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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Date of Report: April 6, 1998
ACTION INDUSTRIES, INC.
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 1-6485 25-0918682
- ------------------------- ------------------- ----------------
(State of Incorporation) (Commission (IRS Employer
File Number) Identification No.)
460 Nixon Road, Cheswick, Pennsylvania 15024-1098
- ---------------------------------------------- ---------------
(Address of principal executive offices) (Zip code)
412-263-2870
-------------------------------------------------------
(Registrant's telephone number, including area code)
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INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On March 20, 1998, Action Industries, Inc. ("Action") acquired
approximately 51% of the issued and outstanding shares of common stock
of General Vision Services, Inc., a Delaware corporation ("GVS"), in
exchange for $5.2 million consisting of Notes payable to Action of $2.7
million representing funds previously advanced to GVS in connection
with a private placement financing completed in August, 1997, and a
$2.5 million secured Note. The Note is secured by a lien on Action
assets and a subordinate lien on the GVS stock acquired by Action. GVS
is a provider of retail vision services primarily in the New York City
metropolitan area, as well as elsewhere in New York and surrounding
states, and in Florida. The consideration for the purchase was
established through arms'-length negotiations between Action and GVS.
As previously announced, Action has been attempting to consummate a
merger wherein it would acquire 100% of the outstanding common stock of
GVS. The merger is subject to a number of conditions, including
approval by the shareholders of both Action and GVS. As a result of the
time it has taken to meet the merger conditions, principally obtaining
the approval of the Securities and Exchange Commission to distribute
the proxy statement required to solicit shareholder approval, Action
determined that this transaction was appropriate to reduce its expenses
and limit the depletion of its limited cash resources. In conjunction
with the acquisition of the 51% interest in GVS, Action's officers and
a majority of Action's directors have resigned, and those functions, as
well as the day to day activities of Action will be managed by two
continuing directors and newly appointed officers and directors, three
of whom are also GVS directors.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(A). Financial Statements of Businesses Acquired
Financial Statements will be filed by
amendment on or before May 1, 1998.
(B). Pro Forma Financial Information
Pro forma financial information will be filed by
amendment on or before May 1, 1998
(C). Exhibits (all filed herewith)
Exhibit 23.1 Stock Purchase Agreement dated as of March
16, 1998 between Action Industries, Inc.
and General Vision Services, Inc.
Exhibit 23.2 Security Agreement dated as of March 18,
1998 between Action Industries, Inc. and
General Vision Services, Inc.
Exhibit 23.3 Security Agreement dated as of March 18,
1998 between Action Industries Inc., and
J. Robbins Securities, LLC, as Agent
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Exhibit 23.4 Promissory Note dated March 18, 1998
Signatures
----------
Pursuant to the requirements of the Securities Exchange Act of 1934 the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ACTION INDUSTRIES, INC.
(Registrant)
By: /s/ William J. Rappaport
-------------------------------
Name: William J. Rappaport
Title: President and
Chief Executive Officer
Dated: April 6, 1998
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EXHIBIT INDEX
Exhibit 23.1 Stock Purchase Agreement dated as of March 16, 1998 between
Action Industries, Inc. and General Vision Services, Inc.
Exhibit 23.2 Security Agreement dated as of March 18, 1998 between Action
Industries, Inc. and General Vision Services, Inc.
Exhibit 23.3 Security Agreement dated as of March 18, 1998 between Action
Industries Inc., and J. Robbins Securities, LLC, as Agent
Exhibit 23.4 Promissory Note dated March 18, 1998
<PAGE> 1
Exhibit 23.1
STOCK PURCHASE AGREEMENT
THIS AGREEMENT dated as of March 16,1998 between ACTION INDUSTRIES, INC., a
corporation organized under the laws of the Commonwealth of Pennsylvania with
offices at 460 Nixon Road, Cheswick, Pennsylvania 15024, (the "Purchaser"), and
GENERAL VISION SERVICES, INC., a corporation organized under the laws of
Delaware with offices at 330 West 42nd Street, New York, New York 10036 (the
"Seller");
W I T N E S S E T H :
WHEREAS, the parties agree that the Purchaser commence the acquisition of the
Seller as expeditiously as possible in a transaction which will not require
the approval of the stockholders of either party as an interim step leading to
the ultimate consummation of the acquisition of the Seller by the Merger
contemplated by the Merger Agreement between the Purchaser and the Seller; and
WHEREAS, there are 26,707,278 shares of capital stock of GVS (the "GVS Common
Stock") currently issued and outstanding; and
WHEREAS, in furtherance of the foregoing the parties intend that the Purchaser
purchase 26,800,000 shares of GVS Common Stock in exchange for the
consideration set forth in Section 1.2 below; and
WHEREAS, the parties hereto intend that this transaction shall constitute an
issuance of stock in consideration for the investment received and, accordingly,
constitute a transaction described in Section 1032 of the Internal Revenue Code
of 1986, as amended; and
WHEREAS, the Purchaser has strengthened its business by effecting a private
financing completed on or about August 18, 1997 (the "First Financing") in which
it received gross proceeds of $3.7 million and is effecting a private
financing to be completed in March 1998 (the "Second Financing") in which it may
receive gross proceeds of up to $300,000 (the First and second Financings
hereinafter sometimes referred to collectively as the "Financings" and the
purchasers in the Financings hereinafter referred to as the "Unit Purchasers");
and
WHEREAS, J. Robbins Securities, LLC ("Robbins") has acted as placement agent on
behalf of the Purchaser in effecting the Financings.
NOW, THEREFORE, in consideration of the premises and the covenants herein
contained, the parties hereto do hereby agree as follows:
ARTICLE I. PURCHASE AND SALE OF THE GVS SHARES
1.1 Transfer of the GVS Shares.
The Seller hereby sells to the Purchaser and the Purchaser hereby purchases from
the Seller 26,800,000 shares of GVS Common Stock (the "GVS Shares"). free and
clear of all security
PAGE 1 OF 6 PAGES
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STOCK PURCHASE AGREEMENT BETWEEN ACTION
INDUSTRIES, INC. AND GENERAL VISION
SERVICES, INC. DATED AS OF MARCH 18, 1998
interests, pledges, liens, charges and encumbrances, and the Purchaser hereby
purchases and accepts the GVS Shares from the Seller.
1.2 Consideration.
Subject to the provisions of this Agreement, as consideration for the GVS Shares
sold, transferred and conveyed to the Purchaser, the Purchaser hereby pays to
the Seller, receipt of which is acknowledged by the Seller, an aggregate of
$5,197,582.15 which consists of the $2,697,582.15 previously advanced by the
Purchaser to the Seller from the proceeds of the First Financing which is
reflected in the notes dated June 13, 1997, July 20, 1997 and August 19, 1997
which notes are herewith delivered to the Seller marked paid in full, together
with the Purchaser's note (the "Purchaser's Note") in the principal amount of
$2.5 million in the form appended hereto as EXHIBIT A. The Purchaser's Note
shall be secured, subject to a superior lien to be granted to the Unit
Purchasers, as set forth in the form of security agreement appended hereto as
EXHIBIT B, which lien in favor of GVS shall be released, unless the Unit
Purchasers notes have previously been paid, in the event that the Merger or
other business combination pursuant to which Purchaser acquires not less than
90% of the voting securities of GVS is not consummated by December 31, 1998. The
Purchaser's Note and the Unit Purchaser's Notes shall also be secured by a
continuing lien on all of the Purchasers other assets, except for the proceeds
resulting from tax refunds or the issuance of debt of equity securities.
Anything to the contrary not withstanding, Seller acknowledges that Purchaser
may be unable to pay the GVS Note without obtaining additional financing,
Purchaser agrees to use its best efforts to obtain the financing to pay the
note.
1.3 Further Assurances.
The Seller shall from time to time after the date hereof, without further
consideration, execute and deliver such instruments of transfer, conveyance and
assignment and shall take such other action as the Purchaser may reasonably
request to more effectively transfer, convey and deliver the GVS Shares to the
Purchaser.
ARTICLE II. AMENDMENT TO MERGER AGREEMENT
The Merger Agreement is hereby amended as follows: (i) all releases required of
resigning officers and directors relating to any moneys owed to or employment,
consulting or other agreements with such resigning officers and directors shall
be given mutually in the form appended hereto as EXHIBIT C upon the execution of
this Agreement in consideration for which Charles C. Cohen, Esq., David S.
