<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 28, 1997
Commission File No. 0-23204
VISTA 2000, INC.
----------------
(Exact name of registrant as specified in its charter)
Delaware 58-1972066
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
221 West First Street
Kewanee, Illinois 61443
------------------------
(Address of principal executive offices)
(309) 856-8068
--------------
(Issuer's telephone number)
Check 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 at least
the past 90 days. Yes No X
---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Class Outstanding at August 15, 1997
- ----- -------------------------------
Common Stock, $.01 par value 43,510,964
<PAGE>
PART I.- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
2
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
JUNE 28, 1997 DECEMBER 28,
(UNAUDITED) 1996
------------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents.......................................... $ 578 $ 1,165
Accounts receivable, net of allowance for doubtful
accounts and returns of $1,498 and $1,405, respectively......... 12,598 16,187
Inventories........................................................ 25,332 25,157
Prepaid expenses................................................... 1,212 1,564
Other current assets............................................... 206 205
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Total current assets............................................ 39,926 44,278
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PROPERTY AND EQUIPMENT, AT COST....................................... 17,032 18,298
Less: accumulated depreciation..................................... 2,689 2,371
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Net property and equipment...................................... 14,343 15,927
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OTHER ASSETS.......................................................... 1,484 1,566
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$ 55,753 $ 61,771
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------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable....................................................... $ 100 $ 908
Current portion of long-term debt.................................. 250 383
Accounts payable................................................... 3,533 5,209
Accrued payroll and related expenses............................... 2,663 3,596
Accrued liabilities................................................ 1,576 3,595
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Total current liabilities....................................... 8,122 13,691
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LONG-TERM DEBT, NET OF CURRENT PORTION................................ 24,412 23,919
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock $1 par value, 500,000 shares authorized,
4,220 and 4,220 shares issued and outstanding, respectively......... 3,985 3,985
Common stock, $.01 par value, authorized 50,000,000 shares,
issued and outstanding, 34,962,731 and 18,074,120 , respectively... 350 181
Additional paid-in capital............................................ 62,908 62,108
Accumulated deficit................................................... (42,242) (40,340)
Currency translation.................................................. (32) (23)
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24,969 25,911
Less: treasury shares and warrants--at cost........................... 1,750 1,750
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Total Stockholders' equity...................................... 23,219 24,161
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$ 55,753 $ 61,771
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</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
QUARTER ENDED QUARTER ENDED SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 28, 1997 JUNE 29, 1996 JUNE 28, 1997 JUNE 29, 1996
-------------- ------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Net Sales.................................. $ 23,712 $ 27,169 $ 47,291 $ 55,283
Cost of Sales.............................. 16,900 20,363 34,121 41,817
-------------- ------------- ---------------- -----------------
Gross profit (loss)........................ 6,812 6,806 13,170 13,466
Operating expenses......................... 6,576 8,608 12,559 19,788
-------------- ------------- ---------------- -----------------
236 (1,802) 611 (6,322)
Gain (loss) on sale of operating assets.... (1,355) 485 (1,355) 485
-------------- ------------- ---------------- -----------------
Operating profit (loss).................... (1,119) (1,317) (744) (5,837)
Other income and (expense)
Interest................................ (569) (464) (1,111) (983)
Other................................... (4) 73 (20) 151
-------------- ------------- ---------------- -----------------
Income (loss) before income tax............ (1,692) (1,708) (1,875) (6,669)
Income tax (expense) benefit............ (3) (27)
-------------- ------------- ---------------- -----------------
Net income (loss).......................... $ (1,695) $ (1,708) $ (1,902) $ (6,669)
-------------- ------------- ---------------- -----------------
-------------- ------------- ---------------- -----------------
Weighted average shares outstanding........ 26,925,322 16,772,927 22,329,050 14,826,933
Profit (loss) per common share:
Net profit (loss)....................... $ (0.06) $ (0.10) $ (0.09) $ (0.45)
-------------- ------------- ---------------- -----------------
-------------- ------------- ---------------- -----------------
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
CONSOLIDATED UNAUDITED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
SIX MONTHS ENDED JUNE 28, 1996
(DOLLARS AND SHARE AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES A SERIES C SERIES D COMMON STOCK
--------------- --------------- --------------- ---------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
------ ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 28, 1997................... 1 $ 122 -- $ 1,098 3 $ 2,765 18,074 $ 181
Common stock issued in settlement
of Class Action.............................. 14,226 142
Exercise of common stock options............... 2,663 27
Foreign currency translation adjustment........
Net (Loss).....................................
------- ------ ------ ------- ------ ------- ------ -------
Balance at June 28, 1997....................... 1 $ 122 -- $ 1,098 3 $ 2,765 34,963 $ 350
------- ------ ------ ------- ------ ------- ------ -------
------- ------ ------ ------- ------ ------- ------ -------
<CAPTION>
TREASURY STOCK ADDITIONAL CUMULATIVE TOTAL
AND WARRANTS PAID-IN ACCUMULATED TRANSLATION STOCKHOLDERS'
SHARES DOLLARS CAPITAL (DEFICIT) ADJUSTMENT EQUITY (DEFITIT)
------ ------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 28, 1997................... (341) $ (1,750) $ 62,108 $ (40,340) $ (23) $ 24,161
Common stock issued in settlement
of Class Action.............................. 747 889
Exercise of common stock options............... 53 80
Foreign currency translation adjustment........ (9) (9)
Net (Loss)..................................... (1,902) (1,902)
------- -------- -------- -------- --------- ----------
BALANCE AT JUNE 28, 1997....................... (341) $ (1,750) $ 62,908 $(42,242) $ (32) $ 23,219
------- -------- -------- -------- --------- ----------
------- -------- -------- -------- --------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENTS
5
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED QUARTER ENDED SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 28, 1997 JUNE 29, 1996 JUNE 28, 1997 JUNE 29, 1996
------------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
CASH FLOWS USED BY OPERATING ACTIVITIES:
Net loss................................... $ (1,695) $ (1,708) $ (1,902) $ (6,669)
Adjustments to reconcile net loss to net
cash used by operations:
Depreciation and amortization............ 490 660 1,089 1,163
(Gain) Loss on disposal of property and
equipment.............................. 1,355 (485) 1,355 (485)
Stock based compensation expense......... 53 35 53 1,601
(Increase) decrease in operating assets:
Accounts receivable.................... (723) (7) 2,415 1,633
Inventories............................ (1,475) (838) (1,549) (6,733)
Prepaid expenses and other current
assets............................... (160) (249) 215 (576)
Deferred charges and other assets...... (1,441) 531 (4) 146
Increase (decrease) in operating
liabilities:
Accounts Payable......................... (424) (436) (694) (2,508)
Accrued liabilities...................... (1,025) (359) (2,842) (2,065)
------------- ------------- ------- -------
Net cash used by operating
activities......................... (5,045) (2,856) (1,864) (14,493)
------------- ------------- ------- -------
CASH FLOWS USED BY INVESTING ACTIVITIES:
Purchases of property and equipment...... (601) (1,243) (2,924) (3,615)
Deposit on real property under contract
for purchase........................... (2,845)
------------- ------------- ------- -------
Net cash used by investing
activities......................... (601) (1,243) (2,924) (6,460)
------------- ------------- ------- -------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Net proceeds (payments) from short-term
borrowings............................. 150 (800)
Net proceeds (payments) from long-term
debt................................... 2,752 (347) 1,041 (459)
Net proceeds from sale of property and
equipment.............................. 2,050 935 2,050 935
Proceeds from issuance of common stock,
net of issue costs..................... 889 -- 889 1,800
Proceeds from issuance of preferred
stock, net of issue costs.............. -- 19,400
Proceeds from exercise of stock options
and warrants........................... 80 -- 80 1,038
Purchase of treasury stock............... (46) (601)
------------- ------------- ------- -------
Net cash provided by financing
activities......................... 5,771 542 4,210 21,313
------------- ------------- ------- -------
Effect of exchange rates on cash and cash
equivalents................................ (4) (9) (1)
------------- ------------- ------- -------
Net increase (decrease) in cash during
period..................................... 125 (3,561) (587) 359
Cash and cash equivalents at the beginning of
the period................................. 453 4,791 1,165 871
------------- ------------- ------- -------
Cash and cash equivalents at the end of the
period..................................... $ 578 $ 1,230 $ 578 $ 1,230
------------- ------------- ------- -------
------------- ------------- ------- -------
SUPPLEMENTAL DISCLOSURE:
Interest paid............................ $ 812 $ 464 $ 1,439 $ 983
NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of debt to common stock........... $ -- $ --
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
6
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 28, 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
- ---------------------------
The accompanying consolidated financial statements as of June 28, 1997
and for the six months then ended include the accounts of Vista 2000, Inc.
(Vista) and its wholly-owned subsidiaries, American Consumer Products, Inc.
(ACPI), Alabaster Industries, Inc. (Alabaster), Family Safety Products, Inc.
(FSPI) and Intelock Technologies, Inc. (Intelock). The accompanying
consolidated financial statements as of June 29, 1996 and for the six months
then ended also include the accounts of Vista, ACPI, Alabaster, FSPI and
Intelock.
INCOME TAXES
- ------------
The Company accounts for income taxes under the asset and liability
method, in accordance with Statement of Financial Accounting Standards Number
109 ("SFAS 109"). Under SFAS 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using statutory tax rates expected to apply to
taxable income in the years in which those temporary differences are expected
to be recovered or settled. Under SFAS 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date. A valuation allowance is
provided for deferred tax assets when utilization of such asset is not
reasonably assured.
NET LOSS PER COMMON SHARE
- -------------------------
Net loss per common share has been calculated using the weighted average
number of shares of common stock outstanding during each period. Fully
diluted net income per common share is not disclosed because the effect of
the exchange or exercise common stock equivalents would be antidilutive, due
to the Company's net loss being spread over a greater number of shares.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
- -----------------------------------------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from the these estimates.
STOCK BASED COMPENSATION
- ------------------------
The Company's Stock Option Plans are accounted for under APB Opinion 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related interpretations.
UNAUDITED INTERIM FINANCIAL INFORMATION
The interim financial information as of and for the six months ended
June 28, 1997 is unaudited and reflects all adjustments (consisting of normal
recurring adjustments) which are, in the opinion of management, necessary for
a fair statement of the results for the interim periods presented. The
results for these interim periods are not necessarily indicative of the
results of a full year.
7
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 28, 1997
(2) INVENTORIES
Inventories consist of the following at June 28, 1997:
Raw materials $ 4,705,000
Work-in-process 1,367,000
Finished goods 21,980,000
Reserve for obsolescence (2,720,000)
-----------
$25,332,000
===========
(3) STOCKHOLDER'S EQUITY
The company issued warrants, during 1995, to various consultants to
acquire up to 645,529 common shares at prices per share ranging from $2.00 to
$12.00. As of June 28, 1997, there were 375,529 of these warrants issued and
outstanding. These warrants expire at various times between January and
November 2000.
Upon completion of the Company's initial public offering, the company
agreed to sell to the underwriters warrants to acquire up to 100,000 shares
of common stock at an exercise price per share of $9.08. Each common share
carried two (2) warrants for the purchase of up to 200,000 shares of the
Company's common stock at $11.55 per share. These warrants expire on October
24, 1999.
During the Company's initial public offering, which occurred in October,
1994, there were warrants issued for the purchase of 2,300,000 shares of the
Company's common stock. For the first two years after issuance the exercise
price per share was $7.00. During the subsequent two year period ending
October 24, 1998, the exercise price increases to $10.00 per share. As of
June 28, 1997, all of these warrants were issued and outstanding. These
warrants expire on October 24, 1998.
In March 1994, the Company issued 235,598 of its 1994 Convertible
Debenture Warrants to all the former debenture holders that acquired common
stock of the Company on September 30, 1993 pursuant to their right of
conversion. The 1994 Warrants provide for the purchase of one share of common
stock at an exercise price of $2.50 per share and may be exercised for a
three year period commencing 24 months from the date of issuance, which was
March 1994. As of June 28, 1997 all of these warrants were issued and
outstanding. These warrants expire during March 1999.
On March 11, 1994, the Board of Directors authorized a one-for-two
reverse common stock split. On November 30, 1993, the Board of Directors
authorized a two-for-three reverse common stock split. All references to
number of shares and to stock warrants as well as per share information have
been adjusted to reflect the stock splits on a retroactive basis.
8
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 28, 1997
(3) STOCKHOLDER'S EQUITY-(CONTINUED)
The Company has adopted stock option plans providing for the issuance of
options covering up to 8,000,000 shares of common stock to be issued to
officers, directors, employees or consultants to the Company. Various
vesting conditions apply to these options. For options granted at strike
prices less than the fair market value of the underlying shares on the date
of the grant, the difference in value is recognized as compensation expense
over the applicable vesting periods.
STOCK OPTIONS
- -------------
Stock option transactions during the six months ended June 28, 1997 are
summarized as follows:
Outstanding at December 28, 1997 118,550
Granted 7,810,000
Exercised (2,662,500)
Canceled (0)
-----------
Outstanding at June 28, 1997 5,266,050
===========
SERIES CONVERTIBLE PREFERRED STOCK
- ----------------------------------
The Company has designated 142,000 of its 500,000 authorized preferred
shares as follows:
Shares Shares Liquidation Preference
Authorized Outstanding per share
---------- ----------- ---------
Series A 100,000 1,250 $100
Series B 20,000 0 $1,000
Series C 2,000 120 $10,000
Series D 20,000 2,850 $1,000
The remaining 358,000 authorized preferred shares have not been
designated as a series. The preferred stock is recorded net of issuance
costs. The preferred stock is convertible into Company common stock based on
a formula defined in the several subscription agreements. The preferred
stock is convertible at various times after its issuance. Under the terms of
the Class Action settlement (see also Part II, Item 1), if the preferred
stock is converted to common at a conversion price of less than $1.35 per
common share for the Series C or $1.19 per common share for the Series A and
D, the Company will be required to issue additional shares of its common
stock to the Class. The Company may not pay any common stock dividends unless
all preferred stock dividends have been paid. Any remaining preferred shares
will automatically convert to the Company's common stock at various times
during 1997.
9
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 28, 1997
(3) STOCKHOLDER'S EQUITY-(CONTINUED)
COMMON STOCK
On March 14, 1997, a settlement of the Class Action litigation was
confirmed by the entry of a Final Judgment and Order of Dismissal with
Prejudice. The settlement provided, among other things, that the Company
would issue shares of its common stock (and provide certain anti-dilution
protection) to the plaintiffs and the Class in order to convey ownership of
40% of the Company's common stock. In addition, the settlement provides that
additional common shares will be issued to the Class to maintain its 40%
ownership interest in the Company if the Company's outstanding convertible
preferred stock is converted to common stock at less than $1.35 per common
share for the Series C preferred or $1.19 per common share for the Series A
and D preferred. Furthermore, additional shares will also be issued to the
Class, if the Company's management is issued common stock through the
Company's stock option plan, resulting in management acquiring more than 20%
of the common stock of the Company. In May 1997, the Company issued
approximately 14,226,000 shares of its common stock in full satisfaction of
all claims of the Class. The Company's insurance carrier also contributed
$300,000 to the settlement.
The total number of authorized shares of the Company's common stock was
50,000,000 on August 15, 1997. At that time, there were 43,510,964 shares of
the Company's common stock issued and outstanding. The following schedule
projects the effect on outstanding common shares of an assumed exercise of
outstanding common stock options:
Common Stock Issued 43,852,305 (1)
Less Treasury Shares (341,341)
Stock Options 5,266,050
----------
48,777,014 (2)
==========
(1) Common stock issued includes approximately 8,890,000 shares relating
to the conversion of the Company's convertible preferred stock and the
release of claims by the owners of the Company's convertible preferred
stock. It also includes approximately 14,226,000 shares issued on May 6,
1997, in settlement of the Class Action litigation.
(2) This total does not include the effect of the exercise of
outstanding common stock warrants which have exercise prices ranging from
$2.00 to $12.00 per common share with varying expiration dates up to
November 2000.
(4) RELATED PARTY TRANSACTIONS
During the six months ended June 28, 1997, the Company compensated
a turnaround management company, S. Gidumal & Company, Inc., and its
affiliate Strategic Turnarounds & Investment Corp. (collectively "STIC"),
approximately $239,000 for services rendered. STIC was involved in many
activities including assisting in negotiating the refinancing of the ACPI
revolving line of credit and assisting in negotiating the sale of certain
assets of ACPI (see Part II, Item 5.). Mr. Shyam Gidumal, a principal of STIC
(and a member of the board of directors of ACPI), exercised common stock
options (which options had been granted and vested on December 31, 1996) and
acquired 1,200,000 shares of the common stock of the Company at an
10
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 28, 1997
(4) RELATED PARTY TRANSACTIONS-(CONTINUED)
exercise price of $.03 per share. This leaves Mr. Gidumal with 1,200,000
remaining options which will vest on December 31, 1997. STIC's services
continue to be engaged in 1997 and are compensated on a basis that has been
developed by the Company's Board of Directors.
