/or
other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall
have the right to select separate counsel to assert such legal defenses (in
which case the indemnifying party shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties). Upon the
permitted assumption by the indemnifying party of the defense of such action,
and approval by the indemnified party of counsel, the indemnifying party shall
not be liable to such indemnified party under this Section 2.8 for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof (other than reasonable costs of investigation) unless
(i) the indemnified party shall have employed separate counsel in connection
with the assertion of legal defenses in accordance with the proviso to the next
preceding sentence, (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time, or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party.
2.9 Inclusion of Additional Shares in Required Registrations;
Other Company Initiated Registrations. The Company shall not register
securities for sale for its own account or for the account of any other person
or entity in any registration requested by the holders of Registrable Stock
pursuant to Section 2.1 hereof unless permitted to do so by the written consent
of holders who hold at least 51% of the Registrable Stock as to which
registration has been requested. The Company may not file a Registration
Statement with respect to any other registration of securities (other than a
registration relating either to the sale of securities to employees of the
Company pursuant to a stock option, stock purchase or similar plan or a Rule
145 transaction) for sale for its own account or for the account of any other
person or entity within 90 days after the effective date of any registration
requested by the holders of Registrable Stock pursuant to Section 2.1 hereof.
2.10 Rights Which May Be Granted to Other Persons. The Company
shall not grant any person or entity registration rights which shall in any way
whatsoever impair the priority of the registration rights granted to the
Investors in this Agreement; provided, however, that this Section 2.10 shall
not prohibit the Company from granting to any other person or entity
registration rights that are substantially similar to or that rank on a parity
with the registration rights granted hereunder.
2.11 Rule 144 Requirements. During such time as the Company has a
class of securities registered under the Securities Exchange Act of 1934, as
amended, the Company shall at all times make publicly available, and available
to the holders of Registrable Stock, such information as is reasonably
necessary to enable the holders of Registrable Stock to make sales of
Registrable Stock pursuant to Rule 144 of the Commission under the Securities
Act. The Company shall furnish to any holder of Registrable Stock, upon
request, a written statement executed by the Company as to the steps it has
taken to comply with the current public information requirements of Rule 144.
-16-
<PAGE> 17
2.12 Transfer of Registration Rights. The registration rights of
any Investor under this Agreement may be transferred to (i) any transferee who
acquires at least 1,000,000 of such Investor's shares, or (ii) an Affiliate
(including directors and officers and shareholders. in the case of a
corporation, and partners in the case of a partnership) of such Investor
without regard to the number of shares transferred.
2.13 Effective Period of Registration. Once any registration
effected by the Company pursuant to this Article II becomes effective, the
Company shall file all reports, financial statements and other documents
necessary to keep such Registration Statement current and the registration in
effect until the earlier of such time as all of the shares covered by such
Registration Statement have been disposed of or 120 days from the effective
date of the registration statement (subject to extension as set forth in
Section 2.6 hereof) or for such longer or shorter period as the parties may
agree.
ARTICLE III.
MISCELLANEOUS
3.1 Recapitalization. Exchanges. Etc. The provisions of this
Agreement shall apply, to the full extent set forth herein with respect to
Registrable Stock, to any and all shares of capital stock of the Company or
any successor or assign of the Company (whether by merger, consolidation, sale
of assets or otherwise) that may be issued in respect of, in exchange for, or
in substitution of, Registrable Stock and shall be appropriately adjusted for
any stock dividends, splits, reverse splits, combinations, recapitalization and
the like occurring after the date hereof.
3.2 Notices. All notices, demands or other communications
hereunder shall be in writing and shall be deemed given when delivered
personally, mailed by certified mail, return receipt requested, sent by
overnight courier service or telecopied, telegraphed or telexed (transmission
confirmed), or otherwise actually delivered:
If to Investors:
The Actava Group Inc.