Shapira, James H. Knowles, Jr. and William P. Snow, is each hereby granted
options by the Purchaser to purchase 25,000 shares of the Purchaser's common
stock (the "Action Common Stock") for a period of five years at $1.00 per share
for 12,500 shares and $1.25 for the balance; (ii) the shares of GVS Common Stock
referred to in Section 1.02 of Article I shall exclude the GVS Shares; (iii) all
representations and warranties shall be true and correct as of the date hereof;
and (iv) the conditions of closing set forth in Section 5.03 of Article V is
hereby waived except that (A) neither party shall be obligated to proceed with
the Merger if the consummation thereof is enjoined by a court of competent
jurisdiction, (B) shareholder approval of both parties shall be required; and
(C) the calculation
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STOCK PURCHASE AGREEMENT BETWEEN ACTION
INDUSTRIES, INC. AND GENERAL VISION
SERVICES, INC. DATED AS OF MARCH 18, 1998
of the Purchaser's negative net worth for the purpose of issuing B Preferred
Stock shall be made as of December 31, 1997 and which is $(525,012) based upon
the statement of Net Worth annexed hereto as Schedule 2.1, (D) all of the
conditions set forth in 5.03(h), (o) and (p). Anything to the contrary not
withstanding, options and/or warrants held by resigning officers and directors
and all rights to indemnity and liability insurance coverage to which they are
entitled are not released.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Seller.
The Seller represents and warrants to the Purchaser all of the representations
and warranties set forth in Article II of the Merger Agreement as if fully set
forth herein. In addition, the Seller represents and warrants to the Purchaser
that (i) the GVS Shares have been duly authorized and are validly issued, fully
paid and non-assessable and the holders thereof will not be subject to personal
liability solely by reason of being such holders; (ii) none of the GVS Shares
are subject to the preemptive rights of any stockholder of the Seller; (iii) all
corporate action required to be taken for the authorization, issue and sale of
the GVS Shares has been duly and validly taken; and (iv) the GVS Shares
represent approximately 51% of the total of all shares of the Seller's capital
stock issued and outstanding as of the date hereof.
3.2 Representations and Warranties of the Purchaser.
The Purchaser represents and warrants to the Seller all of the representations
and warranties set forth in the Merger Agreement as if fully set forth herein.
3.3 Representations and Warranties of the Purchaser and the Seller.
The Purchaser and the Seller each represent and warrant to the other that (i) it
has due and proper authority to make and perform all duties and obligations set
forth and contemplated by this Agreement, and full power and authority to
execute and deliver this Agreement; (ii) the execution and delivery of this
Agreement will not result in the breach of or default under, with or without the
giving of notice and/or the passage of time, any other agreement, arrangement or
indenture to which it is a party or by which it may be bound, or the violation
of any law, statute, rule, decree, judgment or regulation binding upon it; and
(iii) upon the execution and delivery of this Agreement by it, such Agreement
shall constitute its valid and legally binding obligation enforceable in
accordance with the terms thereof.
ARTICLE IV. NATURE AND SURVIVAL OF
REPRESENTATIONS AND WARRANTIES
4.1 Nature of Statements.
All statements contained herein or in any schedule, exhibit, or certificate
delivered by or on behalf of the Seller or the Purchaser pursuant to this
Agreement, or in connection with the
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STOCK PURCHASE AGREEMENT BETWEEN ACTION
INDUSTRIES, INC. AND GENERAL VISION
SERVICES, INC. DATED AS OF MARCH 18, 1998
transactions contemplated hereby, shall be deemed representations and warranties
by the Seller or the Purchaser, as the case may be.
4.2 Survival of Representations and Warranties.
All covenants, agreements, representations and warranties made hereunder or
pursuant hereto or in connection with the transactions contemplated hereby shall
not survive the execution of this Agreement.
ARTICLE V. COVENANTS
5.1 Covenant of Purchaser. The Purchaser covenants and agrees that (i) upon
execution of this Agreement it shall obtain the resignation of its officers and
certain of its directors and appoint directors to replace them so that its board
of directors shall consist of the persons set forth on SCHEDULE 3.1; and (ii) it
shall vote the GVS Shares in favor of the Merger.
5.2 Covenant of Seller. The Seller covenants and agrees that it shall use the
proceeds it shall receive from the payment of the Purchaser's Note in accordance
with the Use of Proceeds Schedule appended hereto as SCHEDULE 3.2.
5.3 Covenants of Purchaser and Seller. The Purchaser and the Seller each
covenant and agree with the other that it will, concurrently with the change in
the Seller's board of directors referred to in SECTION 3.1 above, cause the
board to (i) appoint a special committee (the "Special Committee") composed of
William J. Rappaport, H. Charles Kleinman and Barry W. Blank ("Blank") (or Joel
Berez if Blank is unable to serve) with Joel Berez serving as a nonvoting
member, the unanimous approval which shall be required to (A) make any material
change in (1) the terms of the Merger Agreement, (2) this Stock Purchase
Agreement, (3) the Promissory Note annexed hereto as Exhibit A, (4) the
definition of Collateral contained in the annexed Security Agreements or (5) the
use of proceeds as set forth on SCHEDULE 3.2, or (B) permit the Seller to issue
any equity securities or securities convertible into equity securities prior to
the consummation of the Merger or ; and (ii) adopt the resolution in the form
appended hereto as EXHIBIT D and the by-law revision in the form appended hereto
as EXHIBIT E.
ARTICLE VI. CONDITIONS OF CLOSING
6.1 Conditions of Purchaser's Obligations to Close. The Purchaser's
obligation to executing this Agreement and closing this transaction shall be
subject to (i) the purchase by the Purchaser of three years of directors and
officers liability insurance in the coverage amount of $5.0 million for the
Purchaser's existing officers and directors; (ii) the Seller providing the
Purchaser's counsel with evidence, reasonably acceptable to such counsel, that
there are no more than 35 shareholders of the Seller who are "non accredited";
(iii) the Seller providing the Purchaser with a written agreement from William
Rappaport ("Rappaport"), the beneficial owner of 11,755,600 shares of GVS Common
Stock, Ned Steinfeld, the beneficial owner of 7,244,078 shares of GVS Common
Stock, and Kenneth Levin, the beneficial owner of 2,550,000 shares of GVS Common
Stock to vote their respective shares of GVS Common
PAGE 4 OF 6 PAGES
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STOCK PURCHASE AGREEMENT BETWEEN ACTION
INDUSTRIES, INC. AND GENERAL VISION
SERVICES, INC. DATED AS OF MARCH 18, 1998
Stock in favor of the Merger; (iv) the execution by Rappaport of an employment
agreement with the Seller which removes all obligations of the Seller to
repurchase, except with the proceeds of existing life insurance policies, any
equity securities from Rappaport; and (v) simultaneously with the execution of
this Agreement the payment of all professional fees then owed by the Purchaser.
6.2 Conditions of Seller's Obligations to Close. The Seller's obligation to
executing this Agreement and closing this transaction shall be subject to the
Purchaser providing the Seller with a written agreement from Blank, the
beneficial owner of 583,500 shares of Action Common Stock; Joel Berez and/or his
affiliates, collectively the beneficial owners of shares 673,400 of Action
Common Stock, and Joseph Giamanco, the beneficial owner of 339,500 shares of
Action Common Stock to conclude the acquisition by voting their respective
shares of Action Common Stock in favor of the Merger.
6.3 Condition of both Parties' Obligation to Close. The obligation of both
parties to executing this Agreement and closing this transaction shall be
subject to Robbins obtaining the written consent of all Unit Purchasers to this
transaction.
ARTICLE VII. MISCELLANEOUS
7.1 Amendment.
This Agreement may be amended only by an instrument in writing executed by each
party hereto and with the unanimous consent of the special committee of the
Action Board of Directors.
7.2 Counterparts.
This Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which shall constitute the same instrument.
7.3 Entire Agreement.
This Agreement and any exhibits, schedules, certificates or documents referred
to herein, constitute the entire agreement of the parties hereto, and supersede
all prior understandings with respect to the subject matter hereof and thereof.
7.4 Expenses.
Each party shall be responsible for its own accounting and attorney's fees and
other expenses in connection with this agreement.
7.5 Governing Law.
This Agreement shall be construed and enforced under and in accordance with and
governed by the law of the State of New York.
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STOCK PURCHASE AGREEMENT BETWEEN ACTION
INDUSTRIES, INC. AND GENERAL VISION
SERVICES, INC. DATED AS OF MARCH 18, 1998
7.6 Notices.
All notices, requests, consents and other communications hereunder shall be in
writing and shall be deemed to have been given if personally delivered, if sent
by overnight express service or if mailed, first class, registered or certified
mail, postage prepaid to the parties at their respective addresses as set forth
above or to such other address as shall be given in writing by either party to
the other.
7.7 Section and Paragraph Headings.
The section and paragraph headings in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this Agreement.
7.8 Successors Bound.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto
as of the date first above written.
THE PURCHASER:
ACTION INDUSTRIES, INC.
BY: /s/ T. RONALD CASPER
------------------------------------
T. Ronald Casper, President
THE SELLER:
GENERAL VISION SERVICES, INC.