On April 15, 1997, employment agreements with two officers of ACPI were
replaced with severance agreements. The severance agreements provide for
minimum annual payments of $169,000 each through 1997. The severance
agreements also provide for additional aggregate payments of up to $400,000
based upon the occurrence of certain events, as defined in the agreements.
(5) SALE OF STOCK OF SUBSIDIARIES
On April 18, 1997, the Company sold all of its 94% interest in
Intelock's common stock to a company managed by a minority (4.2%) shareholder
of Intelock, who was an officer and director of Intelock prior to the
purchase of Intelock by the Company in 1995. Proceeds from the sale were
$5,000 in cash and a $95,000 promissory note, which matures on April 11, 1998
. In deciding to sell Intelock, the Company's management considered claims,
made by minority (6.3%) shareholders of Intelock, regarding alleged false
representations made by former officers and former directors of the Company
during its purchase of Intelock and alleged mis-management of Intelock's
assets, by the same former officers and former directors, following the
purchase. These minority shareholder claims have been withdrawn since the
sale of Intelock by the Company. This sale resulted in a gain of
approximately $30,000 during the quarter ended June 28, 1997, as a result of
the net operating assets of Intelock having been previously written off
during the third quarter of the 1996 fiscal year when Intelock ceased
operations.
On June 19, 1997, the Company sold all of the stock of Alabaster to W. R.
Hill & Co., Inc., for $2,000,000. Payment consisted of $500,000 cash and a
$1,500,000 note receivable, secured by a first mortgage on the land and
buildings which comprise Alabaster's manufacturing, sales and administrative
operations. During the quarter ended June 28, 1997, the Company recorded a
loss of approximately ($1,400,000) on the sale. During the year ended
December 28, 1996, the Company had recorded losses of approximately
($3,600,000), related to Alabaster, as a result of operating losses and asset
writedowns. Alabaster represented approximately $2,801,000 of the Company's
consolidated sales for the six months ended June 28, 1997.
11
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
All statements, other than statements of historical fact, included in
this Quarterly Report including, without limitation, the statements under
"Management" Discussion and Analysis of Financial Condition and Results of
Operations" are, or may be deemed to be, forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934. Important
factors that could cause actual results to differ materially from those
discussed in such forward-looking statements ("Cautionary Statements")
include: the general strength or weakness of the consumer products industry
and the pricing policies of competitors. All subsequent written and oral
forward-looking statements attributable to Vista or persons acting on the
behalf of Vista are expressly qualified in their entirety by such Cautionary
Statements.
SALES AND COST OF SALES
Total revenues for the six months ended June 28, 1997 were $47,291,000
versus $55,283,000 for the six months ended June 29, 1996. The decrease in
sales is substantially attributable to the sale of FSPI subsequent to June
29, 1996 and a decrease in sales in ACPI's key manufacturing operations due
to loss of business to a competitor. Cost of sales for the six months ended
June 28, 1997 were $34,121,000 compared to a cost of sales in the
corresponding 1996 period of $41,817,000. Gross margin for the six months
ended June 28, 1997 was approximately 28% compared to 24% for the six months
ended June 29, 1996 . The increase in gross margin percentage is
attributable to the sale, in August 1996, of FSPI, whose cost of sales
exceeded its sales for the six months ended June 29, 1996.
OPERATING EXPENSES
Operating expenses (selling, general and administrative expenses) totaled
$12,559,000 for the six months ended June 28, 1997, as compared to
$19,788,000 for the same quarterly period of 1996. The decrease is
substantially attributable to reductions of staff, legal and auditing
expenses at the Company's corporate headquarters and the ceasing of
operations of FSPI during the third quarter of 1996. Additionally, the 1996
period included expenses of approximately $2,366,000 related to stock options
and the write off of a note receivable from a former officer of the Company.
LIQUIDITY AND CAPITAL RESOURCES
On May 7, 1997, ACPI replaced its then existing line of credit with
financing provided by a new lender. The new financing provided for
borrowings up to $30,000,000 (see Exhibit 10.22 to this Form 10-Q) and
carries an initial term of three years. The line availability as of June 28
, 1997, was $23,900,000 of which $20,600,000 had been drawn. As of June 28,
1997 the Company had $578,000 in cash and equivalents.
Regarding the Company's use of its federal income tax loss carryforwards,
the Company has experienced a change in control, as defined under Section 382
of the Internal Revenue Service Code, during 1995 and 1996. Additionally,
the Company believes that another change in control occurred in May 1997 upon
issuance of the common stock in settlement of the Class
12
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES-(CONTINUED)
Action lawsuit described in Part II, Item 1. As a result, the utilization of
a significant portion of the tax loss carryforwards will be limited on an
annual basis and could expire unused.
13
<PAGE>
PART II.--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The corporation is involved in various lawsuits in the ordinary course of
business. These lawsuits primarily involve claims for damages arising out of
commercial disputes.
In July 1996, the Company commenced a legal action against Richard P.
Smyth, a former officer and director. The action alleged that Mr. Smyth
committed fraudulent and unlawful acts resulting in substantial harm to the
Company and its shareholders. The Company continues to pursue this action;
however, management and legal counsel are unable to determine the possible
outcome of this matter at this time.
During the quarter ended June 29, 1996, the Company together with certain
former officers, former directors and third parties was named as a defendant
in seventeen (17) class action lawsuits, filed by persons and entities who
purchased the common stock and warrants of the Company during the period
November 11, 1994, through and including April 15, 1996, in the United States
District Court for the Northern District of Georgia. On July 9, 1996, the
District Court ordered that the complaints be consolidated for all purposes.
On July 23, 1996, plaintiffs filed a consolidated class action complaint
("Complaint") alleging violations of Section 10(b) of the Securities Exchange
Act of 1934, and Rule 10b-5 promulgated thereunder, and an additional claim
under Georgia common law for alleged negligent misrepresentations. The
Complaint named as defendants the Company; Richard P. Smyth ("Smyth"), the
former Chairman of the Board and Chief Executive Officer of the Company;
Arnold E. Johns ("Johns") formerly President and a director of the Company;
Roemmich & Seymour, P.C. ("R&S"), the Company's former outside auditor; and
the principals of R&S, Roger Roemmich and J. Alan Seymour.
The Complaint alleged that throughout the period from November 11, 1994
through April 15, 1996, Vista issued materially false and misleading
financial statements that caused the market price of Vista securities to
trade at artificially inflated prices.
On August 29, 1996 the district court certified plaintiffs as
representatives of a class of all persons who purchased the Company's common
stock and/or warrants during the period from October 24, 1994 through June 8,
1996 (the "Class") except the defendants, all former officers and former
directors and employees of the Company, all underwriters of the Company's
initial public offering, members of the immediate families of each of the
foregoing and any person, firm, trust, corporation, officer, director or
other individual or entity in which any of the defendants has a controlling
interest or which is related to or affiliated with any of the defendants, and
the legal representatives, heirs, successors-in-interest or assigns of the
Class as well as all individuals or entities who acquired Vista common stock
and/or warrants through Vista's employee profit sharing, retirement, benefit
or incentive program. Current officers and directors are not excluded from
the Class, so long as they meet the requirements for participation.
On March 14, 1997, a settlement was confirmed by the entry of a Final
Judgment and Order of Dismissal with Prejudice. The settlement provides,
among other things, that the Company will issue shares of its common stock
(and provide certain anti-dilution protection) to
14
<PAGE>
ITEM 1. LEGAL PROCEEDINGS-(CONTINUED)
the plaintiffs and the Class in order to convey ownership of 40% of the
Company's common stock. In addition, the settlement provides that additional
common shares will be issued to the Class to maintain its 40% ownership
interest in the Company if the Company's outstanding convertible preferred
stock is converted to common stock at less than $1.35 per common share for
the Series C preferred or $1.19 per common share for the Series A and D
preferred. Furthermore, additional shares will also be issued to the Class,
if the Company's management is issued common stock through the Company's
stock option plan, resulting in management acquiring more than 20% of the
common stock of the Company. In May 1997, the Company issued approximately
14,226,000 shares of its common stock in full satisfaction of all claims of
the Class. The Company's insurance carrier also contributed $300,000 to the
settlement. The Company has been notified by the Securities and Exchange
Commission ("SEC") that it has commenced a formal private investigation of
the Company. The Company intends to cooperate with the SEC in this matter.
The Company cannot predict the eventual outcome of this investigation.
Independently, the Company through its Audit Committee has conducted an
internal investigation of the facts and circumstances surrounding the
investigation.
ITEM 2. CHANGES IN SECURITIES
There have been no material modifications in the instruments defining the
rights of shareholders. None of the rights evidenced by the shares of the
Company's common stock have been materially limited or qualified by the
issuance or modification of any other class of securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There have been no material defaults in the payment of principal,
interest, sinking fund installment or any other material default not cured
within 30 days, with respect to any indebtedness of the Company exceeding
five percent (5%) of the total assets of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the period covered by this report, no matters were submitted to
the vote of the Security holders of the Company.
ITEM 5. OTHER INFORMATION
During the period from November 1996 through April 1997, the Company
engaged in negotiations with certain holders of various classes of the
Company's convertible preferred stock concerning a possible transaction in
which the Company would have repurchased and retired the preferred stock and
the holders of the preferred stock would have released the Company from all
purported claims by such holders against the Company, including claims
alleging fraudulent misrepresentation by the Company in the original issuance
of the preferred stock. However, the Company ultimately determined that such
a use of its resources would not be in its best interest and determined not
to accept the preferred shareholders' last offer. Thereafter, in May and
July 1997, in order to help the Company settle all claims by these preferred
shareholders, four of the Company's five directors, a consultant to the
Company and an unaffiliated third party (the
15
<PAGE>
ITEM 5. OTHER INFORMATION-(CONTINUED)
"Individual Purchasers") agreed to purchase shares held by such preferred
shareholders on the same terms as they, the preferred shareholders, had
offered to the Company. The aggregate number of shares of common stock
issued to the Individual Purchasers upon the conversion of such shares of
preferred stock and issued by the Company in consideration for the release of
claims, was the same number of shares of the Company's common stock
originally offered to, but rejected by, the original preferred shareholders.
As a result, the Individual Purchasers acquired an aggregate of 2,570 shares
of the Company's Series C and D Convertible Preferred Stock for an aggregate
cash consideration of approximately $1 million and the preferred shareholders
granted to the Company the release described above. The shares of Series C
and D Convertible Preferred Stock acquired by the Individual Purchasers were
converted into an aggregate of 2,947,712 shares of the Company's common
stock. In addition, the Company issued an aggregate of 5,794,803 shares of
its common stock to the Individual Purchasers in consideration for obtaining
the release described above. The Company also agreed to issue additional
shares of its common stock to the Individual Purchasers and pay the same
consideration in the event that other holders of the Company's preferred
stock convert such preferred stock into the Company's common stock at a more
favorable conversion rate or receive additional consideration from the
Company on a more favorable basis than that provided to the Individual
Purchasers.
Separately, the Company agreed to pay $175,000 and $2,500 in attorneys'
fees to one of the original preferred shareholders as additional
consideration for the release of the claims associated with the preferred
shares. The $175,000 will be paid on January 2, 1999 with the interest
accruing on such amount at 8% per annum, payable quarterly. The Company
obtained from the Individual Purchasers a waiver of their rights to also
receive the additional consideration paid by the Company in the form of this
note, as referenced above.
On August 25, 1997, the Company closed the sale of certain assets of ACPI
to Axxess Technologies, Inc. (the "Purchaser"). These assets comprised
primarily ACPI's key, key manufacturing, letters, numbers and signs
manufacturing, real estate and related businesses. The Company retains Boss
Manufacturing, Inc., Boss Balloon, Inc. and the ACPI Warren Pet Division.
The business assets being sold accounted for approximately $57,000,000 of the
Company's consolidated sales for the year ended December 28, 1996. Based on
a preliminary purchase price, which is subject to adjustment based on final
agreement of asset values between the Company and the Purchaser, the Company
expects to recognize a loss of approximately ($1,200,000) on the sale, after
accounting for legal and other transaction expenses.
Consideration for the sale consisted of cash of approximately
$24,800,000 and the assumption of approximately $3,600,000 of liabilities by
the Purchaser. Except for approximately $3,000,000, which was retained by the
Company to pay, among other things, closing costs and other expenses
associated with the transaction, the balance of the cash proceeds were used
to retire debt, including a payment of approximately $18,600,000 against
ACPI's revolving line of credit. Immediately after this payment the ACPI
revolving line of credit had an outstanding balance of approximately
$3,400,000. As a result of this sale of ACPI's assets, including inventory
and accounts receivable, which comprised a significant portion of the
revolving line of credit borrowing base, ACPI's borrowing limit was reduced
from $30,000,000 to $10,000,000.
16
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) See Index to Exhibits
(b) For the three months ended June 28, 1997, the Company filed a form
8-K disclosing the terms of the sale of its Alabaster subsidiary,
which was sold on June 19, 1997.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VISTA 2000, INC.
Dated: September 18, 1997 By: /s/ G. Louis Graziadio, III
---------------------------
G. Louis Graziadio, III
Chief Executive Officer
(principal executive officer)
Dated: September 18, 1997 By: /s/ Larry C. Cobb
---------------------------
Larry C. Cobb
Interim Chief Financial Officer
(principal financial officer)
18
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INDEX TO EXHIBITS
(2) PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENTS, LIQUIDATION OR
SUCCESSION.
Not applicable.
(3) (i) ARTICLES OF INCORPORATION
3.1(a) Certificate of Incorporation (Exhibit 3.1)
(ii) BY-LAWS
3.2(a) By-Laws (Exhibit 3.2)
(4) INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
4.1(c) Specimen of Common Stock Certificate (Exhibit 4.1)
4.2(a) Form of Warrant Agreement covering Series A Warrants (Exhibit 4.2)
4.3(c) Specimen of Series A Warrant (Exhibit 4.3)
4.4(b) Form of Preferred Stock Certificate covering Series A Preferred Stock
(Exhibit 4.1)
4.5(b) Form of Preferred Stock Certificate covering Series B Preferred Stock
(Exhibit 4.2)
4.6(b) Form of Preferred Stock Subscription Agreement covering Series B
Preferred Stock (Exhibit 4.3)
4.7(b) Form of Preferred Stock Certificate covering Series C Preferred Stock
(Exhibit 4.4)
4.8(b) Form of Preferred Stock Certificate covering Series D Preferred Stock
(Exhibit 4.5)
4.9(b) Form of Preferred Stock Subscription Agreement covering Series D
Preferred Stock (Exhibit 4.6)
(10) MATERIAL CONTRACTS
10.1(a) Lease Agreement, dated January 5, 1993 between Roswell Business
Centers Associates, LP and the Company as amended. (Exhibit 10.1)
10.2(a) Patent Rights Purchase Agreement, dated October 1, 1993 between Blue
Ridge Ventures, Inc. and the Company. (Exhibit 10.2)
10.3(a) 1993 Incentive Stock Option Plan (Exhibit 10.4)
<PAGE>
10.4(b) 1993 Non-Employee Director Stock Option Plan, as amended.
(Exhibit 10.2)
10.5(a) Form of Series 1992B 15% Subordinated Debenture, as amended.
(Exhibit 10.8)
10.6(a) Form of 1992B Warrant to Purchase Common Stock. (Exhibit 10.9)
10.7(a) Form of Series 1993A 15% Subordinated Convertible Debenture.
(Exhibit 10.10)
10.8(a) Form of 1993A Warrant to Purchase Common Stock. (Exhibit 10.11)
10.9(d) Form of Employment Agreement to be entered into between the Company
and Robert M. Fuller, Richard P. Smyth and Norman W. Wicks,
respectively. (Exhibit 10.12)
10.10(a) Nonstatutory Stock Option Agreement dated December 1, 1993 between
Robert M. Fuller and the Company. (Exhibit 10.27)
10.11(a) Nonstatutory Stock Option Agreement dated December 1, 1993 between
Richard P. Smyth and the Company. (Exhibit 10.28)
10.12(a) Nonstatutory Stock Option Agreement dated December 1, 1993 between
Norman W. Wicks and the Company. (Exhibit 10.29)
10.13(b) Prospectus for the Company's 1993 Incentive Stock Option Plan and 1993
Non-Employee Director Stock Option Plan. (Exhibit 10.1)
10.14(b) First Amendment to the Company's 1993 Incentive Stock Option Plan.
(Exhibit 10.1)
10.15(b) Employment Agreement between the Company and Arnold E. Johns, Jr.
(Exhibit 10.4)
10.16(b) Employment Agreement between the Company's subsidiary, American
Consumer Products, Inc., and Richard Bern. (Exhibit 10.5)
10.17(b) Employment Agreement between the Company's subsidiary, Alabaster
Industries, Inc., and Daniel A. Norris. (Exhibit 10.6)
10.18(b) Employment Agreement between the Company's subsidiary, American
Consumer Products, Inc., and Stephen W. Cole. (Exhibit 10.7)
10.19(f) Employment Agreement between the Company and Robert E. Altenbach.
(Exhibit 10.19)
10.20(g) Asset Purchase Agreement between Vista 2000, Inc., Family Safety
Products, Inc. and Therm Acquisition, Inc. dated August 23, 1996.