4900 Georgia-Pacific Center
133 Peachtree Street
Atlanta, Georgia 30303
Attention: Walter M. Grant
Telephone: (404) 658-9000
Facsimile: (404) 525-3010
-17-
<PAGE> 18
with copies to: Long, Aldridge & Norman
5300 One Peachtree Center
303 Peachtree Street
Atlanta, Georgia 30308
Attention: Clay C. Long, Esq.
Telephone: (404) 527-4050
Facsimile: (404) 527-4198
If to Company: Roadmaster Industries, Inc.
7315 East Peakview Avenue
Englewood, Colorado 80111
Attention: Henry Fong
Telephone: (303) 796-8940
Facsimile: (303) 796-9672
With copies to: Smith, Gambrell & Russell
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attention: David J. Harris
Telephone: (404) 815-3515
Facsimile: (404) 815-3509
If to any other
Investor: At the address and numbers set forth in the
Company's records, marked for attention as
therein indicated;
or at such other address and numbers as may have been furnished by such person
or entity in writing to the other parties.
3. Severability and Governing Law. Should any Section or any
part of a Section within this Agreement be rendered void, invalid or
unenforceable by any court of law for any reason, such invalidity or
unenforceability shall not void or render invalid or unenforceable any other
Section or part of a Section in this Agreement. This Agreement is made and
entered into in the State of Georgia, and the laws of said state shall govern
the validity and interpretation hereof an the performance by the parties hereto
of their respective duties and obligations hereunder.
3.4 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
3.5 Captions and Section Headlines. Section titles or captions
contained in this Agreement are inserted as a matter of convenience and for
reference purposes only, and in
-18-
<PAGE> 19
no way define, limit, extend or describe the scope of this Agreement or the
intent of any provision hereof.
3.6 Singular and Plural. Etc. Whenever the singular number is
used herein and where required by the context, the same shall include the
plural, and the neuter gender shall include the masculine and feminine genders.
3.7 Amendments and Waivers. Neither this Agreement nor any term
hereof may be changed, waived, discharged or terminated orally or in writing,
except that any term of this Agreement may be amended and the observance of any
such term may be waived (either generally or in a particular instance and
either retroactively or prospectively) only with the written consent of the
Company and the Investors holding at least 66-2/3 % of the Registrable Stock
then outstanding; provided, however, that no such amendment or waiver shall
affect the provisions of this Section 3.7 and no such waiver shall extend to or
affect any other obligation not expressly waived. No failure to exercise and no
delay in exercising, on the part of any party, any right, remedy, power or
privilege hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right
remedy, power or privilege. The rights, remedies, powers and privileges herein
provided are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law. The failure of any party to insist upon a strict
performance of any of the terms or provisions of this Agreement, or to exercise
any option, right or remedy herein contained, shall not be construed as a
waiver or as a relinquishment for the future of such term, provision, option,
right or remedy, but the same shall continue and remain in full force and
effect.
3.8 Successors and Assigns. All rights, covenants and agreements
of the parties contained in this Agreement shall, except as otherwise provided
herein, be binding upon and inure to the benefit of their respective successors
and assigns.
3.9 Specific Performance. The parties hereto acknowledge that the
Registrable Stock of the Company currently cannot be purchased or sold in the
open market and that, for these reasons, among others, the parties will be
irreparably damaged in the event that this Agreement is not specifically
enforceable. Accordingly, in the event of any controversy concerning the
Registrable Stock which is the subject of this Agreement, or any right or
obligation to register such securities, such right or obligation shall be
enforceable in a court of equity by specific performance. The rights granted in
this SECTION 3.10 SHALL BE cumulative and not exclusive, and shall be in
addition to any and all other rights which the parties hereto may have
hereunder, at law or in equity.
3.10 Entire Agreement. This Agreement contains the entire
understanding of the parties with regard to registration rights provided by the
Company to the Investors. There
-19-
<PAGE> 20
are no further or other agreements or understandings, written or oral, in
effect between the parties relating to the subject matter hereof unless
expressly referred to herein.