BY: /s/ WILLIAM RAPPAPORT
------------------------------------
William Rappaport, President and CEO
PAGE 6 OF 6 PAGES
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STOCK PURCHASE AGREEMENT BETWEEN ACTION
INDUSTRIES, INC. AND GENERAL VISION
SERVICES, INC. DATED AS OF MARCH 18, 1998
SCHEDULE 2.1
STATEMENT OF NET WORTH
PAGE 7 OF 6 PAGES
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SCHEDULE 3.1
APPENDED TO
STOCK PURCHASE AGREEMENT
(THE "AGREEMENT")
BETWEEN
ACTION INDUSTRIES, INC.
AND
GENERAL VISION SERVICES, INC.
DATED AS OF MARCH 18,1998
SCHEDULE OF RESIGNING
AND
REPLACEMENT DIRECTORS
The following directors of the Purchaser shall resign upon the execution of the
Agreement: Charles C. Cohen, Esq., David S. Shapira, James H. Knowles, Jr. and
William B. Snow. The following individuals shall be appointed as directors of
the Purchaser to replace the resigning directors: William Rappaport, H. Charles
Kleinman, Ned Steinfeld, Howard Rapp, Ralph Woythaler and Bruce Allen. Joel
Berez and Barry W. Blank shall remain as directors of the Purchaser.
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SCHEDULE 3.2
APPENDED TO
STOCK PURCHASE AGREEMENT
(THE "AGREEMENT")
BETWEEN
ACTION INDUSTRIES, INC.
AND
GENERAL VISION SERVICES, INC.
DATED AS OF MARCH 16, 1998
SCHEDULE OF
USE OF PROCEEDS
The Seller shall use the proceeds (the "Proceeds") it shall receive from the
payment of the Purchaser's Note and/or the contemplated $2 million financing for
store refurbishment, purchase of inventory, general and administrative expenses,
working capital, and such other purposes as the Seller's management shall deem
necessary for the support, maintenance and operation of the Seller's business.
Anything to the contrary not withstanding, the Seller agrees that no portion of
the Proceeds will be used to repurchase any of its securities or repay
indebtedness to any of its officers, directors, stockholders or other affiliates
except for scheduled payments to William J. Rappaport and Ned Steinfeld arising
from advances or joint venture profit distributions, or the $75,000 payment due
to Paxton Ventures Corp, in accordance the terms of the settlement agreement
between the Seller and Paxton.
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SCHEDULE 3.2
APPENDED TO
STOCK PURCHASE AGREEMENT
(THE "AGREEMENT")
BETWEEN
ACTION INDUSTRIES, INC.
AND
GENERAL VISION SERVICES, INC.
DATED AS OF MARCH 16, 1998
SCHEDULE OF
USE OF PROCEEDS
The Seller shall use the proceeds (the "Proceeds") it shall receive from the
payment of the Purchaser's Note and/or the contemplated $2 million financing for
store refurbishment, purchase of inventory, general and administrative expenses,
working capital, and such other purposes as the Seller's management shall deem
necessary for the support, maintenance and operation of the Seller's business.
Anything to the contrary not withstanding, the Seller agrees that no portion of
the Proceeds will be used to repurchase any of its securities or repay
indebtedness to any of its officers, directors, stockholders or other affiliates
except for scheduled payments to William J. Rappaport and Ned Steinfeld arising
from advances or joint venture profit distributions, or the $75,000 payment due
to Paxton Ventures Corp. in accordance the terms of the settlement agreement
between the Seller and Paxton.
<PAGE> 1
Exhibit 23.2
SECURITY AGREEMENT
FOR VALUE RECEIVED, and to induce GENERAL VISION SERVICES, INC., a Delaware
corporation with offices at 330 West 42nd Street, New York, New York 10036
(hereinafter referred to as "Secured Party"), to loan to ACTION INDUSTRIES,
INC., a Pennsylvania corporation with offices at 460 Nixon Road, Cheswick,
Pennsylvania 15024 (hereinafter referred to as "Debtor"), Two Million Five
Hundred ($2,500,000) Dollars which loan is evidenced by a 6% note dated March
18, 1998 issued by Debtor to Secured Party (the "Note"), Debtor, hereby agrees
that Secured Party shall have the rights, remedies and benefits hereinafter set
forth.
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
(i) "Action Private Placement" shall mean the private financing
effected by Secured Party pursuant to which it sold Private Placement Notes
in the aggregate principal amount of approximately $4 million.
(ii) "Collateral" shall mean the GVS Shares and all other assets of
the Debtor, together with all products, proceeds, additions and
substitutions thereto, but excluding all after acquired property, proceeds
of income tax refunds, proceeds of the sales of debt or equity securities.
(iii) "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 5 of the Note.
(iv) "Financing Agreements" shall mean this Agreement, the Private
Placement Security Agreement, all current and future related agreements,
documents and instruments, as now existing and as hereafter amended,
modified or supplemented, and the Note.
(v) "GVS Shares" shall mean all of the 26,800,000 shares of Secured
Party's common stock purchased by Debtor pursuant to the Purchase
Agreement and all dividends thereon, including but not limited to Stock
dividends, and shares resulting from stock splits thereof.
(vi) "Note" shall mean the note dated March 18, 1998 issued by Debtor
to Secured party in the principal amount of Two Million Five Hundred
($2,500,000) Dollars due March 31, 2000 and bearing interest at the rate of
six percent (6%) per annum until maturity and twelve percent (12%) per
annum thereafter.
(vii) "Obligations" shall mean the Obligations as defined in the Note.
PAGE 1 OF 8 PAGES
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SECURITY AGREEMENT BETWEEN GENERAL VISION
SERVICES, INC., AND ACTION INDUSTRIES,
INC. DATED AS OF MARCH 18, 1998.
(viii) "Private Placement Notes" shall mean the 10% convertible
promissory notes acquired by the Private Placement Purchasers.
(ix) "Private Placement Purchasers" shall mean the purchasers of the
Private Placement Notes.
(x) "Private Placement Security Agreement" shall mean the security
agreement dated as of the date hereof Debtor, Secured Party and J. Robbins
Securities, LLC, as agent for the Private Placement Purchasers, pursuant to
which Secured Party has pledged the GVS Shares as security for the payment of
the Private Placement Notes, the form of which is appended hereto as EXHIBIT A.
(xi) "Purchase Agreement" shall mean the stock purchase agreement, to
which the form of this agreement is appended as EXHIBIT B, between Debtor and
Secured Party dated as of the date hereof, pursuant to which Debtor is
purchasing the GVS Shares.
All other terms defined in the preamble or the recitals hereto shall have the
respective meanings ascribed to them therein. Unless the context otherwise
indicates, all terms used without definition in this Agreement shall have the
meanings ascribed to them in the Uniform Commercial Code of the State of New
York as presently in effect, to the extent the same are used or defined therein.
ARTICLE II
SECURITY
As security for the payment and performance of the Obligations, Debtor hereby
grants to Secured Party a continuing security interest in and a general lien
upon the Collateral, subject in the case of the GVS Shares to a senior security
interest granted to the Private Placement Purchasers in accordance with the
terms of the Private Placement Security Agreement and in the case of the
Debtor's other assets, pari passu with the Private Placement Purchasers. Debtor
hereby agrees that upon the execution of this Agreement it will deliver the GVS
Shares to Robbins as agent for the Secured Parties to be held in accordance with
the terms hereof and the terms of the Senior Security Agreement.
ARTICLE III
REPRESENTATIONS, WARRANTIES
AND COVENANTS OF DEBTOR
3.1 INCORPORATION OF COVENANTS, REPRESENTATIONS AND WARRANTIES.
All covenants of Debtor set forth in Sections 1 and 2 of the Note and all
representations and warranties of Debtor set forth in Section 3 of the Note are
hereby made a part hereof and incorporated by reference herein.
PAGE 2 OF 8 PAGES
<PAGE> 3
SECURITY AGREEMENT BETWEEN GENERAL VISION
SERVICES, INC., AND ACTION INDUSTRIES,
INC. DATED AS OF MARCH 18, 1998.
3.2 FURTHER ASSURANCES; FINANCING STATEMENTS.
Upon request of Secured Party, at any time and from time to time, Debtor will,
at its own cost and expense, execute and deliver to Secured Party one or more
financing statements pursuant to the Uniform Commercial Code, or amendments or
continuations thereof, and any other documents required by Secured Party to
further evidence, effect or perfect the security interest granted herein or to
otherwise effectuate the purposes of this Agreement, and, to the extent
permitted by applicable law, Debtor hereby authorizes Secured Party to execute
and file at any time or times one or more financing statements pursuant to the
Uniform Commercial Code with respect to any or all of the Collateral, signed
only by Secured Party. Debtor hereby agrees that a carbon, photographic or other
reproduction of this Agreement or of a financing statement shall be sufficient
as a financing statement.
3.3 COLLATERAL TO BE HELD FREE AND CLEAR OF LIENS AND ENCUMBRANCES;
RESTRICTIONS ON SALE.