(Exhibit 10.20)
<PAGE>
10.21(g) Loan and Security Agreement between Alabaster Industries, Inc. and
Century Business Credit Corporation dated September 20, 1996.
(Exhibit 10.21)
10.22 Loan and Security Agreement between American Consumer Products, Inc.,
Products Merchandisers, Inc., Boss Manufacturing Company and Fleet
Capital Corporation dated May 7, 1997 is included herein as Exhibit
10.22 of this Report.
10.23(h) Stock Purchase Agreement between Vista 2000, Inc. and W. R. Hill &
Co., Inc. dated May 12, 1997 (Exhibit 2.1)
(11) STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
11.1 Statement re computation of per share earnings is included
herein as Exhibit 11.1 of this Report.
(15) LETTER RE UNAUDITED INTERIM FINANCIAL INFORMATION
Incorporated by reference, see Page 7 of this Form 10-Q for the
Quarter ended June 28, 1997.
(18) LETTER RE CHANGE IN ACCOUNTING PRINCIPLES
Not applicable.
(19) REPORT FURNISHED TO SECURITY HOLDERS
Not applicable.
(21) SUBSIDIARIES OF THE REGISTRANT
21.1(e) Subsidiaries of the Registrant. (Exhibit 21.1)
(23) CONSENTS OF EXPERTS AND COUNSEL
Not applicable.
(24) POWER OF ATTORNEY
Not applicable.
(27) FINANCIAL DATA SCHEDULE (FILED ONLY BY ELECTRONIC FILERS)
27.1 Financial Data Schedule is included as Exhibit 27.1 of this Report
(99) ADDITIONAL EXHIBITS
None.
<PAGE>
(a) Exhibit previously filed as part of and is incorporated herein by reference
to the Company's Registration Statement on Form SB-2 (Registration No.
33-73118-A). The exhibit number contained in parenthesis refers to the
exhibit number in such Registration Statement.
(b) Exhibit previously filed as part of and is incorporated herein by reference
to the Company's Current Report on Form 8-K dated June 29, 1996. The
exhibit number contained in parenthesis refers to the Exhibit number in
such Form 8-K.
(c) Exhibit previously filed as part of and is incorporated by reference to
Amendment No. 2 to the Company's Registration Statement on Form SC-2
(Registration No. 33-73118-A). The exhibit number contained in parenthesis
refers to the exhibit numbers in such Registration Statement.
(d) Exhibit previously filed as part of and is incorporated by reference to
Amendment No. 1 to the Company's Registration Statement on Form SC-2
(Registration No. 33-73118-A). The exhibit number contained in parenthesis
refers to the exhibit numbers in such Registration Statement.
(e) Exhibit previously filed as part of and is incorporated herein by reference
to the Company's Current Report on Form 10-K for the fiscal year ended
December 30, 1995. The exhibit number contained in parenthesis refers to
the Exhibit number in such Form 10-K.
(f) Exhibit previously filed as part of and is incorporated herein by reference
to the Company's Current Report on Form 10-Q for the quarter ended March
30, 1996. The exhibit number contained in parenthesis refers to the
Exhibit number in such Form 10-Q.
(g) Exhibit previously filed as part of and is incorporated herein by reference
to the Company's Current Report on Form 10-Q for the quarter ended
September 28, 1996. The exhibit number contained in parenthesis refers to
the Exhibit number in such Form 10-Q.
(h) Exhibit previously filed as part of and is incorporated herein by reference
to the Company's Current Report on Form 8-K dated June 19, 1997. The
exhibit number contained in parenthesis refers to the Exhibit number in
such Form 8-K.
<PAGE>
____________________________ EXHIBIT 10.22 ____________________________
AMERICAN CONSUMER PRODUCTS, INC.
PRODUCTS MERCHANDISERS, INC.
BOSS MANUFACTURING COMPANY
___________________________________________________________
___________________________________________________________
___________________________________________________________
LOAN AND SECURITY AGREEMENT
Dated: May 7, 1997
$30,000,000
___________________________________________________________
FLEET CAPITAL CORPORATION
___________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
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SECTION 1. CREDIT FACILITY ............................................................ 1
1.1. Revolving Credit Loans ........................................................ 1
1.2. Letters of Credit; LC Guaranties .............................................. 2
1.3. Overadvance Facility .......................................................... 2
SECTION 2. INTEREST, FEES AND CHARGES ................................................. 3
2.1. Interest ...................................................................... 3
2.2. Computation of Interest and Fees .............................................. 3
2.3. LIBOR Option .................................................................. 3
2.4. Facility Fee .................................................................. 5
2.5. Letter of Credit and LC Guaranty Fees ......................................... 5
2.6. Unused Line Fee ............................................................... 6
2.7. Audit and Appraisal Fees ...................................................... 6
2.8. Reimbursement of Expenses ..................................................... 6
2.9. Bank Charges .................................................................. 6
SECTION 3. LOAN ADMINISTRATION ........................................................ 7
3.1. Manner of Borrowing Revolving Credit Loans .................................... 7
3.2. Payments ...................................................................... 8
3.3. Application of Payments and Collections ....................................... 9
3.4. All Loans to Constitute One Obligation; Joint and Several Liability ........... 10
3.5. Loan Account .................................................................. 10
3.6. Statements of Account ......................................................... 10
SECTION 4. TERM AND TERMINATION ....................................................... 10
4.1. Term of Agreement ............................................................. 10
</TABLE>
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4.2. Termination ................................................................... 10
SECTION 5. SECURITY INTERESTS ......................................................... 12
5.1. Security Interest in Collateral ............................................... 12
5.2. Lien Perfection; Further Assurances ........................................... 12
5.3. Lien on Realty ................................................................ 13
SECTION 6. COLLATERAL ADMINISTRATION .................................................. 13
6.1. General ....................................................................... 13
6.2. Administration of Accounts .................................................... 14
6.3. Administration of Inventory ................................................... 16
6.4. Administration of Equipment ................................................... 16
6.5. Payment of Charges ............................................................ 17
SECTION 7. REPRESENTATIONS AND WARRANTIES ............................................. 17
7.1. General Representations and Warranties ........................................ 17
7.2. Continuous Nature of Representations and Warranties ........................... 24
7.3. Survival of Representations and Warranties .................................... 24
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS ........................................ 24
8.1. Affirmative Covenants ......................................................... 24
8.2. Negative Covenants ............................................................ 26
8.3. Specific Financial Covenants .................................................. 29
SECTION 9. CONDITIONS PRECEDENT ....................................................... 30
9.1. Documentation ................................................................. 30
9.2. No Default .................................................................... 30
9.3. Other Conditions .............................................................. 30
9.4. Availability .................................................................. 30
9.5. No Litigation ................................................................. 30
</TABLE>
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SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT ......................... 30
10.1. Events of Default ............................................................ 30
10.2. Acceleration of the Obligations .............................................. 33
10.3. Other Remedies ............................................................... 33
10.4. Remedies Cumulative; No Waiver ............................................... 35
SECTION 11. MISCELLANEOUS .............................................................. 35
11.1. Power of Attorney ............................................................ 35
11.2. Indemnity .................................................................... 36
11.3. Modification of Agreement; Sale of Interest .................................. 36
11.4. Severability ................................................................. 37
11.5. Successors and Assigns ....................................................... 37
11.6. Cumulative Effect; Conflict of Terms ......................................... 37
11.7. Execution in Counterparts .................................................... 37
11.8. Notice ....................................................................... 38
11.9. Lender's Consent ............................................................. 39
11.10. Credit Inquiries ............................................................ 39
11.11. Time of Essence ............................................................. 39
11.12. Entire Agreement ............................................................ 39
11.13. Interpretation .............................................................. 39
11.14. Publicity ................................................................... 39
11.15. GOVERNING LAW; CONSENT TO FORUM ............................................. 39
11.16. WAIVERS BY BORROWERS ........................................................ 40
</TABLE>
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made this 7th day of May,
1997, by and between FLEET CAPITAL CORPORATION ("Lender"), a Rhode Island
corporation with an office at One North Franklin Street, Suite 3600, Chicago,
Illinois 60606; and American Consumer Products, Inc. ("ACPI"), a Delaware
corporation with its chief executive office and principal place of business
at 31100 Solon Road, Solon, Ohio 44139, Product Merchandisers, Inc. ("PMI"),
a Minnesota corporation with its chief executive office and place of business
at P.O. Box 935, 1674 E. Clifford Road, Burnsville, Minnesota 44337-2901, and
Boss Manufacturing Company ("Boss"), a Delaware corporation with its chief
executive offices and place of business at 221 West First Street, Kewanee,
Illinois 61443. ACPI, PMI and Boss are sometime referred to herein
individually as a "Borrower" and collectively as "Borrowers". Capitalized
terms used in this Agreement have the meanings assigned to them in Appendix
A, General Definitions. Accounting terms not otherwise specifically defined
herein shall be construed in accordance with GAAP consistently applied.
SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon
the representations and warranties made in, this Agreement and the other Loan
Documents, Lender agrees to make a Total Credit Facility of up to $30,000,000
available upon Borrowers' request therefor, as follows:
1.1. REVOLVING CREDIT LOANS.
1.1.1. LOANS AND RESERVES. Lender agrees, for so long
as no Default or Event of Default exists, to make Revolving
Credit Loans to Borrowers from time to time, as requested by
ACPI in the manner set forth in subsection 3.1.1 hereof, up to
a maximum principal amount at any time outstanding equal to
the Borrowing Base at such time minus the LC Amount and
reserves, if any. Lender shall have the right to establish
reserves in such amounts, and with respect to such matters, as
Lender shall deem necessary or appropriate, against the amount
of Revolving Credit Loans which Borrowers may otherwise
request under this subsection 1.1.1, including, without
limitation, with respect to (i) price adjustments, damages,
unearned discounts, returned products or other matters for
which credit memoranda are issued in the ordinary course of a
Borrower's business; (ii) shrinkage, spoilage and obsolescence
of Inventory; (iii) slow moving Inventory; (iv) other sums
chargeable against a Borrower's Loan Account as Revolving
Credit Loans under any section of this Agreement; (v) amounts
owing by a Borrower to any Person to the extent secured by a
Lien on, or trust over, any Property of a Borrower; and (vi)
such other matters, events, conditions or contingencies as to
which Lender, in its sole credit judgment, determines reserves
should be established from time to time hereunder except that
Lender shall not establish Reserves in respect of any matters
relating to any items of Collateral that have been taken into
account in determining Eligible Accounts or
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Eligible Inventory. Borrowers agree that a reserve equal to
one month's rent will be established and remain in place under
this subsection 1.1.1 with respect to any leased location
where any Collateral is now or may hereafter be located if
Borrowers have not obtained a landlord's agreement from the
lessor of such premises in form and substance satisfactory to
Lender.
1.1.2. USE OF PROCEEDS. The Revolving Credit Loans
shall be used solely for the satisfaction of existing
Indebtedness of Borrowers to National City Bank, as Agent for
itself and NBD Bank, N.A., permitted Distributions to Vista
2000, Inc. ("Vista 2000") to be made on the Closing date and
for Borrower's general operating capital needs in a manner
consistent with the provisions of this Agreement and all
applicable laws.
1.2. LETTERS OF CREDIT; LC GUARANTIES.
Lender agrees, for so long as no Default or Event of Default
exists and if requested by ACPI, to (i) issue its, or cause to be issued its
Affiliate's, Letters of Credit for the account of such Borrower as ACPI
shall request or (ii) execute LC Guaranties by which Lender or its Affiliate
shall guaranty the payment or performance by such Borrower as ACPI shall
request of its reimbursement obligations with respect to Letters of Credit
and letters of credit issued for such Borrower's account by other Persons in
support of such Borrower's obligations (other than obligations for the
repayment of Money Borrowed), PROVIDED that the LC Amount at any time shall
not exceed $3,000,000. No Letter of Credit or LC Guarantee may have an
expiration date that is after the last day of the Term. Any amounts paid by
Lender under any LC Guaranty or in connection with any Letter of Credit shall
be treated as Revolving Credit Loans, shall be secured by all of the
Collateral and shall bear interest and be payable at the same rate and in the
same manner as Base Rate Portions.
1.3. OVERADVANCE FACILITY.
Lender may in its sole discretion, for so long as no Default
or Event of Default exists, make additional Revolving Credit Loans to
Borrowers from time to time as requested by ACPI in an amount that, when
aggregated with the then outstanding principal amount of Revolving Credit
Loans and the LC Amount, exceeds the Borrowing Base by no more than
$2,000,000, PROVIDED, HOWEVER, that (i) an Overadvance may exist for no more
than 120 consecutive days and (ii) no Overadvance may be made or suffered to
exist for 60 days following any date upon which an Overadvance ceases to
exist. Any Overadvances made pursuant to this subsection 1.3 shall be
treated as Revolving Credit Loans, shall be secured by all of the Collateral
and shall bear interest at the same rate and payable in the same manner as
Base Rate Portions.
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SECTION 2. INTEREST, FEES AND CHARGES
2.1. INTEREST.
2.1.1. RATES OF INTEREST. Interest shall accrue on
the principal amount of the Base Rate Portion outstanding at
the end of each day at a fluctuating rate per annum equal to
the Applicable Margin PLUS the Base Rate. The foregoing rate
of interest shall increase or decrease by an amount equal to
any increase or decrease in the Base Rate, effective as of the
opening of business on the day that any such change in the
Base Rate occurs. If Borrowers properly exercise the LIBOR
Option as provided in Section 2.3, interest shall accrue on
the principal amount of the LIBOR Portions outstanding at the
end of each day at a rate per annum equal to the Applicable
Margin plus the LIBOR Rate applicable to each LIBOR Portion
for the corresponding LIBOR Period.
2.1.2. DEFAULT RATE OF INTEREST. Upon and after the
occurrence of an Event of Default, and during the continuation
thereof, the principal amount of all Loans shall bear interest
at a rate per annum equal to 2.0% PLUS the interest rate
otherwise applicable thereto (the "Default Rate").
2.1.3. MAXIMUM INTEREST. In no event whatsoever shall
the aggregate of all amounts deemed interest hereunder and
charged or collected pursuant to the terms of this Agreement
exceed the highest rate permissible under any law which a
court of competent jurisdiction shall, in a final
determination, deem applicable hereto. If any provisions of
this Agreement, are in contravention of any such law, such
provisions shall be deemed amended to conform thereto.
2.2. COMPUTATION OF INTEREST AND FEES.
Interest, Letter of Credit and LC Guaranty fees and unused
line fees hereunder shall be calculated daily and shall be computed on the
actual number of days elapsed over a year of 360 days. For the purpose of
computing interest hereunder, all items of payment received by Lender shall
be deemed applied by Lender on account of the Obligations (subject to final
payment of such items) one Business Day after receipt by Lender of such items
in Lender's account located in Chicago, Illinois.
2.3. LIBOR OPTION.
(i) Upon the conditions that: (1) Lender shall
have received a LIBOR Request from ACPI at least 3
Business Days prior to the first day of the LIBOR Period
requested, (2) there shall have occurred no change in
applicable law which would make it unlawful for Lender to
obtain deposits of U.S. dollars in the London interbank
foreign currency deposits market, (3) as of the date of
the LIBOR Request and the first day of the LIBOR Period,
there shall exist no Default or Event of Default, (4)
Lender is able to determine the
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LIBOR Rate in respect of the requested LIBOR Period or
Lender is able to obtain deposits of U.S. dollars in the
London interbank foreign currency deposits market in the
applicable amounts and for the requested LIBOR Period,
and (5) as of the first date of the LIBOR Period, there
are no more than three outstanding LIBOR Portions
including the LIBOR Portion being requested; then
interest on the LIBOR Portion requested during the LIBOR
Period requested will be based on the applicable LIBOR
Rate.
(ii) Each LIBOR Request shall be irrevocable
and binding on the requesting Borrowers. Borrowers shall
indemnify Lender for any loss, penalty or expense
incurred by Lender due to failure on the part of a
Borrower to fulfill, on or before the date specified in
any LIBOR Request, the applicable conditions set forth in
this Agreement or due to the prepayment of the applicable
LIBOR Portion prior to the last day of the applicable
LIBOR Period, including, without limitation, any loss
(including loss of anticipated profits) or expense
incurred by reason of the liquidation or redeployment of
deposits or other funds acquired by Lender to fund or
maintain the requested LIBOR Portion.
(iii) If any Legal Requirement shall (1) make it
unlawful for Lender to fund through the purchase of U.S.
dollar deposits any LIBOR Portion or otherwise give
effect to its obligations as contemplated under this
Section 2.3, or (2) shall impose on Lender any costs
based on or measured by the excess above a specified
level of the amount of a category of deposits or other
liabilities of Lender which includes deposits by
reference to which the LIBOR Rate is determined as
provided herein or a category of extensions of credit or
other assets of Lender which includes any LIBOR Portion
or (3) shall impose on Lender any restrictions on the
amount of such a category of liabilities or assets which
Lender may hold, then, in each such case, Lender may, by
notice thereof to Borrowers, terminate the LIBOR Option.