IN WITNESS WHEREOF. the parties hereto have executed and delivered
this Agreement as of the date first above written.
ROADMASTER INDUSTRIES, INC.
By: Henry Fong
Name: Henry Fong
Title: President/CEO
ATTEST:
By: Jeff L. Hinton
Name: Jeff L. Hinton
Title: CEO
THE ACTAVA GROUP INC.
By: John D. Phillips
Name: John D. Phillips
Title: President/CEO
ATTEST:
By: Walter M. Grant
Name: Walter M. Grant
Title: Sr. VP/General Counsel
-20-
<PAGE> 1
EXHIBIT 10(r)(iii)
ENVIRONMENTAL INDEMNITY AGREEMENT
THIS AGREEMENT, dated as of December 6th, 1994 (the "Agreement), by and
among THE ACTAVA GROUP INC., a Delaware corporation ("Actava"), DIVERSIFIED
PRODUCTS CORPORATION, an Alabama corporation ("DP"), and ROADMASTER INDUSTRIES,
INC., a Delaware corporation ("Roadmaster").
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, Actava is transferring all of the issued and outstanding stock of DP
to Roadmaster; and
WHEREAS, DP owns and operates a manufacturing facility in Opelika,
Alabama, (the "DP Facility) which adjoins the "Orbitron Materials Storage
Parcel," which is described more particularly on Schedule 6.14 of the Agreement
and Plan of Reorganization between Roadmaster, Actava, DP and certain other
Actava subsidiaries and which was formerly part of the DP Facility; and
WHEREAS, Actava and Roadmaster disagree concerning the extent to which
materials regulated at the time of this Agreement under federal, state or local
laws as hazardous substances, solid or hazardous wastes, or hazardous
constituents (hereinafter "Regulated Materials") are present on the Orbitron
Materials Storage Parcel; and
WHEREAS, Actava has agreed to indemnify Roadmaster for costs and
liabilities resulting from the presence on or migration of
<PAGE> 2
Regulated Materials from the Orbitron Materials Storage Parcel under the terms
set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises, covenants and
agreements contained herein, the parties hereto, intending to be legally bound
hereby, agree as follows:
1.0 INDEMNIFICATION FOR CERTAIN ENVIRONMENTAL COSTS.
1.01 In the event that federal, state or local governmental
authorities order Roadmaster to undertake investigation and/or remediation
activities related to Regulated Materials on the Orbitron Materials Storage
Parcel, Actava shall indemnify Roadmaster for any losses, liabilities, damages
and costs, including reasonable attorneys' and consulting fees, reasonably
incurred by Roadmaster in carrying out such order. Such costs shall include,
without limitation, all reasonable costs incurred to prepare and implement work
plans for investigating and remediating releases of Regulated Materials at the
Orbitron Materials Storage Parcel and any other real property impacted by
Regulated Materials migrating from the Orbitron Materials Storage Parcel,
together with any costs of postclosure care and long-term soil and groundwater
monitoring required by an order. If Roadmaster receives a request from a
government agency or private party to investigate and remediate the Orbitron
Materials Storage Parcel, it shall so notify Actava as soon as practicable.
Upon receipt of such notice, Actava shall have the right, but not the duty, to
assume responsibility for performing
-2-
<PAGE> 3
all investigative and remedial activities requested by the private party or
federal, state or local authorities. In the event that Actava declines or is
prevented from performing onsite investigative and remedial activities
associated with Regulated Materials which Roadmaster is ordered to perform,
Actava shall reimburse Roadmaster promptly upon receipt of invoices or other
documentation specifying reasonable costs incurred by Roadmaster in connection
with any investigation, remediation or postclosure care of the Orbitron
Materials Storage Parcel required by an order from a government agency.
