-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Qr7e40Ye7PL6OgwQq4HiuBk4RtmkfXXhCfpdh3qP3pamP31r5qMDgEaaLo3tM5W4 EWqBJ0cRbnXp4YFvyOUvMQ== 0000950144-94-000799.txt : 19940404 0000950144-94-000799.hdr.sgml : 19940404 ACCESSION NUMBER: 0000950144-94-000799 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACTAVA GROUP INC CENTRAL INDEX KEY: 0000039547 STANDARD INDUSTRIAL CLASSIFICATION: 7384 IRS NUMBER: 580971455 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-05706 FILM NUMBER: 94519837 BUSINESS ADDRESS: STREET 1: 4900 GEORGIA PACIFIC CTR CITY: ATLANTA STATE: GA ZIP: 30303 BUSINESS PHONE: 4046589000 FORMER COMPANY: FORMER CONFORMED NAME: FUQUA INDUSTRIES INC /DE/ DATE OF NAME CHANGE: 19920703 10-K 1 ACTAVA GROUP - 10-K 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 --------------------- FORM 10-K (MARK ONE) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-5706. --------------------- THE ACTAVA GROUP INC. (EXACT NAME OF REGISTRANT, AS SPECIFIED IN ITS CHARTER) DELAWARE 58-0971455 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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) --------------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON WHICH TITLE OF EACH CLASS 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
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO --- --- INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K. / / THE AGGREGATE MARKET VALUE OF VOTING STOCK OF THE REGISTRANT HELD BY NONAFFILIATES OF THE REGISTRANT AT MARCH 24, 1994 COMPUTED BY REFERENCE TO THE LAST REPORTED SALE PRICE OF THE COMMON STOCK ON THE COMPOSITE TAPE ON SUCH DATE WAS $127,855,099. THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF MARCH 24, 1994 WAS 17,635,186 SHARES. DOCUMENTS INCORPORATED BY REFERENCE: NONE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 PART I ITEM 1. BUSINESS. The Actava Group Inc. ("Actava" or the "Company") provides high quality, brand-name products through distribution channels to retail markets across the United States. Actava operates in three distinct businesses: photofinishing, lawn and garden equipment and sporting goods. A description of each segment appears below. Actava was organized in 1929 under Pennsylvania law and reincorporated in 1968 under Delaware law. On July 19, 1993, the Company changed its name from Fuqua Industries, Inc. to The Actava Group Inc. Actava's principal executive offices are located at 4900 Georgia-Pacific Center, Atlanta, Georgia 30303 and its telephone number is (404) 658-9000. PHOTOFINISHING Actava owns 51% of the voting stock and 50% of the equity of Qualex Inc. ("Qualex"). Qualex, the largest wholesale photofinishing company in the United States, was created in 1988 through a combination of Actava's photofinishing subsidiary, Colorcraft Corporation, and the United States photofinishing operations of Eastman Kodak Company ("Kodak"). Kodak owns all of the voting stock and equity interest of Qualex not owned by Actava. Both Actava and Kodak have granted to the other a right of first refusal for the purchase of their respective interests in Qualex. Qualex is engaged in the processing of photographic film for consumer use throughout the United States. Qualex primarily processes color film to produce prints and slides, but also processes black and white and movie film. Qualex is a wholesale photofinisher, obtaining over 98% of its sales from independent retailers in 1993. Qualex's business also includes a limited amount of direct sales to consumers through owned and operated retail photographic stores and mail order operations. Qualex offers nonbranded photofinishing products which are sold to major retailers, largely drug, mass merchant and grocery operators, who market these products under their own retail brands. In addition, Qualex offers certain branded photofinishing products, including premium-quality photofinishing through its Kodalux(R) Processing Services ("KPS"). KPS is available to all Qualex customers and is currently offered from ten Qualex processing plants. Kodalux(R) is a Kodak-owned trademark licensed to Qualex under an agreement which expires on April 15, 1997. In addition to color roll processing, KPS includes chrome processing (slides and movies) and ancillary work such as reprints, enlargements and other services. Qualex provides pickup and delivery services for over 41,000 retail stores in all 50 states. These pickup and delivery services are provided by either Qualex-owned vehicles or through third party contract delivery services. Qualex provides 24-hour (next day) processing services, often on a seven-day-a-week basis, to all major metropolitan areas it serves. The film to be processed is picked up throughout the day and then delivered to Qualex's plants for processing. Consequently, Qualex plants perform the majority of their processing work at night. Plants are located as close to customers as possible to minimize the delivery constraints inherent in next-day service. Qualex currently operates 50 plants located in 33 states. The combination of Colorcraft and Kodak initially permitted Qualex to consolidate plants and other distribution systems which serviced overlapping geographic areas. The consolidation of redundant services has allowed and will continue to allow Qualex to enjoy the benefits of economies of scale and cost savings. In early 1987, Colorcraft Corporation entered into long-term arrangements to purchase a significant portion of its photofinishing materials from Kodak. Upon its formation, Qualex assumed these arrangements on substantially the same terms and conditions. Additionally, all of Qualex's photofinishing plants which offer nonbranded products participate in the Kodak Colorwatch(R) photofinishing marketing program and, therefore, use exclusively Kodak consumable materials. As a result of the long-term arrangements and the fact that substantially all of Qualex's plants are on the Kodak Colorwatch(R) program, Qualex purchases substantially all 1 3 of its photofinishing material from Kodak. SEE "CONSOLIDATED STATEMENTS OF OPERATIONS" IN CONSOLIDATED FINANCIAL STATEMENTS. In addition to its traditional photofinishing services, Qualex also provides microlabs and related maintenance and supplies to customers who desire to offer on-site processing. Because of the continuing development of the microlab, the ultimate level of acceptance by retail stores and consumers cannot be determined. Management believes the new microlabs will allow both Qualex and its retail customers to participate in the well established on-site processing market. SEE ITEM 3. "LEGAL PROCEEDINGS." Qualex has not incurred significant research and development costs. In order to deliver high-quality pictures in a brief period of time at a competitive price, Qualex utilizes high-speed printers, paper processors and other sophisticated equipment which require significant ongoing capital expenditures. Capital expenditures in 1993 were approximately $44 million. Competition in the photofinishing industry is aggressive and is based upon price, quality processing, dependable delivery time and convenience. There are many processors in each market, including mini-labs and microlabs which offer "one-hour" on-site developing. In 1993, Qualex's largest account constituted 11% of its sales volume, its five largest accounts produced approximately 31% of its sales volume and its 10 largest accounts produced approximately 43% of its sales volume. Due to the next day processing nature of the business, there is no material backlog. Actava and Kodak are parties to a Shareholders' Agreement (as amended, the "Qualex Shareholders' Agreement") which sets forth certain rights of and limitations on Actava and Kodak with regard to their Qualex stock. The Qualex Shareholders' Agreement provides that certain decisions regarding Qualex's operations are to be approved by a majority of the members of the Qualex Board of Directors, including at least one of Kodak's representatives on the Board. The declaration of dividends by Qualex merely requires the approval of a majority of the Qualex directors. Actava has control over the distribution of dividends from Qualex because its appointees constitute a majority of the Qualex directors. Upon any change of control of Actava, as defined in the Qualex Shareholders' Agreement ("Qualex Control Event"), the Qualex Shareholders' Agreement provides for changes in the stock ownership and the composition and voting requirements of the Qualex Board of Directors that would eliminate Actava's ability, among other things, unilaterally to cause the declaration of dividends by Qualex. Pursuant to the terms of an amendment to the Qualex Shareholders' Agreement (the "Amendment"), the parties have stipulated that the election of Mr. Charles R. Scott as president and chief executive officer of Actava on February 6, 1991 constituted a Qualex Control Event. Under the terms of the Amendment, Kodak initially waived its Qualex Control Event rights under the Qualex Shareholders' Agreement with respect to such Qualex Control Event, but Kodak reserved the right to withdraw its waiver and enforce such rights on March 1, 1992 or any subsequent March 1, by providing Actava with at least 30 days' prior written notice. Kodak did not withdraw its waiver and seek to enforce its rights as a result of such Qualex Control Event on March 1, 1992, March 1, 1993 or March 1, 1994. Kodak also retained its rights to require the changes permitted by the Qualex Shareholders' Agreement if any other Qualex Control Event occurs. If Kodak in the future elects to enforce its Qualex Control Event rights, Actava would lose the ability to control the declaration of dividends by Qualex, and therefore, any distribution of profits by Qualex. The results of Qualex are consolidated with the results of Actava. In 1993, Qualex accounted for 62% of Actava's consolidated sales. SEE ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." If Actava in the future is deemed to be no longer in control of Qualex, then Actava would cease to consolidate the accounts of Qualex. In that event, Actava would account for its ownership of Qualex using the equity method of accounting. SEE "PHOTOFINISHING TRANSACTION" IN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. LAWN AND GARDEN EQUIPMENT Actava's Snapper Division manufactures Snapper(R) brand power lawnmowers, lawn tractors, garden tillers, snow throwers, and related parts and accessories and distributes blowers, string trimmers and edgers. 2 4 The lawnmowers include rear engine riding mowers, front engine riding mowers or lawn tractors, and self-propelled and push-type walk-behind mowers. Snapper also manufactures a line of commercial lawn and turf equipment, a Blackhawk(TM) line of mowers and markets a fertilizer line under the Snapper(R) brand. Snapper products are premium priced, generally selling at retail from $250 to $8,200. They are sold exclusively through 54 independent distributors and to approximately 7,800 dealers throughout the United States. In addition, Snapper products are exported to 27 independent distributors and four company-owned distributors covering 41 foreign countries. Snapper does no private label manufacturing of lawn and garden equipment and does not sell directly to multi-unit retailers or mass merchandisers. While the ultimate consumers generally purchase lawnmowers in the spring and early summer, Snapper sells to its distributors nearly year-round utilizing accounts receivable dating programs, with the greatest volume of production and shipment preceding ultimate consumer purchasing periods. Accounts receivable dating programs establish the due dates for distributor accounts receivable to coincide with the anticipated sales to the ultimate consumer. Therefore, Snapper's cash flow needs are seasonal, with the greatest need for funds being in the first quarter of the year. SEE ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS." Snapper makes available, through General Electric Credit Corporation, a retail customer revolving credit plan which allows consumers to pay for Snapper products in installments. Consumers also receive Snapper credit cards which can be used to purchase additional Snapper products. In addition, Snapper has an agreement with a financial institution which makes available to dealers floor plan financing for Snapper products. This agreement provides financing for dealer inventories and accelerates cash flow to Snapper's distributors and to Snapper. Under the terms of the agreement, a default in payment by one of the dealers on the program is non-recourse by the financial institution to both the distributor and Snapper. However, the distributor is obligated to repurchase any equipment recovered from the dealer and Snapper is obligated to repurchase the recovered equipment if the distributor defaults. Snapper manufactures its products in McDonough, Georgia at facilities totaling approximately 1,000,000 square feet. A substantial portion of the component parts for Snapper products is manufactured by Snapper, excluding engines and tires. During the three years ended December 31, 1993, Snapper has expended an average of $4.9 million per year for research and development. While it holds several design and mechanical patents, Snapper is not dependent upon any one or more patents, nor does it consider that patents play a material role in its business. Snapper does believe, however, that its registered trademark Snapper(R) is an important asset in its business. Snapper walk-behind mowers are subject to Consumer Product Safety Commission safety standards and are designed and manufactured in accordance therewith. The lawn and garden business is highly competitive, with the competition being based upon price, image, quality and service. While no one company dominates the market, Actava believes Snapper is one of the significant manufacturers of lawn and garden products. There are approximately 50 manufacturers in competition with Snapper. Snapper's principal brand name competitors in the sale of power lawnmowers include The Toro Company, Lawn-Boy (a product group of The Toro Company), Sears, Roebuck and Co., Deere & Company, Ariens Company, Honda Corporation, Murray Ohio Manufacturing Co., American Yard Products, Inc. (a subsidiary of AB Electrolux), MTD Products, Inc. and Simplicity Manufacturing, Inc. The Company announced in March 1993 that it had retained Merrill Lynch to assist in exploring alternatives for realizing value from the Company's investment in Snapper. These efforts have not been successful and management believes they have resulted in a substantial distraction for Snapper's management, distributors and dealers. As a result, the Company has suspended its efforts to find alternatives for Snapper and has instructed Snapper's management to devote their full time and attention to improving operating results. At December 31, 1993, Snapper had approximately $122 million in backlog orders believed to be firm as compared to approximately $114 million at December 31, 1992. In 1993, Snapper accounted for 18% of 3 5 Actava's consolidated sales. SEE ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." SPORTING GOODS The companies which comprise Actava Sports manufacture, import and distribute products for a broad cross section of the sporting goods and leisure time markets. Products are sold under a variety of Actava's own brand names, including DP(R), Hutch(R), Reach(R), Weather-Rite(R) and American Camper(R). Actava also sells exercise equipment under a license for the Body By Jake(R) trademark and various other products under licenses from the National Football League, National Basketball Association, National Hockey League, Major League Baseball, The Walt Disney Company, Inc., Remington Arms Company, Inc. and numerous colleges and universities. In addition, Actava has a nationally distributed line of hosiery and is a licensee for the officially licensed socks of the National Football League, Major League Baseball, Keds(R) and Pro-Keds(R) (copyrights and registered trademarks which are held by third parties) and various colleges and universities. On June 8, 1993, Actava acquired substantially all of the assets of Diversified Products Corporation ("DP"), a fitness and recreation equipment company based in Opelika, Alabama, for a net purchase price consisting of $11,629,500 in cash, the issuance of 1,090,909 shares of the Company's Common Stock valued at $12,000,000 and the assumption or payment of certain liabilities including trade payables and a revolving credit facility. Actava also entered into an agreement which may provide the seller with the right to receive additional payments, or additional shares of Actava Common Stock, depending upon the value of the issued shares over a period of not longer than one year from the purchase. SEE ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." The transaction has been accounted for using the purchase method of accounting; accordingly, the purchased assets and liabilities have been recorded at their estimated fair value at the date of the acquisition. The results of operations of the acquired business have been included in the consolidated financial statements of Actava since the date of acquisition. Approximately 57% of the sales of Actava Sports consists of products manufactured or purchased domestically by Actava. These include hosiery, footballs, uniforms and related equipment. The remaining 43% of sales comes from imported merchandise, including fitness and camping equipment, soccer balls, volleyballs, basketballs, footballs, rainwear and other related sports items. Imported products come from a large number of suppliers, located primarily in the Far East. Analyzed by product lines, camping and outdoor equipment comprised approximately 26% of the Actava Sports sales in 1993, exercise equipment represented 36% and products for team and other recreational activities comprised approximately 38%. International buying is an important part of the Actava Sports operations. Actava World Trade Corporation maintains offices in The People's Republic of China, Taiwan, Hong Kong and South Korea to facilitate purchasing in the Pacific Rim. To the extent the business of Actava Sports is dependent upon imports, factors affecting foreign trade (such as dock and carrier strikes, tariff rates, import and export quotas, currency fluctuations and revaluations, local economic conditions in foreign countries, foreign relations between the United States and other countries and international political and economic situations) are significant in determining the general availability and prices paid by Actava Sports for purchases abroad. Actava Sports has not encountered a shortage of raw materials or finished goods and is generally not dependent upon any sole supplier, although in 1993 DP was adversely affected by delays experienced in receiving electronic components for DP treadmills. SEE ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." Sporting goods are sold by Actava Sports through manufacturers' representatives and directly to mass merchandisers and other retailers. The sporting goods market is highly competitive. Actava Sports does not spend a significant amount of funds for research and development. The trademarks used by Actava Sports in the aggregate are considered to be of material importance, but no single patent or trademark is of material importance to consolidated operations. The loss of certain significant patents or trademarks could have a material effect on the affected individual Actava Sports company. 4 6 Actava Sports had approximately $34 million in backlog orders believed to be firm as of December 31, 1993 as compared to approximately $19 million at December 31, 1992. This increase is primarily due to the acquisition of DP. In 1993, Actava Sports accounted for 19% of Actava's consolidated sales. SEE ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." ENVIRONMENTAL PROTECTION Actava's manufacturing and processing plants are subject to federal, state and local pollution laws and regulations. Compliance with such laws and regulations has not, and is not expected to, materially affect Actava's competitive position. Actava's capital expenditures for environmental control facilities and incremental operating costs in connection therewith were not material in 1993, and are not expected to be material in future years for compliance relating to facilities owned by Actava in 1993. The Company is involved in various environmental matters including clean-up efforts at landfill or refuse sites and groundwater contamination. The Company's participation in three existing superfund sites has been quantified and its remaining exposure is estimated to be less than $300,000 for all three sites. The Company is participating with the Federal and Ohio Environmental Protection Agencies in initial investigations of a potential environmental contamination site involving a divested subsidiary. DP is also complying with various requirements under a compliance order under the Resource Conservation Recovery Act as administered by the State of Alabama. Upon the acquisition of DP, a reserve of approximately $1.5 million was established for expected clean-up costs. EMPLOYEES At December 31, 1993, Actava, including Qualex, had approximately 11,200 employees, of whom approximately 1,400 were represented by unions under various collective bargaining agreements. In general, Actava believes its employee relations to be good. INDUSTRY SEGMENT DATA Industry Segment Data is included in ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." ITEM 2. PROPERTIES. The following is a list of Actava's principal properties. Certain of the properties are subject to mortgages securing indebtedness, which, as of December 31, 1993, aggregated approximately $1.8 million, including mortgages on machinery and equipment. SEE "NOTES PAYABLE AND LONG-TERM DEBT" IN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
NUMBER -------------------- DESCRIPTION OWNED LEASED LOCATION ------------------------------------------------- ----- ------ ------------ Lawn and Garden: Manufacturing plant............................ 1 -- 1 state Distribution facility.......................... -- 1 1 state Photofinishing: Processing plants.............................. 19 31 33 states Retail photographic stores..................... -- 5 5 states Sporting Goods: Distribution facility.......................... -- 4 4 states Manufacturing Plant............................ 1 -- 1 state
The management of Actava believes that the above listed facilities are generally adequate and satisfactory for their present usage. In addition, Actava owns or leases miscellaneous real estate, offices and warehouse facilities, machinery and equipment at various locations which are not currently utilized in Actava's current operations and are, or may be, offered for sale or other disposal. 5 7 ITEM 3. LEGAL PROCEEDINGS. Qualex On February 18, 1994, Photographic Concepts Inc. (PCI), a Florida corporation, sued Qualex in the United States District Court for the Middle District of North Carolina, in a lawsuit captioned Photographic Concepts, Inc. v. Qualex, Inc., Civil Action No. 1:94-CV-00081. PCI's claims arise out of allegations that Qualex entered into and then breached an agreement with PCI relating to the marketing of on-site microlab photofinishing services. During 1993, Qualex's microlab business resulted in $33.3 million in revenues and $7.3 million in gross profits, and Qualex expects such business to increase in the future. PCI alleges, among other things, that Qualex breached an agreement to purchase an interest in PCI, violated a confidentiality agreement with PCI, and misappropriated trade property and other information from PCI. PCI is seeking both monetary and injunctive relief. Qualex is currently gathering the information and documents necessary to file its response to PCI's Complaint. That response must be filed by April 25, 1994. Qualex intends to defend the case vigorously, but the Company is unable to determine the probable impact of the suit at this early stage in the proceeding. Divested Subsidiary On November 30, 1993, a lawsuit was filed by the Department of Justice ("DOJ") against American Seating Company ("American Seating"), a former subsidiary of Actava, in the United States District Court for the Western District of Michigan. The lawsuit is captioned United States v. American Seating Co., Civil Action No. 1:93-CV-956. Pursuant to an asset purchase agreement between Actava and Amseco Acquisition, Inc., dated July 15, 1987, Actava assumed the obligation for certain liabilities incurred by American Seating arising out of litigation or other dispute, involving events occurring on or before June 22, 1987. The DOJ alleges that American Seating failed to disclose certain information relating to its price discount practices that it contends was required in an offer submitted by American Seating to the General Services Administration for possible contracts for sales of systems furniture and related services. The complaint seeks recovery of unspecified single and treble damages, penalties, costs and prejudgment and post-judgment interest. The parties have engaged in settlement discussions but have not agreed on a disposition of the case. A trial, if necessary, has been scheduled for June 1995. Management believes that American Seating has meritorious defenses to the allegations and intends to vigorously defend the action. Since the suit is still in the early stages, management is unable to determine the probable impact of the suit. Because the DOJ has previously asserted damages of approximately $3.5 million, the lawsuit could have a material effect on results of operations and financial condition of the Company, if adversely determined, on a number of disputed issues as to liability, damages and penalties. Shareholder Litigation In 1991, Virginia E. Abrams and Fuqua Industries, Inc. v. J. B. Fuqua, et al., Civil Action No. 11974, was filed in the Delaware Chancery Court. The named defendants are certain current and former members of Actava's Board of Directors and Intermark, Inc., a predecessor of Triton Group Ltd., which currently owns 25.0% of the Company's Common Stock. The Company was named as a nominal defendant. The action is brought derivatively in the right of and on behalf of the Company and was purportedly brought as a class action on behalf of all common stockholders of the Company other than the defendants. The complaint alleges, among other things, a long-standing pattern and practice by the defendants of misusing and abusing their power as directors and insiders of the Company by manipulating the affairs of the Company to the detriment of the Company's past and present stockholders. The complaint seeks (i) monetary damages from the director defendants, including a joint and several judgment for $15.7 million for alleged improper profits obtained by Mr. J. B. Fuqua in connection with the sale of his shares in the Company to Intermark; (ii) injunctive relief against the Company, Intermark and its current directors, including a prohibition against 6 8 approving or entering into any business combination with Intermark without specified approval; and (iii) costs of suit and attorneys' fees. In 1991, two additional complaints, Behrens and Harris v. Fuqua Industries, Inc., et al., Civil Action No. 11988 and Freberg and Lewis v. Fuqua Industries, Inc., et al., Civil Action No. 11989, were filed in the Delaware Chancery Court by plaintiffs who allege that they are stockholders of the Company. Each of these complaints purport to be brought on behalf of a class of stockholders of the Company other than the named defendants. The named defendants are the Company and certain of its current and former directors. The complaints allege, among other things, that members of the Company's Board of Directors presently contemplate either a sale, a merger or other business combination involving Intermark and the Company or one or more of its subsidiaries or affiliates. The complaints seek costs of suit and attorneys' fees and preliminary and permanent injunctive relief and other equitable remedies, ordering the director defendants to carry out their fiduciary duties to the plaintiffs and other members of the class and to take all appropriate steps to enhance the Company's value as a merger or acquisition candidate. On motion by the defendants in all three class action suits, the Delaware Chancery Court ordered the consolidation of the three suits in re Fuqua Industries, Inc. Shareholder Litigation, Civil Action No. 11974 on May 1, 1991. The action is in the discovery stage and no significant events occurred in regard to these legal proceedings in 1993. Other Litigation Actava is the defendant in various other legal proceedings. Actava is not aware, however, of any other action which, in the opinion of management, would materially and adversely affect liquidity, results of operations or the financial position of Actava. SEE ITEM 1. "ENVIRONMENTAL PROTECTION." ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. EXECUTIVE OFFICERS OF THE REGISTRANT Each of the executive officers of Actava as of the date hereof was elected to serve until the next annual meeting of the Board of Directors of Actava or until his successor is elected and qualified:
POSITION NAME AGE OFFICE HELD SINCE - ----------------------------------- --- ------------------------------------- ------------- Charles R. Scott 66 President and Chief Executive Officer February 1991 Frederick B. Beilstein, III 46 Senior Vice President -- Treasurer & Chief Financial Officer May 1991 Walter M. Grant 49 Senior Vice President, General Counsel and Secretary July 1993
On February 6, 1991, Mr. Charles R. Scott was elected to the office of president and chief executive officer. Mr. Scott had previously not held an office with Actava although he had been a member of the Board of Directors since January 16, 1989 and served as chairman from July 1, 1989 to February 6, 1991. Prior to being elected as Actava's president and chief executive officer, Mr. Scott served as chairman and chief executive officer of Intermark, Inc., which, through its wholly owned subsidiary, Triton Group Ltd., owned approximately 25.0% of the outstanding shares of Actava's common stock. In 1992, Intermark filed for protection under Chapter 11 of the Bankruptcy Act and was merged into Triton Group Ltd. upon confirmation of its Plan of Reorganization on June 25, 1993. On March 3, 1994, Actava announced that an independent committee of its Board of Directors had been appointed to select a successor to Mr. Scott. 7 9 On May 30, 1991, Mr. Frederick B. Beilstein was elected to the office of senior vice president-treasurer and chief financial officer. Prior to joining Actava, Mr. Beilstein served as executive vice president and chief financial officer of Edgcomb Metals Company from January 1990 through March 1991. Prior to March 1991, Mr. Beilstein served as senior executive vice president and chief financial officer of Days Inns Corp. and as president of Days Inns Management Company, Inc. Mr. Walter M. Grant was elected to the office of senior vice president and general counsel in July 1993 and to the position of corporate secretary in March 1994. Mr. Grant served as senior vice president and general counsel for the North American operations of Smith & Nephew plc, an international health care company, from October 1991 through June 1993. Prior to October 1991, Mr. Grant served as vice president, general counsel and secretary of Contel Corporation, a telecommunications company. 8 10 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS. Actava's Common Stock is listed and traded on the New York and Pacific Stock Exchanges. The following table summarizes the high and low market prices according to the New York Stock Exchange Composite Tape and cash dividends declared for 1993 and 1992:
MARKET PRICE OF COMMON STOCK ---------------------------- CASH 1993 1992 DIVIDENDS ------------ ------------ ------------ QUARTERS ENDED HIGH LOW HIGH LOW 1993 1992 --------------------------------------------- ---- --- ---- --- ---- ---- March 31..................................... 14 1/2 11 5/8 16 3/4 12 1/2 $.09 $.09 June 30...................................... 14 9 1/2 14 1/4 11 1/4 $.09 $.09 September 30................................. 9 5/8 7 1/4 12 3/8 9 7/8 $.09 $.09 December 31.................................. 8 1/4 6 5/8 13 3/4 9 3/8 $.09 $.09
Actava's debt agreements, including subordinated debt, contain covenants which, among other things, place restrictions upon the amount of dividends it may pay. SEE ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." On March 3, 1994, the Company reported the suspension of the dividend on its Common Stock. SEE ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." As of March 24, 1994, there were approximately 6,878 holders of record of Common Stock. The last reported sale price of the Common Stock on the composite tape on such date was $7 1/4 per share. 9 11 ITEM 6. SELECTED FINANCIAL DATA.
YEARS ENDED DECEMBER 31, ---------------------------------------------- 1993 1992 1991 1990 1989 ------ ------ ------ ------ ------ (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Net sales......................................... $1,241 $1,149 $ 925 $ 972 $ 926 Income (loss) from continuing operations.......... (43) 11 (51) (1) 7 Discontinued operations........................... -- -- -- -- (1) Extraordinary item................................ -- -- -- 1 -- Cumulative effect of change in accounting principle....................................... (4) 1 -- -- -- Net income (loss)................................. (47) 12 (51) -- 6 Total assets...................................... 1,275 1,218 1,090 1,016 1,148 Long-term debt.................................... 221 220 157 43 81 Subordinated debt................................. 191 194 195 200 220 ------ ------ ------ ------ ------ Total long-term and subordinated debt............. $ 412 $ 414 $ 352 $ 243 $ 301 Per common share: Primary earnings Continuing operations........................ $(2.52) $ .64 $(3.08) $ (.06) $ .34 Discontinued operations...................... -- -- -- -- (.04) Extraordinary item........................... -- -- -- .05 -- Cumulative effect of change in accounting principle.................................. (.25) .06 -- -- -- ------ ------ ------ ------ ------ Net income (loss)....................... $(2.77) $ .70 $(3.08) $ (.01) $ .30 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Fully diluted earnings Continuing operations........................ $(2.52) $ .64 $(3.08) $ (.06) $ .34 Discontinued operations...................... -- -- -- -- (.04) Extraordinary item........................... -- -- -- .05 -- Cumulative effect of change in accounting principle.................................. (.25) .06 -- -- -- ------ ------ ------ ------ ------ Net income (loss)....................... $(2.77) $ .70 $(3.08) $ (.01) $ .30 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Cash dividends declared........................... $ .36 $ .36 $ .36 $ .32 $ .26 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 10 12 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Actava provides high-quality, brand name consumer products through distribution channels to retail markets across the United States. The Company's businesses encompass the broad leisure industry, including photofinishing, fitness equipment and sporting goods, as well as lawn and garden equipment. Actava owns 51% of the voting stock of Qualex, the largest photofinisher in the United States, processing approximately 20% of all color print rolls of film. Qualex also processes black and white and movie film. Qualex is a wholesale photofinisher, obtaining substantially all of its sales from independent retailers in 1993. Qualex's business also includes a limited amount of direct sales to consumers through owned and operated retail photographic stores and mail-order operations. Actava's Snapper Division manufactures Snapper(R) brand power lawnmowers, lawn tractors, garden tillers, snow throwers, and related products, parts and accessories and distributes blowers, string trimmers and edgers. The lawnmowers include rear engine riding mowers, front engine riding mowers or lawn tractors, and walk-behind mowers. Snapper also manufactures a line of commercial lawn and turf equipment and a Blackhawk(TM) line of mowers and markets a fertilizer line under the Snapper(R) brand. Actava Sports companies manufacture, import and distribute products for a broad cross-section of the sporting goods, fitness and leisure markets. Products are sold under a variety of Actava companies' own brand names, as well as under licenses from the National Football League, National Basketball Association, Major League Baseball, The Walt Disney Company, Inc., Remington Arms Company, Inc., The Keds Corporation (Keds(R) and Pro-Keds(R)), Body by Jake Licensing Corporation (Body by Jake(R)), and numerous colleges and universities. Actava's long-range strategy is to maximize stockholder wealth by concentrating its capital resources on its companies which offer the highest potential returns. As a result, the Company continues to analyze its businesses with a view toward enhancing their value through marketing alliances, licensing arrangements and joint ventures, with particular emphasis on cost efficiencies through plant consolidations or product-line expansions or improvements. The following is a discussion of the operating results and financial position of the Company on a consolidated basis and the operating results of each of these business segments. CONSOLIDATED CONTINUING OPERATIONS The Company's consolidated sales for 1993 increased $92.4 million, or 8.0% from 1992 principally because of the acquisition of DP. Gross profit as a percentage of sales for 1993 of 22.9% is a decrease from 29.2% while gross profit dollars decreased by $52.1 million to $283.7 million. This is primarily due to gross profit declines suffered by Snapper and Qualex, but partially offset by an increase in gross profits by Actava Sports companies. The Snapper gross profit decline is primarily attributable to manufacturing problems associated with new product introductions during 1993. In 1992, sales increased $224.1 million, or 24.2%, from 1991, primarily as a result of the resumption of production and shipment to distributors at Snapper, the impact of the acquisitions at Qualex in the fourth quarter of 1991 and the first quarter of 1992 as well as increased market share with certain Qualex customers and the expansion of business with existing customers for each of the companies comprising Actava Sports. The gross profit for 1992 of $335.8 million compared to the gross profit for 1991 of $255.5 million, an increase of $80.3 million. This increase was primarily attributable to the increased production and shipment levels at Snapper for 1992 which resulted in significantly higher sales and absorption of fixed manufacturing costs and the additional gross profit at Qualex attributable to acquisition activities. During 1991, certain inventory quantities at Snapper were reduced, resulting in a liquidation of LIFO inventory quantities which were carried at lower costs prevailing in years prior to 1991 as compared with the cost of 1991 purchases. The effect of this decreased the 1991 net loss by approximately $1.5 million and decreased loss per share of common stock by $.09. 11 13 Selling, general and administrative expenses, which include provisions for doubtful accounts, decreased by $9.9 million, or 3.8%, to $253.7 million for 1993 in comparison to 1992. The reductions in selling, general and administrative expenses are primarily attributable to cost reductions at Qualex achieved through plant and administrative restructuring and consolidations. Selling, general and administrative expenses, which include provisions for doubtful accounts, increased by $1.7 million in 1992 in comparison to 1991. The 1992 increase is related to the additional costs at Qualex associated with the increased volume of prints processed as well as higher promotional and advertising expenses partially offset by reductions at Snapper due to the curtailment of special promotional programs and the positive impact of other administrative cost savings as a result of plant restructuring and a decrease in unallocated corporate expenses principally because of the downsizing of the corporate staff. In 1993, Actava recorded an operating profit of $26.7 million, compared to an operating profit from 1992 of $72.1 million. The 1993 operating profit includes provisions of $3.2 million for plant relocations and consolidations and an additional $4.0 million for a change in estimate of future warranty costs at Snapper due to increased warranty claims. Also negatively impacting operating profits for 1993 in comparison to 1992 was underutilization of plant capacity and manufacturing inefficiencies at Snapper and DP, lower gross margins on initial product introductions by Snapper, and an increase in corporate expenses of approximately $4.0 million. The corporate expense increase is primarily attributable to additional self-insurance reserves, as well as an increase in insurance administrative expense, and the impact of reduced expense for 1992 due to the reversal in 1992 of certain reserves previously established for settlement of employee agreements and office relocations. The 1992 operating profit of $72.1 million compares to an operating loss of $35.7 million for 1991. The operating loss for 1991 included provisions for plant relocations and consolidations totaling $19.0 million and provisions for the settlement of employee agreements and related costs of $6.8 million. Operating profit for 1991 was adversely affected by production costs at Snapper. Interest expense for 1993 of $43.3 million is an increase of $9.8 million from 1992. This increase is primarily attributable to higher average borrowings at both Qualex and Snapper and the addition of interest associated with DP. The increased borrowing resulted from the Qualex $200 million Senior Note private placement completed in the second quarter of 1992 and the revolving credit facilities established to provide working capital for Snapper and the Actava Sports companies, including DP. These credit lines have substantially reduced subsidiary reliance on Actava for working capital needs. Interest expense for 1992 of $33.5 million is an increase of $9.9 million from 1991. This increase is primarily attributable to higher average borrowings at both Qualex and Snapper. The increased borrowing resulted from the financing required for the acquisitions made by Qualex in the fourth quarter of 1991 and January 1992, borrowings in excess of debt repayments from the Qualex Senior Note private placement, and the revolving credit facilities established in 1992 to provide working capital for Snapper. Other income (net of other deductions) decreased $9.0 million for 1993 when compared to 1992. This is primarily due to a decrease in investment income from lower levels of investment, increases in early payment interest credit expense at Snapper, losses on asset sales at Qualex and an increase of $3.0 million in a valuation allowance for a real estate investment due to an accelerated plan of disposition. Other income (net of other deductions) in 1992 increased $2.6 million in comparison to 1991. This increase is the result of a decrease in early payment interest credit expenses at Snapper, partially offset by reduced investment income due to lower average investment levels and rates of return. During the year, the Company provides for income taxes using anticipated effective annual tax rates for Qualex and for all other company operations. The rates are based on expected operating results for the year and estimated permanent differences between book and taxable income. Due to the recognition of net operating loss benefits to the extent possible through a reduction in deferred income tax liabilities in a prior year, Actava, excluding Qualex, recognizes the benefit of current net operating losses only to the extent of potential refunds from carrybacks. SEE "INCOME TAXES" IN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. The Company has net deferred taxes of approximately $24.3 million composed of deferred tax liabilities of approximately $78.1 million offset by deferred tax assets of approximately $53.8 million. Deferred income 12 14 taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Included in the approximate $53.8 million of deferred tax assets is approximately $16.2 million as recognized by Qualex, which is not included in the Actava consolidated federal income tax return. The remaining approximate $37.6 million of deferred assets have been recognized by Actava due to available income tax carrybacks and the company's determination that available net operating losses should not be allowed to expire, as the tax savings represent significant amounts. The Company plans to implement actions to create sufficient taxable income to utilize the carryover prior to any expiration. In order to implement its tax planning strategy to utilize its tax carryforwards, the Company would pursue the sale of certain corporate assets, including its investment in Qualex. SEE "INCOME TAXES" IN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. The minority interest shown on Actava's Consolidated Statements of Operations represents Kodak's portion of the earnings of Qualex. In accordance with the Shareholders' Agreement, the Company and Kodak are each entitled to 50% of Qualex's net income for income reporting purposes. Although Qualex accounted for 62% of Actava's 1993 revenues and had pre-tax profits of $33.7 million in 1993, only approximately 25% of its pre-tax profits ($8.5 million in 1993) is reported in Actava's consolidated net income due to Qualex's income tax provision at an effective rate of 49% and the 50% minority interest effect. SEE "PHOTOFINISHING TRANSACTION" IN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. Effective January 1, 1992, Qualex changed its method of accounting for the cost of its proof advertising program to recognize advertising expense as it is incurred rather than at the time of the initial sale to the customer. SEE "SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- ACCOUNTING CHANGES -- CHANGE IN ACCOUNTING FOR CERTAIN ADVERTISING COSTS" IN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". The Company adopted the new method of accounting for income taxes as of January 1, 1993. Statement No. 109 affects the manner and rates at which deferred income taxes are reflected on the balance sheet and the amount of taxes reflected in the statement of operations. The adoption of Statement No. 109 did not result in a material effect on net income for 1993. SEE "SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ACCOUNTING CHANGES -- CHANGE IN METHOD OF ACCOUNTING FOR INCOME TAXES" IN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions". Statement No. 106 requires the cost of postretirement benefits to be recognized in the financial statements over an employee's active working career. The Company adopted the new method of accounting for these benefits as of January 1, 1993. The adoption of Statement No. 106 resulted in a charge to net income of $4.4 million and was reported as the cumulative effect of change in accounting principle in the first quarter of 1993. SEE "SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- ACCOUNTING CHANGES -- CHANGE IN METHOD OF ACCOUNTING FOR POSTRETIREMENT BENEFITS" IN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. The Company and its subsidiaries provide benefits to former or inactive employees after employment, but before retirement, such as severance benefits, continuation of health care benefits and life insurance coverage. The costs of these are currently accounted for on a pay-as-you-go (cash) basis. The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits," which requires employers to recognize the obligation to provide these benefits when certain conditions are met. The Company is required to adopt the new method of accounting for these benefits no later than January 1, 1994. The adoption of Statement No. 112 will not have a significant effect on the Company's financial position or results of operations. The Company and its subsidiaries invest in various debt and equity securities. The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which requires certain debt securities to be reported at amortized cost, certain debt and equity securities to be reported at market with current recognition of unrealized gains and losses, and certain debt and equity securities to be reported at market with unrealized gains and losses as a separate component of shareholders' equity. The Company is required to adopt the new method of accounting 13 15 no later than January 1, 1994. The adoption of Statement No. 115 will not have a significant impact on the Company's financial position or results of operations. As a result of the items described above, Actava reported a net loss in 1993 of $47.6 million in comparison to net income in 1992 of $11.6 million and a net loss in 1991 of $50.8 million, respectively. OPERATING SEGMENTS SEGMENT PERFORMANCE THE ACTAVA GROUP INC. AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, -------------------------------------------------------------- 1993 1992 1991 1990 1989 -------- -------- ------ ------ ------ (IN MILLIONS) NET SALES Photofinishing............................. $ 775.3 $ 770.8 $649.7 $623.9 $629.9 Lawn and Garden............................ 225.0 248.2 158.5 237.7 190.8 Sporting Goods............................. 240.8 129.7 116.4 110.7 105.0 -------- -------- ------ ------ ------ Total............................... $1,241.1 $1,148.7 $924.6 $972.3 $925.7 -------- -------- ------ ------ ------ -------- -------- ------ ------ ------ PRE-TAX EARNINGS (LOSS)(A) Photofinishing............................. $ 51.3(c) $ 54.6 $ 28.0(c) $ 44.1(c) $ 43.7(c) Lawn and Garden............................ (17.1)(d) 17.8 (50.6) (.3)(d) 2.3 Sporting Goods............................. 2.7 5.9 4.3 3.6 2.9 -------- -------- ------ ------ ------ Operating profit (loss) -- segments(b)... 36.9 78.3 (18.3) 47.4 48.9 Unallocated corporate expenses............... (10.2) (6.2) (10.6) (9.6) (12.3) Settlement of employee agreements and related costs...................................... -- -- (6.8) -- -- -------- -------- ------ ------ ------ Operating profit (loss)...................... 26.7 72.1 (35.7) 37.8 36.6 Interest expense............................. (43.3) (33.4) (23.5) (25.7) (27.8) Other income (expense) -- net................ (2.9) 6.1 3.5 9.9 14.7 -------- -------- ------ ------ ------ Total pre-tax earnings (loss)....... $ (19.5) $ 44.8 $(55.7) $ 22.0 $ 23.5 -------- -------- ------ ------ ------ -------- -------- ------ ------ ------