Any LIBOR Portion subject thereto shall immediately bear
interest thereafter at the rate and in the manner
provided for Base Rate Portions pursuant to subsection
2.1.1. Borrowers shall indemnify Lender against any
loss, penalty or expense incurred by Lender due to
liquidation or redeployment of deposits or other funds
acquired Lender to fund or maintain any LIBOR Portion
that is terminated hereunder.
(iv) Lender shall receive payments of amounts
of principal of and interest with respect to the LIBOR
Portions free and clear of, and without deduction for,
any Taxes. If (1) Lender shall be subject to any Tax in
respect of any LIBOR Portion or any part thereof or, (2)
Borrowers shall be required to withhold or deduct any Tax
from any such amount, the LIBOR Rate applicable to such
LIBOR Portion shall be adjusted by Lender to reflect all
additional costs incurred by Lender in connection with
the payment by Lender
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or the withholding by any Borrower of such Tax and
Borrowers shall provide Lender with a statement detailing
the amount of any such Tax actually paid by any Borrower.
Determination by Lender of the amount of such costs
shall, in the absence of manifest error, be conclusive.
If after any such adjustment any part of any Tax paid by
Lender is subsequently recovered by Lender, Lender shall
reimburse such Borrower to the extent of the amount so
recovered. A certificate of an officer of Lender setting
forth the amount of such recovery and the basis therefor
shall, in the absence of manifest error, be conclusive.
2.4. FACILITY FEE.
Borrowers shall pay to Lender facility fee of $32,500 per
annum, which shall be fully earned and nonrefundable on the Closing Date and
shall be paid annually on each anniversary of the Closing Date.
2.5. LETTER OF CREDIT AND LC GUARANTY FEES.
Borrowers shall pay to Lender:
(i) for standby Letters of Credit and LC Guaranties
of standby Letters of Credit, a fee equal to the
aggregate face amount of such Letters of Credit and LC
Guaranties outstanding from time to time during the Term
times a per annum rate equal to the Applicable Margin for
LIBOR Portions as in effect from time to time, PLUS all
normal and customary charges associated with the issuance
thereof, which fees and charges shall be deemed fully
earned and shall be due and payable upon issuance of each
such Letter of Credit or LC Guaranty and shall not be
subject to rebate or proration upon the termination of
this Agreement for any reason; and
(ii) for documentary Letters of Credit and LC
Guaranties of documentary Letters of Credit, a fee equal
to the Applicable Margin for LIBOR Portions then in
effect, PLUS the normal and customary charges associated
with the issuance thereof as set forth on EXHIBIT Q
hereof, payable upon the issuance of such Letter of
Credit or execution of such LC Guaranty and an additional
fee equal to the face amount of such Letter of Credit or
LC Guaranty times the Applicable Margin for LIBOR
Portions then in effect, payable upon each renewal or
extension thereof. All of such fees and charges shall be
fully earned and due and payable upon issuance, renewal
or extension (as the case may be) of each such Letter of
Credit or LC Guaranty, and shall not be subject to rebate
or proration upon the termination of this Agreement for
any reason.
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2.6. UNUSED LINE FEE.
Borrowers shall pay to Lender a fee equal to 3/8 of 1.0% per
annum of the average monthly amount by which $30,000,000 exceeds the sum of
the outstanding principal balance of the Revolving Credit Loans plus the LC
Amount. The unused line fee shall be payable monthly in arrears on the first
day of each calendar month hereafter.
2.7. AUDIT AND APPRAISAL FEES.
Borrowers shall pay to Lender audit and appraisal fees in
accordance with Lender's current schedule of fees in effect from time to time
in connection with audits and appraisals of Borrowers' books and records and
such other matters as Lender shall deem appropriate, plus all out-of-pocket
expenses incurred by Lender in connection with such audits and appraisals.
Audit fees shall be payable on the first day of the month following the date
of issuance by Lender of a request for payment thereof to Borrowers.
2.8. REIMBURSEMENT OF EXPENSES.
If, at any time or times regardless of whether or not an Event
of Default then exists, Lender incurs legal or accounting expenses or any
other costs or out-of-pocket expenses in connection with (i) the negotiation
and preparation of this Agreement or any of the other Loan Documents, any
amendment of or modification of this Agreement or any of the other Loan
Documents; (ii) the administration of this Agreement or any of the other Loan
Documents and the transactions contemplated hereby and thereby; (iii) any
litigation, contest, dispute, suit, proceeding or action (whether instituted
by Lender, any Borrower or any other Person) in any way relating to the
Collateral, this Agreement or any of the other Loan Documents or any
Borrower's affairs; (iv) any attempt to enforce any rights of Lender against
any Borrower or any other Person which may be obligated to Lender by virtue
of this Agreement or any of the other Loan Documents, including, without
limitation, the Account Debtors; or (v) any attempt to inspect, verify,
protect, preserve, restore, collect, sell, liquidate or otherwise dispose of
or realize upon the Collateral; then all such legal and accounting expenses,
other costs and out of pocket expenses of Lender shall be charged to
Borrowers. All amounts chargeable to Borrowers under this Section 2.8 shall
be Obligations secured by all of the Collateral, shall be payable on demand
to Lender and shall bear interest from the date such demand is made until
paid in full at the rate applicable to Base Rate Portions from time to time.
Borrowers shall also reimburse Lender for expenses incurred by Lender in its
administration of the Collateral to the extent and in the manner provided in
Section 6 hereof.
2.9. BANK CHARGES.
Borrowers shall pay to Lender, on demand, any and all fees,
costs or expenses which Lender or any Participating Lender pays to a bank or
other similar institution (including, without limitation, any fees paid by
Lender to any Participating Lender) arising out of or in connection with (i)
the forwarding to any Borrower or any other Person on behalf of any Borrower,
by Lender or any Participating Lender, of proceeds of loans made by Lender to
any
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Borrower pursuant to this Agreement and (ii) the depositing for collection,
by Lender or any Participating Lender, of any check or item of payment
received or delivered to Lender or any Participating Lender on account of the
Obligations.
SECTION 3. LOAN ADMINISTRATION.
3.1. MANNER OF BORROWING REVOLVING CREDIT LOANS.
Borrowings under the credit facility established pursuant to
Section 1 hereof shall be as follows:
3.1.1. LOAN REQUESTS. A request for a Revolving
Credit Loan shall be made, or shall be deemed to be made, in
the following manner: (i) ACPI may give Lender notice of its
intention to borrow, in which notice such ACPI shall specify
the proposed Borrower, the amount of the proposed borrowing
and the proposed borrowing date, no later than 11:00 a.m.
Chicago, Illinois, time on the proposed borrowing date (or in
accordance with Section 2.3 hereof in the case of a request
for a LIBOR Portion), PROVIDED, however, that no such request
may be made at a time when there exists a Default or an Event
of Default; and (ii) the becoming due of any amount required
to be paid under this Agreement, whether as interest or for
any other Obligation, shall be deemed irrevocably to be a
request for a Revolving Credit Loan on the due date in the
amount required to pay such interest or other Obligation.
3.1.2. DISBURSEMENT. Borrowers hereby irrevocably
authorize Lender to disburse the proceeds of each Revolving
Credit Loan requested by ACPI, or deemed to be requested,
pursuant to this subsection 3.1.2 as follows: (i) the
proceeds of each Revolving Credit Loan requested under
subsection 3.1.1(i) shall be disbursed by Lender in lawful
money of the United States of America in immediately available
funds, in the case of the initial borrowing, in accordance
with the terms of the written disbursement letter from
Borrowers, and in the case of each subsequent borrowing, by
wire transfer to such bank account of the Borrower designated
by ACPI to receive such proceeds as may be agreed upon by
Borrowers and Lender from time to time or elsewhere if
pursuant to a written direction from ACPI; and (ii) the
proceeds of each Revolving Credit Loan requested under
subsection 3.1.1(ii) shall be disbursed by Lender by way of
direct payment of the relevant interest or other Obligation.
3.1.3. AUTHORIZATION. Borrowers hereby irrevocably
authorize Lender, in Lender's sole discretion, to advance to
Borrowers, and to charge to Borrowers' Loan Account hereunder
as a Revolving Credit Loan, a sum sufficient to pay all
interest accrued on the Obligations during the immediately
preceding month and to pay all costs, fees and expenses at any
time owed by Borrowers to Lender hereunder.
3.1.4. LETTER OF CREDIT AND LC GUARANTY REQUESTS. A
request for a Letter of Credit or LC Guaranty shall be made in
the following manner: ACPI may give Lender and Bank a written
notice of its request for the issuance of a Letter of Credit
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or LC Guaranty, not later than 11:00 a.m. Chicago, Illinois
time, one Business Day before the proposed issuance date
thereof, in which notice such Borrower shall specify the
Borrower for whose account the Letter of Credit or LC Guaranty
is to be issued, the proposed issuer and issuance date;
PROVIDED, that no such request may be made at a time when
there exists a Default or Event of Default. Such request
shall be accompanied by an executed application and
reimbursement agreement in form and substance satisfactory to
the Person being asked to issue the Letter of Credit or LC
Guaranty, as well as any required corporate resolutions.
3.1.5. METHOD OF MAKING REQUESTS. Each Borrower
hereby irrevocably appoints ACPI as its agent for requesting
Loans under this Agreement and authorizes and directs Lender
to make Loans and to issue Letters of Credit and LC Guaranties
for the account of such Borrower as requested by ACPI from
time to time. As an accommodation to Borrowers, unless a
Default or an Event of Default is then in existence, (i)
Lender shall permit telephonic requests for Revolving Credit
Loans to Lender, (ii) Lender and Bank may, in their
discretion, permit electronic transmittal of requests for
Letters of Credit and LC Guaranties to them, and (iii) Lender
may, in Lender's discretion, permit electronic transmittal of
instructions, authorizations, agreements or reports to Lender.
Unless a Borrower specifically directs Lender or Bank in
writing not to accept or act upon telephonic or electronic
communications from such Borrower, neither Lender nor Bank
shall have any liability to Borrowers for any loss or damage
suffered by such Borrower as a result of Lender's or Bank's
honoring of any requests, execution of any instructions,
authorizations or agreements or reliance on any reports
communicated to it telephonically or electronically and
purporting to have been sent to Lender or Bank by such
Borrower and neither Lender nor Bank shall have any duty to
verify the origin of any such communication or the authority
of the person sending it. Each telephonic request for a
Revolving Credit Loan, Letter of Credit or LC Guaranty
accepted by Lender and Bank, if applicable, hereunder shall be
promptly followed by a written confirmation of such request
from the requesting Borrower to Lender and Bank, if applicable.
3.2. PAYMENTS.
Except where evidenced by notes or other instruments issued or
made by Borrowers to Lender and accepted by Lender specifically containing
payment provisions which are in conflict with this Section 3.2 (in which
event the conflicting provisions of said notes or other instruments shall
govern and control), the Obligations shall be payable as follows:
3.2.1. PRINCIPAL. Principal payable on account of
Revolving Credit Loans shall be payable by Borrowers to Lender
immediately upon the earliest of (i) the receipt by Lender or
any Borrower of any proceeds of any of the Collateral, to the
extent of said proceeds, except that, so long as no Default or
Event of Default exists, if all Loans outstanding at the time
of receipt by a Borrower of any such proceeds are LIBOR
Portions, then Borrowers may direct that such proceeds be held
by Lender in
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a non-interest bearing cash collateral account maintained by
Lender or invested in the name of Lender in an investment that
is not a Restricted Investment if so requested by ACPI to be
applied to the payment of principal on the last day of the
Interest Period applicable to each LIBOR Portion in the order
of maturity; (ii) the occurrence of an Event of Default in
consequence of which Lender elects to accelerate the maturity
and payment of the Obligations, or (iii) termination of this
Agreement pursuant to Section 4 hereof; PROVIDED, HOWEVER,
that if an Overadvance other than one outstanding pursuant to
the terms of Section 1.3 hereof shall exist at any time,
Borrowers shall, on demand, repay the Overadvance.
3.2.2. INTEREST.
(i) BASE RATE PORTION. Interest accrued on Base
Rate Portions shall be due on the earliest of (1) the
first calendar day of each month (for the immediately
preceding month), computed through the last calendar day
of the preceding month, (2) the occurrence of an Event of
Default in consequence of which Lender elects to
accelerate the maturity and payment of the Obligations or
(3) termination of this Agreement pursuant to Section 4
hereof.
(ii) LIBOR PORTION. Interest accrued on each LIBOR
Portion shall be due and payable on each LIBOR Interest
Payment Date and on the earliest of (1) the last day of
the Interest Period applicable to such LIBOR Portion, (2)
the occurrence of an Event of Default in consequence of
which Lender elects to accelerate the maturity and
payment of the Obligations or (3) termination of this
Agreement pursuant to Section 4 hereof.
3.2.3. COSTS, FEES AND CHARGES. Costs, fees and
charges payable pursuant to this Agreement shall be payable by
Borrowers as and when provided in Section 2 hereof, to Lender
or to any other Person designated by Lender in writing.
3.2.4. OTHER OBLIGATIONS. The balance of the
Obligations requiring the payment of money, if any, shall be
payable by Borrowers to Lender as and when provided in this
Agreement, the Other Agreements or the Security Documents, or
on demand, whichever is later.
3.3. APPLICATION OF PAYMENTS AND COLLECTIONS.
All items of payment received by Lender by 12:00 noon,
Chicago, Illinois, time, on any Business Day shall be deemed received on that
Business Day. All items of payment received after 12:00 noon, Chicago,
Illinois, time, on any Business Day shall be deemed received on the following
Business Day. Borrowers irrevocably waive the right to direct the
application of any and all payments and collections at any time or times
hereafter received by Lender from or on behalf of Borrowers, and each
Borrower does hereby irrevocably agree that, subject to subsection 3.2.1(i),
Lender shall have the continuing exclusive right to apply and reapply any and
all such payments and collections received at any time or times hereafter by
Lender or its
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agent against the Obligations, in such manner as Lender may deem advisable,
notwithstanding any entry by Lender upon any of its books and records. If as
the result of collections of Accounts as authorized by subsection 6.2.6
hereof a credit balance exists in the Loan Account, such credit balance shall
not accrue interest in favor of Borrowers, but shall be available to
Borrowers at any time or times for so long as no Default or Event of Default
exists.
3.4. ALL LOANS TO CONSTITUTE ONE OBLIGATION; JOINT AND SEVERAL
LIABILITY.
The Loans shall constitute one general Obligation of
Borrowers, and shall be secured by Lender's Lien upon all of the Collateral.
Borrowers shall be jointly and severally liable for the repayment of all
Loans and the payment or fulfillment of all other Obligations hereunder.
3.5. LOAN ACCOUNT.
Lender shall enter all Loans as debits to a loan account (the
"Loan Account") and shall also record in the Loan Account all payments made
by Borrowers on any Obligations and all proceeds of Collateral which are
finally paid to Lender, and may record therein, in accordance with customary
accounting practice, other debits and credits, including interest and all
charges and expenses properly chargeable to Borrowers.
3.6. STATEMENTS OF ACCOUNT.
Lender will account to Borrowers monthly with a statement of
Loans, charges and payments made pursuant to this Agreement, and such account
rendered by Lender shall be deemed final, binding and conclusive upon
Borrowers unless Lender is notified by Borrowers in writing to the contrary
within 30 days of the date each accounting is mailed to Borrowers. Such
notice shall only be deemed an objection to those items specifically objected
to therein.
SECTION 4. TERM AND TERMINATION
4.1. TERM OF AGREEMENT.
Subject to Lender's right to cease making Loans to Borrowers
upon or after the occurrence of any Default or Event of Default, this
Agreement shall be in effect for a period of three years from the date
hereof, through and including May ___, 2000 (the "Term"), unless terminated
as provided in Section 4.2 hereof.
4.2. TERMINATION.
4.2.1. TERMINATION BY LENDER. Lender may terminate
this Agreement without notice upon or after the occurrence and
during the continuance of an Event of Default.
4.2.2. Termination by Borrowers. Upon at least 30
days prior written notice to Lender, Borrowers may, at their
option, terminate this Agreement; PROVIDED, HOWEVER, no such
termination shall be effective until Borrowers have paid all
of the
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Obligations in immediately available funds and all Letters of
Credit and, LC Guaranties, have expired or have been cash
collateralized to Lender's satisfaction. Any notice of
termination given by Borrowers in the anticipation of a sale
of the Borrowers shall be revocable at any time; any notice of
termination given in anticipation of a refinancing of the
Loans shall be irrevocable from and after the tenth day prior
to the termination date stated therein unless Lender otherwise
agrees in writing, and Lender shall have no obligation to make
any Loans or issue or procure any Letters of Credit or LC
Guaranties, on or after the termination date stated in such
notice. Borrowers may elect to terminate this Agreement in its
entirety only. No section of this Agreement or type of Loan
available hereunder may be terminated singly.