Notwithstanding any of the foregoing, Actava shall only be liable for costs
which are attributable to Regulated Materials either on or migrating from the
Orbitron Materials Storage Parcel. In the event Roadmaster incurs any costs
otherwise covered by Section 1.01, Actava shall only be required to reimburse
Roadmaster for the equitable portion of those costs which are the result of
Regulated Materials either on or migrating from the Orbitron Materials Storage
Parcel.
1.02 Except as otherwise provided in Section 1.01 of this
Agreement, Actava agrees to and does hereby indemnify and agree to defend and
hold Roadmaster and its successors harmless from and against all actions,
claims, liabilities, litigation, causes of action, damages, costs and expenses
(including reasonable fees of attorneys and consultants) resulting from,
arising out of or related to personal injury or property damage suffered by any
person, firm, corporation or entity whatsoever caused by
-3-
<PAGE> 4
Regulated Materials either on or migrating from the Orbitron Storage Parcel.
The foregoing indemnity shall apply, without limitation, to any actions,
claims, liabilities, litigation, causes of action, damages, costs or expenses
not otherwise covered by Section 1.01 of this Agreement, arising out of actions
or claims instituted by federal, state or local governments or agencies with
respect to any remedial action or migrating from the Orbitron Materials Storage
Parcel. Notwithstanding any of the foregoing, Actava shall only be required to
Indemnify Roadmaster for liability, costs or expenses which are attributable to
Regulated Materials either on or migrating from the Orbitron Materials Disposal
Parcel. In the event Roadmaster is the subject of claims or liabilities or
suffers costs or other expenses otherwise covered by Section 1.02, Actava shall
only be required to indemnify Roadmaster for the equitable portion of those
claims, liabilities, costs or other expenses which are the result of Regulated
Materials on or migrating from the Orbitron Materials Storage Parcel.
1.03 If any claim, suit or other legal proceeding shall be
commenced, or any claim or demand, against any party entitled to
indemnification under Section 1.01 or 1.02 (the "Indemnified Party"), and if
the Indemnified Party proposes to demand or seek indemnification pursuant to
Section 1.01 or 1.02, Actava (the Indemnifying Party) shall be notified to such
effect as soon as practicable and shall have the absolute right
-4-
<PAGE> 5
to manage and control the defense, and all communications or proceedings
related to such defense, of any claim for which Actava would be liable pursuant
to Section 1.01 or 1.02 including, without limitation, the right to manage and
prosecute all administrative and judicial remedies, settle all issues, enter
into settlement agreements and to execute consents or waivers extending the
statue of limitation with respect to any such claim. Roadmaster shall, and
shall cause its subsidiaries to, fully cooperate with Actava in the defense of
any such claim, furnish such records, information and testimony, and attend
such conferences, discovery proceedings, hearings, trials and appeals, as may
be reasonably requested in connection therewith. Actava shall be subrogated to
all rights and remedies of Roadmaster or its subsidiaries with respect to any
such claim. Failure by Roadmaster or any of its subsidiaries to comply with any
of their obligations set forth in this Section 1.03 with respect to any claim
for which Roadmaster is entitled to be indemnified against pursuant to Section
1.01 or 1.02 shall release Actava from its obligation to indemnify hereunder to
the extent that Actava is prejudiced by any such failure.
2.0 COOPERATION AND INTERRUPTION OF BUSINESS.
2.01 Roadmaster agrees to cooperate with any reasonable
investigatory or remedial activities performed by Actava on the Orbitron
Materials Storage Area to the extent consistent with Roadmaster's business.
Roadmaster's cooperation shall include, at a minimum, providing reasonable
access to Actava to the
-5-
<PAGE> 6
Orbitron Materials Storage Area for any equipment reasonably necessary to
conduct investigatory or remedial activities.
2.02 Notwithstanding the provision of 2.01, Actava shall not cause
an unreasonable interference with Roadmaster's business through any
investigatory or remedial activities related to the Orbitron Materials Storage
Parcel, and Actava shall be liable to Roadmaster for any reasonable costs,
including costs associated with the interruption of Actava's business, caused
by such unreasonable interference.