- --------------- (a) Pre-Tax Earnings include the minority interest of Eastman Kodak Company in Qualex Inc. (b) Operating profit represents total sales less costs of products sold and selling, general and administrative expenses including goodwill amortization. There were no significant intersegment sales or transfers. (c) Includes a provision of $4.1 million in 1993, $17.0 million in 1991, $15.7 million in 1990, and $2.9 million in 1989 before tax for the relocation or consolidation of certain photofinishing plants. (d) Includes warranty expense of $4.0 million before tax in 1993 due to a change in accounting estimate and provisions in 1990 of $13.7 million before tax for the consolidation of lawn and garden manufacturing facilities and $4.8 million before tax for the write-off of excess inventory created as a result of the elimination of certain models from lawn and garden product lines. Photofinishing: In 1988, the Company combined its photofinishing operations, with the domestic photofinishing operations of Eastman Kodak Company in a transaction accounted for as a purchase, forming a jointly owned company, Qualex Inc. SEE "PHOTOFINISHING TRANSACTION" IN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. In October, 1993, Qualex entered into an Agreement of General Partnership with JVQ Capital One, Inc. for the purpose of acquiring, owning, holding, leasing, and selling on-site microlab equipment. In the future, Qualex intends to sell to this partnership qualifying leases of microlab equipment with the result that Qualex will record income upon the sale of the lease rather than over the life of the lease. Qualex will continue to service the equipment under an agreement with the lessee of the equipment and will pay fees for management and leasing services to the parent corporation of JVQ Capital One, Inc., a general partner. Actava, which owns 51% of the voting shares of Qualex, consolidates the accounts of Qualex with its accounts. Kodak's interest in the earnings and equity of Qualex are reflected as minority interest. 14 16 Photofinishing sales increased $4.4 million or .6% in 1993 as compared to 1992 due primarily to the conversion of former microlab operating leases to salestype financing leases as a result of the expiration of early cancellation periods for certain of such leases. An overall increase in equivalent prints processed from 1992 to 1993 partially offset continued per print price declines. Photofinishing sales increased $121.1 million or 18.6% in 1992 as compared to 1991. Generally, Qualex experienced price declines of 4% to 5% during the 1992 year while sales increased. These price decreases occurred due to the effect of price reductions offered by competitors and the associated demand for similar prices from Qualex customers. The primary reasons for the sales increase were the added print volume resulting from acquisitions finalized in the last quarter of 1991 and in January 1992 (SEE "ACQUISITIONS" IN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS), and an overall increase in rolls processed through comparable 1991 plants, partially offset by continued price declines. Although sales increased in 1993, per print price continued to decline, resulting in a decrease in gross profit as a percent of sales from 31.3% for 1992 to 28.3% for 1993, with 1992 restated to include route distribution costs as a cost of sales component. Gross profit dollars decreased $22.2 million in 1993 from 1992 levels. Gross profit as a percentage of sales was 31.3% for 1992 and 1991. However, because of the increase in sales, gross profit dollars rose $38.4 million or 18.9% in 1992 in comparison to 1991. The 1991 increase, however, was partially offset by increases in selling, general and administrative expenses. As a result of the additional sales volume, selling expense increased $8.1 million or 16.4% and route pick-up and delivery costs increased by $9.0 million or 14.7% for 1992 in comparison to 1991. In addition, advertising and promotional expenses decreased $1.7 million or 5.5% as a result of an accounting principle change which resulted in the deferral of $3.5 million of advertising expenses to later periods. If the accounting principle for the recognition of certain advertising expenses had not been changed, advertising and promotional expenses would have increased by $1.8 million or 5.8% in 1992. Qualex also incurred increased administrative expenses of $19.3 million or 24.8% for 1992 in comparison to 1991. This increase was primarily due to acquired administrative offices, amortization of intangibles associated with the 1991 and 1992 acquisitions and the increased volume of prints processed, even though the cost per print has decreased. As a result, operating profit before charges for plant relocations and consolidations increased $807,000 in 1993 and $9.6 million in 1992 when compared to respective prior periods. Charges for plant relocations and consolidations of $4.1 million for 1993 and $17.0 million for 1991 were provided, while no provision was made for 1992. This contributed to the increase in operating profit of $26.6 million, or 95%, from 1991 to 1992, and to a decrease in operating profit of $3.3 million, or 6%, from 1992 to 1993. In 1993 and 1991 Qualex recorded charges of $4.1 million and $17.0 million before tax benefits, respectively, primarily for the expenses associated with the relocation and consolidation of certain photofinishing plants and, in 1992, $725,000 for the consolidation of certain marketing and sales and operations functions. During 1992 and 1993, $33.3 million was charged against these reserves for the direct costs associated with plant and administrative relocations and consolidations and the reserve balance available for future charges was $6.8 million at December 31, 1993. As a result of the above factors, Qualex recorded an operating profit of $51.3 million for 1993, a decrease of $3.3 million or 6.0% from 1992. The operating profit for 1992 of $54.6 million was an increase of $26.6 million from 1991. Management anticipates lower pricing trends in the wholesale photofinishing industry to continue in 1994. Qualex will attempt to offset the effects of lower pricing with improved product mix, lower prices for paper and chemicals, the sale of certain microlab leases and continuing consolidations of plant facilities and administrative offices. Lawn and Garden: Snapper's sales to distributors decreased by $23.2 million, or 9.4% for 1993 in comparison to 1992, despite a strong retail sales year for lawn and garden equipment, as Snapper continued to control production to estimated retail sales by reducing production and shipments to distributors in order to decrease retail inventories. Sales for 1993 and 1992 were $225.0 million and $248.2 million, respectively. Gross profit as a percentage of sales decreased to 13.9% for 1993 as compared to 27.5% in 1992. Gross profit in dollars decreased by $37.0 million from $68.2 million to $31.2 million for these same respective periods. These decreases resulted from continuing manufacturing problems such as unfavorable manufacturing variances and cost over-runs for newly introduced products as well as an increase in product related expenses such as 15 17 warranty. The start-up costs, overall product mix and delays associated with these new products negatively impacted Snapper's cost of sales. In addition, because Snapper's new Blackhawk(TM) line of mowers, which represented sales of approximately $10.9 million in 1993, is a lower price-point and margin product than the Snapper(TM) brand line, per unit gross margin has been lower when compared to last year's margins. Management does not expect sales of Blackhawk(TM) line to be as significant in 1994 as in 1993. A $4.0 million warranty expense was charged to operations in the fourth quarter of 1993 due to recent unanticipated increases in warranty claims. Also, gross profit was lower because of inventory shortages and shut-down costs for a company owned foreign distributor. Snapper's sales to distributors and gross profit increased $89.7 million and $40.2 million or 56.5% and 143.7%, respectively, for 1992 in comparison to 1991. 1991 sales to distributors were purposely reduced as a result of the decision to decrease retail inventories by producing and shipping less product than that sold at retail. Production and shipment to distributors was increased for the 1992 model year. In addition, in 1992 Snapper redesigned and reengineered its product offerings, with particular emphasis on recycling and mulching capability. Because sales were down for 1993, selling, general and administrative expenses, including sales volume related expenses such as co-operative advertising, decreased by 2.5% in comparison to 1992. Income of $849,000 was provided by reducing a reserve for plant relocation and consolidation in recognition of finalizing a plant closing. During 1993, Snapper's management extended the due dates of certain receivables for terms beyond one year and as a result recorded unearned discounts in the amount of approximately $1.8 million as a charge to other expense. The decreased gross profit, partially offset by reduced selling, general and administrative expenses, resulted in an operating loss of $17.1 million at Snapper in 1993 as compared to an operating profit of $17.8 million for 1992. Operating profit decreased $34.9 million in 1993, compared to 1992, because selling, general and administrative expenses remained relatively constant whereas gross profit decreased by $37.0 million. In 1991, Snapper initiated an aggressive retail marketing campaign in order to further accelerate the reduction of inventory. Snapper reduced its expenditures for marketing promotions and advertising campaigns in 1992 in comparison to 1991, concentrating its 1992 programs on the new product offerings with particular emphasis on mulching capabilities as well as quality and service. As a result, selling, general and administrative expenses decreased $28.1 million or 35.8% in 1992, in comparison to 1991. In addition, certain cost reductions were achieved as a result of the 1991 closing of two of the three Snapper manufacturing facilities. Management believes these savings were approximately $10.0 million. As a result of the factors discussed above, Snapper recorded an operating profit of $17.8 million in 1992 in comparison to an operating loss of $50.6 million for 1991. The Company announced in March, 1993, that it had retained Merrill Lynch to assist in exploring alternatives for realizing value from the Company's investment in Snapper. These efforts have not been successful and management believes they have resulted in a substantial distraction for Snapper's management, distributors and dealers. As a result, the Company has suspended its efforts to find alternatives for Snapper and has instructed Snapper's management to devote their full time and attention to improving operating results. On August 9, 1993, the Company announced that a new Chief Executive Officer had been employed for Snapper. Sporting Goods: Sales for Actava Sports increased by $111.2 million, or 85.7% for 1993 when compared to 1992. This increase is primarily due to the acquisition of DP in June, 1993. In addition to the increase resulting from the acquisition, sales increased for other Actava Sports companies during 1993. Gross profit as a percent of sales decreased from 20.1% to 13.8% for 1993 but gross profit in dollars increased by $7.2 million, or 27.4%, from $26.0 million to $33.2 million, when compared to 1992. Selling, general and administrative expenses increased by $10.3 million for 1993 as compared to 1992, from $20.1 million to $30.4 million. This was due to $8.6 million of DP selling, general and administrative expense incurred from the acquisition date to year-end 1993. Operating profit decreased from $5.9 million in 1992 to $2.7 million in 1993. The decrease in operating profit is primarily attributable to DP, which recorded a loss for the six months ended December 31, 1993 due to the cautious retail environment and production problems caused by late delivery of electronic components for treadmill equipment. Actava announced on October 26, 1993, that a new President and Chief Executive Officer had been appointed for DP. 16 18 Sales for Actava Sports increased $13.2 million or 11.4% in 1992 as compared to 1991. Each of the three subsidiaries that comprised this segment in 1992 had increased net sales in 1992 to their major multi-unit retail customers. The Actava Sports operating profit of $5.9 million for 1992 was an increase of 33.3% from 1991. Operating profit as a percent of net sales was 4.5% and 3.7%, respectively, for 1992 and 1991. In addition, operating profit for 1991 included the impact of provisions for plant consolidations of $500,000 before tax benefits for the costs of consolidating the manufacturing and warehouse facilities of one of the companies in Actava Sports. FINANCIAL POSITION Actava's working capital was $103.4 million at December 31, 1993 as compared to $176.1 million at December 31, 1992. The decrease reflects the loss incurred by the Company for 1993, repayment by Qualex of long-term debt using cash realized through collections and sales of accounts receivable, the payment of certain sinking fund requirements, the use of approximately $11.6 million of cash in the DP acquisition and $23.0 million of additional cash provided to DP. Increases in accounts receivable and increases in inventory are principally financed by borrowings from working capital lines of credit. Cash and short-term investments at Actava, excluding Qualex, decreased by $31.6 million in 1993, to $44.3 million. The primary reasons for this decrease were the cash requirements for the DP acquisition, plus a $15.0 million equity contribution and an $8.0 million working capital advance made by Actava to DP following the acquisition. Increased inventory also contributed to the decrease in cash. At December 31, 1993, approximately $5.0 million of Actava's cash and short-term investments were pledged to secure a Snapper credit line and approximately $20.7 million of cash and short-term investments were pledged to support outstanding letters of credit. Due to the seasonal nature of its businesses, the Company has the greatest need for funds in the first and last quarters of the year. For 1993, consolidated cash flows of $12.9 million were used by operations, investing activities used $25.0 million of cash, and financing activities provided $35.9 million of cash. Cash flow used by operations included depreciation of $44.7 million and amortization of $25.8 million. Investing activities used $25.0 million of cash, including payments for property, plant and equipment (net of disposals) of $39.5 million, payments for purchases of businesses of $9.4 million, representing the acquisition of DP, and net sales of investments of $34.2 million. Financing activities provided $35.9 million during the year with borrowings under short-term bank agreements of $52.3 million, net payments of $311,000 under longterm debt agreements, payments of subordinated debt of $1.8 million, and payments of dividends by Qualex and the Company of $8.6 million and $6.3 million, respectively. Actava's senior long-term debt increased slightly from $220.4 million at December 31, 1992 to $220.9 million at December 31, 1993. This increase is primarily attributable to borrowings by Qualex, partially offset by the termination of capitalized lease obligations for Snapper. Actava's long-term subordinated debt position of $190.6 million at December 31, 1993 is a decrease of $3.0 million from year-end 1992. Subordinated debt is 46.5% of Actava's total long-term debt, including the current portion, with the first significant maturity due in 1996. The Company has a currency swap agreement with a financial institution in order to eliminate exposure to foreign currency exchange rates for its 6% Senior Subordinated Swiss Franc Bonds. A default by the financial institution that is a party to the swap agreement would expose the Company to potential currency exchange risk on the remaining bond interest and principal payments. SEE "SUBORDINATED DEBENTURES" IN NOTES TO FINANCIAL STATEMENTS. On June 8, 1993, the Company acquired substantially all the assets of DP for a net purchase price consisting of $11.6 million in cash, the issuance of 1,090,909 shares of the Company's Common Stock valued at $12 million, and the assumption or payment of certain liabilities including trade payables and a revolving credit facility. SEE "ACQUISITIONS" IN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. The Company also entered into an agreement which may provide the seller with the right to receive additional payments of cash, or additional shares of Company Common Stock, depending upon the value of the issued shares over a period of 17 19 not longer than one year from the purchase date. The agreement gives the seller the right under certain circumstances, to require the Company to purchase the 1,090,909 shares issued to the seller in connection with the acquisition (the "Acquisition Shares") at a price equal to $11.00 per share. The payment of additional cash or the issuance of additional shares will not increase the cost recorded by Actava for DP, but will affect the manner in which the total purchase price is recorded by Actava. The right of the seller to receive additional payments of cash or additional shares of Company Common Stock becomes exercisable after June 8, 1994. In the event that a registration statement under the Securities Act of 1933, as amended, is in effect with respect to the Acquisition Shares, the Company may require the seller to sell the Acquisition Shares to purchasers other than the Company and pay to the seller the difference between the price received and $11.00 per share. The Company has filed a Registration Statement under the Securities Act of 1933, as amended, with respect to the Acquisition Shares. If the Registration Statement is not declared effective on or before June 8, 1994, the Company will be required to repurchase the Acquisition Shares for $12.0 million in cash. Any such repurchase would violate covenants in the Company's credit and subordinated debt agreements. Actava's debt agreements contain covenants which, among other things, place restrictions upon the amount of stock the Company may repurchase and dividends it may pay. Under the terms of Actava's 6% Senior Subordinated Swiss Franc Bonds due 1996, Actava may not make any cash redemptions (in excess of the aggregate net cash proceeds from the sale of Common Stock) of its Common Stock or declare any cash dividends after September 30, 1985 in excess of $25 million plus (or minus) the net income (or loss) of Actava subsequent to September 30, 1985. As of December 31, 1993 Actava had approximately $3.4 million available for dividends or redemptions pursuant to this covenant. The Qualex credit agreement and the Shareholders' Agreement with Eastman Kodak Company also restrict the amount of net assets of Qualex which may be transferred to the Company or Kodak by dividend or other means. In addition, the DP credit agreement requires that Actava maintain, at all times, an unrestricted cash and short-term investment position of $20 million after September 30, 1994. Non-compliance with this requirement subjects this agreement to termination by the lender upon seventy-five days notice to Actava. In November 1991, the Company entered into a Loan Agreement with its 25.0% stockholder, Triton Group Ltd. ("Triton"), whereby Triton could borrow up to $32.0 million from the Company secured by the stock in the Company owned by Triton (the "Triton Loan"). SEE "TRITON GROUP LTD." IN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. The Triton Loan Agreement was modified in June 1993, pursuant to the Plan of Reorganization filed by Triton in its Chapter 11 bankruptcy proceeding. The modification reduced the interest rate on the Triton Loan, extended the maturity date from November 1994 to April 1997 and modified the mandatory payment (margin call) provisions and the Stockholder Agreement between Actava and Triton, as described in the Notes to the Consolidated Financial Statements. As modified, the Triton Loan provided for quarterly payments of interest only with no scheduled principal payments due until final maturity in April 1997. In December 1993, Triton and Actava entered into a further amendment to the Loan Agreement pursuant to which Triton made a principal payment of $5.0 million plus accrued interest on the Triton Loan, reducing the loan balance to approximately $26.7 million. In addition, the December 1993 amendment provided for quarterly principal payments of $1.25 million commencing March 31, 1994 and modified the mandatory payment (margin call) provisions of the loan, as described in the Notes to Consolidated Financial Statements. Triton has announced that it is seeking to make arrangements to prepay the remaining balance of approximately $26.7 million due under the Triton Loan and has obtained a bank commitment, subject to certain conditions, that would enable Triton to prepay its obligations in full. Triton has also announced, however, that it may seek to impose additional requirements on Actava as a condition to Triton's repayment of the loan. On December 31, 1993, the Company, excluding its subsidiaries and Snapper, had $9.3 million of unrestricted cash and short-term investments. The Company's subsidiaries, excluding Qualex, had unused borrowing capacity of approximately $36.5 million at December 31, 1993 under credit agreements secured by assets such as accounts receivable and inventory. Such subsidiaries, however, are restricted by financial covenants in their credit agreements from paying the Company more than 70% of their net income as dividends. Qualex is subject to similar restrictions under its credit agreements. In addition, Qualex is subject 18 20 to the Change of Control provisions in the Shareholders Agreement between the Company and Kodak. These Change of Control provisions could have the effect of eliminating the Company's ability to control the payment of dividends by Qualex. During 1994, the Company will be entitled, under these covenants, to receive approximately $8.8 million in cash dividends from its subsidiaries, including Qualex and Snapper, based on their earnings in 1993 plus an additional dividend of approximately $4.7 million from Qualex pursuant to a waiver of the dividend restrictions by the lender to Qualex. These subsidiary dividends are usually paid in the first three months of the year. The Company uses its existing cash and short-term investments, as well as dividends from its subsidiaries and payments on the Triton Loan, to provide for items such as operating expense payments, debt service, and dividend payments to shareholders. On March 3, 1994, the Company announced it was suspending dividend payments to shareholders, which will result in approximately $6.3 million of cash savings in 1994. The Company, excluding its subsidiaries and Snapper, has debt service payments scheduled in 1994 of approximately $21.3 million, and the Company anticipates that its total cash needs in 1994 will exceed the anticipated amount of additional cash to be received by the Company, including dividends from its subsidiaries. As a result, if the Company does not receive additional cash through either a refinancing, the repayment of the Triton Loan or the realization of value from the sale or partial sale of one of its operating entities, the Company will end 1994 with less unrestricted cash and short-term investments than it held at the end of 1993. The amended credit agreements (SEE "NOTES PAYABLE AND LONG-TERM DEBT" IN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS), with Snapper and one of the Company's sporting goods subsidiaries contain financial covenants (involving tangible net worth, book net worth and other matters) which the Company must comply with to prevent a default. A default under these credit agreements would have serious adverse consequences, including the elimination of funding for the operations of Snapper and the sporting goods company, as well as the prohibition on payment of any dividends to the Company by these businesses. As a result of the net loss for 1993, it was necessary for the Company to obtain financial covenant amendments from the lenders in order for the Company to be in compliance with these covenants at December 31, 1993. Management expects the Company to remain in compliance with these covenants, as amended, for the first and second quarters of 1994 and thereafter if certain events take place, including increased earnings. Management expects that the Company would continue to be in compliance after the second quarter of 1994 without regard to increased earnings if the $26.7 million Triton Loan is repaid because the Triton Loan is excluded for purposes of determining compliance with certain covenants in the credit agreements. If existing cash, dividends from subsidiaries and payments on the Triton Loan are not sufficient to meet its cash requirements, the Company will seek to generate additional cash by selling or pledging certain assets, and will consider additional options to reduce its cash expenditures. OTHER ITEMS On March 28, 1991, the Qualex Shareholders Agreement between Actava and Eastman Kodak Company was amended. The amendment stipulates that a change of control of Actava, as defined in the Shareholders' Agreement ("Change of Control"), occurred on February 6, 1991. However, in the amendment, Kodak waived its Change of Control rights under the Shareholders' Agreement with respect to the February 6, 1991 Change of Control. Kodak may withdraw its waiver and enforce its rights under the agreement as of each March 1, by providing Actava with 30 days written notice. Kodak did not give the notice required to exercise its Change of Control rights on March 1, 1994. The amendment also provides that the Board of Directors of Qualex would be increased to nine members, comprised of five representatives of Actava, three representatives of Kodak and the chief executive officer of Qualex. Since the formation of Qualex in March, 1988, Actava has consolidated the accounts of Qualex as Actava has a controlling interest in the entity. Actava's controlling interest includes ownership of 51% of the voting securities of Qualex and majority representation on Qualex's Board of Directors. SEE "PHOTOFINISHING TRANSACTION" IN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. While the March, 1991 amendment does not change Actava's controlling interest in Qualex, if Kodak were to withdraw its waiver, or if an additional Change of Control of Actava were to occur, the Shareholders' Agreement, as amended, provides for the redemption of certain of Qualex's preferred stock, including the voting preferred stock owned by Actava. Upon 19 21 redemption, Actava would own 50% of the voting securities of Qualex. While Actava's voting stock would be reduced from 51% to 50%, this change would not alter Actava's and Kodak's current equal interest in the equity, earnings and cash dividends of Qualex. In addition, the Board of Directors of Qualex would be composed of 11 members, comprised of five representatives of Actava, five representatives of Kodak and the chief executive officer of Qualex and all actions of the board would require the affirmative vote of at least seven board members. In the event these changes were to occur, Actava may possibly be deemed to no longer control Qualex and Actava would no longer be in a position to unilaterally control, among other things, the declaration of dividends to Actava and Kodak by Qualex as the declaration would require the concurrence of Kodak. If Actava were deemed in the future to no longer be in control of Qualex, Actava would cease to consolidate the accounts of Qualex. In that event, Actava would account for its ownership of Qualex using the equity method of accounting. Such a development would not affect the net income and shareholders' equity of Actava. However, Actava's consolidated total assets, liabilities, sales and costs and expenses would be reduced as they would no longer include specific accounts of Qualex. If Actava had accounted for Qualex using the equity method during all of 1993, Actava's total assets and liabilities at December 31, 1993 would have been $696.4 million and $500.5 million, respectively, and sales and total costs and expenses would have been $465.8 million and $519.0 million, respectively. Actava's manufacturing and processing plants are subject to federal, state and local pollution laws and regulations. Compliance with such laws and regulations has not, and is not expected to, materially affect Actava's competitive position. Actava's capital expenditures for environmental control facilities and incremental operating costs in connection therewith were not material in 1993, and are not expected to be material in future years for compliance in regard to its 1993 facilities. The Company is involved in various environmental matters including clean-up efforts at landfill or refuse sites and groundwater contamination. The Company's participation in three existing superfund sites has been quantified and its remaining exposure is estimated to be less than $300,000 for all three sites. The Company is participating with the Federal and Ohio Environmental Protection Agencies in initial investigations of a potential environmental contamination site involving a divested subsidiary. DP is also complying with various requirements under a compliance order under the Resource Conservation Recovery Act as administered by the State of Alabama. Upon the acquisition of DP, a reserve of approximately $1.5 million was established for expected clean-up costs. 20 22 OTHER SEGMENT DATA THE ACTAVA GROUP INC. AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, -------------------------------- 1993 1992 1991 -------- -------- -------- (IN MILLIONS) ASSETS Photofinishing............................................... $ 778.2 $ 787.8 $ 702.2 Lawn and Garden.............................................. 230.7 236.8 186.3 Sporting Goods............................................... 165.7 47.2 45.3 -------- -------- -------- Segments.................................................. 1,174.6 1,071.8 933.8 Corporate(a).............................................. 100.5 146.1 155.8 -------- -------- -------- Total................................................ $1,275.1 $1,217.9 $1,089.6 -------- -------- -------- -------- -------- -------- DEPRECIATION AND AMORTIZATION Photofinishing............................................... $ 58.3 $ 50.3 $ 35.7 Lawn and Garden.............................................. 8.9 8.1 7.6 Sporting Goods............................................... 3.1 .4 .4 -------- -------- -------- Segments.................................................. 70.3 58.8 43.7 Corporate................................................. .1 .2 .3 -------- -------- -------- Total................................................ $ 70.4 $ 59.0 $ 44.0 -------- -------- -------- -------- -------- -------- CAPITAL EXPENDITURES Photofinishing............................................... $ 43.9 $ 68.5 $ 45.5 Lawn and Garden.............................................. 6.4 13.0 13.7 Sporting Goods............................................... .3 .2 .2 -------- -------- -------- Segments.................................................. 50.6 81.7 59.4 Corporate................................................. -- .1 .1 -------- -------- -------- Total................................................ $ 50.6 $ 81.8 $ 59.5 -------- -------- -------- -------- -------- --------
- --------------- (a) Corporate assets consist primarily of short-term investments, land, notes receivable and certain property and equipment. ACCOUNTING PRINCIPLE DEVELOPMENTS The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Actava adopted the new method of accounting for income taxes on January 1, 1993. Statement No. 109 affects the manner and rates at which deferred income taxes are reflected on the balance sheet and therefore, possibly the amount of taxes reflected in the statement of operations. The adoption of Statement No. 109 did not result in a significant impact to net income when reported as the cumulative effect of a change in accounting principle in the first quarter of 1993. SEE "SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- INCOME TAXES" IN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." Statement No. 106 requires the cost of postretirement benefits to be recognized in the financial statements over an employee's active working career. Actava adopted the new method of accounting for these benefits on January 1, 1993. The adoption of Statement No. 106 resulted in a $4.4 million charge to net income and was reported as the cumulative effect of a change in accounting principle in the first quarter of 1993. SEE "SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- POSTRETIREMENT BENEFITS OTHER THAN PENSIONS" IN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. The Company and its subsidiaries provide benefits to former or inactive employees after employment, but before retirement, such as severance benefits, continuation of health care benefits and life insurance coverage. 21 23 The costs of these are currently accounted for on a pay-as-you-go (cash) basis. The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits," which requires employers to recognize the obligation to provide these benefits when certain conditions are met. The Company is required to adopt the new method of accounting for these benefits no later than January 1, 1994. The adoption of Statement No. 112 will not have a significant effect on the Company's financial position or results of operations. The Company and its subsidiaries invest in various debt and equity securities. The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which requires certain debt securities to be reported at amortized cost, certain debt and equity securities to be reported at market with current recognition of unrealized gains and losses, and certain debt and equity securities to be reported at market with unrealized gains and losses as a separate component of shareholders' equity. The Company is required to adopt the new method of accounting no later than January 1, 1994. The adoption of Statement No. 115 will not have a significant impact on the Company's financial position or results of operations. 22 24 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information required under this item is submitted as a separate section in this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None 23 25 PART III Incorporated by reference to the Proxy Statement for the 1994 annual meeting of stockholders. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a)(1) Financial Statements INDEX OF FINANCIAL STATEMENTS The following consolidated financial statements of The Actava Group Inc. and subsidiaries are included in Item 8:
PAGE ---- Report of Independent Auditors................................................ F-3 Consolidated Balance Sheets as of December 31, 1993 and 1992.................. F-4 Consolidated Statements of Operations for the years ended December 31, 1993, 1992 and 1991............................................................... F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991............................................................... F-6 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1993, 1992 and 1991..................................................... F-7 Notes to Consolidated Financial Statements -- December 31, 1993............... F-8 Summary of Quarterly Earnings and Dividends................................... F-30
(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):
PAGE ---- Schedule II -- Amounts Receivable From Related Parties and Underwriters, Promoters, and Employees Other Than Related Parties........... S-2 Schedule III -- Condensed Financial Information of The Actava Group Inc....... S-3 Schedule V -- Property, Plant and Equipment................................. S-7 Schedule VI -- Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment................................. S-8 Schedule VIII -- Valuation and Qualifying Accounts............................. S-9 Schedule IX -- Short-term Borrowings......................................... S-12 Schedule X -- Supplementary Income Statement Information.................... S-13
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. 24 26 (a)(3) Listing of Exhibits.
EXHIBITS INCORPORATED HEREIN BY REFERENCE --------------------------------------------------- DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT - --------------- ----------------------------- ----------------------------- -------------------- 3(a)(i) Restated Certificate of Incorporation of Actava 3(b)(i) Restated By-laws of Actava 4(a) Reference is made to Exhibit 3(a)(i) 4(b)(i) Indenture dated as of August Application on Form T-3 for Exhibit T3C 1, 1973, with respect to Qualification of Indenture 9 1/2% Subordinated under the Trust Indenture Act Debentures due August 1, of 1939 (File No. 22-7615) 1998, between Actava and Chemical Bank, as Trustee 4(b)(ii) Agreement among Actava, Chem- Registration Statement on Exhibit 4(d)(ii) ical Bank and Manufacturers Form S-14 (Registration No. Hanover Trust Company, dated 2-81094) as of September 26, 1980, with respect to successor trusteeship of the 9 1/2% Subordinated Debentures due August 1, 1998 4(b)(iii) Instrument of resignation, Annual Report on Form 10-K Exhibit 4(d)(iii) appointment and acceptance for the year ended December dated as of June 9, 1986 31, 1986 among Actava, Manufacturers Hanover Trust Company and Irving Trust Company, with respect to successor trustee- ship of the 9 1/2% Subordinated Debentures due August 1, 1998 4(c)(i) Indenture dated as of March Registration Statement on Exhibit 2(d) 15, 1977, with respect to Form S-7 (Registration No. 9 7/8% Senior Subordinated 2-58317) Debentures due March 15, 1997, between Actava and The Chase Manhattan Bank, N.A., as Trustee 4(c)(ii) Agreement among Actava, The Registration Statement on Exhibit 4(e)(ii) Chase Manhattan Bank, N.A. Form S-14 (Registration No. and United States Trust 2-81094) Company of New York, dated as of June 14, 1982, with respect to successor trusteeship of the 9 7/8% Senior Subordinated Debentures due March 15, 1997 4(d)(i) Indenture between National Post-Effective Amendment No. Exhibit T3C Industries, Inc. and First 1 to Application on Form T-3 National City Bank, dated for Qualification of October 1, 1974, for the 10% Indenture Under The Trust Subordinated Debentures, due Indenture Act of 1939 (File October 1, 1999 No. 22-8076)
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EXHIBITS INCORPORATED HEREIN BY REFERENCE --------------------------------------------------- DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT - --------------- ----------------------------- ----------------------------- -------------------- 4(d)(ii) Agreement among National In- Registration Statement on Exhibit 4(f)(ii) dustries, Inc., Actava, Form S-14 (Registration No. Citibank, N.A., and Marine 2-81094) Midland Bank, dated as of December 20, 1977, with respect to successor trustee- ship of the 10% Subordinated Debentures due October 1, 1999 4(d)(iii) First Supplemental Indenture Registration Statement on Exhibit 2(q) among Actava, National Indus- Form S-7 (Registration No. tries, Inc. and Marine 2-60566) Midland Bank, dated January 3, 1978, supplemental to the Indenture dated October 1, 1974 between National and First National City Bank for the 10% Subordinated Debentures due October 1, 1999 4(e) Public Bond Issue Agreement Annual Report on Form 10-K Exhibit 4(h) dated February 19, 1986, with for the year ended December respect to 6% Senior 31, 1985 Subordinated Swiss Franc Bonds due March 6, 1996, among Actava, Soditic S.A. and certain other institutions named therein 4(f) Indenture dated as of August Annual Report on Form 10-K Exhibit 4(i) 1, 1987 with respect to for the year ended December 6 1/2% Convertible 31, 1987 Subordinated Debentures due August 4, 2002, between Ac- tava and Chemical Bank, as Trustee 4(g) Loan and Security Agreement, Amendment No. 1 to Registra- Exhibit 4(i) dated as of April 30, 1992, tion Statement on Form S-3 with respect to $35 million (Registration No. 33-48202) secured revolving credit facility, among Actava, certain of its subsidiaries and Barclays Business Credit, Inc. 4(h) Senior Note Agreement, dated Amendment No. 1 to Registra- Exhibit 4(j) as of June 8, 1992, with tion Statement on Form S-3 respect to private placement (Registration No. 33-48202) of $200 million of Senior Notes due 1997, 1999 and 2002, among Qualex Inc. and the purchasers listed therein.
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EXHIBITS INCORPORATED HEREIN BY REFERENCE --------------------------------------------------- DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT - --------------- ----------------------------- ----------------------------- -------------------- 4(i) Credit Agreement, dated as of October 30, 1992, with respect to a $115 million revolving credit facility, among Qualex Inc. and the eight participants thereto. A copy of this agreement is not filed as the debt does not exceed 10% of the total assets of total assets of registrant; however, registrant hereby agrees to furnish a copy of such agreement to the Commission upon request. 4(j)(i) Finance and Security Agreement, dated as of October 30, 1992, with respect to a revolving credit facility of up to $100 million, between Actava Industries, Inc. and ITT Commercial Finance Corp. A copy of this agreement is not filed as the debt does not exceed 10% of the total assets of registrant; how- ever, registrant hereby agrees to furnish a copy of such agreement to the Commission upon request. 4(j)(ii) Amendment, dated as of March 29, 1994, to Finance and Security Agreement, dated as of October 30, 1992, with respect to a revolving credit facility of up to $100 million, between Actava In- dustries, Inc. and ITT Commercial Finance Corp. A copy of this agreement is not filed as the debt does not exceed 10% of the total assets of registrant; however, registrant hereby agrees to furnish a copy of such agreement to the Commission upon request. 4(k) Loan and Security Agreement, dated as of December 29, 1992, with respect to a revolving credit facility of up to $35 million between Nelson/Weather-Rite, Inc. and BA Business Credit, Inc. A copy of this agreement is not filed as the debt does not exceed 10% of the total assets of registrant; how- ever, registrant hereby agrees to furnish a copy of such agreement to the Commission upon request.
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EXHIBITS INCORPORATED HEREIN BY REFERENCE --------------------------------------------------- DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT - --------------- ----------------------------- ----------------------------- -------------------- 4(l)(i) Finance and Security Agreement, dated as of December 15, 1993, with respect to a revolving credit facility of up to $50 million, between Diversified Products Corporation and ITT Commercial Finance Corp. and the Provident Bank. A copy of this agreement is not filed as the debt does not exceed 10% of the total assets of registrant; however, registrant hereby agrees to furnish a copy of such agreement to the commission upon request. 4(l)(ii) Amendment, dated as of March 29, 1994, to Finance and Security Agreement, dated as of December 15, 1993, with respect to a revolving credit facility of up to $50 million, between Diversified Products Corporation and ITT Commercial Finance Corp. and the Provident Bank. A copy of this agreement is not filed as the debt does not exceed 10% of the total assets of registrant; however, regis- trant hereby agrees to furnish a copy of such agreement to the commission upon request. 4(m) Revolving Loan and Security Agreement, dated as of April 29, 1993, with respect to a revolving credit facility of up to $10 million between Willow Hosiery Company, Inc. and Sterling National Bank and Trust Company of New York. A copy of this agreement is not filed as the debt does not exceed 10% of the total assets of registrant; however, registrant hereby agrees to furnish a copy of such agreement to the Commission upon request.