4.2.3. TERMINATION CHARGES. At the effective date of
termination of this Agreement for any reason prior to the last
day of the Term, Borrowers shall pay to Lender (in addition to
the then outstanding principal, accrued interest and other
charges owing under the terms of this Agreement and any of the
other Loan Documents) as liquidated damages for the loss of
the bargain and not as a penalty, an amount equal to 1.0% of
the Total Credit Facility. No termination charge shall be
payable if (i) termination occurs on the last day of the Term
or (ii) ACPI does a secondary public offering or private
placement of its stock and, in connection therewith, replaces
the Total Credit Facility with conventional unsecured
financing or if Vista 2000 does a secondary public offering or
private placement and the proceeds thereof are used to replace
the Total Credit Facility.
4.2.4. EFFECT OF TERMINATION. All of the Obligations
shall be immediately due and payable upon the termination date
stated in any notice of termination of this Agreement. All
undertakings, agreements, covenants, warranties and
representations of Borrowers contained in the Loan Documents
shall survive any such termination and Lender shall retain its
Liens in the Collateral and all of its rights and remedies
under the Loan Documents notwithstanding such termination
until all Obligations (other than Obligations under Section
11.2 that have not yet been identified or quantified) have
been discharged or paid, in full, in immediately available
funds, together with the applicable termination charge, if
any. Notwithstanding the payment in full of the Obligations,
Lender shall not be required to terminate its security
interests in the Collateral unless, with respect to any loss
or damage Lender may incur as a result of dishonored checks or
other items of payment received by Lender from any Borrower or
any Account Debtor and applied to the Obligations, Lender
shall, at its option, (i) have received a written agreement,
executed by Borrowers jointly and severally, and by any Person
whose loans or other advances to Borrowers are used in whole
or in part to satisfy the Obligations, indemnifying Lender
from any such loss or damage; or (ii) have retained such
monetary reserves and Liens on the Collateral for such period
of time as Lender, in its reasonable discretion, may deem
necessary to protect Lender from any such loss or damage.
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SECTION 5. SECURITY INTERESTS
5.1. SECURITY INTEREST IN COLLATERAL.
To secure the prompt payment and performance to Lender of the
Obligations, each Borrower hereby grants to Lender a continuing Lien upon
all of such Borrower's assets, including all of the following Property and
interests in Property of such Borrower, whether now owned or existing or
hereafter created, acquired or arising and wheresoever located:
(i) Accounts;
(ii) Inventory;
(iii) Equipment;
(iv) General Intangibles;
(v) Investment Property;
(vi) All monies and other Property of any kind now
or at any time or times hereafter in the possession or under
the control of Lender or a bailee or Affiliate of Lender;
(vii) All accessions to, substitutions for and all
replacements, products and cash and non-cash proceeds of
(i) through (vi) above, including, without limitation,
proceeds of and unearned premiums with respect to insurance
policies insuring any of the Collateral; and
(viii) All books and records (including, without
limitation, customer lists, credit files, computer programs,
print-outs, and other computer materials and records) of
each Borrower pertaining to any of (i) through (vii) above.
5.2. LIEN PERFECTION; FURTHER ASSURANCES.
Borrowers shall execute such UCC-1 financing statements
as are required by the Code and such other instruments, assignments or
documents as are necessary to perfect Lender's Lien upon any of the
Collateral and shall take such other action as may be required to perfect or
to continue the perfection of Lender's Lien upon the Collateral. Unless
prohibited by applicable law, each Borrower hereby authorizes Lender to
execute and file any such financing statement on such Borrower's behalf. The
parties agree that a carbon, photographic or other reproduction of this
Agreement shall be sufficient as a financing statement and may be filed in
any appropriate office in lieu thereof. At Lender's request, Borrowers shall
also promptly execute or cause to be executed and shall deliver to Lender any
and all documents, instruments and agreements deemed necessary by Lender to
give effect to or carry out the terms or intent of the Loan Documents. In
particular, but not by way of limitation of the foregoing, subject to the
immediately following sentence, should the aggregate value of Inventory of
any Borrower
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located at a particular outside processor exceed $20,000 at any time, such
Borrower will notify Lender and will obtain from each such processor a
processor's letter in form and substance satisfactory to Fleet; provided,
that if the aggregate value of such Inventory is less than $20,000 at such
a location, such Borrower will use its best efforts to obtain a processor's
letter in form and substance satisfactory to Fleet. Further, in the event
that (i) the aggregate value of Inventory of any Borrower located at a
particular seasonal or overflow outside processor exceeds $75,000 at any
time and (ii) Inventory at such seasonal or overflow processor remains at
such processor in excess of two weeks, such Borrower will notify Lender and
will obtain from each such processor a processor's letter in form and
substance satisfactory to Fleet; provided, that if the value of such
Inventory is less than $75,000 and such Inventory remains at such processor
for less than one week, such Borrower shall use its best efforts to obtain
a processor's letter in form and substance satisfactory to Fleet.
5.3. LIEN ON REALTY.
The due and punctual payment and performance of the
Obligations shall also be secured by the Lien created by Mortgages upon all
real Property of any Borrower described therein. The Mortgages shall be
executed by each applicable Borrower in favor of Lender and shall be duly
recorded, at Borrowers' expense, in each office where such recording is
required to constitute a fully perfected Lien on the real Property covered
thereby. Borrowers shall deliver to Lender, at Borrowers' expense, mortgagee
title insurance policies issued by a title insurance company satisfactory to
Lender, which policies shall be in form and substance satisfactory to Lender
and shall insure a valid first Lien in favor of Lender on the Property
covered thereby, subject only to those exceptions acceptable to Lender and
its counsel. Borrowers shall deliver to Lender such other documents,
including, without limitation, as-built survey prints of the real Property,
as Lender and its counsel may request relating to the real Property subject
to the Mortgage.
SECTION 6. COLLATERAL ADMINISTRATION
6.1. GENERAL.
6.1.1. LOCATION OF COLLATERAL. All Collateral, other
than Inventory in transit and motor vehicles, will at all
times be kept by Borrowers and their respective Subsidiaries
at one or more of business locations set forth in EXHIBIT B
hereto and shall not, without the prior written approval of
Lender, be moved therefrom except, prior to an Event of
Default and Lender's acceleration of the maturity of the
Obligations in consequence thereof, for (i) sales of Inventory
in the ordinary course of business; and (ii) removals in
connection with dispositions of Equipment that are authorized
by subsection 6.4.2 hereof.
6.1.2. INSURANCE OF COLLATERAL. Borrowers shall maintain
and pay for insurance upon all Collateral wherever located and
with respect to Borrowers' business, covering casualty, hazard,
public liability and such other risks in such
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amounts and with such insurance companies as are reasonably
satisfactory to Lender. Borrowers shall deliver the originals
of such policies to Lender with satisfactory lender's loss
payable endorsements, naming Lender as sole loss payee, assignee
or additional insured, as appropriate. Each policy of insurance
or endorsement shall contain a clause requiring the insurer to
give not less than 30 days prior written notice to Lender in the
event of cancellation of the policy for any reason whatsoever
and a clause specifying that the interest of Lender shall not be
impaired or invalidated by any act or neglect of any Borrower or
the owner of the Property or by the occupation of the premises
for purposes more hazardous than are permitted by said policy.
If Borrowers fail to provide and pay for such insurance, Lender
may, at its option, but shall not be required to, procure the
same and charge Borrowers therefor. Borrowers agree to deliver
to Lender, promptly as rendered, true copies of all reports made
in any reporting forms to insurance companies.
6.1.3. PROTECTION OF COLLATERAL. All expenses of
protecting, storing, warehousing, insuring, handling, maintaining
and shipping the Collateral, any and all excise, property, sales,
and use taxes imposed by any state, federal, or local authority
on any of the Collateral or in respect of the sale thereof shall
be borne and paid by Borrowers. If Borrowers fail to promptly
pay any portion thereof when due, Lender may, at its option, but
shall not be required to, pay the same and charge Borrowers
therefor. Lender shall not be liable or responsible in any way
for the safekeeping of any of the Collateral or for any loss or
damage thereto (except for reasonable care in the custody thereof
while any Collateral is in Lender's actual possession) or for any
diminution in the value thereof, or for any act or default of any
warehouseman, carrier, forwarding agency, or other person
whomsoever, but the same shall be at Borrowers' sole risk.
6.2. ADMINISTRATION OF ACCOUNTS.
6.2.1. RECORDS, SCHEDULES AND ASSIGNMENTS OF ACCOUNTS.
Each Borrower shall keep accurate and complete records of its
Accounts and all payments and collections thereon and shall
submit to Lender on such periodic basis as Lender shall request
a sales and collections report for the preceding period, in
form satisfactory to Lender. On or before the fifteenth day of
each month from and after the date hereof, Borrowers shall
deliver to Lender, in form acceptable to Lender, a detailed aged
trial balance of all Accounts existing as of the last day of the
preceding month, specifying the names, face value, dates of
invoices and due dates for each Account Debtor obligated on an
Account so listed ("Schedule of Accounts"), a net debit report as
of the last day of the preceding month and, upon Lender's request
therefor, copies of proof of delivery and the original copy of
all documents, including, without limitation, repayment histories
and present status reports relating to the Accounts so scheduled
and such other matters and information relating to the status of
then existing Accounts as Lender shall reasonably request. If
requested by Lender, Borrower shall execute and deliver to Lender
formal written assignments of all of its
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Accounts weekly or daily, which shall include all Accounts that
have been created since the date of the last assignment, together
with copies of invoices or invoice registers related thereto.
6.2.2. DISCOUNTS, ALLOWANCES, DISPUTES. If any Borrower
grants any discounts, allowances or credits that are not shown on
the face of the invoice for the Account involved, such Borrower
shall report such discounts, allowances or credits, as the case
may be, to Lender as part of the next required Schedule of
Accounts. Upon and after the occurrence of an Event of Default,
Lender shall have the right to settle or adjust all disputes and
claims directly with the Account Debtor and to compromise the
amount or extend the time for payment of the Accounts upon such
terms and conditions as Lender may deem advisable, and to charge
the deficiencies, costs and expenses thereof, including
attorney's fees, to Borrowers.
6.2.3. TAXES. If an Account includes a charge for any tax
payable to any governmental taxing authority, Lender is
authorized, in its sole discretion, to pay the amount thereof to
the proper taxing authority for the account of Borrowers and to
charge Borrowers therefor, provided, however that Lender shall
not be liable for any taxes to any governmental taxing authority
that may be due by any Borrower.
6.2.3. ACCOUNT VERIFICATION. Whether or not a Default or
an Event of Default has occurred, any of Lender's officers,
employees or agents shall have the right at any time or times
hereafter to verify the validity, amount or any other matter
relating to any Accounts by mail, telephone, telegraph or
otherwise. Prior to a Default, such verifications may be made
by Lender in the name of its designee or any Borrower upon prior
notice to ACPI. After a Default, such verifications may also be
made by Lender in its own name and without prior notice to ACPI.
Borrowers shall cooperate fully with Lender in an effort to
facilitate and promptly conclude any such verification process.
6.2.5. MAINTENANCE OF DOMINION ACCOUNT. Borrowers shall
maintain a Dominion Account or Accounts pursuant to a lockbox
arrangements acceptable to Lender with such banks as may be
selected by Borrowers and be acceptable to Lender. Borrowers
shall issue to any such banks an irrevocable letter of
instruction directing such banks to deposit all payments or
other remittances received in the lockbox to the Dominion Account
for application on account of the Obligations, except that, prior
to a Default, remittances received in Canada in Canadian funds
may be deposited in the appropriate Borrower's operating account
in Canada. All funds deposited in any Dominion Account shall
immediately become the property of Lender and Borrowers shall
obtain the agreement by such banks in favor of Lender to waive
any offset rights against the funds so deposited. Lender assumes
no responsibility for such lockbox arrangement, including,
without limitation, any claim of accord and satisfaction or
release with respect to deposits accepted by any bank thereunder.
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6.2.6. COLLECTION OF ACCOUNTS, PROCEEDS OF COLLATERAL. To
expedite collection, Borrowers shall endeavor in the first
instance to make collection of their Accounts for Lender. All
remittances received by any Borrower on account of Accounts,
together with the proceeds of any other Collateral, shall be held
as Lender's property by such Borrower as trustee of an express
trust for Lender's benefit and such Borrower shall immediately
deposit same in kind in the Dominion Account. Lender retains
the right at all times after the occurrence of a Default or an
Event of Default to notify Account Debtors that Accounts have
been assigned to Lender and to collect Accounts directly in its
own name and to charge the collection costs and expenses,
including attorneys' fees, to Borrowers.
6.3. ADMINISTRATION OF INVENTORY.
6.3.1. RECORDS AND REPORTS OF INVENTORY. Each Borrower
shall keep accurate and complete records of its Inventory.
Borrowers shall furnish to Lender Inventory reports in form and
detail satisfactory to Lender at such times as Lender may
request, but at least once each month, not later than the
fifteenth day of such month. Borrowers shall conduct a
physical inventory no less frequently than annually and shall
provide to Lender a report based on each such physical inventory
promptly thereafter, together with such supporting information as
Lender shall request.
6.3.1. RETURNS OF INVENTORY. If at any time or times
hereafter any Account Debtors return any Inventory to any
Borrower having an aggregate value in excess of $50,000, such
Borrower shall immediately notify Lender of the same,
specifying the reason for such return and the location,
condition and intended disposition of the returned Inventory.
6.4. ADMINISTRATION OF EQUIPMENT.
6.4.1. RECORDS AND SCHEDULES OF EQUIPMENT. Each
Borrower shall keep accurate records itemizing and describing
the kind, type, quality, quantity and value of its Equipment
and all dispositions made in accordance with subsection 6.4.2
hereof, and shall furnish Lender with a current schedule
containing the foregoing information on at least an annual
basis and more often if requested by Lender. Immediately on
request therefor by Lender, Borrowers shall deliver to Lender
any and all evidence of ownership, if any, of any of the
Equipment.
6.4.2. DISPOSITIONS OF EQUIPMENT. No Borrower will
sell, lease or otherwise dispose of or transfer any of the
Equipment or any part thereof without the prior written
consent of Lender; PROVIDED, HOWEVER, that the foregoing
restriction shall not apply, for so long as no Default or
Event of Default exists, to (i) dispositions of Equipment
which, in the aggregate during any consecutive twelve-month
period, has a fair market value or book value, whichever is
greater, of $100,000 or less, provided that all proceeds
thereof are remitted to Lender for application to the Loans,
or (ii)
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replacements of Equipment that is substantially worn, damaged
or obsolete with Equipment of like kind, function and value,
provided that the replacement Equipment shall be acquired
prior to or concurrently with any disposition of the
Equipment that is to be replaced, the replacement Equipment
shall be free and clear of Liens other than Permitted Liens
that are Purchase Money Liens, and such Borrower shall have
given Lender at least 5 days prior written notice of such
disposition.
6.5. PAYMENT OF CHARGES.
All amounts chargeable to Borrowers under Section 6 hereof shall
be Obligations secured by all of the Collateral, shall be payable on demand
and shall bear interest from the date such advance was made until paid in
full at the rate applicable to Base Rate Portions from time to time.
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1. GENERAL REPRESENTATIONS AND WARRANTIES.
To induce Lender to enter into this Agreement and to make
advances hereunder, Borrowers, jointly and severally, warrant, represent and
covenant to Lender that:
7.1.1. ORGANIZATION AND QUALIFICATION. Each Borrower
and each of their respective Subsidiaries is a corporation
duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation. Each
Borrower and each of their respective Subsidiaries is duly
qualified and is authorized to do business and is in good
standing as a foreign corporation in each state or
jurisdiction listed on Exhibit C hereto and in all other
states and jurisdictions where the failure to be so qualified
would have a material adverse effect on such Borrower or
Subsidiary.
7.1.2. CORPORATE POWER AND AUTHORITY. Each Borrower and
each of their respective Subsidiaries is duly authorized and
empowered to enter into, execute, deliver and perform this
Agreement and each of the other Loan Documents to which it is
a party. The execution, delivery and performance of this
Agreement and each of the other Loan Documents have been duly
authorized by all necessary corporate action and do not and
will not (i) require any consent or approval of the
shareholders of any Borrower or any of each of their
respective Subsidiaries; (ii) contravene any Borrower's or
any of their respective Subsidiaries' charter, articles or
certificate of incorporation or by-laws; (iii) violate, or
cause any Borrower or any of their respective Subsidiaries to
be in default under, any provision of any law, rule,
regulation, order, writ, judgment, injunction, decree,
determination or award in effect having applicability to such
Borrower or any such Subsidiary; (iv) result in a breach of
or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to
which any Borrower or any of their respective Subsidiaries is
a party or by which it or its Properties may be bound or
affected, the breach of which would result in any material
adverse effect on any of the Borrowers,
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their Subsidiaries or their respective assets; or (v) result
in, or require, the creation or imposition of any Lien (other
than Permitted Liens) upon or with respect to any of the
Properties now owned or hereafter acquired by any Borrower or
any of their respective Subsidiaries.
7.1.3. LEGALLY ENFORCEABLE AGREEMENT. This Agreement
is, and each of the other Loan Documents when delivered under
this Agreement will be, a legal, valid and binding obligation
of each of Borrower and each of their respective Subsidiaries
party thereto, enforceable against it in accordance with its
respective terms, subject to the effect of bankruptcy,
insolvency and other laws affecting the rights and remedies
of creditors generally.