2.03 In the event that Roadmaster receives a judicial or
administrative order preventing it from conducting material portion of its
business operations at the DP Facility, which order, is directly and
substantially the result of any failure by Actava to fulfill its obligations
under this Agreement, Actava shall be liable for any reasonable costs,
including costs associated with interruption of Roadmaster's business, caused
by Roadmaster's compliance with any such order.
3.0 ENTIRE AGREEMENT WITH RESPECT TO CONTAMINATION.
3.01 Roadmaster acknowledges and agrees that the obligations and
liabilities of Actava set forth in this Agreement are the sole and exclusive
obligations and liabilities of Actava to Roadmaster with respect to soil and
groundwater contamination at the Orbitron Materials Storage Parcel.
Notwithstanding anything contained to the contrary in this Agreement, in no
event shall Actava be liable or obligated to Roadmaster, its successors or
-6-
<PAGE> 7
assigns, for any breach of warranty, indemnity or other matter arising out of
soil or groundwater contamination at the Opelika plant site heretofore operated
by DP, except with respect to the specific obligations and liabilities of
Actava set forth in this Agreement. In addition to the foregoing, the
obligations, covenants and agreements of Actava under this Section 3.01 are for
the sole and exclusive benefit of Roadmaster and its assigns and may not be
relied upon or considered to be enforceable by any person, firm, corporation,
government agency or other entity whatsoever except Roadmaster and its assigns.
IN WITNESS WHEREOF, the Parties have each executed this Agreement under
seal as of the day and year first above written.
ATTEST: THE ACTAVA GROUP, INC.
Walter M. Grant By: Frederick B. Beilstein III
-------------------------------- -----------------------------
[CORPORATE SEAL] Title: Senior Vice President
-----------------------
ATTEST: DIVERSIFIED PRODUCTS CORPORATION
Paul N. Kiel By: J.L. Marden
-------------------------------- -----------------------------
[CORPORATE SEAL] Title: President and CEO
-----------------------
ATTEST: ROADMASTER INDUSTRIES, INC.
Jeff L. Hinton, CEO By: Henry Fong
-------------------------------- ----------------------------
[CORPORATE SEAL] Title: President and CEO
----------------------
-7-
<PAGE> 1
EXHIBIT 10(s)
The Actava Group Inc.
4900 Georgia-Pacific Center
Atlanta, Georgia 30303
404/658-9000
404/524-4713 FAX
--------------------------------------------------------------------------------
ACTAVA (LOGO)
October 21, 1994
JDP AIRCRAFT II, INC.
2210 Resurgens Plaza South
945 East Paces Ferry Road
Atlanta, Georgia 30326
Gentlemen:
This letter is to serve as our agreement to lease your Citation Jet
(N525 AE) on the terms and conditions attached hereto commencing on the date
hereof.
THE ACTAVA GROUP INC.
By: F. B. Beilstein III
-------------------------
Agreed to as of October 21, 1994.
JDP AIRCRAFT II, INC.
By: John D. Phillips
-----------------------------
<PAGE> 2
JOHN D. PHILLIPS
LEASE
Plane: Citation Jet
Lessor: JDP Aircraft II, Inc.
Lessee: The Actava Group, Inc.
Term: Twelve months, but can be canceled at any time on thirty
(30) days notice by Actava.