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EXHIBITS INCORPORATED HEREIN BY REFERENCE --------------------------------------------------- DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT - --------------- ----------------------------- ----------------------------- -------------------- 4(n) Amended and Restated $5 Million Revolving Note, Amended and Restated $3 Million Letter of Credit Note, and First Amendment to the Revolving Loan Agreement dated as of August 31, 1993, and Revolving Loan Agreement dated as of August 24, 1992, between Hutch Sports USA Inc. and the Fifth Third Bank. Copies of these agreements are not filed as the debt does not exceed 10% of the total assets of the registrant; however, registrant hereby agrees to furnish copies of such agree- ments to the Commission upon request. 10(a)(i) 1982 Stock Option Plan of Proxy Statement dated March Exhibit A Actava 31, 1982 10(a)(ii) 1989 Stock Option Plan of Proxy Statement dated March Exhibit A Actava 31, 1989 10(a)(iii) 1969 Restricted Stock Plan of Annual Report on Form 10-K Exhibit 10(a)(iii) Actava for the year ended December 31, 1990 10(a)(iv) 1991 Non-Employee Director Annual Report on Form 10-K Exhibit 10(a)(iv) Stock Option Plan for the year ended December 31, 1991 10(a)(v) Amendment to 1991 Non-Em- Annual Report on Form 10-K Exhibit 10(a)(v) ployee Director Stock Option for the year ended December Plan 31, 1992 10(b) Form of Severance Agreement Annual Report on Form 10-K Exhibit 10(c) between officers of Actava for the year ended December and Actava dated May 20, 1985 31, 1985 10(c) Snapper Power Equipment Annual Report on Form 10-K Exhibit 10(c) Profit Sharing Plan for the year ended December 31, 1987 10(f)(iii) Termination Agreement between Annual Report on Form 10-K Exhibit 10(f)(iii) J. B. Fuqua and Actava dated for the year ended December March 18, 1991 31, 1990 10(h)(i) Retirement Plan executed No- Annual Report on Form 10-K Exhibit 10(h)(i) vember 1, 1990 as amended to for the year ended December be effective January 1, 1989 31, 1990 10(h)(ii) Supplemental Retirement Plan Annual Report on Form 10-K Exhibit 10(j) of Actava for the year ended December 31, 1983 10(h)(iii) Supplemental Executive Annual Report on Form 10-K Exhibit 10(h)(iii) Medical Reimbursement Plan for the year ended December 31, 1990
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EXHIBITS INCORPORATED HEREIN BY REFERENCE --------------------------------------------------- DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT - --------------- ----------------------------- ----------------------------- -------------------- 10(h)(iv) Amendment to Supplemental Re- Annual Report on Form 10-K Exhibit 10(h)(iv) tirement Plan of Actava for the year ended December effective April 1, 1992 31, 1991 10(i)(i) Shareholders' Agreement dated Annual Report on Form 10-K Exhibit 10(j) as of December 7, 1987 by and for the year ended December between Eastman Kodak Company 1, 1987 and Actava 10(i)(ii) Amendment No. 1, dated as of Current Report on Form 8-K Exhibit 2(b) March 29, 1988 to the dated April 12, 1988 Shareholders' Agreement dated as of June 7, 1987 between Eastman Kodak Company and Actava 10(i)(iii) Amendment No. 2, dated as of Annual Report on Form 10-K Exhibit 10(i)(iii) March 28, 1991 to the for the year ended December Shareholders' Agreement dated 31, 1990 as of June 7, 1987 between Eastman Kodak Company and Actava 10(j) Stockholder Agreement dated Quarterly Report on Form 10-Q Exhibit 3 as of May 22, 1989 by and for the three months ended between Actava and Triton June 30, 1989 Group Ltd. 10(j)(ii) Loan Agreement dated Novem- Annual Report on Form 10-K Exhibit 10(j)(ii) ber 27, 1991 between Actava for the year ended December and Triton Group Ltd. 31, 1991 10(k)(i) Form of Post Employment Con- Annual Report of Form 10-K Exhibit 10(k) sulting Agreement between of- for the year ended December ficers of Actava and Actava 31, 1991 10(k)(ii) Form of First Amendment to Post-employment Consulting Agreement between officers of Actava and Actava 10(l) 1992 Officer and Director Annual Report on Form 10-K Exhibit 10(l) Stock Purchase Plan for the year ended December 31, 1991 10(m) Director Group Medical Plan Annual Report on Form 10-K Exhibit 10(m) for the year ended December 31, 1991 10(n) Form of Restricted Stock Annual Report on Form 10-K Exhibit 10(n) Purchase Agreement between for the year ended December certain officers of Actava 31, 1991 and Actava 10(o) Incentive Bonuses for Certain Annual Report on Form 10-K Exhibit 10(o) Corporate Officers for the year ended December 31, 1991 10(p)(i) Forbearance Agreement dated Amendment No. 1 Registration Exhibit 10(o) June 30, 1992 between Actava, Statement on Form S-3 (Regis- Triton Group Ltd. and tration No. 33-48202) Intermark, Inc.
30 32
EXHIBITS INCORPORATED HEREIN BY REFERENCE --------------------------------------------------- DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT - --------------- ----------------------------- ----------------------------- -------------------- 10(p)(ii) Amendment, dated July 13, Quarterly Report on Form 10-Q Exhibit 5 1992, to Forbearance for the three months ended Agreement dated June 30, 1992 June 30, 1992 between Actava, Triton Group Ltd. and Intermark, Inc. 10(p)(iii) Amendment, dated July 30, Quarterly Report on Form 10-Q Exhibit 6 1992, to Forbearance for the three months ended Agreement dated June 30, 1992 June 30, 1992 between Actava, Triton Group Ltd. and Intermark, Inc., as amended by Amendment to Forbearance Agreement dated July 13, 1992. 10(p)(iv) Amendment, dated September Quarterly Report on Form 10-Q Exhibit 4 23, 1992, to Forbearance for the three months ended Agreement dated June 30, 1992 September 30, 1992 between Actava Industries, Inc., Triton Group Ltd. and Intermark, Inc., as amended by Amendments to Forbearance Agreement dated July 13, 1992 and July 30, 1992. 10(p)(v) Amendment, dated October 7, Quarterly Report on Form 10-Q Exhibit 5 1992, to Forbearance for the three months ended Agreement dated June 30, 1992 September 30, 1992 between Actava Industries, Inc., Triton Group Ltd. and Intermark, Inc., as amended by Amendments to Forbearance Agreement dated July 13, July 30, and September 23, 1992. 10(q) Agreement between The Actava Annual Report on Form 10-K Exhibit 10(q) Group Inc. and J.B. Fuqua for the year ended December regarding sale by The Actava 31, 1992 Group, Inc. of rights in the name "Actava". 10(r) Amended and Restated Loan Quarterly report on Form 10-Q Exhibit 19 Agreement between The Actava for the three months ended Group Inc. and Triton Group June 30, 1993. Ltd. dated June 25, 1993. 10(s) First Amendment, dated Au- Quarterly Report on Form 10-Q Exhibit 19 gust 19, 1993 to Amended and for the three months ended Restated Loan Agreement be- September 30, 1993 tween The Actava Group Inc. and Triton Group Ltd. dated June 5, 1993 10(t) Second Amendment, dated De- cember 7, 1993 to Amendment and Restated Loan Agreement between The Actava Group Inc. and Triton Group Ltd. dated June 25, 1993
31 33
EXHIBITS INCORPORATED HEREIN BY REFERENCE --------------------------------------------------- DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT - --------------- ----------------------------- ----------------------------- -------------------- 10(u) Form of Indemnification Agreement between Actava and each of its directors and executive officers 10(v) 1993 Incentive Bonus Plan for Confidential Treatment Re- certain corporate officers quested by the Company. Filed separately with the Commission. 11 Statement of computation of earnings per share 18 Letter regarding change in Annual Report on Form 10-K Exhibit 18 accounting principle for the for the year ended December costs associated with proof 31, 1992 advertising program. 22 Subsidiaries of Actava 23 Consent of Ernst & Young 24 Powers-of-Attorney
- --------------- (b) Reports on Form 8-K filed in the fourth quarter of 1993: None. (c) The response to this portion of Item 14 is submitted as a separate section in this report. (d) The response to this portion of Item 14 is submitted as a separate section in this report. 32 34 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE ACTAVA GROUP INC. By: /s/ FREDERICK B. BEILSTEIN, III -------------------------------- Frederick B. Beilstein, III Senior Vice President and Chief Financial Officer Dated: March 31, 1994 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant ad in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - --------------------------------------------- ------------------------------- --------------- /s/ CHARLES R. SCOTT President and Chief Executive March 31, 1994 - --------------------------------------------- Officer and Director Charles R. Scott (Principal Executive Officer) /s/ FREDERICK B. BEILSTEIN, III Senior Vice President -- Chief March 31, 1994 - --------------------------------------------- Financial Officer (Principal Frederick B. Beilstein, III Financial and Accounting Officer) * Director March 31, 1994 - --------------------------------------------- John E. Aderhold Director March 31, 1994 - --------------------------------------------- Michael E. Cahr * Director March 31, 1994 - --------------------------------------------- J. M. Darden III * Director March 31, 1994 - --------------------------------------------- John P. Imlay, Jr. * Director March 31, 1994 - --------------------------------------------- Clark A. Johnson * Director March 31, 1994 - --------------------------------------------- Anthony F. Kopp * Director March 31, 1994 - --------------------------------------------- Richard Nevins * Director March 31, 1994 - --------------------------------------------- Carl E. Sanders *By: /s/ FREDERICK B. BEILSTEIN, III ------------------------------------ Frederick B. Beilstein, III Attorney-in-fact
33 35 THE ACTAVA GROUP INC. ANNUAL REPORT ON FORM 10-K ITEM 14(A)(1) AND (2), (C) AND (D) LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES CERTAIN EXHIBITS FINANCIAL STATEMENT SCHEDULES YEAR ENDED DECEMBER 31, 1993 F-1 36 FORM 10-K-ITEM 14(A)(1) AND (2) The Actava Group Inc. and Subsidiaries List of Financial Statements and Financial Statement Schedules The following consolidated financial statements of The Actava Group Inc. and subsidiaries are included in Item 8: Consolidated balance sheets -- December 31, 1993 and 1992 Consolidated statements of operations -- Years ended December 31, 1993, 1992 and 1991 Consolidated statements of cash flows -- Years ended December 31, 1993, 1992 and 1991 Consolidated statements of stockholders' equity -- Years ended December 31, 1993, 1992 and 1991 Notes to consolidated financial statements -- December 31, 1993 The following consolidated financial statement schedules of The Actava Group Inc. and subsidiaries are included in Item 14(d) Schedule II -- Amounts receivable from related parties and underwriters, promoters, and employees other than related parties Schedule III -- Condensed financial information of registrant Schedule V -- Property, plant and equipment Schedule VI -- Accumulated depreciation, depletion, and amortization of property, plant and equipment Schedule VIII -- Valuation and qualifying accounts Schedule IX -- Short-term borrowings Schedule X -- Supplementary income statement information
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 37 REPORT OF INDEPENDENT AUDITORS To The Stockholders The Actava Group Inc. We have audited the accompanying consolidated balance sheets of The Actava Group Inc. and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1993. Our audits also included the financial statement schedules listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Actava Group Inc. and subsidiaries at December 31, 1993 and 1992, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. As discussed in the notes to consolidated financial statements, in 1993 Actava changed its method of accounting for income taxes and postretirement benefits, and in 1992 Actava changed its method of accounting for the cost of its proof advertising program. ERNST & YOUNG Atlanta, Georgia March 3, 1994, except for the Notes Payable and Long-Term Debt Note as to which the date is March 29, 1994 F-3 38 THE ACTAVA GROUP INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31, ----------------------- 1993 1992 ---------- ---------- (IN THOUSANDS) ASSETS Current Assets Cash.......................................................................... $ 18,770 $ 20,792 Short-term investments........................................................ 29,635 63,842 Receivables (less allowance for doubtful accounts of $10,227 in 1993 and $12,805 in 1992)............................................................ 276,018 243,368 Inventories................................................................... 108,439 63,987 Prepaid expenses.............................................................. 43,809 38,365 Income tax benefits........................................................... 32,434 45,790 ---------- ---------- Total Current Assets................................................... 509,105 476,144 Property, Plant and Equipment Land.......................................................................... 8,303 8,700 Buildings and improvements.................................................... 72,289 57,490 Machinery and equipment....................................................... 393,643 343,140 ---------- ---------- 474,235 409,330 Less allowances for depreciation.............................................. (198,881) (165,720) ---------- ---------- Total Property, Plant and Equipment.................................... 275,354 243,610 Notes Receivable from Triton Group Ltd.......................................... 26,726 31,726 Other Assets (less allowance for doubtful notes and accounts of $3,988 in 1993 and $3,104 in 1992)........................................................... 50,702 45,754 Long-term investments........................................................... 26,611 24,719 Intangibles (less accumulated amortization of $88,281 in 1993 and $65,219 in 1992)......................................................................... 386,626 395,913 ---------- ---------- Total Assets........................................................... $1,275,124 $1,217,866 ---------- ---------- ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable.............................................................. $ 86,163 $ 69,665 Accrued expenses and other current liabilities................................ 177,720 160,810 Notes payable................................................................. 135,114 64,795 Current portion of long-term debt............................................. 6,665 10,013 ---------- ---------- Total Current Liabilities.............................................. 405,662 305,283 Deferred Income Taxes........................................................... 56,715 53,431 Long-Term Debt.................................................................. 220,887 220,357 Subordinated Debt............................................................... 190,551 193,566 Minority Interest in Photofinishing Subsidiary.................................. 205,395 205,382 Stockholders' Equity Common Stock (22,767,744 shares in 1993 and 1992)............................. 22,768 22,768 Additional capital............................................................ 37,056 46,362 Retained earnings............................................................. 236,334 292,266 Less treasury stock -- at cost (5,132,558 shares in 1993 and 6,223,467 shares in 1992).................................................................... (100,244) (121,549) ---------- ---------- Total Stockholders' Equity............................................. 195,914 239,847 ---------- ---------- Contingent Liabilities and Commitments Total Liabilities and Stockholders' Equity............................. $1,275,124 $1,217,866 ---------- ---------- ---------- ----------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. F-4 39 THE ACTAVA GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, ------------------------------------ 1993 1992 1991 ---------- ---------- -------- (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) Net sales................................................. $1,241,111 $1,148,743 $924,635 Costs, expenses and other costs of products sold (includes $219,825 in 1993, $202,360 in 1992 and $172,652 in 1991 purchased from Eastman Kodak Company)................... 957,440 812,932 669,129 Selling, general and administrative....................... 246,465 260,256 259,904 Interest expense.......................................... 43,299 33,454 23,534 Provision for doubtful accounts........................... 7,262 3,419 5,485 Other (income) expense-net................................ 2,915 (6,099) (3,537) Provision for plant relocations and consolidations........ 3,231 -- 18,969 Provision for employee agreements and related costs....... -- -- 6,839 ---------- ---------- -------- Total costs, expenses and other........................... 1,260,612 1,103,962 980,323 Income (Loss) before Income Taxes, Minority Interest and Cumulative Effect of Change in Accounting Principle............................................ (19,501) 44,781 (55,688) Income tax expense (benefit).............................. 15,163 23,328 (10,033) ---------- ---------- -------- Income (Loss) before Minority Interest and Cumulative Effect of Change in Accounting Principle............. (34,664) 21,453 (45,655) Minority interest......................................... (8,526) (10,888) (5,166) ---------- ---------- -------- Income (Loss) before Cumulative Effect of Change in Accounting Principle................................. (43,190) 10,565 (50,821) Cumulative effect of change in accounting principle....... (4,404) 1,034 -- ---------- ---------- -------- Net Income (Loss)....................................... $ (47,594) $ 11,599 $(50,821) ---------- ---------- -------- ---------- ---------- -------- Earnings (Loss) Per Share of Common Stock Primary Continuing operations..................................... $ (2.52) $ .64 $ (3.08) Cumulative effect of change in accounting principle....... (.25) .06 -- ---------- ---------- -------- Net Income (Loss)......................................... $ (2.77) $ .70 $ (3.08) ---------- ---------- -------- ---------- ---------- -------- Pro forma Effect Assuming the Changes in Accounting Principles are Applied Retroactively: Net Income (Loss)......................................... $ (43,190) $ 10,565 $(50,667) ---------- ---------- -------- ---------- ---------- -------- Net Income (Loss) Per Share............................... $ (2.77) $ .64 $ (3.07) ---------- ---------- -------- ---------- ---------- --------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. F-5 40 THE ACTAVA GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, -------------------------------- 1993 1992 1991 -------- --------- --------- (IN THOUSANDS) INCREASE (DECREASE) IN CASH Cash Flows from Operating Activities: Net Income (Loss)............................................ $(47,594) $ 11,599 $ (50,821) Cumulative effect of change in accounting principle.......... (4,404) 1,034 -- -------- --------- --------- Income (loss) before cumulative effect of change in accounting principle....................................... (43,190) 10,565 (50,821) Items providing cash from operating activities............... 30,243 13,714 95,965 -------- --------- --------- Net Cash Provided (Used) by Operating Activities............. (12,947) 24,279 45,144 -------- --------- --------- Cash Flows from Investing Activities: Purchases of investments (maturities over 90 days)........... (99,510) (99,198) (288,996) Sales of investments (maturities over 90 days)............... 111,851 107,932 284,980 Net sales of other investments............................... 21,866 6,143 50,739 Purchase of long-term investments............................ -- (24,719) -- Payments for property, plant and equipment................... (55,554) (81,800) (59,499) Proceeds from disposals of property, plant and equipment..... 16,024 10,230 6,018 Payments for purchases of businesses......................... (9,415) (30,560) (90,019) Loans to Triton Group Ltd.................................... 5,000 (1,426) (30,300) Other investing activities -- net............................ (15,221) (3,604) 5,801 -------- --------- --------- Net Cash Used by Investing Activities........................ (24,959) (117,002) (121,276) -------- --------- --------- Cash Flows from Financing Activities: Net borrowings (payments) under short-term bank agreements... 52,284 51,107 (4,013) Borrowings under long-term debt agreements................... 21,503 817,000 774,740 Payments on long-term debt agreements........................ (21,192) (771,136) (653,895) Payments of subordinated debt................................ (1,847) (200) (5,824) Proceeds from issuance of Actava Common Stock................ -- 365 Cash dividends paid by Qualex to minority interest........... (8,614) (3,886) (5,884) Cash dividends paid by Actava................................ (6,250) (5,956) (5,947) -------- --------- --------- Net Cash Provided by Financing Activities.................. 35,884 86,929 99,542 -------- --------- --------- Increase (Decrease) in Cash............................. (2,022) (5,794) 23,410 Cash at beginning of year.................................... 20,792 26,586 3,176 -------- --------- --------- Cash at End of Year..................................... $ 18,770 $ 20,792 $ 26,586 -------- --------- --------- -------- --------- ---------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. F-6 41 THE ACTAVA GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
COMMON STOCK TREASURY STOCK ---------------- ADDITIONAL RETAINED ------------------ SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT TOTAL ------ ------- ---------- -------- ------ --------- -------- (IN THOUSANDS) Balance -- January 1, 1991........................ 22,768 $22,768 $ 46,276 $344,622 6,254 $(122,136) $291,530 Net (loss) for the year......................... (50,821) (50,821) Cash dividends on Common Stock, $.36 per share......................................... (5,947) (5,947) Common Stock issued under employee stock options....................................... (220) (30) 585 365 Common Stock purchased and other................ 306 (2) 304 ------ ------- ---------- -------- ------ --------- -------- Balance -- December 31, 1991...................... 22,768 22,768 46,362 287,854 6,224 (121,553) 235,431 Net income for the year......................... 11,599 11,599 Cash dividends on Common Stock, $.36 per share......................................... (5,956) (5,956) Common Stock issued under employee stock options....................................... (1) 4 4 Other, principally foreign currency translation adjustment.................................... (1,231) (1,231) ------ ------- ---------- -------- ------ --------- -------- Balance -- December 31, 1992...................... 22,768 22,768 46,362 292,266 6,223 (121,549) 239,847 Net income for the year......................... (47,594) (47,594) Cash dividends on Common Stock, $.36 per share......................................... (6,250) (6,250) Common Stock issued from Treasury............... (9,305) (1,090) 21,305 12,000 Other, principally foreign currency translation adjustment.................................... (1) (2,088) (2,089) ------ ------- ---------- -------- ------ --------- -------- Balance -- December 31, 1993...................... 22,768 $22,768 $ 37,056 $236,334 5,133 $(100,244) $195,914 ------ ------- ---------- -------- ------ --------- -------- ------ ------- ---------- -------- ------ --------- --------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. F-7 42 THE ACTAVA GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of Actava and its majority-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation. Accounting Changes Change in Method of Accounting for Certain Advertising Costs Effective January 1, 1992, Qualex changed its method of accounting for the cost of its proof advertising program to recognize these costs at the time the advertising is placed by the customer. Under the proof advertising program, Qualex reimburses certain advertising costs incurred by its customers up to a percentage of sales to that customer. Qualex previously accrued such costs at the time of the initial sale. Qualex believes that this new method is preferable because it recognizes advertising expense as it is incurred rather than at the time of the initial sale to the customer. The 1992 adjustment of $1,034,000, net of income taxes of $1,437,000 and minority interest of $1,033,000, was included in income for 1992 to apply retroactively the new method. The 1992 adjustment before income taxes and minority interest was $3,504,000. The pro forma amounts presented in the consolidated statements of operations for 1992 and 1991 reflect the effect of the retroactive application of applying the new method and related taxes and minority interest. Change in Method of Accounting for Income Taxes Effective January 1, 1993, the Company adopted FASB Statement No. 109, "Accounting for Income Taxes." Under Statement 109, the liability method is used in accounting for income taxes: deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Prior to the adoption of Statement 109, income tax expense was determined using the deferred method: deferred tax expense was based on items of income and expense that were reported in different years in the financial statements and tax returns and were measured at the tax rate in effect in the year the difference originated. As permitted by Statement 109, the Company has elected not to restate the financial statements of any prior years. The presentation of some items, such as depreciation, has changed; however, the cumulative effect of the change in accounting principle on pre-tax income from continuing operations, net income and financial position was not material. Change in Method of Accounting for Postretirement Benefits Effective January 1, 1993, the Company adopted FASB Statement No. 106, "Accounting for Postretirement Benefits Other Than Pensions." The Company and its subsidiaries provide group medical plans and life insurance coverage for certain employees subsequent to retirement. The plans have been funded on a pay-as-you-go (cash) basis. The plans are contributory, with retiree contributions adjusted annually, and contain other cost-sharing features such as deductibles, coinsurance and life-time maximums. The plan accounting anticipates future cost-sharing changes that are consistent with the Company's expressed intent to increase the retiree contribution rate annually for the expected medical trend rate for that year. The Company funds the excess of the cost of benefits under the plans over the participants' contributions as the costs are incurred. The coordination of benefits with medicare uses a supplemental, or exclusion of benefits, approach. As permitted by Statement 106, the Company elected to immediately recognize the effect in the statement of operations for the first quarter of 1993 as a $4,404,000 charge to net income as the cumulative effect of a change in accounting principle. The annual net periodic postretirement benefit expense for 1993 decreased by $38,000 as a result of adopting the new rules. Postretirement benefit expense for 1992 and 1991, F-8 43 THE ACTAVA GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) recorded on a cash basis, has not been restated. The pro forma amounts presented in the consolidated statements of operations reflect no effect of the retroactive application of applying the new method as it is not material. The assumed health care cost trend rate used to measure the expected cost of benefits covered by the plan for 1993 is 14%. This trend rate is assumed to decrease in 1% decrements to 6% in 2001 and years thereafter. A 7% discount rate per year, compounded annually, was assumed to measure the accumulated postretirement benefit obligation as of December 31, 1993, as compared to 9% for January 1, 1993. A 1% increase in the assumed health care cost trend rate would increase the accumulated postretirement benefit obligations as of December 31, 1993, by 16% and the net periodic postretirement benefit cost by 18%. The following table presents the plans' funded status reconciled with amounts recognized in the Company's consolidated balance sheet:
DECEMBER 31, ------------------- 1993 1992 ------- ------- (IN THOUSANDS) Accumulated postretirement benefit obligation: Retirees....................................................... $(1,094) $ (990) Fully eligible active plan participants........................ (788) (932) Other active plan participants................................. (1,149) (2,482) ------- ------- (3,031) (4,404) Plan assets...................................................... -- -- ------- ------- Accumulated postretirement benefit obligation in excess of plan assets......................................................... (3,031) (4,404) Unrecognized prior service cost.................................. (1,995) -- Unrecognized net (gain) or loss.................................. 544 -- Unrecognized transition obligation............................... -- 4,404 ------- ------- Accrued postretirement benefit cost.............................. $(4,482) $ -- ------- ------- ------- -------
Net periodic postretirement benefit cost includes the following components:
1993 1992 ------- ------- (IN THOUSANDS) Service cost..................................................... $ 96 $ -- Interest cost.................................................... 296 -- Amortization of unrecognized prior service cost.................. (154) -- Cash basis expense............................................... -- 102 ------- ------- $ 238 $ 102 ------- ------- ------- -------
Change in Accounting Estimate During 1993, Snapper revised its estimate of accrued product warranty expense to reflect an increase in the amount of future warranty expense to be incurred due to increased warranty claims. This change in accounting estimate resulted in an additional $4,000,000 charge to net income in 1993. Short-Term Investments Short-term investments which are classified as current assets are carried at the lower of aggregate cost or market value. These investments consist of interest bearing obligations and other obligations whose return is based upon market rates of interest. There is no significant concentration of short-term investments in any single issuer. F-9 44 THE ACTAVA GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Marketable equity securities which are classified as long-term investments are carried at the lower of aggregate cost or market value. Marketable debt securities which are classified as long-term investments are carried at cost which approximates market value. Market values for these securities are based on quoted market prices. Interest income is accrued as earned, while dividend income is recorded on the exdividend date. The cost of marketable securities sold is determined on the specific identification method and realized gains and losses are reflected in income. Inventories Inventories of finished goods, work in process and raw materials are stated at the lower of cost or market. The Last-In, First-Out (LIFO) method of determining cost is used for a substantial portion of these inventories. Property, Plant and Equipment Property, plant and equipment are recorded at cost and are depreciated over their expected useful lives. Generally, depreciation is provided on the straight-line method for financial reporting purposes and on accelerated methods for tax purposes. Amortization associated with capitalized leases is included in depreciation expense. Intangibles Intangibles consist of the excess of the purchase price over the net asset of businesses acquired, customer lists and covenants not to compete. Amounts relating to the excess of the purchase price over the net assets of businesses acquired are amortized over a 40-year period using the straight-line method. Amounts relating to customer lists and covenants not to compete are amortized over two to five years or the life of the agreement, respectively. Management continuously evaluates intangible assets to determine that no diminishment in value has occurred. Intangible assets are summarized as follows:
DECEMBER 31, ------------------- 1993 1992 -------- -------- (IN THOUSANDS) Excess of purchase price over net assets of businesses acquired....................................................... $349,546 $344,948 Customer lists................................................... 29,847 40,912 Covenants not to compete......................................... 7,233 10,053 -------- -------- $386,626 $395,913 -------- -------- -------- --------
Income Taxes Income taxes are provided for all taxable items in the statement of operations regardless of when these items are reported for federal income tax purposes. Actava elects to utilize certain provisions of the federal income tax laws to reduce current taxes payable. Deferred income taxes are provided for temporary differences in recognition of income and expenses for tax and financial reporting purposes. Effective January 1, 1993, the Company adopted FASB Statement No. 109, "Accounting for Income Taxes." Under Statement 109, the liability method is used in accounting for income taxes: deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. F-10 45 THE ACTAVA GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Postemployment Benefits The Company and its subsidiaries provide benefits to former or inactive employees after employment, but before retirement, such as severance benefits, continuation of health care benefits and life insurance coverage. The costs of these are currently accounted for on a pay-as-you-go (cash) basis. The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits," which requires employers to recognize the obligation to provide these benefits when certain conditions are met. The Company is required to adopt the new method of accounting for these benefits no later than January 1, 1994. The adoption of Statement No. 112 will not have a significant effect on the Company's financial position or results of operations. Certain Investments in Debt and Equity Securities The Company and its subsidiaries invest in various debt and equity securities. The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which requires certain debt securities to be reported at amortized cost, certain debt and equity securities to be reported at market with current recognition of unrealized gains and losses, and certain debt and equity securities to be reported at market with unrealized gains and losses as a separate component of shareholders' equity. The Company is required to adopt the new method of accounting no later than January 1, 1994. The adoption of Statement No. 115 will not have a significant impact on the Company's financial position or results of operations. Earnings Per Share of Common Stock Primary earnings per share are computed by dividing net income (loss) by the average number of common and common equivalent shares outstanding during the year. Common equivalent shares include shares issuable upon the assumed exercise of stock options using the treasury stock method when dilutive. Computations of common equivalent shares are based upon average prices during each period. Fully diluted earnings per share are computed using such average shares adjusted for any additional shares which would result from using end-of-year prices in the above computations, plus the additional shares that would result from the conversion of the 6 1/2% Convertible Subordinated Debentures. Net income (loss) is adjusted by interest (net of income taxes) on the 6 1/2% Convertible Subordinated Debentures. The computation of fully diluted earnings per share is used only when it results in an earnings per share number which is lower than primary earnings per share. Revenue Recognition Sales from the lawn and garden and sporting goods segments are recognized when the products are shipped to their customers. Sales from the photofinishing segment are recognized when the products are delivered to their customer. Index Protection Agreements The Company uses index protection agreements to hedge interest rate risk associated with its borrowings and to hedge the risk or market price fluctuations of commodities bought and sold in the normal course of business. These contracts are accounted for as hedges and any gains or losses are deferred and included in the basis of the underlying transactions. Cash flows from the contracts are accounted for in the same categories as the cash flows from the items being hedged. During 1993, Qualex entered into a $100,000,000 notional amount interest rate swap agreement which expires in 1996. Under the agreement, Qualex pays a variable interest rate based on the London interbank offered rate (LIBOR) and receives a variable amount based on the difference between LIBOR and prime F-11 46 THE ACTAVA GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) rate. At December 31, 1993, termination of this interest rate swap agreement would require a cash payment by Qualex of $1,158,000 based on market quotes. Qualex also entered into various commodity swaps to provide protection for silver recoveries from photofinishing processes. During 1993 and 1992, Qualex received $835,000 and $12,335,000, respectively, from the termination of such swap agreements. These gains were deferred and are being amortized over the original agreement terms. During 1993 and 1992, $2,928,000 and $1,683,000 of these gains were amortized as reductions of cost of sales while $1,961,000 and $782,000 of gain amortization reduced interest expense in 1993 and 1992, respectively. At December 31, 1993 and 1992, respectively, $7,422,000 and $11,476,000 of these gains were recorded as deferred income. At December 31, 1993, termination of the commodity swap agreements would require cash payments by Qualex of $18,688,000 based on market quotes. Self-Insurance The Company is primarily self-insured for workers' compensation, health, automobile, product and general liability costs. The self-insurance claim liability is determined based on claims filed and an estimate of claims incurred but not yet reported. Reclassifications Certain reclassifications were made in prior years' financial statements to conform to current presentations. F-12 47 THE ACTAVA GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTAL CASH FLOW INFORMATION The following tables provide additional information related to the Consolidated Statements of Cash Flows:
YEARS ENDED DECEMBER 31, ------------------------------ 1993 1992 1991 -------- -------- -------- (IN THOUSANDS) Items providing (not providing) cash from continuing operations: Minority interest............................................ $ 8,526 $ 11,922 $ 5,166 Depreciation................................................. 44,665 35,030 30,896 Amortization................................................. 25,780 24,006 13,118 Provision for doubtful accounts.............................. 7,262 3,419 5,485 Provision for plant relocations and consolidations........... 3,231 -- 18,969 Changes in operating assets and liabilities, net of effects from purchases and dispositions: Accounts receivable.......................................... (30,665) (25,464) 41,399 Inventories.................................................. (31,435) (4,763) 27,336 Prepaid expenses and other assets............................ (13,912) (23,621) (2,965) Accounts payable, accrued expenses and other current liabilities............................................... 299 (22,129) (12,603) Current and deferred taxes................................... 16,118 16,332 (24,336) Other operating activities -- net............................ 374 (1,018) (6,500) -------- -------- -------- Net items providing cash from continuing operations............ $ 30,243 $ 13,714 $ 95,965 -------- -------- -------- -------- -------- -------- Net assets of business sold: Total assets................................................. $ -- $ -- $ 2,696 Total liabilities............................................ -- -- 871 -------- -------- -------- Net assets................................................... $ -- $ -- $ 1,825 -------- -------- -------- -------- -------- -------- Net assets of businesses purchased: Total assets................................................. $ 71,693 $ 58,040 $127,825 Total liabilities............................................ 48,063 27,448 37,437 -------- -------- -------- Net assets................................................... $ 23,630 $ 30,592 $ 90,388 -------- -------- -------- -------- -------- -------- Interest paid................................................ $ 44,570 $ 27,279 $ 23,142 Income taxes paid............................................ $ 11,406 $ 3,334 $ 11,060 -------- -------- -------- -------- -------- --------
PHOTOFINISHING TRANSACTION Photofinishing operations are conducted by Qualex Inc., which was formed in March 1988 by the combination of Actava's photofinishing subsidiary with the domestic photofinishing operations of Eastman Kodak Company. While Actava and Kodak currently share Qualex's equity, income and dividends equally, Actava has 51% voting control by virtue of its ownership of 50% of Qualex's common stock and 100% of Qualex's voting preferred stock. Actava also has majority representation on the Qualex Board of Directors, although certain decisions, not including the declaration of dividends, require the concurrence of Kodak's Board representatives. Actava consolidates the accounts of Qualex and presents Kodak's portion of ownership and equity in the income of Qualex as minority interest. The Qualex Shareholders' Agreement between Actava and Eastman Kodak Company stipulates that upon a change of control at Actava certain Qualex preferred stock, including the voting preferred owned by F-13 48 THE ACTAVA GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Actava, will be redeemed. On March 28, 1991, the Qualex Shareholders' Agreement between Actava and Kodak was amended. The amendment stipulates that a change of control of Actava, as defined in the Shareholders' Agreement, occurred on February 6, 1991. However, in the amendment Kodak waived its change of control rights under the Shareholders' Agreement with respect to the February 6, 1991 change of control. As of March 1, 1992, and each subsequent March 1, Kodak may withdraw its waiver, and enforce its rights under the Agreement by providing Actava with 30 days written notice. At March 3, 1994, Kodak had not provided notice to Actava of an election to withdraw its waiver. The Board of Directors of Qualex was increased from seven to nine members, comprised of five representatives of Actava, three representatives of Kodak and the chief executive officer of Qualex, pursuant to the amendment. Should Kodak withdraw its waiver or if an additional change in control of Actava were to occur and if the Qualex preferred stock were redeemed, Actava would own 50% of the voting securities of Qualex. While Actava's voting stock would be reduced from 51% to 50%, this change would not alter Actava's and Kodak's current equal interest in the equity, earnings and cash dividends of Qualex. In addition, the Board of Directors of Qualex would be composed of 11 members, comprised of five representatives of Actava, five representatives of Kodak and the chief executive officer of Qualex, and all actions of the Board would require the affirmative vote of at least seven board members. In the event these changes were to occur, Actava may possibly be deemed to no longer control Qualex and Actava would no longer be in a position unilaterally to control, among other things, the declaration of dividends to Actava and Kodak by Qualex. If Actava were deemed in the future to no longer be in control of Qualex, Actava would cease to consolidate the accounts of Qualex. In that event, Actava would account for its ownership of Qualex by using the equity method of accounting. Such a development would not affect the net income or shareholders' equity of Actava. However, Actava's consolidated total assets, liabilities, sales and costs and expenses would be reduced as they would no longer include the specific accounts of Qualex. If Actava had accounted for Qualex using the equity method during all of 1993, Actava's total assets and liabilities would have been $696,374,000 and $500,460,000, respectively, and sales and total costs and expenses would have been $465,812,000 and $518,963,000, respectively. ACQUISITIONS On June 8, 1993, the Company acquired substantially all the assets of Diversified Products Corporation ("DP") for a net purchase price consisting of $11,629,500, the issuance of 1,090,909 shares of the Company's Common Stock valued at $12,000,000, and the assumption or payment of certain liabilities including trade payables and a revolving credit facility. The Company also entered into an agreement which may provide the seller the right to additional payments depending upon the value of the issued shares over a period of not longer than one year from the purchase date. The issuance of additional payments of cash or additional shares will not increase the cost to DP; any subsequent issuance will only affect the manner in which the total purchase price is recorded for Actava. This transaction was accounted for using the purchase method of accounting; accordingly, the purchased assets and liabilities have been recorded at their estimated fair value at the date of the acquisition. The purchase price resulted in an excess of costs over net assets acquired of approximately $11,417,000. The results of operations of the acquired business have been included in the consolidated financial statements since the date of acquisition. The following data represents the combined unaudited operating results of Actava on a pro forma basis as if the above transaction had taken place at the beginning of 1992. The pro forma information does not necessarily reflect the results of operations as they would have been had the transaction actually taken place at F-14 49 THE ACTAVA GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) that time. Adjustments include amounts of depreciation to reflect the fair value and economic lives of property, plant and equipment and amortization of intangible assets:
PRO FORMA YEAR ENDED DECEMBER 31, ------------------------- 1993 1992 ---------- ---------- (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) UNAUDITED Sales....................................................... $1,294,776 $1,304,993 Net income (loss)........................................... (56,988) 1,352 Income (loss) per share -- primary.......................... (3.23) .08
During 1992, Qualex acquired Samiljan Foto, L.P. and certain other photofinishing operations for $21,228,000 and $22,997,000 respectively, including expenses. For one of the businesses in which Qualex purchased a majority interest in 1992, the sellers have the right to require Qualex to purchase the remaining interest, beginning in 1997, at an amount not to exceed $18,000,000. During 1991, Qualex acquired Guardian Photo Inc. and Phototron Corporation for $73,785,000 and $16,137,000, respectively, including expenses. In a concurrent transaction with the acquisition of Phototron Corporation, Actava, Kodak and Qualex settled the litigation brought against them by Phototron Corporation. These transactions were accounted for using the purchase method of accounting, accordingly; the assets and liabilities of the purchased businesses have been recorded at their estimated fair value at the dates of acquisition. The purchase price resulted in an excess of costs over net assets acquired of approximately $23,321,000 and $53,848,000 during 1992 and 1991, respectively, in addition to $19,215,000 and $30,300,000 attributed to customer lists, respectively. The results of operations of the businesses acquired have been included in the consolidated financial statements since the dates of acquisition. The following data represents the combined unaudited operating results of Actava on a pro forma basis as if the 1991 transactions had taken place at the beginning of 1991. Pro forma information for 1992 acquisitions would not be significantly different from the results reported. The pro forma information does not necessarily reflect the results of operations as they would have been had the transaction actually taken place at that time. Adjustments include amounts of depreciation to reflect the fair value and economic lives of property, plant and equipment and amortization of intangible assets.