7.1.4. CAPITAL STRUCTURE. Exhibit D hereto states (i)
the correct name of each of the Subsidiaries of each
Borrower, its jurisdiction of incorporation and the
percentage of its Voting Stock owned by the relevant
Borrower, (ii) the names of each Borrower's Corporate or joint
venture Affiliates and the nature of the affiliation, (iii)
the number, nature and holder of all outstanding Securities
of each Borrower and each Subsidiary of each Borrower and
(iv) the number of authorized, issued and treasury shares of
each Borrower and each Subsidiary of each Borrower. Each
Borrower has good title to all of the shares it purports to
own of the stock of each of its Subsidiaries, free and clear
in each case of any Lien other than Permitted Liens. All
such shares have been duly issued and are fully paid and
non-assessable. There are no outstanding options to
purchase, or any rights or warrants to subscribe for, or any
commitments or agreements to issue or sell, or any Securities
or obligations convertible into, or any powers of attorney
relating to, shares of the capital stock of any Borrower or
any of their respective Subsidiaries. There are no
outstanding agreements or instruments binding upon any of any
Borrower's shareholders relating to the ownership of its
shares of capital stock.
7.1.5. CORPORATE NAMES. No Borrower and none of their
respective Subsidiaries has been known as or used any
corporate, fictitious or trade names within the last year
except those listed on EXHIBIT E hereto. Except as set forth
on EXHIBIT E, no Borrower and none of their respective
Subsidiaries has, within the last year, been the surviving
corporation of a merger or consolidation or has acquired all
or substantially all of the assets of any Person.
7.1.6. BUSINESS LOCATIONS; AGENT FOR PROCESS. Each
Borrower's and each of their respective Subsidiaries' chief
executive office and other places of business are as listed
on Exhibit B hereto. During the preceding one-year period,
no Borrower and none of their respective Subsidiaries has had
an office, place of business or agent for service of process
other than as listed on EXHIBIT B. Except as shown on
EXHIBIT B and except for Inventory with an aggregate value of
$15,000 or less in the possession of employees or sales
representatives of Borrowers, no Inventory is stored with a
bailee, warehouseman or similar party, nor is any Inventory
consigned to any Person.
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7.1.7. TITLE TO PROPERTIES; PRIORITY OF LIENS. Each
Borrower and each of their respective Subsidiaries has good,
indefeasible and marketable title to and fee simple ownership
of, or valid and subsisting leasehold interests in, all of
its real Property, and good title to all of the Collateral
and all of its other Property, in each case, free and clear
of all Liens except Permitted Liens. Each Borrower has paid
or discharged all lawful claims which, if unpaid, might
become a Lien against any of such Borrower's Properties that
is not a Permitted Lien. The Liens granted to Lender under
Section 5 hereof are first priority Liens, subject only to
Permitted Liens.
7.1.8. ACCOUNTS. Lender may rely, in determining which
Accounts are Eligible Accounts, on all statements and
representations made by any Borrower with respect to any
Account or Accounts. Unless otherwise indicated in writing
to Lender in the next Schedule of Accounts delivered to
Lender in accordance with Section 6.2.1, or, in cases of
Accounts which have balances of $5,000 or more, promptly upon
any Borrower's becoming aware thereof, with respect to each
Account that Borrowers have requested Lender to treat as an
Eligible Account:
(i) It is genuine and in all respects what it
purports to be, and it is not evidenced by a judgment;
(ii) It arises out of a completed, BONA FIDE sale
and delivery of goods or rendition of services by a
Borrower in the ordinary course of its business and in
accordance with the terms and conditions of all purchase
orders, contracts or other documents relating thereto and
forming a part of the contract between such Borrower and
the Account Debtor;
(iii) It is for a liquidated amount maturing as
stated in the duplicate invoice covering such sale or
rendition of services, a copy of which has been furnished
or is available to Lender;
(iv) Such Account, and Lender's Lien therein, is
not, and will not (by voluntary act or omission of any
Borrower) be in the future, subject to any offset, Lien,
deduction, defense, dispute, counterclaim or any other
adverse condition except for disputes resulting in
returned goods where the amount in controversy is deemed
by Lender to be immaterial, and each such Account is
absolutely owing to a Borrower and is not contingent in
any respect or for any reason;
(v) No Borrower has made any agreement with any
Account Debtor thereunder for any extension, compromise,
settlement or modification of any such Account or any
deduction therefrom, except discounts or allowances which
are granted by a Borrower in the ordinary course of its
business for prompt payment and which are reflected in
the calculation of the net amount of
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each respective invoice related thereto and are reflected
in the Schedules of Accounts submitted to Lender pursuant
to subsection 6.2.1 hereof;
(vi) There are no facts, events or occurrences which
in any way impair the validity or enforceability of any
Accounts or tend to reduce the amount payable thereunder
from the face amount of the invoice and statements
delivered to Lender with respect thereto;
(vii) To the best of each Borrower's knowledge, the
Account Debtor thereunder (1) had the capacity to
contract at the time any contract or other document
giving rise to the Account was executed and (2) such
Account Debtor is Solvent; and
(viii) To the best of each Borrower's knowledge,
there are no proceedings or actions which are threatened
or pending against any Account Debtor thereunder which
might result in any material adverse change in such
Account Debtor's financial condition or the
collectibility of such Account.
7.1.9. EQUIPMENT. The Equipment is in good operating
condition and repair, and all necessary replacements of and
repairs thereto shall be made so that the value and operating
efficiency of the Equipment shall be maintained and
preserved, reasonable wear and tear excepted. At the date of
this Agreement, no material amount of Equipment is so affixed
to any real Property leased to any Borrower that an interest
arises therein under the real estate laws of the applicable
jurisdiction. From and after the date of this Agreement, no
Borrower will permit any of the Equipment not so affixed on
the date of this Agreement to become affixed to any real
Property leased to such Borrower so that an interest arises
therein under the real estate laws of the applicable
jurisdiction unless the landlord of such real Property has
executed a landlord waiver or leasehold mortgage in favor of
and in form acceptable to Lender, and no Borrower will permit
any of the Equipment to become an accession to any personal
Property other than Equipment that is subject to first
priority (except for Permitted Liens) Liens in favor of
Lender.
7.1.10. FINANCIAL STATEMENTS; FISCAL YEAR. The
Consolidated and consolidating balance sheets of ACPI and
such other Persons described therein (including the accounts
of all Subsidiaries of ACPI and their respective Subsidiaries
for the respective periods during which a Subsidiary
relationship existed) as of December 31, 1996, and February
28, 1997, respectively and the related statements of income,
changes in stockholder's equity, and changes in financial
position for the periods ended on such dates, have been
prepared in accordance with GAAP, and present fairly the
financial positions of Borrowers and such Persons at such
dates and the results of Borrowers' and such Persons'
operations for such periods. Since February 28, 1997, there
has been no material change in the condition, financial or
otherwise, of any Borrower or such other Persons as shown on
the Consolidated
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balance sheet as of such date and no change in the aggregate
value of Equipment and real Property owned by Borrowers or
such other Persons, except changes in the ordinary course of
business, none of which individually or in the aggregate has
been materially adverse. The fiscal year of Borrowers and
each of their respective Subsidiaries ends on the last
Saturday of the 52nd week of each year.
7.1.11. FULL DISCLOSURE. The financial statements
referred to in subsection 7.1.10 hereof do not, nor does this
Agreement or any other written statement of any Borrower to
Lender, contain any untrue statement of a material fact or
omit a material fact necessary to make the statements
contained therein or herein not misleading. There is no fact
which any Borrower has failed to disclose to Lender in
writing which materially affects adversely or, so far as any
Borrower can now foresee, will materially affect adversely
the Properties, business, prospects, profits or condition
(financial or otherwise) of any Borrower or any of their
respective Subsidiaries or the ability of any Borrower or
their respective Subsidiaries to perform this Agreement or
the other Loan Documents.
7.1.12. SOLVENT FINANCIAL CONDITION. Each Borrower and
each of their respective Subsidiaries is now and, after
giving effect to the Loans to be made and the Letters of
Credit, and LC Guaranties to be issued hereunder, at all
times will be, Solvent.
7.1.13. SURETY OBLIGATIONS. No Borrower and none of
their respective Subsidiaries is obligated as surety or
indemnitor under any surety or similar bond or other contract
issued or entered into to assure payment, performance or
completion of performance of any undertaking or obligation of
any Person.
7.1.14. TAXES. ACPI's federal tax identification number
is 34-1376833. The federal tax identification number of each
of PMI, Boss and their respective Subsidiaries is shown on
EXHIBIT F hereto. Each Borrower and each of its Subsidiaries
has filed all federal, state and local tax returns and other
reports it is required by law to file and has paid, or made
provision for the payment of, all taxes, assessments, fees,
levies and other governmental charges upon it, its income and
Properties as and when such taxes, assessments, fees, levies
and charges are due and payable, unless and to the extent any
thereof are being actively contested in good faith and by
appropriate proceedings and each Borrower maintains
reasonable reserves on its books therefor. The provision for
taxes on the books of each Borrower and each of their
respective Subsidiaries is adequate for all years not closed
by applicable statutes, and for the current fiscal year.
7.1.15. BROKERS. There are no claims for brokerage
commissions, finder's fees or investment banking fees in
connection with the transactions contemplated by this
Agreement.
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7.1.16. PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES.
Each Borrower and each of their respective Subsidiaries owns
or possesses all the patents, trademarks, service marks,
trade names, copyrights and licenses necessary for the
conduct of its business without any known conflict with the
rights of others. All such patents, trademarks, service
marks, trade names, copyrights, licenses and other similar
rights are listed on Exhibit G hereto.
7.1.17. GOVERNMENTAL CONSENTS. Each Borrower and each of
their respective Subsidiaries has, and is in good standing
with respect to, all governmental consents, approvals,
licenses, authorizations, permits, certificates, inspections
and franchises necessary to continue to conduct its business
as conducted by it and to own or lease and operate its
Properties as now owned or leased by it.
7.1.18. COMPLIANCE WITH LAWS. Each Borrower and each of
their respective Subsidiaries has duly complied in all
material respects with, and its Properties, business
operations and leaseholds are in compliance in all material
respects with, the provisions of all federal, state and local
laws, rules and regulations applicable to such Borrower or
such Subsidiary, as applicable, its Properties or the conduct
of its business and there have been no citations, notices or
orders of material noncompliance issued to such Borrower or
any of its Subsidiaries under any such law, rule or
regulation. Each Borrower and each of their respective
Subsidiaries has established and maintains an adequate
monitoring system to insure that it remains in compliance
with all federal, state and local laws, rules and regulations
applicable to it. No Inventory has been produced in
violation of the Fair Labor Standards Act (29 U.S.C. Section
201 ET SEQ.), as amended.
7.1.19. RESTRICTIONS. No Borrower and none of their
respective Subsidiaries is a party or subject to any
contract, agreement, or charter or other corporate
restriction, which materially and adversely affects its
business or the use or ownership of any of its Properties. No
Borrower and none of their respective Subsidiaries is a party
or subject to any contract or agreement which restricts its
right or ability to incur Indebtedness, other than as set
forth on EXHIBIT H hereto, none of which prohibit the
execution of or compliance with this Agreement or the other
Loan Documents by Borrower or any of their respective
Subsidiaries, as applicable.
7.1.20. LITIGATION. Except as set forth on EXHIBIT I
hereto, there are no actions, suits, proceedings or
investigations pending, or to the knowledge of any Borrower,
threatened, against or affecting any Borrower or any of their
respective Subsidiaries, or the business, operations,
Properties, prospects, profits or condition of any Borrower
or any of their respective Subsidiaries. No Borrower and
none of their respective Subsidiaries is in default with
respect to any order, writ, injunction, judgment, decree or
rule of any court, governmental authority or arbitration
board or tribunal.
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7.1.21. NO DEFAULTS. No event has occurred and no
condition exists which would, upon or after the execution and
delivery of this Agreement or any Borrower's performance
hereunder, constitute a Default or an Event of Default. No
Borrower and none of their respective Subsidiaries is in
default in (and no event has occurred and no condition exists
which constitutes, or which with the passage of time or the
giving of notice or both would constitute, a default in) the
payment of any Indebtedness to any Person for Money Borrowed.
7.1.22. LEASES. EXHIBIT J hereto is a complete listing
of all capitalized leases of each Borrower and their
respective Subsidiaries and EXHIBIT K hereto is a complete
listing of all operating leases of each Borrower and their
respective Subsidiaries. Each Borrower and each of their
respective Subsidiaries is in full compliance with all of the
terms of each of its respective capitalized and operating
leases.
7.1.23. PENSION PLANS. Except as disclosed on EXHIBIT L
hereto, no Borrower and none of their respective Subsidiaries
has any Plan. Each Borrower and each of their respective
Subsidiaries is in substantial compliance with the
requirements of ERISA and the regulations promulgated
thereunder with respect to each Plan. No fact or situation
that could result in a material adverse change in the
financial condition of any Borrower or any of their
respective Subsidiaries exists in connection with any Plan.
No Borrower and none of their respective Subsidiaries has any
withdrawal liability in connection with a Multiemployer Plan.
7.1.24. TRADE RELATIONS. There exists no actual or
threatened termination, cancellation or limitation of, or any
modification or change in, the business relationship between
any Borrower or any of their respective Subsidiaries and any
customer or any group of customers whose purchases
individually or in the aggregate are material to the business
of any Borrower or any of their Subsidiaries, or with any
material supplier, and there exists no present condition
state of facts or circumstances which would materially affect
adversely any Borrower or any of their respective
Subsidiaries or prevent any Borrower or any of their
respective Subsidiaries from conducting such business after
the consummation of the transaction contemplated by this
Agreement in substantially the same manner in which it has
heretofore been conducted.
7.1.25. LABOR RELATIONS. Except as described on EXHIBIT
M hereto, no Borrower and none of their respective
Subsidiaries is a party to any collective bargaining
agreement. There are no material grievances, disputes or
controversies with any union or any other organization of any
Borrower's or any of their respective Subsidiaries'
employees, or threats of strikes, work stoppages or any
asserted pending demands for collective bargaining by any
union or organization.
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7.2. CONTINUOUS NATURE OF REPRESENTATIONS AND WARRANTIES.
Each representation and warranty (except the second sentence of
subsection 7.1.10 and the reference to financial statements in the first
sentence of subsection 7.1.11, it being understood that the financial
statements described in subsection 7.1.10 are as represented only as of the
respective dates thereof) contained in this Agreement and the other Loan
Documents shall be continuous in nature and shall remain accurate, complete
and not misleading at all times during the term of this Agreement, except
for changes in the nature of any Borrower's or any of their respective
Subsidiaries' business or operations that would render the information in
any exhibit attached hereto either inaccurate, incomplete or misleading, so
long as Lender has consented to such changes or such changes are expressly
permitted by this Agreement.
7.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties of Borrowers contained in this
Agreement or any of the other Loan Documents shall survive the execution,
delivery and acceptance thereof by Lender and the parties thereto and the
closing of the transactions described therein or related thereto.
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
8.1. AFFIRMATIVE COVENANTS.
During the term of this Agreement, and thereafter for so long as
there are any Obligations to Lender, Borrowers covenant that, unless otherwise
consented to by Lender in writing, they shall:
8.1.1. VISITS AND INSPECTIONS. Permit representatives
of Lender, from time to time, as often as may be reasonably
requested, but only during normal business hours, to visit
and inspect the Properties of Borrowers and each of their
respective Subsidiaries, inspect, audit and make extracts
from their respective books and records, and discuss with
their respective officers, employees and independent
accountants, each Borrower's and each of their respective
Subsidiaries' business, assets, liabilities, financial
condition, business prospects and results of operations.
8.1.2. NOTICES. Promptly notify Lender in writing of
the occurrence of any event or the existence of any fact
which renders any representation or warranty in this
Agreement or any of the other Loan Documents inaccurate,
incomplete or misleading.
8.1.3. FINANCIAL STATEMENTS. Keep, and cause each of
their Subsidiaries to keep, adequate records and books of
account with respect to its business activities in which
proper entries are made in accordance with GAAP reflecting
all its financial transactions; and cause to be prepared and
furnished to Lender the following (all to be prepared in
accordance with GAAP applied on a consistent basis, unless
Borrowers'
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certified public accountants concur in any change therein and
such change is disclosed to Lender and is consistent with GAAP):
(i) not later than 120 days after the close of each
fiscal year of ACPI, unqualified (except for a
qualification for a change in accounting principles with
which the accountant concurs) audited financial
statements of ACPI, its Subsidiaries and each of their
respective Subsidiaries as of the end of such year, on a
Consolidated and consolidating basis, certified by a
firm of independent certified public accountants of
recognized standing selected by ACPI acceptable to
Lender;
(ii) not later than 30 days after the end of each
month hereafter, including the last month of ACPI's
fiscal year, unaudited interim financial statements of
ACPI, its Subsidiaries and each of their respective
Subsidiaries as of the end of such month and of the
portion of ACPI's fiscal year then elapsed, on a
Consolidated and consolidating basis, certified by the
principal financial officer of ACPI as prepared in
accordance with GAAP and fairly presenting the
Consolidated financial position and results of
operations of ACPI, its Subsidiaries and each of their
respective Subsidiaries for such month and period
subject only to changes from audit and year-end
adjustments and except that such statements need not
contain notes;
(iii) promptly after the sending or filing thereof,
as the case may be, copies of any proxy statements,
financial statements or reports which ACPI has made
available to its shareholders and copies of any regular,
periodic and special reports or registration statements
which ACPI files with the Securities and Exchange
Commission or any governmental authority which may be
substituted therefor, or any national securities
exchange;
(iv) promptly after the filing thereof, copies of
any annual report to be filed with ERISA in connection
with each Plan; promptly after the filing thereof, a
copy of each 10-K and 10-Q filed by Vista 2000 with the
Securities Exchange Commission; and
(vi) such other data and information (financial and
otherwise) as Lender, from time to time, may reasonably
request, bearing upon or related to the Collateral or
any Borrower's or any of their respective Subsidiaries'
financial condition or results of operations.