During the term of this Agreement and until the Obligations are paid in full,
Debtor (i) shall not sell or otherwise transfer the GVS Shares and shall hold
such shares free and clear of any liens and encumbrances except as provided in
the Private Placement Security Agreement; and (ii) shall place a legend on the
certificates representing the GVS Shares, acceptable to Secured Party,
referencing this Agreement and the restrictions set forth in this Section 3.3,
which legend shall not be removed without the written approval of Secured Party.
3.4 DISCHARGE OF LIENS.
Debtor shall immediately pay and cause the discharge of any liens, taxes or
assessments which may be levied upon the Collateral; provided, however, that
Debtor shall not be required to pay or discharge any lien, tax or assessment
which is being contested in good faith by appropriate proceedings diligently
pursued, and for which adequate reserves have been established.
3.5 ACTIONS BY SECURED PARTY.
Secured Party may, in its sole discretion and at any time, for the account and
expense of Debtor, pay any amount or do any act required of Debtor hereunder or
requested by Secured Party to preserve, protect, maintain or enforce the
Obligations, the Collateral or security interest granted herein, and which
Debtor fails to do or pay, including, without limitation, payment of any
judgment against Debtor, and insurance premium, any warehouse charge and any
lien, claim or encumbrance upon or with respect to the Collateral, and any such
payment shall be added to the Obligations and shall be payable upon demand.
3.5 ADVERSE CHANGES.
Debtor shall promptly notify Secured Party in writing of any event which
materially adversely affects the value of the Collateral.
PAGE 3 OF 8 PAGES
<PAGE> 4
SECURITY AGREEMENT BETWEEN GENERAL VISION
SERVICES, INC., AND ACTION INDUSTRIES,
INC. DATED AS OF MARCH 18, 1998.
3.6 PRESERVATION OF CORPORATE EXISTENCE.
Debtor will at all times preserve and keep in full force and effect its
corporate existence, licenses, permits, rights and franchises.
ARTICLE IV
REMEDIES UPON EVENT OF DEFAULT
4.1 ACCELERATION OF OBLIGATIONS.
For purposes of this Article IV, upon the occurrence of an Event of Default as
set forth in Section 5 of the Note, all or any portion of the Obligations shall,
at the option of Secured Party and without notice, demand or legal process,
become immediately due and payable.
4.2 RIGHTS UNDER UNIFORM COMMERCIAL CODE.
In addition to all of its other rights and remedies under this Agreement, the
other Financing Agreements and any other agreement with Debtor, Secured Party
shall have all of the rights and remedies of a secured party under the Uniform
Commercial Code of the State of New York and of any state in which the
Collateral is located from time to time.
4.3 ACTION PENDING DISPOSITION.
Until Secured Party is able to effect a sale or other disposition of the
Collateral, Secured Party shall have the right to use or take such action with
respect to the Collateral, or any part thereof, as it deems appropriate for the
purpose of preserving the Collateral or its value or for any other purpose
deemed appropriate by Secured Party. Secured Party shall have no obligation to
Debtor to maintain or preserve the rights of Debtor as against third parties
with respect to the Collateral while the Collateral is in the possession of
Secured Party. Secured Party may, if it so elects, seek the appointment of a
receiver or keeper to take possession of the Collateral and to enforce any of
Secured Party's remedies with respect to such appointment without prior notice
or hearing.
4.4 DISPOSITION OF COLLATERAL.
4.41 Right to Sell or Otherwise Dispose of Collateral. Secured Party shall have
the right to sell or otherwise dispose of all or any of the Collateral except
for the GVS Shares which may be disposed of only in accordance with the terms of
the Private Placement Security Agreement, at public or private sale or sales,
with such notice as may be required by law, in lots or in bulk, for cash or on
credit, all as Secured Party, in its sole discretion, may deem advisable. Such
sales may be adjourned and continued from time to time with or without notice.
To enable Secured Party to effect any such sale, assignment and/or transfer,
Debtor hereby makes, constitutes and appoints Secured Party as its true and
lawful attorney, in its name, place and stead, and for its account and risk, to
make, execute and deliver any and all assignments or other instruments which
Secured Party may deem necessary or proper to
PAGE 4 OF 8 PAGES
<PAGE> 5
SECURITY AGREEMENT BETWEEN GENERAL VISION
SERVICES, INC., AND ACTION INDUSTRIES,
INC. DATED AS OF MARCH 18, 1998.
effectuate the authority hereby conferred by signing Debtor's name only or by
signing the same as its attorney-in-fact, as may be deemed by Secured Party to
be necessary or proper in connection with any sale, assignment or transfer of
all or any part of the Collateral. The foregoing power of attorney is coupled
with an interest and shall be a continuing one and irrevocable so long as any
portion of the Obligations remains unpaid in whole or in part.
4.42. Right to Purchase Collateral. Secured Party may purchase all or any part
of the Collateral at public sale or, if permitted by law, private sale, and in
lieu of actual payment of such purchase price, may set off the amount of such
price against the Obligations.
4.43 Application of Proceeds of Sale of Collateral. Except as otherwise
provided by law, the proceeds realized from the sale of any of the Collateral
shall be applied by Secured Party as follows:
First, to the reasonable costs and expenses of every kind incurred in
connection with or incidental to the care, safekeeping or otherwise of any and
all of the Collateral or in any way relating to the rights of the Secured Party
hereunder, including reasonable attorney's fees and legal expenses;
Second, solely with respect to the proceeds from any sale of the GVS
Shares, to the payment of the Private Placement Notes;
Third, to the satisfaction of the Obligations;
Fourth, to the payment of any other amounts required by applicable law;
and
Fifth, to Debtor to the extent of the surplus proceeds, if any.
In the event that the proceeds realized from the sale as aforesaid are
insufficient to pay all amounts to which Secured Party is legally entitled,
Debtor will be liable for the deficiency, together with interest thereon, at the
rate of twelve (12%) percent per annum, and the reasonable fees of any attorneys
employed by Secured Party to collect such deficiency.
4.5 WAIVER OF BOND.
In connection with the foregoing remedies, Debtor hereby waives the posting of
any bond which might otherwise be required.
4.6 REMEDIES CUMULATIVE.
All rights and remedies of Secured Party arising under this Agreement, the other
Financing Agreements, any other agreement with Debtor or by operation of law
shall be cumulative and non-exclusive, to the fullest extent permitted by law.
PAGE 5 OF 8 PAGES
<PAGE> 6
SECURITY AGREEMENT BETWEEN GENERAL VISION
SERVICES, INC., AND ACTION INDUSTRIES,
INC. DATED AS OF MARCH 18, 1998.
ARTICLE V
LIABILITY OF DEBTOR FOR
SECURED PARTY'S EXPENSES AND ATTORNEYS' FEES
Debtor will be liable to Secured Party for any and all sums, costs and expenses
which Secured Party may pay or incur pursuant to the provisions of this
Agreement or in defending, protecting and enforcing the security interest
granted herein or in enforcing payment of the Obligations or otherwise in
connection with the provisions hereof, including without limitation all search,
filing and recording fees, appraisal fees, taxes, levies and reasonable
attorneys' and accountants' fees and legal expenses, all fees and expenses for
the service and filing of papers, fees of marshals, sheriffs, custodians,
auctioneers and others, travel expenses, court costs and collection charges all
expenditures in connection with the repossession, holding, preparation for sale
and sale of the Collateral, as well as all damages for breach of warranty,
misrepresentation or breach of covenant by Debtor, and all such liabilities
shall be part of the Obligations and shall be payable upon demand.
ARTICLE VI
MISCELLANEOUS
6.1 AMENDMENT.
This Agreement may be amended only by an instrument in writing executed by
parties hereto.
6.2 ENTIRE AGREEMENT.
This Agreement, the Stock Purchase Agreement, the Financing Agreements and any
exhibits, schedules, certificates or documents referred to herein and therein,
constitute the entire agreement of the parties hereto, and supersede all prior
understandings with respect to the subject matter hereof and thereof.
6.3 WAIVERS.
Any failure or delay by Secured Party to require strict performance by Debtor of
any of the provisions, warranties, terms or conditions contained herein or in
any of the other Financing Agreements shall not affect Secured Party's right to
demand strict compliance therewith and performance thereof, and any waiver of
any default shall not waive or affect any other default, whether prior or
subsequent thereto, and whether of the same or of a different type. None of the
warranties, conditions, provisions and terms contained herein or in any other
agreement, document or instrument shall be deemed to have been waived by any act
or knowledge of Secured Party, its agents, officers, stockholders or employees,
but only by an instrument in writing, signed by an officer of Secured Party and
directed to Debtor, specifying such waiver.
6.4 NOTICES.
PAGE 6 OF 8 PAGES
<PAGE> 7
SECURITY AGREEMENT BETWEEN GENERAL VISION
SERVICES, INC., AND ACTION INDUSTRIES,
INC. DATED AS OF MARCH 18, 1998.