PRO FORMA YEAR ENDED DECEMBER 31, 1991 ---------------- (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) UNAUDITED Sales......................................................................... $1,029,676 Net (loss).................................................................... (53,538) (Loss) per share -- primary................................................... (3.24)
ACCOUNTS AND NOTES RECEIVABLE Receivables from sales of Actava's lawn and garden products amounted to $146,994,000 and $157,605,000 at December 31, 1993 and 1992, respectively. The receivables are primarily due from independent distributors located throughout the United States. Amounts due from distributors are supported by a security interest in the inventory or accounts receivable of the distributors. The receivables generally have extended due dates which correspond to the seasonal nature of the products' retail selling season. Concentrations of credit risk due to the common business of the customers are limited due to the number of customers F-15 50 THE ACTAVA GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) comprising the customer base and their geographic location. Ongoing credit evaluations of customer's financial condition are performed and reserves for potential credit losses are maintained. Such losses, in the aggregate, have not exceeded management's expectations. Photofinishing sales are made to national, regional and local retailers located throughout the United States, including mass merchants, grocery store chains and drug store chains. Photofinishing receivables, which were $70,744,000 and $76,202,000 at December 31, 1993 and 1992, respectively, are unsecured and generally due within 20 days following the end of each month. Included in accounts receivable at December 31, 1993 and 1992 are $54,711,000 and $47,564,000, respectively, due from national retail chains. Of these amounts, $9,812,000 and $9,465,000 at December 31, 1993 and 1992, respectively, were receivable from one such customer on net sales of $84,297,000 and $86,611,000, respectively. The Company provides an allowance for doubtful accounts equal to the estimated losses expected to be incurred in the collection of accounts receivable. Such losses have consistently been within management's expectations. Receivables from the sale of sporting goods are primarily from mass merchants and sporting goods retailers located throughout the United States. The receivables, which are unsecured, were $71,836,000 and $19,781,000 at December 31, 1993 and 1992, respectively, and are generally due within 30 to 60 days. Of these amounts, $23,362,000, and $4,686,000 are from the same four highest balance customers for December 31, 1993 and 1992, respectively. The companies which comprise the sporting goods group maintain allowances for potential credit losses and such losses, in the aggregate, have not exceeded management's expectations. TRITON GROUP LTD. LOAN At December 31, 1993, the Company had a $26,726,000 million note receivable from Triton Group Ltd. secured by 4,413,598 shares of Actava Common Stock. At December 31, 1992, $31,726,000 was outstanding under the agreement and was secured by 4,338,598 shares of Actava Common Stock. Effective June 25, 1993, the Company and Triton modified the terms of the loan as part of a plan of reorganization filed by Triton under Chapter 11 of the U.S. Bankruptcy Code. The modifications, which became effective June 25, 1993, included: extending the due date of the Loan to April 1, 1997; reducing the interest rate to prime plus 1 1/2% for the first six months following June 25, 1993, to prime plus 2% for the next six months, and to prime plus 2 1/2% for the remainder of the term of the note; revising collateral maintenance (margin call) requirements; and providing for release of collateral under certain circumstances. Under the modified agreements, Actava's right of first refusal with respect to any sale by Triton of its Actava Common stock will continue in effect until the loan is paid off. The Stockholder Agreement was amended to permit Triton to designate two directors (who are not officers or employees of Triton) on an expanded nine-member Board of Directors so long as Triton continues to own 20% or more of Actava's outstanding Common Stock. Triton filed a motion on July 30, 1993, with the United States Bankruptcy Court for the Southern District of California seeking to modify Triton's recently approved Plan of Reorganization. The modifications sought by Triton would have amended or eliminated the collateral maintenance (margin call) provisions that are an integral part of the Amended and Restated Loan Agreement. On August 2, 1993, the Bankruptcy Court entered a temporary restraining order suspending the effectiveness of the margin call provisions until the Court had an opportunity to hear Triton's motion seeking preliminary injunction. The motion seeking a preliminary injunction was heard on August 10, 1993, and was denied. Triton then withdrew its motion to modify its Plan of Reorganization. Therefore, the provisions of the Amended and Restated Loan Agreement continue to remain in effect. On August 19, 1993, the Amended and Restated Loan agreement was amended to allow Triton to satisfy certain margin call requirements by making deposits to a Collateral Deposit Account in lieu of delivering certificates of deposit. The margin call provisions for principal repayments and transfers of shares of Company Common Stock were not amended. On December 7, 1993, the Amended and Restated Loan Agreement was amended, in connection with a $5,000,000 prepayment of principal received on December 7, 1993, to provide for quarterly principal payment installments of $1,250,000 due on the last day of each quarter F-16 51 THE ACTAVA GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) of each year beginning March 31, 1994, with any unpaid principal and accrued interest due on April 1, 1997. The Agreement was also amended to require 75,000 additional shares of Actava Common Stock to be pledged as collateral and to modify the margin call provisions of the Agreement to provide a $7.50 minimum per share value of Actava Common Stock for purposes of determining the amount of any margin call mandatory payments. These modifications limit the circumstances under which Triton must pledge additional collateral for the loan; however, the 4,413,598 shares of Actava Common Stock owned by Triton will continue to be pledged to secure the loan until the loan is paid in full. At March 3, 1994, the pledged shares had a market value of $30,895,000 as compared to the loan balance of $26,726,000. In the opinion of management, the shares held as collateral are, and will continue to be, sufficient to provide for realization of the loan. INVENTORIES Inventory balances are summarized as follows:
DECEMBER 31, --------------------- 1993 1992 -------- -------- (IN THOUSANDS) Finished goods and goods purchased for resale.................. $ 82,559 $ 49,279 Raw materials and supplies..................................... 46,018 33,537 -------- -------- 128,577 82,816 Reserve for LIFO cost valuation................................ (20,138) (18,829) -------- -------- $108,439 $ 63,987 -------- -------- -------- --------
Work in process is not considered significant. During 1991, certain inventory quantities were reduced resulting in a liquidation of LIFO inventory quantities which were carried at lower costs prevailing in prior years as compared with the cost of current year purchases. The utilization of this lower cost inventory decreased net loss by approximately $1,487,000 and decreased loss per share of common stock by $.09. LONG-TERM INVESTMENTS Marketable securities are summarized as follows:
DECEMBER 31, ------------------- 1993 1992 ------- ------- (IN THOUSANDS) Marketable equity securities, at lower cost or market............ $15,850 $15,031 Bonds and commercial paper....................................... 3,003 7,430 U.S. Treasury bills.............................................. 7,758 2,258 ------- ------- Total.................................................. $26,611 $24,719 ------- ------- ------- -------
Net realized gains (losses) on the sale of these securities totaled $(185,000) and $134,000 in 1993 and 1992, respectively, and have been included in the determination of income. At December 31, 1993, the value of marketable equity securities exceeded their cost by $265,000, while at December 31, 1992, unrealized losses on these securities of $201,000 were recorded to a valuation allowance and included in shareholders' equity. The market value of debt securities approximates cost. F-17 52 THE ACTAVA GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accounts payable, accrued expenses and other current liabilities, including $31,392,000 in 1993 and $44,274,000 in 1992 due to Eastman Kodak Company, are summarized as follows:
DECEMBER 31, ------------------- 1993 1992 -------- -------- (IN THOUSANDS) Accrued salaries and wages....................................... $ 8,363 $ 10,211 Accrued interest................................................. 14,471 15,741 Accrued advertising and promotion................................ 25,238 15,039 Deferred income.................................................. 13,791 17,251 Self-insurance claims payable.................................... 35,070 35,683 Reserve for relocation and consolidation of photofinishing operations..................................................... 6,754 15,286 Other............................................................ 74,033 51,599 -------- -------- $177,720 $160,810 -------- -------- -------- --------
NOTES PAYABLE AND LONG-TERM DEBT Qualex has three separate line of credit agreements for working capital needs. These agreements are $5,000,000 each, for a total of $15,000,000. The Company pays a facility fee of 1/4% per annum on the committed line of credit agreements. At December 31, 1993, $3,200,000 was outstanding under these agreements while no amounts were outstanding at December 31, 1992. Included in Notes Payable at December 31, 1993 and 1992 is $87,359,000 and $58,243,000, respectively, which was outstanding under a three year Finance and Security Agreement which provides working capital to the Snapper division. The Agreement, dated October 23, 1992, is for $75,000,000 (and may be increased under certain circumstances up to $100,000,000 for a specified period of time). Interest is payable at the prime rate plus 3/4% to 1 1/4%, depending upon the prime rate in effect. The Agreement provides for the payment of an annual line fee of $487,500 which is subject to increases in certain circumstances. The loan is principally secured by Snapper assets and certain inventory of Snapper and requires Actava to comply with various restrictive financial covenants. The assets which serve as collateral are determined by reference to the outstanding balance under the credit agreement and the qualification of the assets as collateral is defined in the credit agreement; however, the assets potentially available as collateral are, in the aggregate, $173,068,000. As of March 29, 1994, effective as of December 31, 1993, various provisions of the Agreement, including the financial covenants, were amended. During 1992, in order to provide additional working capital and for general corporate purposes, an Actava Sports subsidiary entered into a three year Loan and Security Agreement with a financial institution to provide up to $35,000,000 of working capital. Interest is payable at the prime rate plus 1 1/4%. The Agreement provides for a facility fee of $350,000. The loan is principally secured by certain receivables and inventory of the subsidiary and requires the subsidiary to comply with various restrictive financial covenants. The assets which serve as collateral are determined by reference to the outstanding balance under the credit agreement and the qualification of the assets as collateral is defined in the credit agreement; however, the assets potentially available as collateral are, in the aggregate, $23,681,000. At December 31, 1993, $1,846,000 was outstanding under the agreement while no amounts were outstanding at December 31, 1992. During 1992, in order to provide additional working capital and for general corporate purposes, an Actava Sports subsidiary entered into a one-year Revolving Loan Agreement with a financial institution to provide up to $6,500,000 for working capital. Interest is payable at the prime rate of the financial institution. The loan is unsecured and requires the subsidiary to comply with various restrictive financial covenants. In August, 1993, the agreement was amended to increase the facility limit to $8,000,000 for a six-month period beginning F-18 53 THE ACTAVA GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) September 1, 1993, and to extend the term of the agreement until August 31, 1994. At December 31, 1993, $2,700,000 was outstanding under the Agreement while no amounts were outstanding at December 31, 1992. In April 1993, a Revolving Loan and Security Agreement with respect to a revolving credit facility of up to $10,000,000 was entered into by an Actava Sports subsidiary. Interest is payable at the prime rate plus 1%. The agreement provides for a facility fee of $25,000. The loan is principally secured by certain receivables and inventory of the subsidiary and requires the subsidiary to comply with various restrictive financial covenants. The assets which serve as collateral are determined by reference to the outstanding balance under the credit agreement and the qualification of the assets as collateral is defined in the credit agreement; however, the assets potentially available as collateral are, in the aggregate, $12,881,000. At December 31, 1993 and 1992, no amounts were outstanding under the agreement. In December 1993, an Actava Sports subsidiary, DP, entered into a Finance and Security Agreement with two financial institutions in order to provide up to $50,000,000 of working capital under a revolving credit facility. The agreement is secured by certain receivables, inventories, property, plant and equipment, and intangibles, as well as DP's issued and outstanding common stock and requires compliance with various restrictive financial covenants. The assets which serve as collateral are determined by reference to the outstanding balance under the credit agreement and the qualification of the assets as collateral is defined in the credit agreement; however, the assets potentially available as collateral are, in the aggregate, $109,000,000. As of March 29, 1994, effective December 31, 1993, various provisions of the Agreement, including the financial covenants, were amended. Interest is payable at the prime rate plus 1 1/2%. The Agreement provides for an annual facility fee of $375,000. At December 31, 1993, $36,178,000 was outstanding under the agreement. Long-term debt is summarized as follows:
DECEMBER 31, ------------------- 1993 1992 -------- -------- (IN THOUSANDS) Senior notes -- Qualex........................................... $200,000 $200,000 Revolving credit agreement -- Qualex............................. 10,000 -- Capitalized lease obligations.................................... 545 5,053 Other long-term debt: Secured (4-9% notes due at various dates to 2002)................ 1,900 2,630 Unsecured (4-8% notes due at various dates to 2001).............. 8,442 12,674 -------- -------- $220,887 $220,357 -------- -------- -------- --------
Qualex issued through a private placement $200,000,000 of Senior Notes in 1992 with September 1 maturities in 1997, 1999 and 2002 of $60,000,000, $70,000,000 and $70,000,000, respectively, with interest rates of 7.99%, 8.45% and 8.84%, respectively. During 1992, Qualex entered into an unsecured $115,000,000 Revolving Credit Agreement with eight financial institutions which will expire in May 1995. Interest is payable under three rate options which are determined by reference to the prime rate, the London interbank offered rate plus 1/2% to 3/4%, and competitive bids. The Agreement provides for a participation fee of 1/8% and an annual facility fee of 1/4%. At December 31, 1993, $10,000,000 was outstanding under the agreement while no amounts were outstanding at December 31, 1992. The Qualex Credit Agreement and the Shareholders' Agreement with Eastman Kodak Company restrict the amount of net assets of Qualex which may be transferred to Actava by dividend or other means. At December 31, 1993, approximately $166,000,000 of the $194,000,000 representing Actava's share of the net assets of Qualex was restricted under the terms of these agreements. F-19 54 THE ACTAVA GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Collateral for certain of the long-term debt includes real property. Assets pledged as collateral under the borrowings are not material. Maturities of long-term and subordinated debt are $15,142,000 in 1995, $35,172,000 in 1996, $75,783,000 in 1997 and $59,121,000 in 1998. The fair value of Actava's long-term and subordinated debt, including the current portion, at December 31, 1993 is estimated to be approximately $445,000,000 and was estimated at $425,000,000 at December 31, 1992. This estimate is based on a discounted cash flow analysis using Actava's current incremental borrowing rates for similar types of agreements and on quoted market prices for issues which are traded. Actava does not anticipate settlement of long-term debt at fair value and currently does not intend to pay the debt prior to maturity. SUBORDINATED DEBT Subordinated debt is summarized as follows:
DECEMBER 31, --------------------- 1993 1992 -------- -------- (IN THOUSANDS) 6% Senior Swiss Franc Bonds due 1996........................... $ 30,152 $ 30,152 6 1/2% Convertible Debentures due 2002......................... 75,000 75,000 9 1/2% Debentures due 1998, net of unamortized discount of $1,308 in 1993 and $1,593 in 1992............................ 58,176 57,891 9 7/8% Senior Debentures due 1997, net of unamortized discount of $468 in 1993 and $661 in 1992............................. 20,532 23,339 10% Debentures due 1999........................................ 6,691 7,184 -------- -------- $190,551 $193,566 -------- -------- -------- --------
In 1986 Actava issued 6% Senior Subordinated Swiss Franc Bonds due 1996 for 100,000,000 Swiss francs. Simultaneously, in order to eliminate exposure to fluctuations in the currency exchange rate over the life of the bonds, Actava entered into a currency swap agreement with a financial institution whereby Actava received approximately $48,000,000 in exchange for the Swiss Franc Bond proceeds. As a result of the swap agreement, Actava will, in effect, make its interest and principal bond repayments in U.S. dollars without regard for changes in the currency exchange rate. A default by the counterparty to the swap agreement would expose Actava to potential currency exchange risk on the remaining bond interest and principal payments in that Actava would be required to purchase Swiss francs at current exchange rates rather than at the swap agreement exchange rate. The amount of this potential risk cannot be currently calculated as the principal and interest payments will be made in future years and alternative swap agreements could be entered into by Actava. At December 31, 1993, the swap agreement has an effective exchange rate over its remaining term of .5459 Swiss francs per U.S. dollar while the U.S. dollar equivalent market exchange rate was .6734. After considering the stated interest rate, the cost of the currency swap agreement, taxes and underwriting commissions, the effective cost of the bonds is approximately 11.3%. The fair value of the currency swap as of December 31, 1993 and 1992, was $10,795,000 and $7,242,000, respectively; however, this is subject to change as domestic interest rates and foreign currency markets are determining factors. Actava, at its option, may redeem the Senior Subordinated Swiss Franc Bonds at 101.0% plus accrued interest for one year subsequent to March 6, 1994 and at decreasing amounts thereafter. The Bonds include a covenant which restricts the amount of stockholders' equity available for cash dividends and the cash redemption of capital stock. At December 31, 1993, $3,412,000 was available for these purposes pursuant to this covenant. In 1987 Actava issued $75,000,000 of 6 1/2% Convertible Subordinated Debentures due in 2002 in the Euro-dollar market. The Debentures are convertible into Actava's Common Stock at a conversion price of F-20 55 THE ACTAVA GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) $41 5/8 per share. At Actava's option the Debentures may be redeemed at 101% plus accrued interest prior to August 4, 1994 and at 100% thereafter. The 9 7/8% Senior Subordinated Debentures are redeemable at the option of Actava at 101.555% of the principal amount plus accrued interest if redeemed prior to March 15, 1994, and at decreasing prices thereafter. Mandatory sinking fund payments of $3,000,000 (which Actava may increase to $6,000,000 annually) began in 1982 and are intended to retire, at par plus accrued interest, 75% of the issue prior to maturity. At the option of Actava, the 10% Subordinated Debentures are redeemable, in whole or in part, at the principal amount plus accrued interest. Sinking fund payments of 10% of the outstanding principal amount commenced in 1989; however, Actava receives credit for Debentures redeemed or otherwise acquired in excess of sinking fund payments. CAPITAL STOCK Preferred and Preference Stock There are 5,000,000 authorized shares of Preferred Stock and 1,000,000 authorized shares of Preference Stock, none of which were outstanding or designated as to a particular series at December 31, 1993. Common Stock There are 100,000,000 authorized shares of Common Stock, $1 par value. At December 31, 1993, 1992 and 1991 there were 17,635,186, 16,544,277 and 16,544,027 shares issued and outstanding, respectively, after deducting 5,132,558, 6,223,467 and 6,223,717 treasury shares, respectively. Actava has reserved the shares of Common Stock listed below for possible future issuance:
DECEMBER 31, ----------------------- 1993 1992 --------- --------- Stock options................................................. 761,000 871,375 6 1/2% Convertible Subordinated Debentures.................... 1,801,802 1,801,802 Restricted stock plan......................................... 102,800 102,800 --------- --------- 2,665,602 2,775,977 --------- --------- --------- ---------
F-21 56 THE ACTAVA GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Stock Options Actava's stock option plans provide for the issuance of qualified incentive stock options and nonqualified stock options. Incentive stock options may be issued at a per share price not less than the market value of Actava's Common Stock at the date of grant. Nonqualified options may be issued generally at prices and on terms determined by the stock option committee. The following table reflects changes in the incentive stock options issued under these plans:
APPROXIMATE PRICE RANGE SHARES PER SHARE -------- ----------- Options outstanding at January 1, 1991......................... 138,525 $ 20-28 Granted...................................................... 64,500 12 Exercised.................................................... (30,000) 12 Canceled..................................................... (13,000) 28 Expired...................................................... (104,775) 20 -------- ----------- Options outstanding at December 31, 1991....................... 55,250 12-28 Granted...................................................... 60,000 12-15 Exercised.................................................... (250) 12 Canceled..................................................... (17,125) 12-28 -------- ----------- Options outstanding at December 31, 1992....................... 97,875 12-28 Granted...................................................... 50,000 9-12 Canceled..................................................... (21,125) 12-28 -------- ----------- Options outstanding at December 31, 1993....................... 126,750 $ 9-28 -------- ----------- -------- -----------
During 1993 nonqualified options for 75,500 shares at $13.75 per share were granted. At December 31, 1993, incentive stock options totaling 64,000 shares were exercisable at prices ranging from $11.875 to $27.875 and nonqualified options totaling 53,875 shares were exercisable at prices ranging from $13.75 to $14.50. There were 591,550 and 696,300 shares under Actava's stock option plans at December 31, 1993 and 1992, respectively, which were available for the granting of additional stock options. PROVISIONS FOR PLANT RELOCATION AND CONSOLIDATION The 1993 and 1991 consolidated provisions for plant relocations and consolidations include $4,096,000 and $17,037,000, respectively, before tax and minority interest for the costs of relocating or consolidating certain of Qualex's photofinishing plants. After tax benefit and minority interest, the Qualex provisions amounted to $1,038,000 and $5,196,000 or $.06 and $.31 per share for 1993 and 1991, respectively. In addition, the 1993 provision includes reductions of $865,000, before and after tax, or $.05 per share, to reserves for consolidating certain lawn and garden facilities and Actava Sports facilities. The 1991 provision also includes $500,000 before tax ($315,000 net of tax or $.02 per share) for consolidating facilities at a sporting goods subsidiary and $1,432,000 before tax ($945,000 net of tax or $.06 per share) for reducing the Actava corporate office facilities. F-22 57 THE ACTAVA GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) OTHER INCOME -- NET Other income net of other (expenses) from continuing operations is summarized as follows:
YEARS ENDED DECEMBER 31, ----------------------------- 1993 1992 1991 ------- ------- ------- (IN THOUSANDS) Interest and investment income.......................... $ 8,731 $ 8,399 $ 7,459 Miscellaneous income (expense).......................... (11,646) (2,300) (3,922) ------- ------- ------- $(2,915) $ 6,099 $ 3,537 ------- ------- ------- ------- ------- -------
Early payment interest credit expense which is the result of cash payments received by Snapper from distributors prior to receivable due dates is included in net miscellaneous income (expense). The early payment interest credit expense was $4,322,000 for 1993, $2,522,000 for 1992, and $4,348,000 for 1991. INCOME TAXES Income tax expense (benefit) is composed of the following:
YEARS ENDED DECEMBER 31, -------------------------------- LIABILITY DEFERRED METHOD METHOD --------- ------------------- 1993 1992 1991 --------- ------- -------- (IN THOUSANDS) Current federal........................................ $ 7,620 $ 6,900 $ 7,366 Current state.......................................... 3,451 4,360 3,256 Deferred federal and state............................. 4,092 12,068 (20,655) --------- ------- -------- $ 15,163 $23,328 $(10,033) --------- ------- -------- --------- ------- --------
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:
YEARS ENDED DECEMBER 31, -------------------------------- LIABILITY DEFERRED METHOD METHOD --------- ------------------- 1993 1992 1991 --------- ------- -------- (IN THOUSANDS) Computed tax at statutory rates........................ $ (6,825) $15,226 $(18,934) State tax, net of federal benefit...................... 2,243 2,877 2,149 Effect of tax rate changes on realization of timing differences.......................................... 414 153 301 Amortization of goodwill............................... 3,123 3,235 2,753 Effect of nontax basis adjustments in connection with acquisitions......................................... -- 914 1,037 Tax-exempt interest.................................... (26) (80) (70) Dividends received deduction........................... (290) -- -- Undistributed earnings of majority-owned subsidiary.... 603 812 351 Over provision of current tax.......................... -- -- 1,675 Deferred tax valuation allowance....................... 16,227 -- -- Other.................................................. (306) 191 705 --------- ------- -------- $ 15,163 $23,328 $(10,033) --------- ------- -------- --------- ------- --------
F-23 58 THE ACTAVA GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Significant components of deferred tax assets and liabilities at December 31, 1993, are as follows:
DEFERRED TAX DEFERRED TAX ASSETS LIABILITIES ------------ ------------ (IN THOUSANDS) Net operating loss carryforward........................ $ 30,383 Reserves for losses and write-down of certain assets... 14,885 Reserves for self-insurance............................ 11,781 Alternative minimum tax credit......................... 8,805 Provision for loss on loans and receivables............ 3,509 Tax amortizable intangible............................. 3,145 State tax accruals..................................... 2,676 Gain on hedge transaction.............................. 2,609 Obligation for postretirement benefits................. 1,966 Plant relocations and consolidations................... 1,541 Charitable contribution carryforward................... 1,053 Other.................................................. 1,913 $ 1,793 Investment in less than 80% owned subsidiary........... -- 37,627 Basis differences in fixed assets...................... -- 29,387 Purchase of safe harbor lease investment............... -- 9,783 Undistributed earnings of majority-owned subsidiary.... -- 1,282 ------------ ------------ Subtotal............................................... 84,266 79,872 Valuation allowance.................................... 28,675 -- ------------ ------------ Total deferred taxes................................... $ 55,591 $ 79,872 ------------ ------------ ------------ ------------ Net deferred taxes..................................... $ 24,281 ------------ ------------
The components of deferred income tax expense (benefit) for the years ended December 31, 1992 and 1991 are as follows:
YEARS ENDED DECEMBER 31, ------------------------ 1992 1991 ------- -------- (IN THOUSANDS) Accelerated depreciation.................................. $ 5,138 $ 3,273 Provision for loss on loans and receivables............... 366 (1,178) Reserves for losses and write-down of certain assets...... 1,961 (1,337) Plant relocations and consolidations...................... 9,148 (1,714) Gain on hedge transaction................................. (3,356) 273 Difference in book and tax basis of assets disposed of.... (881) 197 Undistributed earnings of majority-owned subsidiary....... 547 (110) Recognition of income tax net operating loss benefit...... -- (19,986) Other..................................................... (855) (73) ------- -------- $12,068 $(20,655) ------- -------- ------- --------
Actava has a net operating loss carryforward for federal income tax purposes of approximately $86,800,000 at December 31, 1993, which will expire in years 2006 through 2008. Actava has an alternative minimum tax credit carryforward of approximately $8,800,000, which may be carried forward indefinitely, available to offset regular tax in certain circumstances. PENSION PLANS Actava and its subsidiaries have several noncontributory defined benefit and other pension plans which are "qualified" under federal tax law and cover substantially all employees. In addition Actava has a F-24 59 THE ACTAVA GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) "nonqualified" supplemental retirement plan which provides for the payment of benefits to certain employees in excess of those payable by the qualified plans. Benefits under the qualified and nonqualified plans are based upon the employee's years of service and level of compensation. Actava's funding policy for the qualified plans is to contribute annually such amounts as are necessary to provide assets sufficient to meet the benefits to be paid to the plans' members and to keep the plans actuarially sound. Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future. The components of net periodic pension costs are as follows:
YEARS ENDED DECEMBER 31, --------------------------- 1993 1992 1991 ------- ------- ------- (IN THOUSANDS) Service cost -- benefits earned during the period......... $ 2,724 $ 3,234 $ 2,707 Interest cost on projected benefit obligation............. 1,892 1,712 1,378 Actual return on plan assets.............................. (2,318) (1,912) (2,304) Net amortization and deferral............................. 454 298 1,001 ------- ------- ------- $ 2,752 $ 3,332 $ 2,782 ------- ------- ------- ------- ------- -------
Assumptions used in the accounting for the defined benefit plans are as follows:
YEARS ENDED DECEMBER 31, ---------------------- 1993 1992 1991 ---- ---- ---- Weighted-average discount rates............................... 7.2 % 8.4 % 8.3 % Rates of increase in compensation levels...................... 4.7 % 6.1 % 6.2 % Expected long-term rate of return on assets................... 7.6 % 8.3 % 8.3 %
These actuarial assumptions were changed during 1993 for accounting for the defined benefit plans as of December 31, 1993. The change in discount rates from 8.4% for 1992 to 7.2% for 1993 increased projected benefit obligations by approximately 12%. F-25 60 THE ACTAVA GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following tables set forth the funded status and amount recognized in the Consolidated Balance Sheets for Actava's defined benefit pension plans:
DECEMBER 31, --------------------- 1993 1992 -------- -------- (IN THOUSANDS) PLANS WHOSE ASSETS EXCEED ACCUMULATED BENEFITS Actuarial present value of benefit obligations: Vested benefit obligations................................... $ (4,652) $(11,717) -------- -------- -------- -------- Accumulated benefit obligation............................... $ (5,232) $(13,100) -------- -------- -------- -------- Projected benefit obligations................................ $ (5,232) $(15,035) Plan assets at fair value.................................... 6,296 15,197 -------- -------- Funded status -- plan assets in excess of projected benefit obligation................................................ $ 1,064 $ 162 -------- -------- -------- -------- Comprised of: Accrued pension cost......................................... $ -- $ (2,265) Prepaid pension cost......................................... 415 332 Unrecognized net gain (loss)................................. (523) 702 Unrecognized prior service cost.............................. 187 325 Unrecognized net assets at January 1, 1987, net of amortization.............................................. 985 1,068 -------- -------- $ 1,064 $ 162 -------- -------- -------- -------- PLANS WHOSE ACCUMULATED BENEFITS EXCEED ASSETS Actuarial present value of benefit obligations: Vested benefit obligation.................................... $(21,174) $ (8,198) -------- -------- -------- -------- Accumulated benefit obligation............................... $(22,224) $ (8,340) -------- -------- -------- -------- Projected benefit obligation................................. $(25,320) $ (9,035) Plan assets at fair value.................................... 18,615 5,594 -------- -------- Funded status -- projected benefit obligation in excess of plan assets............................................... $ (6,705) $ (3,441) -------- -------- -------- -------- Comprised of: Accrued pension cost......................................... $ (4,637) $ (3,246) Prepaid pension cost......................................... -- 596 Unrecognized net gain (loss)................................. (2,157) (1,098) Unrecognized prior service cost.............................. (215) (215) Unrecognized net obligation at January 1, 1987, net of amortization.............................................. 304 522 -------- -------- $ (6,705) $ (3,441) -------- -------- -------- --------
Substantially all of the plan assets at December 31, 1993 and 1992 are invested in governmental bonds, mutual funds and temporary investments. Some of the Company's subsidiaries also have defined contribution plans which provide for discretionary annual contributions covering substantially all of their employees. Contributions from continuing operations of approximately $5,900,000 in 1993, $7,000,000 in 1992, and $4,800,000 in 1991 were made to these plans. LEASES Actava and its subsidiaries are lessees of warehouses, manufacturing facilities and other properties under numerous noncancelable leases. F-26 61 THE ACTAVA GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Capitalized leased property, which is not significant, is included in property, plant and equipment and other assets. Future minimum payments for the capital leases and noncancelable operating leases with initial or remaining terms of one year or more are summarized as follows:
YEARS ENDING OPERATING CAPITAL DECEMBER 31, LEASES LEASES ------------------------------------------------------------- --------- ------- (IN THOUSANDS) 1994......................................................... $12,976 $ 462 1995......................................................... 10,321 287 1996......................................................... 8,813 157 1997......................................................... 7,717 138 1998......................................................... 5,377 0 Thereafter................................................... 12,847 0 --------- ------- Total minimum lease payments................................. $58,051 1,044 --------- --------- Less amounts representing interest........................... (128) ------- Present value of net minimum lease payments.................. 916 ------- -------
Rental expense charged to continuing operations for all operating leases was $19,729,000, $21,499,000 and $17,720,000 for the years ended December 31, 1993, 1992 and 1991, respectively. Certain noncancelable leases have renewal options for up to 10 years, and generally, related real estate taxes, insurance and maintenance expenses are obligations of Actava. Certain leases have escalation clauses which provide for increases in annual rentals in certain circumstances. LITIGATION On February 18, 1994, Photographic Concepts Inc. ("PCI"), a Florida corporation, sued Qualex in the United States District Court for the Middle District of North Carolina, in a lawsuit captioned Photographic Concepts, Inc. v. Qualex, Inc., Civil Action No. 1:94-CV-00081. PCI's claims arise out of allegations that Qualex entered into and then breached an agreement with PCI relating to the marketing of on-site "microlab" photofinishing services. During 1993, Qualex's microlab business resulted in $33,300,000 in revenues and $7,300,000 in gross profits, and Qualex expects such business to increase in the future. PCI alleges, among other things, that Qualex breached agreement with PCI, and misappropriated trade property and other information from PCI. PCI is seeking both monetary and injunctive relief. Qualex is currently gathering the information and documents necessary to file its response to PCI's Complaint. That response must be filed by April 25, 1994. Qualex intends to defend the case vigorously, but the Company is unable to determine the probable impact of the suit at this early stage in the proceeding. In 1991, three lawsuits were filed against Actava, certain of Actava's current and former directors and Intermark, Inc., which owned approximately 26% of Actava's Common Stock. One complaint alleged, among other things, a long-standing pattern and practice by the defendants of misusing and abusing their power as directors and insiders of Actava by manipulating the affairs of Actava to the detriment of Actava's past and present stockholders. The complaint sought monetary damages from the director defendants, injunctive relief against Actava, Intermark and its current directors, and costs of suit and attorney's fees. The other two complaints alleged, among other things that members of the Actava Board of Directors contemplate either a sale, a merger, or other business combination involving Intermark, Inc. and Actava or one or more of its subsidiaries or affiliates. The complaints sought costs of suit and attorney's fees and preliminary and permanent injunctive relief and other equitable remedies, ordering the director defendants to carry out their fiduciary duties and to take all appropriate steps to enhance Actava's value as a merger/acquisition candidate. F-27 62 THE ACTAVA GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) These three suits were consolidated on May 1, 1991. While these actions are in their preliminary stages, management currently believes the actions will not materially affect the operations or financial position of Actava. Actava is a defendant in various other legal proceedings. However, Actava is not aware of any action which, in the opinion of management, would materially affect the financial position or results of operations of Actava. CONTINGENT LIABILITIES AND COMMITMENTS Actava, on behalf of its Snapper division, has an agreement with a financial institution which makes available to dealers floor plan financing for Snapper products. This agreement provides financing for dealer inventories and accelerates cash flow to Snapper's distributors and to Snapper. Under the terms of the agreement, a default in payment by one of the dealers on the program is non-recourse to both the distributor and to Snapper. However, the distributor is obligated to repurchase any equipment recovered from the dealer and Snapper is obligated to repurchase the recovered equipment if the distributor defaults. At December 31, 1993 and 1992, there was approximately $23,000,000 and $20,000,000, respectively, outstanding under these floor plan financing arrangements. Actava is contingently liable under various guarantees of debt totaling approximately $8,600,000. The debt is primarily Industrial Revenue Bonds which were issued by former subsidiaries to finance their manufacturing facilities and equipment, and is secured by the facilities and equipment. In addition, upon the sale of the subsidiaries, Actava received lending institution guarantees or bank letters of credit to support Actava's contingent obligations. There are no material defaults on the debt agreements. Actava is contingently liable under various real estate leases of former subsidiaries. The total future payments under these leases, including real estate taxes, is estimated to be approximately $9,100,000. The leased properties generally have financially sound subleases. In January 1992, Qualex entered into an agreement whereby it sells an undivided interest in a designated pool of trade accounts receivable on an ongoing basis. The maximum allowable amount of receivables to be sold, initially set at $50,000,000, was increased to $75,000,000 in August 1992. As collections reduce the pool of sold accounts receivable, Qualex sells participating interests in new receivables to bring the amount sold up to the desired level. At December 31, 1993 and 1992, the uncollected balance of receivables sold amounted to $60,000,000 and $30,000,000, respectively. The proceeds are reported as operating cash flows in the statement of cash flows and a reduction of receivables in Qualex's balance sheet. Total proceeds received by Qualex during the year were $519,000,000 for 1993 and $220,000,000 for 1992. There has been no adjustment to the allowance for doubtful accounts because Qualex has retained substantially the same risk of credit loss as if the receivables had not been sold. Qualex pays fees based on the purchaser's level of investment and borrowing costs. During 1993 and 1992, Qualex recorded $2,200,000 and $1,100,000, respectively, of these fees as other expenses. Qualex has a supply contract with Kodak for the purchase of sensitized photographic paper and purchases substantially all of the chemicals used in photoprocessing from Kodak. Qualex also purchases various other production materials and equipment from Kodak. Qualex and DP handle and store various materials in the normal course of business that have been classified as hazardous by various federal, state and local regulatory agencies. As of December 31, 1993, Qualex and DP are continuing to conduct tests at various sites and will perform any necessary cleanup where and to the extent legally required. At those sites where tests have been completed, cleanup costs have been immaterial. The Company may also be liable for remediation of environmental damage relating to businesses previously sold in excess of amounts accrued. At the sites currently being tested, it is management's opinion that cleanup costs will not have a material effect on Actava's financial position or results of operations. F-28 63 THE ACTAVA GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In January 1993, Qualex signed a ten year agreement to purchase its information systems services from an outside agency. Annual service charges under this agreement are approximately $13,000,000. At December 31, 1993, approximately $5,000,000 of Actava's cash and short-term investments were pledged to secure a Snapper credit line and approximately $20,700,000 of cash and short-term investments were pledged to support outstanding letters of credit. SEGMENT INFORMATION A description of Actava's segments is presented in the first four paragraphs of Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations." Additional segment information as of and for the three years ended December 31, 1993 is presented in the tables captioned "Segment Performance" and "Other Segment Data" which are included in Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations." F-29 64 THE ACTAVA GROUP INC. AND SUBSIDIARIES SUMMARY OF QUARTERLY EARNINGS AND DIVIDENDS