Concurrently with the delivery of the financial statements
described in clause (i) of this subsection 8.1.3, ACPI shall forward to
Lender a copy of the accountants' letter to ACPI's management that is
prepared in connection with such financial statements and also shall cause to
be prepared and shall furnish to Lender a certificate of the aforesaid
certified public accountants certifying to Lender that, based upon their
examination of the financial statements
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of ACPI, its Subsidiaries and their respective Subsidiaries performed in
connection with their examination of said financial statements, they are not
aware of any Default or Event of Default, or, if they are aware of such
Default or Event of Default, specifying the nature thereof.Concurrently
with the delivery of the financial statements described in clauses (i) and
(ii) of this subsection 8.1.3, or more frequently if requested by Lender,
ACPI shall cause to be prepared and furnished to Lender a Compliance
Certificate in the form of EXHIBIT N hereto executed by the Chief Financial
Officer of ACPI.
8.1.4. LANDLORD AND STORAGE AGREEMENTS. Provide Lender
with copies of all agreements between any Borrower or any of
their respective Subsidiaries and any landlord or warehouseman
which owns any premises at which any Inventory may, from time
to time, be kept.
8.1.5. GUARANTOR FINANCIAL STATEMENTS. Deliver or cause to
be delivered to Lender financial statements for each
Guarantor (to the extent not delivered pursuant to subsection
8.1.3 hereof) in form and substance satisfactory to Lender
at such intervals and covering such time periods as Lender may
request.
8.1.6. PROJECTIONS. No later than the end of each fiscal
year of Borrowers, deliver to Lender preliminary Projections
of Borrowers for the forthcoming fiscal year, month by month
and no later than February 28th of each year deliver to Lender
final Projections for the then current fiscal year, month by
month.
8.2. NEGATIVE COVENANTS.
During the term of this Agreement, and thereafter for so long
as there are any Obligations to Lender, Borrowers covenant that, unless Lender
has first consented thereto in writing, they will not:
8.2.1. MERGERS; CONSOLIDATIONS; ACQUISITIONS. Merge or
consolidate, or permit any Subsidiary of any Borrower to
merge or consolidate, with any Person; or acquire, or permit
any of their respective Subsidiaries to acquire, all or any
substantial part of the Properties of any Person.
8.2.1. LOANS. Make, or permit any Subsidiary of any
Borrower to make, any loans or other advances of money (other
than loans representing Indebtedness permitted under Section
8.2.3(iii) hereof and/or for salary, travel advances, advances
against commissions and other similar advances in the
ordinary course of business) to any Person.
8.2.3. TOTAL INDEBTEDNESS. Create, incur, assume, or
suffer to exist, or permit any Subsidiary of any Borrower to
create, incur or suffer to exist, any Indebtedness, except:
(i) Obligations owing to Lender;
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(ii) Indebtedness listed on Exhibit O hereto and
refinancing thereof on terms no less favorable to the
obligor;
(iii) Indebtedness of any Subsidiary of any
Borrower to that Borrower;
(iv) accounts payable to trade creditors and
payables incurred in the operation of the businesses of
the Borrowers and their respective Subsidiaries (other
than for Money Borrowed not permitted under subsection
(iii) above) which are not aged more than 120 days from
billing date or more than 30 days from the due date, in
each case incurred in the ordinary course of business
and paid within such time period, unless the same are
being actively contested in good faith and by
appropriate and lawful proceedings; and such Borrower or
such Subsidiary shall have set aside such reserves, if
any, with respect thereto as are required by GAAP and
deemed adequate by such Borrower or such Subsidiary and
its independent accountants;
(v) Obligations to pay Rentals permitted by
subsection 8.2.13;
(vi) Permitted Purchase Money Indebtedness;
(vii) contingent liabilities arising out of
endorsements of checks and other negotiable instruments
for deposit or collection in the ordinary course of
business; and
(viii) Indebtedness not included in paragraphs (i)
through (vii) above which does not exceed at any time,
in the aggregate, the sum of $100,000.
8.2.4. AFFILIATE TRANSACTIONS. Enter into, or be a
party to, or permit any Subsidiary of any Borrower to enter
into or be a party to, any transaction with any Affiliate of
any Borrower or stockholder, except in the ordinary course of
and pursuant to the reasonable requirements of such
Borrower's or such Subsidiary's business and upon fair and
reasonable terms which are fully disclosed to Lender and
are no less favorable to such Borrower than would obtain in a
comparable arm's length transaction with a Person not an
Affiliate or stockholder of such Borrower or such Subsidiary.
8.2.5. LIMITATION ON LIENS. Create or suffer to exist,
or permit any Subsidiary of any Borrower to create or suffer
to exist,any Lien upon any of its Property, income or
profits, whether now owned or hereafter acquired, except:
(i) Liens at any time granted in favor of Lender;
(ii) Liens for taxes (excluding any Lien imposed
pursuant to any of the provisions of ERISA) not yet due,
or being contested in the manner
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described in subsection 7.1.14 hereto, but only if in
Lender's judgment such Lien does not adversely affect
Lender's rights or the priority of Lender's Lien in the
Collateral;
(iii) Liens arising in the ordinary course of a
Borrower's business by operation of law or regulation,
but only if payment in respect of any such Lien is not
at the time required and such Liens do not, in the
aggregate, materially detract from the value of the
Property of any Borrower or materially impair the use
thereof in the operation of such Borrower's business;
(iv) Purchase Money Liens securing Permitted
Purchase Money Indebtedness;
(v) Liens securing Indebtedness of one of a
Borrower's Subsidiaries to such Borrower or another such
Subsidiary;
(vi) such other Liens as appear on EXHIBIT P
hereto; and
(vii) such other Liens as Lender may hereafter
approve in writing.
8.2.6. SUBORDINATED DEBT. Make, or permit any Subsidiary
of any Borrower to make, any payment of any part or all of
any Subordinated Debt or take any other action or omit to
take any other action in respect of any Subordinated Debt,
except in accordance with the subordination agreement
relative thereto.
8.2.7. DISTRIBUTIONS. Declare or make, or permit any
Subsidiary of any Borrower to declare or make, any
Distributions except that, provided no Default or Event of
Default exists at the time of, or would be caused by the
making of, any such Distribution and provided that, after
making any such Distribution, Availability is not less than
$3,000,000 (i) any Subsidiary of any Borrower may
make Distributions to its immediate parent; (ii) ACPI may make
a Distribution of $250,000 to Vista 2000 on the Closing Date
and subsequent quarterly Distributions commencing June 30,
1997, in the amount of $62,500 each; (iii) ACPI may make a
Distribution to Vista2000 in an amount sufficient to
reimburse Vista 2000 for any cash taxes paid by it on behalf
of ACPI; (iv) ACPI may make an additional annual Distribution
to Vista 2000, in an amount not to exceed 50% of ACPI's
consolidated excess cash flow for any fiscal year of
Borrowers, defined as net income for such fiscal year plus
depreciation, amortization and other non-cash charges minus
scheduled principal payments on Indebtedness for Money
Borrowed, the non-financed portion of Capital Expenditures and
all Distributions paid to Vista 2000during such fiscal year;
and (v) ACPI Real Estate, Inc. may make a Distribution to
Vista 2000 in the amount of the net proceeds of the sale of
any real estate owned by it and ACPI may make a
Distribution to Vista 2000 in the amount of the net proceeds
of the sale of any real estate owned by Boss Manufacturing
Real Estate, Inc. that are actually received by ACPI.
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8.2.8. CAPITAL EXPENDITURES. Make Capital Expenditures
(including, without limitation, by way of capitalized leases)
which,in the aggregate, as to all Borrowers and all of their
respective Subsidiaries, exceed $3,000,000 during any fiscal
year of Borrowers not including Capital Expenditures with
respect to Boss' Springfield, Illinois, facility made during
fiscal year 1997 but prior to the date of this Agreement.
8.2.9. DISPOSITION OF ASSETS. Sell, lease or otherwise
dispose of any of, or permit any Subsidiary of any Borrower
to sell,lease or otherwise dispose of any of, its Properties,
including any disposition of Property as part of a sale and
leaseback transaction,to or in favor of any Person, except
(i) sales of Inventory in the ordinary course of business for
so long as no Event of Default exists hereunder, (ii)
transfers of Property to any Borrower by a Subsidiary of any
Borrower, (iii) dispositions expressly authorized by
this Agreement, or (iv) the sale of the respective parcels of
real estate owned by ACPI Real Estate, Inc. and Boss
Manufacturing Real Estate,Inc.
8.2.10. STOCK OF SUBSIDIARIES. Permit any of their
respective Subsidiaries to issue any additional shares of its
capital stock except director's qualifying shares.
8.2.11. BILL-AND-HOLD SALES, ETC. Make a sale to any
customer on a bill-and-hold, guaranteed sale, sale and
return, sale on approval or consignment basis, or any sale
on a repurchase or return basis.
8.2.12. RESTRICTED INVESTMENT. Make or have, or permit
any Subsidiary of any Borrower to make or have, any
Restricted Investment.
8.2.13. LEASES. Become, or permit any of their respective
Subsidiaries to become, a lessee under any operating lease
(other than a lease under which a Borrower or any of its
Subsidiaries is lessor)of Property if the aggregate Rentals
payable during any current or future period of 12 consecutive
months under the lease in question and all other leases under
which any Borrower or any of their respective Subsidiaries is
then lessee would exceed $750,000.The term "Rentals" means,
as of the date of determination, all payments which the
lessee is required to make by the terms of any lease.
8.2.14. TAX CONSOLIDATION. File or consent to the filing
of any consolidated income tax return with any Person other
than Vista 2000, ACPI, any Subsidiary of ACPI or any of their
respective Subsidiaries.
8.3. SPECIFIC FINANCIAL COVENANTS.
During the term of this Agreement, and thereafter for so long as
there are any Obligations to Lender, Borrowers covenant that, unless otherwise
consented to by Lender in writing, they shall comply with all of the financial
covenants set forth in EXHIBIT R hereto.
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SECTION 9. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any
of the other Loan Documents, and without affecting in any manner the rights
of Lender under the other sections of this Agreement, Lender shall not be
required to make any Loan or issue or procure any Letter of Credit or under
this Agreement unless and until each of the following conditions has been and
continues to be satisfied:
9.1. DOCUMENTATION.
Lender shall have received, in form and substance satisfactory
to Lender and its counsel, a duly executed copy of this Agreement and the
other Loan Documents, together with such additional documents, instruments
and certificates as Lender and its counsel shall require in connection
therewith from time to time, all in form and substance satisfactory to Lender
and its counsel.
9.2. NO DEFAULT.
No Default or Event of Default shall exist.
9.3. OTHER CONDITIONS.
Each of the conditions precedent set forth in the Loan
Documents shall have been satisfied.
9.4. AVAILABILITY.
Lender shall have determined that immediately after Lender has
made the initial Loans and issued the initial Letters of Credit and LC
Guaranties contemplated hereby, and paid all closing costs incurred in
connection with the transactions contemplated hereby, Availability shall not
be less than $3,000,000.
9.5. NO LITIGATION.
No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any
court, governmental agency or legislative body to enjoin, restrain or
prohibit, or to obtain damages in respect of, or which is related to or
arises out of this Agreement or the consummation of the transactions
contemplated hereby.
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1. EVENTS OF DEFAULT.
The occurrence of one or more of the following events shall
constitute an "Event of Default":
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10.1.1. PAYMENT OF OBLIGATIONS. Any Borrower shall
fail to pay any of the Obligations on the due date thereof
(whether due at stated maturity, on demand, upon acceleration
or otherwise).
10.1.2. MISREPRESENTATIONS. Any representation,
warranty or other statement made or furnished to Lender by or
on behalf of any Borrower, any Subsidiary of any Borrower or
any Guarantor in this Agreement, any of the other Loan
Documents or any instrument, certificate or financial
statement furnished in compliance with or in reference thereto
proves to have been false or misleading in any material
respect when made or furnished or when reaffirmed pursuant to
Section 7.2 hereof.
10.1.3. BREACH OF SPECIFIC COVENANTS. Any Borrower
shall fail or neglect to perform, keep or observe any covenant
contained in Sections 5.2, 5.3, 6.1.1, 6.2, 8.1.1, 8.1.3, 8.2
or 8.3 hereof on the date that such Borrower is required to
perform, keep or observe such covenant.
10.1.4. BREACH OF OTHER COVENANTS. Any Borrower shall
fail or neglect to perform, keep or observe any covenant
contained in this Agreement (other than a covenant which is
dealt with specifically elsewhere in Section 10.1 hereof) and
the breach of such other covenant is not cured to Lender's
satisfaction within 15 days after the sooner to occur of any
Borrower's receipt of notice of such breach from Lender or the
date on which such failure or neglect first becomes known to
any officer of any Borrower.
10.1.5. DEFAULT UNDER SECURITY DOCUMENTS; OTHER
AGREEMENTS. Any event of default shall occur under, or any
Borrower shall default in the performance or observance of any
term, covenant, condition or agreement contained in, any of
the Security Documents or the Other Agreements and such
default shall continue beyond any applicable grace period.
10.1.6. OTHER DEFAULTS. There shall occur any default
or event of default on the part of any Borrower under any
agreement, document or instrument to which such Borrower is a
party or by which such Borrower or any of its Property is
bound, creating or relating to any Indebtedness (other than
the Obligations) if the payment or maturity of such
Indebtedness is accelerated in consequence of such event of
default or demand for payment of such Indebtedness is made.
10.1.7. UNINSURED LOSSES. Any material loss, theft,
damage or destruction of any of the Collateral not fully
covered (subject to such deductibles as Lender shall have
permitted) by insurance.
10.1.8. ADVERSE CHANGES. There shall occur any
material adverse change in the financial condition or business
prospects of any Borrower or any Guarantor.
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10.1.9. INSOLVENCY AND RELATED PROCEEDINGS. Any
Borrower or any Guarantor shall cease to be Solvent or shall
suffer the appointment of a receiver, trustee, custodian or
similar fiduciary, or shall make an assignment for the benefit
of creditors, or any petition for an order for relief shall be
filed by or against any Borrower or any Guarantor under the
federal bankruptcy laws (if against a Borrower or any
Guarantor, the continuation of such proceeding for more than
30 days), or any Borrower or any Guarantor shall make any
offer of settlement, extension or composition to their
respective unsecured creditors generally.
10.1.10. BUSINESS DISRUPTION; CONDEMNATION. There shall
occur a disruption or cessation of a substantial part of the
business of any Borrower, any Subsidiary of any Borrower or
any Guarantor for a period which significantly affects such
Borrower's or such Guarantor's capacity to continue its
business, on a profitable basis; or any Borrower, any
Subsidiary of any Borrower or any Guarantor shall suffer the
loss or revocation of any license or permit now held or
hereafter acquired by any Borrower or such Guarantor which is
necessary to the continued or lawful operation of its
business; or Any Borrower or any Guarantor shall be enjoined,
restrained or in any way prevented by court, governmental or
administrative order from conducting all or any material part
of its business affairs; or any material part of the
Collateral shall be taken through condemnation or the value of
such Property shall be impaired through condemnation.
10.1.11. CHANGE OF OWNERSHIP. Vista 2000 shall cease to
own and control, beneficially and or record, 51% or more of
the issued and outstanding capital stock of ACPI; ACPI shall
cease to own and control, beneficially and of record, 100% of
the issued and outstanding capital stock of each of PMI, Boss
and ACPI Real Estate, Inc. or Boss shall cease to own and
control, beneficially and of record, 100% of the issued and
outstanding stock of each other Guarantor.
10.1.12. ERISA. A Reportable Event shall occur which
Lender, in its sole discretion, shall determine in good faith
constitutes grounds for the termination by the Pension Benefit
Guaranty Corporation of any Plan or for the appointment by the
appropriate United States district court of a trustee for any
Plan, or if any Plan shall be terminated or any such trustee
shall be requested or appointed, or if any Borrower, any
Subsidiary of any Borrower or any Guarantor is in "default"
(as defined in Section 4219(c)(5) of ERISA) with respect to
payments to a Multiemployer Plan resulting from such
Borrower's, such Subsidiary's or such Guarantor's complete or
partial withdrawal from such Plan.