6.41 Procedure for Notice. Any notice, demand, consent, approval, disapproval
or statement (collectively, "Notices") required or permitted to be given by the
terms and provisions of this Agreement, or by any law or governmental
regulation, shall be in writing and, unless otherwise required by such law or
regulation, shall be personally delivered or sent by United States mail, postage
prepaid, as registered or certified mail or by nationally recognized overnight
courier service. Any Notice to Debtor shall be addressed to such party at its
address herein above set forth. Any Notice to Secured Party shall be addressed
to such party at its address herein above set forth. By giving the other party
at least ten (10) days' prior written notice, any party may, by Notice given as
above provided, designate a different address or addresses for Notices.
6.42 When Notice Deemed Given. Any Notice shall be deemed given as of the date
of delivery as indicated by affidavit in the case of personal delivery; in the
case of mailing, any Notice shall be deemed given on the fifth day after
mailing; in the case of delivery by nationally recognized overnight courier
service, any Notice shall be deemed given on the next business day after
dispatch.
6.5 SEVERABILITY.
Wherever possible, each provision of this Agreement shall be interpreted in a
manner so as to be effective and valid under applicable law. If any provision of
this Agreement shall be held to be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of such provision
and the remaining provisions of this Agreement shall remain unaffected and in
full force and effect.
6.6 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and for the benefit of the parties hereto
and their respective legal representatives, successors and assigns.
6.7 GOVERNING LAW; CONSENT TO JURISDICTION; VENUE WAIVER; WAIVER OF JURY
TRIAL.
The validity, interpretation and effect of this Agreement shall be governed by
the laws of the State of New York. Debtor hereby consents to the non-exclusive
jurisdiction of all courts in said State and hereby waives all right to trial by
jury in any action, suit or proceeding brought to enforce or defend any rights
or remedies under this Agreement.
6.8 ARTICLES AND SECTION TITLES.
The titles of articles and sections contained in this Agreement are merely for
convenience and shall be without substantive meaning or content.
6.9 COUNTERPARTS.
PAGE 7 OF 8 PAGES
<PAGE> 8
SECURITY AGREEMENT BETWEEN GENERAL VISION
SERVICES, INC., AND ACTION INDUSTRIES,
INC. DATED AS OF MARCH 18, 1998.
This Agreement may be executed in any number of counterparts, each of which
shall be considered and original but all of which shall constitute one and the
same Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the 18th
day of March, 1998.
ACTION INDUSTRIES, INC.
a Pennsylvania corporation
By: /s/ T. RONALD CASPER
----------------------------------
T. Ronald Casper, President
GENERAL VISION SERVICES, INC.
a Delaware corporation
By: /s/ WILLIAM RAPPAPORT, PRESIDENT
----------------------------------
William Rappaport, President
PAGE 8 OF 8 PAGES
<PAGE> 9
EXHIBIT A
TO
SECURITY AGREEMENT
AMONG
SECURED PARTIES,
ACTION INDUSTRIES, INC.
AND
GENERAL VISION SERVICES, INC.
SCHEDULE OF SECURED PARTIES
Name and Address Number of Principal Amount
of Secured Party Note Secured of Note Secured
- ---------------- ------------ ---------------
PAGE 9 OF 8 PAGES
<PAGE> 1
Exhibit 23.3
SECURITY AGREEMENT
FOR VALUE RECEIVED, and to induce the persons whose names appear on the list of
Secured Parties appended hereto as EXHIBIT A which may be supplemented from time
to time (hereinafter collectively referred to as "Secured Parties") to consent
to the transactions set forth in the Stock Purchase Agreement (the "Stock
Purchase Agreement") dated as of the date hereof, between Action Industries,
Inc., a Pennsylvania corporation having an office at 460 Nixon Road, Cheswick,
Pennsylvania 15024 (hereinafter referred to as "Debtor") and General Vision
Services, Inc. a Delaware corporation with offices at 330 West 42nd Street, New
York, New York 10036 (hereinafter referred to as "GVS"), such persons having
loaned to Debtor up to an aggregate of Four Million ($4,000,000) Dollars which
loan is evidenced by a series of 10% convertible subordinated promissory notes
issued by Debtor to Secured Parties as set forth on EXHIBIT A, Debtor, GVS and
J. Robbins Securities, LLC as Agent for the Secured Parties, hereby agree that
Secured Parties shall have the rights, remedies and benefits hereinafter set
forth.
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
(i) "Collateral" shall mean the GVS Shares and all other assets belonging
to Debtor, together with all products, proceeds, additions and substitutions
thereto, but excluding all after acquired property, proceeds of income tax
refunds proceeds of the sales of any debt or equity securities.
(ii) "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 5 of the Notes.
(iii) "Financing Agreements" shall mean this Agreement, all current and
future related agreements, documents and instruments, as now existing and as
hereafter amended, modified or supplemented, and the Notes.
(iv) "GVS Note" shall mean the note given by Debtor to GVS as partial
consideration for the purchase of the GVS Shares.
(v) "GVS Shares" shall mean all of the 26,800,000 shares of GVS common
stock purchased by Debtor pursuant to the Stock Purchase Agreement and all
dividends thereon, including but not limited to Stock dividends, and shares
resulting from stock splits thereof.
(vi) "Notes" shall mean the 10% convertible subordinated promissory notes
issued by Debtor to Secured Parties as set forth on EXHIBIT A.
(vii) "Obligations" shall mean the Obligations as defined in the Notes.
PAGE 1 OF 8 PAGES
<PAGE> 2
SECURITY AGREEMENT AMONG SECURED
PARTIES, ACTION INDUSTRIES, INC.,
AND GENERAL VISION SERVICES, INC.
DATED MARCH 18, 1996.
(viii) "Uniform Commercial Code" shall mean the Uniform Commercial
Code of the State of New York
All other terms defined in the preamble or the recitals hereto shall have the
respective meanings ascribed to them therein. Unless the context otherwise
indicates, all terms used without definition in this Agreement shall have the
meanings ascribed to them in the Uniform Commercial Code as currently in effect,
to the extent the same are used or defined therein.
ARTICLE II
SECURITY
As security for the payment and performance of the Obligations, Debtor hereby
grants to Secured Parties a continuing security interest in and a first general
lien upon the Collateral. GVS and Debtor hereby agree that the lien created by
this Agreement in favor of the Secured Parties shall be senior to any other lien
on that portion of the Collateral, consisting of the GVS Shares and pari passu
with GVS with respect to all other collateral.
ARTICLE III
REPRESENTATIONS, WARRANTIES
AND COVENANTS OF DEBTOR
3.1 INCORPORATION OF COVENANTS, REPRESENTATIONS AND WARRANTIES.
All covenants set forth in Section I of the Notes and all representations and
warranties set forth in Section 3 of the Notes are hereby made a part hereof and
incorporated by reference herein.
3.2 FURTHER ASSURANCES; FINANCING STATEMENTS.
Upon request of J. Robbins Securities, LLC ("Agent"), as agent for Secured
Parties, at any time and from time to time, Debtor and GVS will, at their own
cost and expense, execute and deliver to Agent one or more financing statements
pursuant to the Uniform Commercial Code, or amendments or continuations thereof,
and any other documents required by Agent to further evidence, effect or perfect
the security interest granted herein or to otherwise effectuate the purposes of
this Agreement, and, to the extent permitted by applicable law, Debtor and GVS
each hereby authorizes Agent to execute and file at any time or times one or
more financing statements pursuant to the Uniform Commercial Code with respect
to any or all of the Collateral, signed only by Agent. Debtor and GVS each
hereby agrees that a carbon, photographic or other reproduction of this
Agreement or of a financing statement shall be sufficient as a financing
statement.
3.3 COLLATERAL TO BE HELD FREE AND CLEAR OF LIENS AND ENCUMBRANCES;
RESTRICTIONS ON SALE.
PAGE 2 OF 8 PAGES
<PAGE> 3
SECURITY AGREEMENT AMONG SECURED
PARTIES, ACTION INDUSTRIES, INC.,
AND GENERAL VISION SERVICES, INC.
DATED MARCH 18, 1996.
During the term of this Agreement and until the Obligations are paid in full,
Debtor (i) shall not sell or otherwise transfer the GVS Shares and shall hold
such shares free and clear of all liens and encumbrances except for the
subordinate lien of GVS which partially secures the GVS Note; and (ii) shall
place a legend on the certificates representing the GVS Shares, acceptable to
Secured Party, referencing this Agreement and the restrictions set forth in this
SECTION 3.3, which legend shall not be removed without the written approval of
Secured Party.
3.4 DISCHARGE OF LIENS.
Debtor shall immediately pay and cause the discharge of any liens, taxes or
assessments which may be levied upon the Collateral; provided, however, that
Debtor shall not be required to pay or discharge any lien, tax or assessment
which is being contested in good faith by appropriate proceedings diligently
pursued, and for which adequate reserves have been established.