QUARTERS ENDED IN 1993 ----------------------------------------- MARCH 31 JUNE 30 SEPT. 30 DEC. 31 -------- -------- -------- -------- (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) Net Sales............................................. $263,887 $313,261 $344,479 $319,484 Gross Profit.......................................... 61,402 82,210 85,632 54,427 Cumulative effect of change in accounting principle(c)........................................ (4,404) -- -- -- Net income (loss)(a)(c)(d)(e)......................... $ (7,604) $ 43 $ (9,047) $(30,986) -------- -------- -------- -------- -------- -------- -------- -------- Earnings (loss) per share before cumulative effect of change in accounting principle...................... $ (.19) $ -- $ (.51) $ (1.76) Cumulative effect of change in accounting principle... (.27) -- -- -- Net income (loss)..................................... $ (.46) $ -- $ (.51) $ (1.76) -------- -------- -------- -------- -------- -------- -------- -------- Cash dividends........................................ $ .09 $ .09 $ .09 $ .09
QUARTERS ENDED IN 1992 ----------------------------------------- MARCH 31 JUNE 30 SEPT. 30 DEC. 31 -------- -------- -------- -------- (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) Net Sales............................................. $276,284 $288,248 $307,585 $276,626 Gross Profit.......................................... 86,607 106,136 119,885 92,985 Cumulative effect of change in accounting principle(b)........................................ 1,034 -- -- -- Net income (loss)(a)(b)............................... $ (772) $ 2,631 $ 4,713 $ 5,027 -------- -------- -------- -------- -------- -------- -------- -------- Earnings (loss) per share before cumulative effect of change in accounting principle...................... $ (.11) $ .16 $ .28 $ .31 Cumulative effect of change in accounting principle... .06 -- -- -- Net income (loss)..................................... $ (.05) $ .16 $ .28 $ .31 -------- -------- -------- -------- -------- -------- -------- -------- Cash dividends........................................ $ .09 $ .09 $ .09 $ .09
- --------------- (a) Actava's lawn and garden division estimates certain sales related expenses for the year and charges these expenses to income based upon estimated sales for the year. Sales and expenses for 1993 were different than estimated in the first three quarters. If the expenses had been charged to income based upon actual sales for the year, net loss would have increased in the first and second quarter by $4,500,000 and $7,450,000, respectively, and decreased in the third and fourth quarters by $1,750,000 and $10,200,000, respectively. Sales and expenses for the year were also different in 1992 than estimated in the first three quarters. If the expenses had been charged to income based upon actual sales for the year, net income would have increased in the first and third quarters by $3,500,000 and $700,000, respectively, and decreased in the fourth quarter by $4,200,000. (b) Effective January 1, 1992, Qualex changed its method of accounting for the cost of its proof advertising program to recognize these costs at the time the advertising is placed by the customer. Under the proof advertising program, Qualex reimburses certain advertising costs incurred by its customers up to a percentage of sales to that customer. Qualex previously accrued such costs at the time of the initial sale. Qualex believes that this new method is preferable because it recognizes advertising expense as it is incurred rather than at the time of the initial sale to the customer. Information for the first quarter of 1992, as previously reported, differs from the above amounts as a result of this change. The effects of this change do not have a significant effect on the other quarters. (c) Effective January 1, 1993, Actava adopted FASB Statement No. 106, "Accounting for Postretirement Benefits Other Than Pensions". Actava and its subsidiaries provide group medical plans and life insurance coverage for certain employees subsequent to retirement. In prior years, these benefits had been charged to operations on a pay-as-you-go (cash) basis; effective as of 1993 they are charged to operations F-30 65 on an accrual basis. Information for the first quarter of 1993, as previously reported, differs from the above amounts because the cumulative effect was originally reported net-of-tax. (d) During the fourth quarter of 1993, Actava's lawn and garden division revised its estimate of accrued product warranty expense to reflect an increase in the amount of future warranty cost to be incurred due to increased warranty claims. This change in accounting estimate resulted in an increase in the net loss for the fourth quarter of approximately $4,000,000. (e) During the fourth quarter of 1993, Actava increased its valuation allowance for an investment in a real estate development from $1,425,000 to $4,425,000, due to an accelerated plan for disposition. This change in estimate resulted in an increase in the net loss for the fourth quarter of approximately $3,000,000. SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. F-31 66 THE ACTAVA GROUP INC. ANNUAL REPORT ON FORM 10-K YEAR ENDED DECEMBER 31, 1993 ITEM 14(D) FINANCIAL STATEMENT SCHEDULES S-1 67 SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES THE ACTAVA GROUP INC. AND SUBSIDIARIES DECEMBER 31, 1993
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E -------- -------- -------- -------------------- ------------------------ DEDUCTIONS BALANCE AT END OF PERIOD -------------------- ------------------------ BALANCE AT (1) (2) (1) (2) BEGINNING AMOUNTS AMOUNTS NAME OF PERIOD ADDITIONS COLLECTED WRITTEN-OFF CURRENT NON-CURRENT -------- ---------- --------- --------- ----------- -------- ------------ Frederick B. Beilstein, III(A)... $ 376,986 $ -- $ -- $ -- $ -- $376,986(B)
- --------------- (A) Senior Vice-President, Treasurer and Chief Financial Officer (B) Represents one note receivable in the amount of $117,000, with interest at 6.5%, due June 25, 2001, with interest payable annually, four notes receivable each in the amount of $60,938, with interest at 6.5%, due August 1, 2001, with at least one-half of interest payable annually, and one note receivable in the amount of $16,234, with interest at 6.5%, due August 1, 2002, with at least one-half of interest payable annually. All notes receivable were issued in connection with purchases of The Actava Group Inc. stock. See "Triton Group Ltd. Loan" of Notes to Consolidated Financial Statements for information regarding a note receivable from Triton Group Ltd. S-2 68 SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF THE ACTAVA GROUP INC. CONDENSED BALANCE SHEETS
DECEMBER 31, ----------------------------- 1993 1992 ------------- ------------- ASSETS Current Assets Cash.......................................................... $ 11,316,000 $ 11,432,000 Short-term investments........................................ 8,566,000 8,335,000 Receivables (less allowance for doubtful accounts of $5,675,000 in 1993 and $9,390,000 in 1992)................. 142,607,000 150,398,000 Inventories................................................... 32,612,000 26,126,000 Prepaid expenses.............................................. 2,855,000 2,940,000 Income tax receivable and future benefits..................... 21,807,000 27,564,000 ------------- ------------- Total Current Assets.................................. 219,763,000 226,795,000 Property, Plant and Equipment -- net............................ 37,332,000 39,999,000 Other Assets Investment in and advances from wholly owned and majority subsidiaries -- net........................................ 290,467,000 283,179,000 Notes receivable from Triton Group Ltd........................ 26,726,000 31,726,000 Notes receivable and other assets............................. 18,488,000 24,211,000 ------------- ------------- Total Other Assets.................................... 335,681,000 339,116,000 Intangibles..................................................... 799,000 675,000 ------------- ------------- Total Assets.......................................... $ 593,575,000 $ 606,585,000 ------------- ------------- ------------- ------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable, accrued expenses and other current liabilities................................................ $ 167,548,000 $ 125,419,000 Current portion of long-term debt............................. 3,838,000 2,727,000 ------------- ------------- Total Current Liabilities............................. 171,386,000 128,146,000 Deferred Income Taxes........................................... 34,144,000 38,850,000 Long-Term Debt.................................................. 1,580,000 6,176,000 Subordinated Debt............................................... 190,551,000 193,566,000 Stockholders' Equity Common Stock.................................................. 22,768,000 22,768,000 Additional capital............................................ 37,056,000 46,362,000 Retained earnings............................................. 236,334,000 292,266,000 Less treasury stock........................................... (100,244,000) (121,549,000) ------------- ------------- Total Stockholders' Equity...................................... 195,914,000 239,847,000 ------------- ------------- Total Liabilities and Stockholder's Equity............ $ 593,575,000 $ 606,585,000 ------------- ------------- ------------- -------------
S-3 69 SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF THE ACTAVA GROUP INC. -- (CONTINUED) CONDENSED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, ---------------------------------------------- 1993 1992 1991 ------------ ------------ ------------ Net Sales........................................ $224,960,000 $248,198,000 $158,500,000 Management fees from wholly owned subsidiaries... 8,181,000 3,837,000 6,958,000 ------------ ------------ ------------ 233,141,000 252,035,000 165,458,000 Costs, Expenses and Other Costs of products sold......................... 193,773,000 179,973,000 130,510,000 Selling, general and administrative............ 59,048,000 56,411,000 87,587,000 Interest expense............................... 23,647,000 20,801,000 19,663,000 Interest paid to wholly owned subsidiaries..... 29,224,000 29,224,000 25,258,000 Other expense (income) -- net.................. 4,981,000 (1,040,000) 1,166,000 Provision for plant consolidations............. (849,000) -- 1,432,000 Settlement of employee agreements and related costs............................... -- -- 6,839,000 ------------ ------------ ------------ Total costs, expenses and other............. 309,824,000 285,369,000 272,455,000 (Loss) before Income Taxes, Equity in Net Income of Subsidiaries, and Cumulative Effect of Changes in Accounting Principles................................ (76,683,000) (33,334,000) (106,997,000) Income taxes (benefits).......................... (12,725,000) (10,316,000) (33,675,000) Equity in net income of subsidiaries............. 20,768,000 34,617,000 22,501,000 Cumulative effect of change in accounting principle...................................... (4,404,000) -- -- ------------ ------------ ------------ Net Income (Loss)........................... $(47,594,000) $ 11,599,000 $(50,821,000) ------------ ------------ ------------ ------------ ------------ ------------
S-4 70 SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF THE ACTAVA GROUP INC. -- (CONTINUED) CONDENSED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH YEARS ENDED DECEMBER 31, -------------------------------------------- 1993 1992 1991 ------------ ------------ ------------ Net Cash Flows Used by Operating Activities........ $(42,287,000) $(63,153,000) $(26,738,000) Cash Flows from Investing Activities: Investment in subsidiaries....................... (15,000,000) (28,818,000) (1,228,000) Dividends received from Qualex................... 8,614,000 3,886,000 6,782,000 Sales of investments (maturities over 90 days)... -- -- 10,000,000 Net sales (purchases) of other investments....... (76,000) (3,209,000) 42,300,000 Payments for property, plant and equipment....... (6,465,000) (13,003,000) (13,818,000) Proceeds from disposals of property, plant and equipment..................................... 401,000 754,000 373,000 Collections on notes receivable.................. 12,000 226,000 -- Payments for purchases of businesses............. (11,630,000) -- -- Loans to Triton Group Ltd........................ 5,000,000 (1,426,000) (30,300,000) Other investing activities -- net................ (3,868,000) (2,120,000) 1,393,000 ------------ ------------ ------------ Net Cash Provided (Used) by Investing Activities.................................. (23,012,000) (43,710,000) 15,502,000 ------------ ------------ ------------ Cash Flows from Financing Activities: Borrowings under short-term financing agreements.................................... 30,141,000 57,111,000 -- Borrowings under long-term debt agreements....... -- -- 5,000,000 Payments on long-term debt agreements............ (356,000) (204,000) (1,226,000) Payments of subordinated debt.................... (1,847,000) (200,000) (5,824,000) Proceeds from issuance of Actava Common Stock.... -- -- 365,000 Cash dividends paid.............................. (6,250,000) (5,956,000) (5,947,000) Decrease in advance to subsidiaries.............. 43,495,000 61,426,000 21,970,000 ------------ ------------ ------------ Net Cash Provided by Financing Activities..... 65,183,000 112,177,000 14,338,000 ------------ ------------ ------------ Increase (Decrease) in Cash................. (116,000) 5,314,000 3,102,000 Cash at beginning of year.......................... 11,432,000 6,118,000 3,016,000 ------------ ------------ ------------ Cash at End of Year......................... $ 11,316,000 $ 11,432,000 $ 6,118,000 ------------ ------------ ------------ ------------ ------------ ------------
S-5 71 SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF THE ACTAVA GROUP INC. -- (CONTINUED) NOTES TO CONDENSED FINANCIAL STATEMENTS NOTE A -- ACCOUNTING POLICIES In the parent-company-only financial statements, Actava's investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries since the date of acquisition. Actava's share of net income of its unconsolidated subsidiaries in these financial statements is included in consolidated income using the equity method. Parent-company-only financial statements should be read in conjunction with Actava's consolidated financial statements. NOTE B -- DEBT Long-term debt consisted of the following:
DECEMBER 31, ----------------------- 1993 1992 ---------- ---------- Capitalized lease obligations......................................... $ -- $4,508,000 Other long-term debt.................................................. 1,580,000 1,668,000 ---------- ---------- $1,580,000 $6,176,000 ---------- ---------- ---------- ----------
Subordinated debt of The Actava Group Inc. is described in "Subordinated Debt" of Notes to Consolidated Financial Statements. Notes payable and long-term debt of The Actava Group Inc. are described in "Notes Payable and Long-Term Debt" of Notes to Consolidated Financial Statements. Maturities of long-term and subordinated debt are $3,764,000 in 1995, $33,849,000 in 1996, $15,171,000 in 1997 and $58,761,000 in 1998. NOTE C -- DIVIDENDS FROM SUBSIDIARIES Cash dividends paid by Qualex Inc. to Actava amounted to $8,614,000 in 1993, $3,886,000 in 1992 and $6,782,000 in 1991. S-6 72 SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT THE ACTAVA GROUP INC. AND SUBSIDIARIES
COL. A COL. B COL. C COL. D COL. E COL. F - ------------------------------------------ ------------ ----------- ----------- --------------- ------------- OTHER BALANCE AT CHANGES -- BEGINNING ADDITIONS ADD (DEDUCT) -- BALANCE AT CLASSIFICATION OF PERIOD AT COST RETIREMENTS DESCRIBE END OF PERIOD - ------------------------------------------ ------------ ----------- ----------- --------------- ------------- Year ended December 31, 1993: Land.................................... $ 8,700,000 $ 19,000 $ 1,836,000 $ 1,420,000A $ 8,303,000 Buildings and improvements................ 57,490,000 7,836,000 4,828,000 11,890,000A 72,289,000 (99,000)C Machinery and equipment................... 343,140,000 42,782,000 21,267,000 28,988,000A 393,643,000 ------------ ----------- ----------- --------------- ------------- Totals............................ $409,330,000 $50,637,000B $27,931,000 $ 42,199,000 $474,235,000 ------------ ----------- ----------- --------------- ------------- ------------ ----------- ----------- --------------- ------------- Year ended December 31, 1992: Land.................................... $ 10,977,000 $ 10,000 $ 2,443,000 $ 156,000C $ 8,700,000 Buildings and improvements.............. 51,804,000 6,470,000 3,615,000 273,000C 57,490,000 2,558,000C Machinery and equipment................. 280,578,000 75,320,000 16,462,000 6,446,000A 343,140,000 (2,742,000)C ------------ ----------- ----------- --------------- ------------- Totals............................ $343,359,000 $81,800,000B $22,520,000 $ 6,691,000 $409,330,000 ------------ ----------- ----------- --------------- ------------- ------------ ----------- ----------- --------------- ------------- Year ended December 31, 1991: Land.................................... $ 10,782,000 $ 675,000 $ 571,000 $ 761,000A $ 10,977,000 (73,000)D (597,000)E Buildings and improvements................ 52,033,000 6,969,000 3,173,000 3,165,000A 51,804,000 (1,849,000)D (5,341,000)E Machinery and equipment................... 257,081,000 51,855,000 12,705,000 8,713,000A 280,578,000 (2,359,000)C (1,889,000)D (20,118,000)E ------------ ----------- ----------- --------------- ------------- Totals............................ $319,896,000 $59,499,000B $16,449,000 $ (19,587,000) $343,359,000 ------------ ----------- ----------- --------------- ------------- ------------ ----------- ----------- --------------- -------------
- --------------- Note A -- Assets acquired in acquisitions of businesses. Note B -- Purchases in the normal course of business. Note C -- Reclassifications and other changes. Note D -- Sale of businesses. Note E -- Reclassification to other assets held for sale. Note F -- The annual provisions for depreciation have been computed principally in accordance with the following ranges of rates: Buildings and improvements 2% to 10% Machinery and equipment 7% to 33% S-7 73 SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT THE ACTAVA GROUP INC. AND SUBSIDIARIES
COL. A COL. B COL. C COL. D COL. E COL. F - ---------------------------------------- ------------ ----------- ----------- -------------- ------------- OTHER ADDITIONS CHANGES -- BALANCE AT CHARGED TO ADD BEGINNING COSTS AND (DEDUCT) -- BALANCE AT CLASSIFICATION OF PERIOD EXPENSES RETIREMENTS DESCRIBE END OF PERIOD - ---------------------------------------- ------------ ----------- ----------- -------------- ------------- Year ended December 31, 1993: Land improvements..................... $ 318,000 $ 29,000 $ -- $ -- $ 347,000 Buildings and improvements............ 17,300,000 3,317,000 1,317,000 151,000A 19,451,000 Machinery and equipment............... 148,102,000 41,319,000 10,590,000 252,000A 179,083,000 ------------ ----------- ----------- -------------- ------------- Totals.......................... $165,720,000 $44,665,000 $11,907,000 $ 403,000 $198,881,000 ------------ ----------- ----------- -------------- ------------- ------------ ----------- ----------- -------------- ------------- Year ended December 31, 1992: Land improvements..................... $ 293,000 $ 25,000 $ -- $ -- $ 318,000 Buildings and improvements............ 16,541,000 2,591,000 1,832,000 -- 17,300,000 Machinery and equipment............... 125,509,000 32,414,000 11,448,000 1,627,000A 148,102,000 ------------ ----------- ----------- -------------- ------------- Totals.......................... $142,343,000 $35,030,000 $13,280,000 $ 1,627,000 $165,720,000 ------------ ----------- ----------- -------------- ------------- ------------ ----------- ----------- -------------- ------------- Year ended December 31, 1991: Land improvements..................... $ 326,000 $ 25,000 $ -- $ (58,000)C $ 293,000 Buildings and improvements............ 17,691,000 2,481,000 1,603,000 (329,000)B 16,541,000 (1,699,000)C Machinery and equipment............... 126,049,000 28,390,000 8,828,000 (452,000)A 125,509,000 (836,000)B (18,814,000)C ------------ ----------- ----------- -------------- ------------- Totals.......................... $144,066,000 $30,896,000 $10,431,000 $(22,188,000) $142,343,000 ------------ ----------- ----------- -------------- ------------- ------------ ----------- ----------- -------------- -------------
- --------------- Note A -- Reclassifications and other changes. Note B -- Sale of businesses. Note C -- Reclassification to other assets held for sale. S-8 74 SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS THE ACTAVA GROUP INC. AND SUBSIDIARIES
COL. A COL. B COL. C COL. D COL. E - --------------------------------- ----------- ------------------------------ ------------ ------------- ADDITIONS (REDUCTIONS) ------------------------------ BALANCE AT CHARGED TO CHARGED TO BALANCE BEGINNING COSTS AND OTHER ACCOUNTS-- DEDUCTIONS -- AT END OF DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD - --------------------------------- ----------- ----------- ---------------- ------------ ------------- Year ended December 31, 1993: Allowances for doubtful $ 9,123,000 A accounts etc (deducted from $ 1,322,000 B current receivables)......... $12,805,000 $ 7,262,000 $ -- $ (605,000 )C $ 10,227,000 ----------- ----------- ---------------- ------------ ------------- ----------- ----------- ---------------- ------------ ------------- Allowances for doubtful accounts, etc. (deducted from non-current notes $ 1,054,000 A receivable).................. $ 3,104,000 $ 4,000 $ -- $(1,934,000 )B $ 3,988,000 ----------- ----------- ---------------- ------------ ------------- ----------- ----------- ---------------- ------------ ------------- Reserve for loss on sales of subsidiaries (included in current liabilities)......... $ 2,418,000 $ -- $ -- $ 265,000 F $ 2,152,000 ----------- ----------- ---------------- ------------ ------------- ----------- ----------- ---------------- ------------ ------------- Reserve for obsolete and excess inventory (included in inventories)................. $ 1,206,000 $ 647,000 $4,909,000 C $ 4,795,000 A $ 1,967,000 ----------- ----------- ---------------- ------------ ------------- ----------- ----------- ---------------- ------------ ------------- Reserve for relocation and consolidation of facilities (included in current $ 2,393,000 B liabilities)................. $13,168,000 $ 3,231,000 $ -- $ 7,252,000 E $ 6,754,000 ----------- ----------- ---------------- ------------ ------------- ----------- ----------- ---------------- ------------ ------------- Reserve for loss on sale of partnership interest (included in current liabilities)................. $ 1,245,000 $ 3,000,000 $ -- $ -- $ 4,245,000 ----------- ----------- ---------------- ------------ ------------- ----------- ----------- ---------------- ------------ -------------
S-9 75 SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS -- (CONTINUED) THE ACTAVA GROUP INC. AND SUBSIDIARIES
COL. A COL. B COL. C COL. D COL. E - --------------------------------- ----------- ------------------------------ ------------ ------------- ADDITIONS (REDUCTIONS) ------------------------------ BALANCE AT CHARGED TO CHARGED TO BALANCE BEGINNING COSTS AND OTHER ACCOUNTS-- DEDUCTIONS -- AT END OF DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD - --------------------------------- ----------- ----------- ---------------- ------------ ------------- Year ended December 31, 1992: Allowances for doubtful accounts etc (deducted from $ 3,900,000 A current receivables)......... $13,953,000 $ 4,209,000 $ -- $ 1,457,000 B $ 12,805,000 ----------- ----------- ---------------- ------------ ------------- ----------- ----------- ---------------- ------------ ------------- Allowances for doubtful accounts, etc. (deducted from non-current notes receivable).................. $ 3,590,000 $ (790,000) $1,457,000 B $ 1,153,000 B $ 3,104,000 ----------- ----------- ---------------- ------------ ------------- ----------- ----------- ---------------- ------------ ------------- Reserve for loss on sales of subsidiaries (included in current liabilities)......... $ 3,268,000 $ -- $ -- $ 850,000 A $ 2,418,000 ----------- ----------- ---------------- ------------ ------------- ----------- ----------- ---------------- ------------ ------------- Reserve for obsolete and excess inventory (included in inventories)................. $ 1,397,000 $ -- $ -- $ 191,000 A $ 1,206,000 ----------- ----------- ---------------- ------------ ------------- ----------- ----------- ---------------- ------------ ------------- Reserve for relocation and consolidation of facilities (included in current liabilities)................. $40,747,000 $(1,506,000) $ -- $26,073,000 E $ 13,168,000 ----------- ----------- ---------------- ------------ ------------- ----------- ----------- ---------------- ------------ ------------- Reserve for loss on sale of partnership interest (included in current liabilities)................. $ 1,500,000 $ -- $ -- $ 255,000 F $ 1,245,000 ----------- ----------- ---------------- ------------ ------------- ----------- ----------- ---------------- ------------ -------------
S-10 76 SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS -- (CONTINUED) THE ACTAVA GROUP INC. AND SUBSIDIARIES
COL. A COL. B COL. C COL. D COL. E - --------------------------------- ----------- ------------------------------ ------------ ------------- ADDITIONS (REDUCTIONS) ------------------------------ BALANCE AT CHARGED TO CHARGED TO BALANCE BEGINNING COSTS AND OTHER ACCOUNTS-- DEDUCTIONS -- AT END OF DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD - --------------------------------- ----------- ----------- ---------------- ------------ ------------- Year ended December 31, 1991: Allowances for doubtful accounts, etc. (deducted from current receivables)......... $ 9,912,000 $ 5,401,000 $ (231,000)B $ 1,129,000 A $ 13,953,000 ----------- ----------- ---------------- ------------ ------------- ----------- ----------- ---------------- ------------ ------------- Allowances for doubtful accounts, etc. (deducted from non-current notes receivable).................. $ 4,103,000 $ 84,000 $ 479,000B $ 1,076,000 A $ 3,590,000 ----------- ----------- ---------------- ------------ ------------- ----------- ----------- ---------------- ------------ ------------- Reserve for loss on sales of subsidiaries (included in current liabilities)......... $ 3,468,000 $ -- $ -- $ 200,000 A $ 3,268,000 ----------- ----------- ---------------- ------------ ------------- ----------- ----------- ---------------- ------------ ------------- Reserve for obsolete and excess inventory (included in inventories)................. $ 5,008,000 $ -- $ -- $ 3,611,000 F $ 1,397,000 ----------- ----------- ---------------- ------------ ------------- ----------- ----------- ---------------- ------------ ------------- Reserve for relocation and consolidation of facilities (included in current liabilities)................. $29,853,000 $18,969,000 $ -- $ 8,075,000 E $ 40,747,000 ----------- ----------- ---------------- ------------ ------------- ----------- ----------- ---------------- ------------ ------------- Reserve for loss on sale of partnership interest (included in current liabilities)................. $ -- $ 1,500,000 $ -- $ -- $ 1,500,000 ----------- ----------- ---------------- ------------ ------------- ----------- ----------- ---------------- ------------ -------------
- --------------- Note A -- Uncollectible accounts charged off -- net of recoveries. Note B -- Reclassifications and other changes. Note C -- Acquisition of business Note D -- Losses of subsidiaries held for disposition and discontinued operations. Note E -- Costs incurred in consolidation of facilities. Note F -- Costs incurred. S-11 77 SCHEDULE IX -- SHORT-TERM BORROWINGS THE ACTAVA GROUP INC. AND SUBSIDIARIES
COL. A COL. B COL. C COL. D COL. E COL. F - ----------------------------- ------------ -------- ------------ ------------ ------------- MAXIMUM AVERAGE WEIGHTED WEIGHTED AMOUNT AMOUNT AVERAGE BALANCE AT AVERAGE OUTSTANDING OUTSTANDING INTEREST RATE CATEGORY OF AGGREGATE END OF INTEREST DURING THE DURING THE DURING THE SHORT-TERM BORROWINGS PERIOD RATE PERIOD PERIOD(B) PERIOD(C) - ----------------------------- ------------ -------- ------------ ------------ ------------- Year ended December 31, 1993: Notes payable to banks(A)................ $135,114,000 7.29% $189,927,149 $116,784,706 7.82% Year ended December 31, 1992: Notes payable to banks(A)................ 64,795,000 7.24 123,114,000 61,027,000 7.74 Year ended December 31, 1991: Notes payable to banks(A)................ 10,000,000 5.66 20,650,000 2,401,000 6.14
- --------------- Note A -- Notes payable to banks represent borrowings under lines of credit arrangements that are reviewed and renewed periodically. Note B -- The average amount outstanding during the period was computed by dividing the total of daily outstanding principal balances by 360, or by the number of days the lines of credit were available. Note C -- The weighted-average interest rate during the period was computed by dividing the actual interest expense by average short-term debt outstanding. S-12 78 SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION THE ACTAVA GROUP INC. AND SUBSIDIARIES
COL. A COL. B - ------------------------------------------------------ ----------------------------------------- CHARGED TO COSTS AND EXPENSES ----------------------------------------- CHARGED TO CONTINUING OPERATIONS YEAR ENDED DECEMBER 31, ----------------------------------------- ITEM 1993 1992 - ------------------------------------------------------ ----------- ----------- Depreciation of fixed assets.......................... $44,665,000 $35,030,000 $30,896,000 Advertising........................................... 41,398,000 45,509,000 47,642,000 Maintenance and repairs............................... 20,178,000 18,864,000 17,872,000 Amortization of intangibles........................... 25,780,000 24,007,000 13,118,000
Amounts for taxes, other than payroll and income taxes, and royalties are not presented as such amounts are less than 1% of total sales and revenues. S-13 79 INDEX TO EXHIBITS
EXHIBITS INCORPORATED HEREIN BY REFERENCE --------------------------------------------------- DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT - --------------- ----------------------------- ----------------------------- -------------------- 3(a)(i) Restated Certificate of Incorporation of Actava 3(b)(i) Restated By-laws of Actava 4(a) Reference is made to Exhibit 3(a)(i) 4(b)(i) Indenture dated as of August Application on Form T-3 for Exhibit T3C 1, 1973, with respect to Qualification of Indenture 9 1/2% Subordinated under the Trust Indenture Act Debentures due August 1, of 1939 (File No. 22-7615) 1998, between Actava and Chemical Bank, as Trustee 4(b)(ii) Agreement among Actava, Chem- Registration Statement on Exhibit 4(d)(ii) ical Bank and Manufacturers Form S-14 (Registration No. Hanover Trust Company, dated 2-81094) as of September 26, 1980, with respect to successor trusteeship of the 9 1/2% Subordinated Debentures due August 1, 1998 4(b)(iii) Instrument of resignation, Annual Report on Form 10-K Exhibit 4(d)(iii) appointment and acceptance for the year ended December dated as of June 9, 1986 31, 1986 among Actava, Manufacturers Hanover Trust Company and Irving Trust Company, with respect to successor trustee- ship of the 9 1/2% Subordinated Debentures due August 1, 1998 4(c)(i) Indenture dated as of March Registration Statement on Exhibit 2(d) 15, 1977, with respect to Form S-7 (Registration No. 9 7/8% Senior Subordinated 2-58317) Debentures due March 15, 1997, between Actava and The Chase Manhattan Bank, N.A., as Trustee 4(c)(ii) Agreement among Actava, The Registration Statement on Exhibit 4(e)(ii) Chase Manhattan Bank, N.A. Form S-14 (Registration No. and United States Trust 2-81094) Company of New York, dated as of June 14, 1982, with respect to successor trusteeship of the 9 7/8% Senior Subordinated Debentures due March 15, 1997 4(d)(i) Indenture between National Post-Effective Amendment No. Exhibit T3C Industries, Inc. and First 1 to Application on Form T-3 National City Bank, dated for Qualification of October 1, 1974, for the 10% Indenture Under The Trust Subordinated Debentures, due Indenture Act of 1939 (File October 1, 1999 No. 22-8076)
80
EXHIBITS INCORPORATED HEREIN BY REFERENCE --------------------------------------------------- DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT - --------------- ----------------------------- ----------------------------- -------------------- 4(d)(ii) Agreement among National In- Registration Statement on Exhibit 4(f)(ii) dustries, Inc., Actava, Form S-14 (Registration No. Citibank, N.A., and Marine 2-81094) Midland Bank, dated as of December 20, 1977, with respect to successor trustee- ship of the 10% Subordinated Debentures due October 1, 1999 4(d)(iii) First Supplemental Indenture Registration Statement on Exhibit 2(q) among Actava, National Indus- Form S-7 (Registration No. tries, Inc. and Marine 2-60566) Midland Bank, dated January 3, 1978, supplemental to the Indenture dated October 1, 1974 between National and First National City Bank for the 10% Subordinated Debentures due October 1, 1999 4(e) Public Bond Issue Agreement Annual Report on Form 10-K Exhibit 4(h) dated February 19, 1986, with for the year ended December respect to 6% Senior 31, 1985 Subordinated Swiss Franc Bonds due March 6, 1996, among Actava, Soditic S.A. and certain other institutions named therein 4(f) Indenture dated as of August Annual Report on Form 10-K Exhibit 4(i) 1, 1987 with respect to for the year ended December 6 1/2% Convertible 31, 1987 Subordinated Debentures due August 4, 2002, between Ac- tava and Chemical Bank, as Trustee 4(g) Loan and Security Agreement, Amendment No. 1 to Registra- Exhibit 4(i) dated as of April 30, 1992, tion Statement on Form S-3 with respect to $35 million (Registration No. 33-48202) secured revolving credit facility, among Actava, certain of its subsidiaries and Barclays Business Credit, Inc. 4(h) Senior Note Agreement, dated Amendment No. 1 to Registra- Exhibit 4(j) as of June 8, 1992, with tion Statement on Form S-3 respect to private placement (Registration No. 33-48202) of $200 million of Senior Notes due 1997, 1999 and 2002, among Qualex Inc. and the purchasers listed therein.
81
EXHIBITS INCORPORATED HEREIN BY REFERENCE --------------------------------------------------- DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT - --------------- ----------------------------- ----------------------------- -------------------- 4(i) Credit Agreement, dated as of October 30, 1992, with respect to a $115 million revolving credit facility, among Qualex Inc. and the eight participants thereto. A copy of this agreement is not filed as the debt does not exceed 10% of the total assets of total assets of registrant; however, registrant hereby agrees to furnish a copy of such agreement to the Commission upon request. 4(j)(i) Finance and Security Agreement, dated as of October 30, 1992, with respect to a revolving credit facility of up to $100 million, between Actava Industries, Inc. and ITT Commercial Finance Corp. A copy of this agreement is not filed as the debt does not exceed 10% of the total assets of registrant; how- ever, registrant hereby agrees to furnish a copy of such agreement to the Commission upon request. 4(j)(ii) Amendment, dated as of March 29, 1994, to Finance and Security Agreement, dated as of October 30, 1992, with respect to a revolving credit facility of up to $100 million, between Actava In- dustries, Inc. and ITT Commercial Finance Corp. A copy of this agreement is not filed as the debt does not exceed 10% of the total assets of registrant; however, registrant hereby agrees to furnish a copy of such agreement to the Commission upon request.
82
EXHIBITS INCORPORATED HEREIN BY REFERENCE --------------------------------------------------- DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT - --------------- ----------------------------- ----------------------------- -------------------- 4(k) Loan and Security Agreement, dated as of December 29, 1992, with respect to a revolving credit facility of up to $35 million between Nelson/Weather-Rite, Inc. and BA Business Credit, Inc. A copy of this agreement is not filed as the debt does not exceed 10% of the total assets of registrant; how- ever, registrant hereby agrees to furnish a copy of such agreement to the Commission upon request. 4(l)(i) Finance and Security Agreement, dated as of December 15, 1993, with respect to a revolving credit facility of up to $50 million, between Diversified Products Corporation and ITT Commercial Finance Corp. and the Provident Bank. A copy of this agreement is not filed as the debt does not exceed 10% of the total assets of registrant; however, registrant hereby agrees to furnish a copy of such agreement to the commission upon request. 4(l)(ii) Amendment, dated as of March 29, 1994, to Finance and Security Agreement, dated as of December 15, 1993, with respect to a revolving credit facility of up to $50 million, between Diversified Products Corporation and ITT Commercial Finance Corp. and the Provident Bank. A copy of this agreement is not filed as the debt does not exceed 10% of the total assets of registrant; however, regis- trant hereby agrees to furnish a copy of such agreement to the commission upon request.
83
EXHIBITS INCORPORATED HEREIN BY REFERENCE --------------------------------------------------- DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT - --------------- ----------------------------- ----------------------------- -------------------- 4(m) Revolving Loan and Security Agreement, dated as of April 29, 1993, with respect to a revolving credit facility of up to $10 million between Willow Hosiery Company, Inc. and Sterling National Bank and Trust Company of New York. A copy of this agreement is not filed as the debt does not exceed 10% of the total assets of registrant; however, registrant hereby agrees to furnish a copy of such agreement to the Commission upon request. 4(m) Amended and Restated $5 Million Revolving Note, Amended and Restated $3 Million Letter of Credit Note, and First Amendment to the Revolving Loan Agreement dated as of August 31, 1993, and Revolving Loan Agreement dated as of August 24, 1992, between Hutch Sports USA Inc. and the Fifth Third Bank. Copies of these agreements are not filed as the debt does not exceed 10% of the total assets of the registrant; however, registrant hereby agrees to furnish copies of such agree- ments to the Commission upon request. 10(a)(i) 1982 Stock Option Plan of Proxy Statement dated March Exhibit A Actava 31, 1982 10(a)(ii) 1989 Stock Option Plan of Proxy Statement dated March Exhibit A Actava 31, 1989 10(a)(iii) 1969 Restricted Stock Plan of Annual Report on Form 10-K Exhibit 10(a)(iii) Actava for the year ended December 31, 1990 10(a)(iv) 1991 Non-Employee Director Annual Report on Form 10-K Exhibit 10(a)(iv) Stock Option Plan for the year ended December 31, 1991 10(a)(v) Amendment to 1991 Non-Em- Annual Report on Form 10-K Exhibit 10(a)(v) ployee Director Stock Option for the year ended December Plan 31, 1992 10(b) Form of Severance Agreement Annual Report on Form 10-K Exhibit 10(c) between officers of Actava for the year ended December and Actava dated May 20, 1985 31, 1985
84
EXHIBITS INCORPORATED HEREIN BY REFERENCE --------------------------------------------------- DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT - --------------- ----------------------------- ----------------------------- -------------------- 10(c) Snapper Power Equipment Annual Report on Form 10-K Exhibit 10(c) Profit Sharing Plan for the year ended December 31, 1987 10(f)(iii) Termination Agreement between Annual Report on Form 10-K Exhibit 10(f)(iii) J. B. Fuqua and Actava dated for the year ended December March 18, 1991 31, 1990 10(h)(i) Retirement Plan executed No- Annual Report on Form 10-K Exhibit 10(h)(i) vember 1, 1990 as amended to for the year ended December be effective January 1, 1989 31, 1990 10(h)(ii) Supplemental Retirement Plan Annual Report on Form 10-K Exhibit 10(j) of Actava for the year ended December 31, 1983 10(h)(iii) Supplemental Executive Annual Report on Form 10-K Exhibit 10(h)(iii) Medical Reimbursement Plan for the year ended December 31, 1990 10(h)(iv) Amendment to Supplemental Re- Annual Report on Form 10-K Exhibit 10(h)(iv) tirement Plan of Actava for the year ended December effective April 1, 1992 31, 1991 10(i)(i) Shareholders' Agreement dated Annual Report on Form 10-K Exhibit 10(j) as of December 7, 1987 by and for the year ended December between Eastman Kodak Company 1, 1987 and Actava 10(i)(ii) Amendment No. 1, dated as of Current Report on Form 8-K Exhibit 2(b) March 29, 1988 to the dated April 12, 1988 Shareholders' Agreement dated as of June 7, 1987 between Eastman Kodak Company and Actava 10(i)(iii) Amendment No. 2, dated as of Annual Report on Form 10-K Exhibit 10(i)(iii) March 28, 1991 to the for the year ended December Shareholders' Agreement dated 31, 1990 as of June 7, 1987 between Eastman Kodak Company and Actava 10(j) Stockholder Agreement dated Quarterly Report on Form 10-Q Exhibit 3 as of May 22, 1989 by and for the three months ended between Actava and Triton June 30, 1989 Group Ltd. 10(j)(ii) Loan Agreement dated Novem- Annual Report on Form 10-K Exhibit 10(j)(ii) ber 27, 1991 between Actava for the year ended December and Triton Group Ltd. 31, 1991 10(k)(i) Form of Post Employment Con- Annual Report of Form 10-K Exhibit 10(k) sulting Agreement between of- for the year ended December ficers of Actava and Actava 31, 1991 10(k)(ii) Form of First Amendment to Post-employment Consulting Agreement between officers of Actava and Actava
85
EXHIBITS INCORPORATED HEREIN BY REFERENCE --------------------------------------------------- DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT - --------------- ----------------------------- ----------------------------- -------------------- 10(l) 1992 Officer and Director Annual Report on Form 10-K Exhibit 10(l) Stock Purchase Plan for the year ended December 31, 1991 10(m) Director Group Medical Plan Annual Report on Form 10-K Exhibit 10(m) for the year ended December 31, 1991 10(n) Form of Restricted Stock Annual Report on Form 10-K Exhibit 10(n) Purchase Agreement between for the year ended December certain officers of Actava 31, 1991 and Actava 10(o) Incentive Bonuses for Certain Annual Report on Form 10-K Exhibit 10(o) Corporate Officers for the year ended December 31, 1991 10(p)(i) Forbearance Agreement dated Amendment No. 1 Registration Exhibit 10(o) June 30, 1992 between Actava, Statement on Form S-3 (Regis- Triton Group Ltd. and tration No. 33-48202) Intermark, Inc. 10(p)(ii) Amendment, dated July 13, Quarterly Report on Form 10-Q Exhibit 5 1992, to Forbearance for the three months ended Agreement dated June 30, 1992 June 30, 1992 between Actava, Triton Group Ltd. and Intermark, Inc. 10(p)(iii) Amendment, dated July 30, Quarterly Report on Form 10-Q Exhibit 6 1992, to Forbearance for the three months ended Agreement dated June 30, 1992 June 30, 1992 between Actava, Triton Group Ltd. and Intermark, Inc., as amended by Amendment to Forbearance Agreement dated July 13, 1992. 10(p)(iv) Amendment, dated September Quarterly Report on Form 10-Q Exhibit 4 23, 1992, to Forbearance for the three months ended Agreement dated June 30, 1992 September 30, 1992 between Actava Industries, Inc., Triton Group Ltd. and Intermark, Inc., as amended by Amendments to Forbearance Agreement dated July 13, 1992 and July 30, 1992. 10(p)(v) Amendment, dated October 7, Quarterly Report on Form 10-Q Exhibit 5 1992, to Forbearance for the three months ended Agreement dated June 30, 1992 September 30, 1992 between Actava Industries, Inc., Triton Group Ltd. and Intermark, Inc., as amended by Amendments to Forbearance Agreement dated July 13, July 30, and September 23, 1992.