Lease Rate: $20,700 per month ($248,400 per year)
Available Hours: - 125 hours annually
- Extra hours at $2,185 per hour
- Available whenever needed, 24 hours a day
Services Included: Plane, pilot(s), fuel, landing fees
(Does not include reimbursement of out of pocket pilot
ground expenses such as hotel, car and food)
<PAGE> 1
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
THE ACTAVA GROUP INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
-------- -------- -------
(IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
PRIMARY
Weighted average Actava Stock outstanding during the period,
less stock in treasury................................... 18,153 17,163 16,544
======== ======== =======
Net income (loss) available for common stock and common
stock equivalents........................................ $(65,750) $(47,594) $11,599
======== ======== =======
Per share amount............................................ $ (3.62) $ (2.77) $ .70
======== ======== =======
FULLY DILUTED
Common stock and common stock equivalents................... 18,153 17,163 16,544
Shares issuable on assumed conversion of 6 1/2% Convertible
Debentures............................................... 1,802 1,802 1,802
-------- -------- -------
Total............................................... 19,955 18,965 18,346
======== ======== =======
Net income (loss)........................................... $(65,750) $(47,594) $11,599
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....................... $(62,442) $(44,286) $14,907
======== ======== =======
Per share amount(a)......................................... $ (3.13) $ (2.34) $ .81
======== ======== =======
</TABLE>
---------------
(a) Fully diluted earnings per share is not used because it exceeds primary
earnings per share.
2
<PAGE> 1
EXHIBIT 21
THE ACTAVA GROUP INC.
CORPORATE DATA
March 28, 1995
<TABLE>
<S> <C> <C>
Federal
State of Date of Identification
Incorporation Incorporation Number
------------- ------------- -------------
Delaware 3-15-68 58-0971455
</TABLE>
<TABLE>
<CAPTION>
____________________________________________________________________________________________________________________________________
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, Ltd. Delaware 6-8-89 100% 51-0317847
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
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
</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 Actava's stock option plans and stock purchase plans, and their
related prospectuses, of our report dated March 10, 1995 with respect to the
consolidated financial statements and schedule of The Actava Group Inc. and
subsidiaries included in this Annual Report (Form 10-K) for the year ended
December 31, 1994.
Ernst & Young
Atlanta, Georgia
March 28, 1995
<PAGE> 1
EXHIBIT 24(a)
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, 1994, 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 22, 1995
<PAGE> 2
EXHIBIT 24(b)
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, 1994, 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 20, 1995
<PAGE> 3
EXHIBIT 24(c)
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, 1994, 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 19, 1995
<PAGE> 4
EXHIBIT 24(d)
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, 1994, 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/ Michael E. Cahr
-------------------------------
Michael E. Cahr
Dated: March 19, 1995
<PAGE> 5
EXHIBIT 24(e)
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, 1994, 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 18, 1995
<PAGE> 6
EXHIBIT 24(f)
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, 1994, 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 19, 1995
<PAGE> 7
EXHIBIT 24(g)
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, 1994, 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 D. Phillips
--------------------
John D. Phillips
Dated: March 19, 1995
<PAGE> 8
EXHIBIT 24(h)
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, 1994, 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 20, 1995
<PAGE> 9
EXHIBIT 24(i)
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, 1994, 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 19, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FORM 10-K.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<CASH> 47,916
<SECURITIES> 14,321
<RECEIVABLES> 274,809
<ALLOWANCES> 6,851
<INVENTORY> 13,403
<CURRENT-ASSETS> 357,893
<PP&E> 74,902
<DEPRECIATION> 40,005
<TOTAL-ASSETS> 493,779
<CURRENT-LIABILITIES> 202,470
<BONDS> 159,740
<COMMON> 22,768
12,000
0
<OTHER-SE> 101,890
<TOTAL-LIABILITY-AND-EQUITY> 124,658
<SALES> 551,828
<TOTAL-REVENUES> 551,828
<CGS> 461,175
<TOTAL-COSTS> 552,149
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,204
<INTEREST-EXPENSE> 28,434
<INCOME-PRETAX> (23,456)
<INCOME-TAX> 0
<INCOME-CONTINUING> (23,456)
<DISCONTINUED> (40,693)
<EXTRAORDINARY> (1,601)
<CHANGES> 0
<NET-INCOME> (65,750)
<EPS-PRIMARY> (3.62)
<EPS-DILUTED> (3.62)
</TABLE>