3.5 ACTIONS BY AGENT.
Agent may, in its sole discretion and at any time, for the account and expense
of Debtor, pay any amount or do any act required of Debtor hereunder or
requested by Agent to preserve, protect, maintain or enforce the Obligations,
the Collateral or security interest granted herein, and which Debtor fails to do
or pay, including, without limitation, payment of any judgment against Debtor,
and insurance premium, any warehouse charge and any lien, claim or encumbrance
upon or with respect to the Collateral, and any such payment shall be added to
the Obligations and shall be payable upon demand.
3.6 ADVERSE CHANGES
Debtor shall promptly notify Agent in writing of any event which materially
adversely affects the value of the Collateral.
3.7 PRESERVATION OF CORPORATE EXISTENCE.
Debtor will at all times preserve and keep in full force and effect its
corporate existence, licenses, permits, rights and franchises and those of any
of its subsidiaries.
ARTICLE IV
REMEDIES UPON EVENT OF DEFAULT
4.1 ACCELERATION OF OBLIGATIONS.
For purposes of this ARTICLE IV, upon the occurrence of an Event of Default as
set forth in Section 5 of the Notes, all or any portion of the Obligations
shall, at the option of Agent or Secured Parties holding at least 25% of the
principal of the Notes and without notice, demand or legal process, become
immediately due and payable.
PAGE 3 OF 8 PAGES
<PAGE> 4
SECURITY AGREEMENT AMONG SECURED
PARTIES, ACTION INDUSTRIES, INC.,
AND GENERAL VISION SERVICES, INC.
DATED MARCH 18, 1996.
4.2 RIGHTS UNDER UNIFORM COMMERCIAL CODE.
In addition to all of its other rights and remedies under this Agreement, the
other Financing Agreements and any other agreement with Debtor, Secured Parties
shall have all of the rights and remedies of a secured party under the Uniform
Commercial Code of the State of New York and of any state in which the
Collateral is located from time to time except the right to retain the
Collateral in full satisfaction of the Obligations.
4.3 ACTION PENDING DISPOSITION.
Until Secured Parties are able to effect a sale or other disposition of the
Collateral, they shall have the right to use or take such action with respect to
the Collateral, or any part thereof, as they deem appropriate for the purpose of
preserving the Collateral or its value or for any other purpose deemed
appropriate by Secured Parties. Secured Parties shall have no obligation to
Debtor to maintain or preserve the rights of Debtor as against third parties
with respect to the Collateral while the Collateral is in the possession of
Secured Parties. Secured Parties may, if they so elect, seek the appointment of
a receiver or keeper to take possession of the Collateral and to enforce any of
Secured Parties' remedies with respect to such appointment without prior notice
or hearing.
4.4 DISPOSITION OF COLLATERAL.
4.41 Right to Sell or Otherwise Dispose of Collateral. Secured Parties shall
have the right to sell or otherwise dispose of all or any of the Collateral, at
a public sale or sales, with such notice as may be required by law but in any
event not less than 60 days, in lots equal to no greater than 25% of the
aggregate collateral, for cash or on credit, all as Secured Parties, in their
sole discretion, may deem advisable. Such sales may be adjourned and continued
from time to time with or without notice. To enable Secured Parties to effect
any such sale, assignment and/or transfer, Debtor hereby makes, constitutes and
appoints Agent as its true and lawful attorney, in its name, place and stead,
and for its account and risk, to make, execute and deliver any and all
assignments or other instruments which Secured Parties may deem necessary or
proper to effectuate the authority hereby conferred by signing Debtor's name
only or by signing the same as its attorney-in-fact, as may be deemed by Secured
Parties to be necessary or proper in connection with any sale, assignment or
transfer of all or any part of the Collateral. The foregoing power of attorney
is coupled with an interest and shall be a continuing one and irrevocable so
long as any portion of the Obligations remains unpaid in whole or in part.
4.42. Right to Purchase Collateral. Secured Parties may purchase all or any
part of the Collateral at public sale or, if permitted by law, private sale, and
in lieu of actual payment of such purchase price, may set off the amount of such
price against the Obligations.
4.43. Application of Proceeds of Sale of Collateral. Except as otherwise
provided by law, the proceeds realized from the sale of any of the Collateral
shall be applied by Secured Parties as follows:
PAGE 4 OF 8 PAGES
<PAGE> 5
SECURITY AGREEMENT AMONG SECURED
PARTIES, ACTION INDUSTRIES, INC.,
AND GENERAL VISION SERVICES, INC.
DATED MARCH 18, 1996.
First, to the reasonable costs and expenses of every kind incurred in
connection with or incidental to the care, safekeeping or otherwise of any
and all of the Collateral or in any way relating to the rights of Secured
Parties hereunder, including reasonable attorney's fees and legal expenses;
Second, to the satisfaction of the Obligations;
Third, to the payment of any other amounts required by applicable law;
Fourth, to GVS to the extent that Debtor is then indebted to GVS as
provided in the GVS Note; and
Fifth, to Debtor to the extent of the surplus proceeds, if any.
In the event that the proceeds realized from the sale as aforesaid are
insufficient to pay all amounts to which Secured Parties are legally entitled,
Debtor will be liable for the deficiency, together with interest thereon, at the
rate of fifteen (15%) percent per annum, and the reasonable fees of any
attorneys employed by Secured Parties to collect such deficiency.
4.5 WAIVER OF BOND.
In connection with the foregoing remedies, Debtor hereby waives the posting of
any bond which might otherwise be required.
4.6 REMEDIES CUMULATIVE.
All rights and remedies of Secured Parties arising under this Agreement, the
other Financing Agreements, any other agreement with Debtor and/or GVS by
operation of law shall be cumulative and non-exclusive, to the fullest extent
permitted by law.
ARTICLE V
LIABILITY OF DEBTOR FOR
SECURED PARTIES' EXPENSES AND ATTORNEYS' FEES
Debtor will be liable to Secured Parties for any and all sums, costs and
expenses which Secured Parties may pay or incur pursuant to the provisions of
this Agreement or in defending, protecting and enforcing the security interest
granted herein or in enforcing payment of the Obligations or otherwise in
connection with the provisions hereof, including without limitation all search,
filing and recording fees, appraisal fees, taxes, levies and reasonable
attorneys' and accountants' fees and legal expenses, all fees and expenses for
the service and filing of papers, fees of marshals, sheriffs, custodians,
auctioneers and others, travel expenses, court costs and collection charges, all
expenditures in connection with the repossession, holding, preparation for sale
and sale of the Collateral, as well as all damages
PAGE 5 OF 8 PAGES
<PAGE> 6
SECURITY AGREEMENT AMONG SECURED
PARTIES, ACTION INDUSTRIES, INC.,
AND GENERAL VISION SERVICES, INC.
DATED MARCH 18, 1996.
for breach of warranty, misrepresentation or breach of covenant by Debtor, and
all such liabilities shall be part of the Obligations and shall be payable upon
demand.
ARTICLE VI
MISCELLANEOUS
6.1 AMENDMENT.
This Agreement may be amended only by an instrument in writing executed by
Debtor, GVS and Agent for Secured Parties.
6.2 ENTIRE AGREEMENT.
This Agreement, the Stock Purchase Agreement, the Financing Agreements and any
exhibits, schedules, certificates or documents referred to herein and therein,
constitute the entire agreement of the parties hereto, and supersede all prior
understandings with respect to the subject matter hereof and thereof.
6.3 WAIVERS.
Any failure or delay by Secured Parties to require strict performance by Debtor
of any of the provisions, warranties, terms or conditions contained herein or in
any of the other Financing Agreements shall not affect Secured Parties' right to
demand strict compliance therewith and performance thereof, and any waiver of
any default shall not waive or affect any other default, whether prior or
subsequent thereto, and whether of the same or of a different type. None of the
warranties, conditions, provisions and terms contained herein or in any other
agreement, document or instrument shall be deemed to have been waived by any act
or knowledge of Secured Parties, their agents, officers, stockholders or
employees, but only by an instrument in writing, signed by Agent and directed to
Debtor, specifying such waiver.
6.4 NOTICES.
6.41 Procedure for Notice. Any notice, demand, consent, approval,
disapproval or statement (collectively, "Notices") required or permitted to be
given by the terms and provisions of this Agreement, or by any law or
governmental regulation, shall be in writing and, unless otherwise required by
such law or regulation, shall be personally delivered or sent by United States
mail, postage prepaid, as registered or certified mail or by nationally
recognized overnight courier service. Any Notice to Debtor or GVS shall be
addressed to such party at its address herein above set forth. Any Notice to
Secured Parties shall be addressed to Agent at 1345 Avenue of the Americas, 22
Floor, New York, New York 10105, Attention: James A. Jedrlinic. By giving the
other parties at least ten (10) days' prior written notice, any party may, by
Notice given as above provided, designate a different address or addresses for
Notices.