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EXHIBITS INCORPORATED HEREIN BY REFERENCE --------------------------------------------------- DESIGNATION DOCUMENT WITH WHICH EXHIBIT DESIGNATION OF SUCH OF EXHIBIT IN DESCRIPTION OF WAS PREVIOUSLY FILED WITH EXHIBIT IN THAT THIS FORM 10-K EXHIBITS COMMISSION DOCUMENT - --------------- ----------------------------- ----------------------------- -------------------- 10(q) Agreement between The Actava Annual Report on Form 10-K Exhibit 10(q) Group Inc. and J.B. Fuqua for the year ended December regarding sale by The Actava 31, 1992 Group, Inc. of rights in the name "Actava". 10(r) Amended and Restated Loan Quarterly report on Form 10-Q Exhibit 19 Agreement between The Actava for the three months ended Group Inc. and Triton Group June 30, 1993. Ltd. dated June 25, 1993. 10(s) First Amendment, dated Au- Quarterly Report on Form 10-Q Exhibit 19 gust 19, 1993 to Amended and for the three months ended Restated Loan Agreement be- September 30, 1993 tween The Actava Group Inc. and Triton Group Ltd. dated June 5, 1993 10(t) Second Amendment, dated De- cember 7, 1993 to Amendment and Restated Loan Agreement between The Actava Group Inc. and Triton Group Ltd. dated June 25, 1993 10(u) Form of Indemnification Agreement between Actava and each of its directors and executive officers 10(v) 1993 Incentive Bonus Plan for Confidential Treatment Re- certain corporate officers quested by the Company. Filed separately with the Commission. 11 Statement of computation of earnings per share 18 Letter regarding change in Annual Report on Form 10-K Exhibit 18 accounting principle for the for the year ended December costs associated with proof 31, 1992 advertising program. 22 Subsidiaries of Actava 23 Consent of Ernst & Young 24 Powers-of-Attorney
- --------------- (b) Reports on Form 8-K filed in the fourth quarter of 1993: None. (c) The response to this portion of Item 14 is submitted as a separate section in this report. (d) The response to this portion of Item 14 is submitted as a separate section in this report. EX-3.A.I 2 RESTATED CERTIFICATE OF INCORPORATION 1 EXHIBIT 3(a)(i) STATE OF DELAWARE PAGE 1 OFFICE OF THE SECRETARY OF STATE -------------------------------- I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF "THE ACTAVA GROUP INC.", FILED IN THIS OFFICE ON THE TWENTY-EIGHTH DAY OF MARCH, A.D. 1994, AT 1:50 O'CLOCK P.M. A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING. /s/ WILLIAM T. QUILLEN -------------------------------------- WILLIAM T. QUILLEN, SECRETARY OF STATE AUTHENTICATION: 7072077 DATE: 03-29-94 2 RESTATED CERTIFICATE OF INCORPORATION OF THE ACTAVA GROUP INC. This is the Restated Certificate of Incorporation of The Actava Group Inc. (hereinafter called the Corporation), which was originally incorporated under the name "F.I., Inc." The original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on March 15, 1968. Prior Restated Certificates of Incorporation were filed with the Secretary of State of the State of Delaware on September 13, 1974, November 23, 1982 and May 17, 1985, respectively. A Certificate of Amendment was filed with the Secretary of State of the State of Delaware on May 27, 1987 and a Certificate of Ownership and Merger was filed with the Secretary of State of the State of Delaware on July 19, 1993. This Restated Certificate of Incorporation was duly adopted by the Board of Directors of the Corporation in accordance with the provisions of Section 245 of the General Corporation Law of the State of Delaware and only restates and integrates and does not further amend the provisions of the Corporation's Certificate of Incorporation as heretofore amended or supplemented. There is no discrepancy between the provisions of the Corporation's Certificate of Incorporation as heretofore amended or supplemented and the provisions of this Restated Certificate of Incorporation, which are as follows: FIRST: The name of the corporation (hereinafter called the Corporation) is THE ACTAVA GROUP INC. SECOND: The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle. The name of the Corporation's registered agent at such address is The Corporation Trust Company. THIRD: The nature of the business or purposes of the Corporation are as follows: (1) To engage in the business of broadcasting, televising, transmitting and otherwise communicating by closed circuit, radio, television, microwave and any and all other lawful means; to engage in the business of producing, selling, licensing and otherwise generally trading and dealing in entertainment and advertising of every kind and description; to construct and to engage in the business of constructing buildings and structures of all kinds including, without limitation, grain storage bins and related equipment and metal buildings; to engage in the business of developing, printing and other processing of, and selling and distributing, photographic film; to manufacture, buy, sell, fabricate, process and deal in lawn mowing equipment and garden 3 tools and earth moving and tillage equipment and machinery; to engage in the business of forming, joining, fabricating and bending tin, steel, and other metals and products constructed thereof; and to buy, sell, mortgage, lease, manage, hold, partition and deal in real estate, land and buildings. (2) To manufacture, fabricate, import, export, purchase, sell, mortgage, lease, manage, hold, trade and deal in manufactured products, materials, processes, systems, goods, wares and merchandise of every kind and description; and to hold the stock and other securities issued by subsidiary and other corporations engaged in any and every lawful kind of business or enterprise. (3) To conduct and carry on research work in, and to engage in any activity pertaining or incidental to any scientific, technical or other field or fields, and to render services of a scientific, technical, managerial, administrative or other nature to any person, association, firm, corporation, country, state, municipality or other governmental division or subdivision. (4) To engage in any other lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The aggregate number of shares which the Corporation shall have the authority to issue and have outstanding is: (i) 100,000,000 shares of Common Stock, $1 par value (hereinafter called the "Common Stock"); (ii) 1,000,000 shares of Preference Stock, no par value (hereinafter called the "Preference Stock"); and (iii) 5,000,000 shares of Preferred Stock, $1 par value (hereinafter called the "Preferred Stock"). Each share of Common Stock shall have one vote. Each share of Preference Stock and Preferred Stock shall have such voting powers, if any, as shall be fixed by the Board of Directors as hereinafter provided. Except as expressly otherwise hereinafter provided or as required by law, all shares having a vote shall vote together and not as separate classes on all matters at meetings of stockholders. None of the holders of shares of stock of any class shall have any preemptive rights to subscribe to any additional issue of stock of any class. (A) PREFERRED STOCK Shares of Preferred Stock may be issued from time to time in one or more series as may from time to time be determined by the Board of Directors, each of said series to be 2 4 distinctly designated. All shares of any one series of Preferred Stock shall be alike in every particular, except that there may be different dates from which dividends, if any, thereon shall be cumulative, if made cumulative. The voting powers and the preferences and relative, participating, optional and other special rights of each such series, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding; and the Board of Directors of the Corporation is hereby expressly granted authority to fix the voting powers and the designations, preferences and relative, optional and other special rights, and the qualifications, limitations and restrictions of such series, including, without limitation, the following: (1) The distinctive designation of, and the number of shares which shall constitute such series, which number may be increased (except where otherwise provided by the Board of Directors) or decreased (but not below the number of shares thereof then outstanding) from time to time by like action of the Board of Directors; (2) The rate and times at which, and the terms and conditions on which, dividends, if any, on shares of such series shall be paid, the extent of the preference or relation, if any, of such dividends to the dividends payable on any other series of Preferred Stock (all of which shall be preferred to all Preference Stock and the Common Stock) and whether such dividends shall be cumulative or non-cumulative; (3) The right, if any, of the holders of shares of such series to convert the same into or exchange the same for, shares of any other class or classes or of any series of the same or any other class or classes of stock of the Corporation and the terms and conditions of such conversion or exchange; (4) Whether or not shares of such series shall be subject to redemption, and the redemption price or prices and the time or times at which, and the terms and conditions on which shares of such series may be redeemed; (5) The rights, if any, of the holders of shares of such series (all of which shall be preferred to all Preference Stock and the Common Stock) upon the voluntary or involuntary liquidation, merger, consolidation, distribution or sale of assets, dissolution or winding-up, of the Corporation; 3 5 (6) The terms of the sinking fund or redemption or purchase account, if any, to be provided for shares of such series; and (7) The voting powers, if any, of the holders of such series which may, without limiting the generality of the foregoing, include the right, voting as a series or by itself or together with other series of Preferred Stock or all series of Preferred Stock as a class, to elect one or more directors of the Corporation if there shall have been a default in the payment of dividends on any one or more series of Preferred Stock or under such other circumstances and on such conditions as the Board of Directors may determine. The relative powers, preferences and rights of each series of Preferred Stock in relation to the relative powers, preferences and rights of each other series of Preferred Stock shall, in each case, be as fixed from time to time by the Board of Directors and the consent, by class or series vote or otherwise, of the holders of any series of Preferred Stock outstanding shall not be required for the issuance by the Board of Directors of any other series of Preferred Stock whether or not the powers, preferences and rights of such other series shall be fixed by the Board of Directors as senior to, or on a parity with, the powers, preferences and rights of such outstanding series; provided, however, that the Board of Directors may provide as to any series of Preferred Stock that the consent of the holders of a majority (or such greater proportion as shall be fixed) of the outstanding shares of such series voting thereon shall be required for the issuance of any or all other series of Preferred Stock. Subject to the provisions hereof, shares of any series of Preferred Stock may be issued from time to time as the Board of Directors of the Corporation shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors. Shares of Preferred Stock from time to time acquired by the Corporation upon redemption, purchase, conversion or otherwise shall be restored to the status of authorized but unissued shares of Preferred Stock without serial designation. (B) PREFERENCE STOCK Subject to the provisions of Section (A) of this Article Fourth relating to the Preferred Stock, shares of Preference Stock may be issued from time to time in one or more series as may from time to time be determined by the Board of Directors, each of said series to be distinctly designated. All shares of any one series of Preference Stock shall be alike in every particular, except that there may be different dates from which dividends, if any, thereon shall be cumulative, if made 4 6 cumulative. The voting powers and the preferences and relative, participating, optional and other special rights of each such series, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding; and the Board of Directors of the Corporation is hereby expressly granted authority to fix the voting powers and the designations, preferences and relative, optional and other special rights and the qualifications, limitations and restrictions of such series, including, without limitation, the following: (1) The distinctive designation of, and the number of shares which shall constitute such series, which number may be increased (except where otherwise provided by the Board of Directors) or decreased (but not below the number of shares thereof then outstanding) from time to time by like action of the Board of Directors; (2) The rate and times at which, and the terms and conditions on which, dividends, if any, on shares of such series shall be paid, the extent of the preference or relation, if any, of such dividends to the dividends payable on any other series of Preference Stock (all of which shall be subordinate to the Preferred Stock but preferred to the Common Stock) and whether such dividends shall be cumulative or non-cumulative; (3) The right, if any, of the holders of shares of such series to convert the same into or exchange the same for, shares of any other class or classes or of any series of the same or any other class or classes of stock of the Corporation and the terms and conditions of such conversion or exchange; (4) Whether or not shares of such series shall be subject to redemption, and the redemption price or prices and the time or times at which, and the terms and conditions on which shares of such series may be redeemed; (5) The rights, if any, of the holders of shares of such series (all of which shall be subordinate to the Preferred Stock but preferred to the Common Stock) upon the voluntary or involuntary liquidation, merger, consolidation, distribution or sale of assets, dissolution or winding-up, of the Corporation; (6) The terms of the sinking fund or redemption or purchase account, if any, to be provided for shares of such series; and (7) The voting powers, if any, of the holders of such series which may, without limiting the generality of 5 7 the foregoing, include the right, voting as a series or by itself or together with other series of Preference Stock or all series of Preference Stock as a class, to elect one or more directors of the Corporation if there shall have been a default in the payment of dividends on any one or more series of Preference Stock or under such other circumstances and on such conditions as the Board of Directors may determine. The relative powers, preferences and rights of each series of Preference Stock in relation to the relative powers, preferences and rights of each other series of Preference Stock shall, in each case, be as fixed from time to time by the Board of Directors and the consent, by class or series vote or otherwise, of the holders of any series of Preference Stock outstanding shall not be required for the issuance by the Board of Directors of any other series of Preference Stock whether or not the powers, preferences and rights of such other series shall be fixed by the Board of Directors as senior to, or on a parity with, the powers, preferences and rights of such outstanding series; provided, however, that the Board of Directors may provide as to any series of Preference Stock that the consent of the holders of a majority (or such greater proportion as shall be fixed) of the outstanding shares of such series voting thereon shall be required for the issuance of any or all other series of Preference Stock. Subject to the provisions hereof, shares of any series of Preference Stock may be issued from time to time as the Board of Directors of the Corporation shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors. Shares of Preference Stock from time to time acquired by the Corporation upon redemption, purchase, conversion or otherwise shall be restored to the status of authorized but unissued shares of Preference Stock without serial designation. (C) COMMON STOCK Each share of Common Stock issued and outstanding shall be identical in all respects one with the other, and no dividend shall be paid on any shares of Common Stock unless the same dividend is paid on all shares of Common Stock outstanding at the time of such payment. Except for and subject to those rights expressly granted to the holders of the Preferred Stock and of the Preference Stock, or except as may be provided by the laws of the State of Delaware, the holders of the Common Stock shall have exclusively all other rights of stockholders including but not by way of limitation (i) the right to receive dividends, when and as declared by the Board of Directors out of assets lawfully available therefor, and (ii) in the event of any distribution of assets 6 8 upon liquidation, dissolution or winding up of the Corporation or otherwise, the right to receive ratably and equally all of the assets and funds of the Corporation remaining after the payment to the holders of other classes of stock of the Corporation of the specific amounts which they are entitled to receive upon such liquidation, dissolution or winding up of the Corporation as hereinbefore provided. Before any sum or sums shall be set aside for or applied to the purchase of Common Stock and before any dividend shall be declared or paid or any distribution ordered or made upon the Common Stock (other than a dividend payable in Common Stock), the Corporation shall comply with any sinking fund provisions applicable to Preferred Stock and to Preference Stock of all series then outstanding. FIFTH: Unless and except to the extent that the By-laws of the Corporation shall so require, the election of directors of the Corporation need not be by written ballot. SIXTH: The Board of Directors is expressly authorized and empowered to make, alter and repeal the By-laws of the Corporation, subject to the power of the stockholders of the Corporation to alter or repeal any or all By-laws made by the Board of Directors. SEVENTH: Any director or any officer of the Corporation elected or appointed by the stockholders of the Corporation or by its Board of Directors may be removed at any time in such manner as shall be provided in the By-laws of the Corporation. EIGHTH: The Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed by law; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to the right reserved in this Article. NINTH: (A) Except as expressly permitted in paragraph (B) hereof, any purchase by the Corporation, or any subsidiary of the Corporation, of shares of Voting Stock (as hereinafter defined) from a person or persons known by the Board of Directors of the Corporation to be an Interested Stockholder (as hereinafter defined), and who has beneficially owned such Voting Stock for less than 24 months prior to the date of such purchase, at a price in excess of the interested Stockholder's Average Price (as hereinafter defined), shall require the affirmative vote 7 9 of not less than a majority of the votes cast by the holders, voting together as a single class, of all then outstanding shares of capital stock of the Corporation entitled to vote generally on matters relating to the Corporation, excluding for this purpose the votes by the Interested Stockholder, unless a greater vote shall be required by law. (B) The provisions of paragraph (A) hereof shall not be applicable to any purchase of shares of Voting Stock if such purchase is pursuant to (i) an offer of substantially the same value to all holders of the outstanding shares of the same class as those purchased, (ii) a tender offer or exchange offer by the Corporation for some or all of the outstanding shares of a class of Voting Stock made on the same terms to all holders of such shares, or (iii) any purchase effected on the open market and not the result of a privately-negotiated transaction. (C) For the purposes of this Article NINTH: (i) "Voting Stock" shall mean any stock of the Corporation having the right to vote generally on matters relating to the Corporation and any security which is convertible into such stock. (ii) "Interested Stockholder" shall mean any person who or which is the beneficial owner, directly or indirectly, of Voting Stock possessing 5% or more of the aggregate vote of all outstanding shares of Voting Stock, excluding from the foregoing: (a) The Corporation or any subsidiary of the Corporation; (b) Any profit sharing, employee stock ownership or other employee benefit plan of the Corporation or any subsidiary thereof, or any trustee or other fiduciary with respect to any such plan when acting in such capacity; or (c) any person who was the owner of 5% or more of the Voting Stock on March 15, 1985 (or the estate of such person). (iii) A person shall be a "beneficial owner" of any Voting Stock of the Corporation: (a) which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; or 8 10 (b) which such person or any of its Affiliates or Associates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (ii) any right to vote pursuant to any agreement, arrangement or understanding; or (c) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing any Voting Stock of the Corporation. (iv) For the purposes of determining whether a person is an Interested Stockholder pursuant to subparagraph (ii) hereof, Voting Stock outstanding shall be deemed to comprise all Voting Stock deemed owned through application of subparagraph (iii) hereof, but shall not include other Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. (v) "Affiliate" or "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on March 15, 1985. (vi) "Interested Stockholder's Average Price" shall mean as to each class of stock or other security which constitutes Voting Stock the average price per unit thereof paid for all such stock or other securities purchased within 24 months prior to the date of determination by the Interested Stockholder to all persons (other than persons who at the time of purchase were Interested Stockholders or Affiliates or Associates thereof), excluding all brokerage commissions, dealers' fees and other expenses of the Interested Stockholder relating to the acquisition of such Voting Stock. (D) The Board of Directors shall have the power and duty to determine, for purposes of this Article, on the basis of information known to the Board: 9 11 (i) the amount of Voting Stock beneficially owned by any person; (ii) when such person acquired a beneficial interest in such Voting Stock; (iii) whether such person owns 5% or more of the Voting Stock; (iv) the aggregate number of shares of stock and the aggregate amount of any other security outstanding at any time; (v) whether a person is an Affiliate or Associate of another; (vi) whether paragraphs (A) or (B) above are or have become applicable in respect of a proposed purchase of Voting Stock by the Corporation; and (vii) if so, the Interested Stockholder's Average Price of any Voting Stock owned by a person; and any such determination made in good faith shall be conclusive and binding for all purposes of this Article. TENTH: A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. IN WITNESS WHEREOF, The Actava Group Inc. has caused its corporate seal to be hereunto affixed and this certificate to be signed by Frederick B. Beilstein, III, its Senior Vice President, Treasurer and Chief Financial Officer, and attested by Walter M. Grant, its Senior Vice President, this 24th day of March, 1994. THE ACTAVA GROUP INC. (Corporate Seal) By: /s/ Frederick B. Beilstein, III - ----------------------------- --------------------------- Frederick B. Beilstein, III Senior Vice President, Treasurer and Chief Financial Officer 10 12 ATTEST: /s/ Walter M. Grant - ----------------------------- Walter M. Grant Senior Vice President Secretary and General Counsel 11 EX-3.B.I 3 RESTATED BYLAWS 1 EXHIBIT 3(b)(i) AMENDED AND RESTATED BYLAWS OF THE ACTAVA GROUP INC. as of November 23, 1993 ARTICLE I MEETINGS OF STOCKHOLDERS SECTION 1. Annual Meetings. The annual meeting of the stockholders of The Actava Group Inc. (herein called the Corporation) shall be held each year on such date and at such time as may be designated by the Board of Directors (herein called the Board) and stated in the notice thereof, for the purpose of electing directors and for the transaction of any other proper business. SECTION 2. Special Meetings. A special meeting of the stockholders of the Corporation (herein called the Stockholders) may be called at any time by the Chairman of the Board, the President, the Board, or by Stockholders holding of record in the aggregate at least 25 percent of the outstanding stock of the Corporation entitled to vote at such meeting, or otherwise as provided by law. SECTION 3. Place of Meetings. All meetings of Stockholders shall be held at such places, within or without the State of Delaware, as may be designated in the respective notices or waivers of notice thereof. SECTION 4. Notice of Meetings. Unless otherwise required by law, the Certificate of Incorporation or these Bylaws, written notice of each meeting of Stockholders shall be given by the Company not less than ten nor more than sixty days before the date of the meeting to each Stockholder of record entitled to vote at such meeting by delivering a written notice thereof to him personally or by depositing such notice in the United States mail, in a postage prepaid envelope, directed to him at his last post-office address appearing on the stock records of the Corporation. If mailed, such notice shall be deemed to be given when deposited in the mail, postage prepaid, directed to the Stockholder at his address as it appears in the records of the Corporation. Unless otherwise required by law, the Certificate of Incorporation or these Bylaws, no publication of any notice of a meeting of Stockholders shall be required. Every notice of a meeting of Stockholders shall state the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Notice of any meeting of Stockholders need not be given to any Stockholder who attends such meeting in person or by proxy, except a Stockholder who attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. If any Stockholder shall, in person or by attorney thereunto authorized, in writing or by 2 telegraph, cable, wireless or other form of recorded communication, waive notice of any meeting of Stockholders, notice thereof need not be given to him. Except as otherwise required by law, notice of any adjourned meeting of Stockholders need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken and the adjournment is for not more than thirty days. SECTION 5. Quorum. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, at each meeting of Stockholders the presence in person or by proxy of Stockholders holding of record shares of stock of the Corporation having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote at the meeting shall be necessary and sufficient to constitute a quorum for the transaction of business. In the absence of a quorum at any such meeting or any adjournment or adjournments thereof, a majority in voting interest of those present in person or by proxy and entitled to vote thereat, or in the absence therefrom of all Stockholders, any officer entitled to preside at, or to act as secretary of, such meeting, may adjourn such meeting from time to time. At any such adjourned meeting at which a quorum may be present any business may be transacted which might have been transacted at the meeting as originally called. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. The absence from any meeting in person or by proxy of Stockholders holding the number of shares of stock of the Corporation required by law, by the Certificate of Incorporation or by these Bylaws for action upon any given matter shall not prevent action at such meeting upon any other matter or matters which may properly come before the meeting if there shall be present thereat in person or by proxy Stockholders holding the number of shares of stock of the Corporation required in respect of such other matter or matters. SECTION 6. Organization. At each meeting of Stockholders, one of the following shall act as Chairman of the meeting, in the following order of precedence: (a) the President; (b) the Executive Vice President present at the meeting who has the longest tenure in office; (c) the Senior Vice President present at the meeting who has the longest tenure in office; (d) the Vice President present at the meeting who has the longest tenure in office; or (e) a Stockholder of record of the Corporation who shall be chosen chairman of such meeting by a majority in voting interest of Stockholders present in person or by proxy and entitled to vote at the meeting. -2- 3 The Secretary, or, if he shall be absent from such meeting, the person (who shall be an Assistant Secretary, if an Assistant Secretary shall be present) whom the Chairman of such meeting shall appoint, shall act as secretary of such meeting and keep the minutes thereof. SECTION 7. Order of Business. The order of business at each meeting of Stockholders shall be determined by the chairman of the meeting, but such order of business may be changed by the vote of a majority in voting interest of those present in person or by proxy at such meeting and entitled to vote. Business transacted at any special meeting of Stockholders shall be limited to the purposes stated in the notice. SECTION 8. Voting. Unless otherwise provided in the Certificate of Incorporation or in an agreement among shareholders as permitted under the General Corporation Law of the State of Delaware (the "Delaware Corporation Law"), each Stockholder shall be entitled to one vote in person or by proxy for each share of the stock of the Corporation which has voting power on the matter in question and which shall have been held by him and registered in his name on the books of the Corporation: (a) on the date fixed pursuant to the provisions of Section 5 of Article VI of these Bylaws as the record date for the determination of Stockholders who shall be entitled to notice of and to vote at such meeting, or (b) if no such record date shall have been so fixed, then (i) at the close of business on the next day preceding the day on which notice of the meeting shall be given or (ii) if notice of the meeting shall be waived, at the close of business on the day next preceding the day on which the meeting shall be held. Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the rights of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. Persons holding stock of the Corporation in a fiduciary capacity shall be entitled to vote such stock so held. Persons whose stock is pledged shall be entitled to vote such stock, unless in the transfer by the pledgor on the books of the Corporation he shall have expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon. Stock having voting power standing of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or with respect to which two or more persons have the same fiduciary relationship, shall be voted in accordance with the provisions of the Delaware Corporation Law. Each Stockholder entitled to vote at a meeting of Stockholders or to express consent or dissent to action by the Corporation in writing without a meeting may authorize another person or persons to act for him by proxy appointed by an instrument in writing, subscribed by such Stockholder or by his attorney thereunto authorized and delivered to the secretary of the meeting in the case of a meeting or to the Secretary in the case of an action by written consent; provided, however, that no proxy shall -3- 4 be voted or acted upon after three years from its date unless the proxy shall provide for a longer period. A duly executed proxy shall be irrevocable only if it states that it is irrevocable and only if, and as long as, it is coupled with an interest in law sufficient to support an irrevocable power. The attendance at any meeting of a Stockholder who may theretofore have given a proxy shall not have the effect of revoking the same unless he shall in writing so notify the secretary of the meeting prior to the voting of the proxy. At all meetings of Stockholders all matters, except as otherwise provided in the Certificate of Incorporation, in these Bylaws or by law, shall be decided by the vote of a majority in voting interest of Stockholders present in person or by proxy and actually voting thereon, a quorum being present. Except in the case of votes for the election of directors, the vote at any meeting of Stockholders on any question need not be by written ballot, unless so directed by the chairman of the meeting. On a vote by ballot each ballot shall be signed by the Stockholder voting, or by his proxy, if there be such proxy, and it shall state the number of shares voted. SECTION 9. List of Stockholders. The Secretary, either directly or through another officer of the Corporation designated by him or through a transfer agent or transfer clerk appointed by the Board, shall prepare and make, at least ten days before every meeting of Stockholders, a complete list of the Stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each Stockholder and the number of shares registered in the name of each Stockholder. Such list shall be open to the examination of any Stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where said meeting is to be held. The list shall also be produced and kept at the time and place of said meeting during the whole time thereof and may be inspected by any Stockholder who is present. The stock ledger shall be the only evidence as to who are the Stockholders entitled to examine the stock ledger, such list or the books of the Corporation, or to vote in person or by proxy at any meeting of Stockholders. SECTION 10. Inspectors or Judges. The Board, in advance of any meeting of Stockholders, may appoint one or more inspectors or judges to act at such meeting or any adjournment thereof. If the inspectors or judges shall not be so appointed, or if any of them shall fail to appear, or act, the chairman of such meeting shall appoint the inspectors or judges, or such substitute or substitutes therefor, as the case may be. Such inspectors or judges, before entering on the discharge of their duties, shall take and sign an oath or affirmation faithfully to execute the duties of inspectors or judges at meetings for which they are appointed. At such meeting, the inspectors or judges shall receive and take charge of the proxies and ballots and decide all questions relating to the qualification of voters and the validity of proxies and the acceptance or rejection of votes. An inspector or judge need not be a stockholder of the Corporation, and any officer of the Corporation may be an inspector or judge on any question other than a vote for or against a proposal in which he shall have a material interest. -4- 5 SECTION 11. Consent of Stockholders in Lieu of Meeting. Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted to be taken at any annual or special meeting of Stockholders may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of shares that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those Stockholders who have not consented in writing. In connection with any such action without a meeting by consent in writing, (i) notice of the proposal to take such action shall be given, as provided in Section 4 of this Article I, to each Stockholder of record who would be entitled to notice if such action were to be taken at a meeting; (ii) such action shall be deemed to have been taken upon the later of receipt by the Corporation of the requisite consents or the record date for determining the Stockholders entitled to express consent to such corporate action without a meeting determined in accordance with Article VI, Section 5 of these Bylaws; (iii) the Stockholder list provided for in Section 9 of this Article I shall be opened to the examination of any Stockholder, for purposes germane to such action to be taken, during ordinary business hours, from the time of giving notice of the meeting until the action shall have been taken; and (iv) inspectors or judges shall be appointed as provided in Section 10 of this Article I. The requirements of Section 1 of this Article I shall be deemed to be satisfied in any year if action required to be taken at an annual meeting shall have been taken without a meeting by consent in writing during such year. ARTICLE II BOARD OF DIRECTORS SECTION 1. General Powers. The property, business and affairs of the Corporation shall be managed by or under the direction of the Board which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these Bylaws directed or required to be exercised or done by the Stockholders. SECTION 2. Number and Term of Office. Subject to the requirements of laws, the Board may from time to time by the vote of the majority of the whole Board determine the number of directors. The term "whole Board" as used in these Bylaws shall mean the number of positions on the Board regardless of the number of directors then in office. Until the Board or the Stockholders shall otherwise so determine, the number of directors shall be eight. Each of the Directors shall hold office until the annual meeting next after his election and until his successor shall be elected and shall qualify, or until his death in office or his earlier resignation or removal in the manner hereinafter provided. Directors need not be stockholders. -5- 6 SECTION 3. Election of Directors. At each annual meeting of Stockholders for the election of directors at which a quorum is present and unless otherwise provided in the Certificate of Incorporation or these Bylaws the persons receiving the greatest number of votes, up to the number of directors to be elected, shall be the directors. Such election shall be by ballot. SECTION 4. Organization and Order of Business. At each meeting of the Board, one of the following shall act as chairman of the meeting and preside thereat, in the following order of precedence: (a) the Chairman of the Board; (b) the President, if a member of the Board; or (c) a Vice President of the Board; or (d) any director chosen by a majority of the directors present at the meeting. The Secretary, or, if he shall be absent from such meeting, the person (who shall be an Assistant Secretary, if an Assistant Secretary shall be present) whom the Chairman of such meeting shall appoint, shall act as secretary of such meeting and keep the minutes thereof. The order of business at each meeting of the Board shall be determined by the chairman of such meeting. SECTION 5. Resignations. Any director may resign at any time by giving written notice of his resignation to the Chairman of the Board, the President or the Secretary. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, it shall take effect immediately upon its receipt. Except as specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 6. Vacancies, etc. Notwithstanding Section 11 of this Article II, in case of any vacancy on the Board or in case of any newly created directorship, a director to fill the vacancy for the unexpired portion of the term being filled or the newly created directorship may be elected by the holders of shares of stock of the Corporation entitled to vote in respect thereof at an annual or special meeting of said holders or by a majority of the directors of the Corporation then in office though less than a quorum. SECTION 7. Place of Meeting. The Board may hold its meetings at such place or places, within or without the State of Delaware, as the Board may from time to time by resolution determine or as shall be designated in the respective notices or waivers of notice thereof. SECTION 8. Annual Meeting. As soon as practicable after each annual election of directors, the Board shall meet for the purpose of organization, the election of officers and -6- 7 the transaction of other business. If the Board shall have provided for the holding of regular meeting, unless the Board shall by resolution otherwise determine, such meeting shall be held at the time and place theretofore fixed by the Board for the next regular meeting of the Board, and no notice thereof need be given. If the Board shall determine that such meeting shall be held at a different place and time than the next regular meeting, or if the Board shall not have provided for regular meetings, notice thereof shall be given in the manner hereinafter provided for special meetings of the Board. SECTION 9. Regular Meetings. Regular meetings of the Board shall be held at such places, within or without the State of Delaware, and at such times as the Board shall from time to time determine. Notices of regular meetings need not be given. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting which would otherwise be held on that day shall be postponed until the same hour of the next succeeding business day. SECTION 10. Special Meetings; Notice. Special meetings of the Board shall be held whenever called by the Chairman of the Board or the President and shall be called by one of them on the request of any three of the directors in office unless the Board consists of fewer than three directors; in which case special meetings shall be called by the Chairman of the Board or the President on the written request of all of the directors then in office. A notice of each such special meeting shall be given as hereinafter provided and shall specify the time and place of such meeting. Except as otherwise provided by law, the purposes of the meeting need not be stated in the notice. Notice of each such meeting shall be mailed to each director, addressed to him at his residence or usual place of business, at least two days before the day on which such meeting is to be held or shall be sent addressed to him at such place by facsimile, telegraph, cable, wireless or other form of recorded communication or be delivered personally or by telephone not later than the day before the day on which such meeting is to be held. Notice of any meeting of the Board need not, however, be given to any director if waived by him in writing or by facsimile, telegraph, cable, wireless of other form of recorded communication before, during or after such meeting or if he shall be present at such meeting; and any meeting of the Board shall be a legal meeting without any notice thereof having been given if all the directors of the Corporation then in office shall be present. SECTION 11. Quorum and Manner of Acting. A majority of the directors in office shall be present at any meeting of the Board in order to constitute a quorum for the transaction of business at such meeting; provided, however, in no case shall a quorum be present if there is present less than 1/3 of the whole Board. Except as otherwise provided in these Bylaws, the Certificate of Incorporation or by law, the vote of a majority of the directors present at any such meeting at which a quorum is present shall be the act of the Board. In the absence of a quorum, a majority of the directors present may adjourn such meeting from time to time until a quorum shall be present. Notice of any adjourned meeting need not be given. The directors shall act only as a board and individual directors shall have no power as such. -7- 8 SECTION 12. Action by Consent. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if prior to such action a written consent thereto is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or committee. SECTION 13. Telephone Meetings Permitted. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board, or any committee designated by the Board, may participate in a meeting thereof by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. SECTION 14. Removal of Directors. Unless otherwise provided by the Certificate of Incorporation or by law, any director may be removed, either with or without cause, at any time, by the affirmative vote of a majority in interest of the Stockholders of record of the Corporation entitled to vote at an election of directors, given at a special meeting of the Stockholders called for the purpose; and the vacancy in the Board caused by such removal may be filled by the Stockholders at such meeting or otherwise as provided in Section 6 of this Article. SECTION 15. Remuneration. Unless otherwise expressly provided by resolution adopted by the Board, none of the directors or of the members of any committee of the Corporation contemplated by these Bylaws or otherwise provided for by resolution of the Board shall, as such, receive any stated remuneration for his services; but the Board may at any time or from time to time by resolution provide that a specified sum shall be paid to any director of the Corporation or to any member of any such committee who shall not otherwise be in the employ of the Corporation or any of its subsidiary companies, either as his annual remuneration as such director or member or as remuneration for his attendance at each meeting of the Board or of such committee, including, if the Board so chooses, a specified sum to any director who may serve as the Chairman of the Board or chairman of any such committee. The Board may also likewise provide that the Corporation shall reimburse each such director or member of such committee for any expenses paid by him on account of his attendance at any such meeting. Nothing in this Section contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving remuneration therefor. SECTION 16. Chairman of the Board. The Chairman of the Board shall, if present, preside at all meetings of the Board. In general, he shall perform all duties incident to the office of Chairman of the Board and such other duties as from time to time may be assigned to him by the Board. -8- 9 SECTION 17. Senior Chairman of the Board. The Corporation may have a Senior Chairman of the Board, who shall have such powers and duties as may be assigned to him from time to time by the Board or the Chairman of the Board. SECTION 18. Vice Chairman of the Board. The Corporation may have one or more Vice Chairmen of the Board. Each Vice Chairman of the Board shall have such powers and duties as may be assigned to him from time to time by the Board or the Chairman of the Board. At the request of the Chairman of the Board, or in case of both his absence or inability to act and that of the President, and unless or until the Board or the Executive Committee shall otherwise determine, the Vice Chairman of the Board having the greatest seniority in that office who is present and able to act shall perform the duties of the Chairman of the Board, and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the Chairman of the Board. ARTICLE III COMMITTEES SECTION 1. Executive Committee; Number, Appointment, Term of Office, Etc. The Board, by resolution adopted by a majority of the whole Board, may designate an Executive Committee consisting of not less than three (3) members of the Board of Directors then in office. Each member of the Executive Committee shall continue to be a member thereof only so long as he remains a director and at the pleasure of a majority of the whole Board. The term "whole Executive Committee" as used in these Bylaws shall mean the number of positions on the Executive Committee regardless of the number of members thereof then in office. SECTION 2. Functions and Powers. The Executive Committee, between meetings of the Board, shall have and may exercise the powers of the Board, except those lodged in any other Committee of the Board, in the management of the property, business and affairs of the Corporation, may authorize the seal of the Corporation to be affixed to all papers which may require it, may authorize the issuance of shares of stock of the Corporation in connection with the acquisition by the Corporation, or one of its subsidiaries, of the stock, assets or business of another corporation, provided that the number of shares to be issued for any one such acquisition shall not exceed 2-1/2 percent of the issued and outstanding shares of the class to be issued, and, if the proposed action has been approved by the Board in principle, may declare dividends upon the shares of stock of the Corporation and may otherwise authorize the issuance of shares of stock of the Corporation. SECTION 3. Organization. At each meeting of the Executive Committee, one of the following shall act as chairman of the meeting in the following order of precedence: -9- 10 (a) the Chairman of the Executive Committee, who shall be appointed from among the members of the Executive Committee by the Board; (b) the Chairman of the Board, if a member of the Executive Committee; (c) the President, if a member of the Executive Committee; (d) a Vice Chairman of the Board, if a member of the Executive Committee; (e) the Executive Vice President present at the meeting who has the longest tenure in office and who is a member of the Executive Committee; (f) the Senior Vice President present at the meeting who has the longest tenure in office and who is a member of the Executive Committee; (g) the Vice President present at the meeting who has the longest tenure in office and who is a member of the Executive Committee; or (h) any member of the Executive Committee chosen by a majority of the members present. The Secretary, or if the shall be absent from such meeting, the person (who shall be an Assistant Secretary, if an Assistant Secretary shall be present) whom the chairman of such meeting shall appoint, shall act as secretary of such meeting and keep the minutes thereof. SECTION 4. Meetings. Regular meetings of the Executive Committee, of which no notice shall be necessary, shall be held on such days and at such places, within or without the State of Delaware, as shall be fixed by resolution adopted by a majority of the whole Executive Committee. Special meetings of the Executive Committee shall be held whenever called by the Chairman of the Board, the President, or the Chairman of the Executive Committee and shall be called by one of them on the request of two members of the Executive Committee then in office. Notice of each special meeting of the Executive Committee shall be given to each member thereof, addressed to him at his residence or usual place of business at least two days before the day on which such meeting is to be held, by mail, facsimile, telegraph, cable, wireless or other form of recorded communication or be delivered personally or by telephone not later than the day before the day on which such meeting is to be held. Notice of any such meeting need not, however, be given to any member of the Executive Committee if waived by him in writing or by facsimile, telegraph, cable, wireless or other form of recorded communication before, during or after such meeting or if he shall be present at such meeting; and any meeting of the Executive Committee shall be a legal meeting without any notice thereof having been given if all the members of the Executive Committee shall be present. The purposes of a meeting need not be specified in the notice or waiver of notice of any meeting. Subject to the provisions of -10- 11 these Bylaws, by resolution adopted by a majority of the whole Executive Committee, the Executive Committee shall fix its own rules of procedures, and it shall keep a record of its proceedings and report them to the Board at the next regular meeting thereof after such proceedings shall have been taken. All such proceedings shall be subject to revision or alteration by the Board. SECTION 5. Quorum and Manner of Acting. At all meetings of the Executive Committee a majority of the Executive Committee shall constitute a quorum for the transaction of business at such meeting. Except as otherwise provided in these Bylaws or by law, the act of a majority of those present at a meeting thereof at which quorum is present shall be the act of the Executive Committee. The members of the Executive Committee shall act only as a committee, and the individual members shall have no power as such. SECTION 6. Resignations. Any member of the Executive Committee may resign therefrom at any time by giving written notice of his resignation to the Chairman of the Board, the President or the Secretary. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, it shall take effect immediately upon its receipt; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 7. Other Committees. The Board, by resolution adopted by a majority of the whole Board, may designate one or more other committees, which shall in each case consist of such number of directors and shall have and may exercise such powers of the Board for such periods as the Board may determine in the respective resolutions designating such committees or from time to time but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation (except that a committee may, to the extent authorized in the resolution or resolutions adopted by the Board as provided in the Delaware Corporation Law Section 151(a), providing for the issuance of shares of stock, fix any of the preferences or rights of such shares relating to dividends, redemptions, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the corporation) adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property or assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the Bylaws of the corporation. A majority of all the members of any such committee may fix its rules of procedure, determine its action, fix the time and place, whether within or without the State of Delaware, of its meetings and specify what notice thereof, if any, shall be given, unless the Board shall by resolution otherwise provide. Each member of any such committee shall continue to be a member thereof only so long as he remains a director and at the pleasure of a majority of the whole Board. Any vacancies on any such committee may be filled by a majority of the whole Board. -11- 12 ARTICLE IV OFFICERS SECTION 1. Election and Term of Office. The Corporation shall have the following officers: a President, one or more Vice Presidents (one or more of whom may be designated Executive or Senior Vice Presidents), a Treasurer and a Secretary. The Board may also elect a Controller, Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers and such other officers as it may deem necessary, who shall have such authority and perform such duties as may be prescribed from time to time by the Board. All officers of the Corporation shall be elected annually by the Board at the first meeting thereof held after each annual meeting of Stockholders for the election of directors and shall hold office until their successors shall have been duly elected and shall qualify. Any vacancies in any offices may be filled by a majority of the whole Board. Any officer elected by the Board shall be subject to removal, either with or without cause, at any time by a majority of the whole Board. SECTION 2. Resignations. Any officer may resign at any time by giving written notice of his resignation to the Chairman of the Board, the President or the Secretary. Any resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 3. President. The President shall be the chief executive officer of the Corporation and shall have, subject to the control of the Board, general and active supervision over the business and affairs of the Corporation and over its several officers. He shall have the power to appoint and remove all agents and employees of the Corporation, subject to the control of the Board. He shall see that all orders and resolutions of the Board are carried in effect. From time to time he shall report to the Stockholders and to the Board all matters within his knowledge which, in his judgement, the interests of the Corporation may require to be brought to their notice. At the request of the Chairman of the Board, or in case of his absence or inability to act, and unless or until the Board or the Executive Committee shall otherwise determine, or as otherwise provided in these Bylaws, the President shall, if a member of the Board, perform the duties of the Chairman of the Board, and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the Chairman of the Board. In general, he shall perform all duties incident to the office of President and such other duties as from time to time may be assigned to him by the Board. SECTION 4. Vice Presidents. Each Vice President shall have such powers and duties as shall be prescribed by the Board at the time of his election and such other powers and duties as may be assigned to him from time to time by the Board or the President. In the absence or disability of the President, and unless or until the Board or the Executive Committee shall otherwise determine, the Executive Vice President with the -12- 13 longest tenure in office or, if there shall be no Executive Vice President, the Senior Vice President with the longest tenure in office or, if there shall be no Senior Vice Presidents, the Vice President with the longest tenure in office shall be vested with all the powers of the President. SECTION 5. Treasurer. If required by the Board, the Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board shall determine. To the extent determined by the Board, he shall: (a) have charge and custody of, and be responsible for, all funds, securities, notes and valuable effects of the Corporation; receive and give receipt for moneys due and payable to the Corporation from any sources whatsoever; deposit all such moneys to the credit of the Corporation or otherwise as the Board or the President shall direct in such banks, trust companies or other depositaries as shall be selected in accordance with the provisions of Section 2 of Article V of these Bylaws; cause such funds to be disbursed by checks or drafts on the authorized depositaries of the Corporation signed as provided in Section 1 of said Article V; and be responsible for the accuracy of the amounts of, and cause to be preserved proper vouchers for, all moneys so disbursed; (b) have the right to require from time to time reports or statements giving such information as he may desire with respect to any and all financial transactions of the Corporation from the officers or agents transacting the same; (c) render to the President, the Board or an Audit Committee of the Board, whenever they, respectively, shall request him to do so, an account of the financial condition of the Corporation and of all his transactions as Treasurer; (d) upon request, exhibit, or cause to be exhibited, at all reasonable times his cash books and other records to the President, an Audit Committee of the Board or any of the directors of the Corporation; and (e) in general, perform all duties incident to the office of treasurer and such other duties as from time to time may be assigned to him by the President or the Board. SECTION 6. Assistant Treasurers. If required by the Board, each of the Assistant Treasurers shall give a bond for the faithful discharge of his duties in such sums and with such surety or sureties as the Board shall determine. At the request of the Treasurer, or in case of his absence or inability to act, the Assistant Treasurer, or, if there be more than one, any of the Assistant Treasurers, shall perform the duties of the Treasurer, and when so acting, shall have all the powers of, and be subject to all the restrictions, upon, the Treasurer. Each of the Assistant Treasurers shall perform such other duties as from time to time may be assigned to him by the Treasurer, the President or the Board. -13- 14 SECTION 7. Secretary. The Secretary shall: (a) record all the proceedings of the meetings and written consents of the Stockholders, the Board, the Executive Committee and any other committees of the Board in one or more books kept for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of all contracts, deeds, documents, all other indicia of title to properties owned by the Corporation and of its other corporate records (except such records as are required by these Bylaws to be held in the custody of the Treasurer or other officers) and of the seal of the Corporation, and see that such seal, or, if authorized by the Board, a facsimile thereof, is affixed to all certificates for stock of the Corporation prior to the issuance thereof and to all other documents the execution of which on behalf of the Corporation under its seal is duly authorized in accordance with the provisions of these Bylaws, and, except as the Board shall otherwise direct, have power and authority to attest the seal of the Corporation when so affixed; (d) have charge, directly or through the transfer clerk or transfer clerks, transfer agent or transfer agents and registrar or registrars appointed as provided in Section 3 of Article VI of these Bylaws, of the issuance, transfer and registration of certificates for stock of the Corporation and of the records thereof, such records to be kept in such manner as to show at any time the amount of the stock of the Corporation issued and outstanding, the manner in which and the time when such stock was paid for, the names, alphabetically arranged, and the address of the holders of record thereof, the number of shares held by each, and the time when each became a holder of record; (e) upon request, exhibit or cause to be exhibited at all reasonable times to any director such records of the issuance, transfer and registration of the certificates for stock of the Corporation; (f) see that the books, reports, statements, certificates and all other documents and records required by law are properly kept and filed; (g) see that the duties prescribed by Section 9 of Article I of these Bylaws are performed; and (h) in general, perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the President or the Board. -14- 15 SECTION 8. Assistant Secretaries. At the request of the Secretary, or in case of his absence or inability to act, the Assistant Secretary, or, if there be more than one, any of the Assistant Secretaries, shall perform the duties of the Secretary and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the Secretary. Each of the Assistant Secretaries shall perform such other duties as from time to time may be assigned to him by the Secretary, the President or the Board. SECTION 9. Salaries. The salaries of the officers of the Corporation shall be fixed from time to time by the Board, by any one or more committees (none of which shall consist of less than three members) appointed by a resolution passed by a majority of the whole Board from among its members, with power to fix such salaries, or by the President when so authorized by a resolution passed by a majority of the whole Board; and none of such officers shall be prevented from receiving a salary by reason of the fact that he is also a member of the Board or of any such committee, but none of such officers who shall also be a member of the Board or of any such committee shall have any vote in the determination of the amount of salary that shall be paid to him. ARTICLE V CHECKS, BANK ACCOUNTS, ETC. SECTION 1. Checks, Drafts, etc. All checks, drafts, orders for the payment of money, bills of lading, warehouse receipts, obligations, bills of exchange and insurance certificates shall be signed or endorsed by any one or two officers or other persons designated by, or in accordance with, a resolution of the Board, or, in the absence of such resolution, by any two of the following officers: the President, any Vice President, the Secretary, the Treasurer, and the Controller. SECTION 2. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation or otherwise as the Board, the President, the Treasurer or other agent designated by, or in accordance with, a resolution of the Board shall direct in such banks, trust companies or other depositaries as the Board may select or as may be selected by any officer or agent or agents of the Corporation to whom power in that respect shall have been delegated by the Board. For purpose of deposit and for the purpose of collection for the account of the Corporation, checks, drafts and other orders for the payment of money which are payable to the order of the Corporation may be endorsed, assigned and delivered by any officer or agent of the Corporation. SECTION 3. General and Special Bank Accounts. The Board may from time to time authorize the opening and keeping of general and special bank accounts with such banks, trust companies or other depositaries as the Board may select, or as may be selected by any officer or officers or agent or agents of the Corporation to whom power in that respect shall have been delegated by the Board. The Board may make such special rules and regulations -15- 16 with respect to such bank accounts, not inconsistent with the provisions of these Bylaws, as it may deem expedient. SECTION 4. Proxies in Respect of Stock or Other Securities of Other Corporations. Unless otherwise provided by resolution adopted by the Board, the President, any Vice President or the Secretary may from time to time appoint an attorney or attorneys or an agent or agents of the Corporation to exercise in the name and on behalf of the Corporation the powers and rights which the Corporation may have as the holder of stock or other securities in any other corporation to vote or consent in respect of such stock or other securities, and the President, any Vice President or the Secretary may instruct the person or persons so appointed as to the manner of exercising such powers and rights; and the President, any Vice President or the Secretary may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal, or otherwise, all such written proxies or other instruments as he may deem necessary or proper in order that the Corporation many exercise its said powers and rights. SECTION 5. Interested Directors; Quorum. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if (i) the material facts as to his interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by a vote sufficient for such purpose without counting the vote of the interested director or directors; or (ii) the material facts as to his interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by a vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board, a committee thereof, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee thereof which authorizes the contract or transaction. -16- 17 ARTICLE VI SHARES, THEIR TRANSFER AND RECORD DATES SECTION 1. Certificates for Stock. Every owner of stock of the Corporation shall be entitled to have a certificate or certificates, in such form as the Board shall prescribe, certifying the number, class and series, if any, of shares of stock of the Corporation owned by him. The certificates representing shares of the respective classes and series, if any, of such stock shall be numbered in the order in which they shall be issued and shall be signed in the name of the Corporation by the person who was at the time of signing the Secretary or an Assistant Secretary, and the seal of the Corporation shall be affixed thereto; provided, however, that if any such certificate is countersigned (a) by a transfer agent other than the Corporation or its employee, the signatures thereon of such Chairman of the Board or President or Vice President and of such Secretary or Assistant Secretary and the seal of the Corporation affixed thereto may be facsimiles. In case any officer or the officers of the Corporation who shall have signed, or whose facsimile signature or signatures shall have been placed upon, any such certificate or certificates shall cease to be such officer or officers before such certificate or certificates shall have been issued, such certificate or certificates may nevertheless be issued by the Corporation with the same effect as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures shall have been placed thereon were such officer or officers at the date of issuance. A record shall be kept of the respective names of the persons, firms or corporations owning the stock represented by certificates for stock of the Corporation, and the number, class and series, if any, of shares represented by such certificates. Every certificate surrendered to the Corporation for exchange or transfer shall be canceled, and a new certificate or certificates shall not be issued in exchange for any existing certificate until such existing certificate shall have been so canceled, except in cases provided for in Section 4 of this Article. SECTION 2. Transfers of Stock. Transfers of the stock of the Corporation shall be made only on the books of the Corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary or with a transfer clerk or a transfer agent appointed as in Section 3 of this Article provided, and upon surrender of the certificate or certificates for such shares properly endorsed and payment of all taxes thereon. The person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. Whenever any transfer of shares shall be made for collateral security, and not absolutely, such fact shall be so expressed in the entry of transfer if, when the certificates shall be presented to the Corporation for transfer, both the transferor and the transferee request the Corporation to do so. SECTION 3. Regulations. The Board may make such rules and regulations as it may deem expedient, not inconsistent with these Bylaws, concerning the issue, transfer and registration of certificates for stock of the Corporation. The Board may appoint or authorize any officer or officers to appoint one or more transfer clerks or one of more transfer agents -17- 18 and one or more registrars and may require all certificates for stock to bear the signature or signatures of any of them. SECTION 4. Lost, Stolen, Destroyed and Mutilated Certificates. The Corporation may issue a new certificate of stock of the Corporation in the place of any certificate heretofore issued by it alleged to have been lost, stolen or destroyed, or which shall have been mutilated, and the Board, in its discretion, may require the owner of such certificate, or his legal representatives, to give the Corporation a bond in such sum, limited or unlimited, in such form and with such surety or sureties as the Board shall in its discretion determine to be sufficient to indemnify the Corporation, and any transfer agent or registrar, against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate, or the issuance of such new certificate. SECTION 5. Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournments thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any other change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board and which record date: (1) in the case of determination of Stockholders entitled to vote at any meeting of Stockholders or adjournment thereof shall, unless otherwise required by law, be not more than sixty nor less than ten days before the date of such meeting; (2) in the case of determination of Stockholders entitled to express consent to corporate action in writing without a meeting shall be not more than ten days from the date upon which the resolution fixing the record date is adopted by the Board and (3) in the case of any other action, shall be not more than sixty days prior to such other action. If the Board shall not fix a record date with respect to a meeting or action: (a) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (b) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting when no prior action by the Board is required by law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation in accordance with applicable law, or, if prior action by the Board is required by law, shall be at the close of business on the day on which the Board adopts the resolution taking such prior action; and (c) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting. -18- 19 ARTICLE VII OFFICES, ETC. SECTION 1. Registered Office. The registered office of the Corporation in the State of Delaware shall be in the City of Wilmington, County of New Castle. SECTION 2. Other Offices. The Corporation may also have an office or offices other than said registered office at such place or places, either within or without the State of Delaware, as provided in these Bylaws or as the Board may from time to time determine or as the business of the Corporation may require. SECTION 3. Books and Records. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, the Corporation may keep its books and records in such place or places within or without the State of Delaware as the Board may from time to time by resolution determine or the business of the Corporation may require. ARTICLE VIII DIVIDENDS Subject to the provisions of law, of the Certificate of Incorporation and of these Bylaws, the Board or the Executive Committee may declare and pay dividends upon the shares of the Corporation's stock either (a) out of the Corporation's surplus as defined in and computed in accordance with provisions of law or (b) in case the Corporation shall not have any such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year, whenever and in such amounts as, in the opinion of the Board or the Executive Committee, the condition of the affairs of the Corporation shall render it advisable. ARTICLE IX SEAL The Board shall provide a corporate seal, which shall be in the form of a circle and shall bear the full name of the Corporation and the words and figures "1968 Delaware", or words and figures of similar import. The seal or a facsimile thereof may be impressed or affixed or reproduced or other use made thereof by the Secretary, any Assistant Secretary or any other officer authorized by the Board. -19- 20 ARTICLE X FISCAL YEAR The fiscal year of the Corporation shall end on December 31 of each year. ARTICLE XI WAIVER OF NOTICES Whenever notice is required to be given by these Bylaws or by the Certificate of Incorporation or by law, a written waiver thereof, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, the Board or members of a committee of the Board may be specified in written waiver of notice unless so provided by the Certificate of Incorporation or these Bylaws. ARTICLE XII INDEMNIFICATION SECTION 1. Right to Indemnification. (a) The Corporation shall have power to indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that such person, or a person for whom he is the executor, administrator, guardian or other legal representative, is or was a director, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, other enterprise, or non-profit entity against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe such conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, -20- 21 of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (b) The Corporation shall have power to indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, other enterprise or non-profit entity, including service with respect to employee benefit plans, against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such Court of Chancery or such other court shall deem proper. SECTION 2. Limitation and Standards. (a) To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1 of this Article, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (b) Any indemnification under Section 1 of this Article (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 1 of this Article. Such determination shall be made (1) by the Board by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such quorum is not obtainable, or, even if obtainable, if a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders. SECTION 3. Advance of Expenses. Expenses incurred by an officer or director in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding, upon receipt of an undertaking by or on behalf of such director or officer to repay such amount unless it shall -21- 22 ultimately be determined that such individual is entitled to be indemnified by the Corporation. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board deems appropriate. SECTION 4. Additional Rights. The rights of indemnification and advancement of expenses provided in, or granted pursuant to, this Article shall not be exclusive of any other right to which any person referred to in Section 1 of this Article may otherwise lawfully be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such individual's official capacity and as to action in another capacity while holding such office, and shall be available whether or not the claim asserted against such person is based on matters which antedate the adoption of this Article. SECTION 5. Additional Persons Covered. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article shall continue as to a person who has ceased to be a director, officer, or employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person. The term "Corporation" as used in this Article includes F.I., Inc., a Delaware corporation, Fuqua Industries, Inc., a Pennsylvania corporation, and Fuqua Industries, Inc., a Delaware corporation, predecessor corporations or former names of the Corporation. SECTION 6. Insurance. The Corporation, as authorized by the Board, shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, other enterprise or non-profit entity, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article or otherwise. SECTION 7. References. For purposes of this Article, references to the "Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Article with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. For purposes of this Article, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which impose duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants or beneficiaries; -22- 23 and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article. ARTICLE XIII AMENDMENTS Unless otherwise expressly provided for in the Certificate of Incorporation or the Bylaws, all bylaws of the Corporation shall be subject to alteration or repeal, and new bylaws may be made, either by the affirmative vote of the holders of record of a majority of the outstanding stock of the Corporation entitled to vote in respect thereof, given at an annual meeting or at any special meeting, provided notice of the proposed alteration or repeal or of the proposed new bylaws be included in the notice of such meeting, or by the affirmative vote of a majority of the whole Board given at any regular or special meeting of the Board. Except as otherwise provided by these Bylaws, any bylaws made or altered by the Stockholders or by the Board shall be subject to alteration or repeal by the Stockholders or by the Board. ===================== -23- EX-10.K.II 4 FORM OF FIRST AMENDMENT 1 EXHIBIT 10(k)(ii) FIRST AMENDMENT TO POST-EMPLOYMENT CONSULTING AGREEMENT THIS FIRST AMENDMENT TO POST-EMPLOYMENT CONSULTING AGREEMENT (the "First Amendment") is made and entered into as of this _______ day of December, 1993, by and between THE ACTAVA GROUP INC. F/K/A FUQUA INDUSTRIES, INC., a Delaware corporation with offices at 4900 Georgia-Pacific Center, Atlanta, Georgia 30303 (the "Company"), and __________________________________, an individual residing at _________________________________________ (the "Executive"). W I T N E S S E T H: WHEREAS, the Company and the Executive entered into that certain Post-Employment Consulting Agreement dated as of _________________________, 199___ (the "Original Agreement"); and WHEREAS, the Company and the Executive wish to amend the Original Agreement to provide for certain changes more fully set forth herein; NOW, THEREFORE, for and in consideration of the premises, the terms and conditions set forth herein and other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. DEFINED TERMS. Defined terms used herein, as indicated by the initial capitalization thereof, shall have the same respective meanings ascribed to such terms in the Original Agreement unless otherwise specifically defined herein. 2. RELEASE AGREEMENT. The Release Agreement referred to in Section 1(b)(i) and attached to the Original Agreement is hereby deleted in its entirety and the Unconditional Release of all Claims and Liability attached hereto as Exhibit A and incorporated herein by reference is hereby substituted in lieu thereof. 3. AMENDMENT OF SECTION 3. Section 3 of the Original Agreement is hereby deleted in its entirety and the following is substituted in lieu thereof: 3. CONSULTING PERIOD. (a) Subject to the possible extension set forth in subparagraph (b) below, the Executive shall perform the Consulting Services for a period of time (the "Consulting Period") commencing on the day following a Qualifying Termination and continuing until the expiration of twelve (12) months thereafter. (b) At such time as the Executive is employed by the Company as an officer for ten (10) years or at such time as the Board of Directors designates the Executive 2 as a senior executive officer, the Consulting Period shall be increased to a period of twenty-four (24) months from the Qualifying Termination. 4. AMENDMENT OF SECTION 4(A). Section 4(a) of the Original Agreement is hereby deleted in its entirety and the following is substituted in lieu thereof: (a) Subject to the provisions of Sections 5, 6 and 11 hereof, the Executive shall receive during the Consulting Period, as full compensation for the Consulting Services, a monthly fee, payable on the last business day of each calendar month during the Consulting Period (a "Consulting Fee," and collectively, the "Consulting Fees"), equal to the Executive's annual base salary immediately prior to the Qualifying Termination divided by twelve (12). The Executive's annual base salary for purposes of calculating the Consulting Fee shall consist solely of the Executive's base salary, exclusive of any bonuses, commissions, allowances or other means of compensation or benefits made available to the Executive as an employee of the Company. The Consulting Fee for any partial months during the Consulting Period shall be reduced proportionately. The aggregate amount of all Consulting Fees to be paid during the full Consulting Period is sometimes hereinafter referred to as the "Total Consulting Fees." 5. AMENDMENT OF SECTION 4(B). The first sentence of Section 4(b) of the Original Agreement is hereby deleted in its entirety and the following is substituted in lieu thereof: Subject to the provisions of Section 5 hereof, during the Consulting Period the Company shall also make available to the Executive such medical, dental and vision insurance coverage as may be provided to the Executive and his dependents by the Company immediately prior to the Qualifying Termination (or such Company medical insurance coverage which is consistent with the coverage in place from time to time for comparable Company executives and their dependents). 6. AMENDMENT OF SECTION 5. Section 5 of the Original Agreement is hereby deleted in its entirety and the following is substituted in lieu thereof: 5. EFFECT OF RE-EMPLOYMENT/OTHER COMPENSATION. (a) If at any time during the Consulting Period the Executive enters into "Re-Employment" (as hereafter defined) or the Executive earns or receives any "Earned -2- 3 Income" (as hereafter defined) from any source other than pursuant to this Agreement, the Executive shall immediately notify the Company in writing of such occurrence, together with the amount of Earned Income received or earned and any insurance coverage provided to the Executive, and the following provisions shall apply: (i) If the Executive notifies the Company that the Executive will earn Earned Income from Re-Employment on a monthly basis equal to or in excess of the Consulting Fee, then, within ten (10) days after receipt of such notification from the Executive, the Company shall pay the Executive, in full satisfaction of all obligations to pay the Consulting Fees hereunder, an amount equal to fifty percent (50%) of the remainder of: (A) the Total Consulting Fees less (B) the Consulting Fees actually paid to the Executive prior to Re-Employment. Notwithstanding anything herein to the contrary, upon payment by the Company of the amounts set forth in this Section 5(a)(i), the Company shall cease to have any obligations under the terms of this Agreement and the Consulting Period shall be deemed to immediately expire. (ii) If the Executive receives Earned Income during the Consulting Period but the provisions of Section 5(a)(i) above are not applicable, then the Executive agrees to make a complete and accurate report to the Company on or before the tenth day of each month showing the amount of Earned Income received by the Executive during the previous month. The Executive shall report such Earned Income on a Certificate Regarding Earned Income in the form attached hereto as Exhibit B and incorporated herein by reference. The Consulting Fee payable to the Executive in each month in which the Company receives such a report shall be reduced by the amount of Earned Income received by the Executive during the previous calendar month. At the end of the Consulting Period and only after the Executive has reported to the Company all Earned Income theretofore received for services rendered during the Consulting Period, the Company shall pay the Executive an amount equal to fifty percent (50%) of the remainder of: (A) the Total Consulting Fees less (B) the sum of (i) the actual Consulting Fees paid to the Executive during the Consulting Period and (ii) any Earned Income received by the Executive during the Consulting Period and not subtracted from the Consulting Fees -3- 4 pursuant to the previous sentence. The Executive shall immediately notify the Company of any change in the level of Earned Income from Re-Employment that the Executive is entitled to receive during the Consulting Period. The provisions of Section 5(a)(i) above shall apply if the Earned Income from Re-Employment increases to a level equal to or in excess of the Consulting Fee. (b) If the Executive at any time during or after the Consulting Period receives any Earned Income that has not previously been reported to the Company pursuant to Section 5(a) hereof, then the Executive shall reimburse the Company, within ten (10) days after receipt of such Earned Income, for the amount by which the Consulting Fees previously paid by the Company to the Executive exceed the Consulting Fees that would have been paid if the amount of such Earned Income had been known and had been applied to reduce the Consulting Fees paid by the Company to the Executive for the period for which such Earned Income was paid as required by Section 5(a) hereof. In connection with such reimbursement, the Executive shall provide the Company with a written notice setting forth the amount of such Earned Income and the period for which such Earned Income was paid, and the Executive thereafter shall provide the Company with any other documentation relating to such Earned Income that the Company may reasonably request. (c) Provided COBRA requirements have been met, the Company's obligation to provide insurance coverage to the Executive and his dependents under Section 4(b) hereof shall terminate as to any specific coverage if and when comparable coverage is made available to the Executive in connection with Re-Employment. (d) As used herein, the term "Re-Employment" shall mean any engagement of the Executive's personal services by any one or more individuals or entities on a full-time or substantially similar basis which the Executive expects to continue on an ongoing basis. The term "Earned Income" as used herein shall mean all compensation for personal services rendered by the Executive during the Consulting Period (other than pursuant to this Agreement), whether in the form of salaries, wages, fees, commissions, bonuses, contingent compensation, any amounts deferred from income, or similar items, but shall not include any stock, stock options or any other fringe benefits. Whenever this Agreement refers to the receipt by the Executive of any Earned Income, such reference shall mean and include the -4- 5 payment of Earned Income to the Executive, or the Executive's spouse, or other members of the Executive's family or household, or an "Entity" (as defined below), to the extent such Earned Income represents personal services rendered by the Executive during the Consulting Period. As used in this paragraph (d), the term "Entity" shall mean any corporation, partnership or other legal entity in which the Executive, the Executive's spouse or other members of the Executive's family or household collectively own or possess more than fifty percent (50%) of the equity or rights to profits or voting rights. Any Earned Income paid to an Entity and subsequently paid to the Executive, or the Executive's spouse, or another member of his family or household shall be counted only once for the purposes of Sections 5(a), 5(b), and 6 hereof. (e) Within ten (10) days after receipt of written notice from the Company, the Executive shall provide the Company with (i) a copy of the Executive's filed tax return for any period included in the Consulting Period and (ii) any other documentation relating to the Executive's Earned Income reasonably requested by the Company. (f) The obligations of the Executive to the Company to notify the Company of the receipt of any Earned Income or Bonus and pay any amount owed to the Company or submit any information requested by the Company under Section 5 hereof shall remain in full force and effect notwithstanding any termination or expiration of this Agreement. 7. AMENDMENT OF SECTION 6(A). Section 6(a) of the Original Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof: (a) If the Executive dies at any time during the Consulting Period during which the Company remains obligated to pay Consulting Fees to the Executive, the Company shall pay to the Executive's estate, in full satisfaction of all obligations to the Executive hereunder, an amount equal to one hundred percent (100%) of the remainder of: (A) the Total Consulting Fees less (B) the actual Consulting Fees paid to the Executive prior to the Executive's death and less (C) any Earned Income received by the Executive during the Consulting Period. -5- 6 8. AMENDMENT OF SECTION 11. Section 11 of the Original Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof: Upon the occurrence of any breach or default in the performance of any of the Executive's duties or responsibilities hereunder, and the Executive's failure to cure such breach or default within thirty (30) days after receipt of written notice thereof, all obligations of the Company hereunder to compensate the Executive or to provide benefits thereto shall immediately be terminated and rendered null, void and of no further effect, after which the Company shall be entitled to pursue any and all remedies available, at law or in equity, to address the Executive's breach or default hereunder. Upon the occurrence of any breach or default in the performance of any of the Company's obligations hereunder and the Company's failure to cure such breach or default within thirty (30) days after receipt of written notice thereof, all of the Company's obligations hereunder shall be immediately accelerated without any right of setoff by the Company for any Earned Income received by the Executive subsequent to such breach or default by the Company, and the Executive shall be entitled to pursue any and all remedies available, at law or in equity, to address the Company's breach or default hereunder. 9. LIMITATION OF FIRST AMENDMENT. Except as expressly set forth herein, this First Amendment shall not be deemed to waive, amend or modify any term or condition of the Original Agreement or to serve as a consent to any matter prohibited by the terms and conditions thereof. 10. COUNTERPARTS. This First Amendment may be executed in any number of counterparts, and any party hereto may execute any counterpart, each of which, when executed and delivered, will be deemed to be an original and all of which, taken together, will be deemed to be but one and the same agreement. 11. SUCCESSORS AND ASSIGNS. This First Amendment shall be binding upon and inure to the benefit of the successors and permitted assigns of the parties hereto. 12. GOVERNING LAW. This First Amendment shall be governed by and construed in accordance with the laws of the State of Georgia. IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as of the day and year first above written. -6- 7 "Company" THE ACTAVA GROUP INC. f/k/a FUQUA INDUSTRIES, INC. By: ---------------------------------- Its: ------------------------------------- (CORPORATE SEAL) "Executive" (SEAL) - ----------------------------------------- -7- 8 EXHIBIT A UNCONDITIONAL RELEASE OF ALL CLAIMS AND LIABILITY THIS UNCONDITIONAL RELEASE OF ALL CLAIMS AND LIABILITY (the "Release") is made and entered into as of this ______ day of _________________, 199___, by ________________________ (the "Executive") in favor of THE ACTAVA GROUP INC. F/K/A FUQUA INDUSTRIES, INC., a Delaware corporation (the "Company"). W I T N E S S E T H : WHEREAS, the Company has, prior to the date hereof, employed the Executive as a full-time employee of the Company, but as of this date the Executive's status as an employee has terminated; and WHEREAS, the Company desires to engage the Executive as a consultant for the Company and the Executive desires to be engaged by the Company as a consultant pursuant to the terms of the Post-Employment Consulting Agreement, dated ________________, 19___, between the Company and the Executive, as amended by the First Amendment to Post-Employment Consulting Agreement, dated ____________, between the Company and the Executive (collectively referred to as the "Consulting Agreement"); and WHEREAS, the Company has required, as a condition precedent to the engagement of the Executive as a consultant for the Company, that the Executive execute and deliver this Release in favor of the Company; NOW, THEREFORE, for and in consideration of the premises, the agreement of the Company to engage the Executive as a consultant and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the Executive hereby agrees as follows: 1. RELEASE. Except with respect to the Company's obligations pursuant to the Consulting Agreement, any vested retirement benefits applicable to the Executive, those benefits, payments or other rights which the Executive is entitled to receive under any plan, agreement or arrangement listed on Schedule 1 hereto, and any benefits earned by the Executive prior to the date hereof under any other employee benefit plan adopted in writing by the Company after the date of the Consulting Agreement, the Executive hereby unconditionally remises, releases and forever discharges, to the fullest extent permitted by law, the Company, its employees, officers, directors, agents, affiliates, subsidiaries and each of them from all manner of actions, proceedings, causes of action, claims, counterclaims, suits, debts, sums, monies, accounts, covenants, agreements, promises, damages, losses or demands of whatever kind or nature from the beginning of time to the present, whether known or unknown, in law or in equity, which in the past, now or in the future arise, may arise or allegedly arise or are in 9 any way resulting from or in any manner connected with the Executive's employment by the Company and the termination of such employment by the Company. In consideration of the additional benefits and consideration provided to the Executive under the Consulting Agreement, the Executive waives all claims and causes of action against the Company and all damages, if any, that may be recoverable. This release and waiver of all claims and damages includes, but is not limited to, any tort or claim of contractual restriction relating to Executive's employment or termination thereof, any claim of wrongful discharge, and all rights under federal, state or local law prohibiting race, sex, age, religion, national origin, handicap, disability or other forms of discrimination, including but not limited to, Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act, as amended, any state or local human rights laws, Workers' Compensation laws, and the National Labor Relations Act, as amended. Notwithstanding anything herein to the contrary, the Executive does not release any claims under the Age Discrimination in Employment Act that may arise as a result of conduct occurring after the execution of this Release. 