PAGE 6 OF 8 PAGES
<PAGE> 7
SECURITY AGREEMENT AMONG SECURED
PARTIES, ACTION INDUSTRIES, INC.,
AND GENERAL VISION SERVICES, INC.
DATED MARCH 18, 1996.
6.42 When Notice Deemed Given. Any Notice shall be deemed given as of the date
of delivery as indicated by affidavit in the case of personal delivery; in the
case of mailing, any Notice shall be deemed given on the fifth day after
mailing; in the case of delivery by nationally recognized overnight courier
service, any Notice shall be deemed given on the next business day after
dispatch.
6.5. LIMITATION OF INTEREST PAYMENTS.
Nothing contained in this Agreement or in any other agreement between Debtor and
Secured Parties requires Debtor to pay or Secured Parties to accept interest in
an amount which would subject Secured Parties to any penalty or forfeiture under
applicable law. In no event shall the total of all charges payable hereunder,
whether of interest or of such other charges which may or might be characterized
as interest, exceed the lower of the maximum rate permitted to be charged under
the laws of the State of New York or the state in which a Secured Party resides.
Should Secured Parties receive any payment which is or would be in excess of
that permitted to be charged under such laws, such payment shall have been and
shall be deemed to have been made in error and shall automatically be applied to
reduce the principal outstanding on the Notes.
6.6 SEVERABILITY.
Wherever possible, each provision of this Agreement shall be interpreted in a
manner so as to be effective and valid under applicable law. If any provision
of this Agreement shall be held to be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of such provision
and the remaining provisions of this Agreement shall remain unaffected and in
full force and effect.
6.7 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and for the benefit of the parties hereto
and their respective legal representatives, successors and assigns.
6.8 GOVERNING LAW; CONSENT TO JURISDICTION; VENUE WAIVER; WAIVER OF JURY
TRIAL.
The validity, interpretation and effect of this Agreement shall be governed by
the laws of the State of New York. Debtor and GVS hereby consent to the
non-exclusive jurisdiction of all courts in such State and hereby waives all
right to trial by jury in any action, suit or proceeding brought to enforce or
defend any rights or remedies under this Agreement.
6.9 ARTICLES AND SECTION TITLES.
The titles of articles and sections contained in this Agreement are merely for
convenience and shall be without substantive meaning or content.
PAGE 7 OF 8 PAGES
<PAGE> 8
SECURITY AGREEMENT AMONG SECURED
PARTIES, ACTION INDUSTRIES, INC.,
AND GENERAL VISION SERVICES, INC.
DATED MARCH 18, 1996.
6.10 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
shall be considered and original but all of which shall constitute one and the
same Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the 18th
day of March, 1998.
ACTION INDUSTRIES, INC.
a Pennsylvania corporation
By: /s/ T. RONALD CASPER
----------------------------------
T. Ronald Casper, President
GENERAL VISION SERVICES, INC.
a Delaware corporation
By: /s/ WILLIAM RAPPAPORT
----------------------------------
William Rappaport, President and CEO
J. ROBBINS SECURITIES, LLC
a New York limited liability company
as agent for Secured Parties
By:
----------------------------------
James A. Jedrlinic, President
PAGE 8 OF 8 PAGES
<PAGE> 1
Exhibit 23.4
ACTION INDUSTRIES, INC.
6% PROMISSORY NOTE
DUE MARCH 31, 2000
$2,500,000.00 March 18, 1998
THIS NOTE IS ISSUED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
PROVISIONS OF THE SECURITIES ACT OF 1933 (THE "ACT") AND QUALIFICATION
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS. IT CANNOT BE SOLD,
HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS REGISTERED PURSUANT TO THE ACT
AND QUALIFIED UNDER APPLICABLE STATE LAW OR, IN THE OPINION OF COUNSEL
ACCEPTABLE TO MAKER, AN EXEMPTION THEREFROM IS AVAILABLE.
FOR VALUE RECEIVED, the undersigned, ACTION INDUSTRIES, INC., a Pennsylvania
corporation with offices at 460 Nixon Road, Cheswick, Pennsylvania 15024
("Maker"), promises to pay to the order of GENERAL VISION SERVICES, INC., a
Delaware corporation with offices at 330 West 42nd Street, New York, New York
10036 ("Payee"), on March 31, 2000 or sooner as provided herein (the "Maturity
Date"), the principal amount of Two Million Five Hundred ($2,500,000.00)
Dollars, in lawful money of the United States of America, together with simple
interest at the rate of six percent (6%) per annum prior to the Maturity Date
and twelve percent (12%) thereafter (the "Obligations"). Interest shall be paid
commencing July 1, 1998 and quarterly thereafter. All payments hereunder shall
be made to Payee at its address set forth above or such other place as Payee
shall designate in writing to Maker. This Note is issued by Maker to Payee in
accordance with the terms and conditions set forth in the agreement between
Maker and Payee dated as of the date hereof (the "Agreement"). Pursuant to the
terms of the Agreement, Payee is purchasing 26,800,000 shares of Maker's common
stock (the "Stock").
1. Affirmative Covenants.
Maker covenants and agrees that from and after the date hereof and until the
date of repayment in full of the Obligations, it shall, and shall cause each of
its subsidiaries to, (i) pay and discharge or cause to be paid and discharged
all of its indebtedness, including the Obligations, as and when due and
payable; and (ii) pay and discharge or cause to be paid and discharged promptly
before any default all (A) taxes (other than those being contested in good
faith) imposed upon it, its income and profits, or any of its property (real,
personal or mixed), and (B) lawful claims (other than those being contested in
good faith) for services or otherwise. Maker, or any of its subsidiaries, may,
however, contest in good faith, by proper legal actions or proceedings, the
validity or amount of any claim arising for indebtedness other than the
Obligations, provided that at the time of commencement of any such action or
proceeding and during the pendency thereof adequate reserves with respect
thereto are maintained on the books of Maker, or any of its subsidiaries, as
the case may be, and Maker, or any of its subsidiaries, as the case may be,
promptly notifies Payee of any
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ACTION INDUSTRIES, INC. 6% NOTE TO THE ORDER OF
GENERAL VISION SERVICES, INC. DATED MARCH 18, 1998
such contest involving an amount in excess of Ten Thousand ($10,000) Dollars, or
an aggregate amount in excess of One Hundred Thousand $100,000 Dollars.
2. Negative Covenants.
Maker hereby agrees that, except as provided in the Agreement, from and after
the date hereof and until the date of repayment in full of the Obligations, it
shall not, and shall cause each of its subsidiaries not to, without the prior
written consent of Payee, (i) directly or indirectly, by operation of law or
otherwise, merge or consolidate with, acquire all or substantially all of the
assets or capital stock of, or otherwise combine with, any person or entity;
provided, however, that Maker may merge any of its subsidiaries into it or
merge with Payee; or (ii) take or omit to take any action, which act or
omission would constitute (A) a default or event of default pursuant to, or
noncompliance with, any of the terms of the Credit Documents (as defined in
Paragraph 4 below), or (B) a default or an event of default which results in
the acceleration of any indebtedness of Maker or any of its subsidiaries to any
commercial bank or financial institution.
3. Representations and Warranties of Maker.
Maker represents and warrants that it: (i) has full power and authority to
execute and deliver this Note, and that the execution and delivery of this Note
will not result in the breach of or default under, with or without the giving
of notice and/or the passage of time, any other agreement, arrangement or
indenture to which it is a party or by which it may be bound, or the violation
of any law, statute, rule, decree, judgment or regulation binding upon it; and
(ii) has taken and will take all acts required, including but not limited to
authorizing the signatory hereof on its behalf to execute this Note, so that
upon the execution and delivery of this Note, it shall constitute the valid and
legally binding obligation of Maker enforceable in accordance with the terms
thereof.
4. Security.
This Note shall be secured by the Stock in accordance with the terms of that
certain Security Agreement dated as of the date hereof between Maker and Payee,
and is entitled to the benefits of and security provided under the Agreement
and the Security Agreement. This Note, the Agreement and the Security Agreement
are sometimes collectively referred to herein as the "Credit Documents."
5. Events of Default.
The occurrence or existence of any one or more of the following events or
conditions (regardless of the reasons therefor) shall constitute an "Event of
Default" hereunder:
(a) Failure to Make Payment. Maker shall fail to make any payment of
principal of, or interest on, or any other amount owning in respect
of, this Note when due and payable or declared due and payable
pursuant to the terms hereof, and such failure shall remain uncured
after the expiration of ten (10) days after giving of notice thereof.
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ACTION INDUSTRIES, INC. 6% NOTE TO THE ORDER OF
GENERAL VISION SERVICES, INC. DATED MARCH 18, 1998
(b) Breach of Covenant. Maker shall fail at any time to be in
material compliance with any of the covenants set forth in this Note
or the Credit Documents or shall to pay or observe any of the
provisions of this Note or the Credit Documents to be compiled with,
performed, kept or observed by the Maker.
(c) Attachments, Seizures and Levies. Any of the material assets of
Maker or any of its subsidiaries shall be attached, seized, levied
upon or subjected to a writ or distress warrant, or come within the
possession of any receiver, trustee, custodian or assignee for the
benefit of creditors of Maker or any of its subsidiaries or
affiliates thereof as the case may be; or any person or entity other
than Maker or any of its subsidiaries or affiliates thereof, as the
case may be, shall apply for the appointment of a receiver, trustee
or custodian for any of the assets of Maker or any of its
subsidiaries, as the case may be, and such application or proceeding
shall remain unstayed or dismissed for a period of sixty (60)
consecutive days.
(d) Involuntary Bankruptcy Proceedings. A case or proceeding shall
have been commenced against Maker or any of its subsidiaries in a
court having competent jurisdiction seeking a decree or order in
respect of Maker or any of its subsidiaries (i) under Title 11 of the
United States Code, as now constituted or hereafter amended, or any
other applicable federal, state or foreign bankruptcy or other similar
law, (ii) appointing a custodian, receiver, liquidator, assignee,
trustee or sequestrator (or similar official) of Maker or any of its
subsidiaries, or any of Maker's or any of its subsidiaries'
properties; or (iii) ordering the winding-up or liquidation of the
affairs of Maker or any of its subsidiaries, and such case or
proceeding shall remain unstayed or undismissed for a period of sixty
(60) consecutive days or such court shall enter a decree or order
granting the relief sought in such case or proceeding.
(e) Change in Board of Directors. A majority of Makers board of
directors as it shall be constituted in accordance with the terms of
the Agreement (the "Current Directors") shall change without the
consent or approval of the Current Directors.
6. Remedies
Upon the occurrence of an Event of Default, Payee may thereafter, at its
option, declare all Obligations then remaining unpaid hereunder immediately due
and payable, whereupon the same shall forthwith mature and become due and
payable, without any further notice to and without presentment, demand, protest
or notice of protest, all of which are hereby waived by Maker. Upon a
declaration of acceleration by Payee, the entire unpaid principal amount,
hereof together with interest thereon shall become immediately due and payable
in full plus all reasonable costs and expenses of the collection and
enforcement of this Note, including reasonable attorney's fees and expenses,
all of which shall be added to the amount due under this Note. The rights,
powers, privileges and remedies of Payee pursuant to the terms hereof are
cumulative and not exclusive of any other rights, powers, privileges and
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ACTION INDUSTRIES, INC. 6% NOTE TO THE ORDER OF
GENERAL VISION SERVICES, INC. DATED MARCH 18, 1998
remedies which Payee may have under this Note, the Credit Documents or any
other instrument or agreement.
7. Acknowledgement of Payee's Investment Representations.
By accepting this Note Payee acknowledges that this Note has not been and will
not be registered under the Act or qualified under any state securities laws
and that the transferability thereof is restricted by the registration
provisions of the Act as well as such state laws. Based upon such
acknowledgment and Payee's representations as set forth below, this Note is
being issued to Payee pursuant to an exemption from such registration provided
by Section 4 (2) of the Act and applicable state securities law qualification
exemptions. Payee represents that it is acquiring the Note for its own account,
for investment purposes only and not with a view to resale or other
distribution thereof, nor with the intention of selling, transferring or
otherwise disposing of all or any part of it for any particular event or
circumstance, except selling, transferring or disposing of it only upon full
compliance with all applicable provisions of the Act, the Securities Exchange
Act of 1934, the Rules and Regulations promulgated by the Commission
thereunder, and any applicable state securities laws. Payee further understands
and agrees that no transfer of this Note shall be valid unless made in
compliance with the restrictions set forth on the front of this Note.
8. Limitation of Liability.
A director, officer, employee or stockholder, as such, of Maker shall not have
any personal financial liability for any obligations of Maker under this Note
or for any claim based on, in respect or by reason of such obligations or their
creation. Payee, by accepting this Note, waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of this Note.
9. Limitation of Interest Payments.
Nothing contained in this Note or in any other agreement between Maker and
Payee requires Maker to pay or Payee to accept interest in an amount which
would subject Payee to any penalty or forfeiture under applicable law. In no
event shall the total of all charges payable hereunder, whether of Interest or
of such other charges which may or might be characterized as interest, exceed
the maximum rate permitted to be charged under the laws of the Commonwealth of
Pennsylvania or the State of New York. Should Payee receive any payment which
is or would be in excess of that permitted to be charged under such laws, such
payment shall have been and shall be deemed to have been made in error and
shall automatically be applied to reduce the Principal outstanding on this
Note.
10. Maker's Right to Prepay.
Maker may prepay this Note or any portion thereof at any time without incurring
any penalty.
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ACTION INDUSTRIES, INC. 6% NOTE TO THE ORDER OF
GENERAL VISION SERVICES, INC. DATED MARCH 18, 1998
11. Miscellaneous
11.1 Effect of Forbearance. No forbearance, indulgence, delay or failure to
exercise any right or remedy by Payee with respect to this Note shall operate as
a waiver or as an acquiescence in any default.
11.2 Effect of Single or Partial Exercise of Right. No single or partial
exercise of any right remedy by Payee shall preclude any other or further
exercise thereof or any exercise of any other right or remedy by Payee.
11.3 Governing Law; Jurisdiction. This Note shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the
internal laws of the State of New York applicable to contracts made and to be
performed entirely within such State. Any action, suit or proceeding in
connection with this Note may be brought against Maker in a court of record of
the State of New York, County of New York, or in the United States District
Court for the Southern District of New York, Maker hereby consenting and
submitting to the jurisdiction thereof; and service process may be made upon
Maker, by certified or registered mail, at the address of Maker first set forth
above, or at such other address as may be given in writing in future by Maker to
Payee.
11.4 Headings. The headings and captions of the various paragraphs herein are
for convenience of reference only and shall in no way modify any of the terms or
provisions of this Note.
11.5 Loss, Theft, Destruction or Mutilation. Upon receipt by Maker of evidence
of loss, theft, destruction or mutilation of this Note, Maker shall make and
deliver or caused to be made and delivered to Payee a new Note of like in tenor
in lieu of this Note.
11.6 Modification of Note or Waiver of Terms Thereof Relating to Payee. No
modification or waiver of any of the provisions of this Note shall be effective
unless in writing and signed by Payee and then only to the extent set forth in
such writing, nor shall any such modification or waiver be applicable except in
the specific instance for which it is given. This Note may not be discharged
orally but only in writing duly executed by Payee.
11.7 Notice. All offers, acceptances, notices, requests, demands and other
communications under this Agreement shall be in writing and, except as otherwise
provided herein, shall be deemed to have been given only when delivered in
person, via facsimile transmission if receipt thereof is confirmed by the
recipient, or if mailed, three days after mailing by certified or registered
mail prepaid, to the parties at their respective addresses first set forth
above, or at such other address as may be given in writing in future by either
party to the other.
11.8 Payee's Right to Assign Note. Payee may transfer or assign this Note
without the approval of Maker upon notice to Maker, in which event Maker, if
requested in such notice, shall, in a timely manner, make a new note of like
tenor in the name of the transferee or assignee and deliver it to such
transferee or assignee against delivery to Maker of this Note.
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ACTION INDUSTRIES, INC. 6% NOTE TO THE ORDER OF
GENERAL VISION SERVICES, INC. DATED MARCH 18, 1998
11.9 Representation of Maker. Maker represents that it has reviewed this Note
with legal counsel and that it understands the meaning and legal consequences of
this Note and the terms, conditions, representations, warranties and covenants
set forth herein.
11.10 Right to Commence Proceedings in Other Jurisdictions. Nothing herein
shall affect the right of Payee to commence legal proceedings or otherwise
proceed against Maker in any other jurisdiction or to serve process in any
manner permitted by applicable law.
11.11 Successors and Assigns. This Note shall be binding upon Maker, its
successors, assigns and transferees, and shall inure to the benefit of and be
enforceable by Payee and its successors and assigns.
11.12 Waiver by Maker. Maker hereby waives presentment of payment, demand,
notice of nonpayment and dishonor, protest and notice of protest.
11.13 Waiver by Maker of Certain Claims and Rights. In any action, suit or
proceeding in connection with this Note, Maker hereby waives (i) any claim that
New York County or the Southern District of New York is an inconvenient forum;
(ii) the right to interpose any defense based upon any claim of laches or the
running of any statute of limitations; (iii) the right to interpose any defense
based upon any set-off, deduction or counterclaim of any nature or description
whatsoever; and (iv) any right to trial by jury.
IN WITNESS WHEREOF, Maker has caused this Note to be executed on its behalf
by an officer thereunto duly authorized as of the date set forth above.
ACTION INDUSTRIES, INC.
a Pennsylvania corporation
By:
---------------------------
T. Ronald Casper, President