2. MISCELLANEOUS. This Release and the Consulting Agreement embody the entire agreement of the parties and supersede all prior agreements between the parties hereto relating to the subject matter hereof. The unenforceability or invalidity of any of the terms or provisions of this agreement shall not affect the validity or enforceability of the remaining terms or provisions which shall be interpreted and construed in such manner as to carry out fully the intention of the parties hereto. This Release shall be construed and enforced in accordance with the laws of the State of Georgia. The Executive represents and warrants that the Executive has been encouraged to seek advice from anyone of the Executive's choosing regarding this Release, including the Executive's attorney, accountant, or tax advisor, prior to the Executive's execution of this Release, the Executive has been given the opportunity and sufficient time to seek such advice, and that the Executive fully understands the meaning and contents of this Release. THE EXECUTIVE UNDERSTANDS THAT HE MAY TAKE UP TO TWENTY-ONE (21) DAYS TO CONSIDER WHETHER OR NOT HE DESIRES TO ENTER INTO THIS RELEASE. The Executive further represents and warrants that he was not coerced, threatened or otherwise forced to sign this Release, and that each signature appearing hereinafter is genuine. THE EXECUTIVE UNDERSTANDS THAT HE MAY REVOKE THIS AGREEMENT BY NOTIFYING THE COMPANY IN WRITING OF SUCH REVOCATION, WITHIN SEVEN (7) DAYS OF HIS EXECUTION OF THIS AGREEMENT AND THAT THIS AGREEMENT IS NOT EFFECTIVE UNTIL THE EXPIRATION OF SUCH SEVEN (7) DAY PERIOD. THE EXECUTIVE UNDERSTANDS THAT UPON THE EXPIRATION OF SUCH SEVEN (7) DAY PERIOD THIS RELEASE WILL BE BINDING UPON THE EXECUTIVE AND WILL BE IRREVOCABLE. THE EXECUTIVE UNDERSTANDS THAT BY EXECUTING THIS RELEASE THE EXECUTIVE IS GIVING UP POSSIBLE RIGHTS THAT HE MAY HAVE, AND THAT -2- 10 THE EXECUTIVE DOES NOT HAVE TO SIGN THIS RELEASE. THIS RELEASE HAS BEEN VOLUNTARILY AND KNOWINGLY EXECUTED BY THE EXECUTIVE WITH THE EXPRESS INTENTION OF EFFECTING THE EXTINGUISHMENT OF ANY AND ALL OBLIGATIONS AND DAMAGES THAT THE COMPANY MAY OWE TO THE EXECUTIVE AS PROVIDED HEREIN. IN WITNESS WHEREOF, the Executive has duly executed this Release in favor of the Company under seal as of the day and year first above written. EXECUTIVE: - ----------------------------------------- - ----------------------------------------- Print Name -3- 11 SCHEDULE 1 RETAINED EMPLOYEE RIGHTS (a) Benefits earned by the Executive prior to the date of the Executive's termination of employment under the following plans or arrangements: Employee Stock Purchase Plan Employee Stock Option Plan Days-Off Policy The Executive's right to payment of expenses incurred on or before the date of the Executive's termination of employment under the medical, dental and vision reimbursement plans maintained by the Company for the Executive, including the executive reimbursement plan. The Executive's right to payment of expenses incurred on or before the date of the Executive's termination of employment under the Company's executive financial and tax planning program. (b) Reimbursement of such business expenses incurred by Executive on or before the date of the Executive's termination of employment that are reimbursable under Company policies in effect on such date. (c) Rights of the Executive to indemnification or payment of expenses under any Indemnification Agreement, or any provision of the Company's Certificate of Incorporation or Bylaws or any law applicable to Executive. 12 EXHIBIT B CERTIFICATE REGARDING EARNED INCOME I, ______________________________________ (the "Executive"), hereby certify to The Actava Group Inc. f/k/a Fuqua Industries, Inc. (the "Company") that the following constitutes all "Earned Income" (as such term is defined in the Post-Employment Consulting Agreement dated as of _____________________, 199___, between the Executive and the Company) received by the Executive whether directly or indirectly from any source during the period from ___________________________ to: ______________________________: Amount of Earned Income: $______________________ Source: _____________________________________________ _____________________________________________ _____________________________________________ _____________________________________________ IN WITNESS WHEREOF, the undersigned has set his hand as of this ________ day of _____________________, 199___. "Executive" _____________________________________ EX-10.T 5 SECOND AMENDMENT TO LOAN AGREEMENT 1 EXHIBIT 10(t) SECOND AMENDMENT TO THE AMENDED AND RESTATED LOAN AGREEMENT This Second Amendment to the Amended and Restated Loan Agreement ("Second Amendment") is made as of this 7th day of December, 1993, by and between TRITON GROUP LTD, a Delaware corporation (hereinafter referred to as "Borrower"), and THE ACTAVA GROUP INC., a Delaware corporation (formerly known as Fuqua Industries, Inc.) (hereinafter referred to as "Lender"); W I T N E S S E T H: WHEREAS, as of November 27, 1991 Borrower and Lender entered into a Loan Agreement (the "Original Loan Agreement") providing that Lender would make and loans and advances to the Borrower in the principal amount of up to Thirty-Two Million Dollars ($32,000,000.00) at any one time outstanding; and WHEREAS, in connection with Borrower's Plan of Reorganization Lender and Borrower entered into an Amended and Restated Loan Agreement dated as of June 25, 1993 whereby Lender and Borrower agreed to amend and restate the Original Loan Agreement (the "Restated Agreement"); and WHEREAS, Lender and Borrower entered into a letter agreement dated as of August 19, 1993 (the "First Amendment") whereby Lender permitted Borrower to make deposits in a deposit account in lieu of pledging additional Certificates of Deposit as required by Section 2.4 of the Restated Agreement; and WHEREAS, in connection with the First Amendment to the Amended and Restated Stock Pledge Agreement, the prepayment by Borrower of Five Million Dollars ($5,000,000.00) plus accrued interest on such amount, and Lender's agreement that the Per Share Value of the Pledged Securities for purposes of Section 2.4 hereof shall not be less than $7.50 per share, Borrower and Lender desire to further amend the Restated Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties hereby agree as follows: 1. DEFINED TERMS. Defined terms used herein, as indicated by the initial capitalization thereof, shall have the same effect and meaning ascribed to such terms in the Restated Agreement, as amended by the First Amendment, unless otherwise specifically defined herein. 2. PREPAYMENT. Simultaneously with the execution of the Second Amendment, Borrower agrees to make a prepayment of the Loan in the amount of $5,000,000.00 plus accrued interest on such amount through the date of the Second Amendment. Such prepayment shall be made immediately available by wire transfer to Lender's bank account in accordance with Lender's instruction. 2 3. DEFINITIONS. (a) Lender. Section 1.1 of the Restated Agreement is hereby amended by deleting the definition of "Lender" in its entirety and substituting the following in lieu thereof: "Lender" shall mean The Actava Group Inc., a Delaware corporation, formerly known as Fuqua Industries, Inc. (b) Note. Section 1.1 of the Restated Agreement is hereby further amended by deleting the definition of "Note" in its entirety and substituting the following in lieu thereof: "Note" shall mean that certain Amended and Restated Promissory Note of Borrower of even date herewith in the principal face amount of $26,726,000.00, together with any and all amendments, modifications, extensions and renewals thereof, in whole or in part in form of Exhibit A attached hereto. (c) Pledge Agreement. Section 1.1 of the Restated Agreement is hereby further amended by deleting the definition of "Pledge Agreement" in its entirety and substituting the following in lieu thereof: "Pledge Agreement" shall mean that certain Amended and Restated Stock Pledge Agreement dated as of June 25, 1993 executed by Borrower in favor of Lender in form of Exhibit B attached hereto which amends and restates the Original Pledge Agreement and confirms the security interest created by the Original Pledge Agreement, as amended by that certain First Amendment to the Amended and Restated Stock Pledge Agreement dated as of December __, 1993 executed by Borrower in favor of Lender. 4. THE LOAN. The Restated Agreement is hereby further amended by deleting Section 2.1 thereof in its entirety and by substituting in lieu thereof a new Section 2.1 to read as follows: As of the date of the Second Amendment, the outstanding principal balance of the "Advances" under, and as such term is defined in, the Original Loan Agreement is $26,726,000.00. Subject to the terms and conditions hereof, Lender agrees that such Advances may remain outstanding and shall be repayable as set forth in this Section 2.1. Such outstanding Advances shall constitute the loan (the "Loan") hereunder. The Loan outstanding hereunder shall be evidenced by the Note, and the outstanding principal amount of the Note shall be repayable in quarterly installments of principal with each installment being in the aggregate -2- 3 amount of $1,250,000.00, payable on March 31, June 30, September 30 and December 31 of each year, commencing March 31, 1994, and the remaining aggregate principal balance of the Loan shall be repaid by Borrower in full on April 1, 1997. Lender is not obligated hereunder to make any further Advances to Borrower. Borrower acknowledges and agrees that the Loan no longer constitutes a revolving credit facility and agrees that Borrower shall have no right, to repay and reborrow all or any portion of the Loan. 5. MANDATORY PAYMENTS. Section 2.4 of the Restated Agreement is hereby deleted in its entirety and a new Section 2.4 is substituted in lieu thereof to read as follows: (a) If at any time the average over any period of ten (10) consecutive trading days (the "Payment Measuring Period") of the Per Share Value of the Pledged Securities for each trading day within the Payment Measuring Period multiplied by the number of shares then constituting the Pledged Securities is less than 125% of the then outstanding principal balance of the Loan, then Borrower shall, within ten (10) Business Days after Lender notifies Borrower in writing of such occurrence ("Lender's Notice"), comply with any one or a combination of the following alternatives (as amended by the First Amendment) at Borrower's option: (i) make a prepayment of principal to Lender in the amount (the "Payment Amount") necessary to cause 125% of the reduced outstanding principal balance of the Loan to not exceed the "Adjusted Collateral Value" which for purposes of this Section 2.4, shall mean the sum of (A) the product of the average of the Per Share Values of the Pledged Securities during the Payment Measuring Period (the "Average Payment Value") multiplied by the number of shares then constituting the Pledged Securities plus (B) the face value of any and all outstanding CDs purchased by Borrower and pledged to Lender under any executed CD Agreements plus (C) any amounts deposited in the Deposit Account and pledged in accordance with the Deposit Agreement by and among Borrower, Lender and The Bank of California, N.A. (the "Bank") dated as of August 19, 1993 (the "Deposit Agreement");or (ii) purchase one or more negotiable Certificates of Deposit from any bank reasonably satisfactory to Lender (the "CD") in the aggregate face amount equal to the difference between 125% of the outstanding principal balance of the Loan and the Adjusted Collateral Value (including the face amount of the CD pledged pursuant to Lender's Notice), deliver such CD to -3- 4 Lender and execute and deliver to Lender a CD Agreement pledging such CD to Lender as Collateral for the Obligations and take such other actions with respect to Lender's perfection of such security interest as Lender may require; or (iii) transfer to Lender (free and clear of any and all liens, claims and encumbrances) as a prepayment of principal on the outstanding loan hereunder the number of shares of Pledged Securities necessary to cause the Adjusted Collateral Value after such transfer to equal or exceed 125% of the reduced principal balance outstanding under the Loan, giving effect to the transferred Pledged Securities at the Average Payment Value; provided, however, in the event that the number of shares required to be transferred to Lender to satisfy this Section 2.4(a)(iii) is within the amount permitted to be sold without registration under SEC Rule 144 or could otherwise be sold in a public offering without violating the registration requirements of the Securities Act of 1933, as amended, at Lender's option set forth in Lender's Notice, Borrower shall sell such number of shares of Pledged Securities in lieu of transferring such shares to Lender and apply all of the net proceeds of such sale (after payment of reasonable and customary brokerage fees) to reduce the principal balance of the Loan; or (iv) make deposits in the deposit account established with The Bank of California, N.A., a national banking association (the "Deposit Account"), in the amounts required by Section 2.4 (a) (ii) hereof (with the amount of any and all funds on deposit in the Deposit Account being included in the calculation of the "Adjusted Collateral Value" under and as defined herein), and in accordance with the First Amendment, grant a security interest in such Deposit Account and the funds from time to time deposited therein. (b) If Borrower has pledged one or more CDs to Lender in accordance with Section 2.4(a)(ii) and/or made deposits in the Deposit Account in accordance with Section 2.4(a)(iv) and the sum of the face amount of such CDs and the total of such deposits plus the average during any period of ten (10) consecutive trading days (the "CD Release Measuring Period") of the Per Share Value of the Pledged Securities for each trading day during the CD Release Measuring Period multiplied by the number of shares then constituting the Pledged Securities exceeds 125% of the then outstanding principal balance of the Loan during the CD Release Measuring Period, Borrower may request in writing a release or partial reduction of any CDs pledged pursuant to Section 2.4(a)(ii) or request a release or partial release of any funds deposited in the Deposit Account and -4- 5 pledged pursuant to Section 2.4(a)(iv)to reduce the Adjusted Collateral Value to an amount equal to 125% of the outstanding principal balance of the Loan. Lender shall (i) notify the bank from which the CD has been purchased to release such CDs and/or (ii) notify the Bank to release funds deposited in the Deposit Account within five (5) Business Days after receipt of such written request. For purposes of Section 2.4(a) and (b), if the Per Share Value as defined herein is less than $7.50, the Per Share Value for purposes of this Section 2.4 shall be deemed to be $7.50, except that if, after the date of the Second Amendment there shall have been a stock dividend, stock split or reverse stock split increasing or decreasing the number of outstanding shares of Lender's Common Stock, the $7.50 minimum Per Share Value shall be proportionally adjusted 6. INTEREST. The Restated Agreement is hereby further amended by deleting the first sentence of Section 2.8 in its entirety and substituting a new first sentence to Section 2.8 in lieu thereof to read as follows: Subject to modification pursuant to Section 7.1, the outstanding principal amount of the Obligations shall bear interest, payable quarterly for the preceding quarter on March 31, June 30, September 30 and December 31 of each year hereafter calculated daily on the basis of a 360-day year and actual days elapsed, from the date hereof until paid in full at a fluctuating rate per annum equal to the Prime Rate plus (a) 1-1/2% from October 1, 1993 through and including December 25, 1993, (b) 2% from December 26, 1993, through and including June 25, 1994, and (c) 2-1/2% at all times thereafter. 7. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. Borrower hereby represents and warrants to Lender that all Borrower's representations and warranties contained in the Restated Agreement, as amended, are true and correct on and as of the date hereof as fully as though such representations and warranties had been made on the date hereof and with specific reference to this Second Amendment and any and all documents executed in connection herewith. 8. DEFAULTS HEREUNDER. The failure of any representation or warranty contained herein to be true and correct in all material respects as of the date hereof or the breach of any covenant contained herein or in any document executed in connection herewith, or the failure to serve or comply with any term or agreement contained herein shall constitute a default or event of default under the Restated Agreement and the Lender shall be entitled to exercise all rights and remedies it may have under the Restated Agreement, the Amended and Restated Stock Pledge Agreement, as amended from time to time, the Deposit Account Agreement, any CD Agreement or any other documents executed in connection therewith and applicable law. -5- 6 9. REFERENCES. All references in the Restated Agreement to the Amended and Restated Loan Agreement shall hereafter be deemed to be references to the Amended and Restated Loan Agreement as amended hereby and as the same may hereafter be amended from time to time. 10. NO NOVATION. The terms of this Second Amendment are not intended to and do not serve to effect a novation as to the Original Pledge Agreement, the Original Loan Agreement, the Restated Agreement or the Amended and Restated Stock Pledge Agreement. The parties hereto expressly do not intend to extinguish any debt or security created pursuant to the above documents or the "Note" (as defined in the Original Loan Agreement) or any document executed in connection with the foregoing. Instead it is the express intention of the parties hereto to affirm the Restated Agreement and the security created thereby. 11. LIMITATION OF SECOND AMENDMENT. Except as especially set forth herein, this Second Amendment shall not be deemed to waive, amend or modify any term or condition of the Restated Agreement which is hereby ratified and reaffirmed and which shall remain in full force and effect, nor to serve as a consent to any matter prohibited by the terms and conditions thereof. 12. COUNTERPARTS. This Second Amendment may be executed in any number of counterparts, and any party hereto may execute any counterpart, each of which, when executed and delivered, will be deemed to be an original and all of which, taken together will be deemed to be but one and the same agreement. 13. FURTHER ASSURANCES. Borrower agrees to take such further action as Lender shall reasonably request in connection herewith to evidence the amendments herein contained to the Restated Agreement. 14. SUCCESSORS AND ASSIGNS. This Second Amendment shall be binding upon and inure to the benefit of the successors and permitted assigns of the parties hereto. 15. GOVERNING LAW. This Second Amendment shall be governed by, and construed in accordance with, the laws of the State of Georgia, without regard to principles of conflicts of law. -6- 7 IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment to the Amended and Restated Loan Agreement under seal at the date first above written. "BORROWER" TRITON GROUP LTD. By: /s/ John C. Stiska --------------------------------- Name: John C. Stiska ---------------------------- Title: President & CEO ---------------------------- Attest: /s/ Barbara J. Flagg ----------------------------- By: Barbara J. Flagg ----------------------------- Its: Associate Accountant ----------------------------- [CORPORATE SEAL] "LENDER" THE ACTAVA GROUP INC. By: /s/ F.B. Beilstein III --------------------------------- Name: Frederick B. Beilstein III ---------------------------- Title: Senior Vice President ---------------------------- Attest: /s/ Paul N. Kiel ----------------------------- By: Paul N. Kiel ----------------------------- Its: Secretary ----------------------------- [CORPORATE SEAL] -7- EX-10.U 6 FORM OF INDEMNIFICATION AGENT 1 EXHIBIT 10(u) AGREEMENT AGREEMENT, effective as of __________________, between FUQUA INDUSTRIES, INC., a Delaware corporation (the "Company"), and ___________________________ (the "Indemnitee"). WHEREAS, it is essential to the Company to retain and attract as directors the most capable persons available; WHEREAS, both the Company and Indemnitee recognize the increased risk of litigation and other claims being asserted against directors of public companies in today's environment; WHEREAS, there is a general awareness that competent and experienced persons are becoming more reluctant to serve as directors of a corporation unless they are protected by comprehensive insurance and/or indemnification, especially since shareholder and derivative lawsuits against publicly-held corporations and their directors for line-of-duty decisions and actions have increased in number in recent years for damages in amounts which have no reasonable or logical relationship to the amount of compensation received by the directors from the corporation, and WHEREAS, the vagaries of "public policy" and the interpretations of ambiguous statutes, regulations and bylaws are too uncertain to provide directors with adequate, reliable knowledge of legal risks to which they may be exposed with these indeterminables multiplied a thousandfold for directors of corporations such as the company with operations in most of the states in the United States and in many foreign jurisdictions, and WHEREAS, damages sought by class action plaintiffs in some cases amount to tens of millions of dollars and, whether or not the case is meritorious, the cost of defending them is enormous with few individual directors having the resources to sustain such legal costs, not to mention the risk of a judgment running into millions even in cases where the defendant was neither culpable nor profited personally to the detriment of the corporation, and WHEREAS, Section 145 of the General Corporation Law of the State of Delaware, under which the Company is organized, empowers corporations to indemnify persons serving as a director, officer, employee or agent of the corporation or a person who serves at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, and further specifies that the indemnification set forth in said section "shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise", and 2 WHEREAS, in recognition of Indemnitee's need for substantial protection against personal liability in order to enhance Indemnitee's service to the Company in an effective manner, the increasing difficulty in obtaining satisfactory directors' and officers' liability insurance coverage, and in part to provide Indemnitee with specific contractual assurance that protection will be available to Indemnitee (regardless of, among other things, any amendment to or revocation of the Certificate of Incorporation ("Certificate") or Bylaws ("Bylaws") of the Company or any change in the composition of the Company's Board of Directors or acquisition transaction relating to the Company), the Company wishes to provide in this Agreement for the indemnification of and the advancing of expenses to Indemnitee to the full extent (whether partial or complete) authorized or permitted by law and as set forth in this Agreement, and for the continued coverage of Indemnitee under the Company's directors' and officers' liability insurance policies, and WHEREAS, Indemnitee is unwilling to serve or to continue to serve the Company as a director without the assurances provided by this Agreement; and the Company in order to induce Indemnitee to serve or continue to serve as a director has agreed to provide Indemnitee with the benefits contemplated by this Agreement; NOW, THEREFORE, in consideration of the premises and of Indemnitee agreeing to serve or to continue to serve the Company directly or, at its request, another enterprise, and intending to be legally bound hereby, the parties hereto agree as follows: 1. Basic Indemnification Arrangement. (a) In the event Indemnitee was, is, or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, a Claim by reason of (or arising in part out of) an Indemnifiable Event, the Company shall indemnify Indemnitee to the full extent authorized or permitted by law as soon as practicable but in any event no later than thirty (30) days after written demand is presented to the Company, against any and all Expenses, judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties or amounts paid in settlement) of such claim; provided, however, that, except for proceedings to enforce rights to indemnification, the Company shall not be obligated to indemnify Indemnitee in connection with a proceeding (or part thereof) initiated by Indemnitee unless such proceeding (or part thereof) was authorized in advance, or unanimously consented to, by the Board of Directors of the Company. If so requested by Indemnitee, the Company shall advance (within two (2) business days of such request) any and all Expenses to Indemnitee (an "Expense Advance"). -2- 3 (b) Notwithstanding the foregoing, (i) the obligations of the Company under Section 1(a) shall be subject to the condition that the Reviewing Party shall not have determined (in a written opinion, in any case in which the Independent Legal Counsel referred to in Section 2 hereof is involved) that Indemnitee would not be permitted to be indemnified under applicable law, and (ii) the obligation of the Company to make an Expense Advance pursuant to Section 1(a) shall be subject to the condition that, if, when and to the extent that the Reviewing Party determines that Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided, however, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by the Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). If there has not been a Change in Control, the Reviewing Party shall be selected by the Company's Board of Directors, and if there has been such a Change in Control, the Reviewing Party shall be the Independent Legal Counsel referred to in Section 2 hereof. If there has been no determination by the Reviewing Party or if the Reviewing Party determines that Indemnitee substantively would not be permitted to be indemnified in whole or in part under applicable law, Indemnitee shall have the right to commence litigation in any court in the States of Georgia or Delaware having subject matter jurisdiction thereof and in which venue is proper seeking an initial determination by the court or challenging any such determination by the Reviewing Party or any aspect thereof, including the legal or factual bases therefor, and the Company hereby consents to service of process and to appear in any such proceeding. Any determination by the Reviewing Party otherwise shall be conclusive and binding on the Company and Indemnitee. (c) No change in the Company's Certificate or Bylaws or in the General Corporation Law of the State of Delaware subsequent to the date of this Agreement shall have the effect of limiting or eliminating the indemnification available under this Agreement as to any act, omission or capacity for which this Agreement provides indemnification at the time of such act, omission or capacity. If any change after the date of this Agreement in any applicable law, statute or rule expands the power of the Company to indemnify the Indemnitee, such change shall to the same extent expand the Indemnitee's rights and the Company's obligations under this Agreement. If any change in any applicable law, statute or rule diminishes the power of the Company to Indemnify the Indemnitee, such change, except to the extent otherwise required by law, -3- 4 statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties' rights and obligations hereunder. 2. Change in Control. The Company agrees that if there is a Change in Control of the Company, then with respect to all matters thereafter arising concerning the rights of Indemnitee to indemnity payments and Expense Advances under this Agreement or any other agreement, or any Certificate or Bylaw provision now or hereinafter in effect relating to Claims for Indemnifiable Events, the Company shall seek legal advice only from Independent Legal Counsel selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld). Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent the Indemnitee would be permitted to be indemnified under applicable law. The Company agrees to pay the reasonable fees of the Independent Legal Counsel referred to above and to fully indemnify such counsel against any and all expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto. 3. Indemnification for Additional Expenses. The Company shall indemnify Indemnitee against any and all expenses (including attorneys' fees) and, if requested by Indemnitee, shall (within two (2) business days of such request) advance such expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for (i) indemnification or advance payment of Expenses by the Company under this Agreement or any other agreement, or any Certificate or Bylaw provision now or hereafter in affect relating to Claims for Indemnifiable Events and/or (ii) recovery under any directors' and officers' liability insurance policies maintained by the Company; provided, however, that if there is a final judicial determination (as to which all rights of appeal therefrom have been exhausted or lapsed) that Indemnitee is not entitled to such indemnification, advance payment of expenses or insurance recovery, Indemnitee shall reimburse the Company for all such expenses theretofore paid under this Section 3. 4. Partial Indemnity, Etc. If indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses, judgments, fines, penalties and amounts paid in settlement of a Claim but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled. Moreover, notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any or all Claims relating in whole or in part to an Indemnifiable Event or in defense of any Issue or matter therein, including dismissal without prejudice, -4- 5 Indemnitee shall be indemnified against all Expenses incurred in connection therewith. 5. Burden of Proof. In connection with any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified hereunder, the burden of proof shall be on the Company to establish that Indemnitee is not so entitled. 6. No Presumptions. For purposes of this Agreement, the termination of any claim, action, suit or proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. In addition, neither the failure of the Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by a Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by Indemnitee to secure a judicial determination that Indemnitee should be indemnified under applicable law shall be a defense to Indemnitee's claim or create a presumption that Indemnitee has not met any particular standard of conduct or did not have any particular belief. 7. Nonexclusivity, Etc. The rights of the Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the Certificate, the Bylaws, or the Delaware General Corporation Law or otherwise. To the extent that a change in the Delaware General Corporation Law (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Certificate, Bylaws and this Agreement, it is the Intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. 8. Liability Insurance. (a) The Company hereby represents and warrants that the Company has purchased and maintains directors' and officers' liability insurance consisting of a primary policy issued by Reliance Insurance Company providing $5,000,000 in coverage and an excess policy issued by Continental Insurance Company providing an additional $5,000,000 in coverage, and that such policies are in full force and effect (the "D&O Insurance"). (b) The Company hereby covenants and agrees that, so long as Indemnitee shall continue to serve as a director of the Company and thereafter so long as Indemnitee shall be subject to any possible claim or threatened, pending or completed action, suit -5- 6 or proceeding, whether civil, criminal or investigative, by reason of the fact that Indemnitee was a director of the Company, the Company shall maintain in full force and effect the D&O Insurance. (c) In all policies of D&O Insurance, Indemnitee shall be named as an insured in such manner as to provide Indemnitee the same rights and benefits, subject to the same limitations, as are accorded to the Company's directors or officers most favorably insured by such policy. 9. Period of Limitations. No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company against Indemnitee, Indemnitee's spouse, heirs, executors or personal or legal representatives after the expiration of two (2) years from the date of accrual of such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two (2) year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action such shorter period shall govern. 10. Amendments, Etc. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. 11. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights. 12. No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, the Certificate, Bylaws or otherwise) of the amounts otherwise indemnifiable hereunder. 13. Binding Effect, Etc. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, executors and personal and legal representatives. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as a director of the Company. -6- 7 14. Severability. The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) is held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable in any respect, and the validity and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired and shall remain enforceable to the full extent permitted by law. 15. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such state without giving effect to the principles of conflicts of laws. 16. Certain Definitions. (a) Change in Control: A Change in Control shall be deemed to have occurred if (i) during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board of Directors and any new directors, whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least three quarters (3/4) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved (the "Continuing Directors"), cease for any reason to constitute a majority thereof; or (ii) any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity, or any syndicate or group deemed to be a person under Section 14(d)(2) of the Exchange Act (other than Triton Group, Ltd. or a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3 of the General Rules and Regulations under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the total voting power represented by the Company's then outstanding Voting Securities in a transaction which has not been approved by the Continuing Directors; or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which (A) has been approved by the Continuing Directors or (B) would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the -7- 8 Company of (in one transaction or a series of transactions) all or substantially all the Company's assets. (b) Claim: any threatened, pending or completed action, suit or proceeding, or any inquiry or investigation, whether instituted by or in the right of the Company or any other party, that Indemnitee in good faith believes might lead to the institution of any such action, suit or proceeding, whether civil, criminal, administrative, investigative or other. (c) Expenses: include attorneys' fees and all other costs, expenses and obligations paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate in any Claim relating to any Indemnifiable Event. (d) Indemnifiable Event: any event or occurrence related to the fact that Indemnitee is or was a director of the Company, or is or was serving at the request of the Company as a director, officer, or trustee of another corporation, trust or other enterprise, or by reason of anything done or not done by Indemnitee in any such capacity. (e) Independent Legal Counsel: an attorney or firm of attorneys, selected in accordance with the provisions of Section 2, who shall not have otherwise performed services for the Company or Indemnitee within the last two (2) years. (f) Reviewing Party: any appropriate person or body consisting of a member of members of the Company's Board of Directors or any other person or body appointed by the Board who is not a party to the particular Claim for which Indemnitee is seeking indemnification, or Independent Legal Counsel. (g) Voting Securities: any securities of the Company which vote generally in the election of directors. -8- 9 IN WITNESS WHEREOF, the parties hereto have executed this Agreement this ____ day of _______________, 1993. FUQUA INDUSTRIES, INC. By: --------------------------------- Name: ------------------------------ Title: ----------------------------- - -------------------------------------- (Indemnitee) -9- 10 -10- EX-10.V 7 1993 INCENTIVE BONUS PLAN 1 EXHIBIT 10(v) 1993 INCENTIVE BONUS PLAN FOR CERTAIN CORPORATE OFFICERS Confidential Treatment Requested by the Company. Filed Separately with the Commission. EX-11 8 COMPUTATION OF EARNINGS 1 EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE The Actava Group Inc. and Subsidiaries (Amounts in thousands, except per share data)
Years Ended December 31, ------------------------------------------ 1993 1992 1991 ---- ---- ---- PRIMARY Weighted average Actava Stock outstanding during the period, less stock in treasury . . . . . 17,163 16,544 16,527 ========= ======= ======== Net income (loss) available for Common Stock and Common Stock equivalents . . . . . . . . . . . . . . $ (47,594) $11,599 $(50,821) ========= ======= ======== Per share amount . . . . . . . . . . . . . . . . . . . . . . $ (2.77) $ .70 $ (3.08) ========= ======= ======== FULLY DILUTED Common Stock and Common Stock equivalents . . . . . . . . . 17,163 16,544 16,527 Shares issuable on assumed conversion of 6 1/2% Convertible Debentures . . . . . . . . . . . . . 1,802 1,802 1,802 --------- ------- -------- TOTAL . . . . . . . . . . . . . . . . . 18,965 18,346 18,329 ========= ======= ======== Net income (loss) . . . . . . . . . . . . . . . . . . . . . . $ (47,594) $11,599 $(50,821) Interest savings on assumed conversion of 6 1/2% Convertible Debentures, net of income tax effect . . . . 3,308 3,308 3,308 --------- ------- -------- Net income available for Common Stock and Common Stock equivalents assuming full dilution . . . . . . . . . . . . . . . . . . . . . . $ (44,286) $14,907 $(47,513) ========= ======= ======== Per share amount (a) . . . . . . . . . . . . . . . . . . . . $ (2.34) $ .81 $ (2.59) ========= ======= ========
(a) Fully diluted earnings per share is not used because it exceeds primary earnings per share. EX-22 9 SUBSIDIARIES OF ACTAVA 1 EXHIBIT 22 THE ACTAVA GROUP INC. CORPORATE DATA March 28, 1994
Federal State of Date of Identification Incorporation Incorporation Number ------------- ------------- ------------- Delaware 3-15-68 58-0971455 - ------------------------------------------------------------------------------------------------------------------------------- SUBSIDIARIES Percent of Voting Federal State of Date of Power Owned by I.D. Name Incorporation Incorporation Immediate Parent Number - ----------------------------------- ------------- ------------- ---------------- ------- ACTAVA FINANCIAL CORPORATION Delaware 3-7-66 100% 58-1049305 ACTAVA INSURANCE COMPANY LIMITED Bermuda 12-12-75 100% 98-0092218 ACTAVA RISK RETENTION GROUP CAPTIVE INSURANCE COMPANY OF GEORGIA, INC. Georgia 6-8-89 100% 58-1840772 ACTAVA SHL, INC. Georgia 8-26-83 100% 58-1532302 * Aliso Management Co., Inc. California 2-16-82 100% 58-1466150 AMERICAN SEATING CREDIT CORPORATION MICHIGAN 6-30-80 100% 38-2322388 DIVERSIFIED PRODUCTS CORPORATION Alabama 4-12-93 100% 58-2054222 Diversified Trucking Corp. Alabama 7-30-65 100% 63-0503336 HUTCH SPORTS USA INC. Delaware 5-28-71 100% 31-0828464 JCJ, INC. Delaware 6-8-89 100% 51-0317847 NELSON/WEATHER-RITE, INC. Delaware 1-28-72 100% 22-1945146 Actava World Trade Corporation Delaware 10-23-75 100% 58-1245785 QUALEX INC. Delaware 7-28-87 51% 16-1306019 Lerner Processing Labs, Inc. California 4-12-89 51% 33-0343478 Linn Photo Company Iowa 10-29-71 100% 42-0985077 Qualex Financial Corporation Delaware 4-4-90 100% 51-0326864 SNAPPER, INC. Georgia 4-7-82 100% 58-1473288 Snapper Deutschland, GmbH Federal Republic of Germany 3-31-89 100% N/A Snapper Europe SA/NV Belgium 2-22-89 100% N/A Snapper France SARL France 8-8-90 100% N/A Snapper Lawn Equipment (U.K.) United Kingdom 3-26-90 100% N/A WILLOW HOSIERY COMPANY, INC. New York 7-2-46 100% 13-5524459
- ------------------------------ * Inactive 2
- ------------------------------------------------------------------------------------------------------------------------ DIVISIONS Snapper N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------------------------- NAME HOLDING CORPORATIONS None - ----------------------------------------------------------------------------------------------------------------------- LIMITED PARTNERSHIPS Sienna Plantation, Ltd. Georgia 10-15-80 -- 58-1424695 Aliso Meadows, Ltd. California 6-27-80 -- 95-3531323 - -----------------------------------------------------------------------------------------------------------------------
Note that: 1. WCS Distributing, Inc. - sold May 31, 1993. 2. Name changes were made as follows: ---------------------------------- Fuqua Industries, Inc. The Actava Group Inc. July 19, 1993 Fuqua Financial Corporation Actava Financial Corporation June 23, 1993 Fuqua Foreign Sales Corporation Actava Foreign Sales Corporation August 4, 1993 Fuqua Insurance Company Limited Actava Insurance Company Limited August 6, 1993 Fuqua Risk Retention Group Captive Actava Risk Retention Group Captive June 23, 1993 Insurance Company of Georgia, Inc. Insurance Company of Georgia, Inc. Fuqua SHL, Inc. Actava SHL, Inc. June 24, 1993 Fuqua World Trade Corporation Actava World Trade Corporation August 16, 1993 3. Diversified Trucking Corp. was added as a subsidiary of Diversified Products Corporation.
CHANGES SINCE LAST REPORT: The following companies were dissolved: Actava Foreign Sales Corporation Dissolved December 10, 1993 Lone Star Snapper, Inc. Dissolved February 10, 1994 MMR Distributing, Inc. Dissolved December 16, 1993 Northeast Snapper Distributing, Inc. Requested to be dissolved 12/31/93 (not completed) Shape-U.K. Acquisition Corp. Dissolved December 16, 1993 (a subsidiary of Diversified Products Corporation)
EX-23 10 CONSENT OF ERNST & YOUNG 1 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in Post-Effective Amendment Number 1 to Registration Statement Number 2-80499 on Form S-8 dated February 14, 1983, Registration Statement Number 33-1038 on Form S-8 dated October 22, 1985, Registration Statement Number 33-26000 on Form S-8 dated December 9, 1988 and Registration Statement Number 33-30755 on Form S-8 dated August 28, 1989 pertaining to The Actava Group Inc. stock option plans and stock purchase plans and Registration Statement Number 33-64774 on Form S-3 dated June 21, 1993, and their related prospectuses, of, our report dated March 3, 1994 with respect to the consolidated financial statements and schedules of The Actava Group Inc. and subsidiaries included in this Annual Report (Form 10-K) for the year ended December 31, 1993. Ernst & Young Atlanta, Georgia March 29, 1994 EX-24 11 POWERS-OF-ATTORNEY 1 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Frederick B. Beilstein, III, and Walter M. Grant, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K of The Actava Group Inc. for the fiscal year ended December 31, 1993, and any or all amendments or supplements thereto, and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, with the undersigned hereby granting unto such attorneys-in-fact and agents full power and authority to do and perform each and every act and thing necessary or appropriate to be done with respect to the Form 10-K Report or any amendments or supplements thereto as fully to all intents and purposes as the undersigned might or could do in person, and the undersigned hereby ratifies and confirms all acts that such attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof. /s/ Charles R. Scott ------------------------------ Charles R. Scott Dated: March 27, 1994 2 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Frederick B. Beilstein, III, and Walter M. Grant, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K of The Actava Group Inc. for the fiscal year ended December 31, 1993, and any or all amendments or supplements thereto, and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, with the undersigned hereby granting unto such attorneys-in-fact and agents full power and authority to do and perform each and every act and thing necessary or appropriate to be done with respect to the Form 10-K Report or any amendments or supplements thereto as fully to all intents and purposes as the undersigned might or could do in person, and the undersigned hereby ratifies and confirms all acts that such attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof. /s/ J.M. Darden III ------------------------------- J. M. Darden III Dated: March 26, 1994 3 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Frederick B. Beilstein, III, and Walter M. Grant, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K of The Actava Group Inc. for the fiscal year ended December 31, 1993, and any or all amendments or supplements thereto, and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, with the undersigned hereby granting unto such attorneys-in-fact and agents full power and authority to do and perform each and every act and thing necessary or appropriate to be done with respect to the Form 10-K Report or any amendments or supplements thereto as fully to all intents and purposes as the undersigned might or could do in person, and the undersigned hereby ratifies and confirms all acts that such attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof. /s/ John Imlay -------------------------- John Imlay Dated: March 29, 1994 4 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Frederick B. Beilstein, III, and Walter M. Grant, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K of The Actava Group Inc. for the fiscal year ended December 31, 1993, and any or all amendments or supplements thereto, and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, with the undersigned hereby granting unto such attorneys-in-fact and agents full power and authority to do and perform each and every act and thing necessary or appropriate to be done with respect to the Form 10-K Report or any amendments or supplements thereto as fully to all intents and purposes as the undersigned might or could do in person, and the undersigned hereby ratifies and confirms all acts that such attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof. /s/ Clark A. Johnson ------------------------------ Clark A. Johnson Dated: March 28, 1994 5 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Frederick B. Beilstein, III, and Walter M. Grant, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K of The Actava Group Inc. for the fiscal year ended December 31, 1993, and any or all amendments or supplements thereto, and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, with the undersigned hereby granting unto such attorneys-in-fact and agents full power and authority to do and perform each and every act and thing necessary or appropriate to be done with respect to the Form 10-K Report or any amendments or supplements thereto as fully to all intents and purposes as the undersigned might or could do in person, and the undersigned hereby ratifies and confirms all acts that such attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof. /s/ Carl E. Sanders ------------------------------ Carl E. Sanders Dated: March 26, 1994 6 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Frederick B. Beilstein, III, and Walter M. Grant, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K of The Actava Group Inc. for the fiscal year ended December 31, 1993, and any or all amendments or supplements thereto, and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, with the undersigned hereby granting unto such attorneys-in-fact and agents full power and authority to do and perform each and every act and thing necessary or appropriate to be done with respect to the Form 10-K Report or any amendments or supplements thereto as fully to all intents and purposes as the undersigned might or could do in person, and the undersigned hereby ratifies and confirms all acts that such attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof. /s/ Richard Nevins ------------------------------- Richard Nevins Dated: March 28, 1994 7 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Frederick B. Beilstein, III, and Walter M. Grant, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K of The Actava Group Inc. for the fiscal year ended December 31, 1993, and any or all amendments or supplements thereto, and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, with the undersigned hereby granting unto such attorneys-in-fact and agents full power and authority to do and perform each and every act and thing necessary or appropriate to be done with respect to the Form 10-K Report or any amendments or supplements thereto as fully to all intents and purposes as the undersigned might or could do in person, and the undersigned hereby ratifies and confirms all acts that such attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof. /s/ John E. Aderhold ------------------------------- John E. Aderhold Dated: March 28, 1994 8 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Frederick B. Beilstein, III, and Walter M. Grant, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K of The Actava Group Inc. for the fiscal year ended December 31, 1993, and any or all amendments or supplements thereto, and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, with the undersigned hereby granting unto such attorneys-in-fact and agents full power and authority to do and perform each and every act and thing necessary or appropriate to be done with respect to the Form 10-K Report or any amendments or supplements thereto as fully to all intents and purposes as the undersigned might or could do in person, and the undersigned hereby ratifies and confirms all acts that such attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof. /s/ Anthony F. Kopp ------------------------------- Anthony F. Kopp Dated: March 24, 1994 -----END PRIVACY-ENHANCED MESSAGE-----