10.1.13. CHALLENGE TO AGREEMENT. Any Borrower, any
Subsidiary of any Borrower or any Guarantor, or any Affiliate
of any of them, shall challenge or contest in any action, suit
or proceeding the validity or enforceability of this Agreement
or any of the other Loan Documents, the legality or
enforceability of any of the Obligations or the perfection or
priority of any Lien granted to Lender.
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10.1.14. REPUDIATION OF OR DEFAULT UNDER GUARANTY
AGREEMENT. Any Guarantor shall revoke or attempt to revoke the
Guaranty Agreement signed by such Guarantor, or shall
repudiate such Guarantor's liability thereunder or shall be in
default under the terms thereof.
10.1.15. CRIMINAL FORFEITURE. Any Borrower, any
Subsidiary of any Borrower or any Guarantor shall be
criminally indicted or convicted under any law that could lead
to a forfeiture of any Property of any Borrower, any
Subsidiary of any Borrower or any Guarantor.
10.1.16. JUDGMENTS. Any money judgment, writ of
attachment or similar process is filed against any Borrower,
any Subsidiary of any Borrower or any Guarantor, or any of
their respective Property which evidences or relates to
collection efforts for any liability for the payment of money
in an amount exceeding $75,000.
10.2. ACCELERATION OF THE OBLIGATIONS.
Without in any way limiting the right of Lender to demand
payment of any portion of the Obligations payable on demand in accordance
with Section 3.2 hereof, upon or at any time after the occurrence of an Event
of Default, all or any portion of the Obligations shall, at the option of
Lender and without presentment, demand protest or further notice by Lender,
become at once due and payable and Borrowers shall forthwith pay to Lender
the full amount of such Obligations, PROVIDED, that upon the occurrence of an
Event of Default specified in subsection 10.1.9 hereof, all of the
Obligations shall become automatically due and payable without declaration,
notice or demand by Lender.
10.3. OTHER REMEDIES.
Upon and after the occurrence of an Event of Default, Lender
shall have and may exercise from time to time the following rights and
remedies:
10.3.1. All of the rights and remedies of a secured
party under the Code or under other applicable law, and all
other legal and equitable rights to which Lender may be
entitled, all of which rights and remedies shall be cumulative
and shall be in addition to any other rights or remedies
contained in this Agreement or any of the other Loan
Documents, and none of which shall be exclusive.
10.3.2. The right to take immediate possession of the
Collateral, and to (i) require Borrowers to assemble the
Collateral, at Borrowers' expense, and make it available to
Lender at a place designated by Lender which is reasonably
convenient to both parties, and (ii) enter any premises where
any of the Collateral shall be located and to keep and store
the Collateral on said premises until sold (and if said
premises be the Property of any Borrower, such Borrower agrees
not to charge Lender for storage thereof).
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10.3.3. The right to sell or otherwise dispose of all
or any Collateral in its then condition, or after any further
manufacturing or processing thereof, 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 Lender, in its sole
discretion, may deem advisable. Each Borrower agrees that 10
days written notice to Borrowers of any public or private sale
or other disposition of Collateral shall be reasonable notice
thereof, and such sale shall be at such locations as Lender
may designate in said notice. Lender shall have the right to
conduct such sales on any Borrower's premises, without charge
therefor, and such sales may be adjourned from time to time in
accordance with applicable law. Lender shall have the right
to sell, lease or otherwise dispose of the Collateral, or any
part thereof, for cash, credit or any combination thereof, and
Lender may purchase all or any part of the Collateral at
public 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. The proceeds realized
from the sale of any Collateral may be applied, after allowing
2 Business Days for collection, first to the costs, expenses
and attorneys' fees incurred by Lender in collecting the
Obligations, in enforcing the rights of Lender under the Loan
Documents and in collecting, retaking, completing, protecting,
removing, storing, advertising for sale, selling and
delivering any Collateral, second to the interest due upon any
of the Obligations; and third, to the principal of the
Obligations. If any deficiency shall arise, each Borrower and
each Guarantor shall remain jointly and severally liable to
Lender therefor.
10.3.4. Lender is hereby granted a license or other
right to use, without charge, each Borrower's labels, patents,
copyrights, rights of use of any name, trade secrets,
tradenames, trademarks and advertising matter, or any Property
of a similar nature, as it pertains to the Collateral, in
advertising for sale and selling any Collateral and each
Borrower's rights under all licenses and all franchise
agreements shall inure to Lender's benefit.
10.3.5. Lender may, at its option, require Borrowers to
deposit with Lender funds equal to the LC Amount and, if
Borrowers fail to promptly make such deposit, Lender may
advance such amount as a Revolving Credit Loan (whether or not
an Overadvance is created thereby). Each such Revolving
Credit Loan shall be secured by all of the Collateral and
shall bear interest and be payable at the same rate and in the
same manner as Base Rate Portions. Any such deposit or
advance shall be held by Lender as a reserve to fund future
payments on such LC Guaranties and future drawings against
such Letters of Credit. At such time as all LC Guaranties
have been paid or terminated and all Letters of Credit have
been drawn upon or expired, any amounts remaining in such
reserve shall be applied against any outstanding Obligations,
or, if all Obligations have been indefeasibly paid in full,
returned to Borrowers.
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10.4. REMEDIES CUMULATIVE; NO WAIVER.
All covenants, conditions, provisions, warranties, guaranties,
indemnities, and other undertakings of Borrowers contained in this Agreement
and the other Loan Documents, or in any document referred to herein or
contained in any agreement supplementary hereto or in any schedule or in any
Guaranty Agreement given to Lender or contained in any other agreement
between Lender and any Borrower, heretofore, concurrently, or hereafter
entered into, shall be deemed cumulative to and not in derogation or
substitution of any of the terms, covenants, conditions, or agreements of
Borrowers herein contained. The failure or delay of Lender to require strict
performance by any Borrower of any provision of this Agreement or to exercise
or enforce any rights, Liens, powers, or remedies hereunder or under any of
the aforesaid agreements or other documents or security or Collateral shall
not operate as a waiver of such performance, Liens, rights, powers and
remedies, but all such requirements, Liens, rights, powers, and remedies
shall continue in full force and effect until all Loans and all other
Obligations owing or to become owing from Borrowers to Lender shall have been
fully satisfied. None of the undertakings, agreements, warranties, covenants
and representations of Borrowers contained in this Agreement or any of the
other Loan Documents and no Event of Default by any Borrower under this
Agreement or any other Loan Documents shall be deemed to have been suspended
or waived by Lender, unless such suspension or waiver is by an instrument in
writing specifying such suspension or waiver and is signed by a duly
authorized representative of Lender and directed to Borrowers.
SECTION 11. MISCELLANEOUS
11.1. POWER OF ATTORNEY.
Each Borrower hereby irrevocably designates, makes,
constitutes and appoints Lender (and all Persons designated by Lender) as
such Borrower's true and lawful attorney (and agent-in-fact) and Lender, or
Lender's agent, may, without notice to any Borrower and in any Borrower's or
Lender's name, but at the cost and expense of Borrowers:
11.1.1. At such time or times upon or after the
occurrence of a Default or an Event of Default as Lender or
said agent, in its sole discretion, may determine, endorse any
Borrower's name on any checks, notes, acceptances, drafts,
money orders or any other evidence of payment or proceeds of
the Collateral which come into the possession of Lender or
under Lender's control.
11.1.2. At such time or times upon or after the
occurrence of an Event of Default as Lender or its agent in
its sole discretion may determine: (i) demand payment of the
Accounts from the Account Debtors, enforce payment of the
Accounts by legal proceedings or otherwise, and generally
exercise all of any Borrower's rights and remedies with
respect to the collection of the Accounts; (ii) settle,
adjust, compromise, discharge or release any of the Accounts
or other Collateral or any legal proceedings brought to
collect any of the Accounts or other Collateral; (iii) sell or
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assign any of the Accounts and other Collateral upon such
terms, for such amounts and at such time or times as Lender
deems advisable; (iv) take control, in any manner, of any item
of payment or proceeds relating to any Collateral; (v)
prepare, file and sign any Borrower's name to a proof of claim
in bankruptcy or similar document against any Account Debtor
or to any notice of lien, assignment or satisfaction of lien
or similar document in connection with any of the Collateral;
(vi) receive, open and dispose of all mail addressed to any
Borrower and notify postal authorities to change the address
for delivery thereof to such address as Lender may designate;
(vii) endorse the name of any Borrower upon any of the items
of payment or proceeds relating to any Collateral and deposit
the same to the account of Lender on account of the
Obligations; (viii) endorse the name of any Borrower upon any
chattel paper, document, instrument, invoice, freight bill,
bill of lading or similar document or agreement relating to
the Accounts, Inventory and any other Collateral; (ix) use any
Borrower's stationery and sign the name of any Borrower to
verifications of the Accounts and notices thereof to Account
Debtors; (x) use the information recorded on or contained in
any data processing equipment and computer hardware and
software relating to the Accounts, Inventory, Equipment and
any other Collateral; (xi) make and adjust claims under
policies of insurance; and (xii) do all other acts and things
necessary, in Lender's determination, to fulfill Borrowers'
obligations under this Agreement.
The power of attorney granted hereby shall
constitute a power coupled with an interest and shall be
irrevocable.
11.2. INDEMNITY.
Borrowers hereby jointly and severally agree to indemnify
Lender and hold Lender harmless from and against any liability, loss, damage,
suit, action or proceeding ever suffered or incurred by Lender (including
reasonable attorneys fees and legal expenses) as the result of any Borrower's
failure to observe, perform or discharge any Borrower's duties hereunder. In
addition, Borrowers, jointly and severally, shall defend Lender against and
save it harmless from all claims of any Person with respect to the
Collateral. Without limiting the generality of the foregoing, these
indemnities shall extend to any claims asserted against Lender by any Person
under any Environmental Laws or similar laws by reason of any Borrower's or
any other Person's failure to comply with laws applicable to solid or
hazardous waste materials or other toxic substances. Notwithstanding any
contrary provision in this Agreement, the Obligations of Borrowers under this
Section 11.2 shall survive the payment in full of the other Obligations and
the termination of this Agreement.
11.3. MODIFICATION OF AGREEMENT; SALE OF INTEREST.
This Agreement may not be modified, altered or amended, except
by an agreement in writing signed by Borrowers and Lender. No Borrower may
sell, assign or transfer any interest in this Agreement, any of the other
Loan Documents, or any of the Obligations, or any portion
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thereof, including, without limitation, any Borrower's rights, title,
interests, remedies, powers, and duties hereunder or thereunder. Borrowers
hereby consent to Lender's participation, sale, assignment, transfer or other
disposition, at any time or times hereafter, of this Agreement and any of the
other Loan Documents, or of any portion hereof or thereof, including, without
limitation, Lender's rights, title, interests, remedies, powers, and duties
hereunder or thereunder. In the case of an assignment, the assignee shall
have, to the extent of such assignment, the same rights, benefits and
obligations as it would if it were "Lender" hereunder and Lender shall be
relieved of all obligations hereunder upon any such assignments. Lender will
notify ACPI as to participants prior to the sale of an interest herein. Each
Borrower agrees that it will use its best efforts to assist and cooperate
with Lender in any manner reasonably requested by Lender to effect the sale
of participations in or assignments of any of the Loan Documents or any
portion thereof or interest therein, including, without limitation, assisting
in the preparation of appropriate disclosure documents. Each Borrower
further agrees that Lender may disclose credit information regarding
Borrowers and their respective Subsidiaries to any potential participant or
assignee.
11.4. SEVERABILITY.
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
11.5. SUCCESSORS AND ASSIGNS.
This Agreement, the Other Agreements and the Security
Documents shall be binding upon and inure to the benefit of the successors
and assigns of Borrowers and Lender permitted under Section 11.3 hereof.
11.6. CUMULATIVE EFFECT; CONFLICT OF TERMS.
The provisions of the Other Agreements and the Security
Documents are hereby made cumulative with the provisions of this Agreement.
Except as otherwise provided in Section 3.2 hereof and except as otherwise
provided in any of the other Loan Documents by specific reference to the
applicable provision of this Agreement, if any provision contained in this
Agreement is in direct conflict with, or inconsistent with, any provision in
any of the other Loan Documents, the provision contained in this Agreement
shall govern and control.
11.7. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when
so executed and delivered shall be deemed to be an original and all of which
counterparts taken together shall constitute but one and the same instrument.
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11.8. NOTICE.
Except as otherwise provided herein, all notices, requests and
demands to or upon a party hereto, to be effective, shall be in writing and
shall be sent by certified or registered mail, return receipt requested, by
personal delivery against receipt, by overnight courier or by facsimile and,
unless otherwise expressly provided herein, shall be deemed to have been
validly served, given or delivered immediately when delivered against
receipt, one Business Day after deposit in the mail, postage prepaid, or with
an overnight courier or, in the case of facsimile notice, when sent,
addressed as follows:
If to Lender: Fleet Capital Corporation
20800 Swenson Drive
Suite 350
Waukesha, Wisconsin 53186
Attention: Loan Administration Manager
Facsimile No.: (414) 798-4882
With a copy to: Goldberg, Kohn, Bell, Black,
Rosenbloom & Moritz, Ltd.
55 East Monroe Street
Suite 3700
Chicago, Illinois 60603
Attention: Karen Ruth Bieber
Facsimile No.: (312) 332-2196
If to Borrowers or
any Borrower: c/o American Consumer Products, Inc.
31100 Solon Road
Solon, Ohio 44139
Attention: Larry Kerr, VP Finance
Facsimile No.: (216) 248-8051
With a copy to: Robert Altenbach, Esq.
Vista 2000, Inc.
136 Johnson Ferry Road
Marietta, Georgia 30068
Attention: Robert Altenbach, Esq.
Facsimile No.: (770) 977-7673
or to such other address as each party may designate for itself by notice
given in accordance with this Section 11.8; PROVIDED, HOWEVER, that any
notice, request or demand to or upon Lender pursuant to subsection 3.1.1 or
4.2.2 hereof shall not be effective until received by Lender.
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11.9. LENDER'S CONSENT.
Whenever Lender's consent is required to be obtained under
this Agreement, any of the Other Agreements or any of the Security Documents
as a condition to any action, inaction, condition or event, Lender shall be
authorized to give or withhold such consent in its sole and absolute
discretion and to condition its consent upon the giving of additional
collateral security for the Obligations, the payment of money or any other
matter.
11.10. CREDIT INQUIRIES.
Each Borrower hereby authorizes and permits Lender to respond
to usual and customary credit inquiries from third parties concerning any
Borrower or any of their respective Subsidiaries.
11.11. TIME OF ESSENCE.
Time is of the essence of this Agreement, the Other Agreements
and the Security Documents.
11.12. ENTIRE AGREEMENT.
This Agreement and the other Loan Documents, together with all
other instruments, agreements and certificates executed by the parties in
connection therewith or with reference thereto, embody the entire
understanding and agreement between the parties hereto and thereto with
respect to the subject matter hereof and thereof and supersede all prior
agreements, understandings and inducements, whether express or implied, oral
or written.
11.13. INTERPRETATION.
No provision of this Agreement or any of the other Loan
Documents shall be construed against or interpreted to the disadvantage of
any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured or dictated
such provision.
11.14. PUBLICITY.
Each Borrower hereby consents to the use of its name and
tradestyle by Lender in any announcements or advertisements by Lender of the
completion of the transactions contemplated hereby and the role played by
Lender in providing financing to Borrowers hereunder in such media and in
such manner as Lender shall, in its sole discretion, determine.
11.15. GOVERNING LAW; CONSENT TO FORUM.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS; PROVIDED, HOWEVER, THAT IF
ANY OF THE COLLATERAL SHALL BE LOCATED IN ANY
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JURISDICTION OTHER THAN ILLINOIS, THE LAWS OF SUCH JURISDICTION SHALL GOVERN
THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE OF LENDER'S LIEN UPON SUCH
COLLATERAL AND THE ENFORCEMENT OF LENDER'S OTHER REMEDIES IN RESPECT OF SUCH
COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH JURISDICTION ARE DIFFERENT
FROM OR INCONSISTENT WITH THE LAWS OF ILLINOIS. AS PART OF THE
CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR FUTURE
DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF ANY BORROWER OR LENDER, EACH
BORROWER HEREBY CONSENTS AND AGREES THAT THE SUPERIOR COURT OF COOK COUNTY,
ILLINOIS, OR, AT LENDER'S OPTION, THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION, SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY
BORROWER OR BORROWERS AND LENDER PERTAINING TO THIS AGREEMENT OR TO ANY
MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT. EACH BORROWER EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND SUCH BORROWER HEREBY WAIVES ANY OBJECTION
WHICH SUCH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF
SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. SUCH
BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED TO SUCH BORROWER AT THE ADDRESS SET FORTH IN THIS AGREEMENT
AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF ANY
BORROWER'S ACTUAL RECEIPT THEREOF OR 3 DAYS AFTER DEPOSIT IN THE U.S. MAILS,
PROPER POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE
TO AFFECT THE RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY LENDER OF ANY JUDGMENT OR
ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT
TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
11.16. WAIVERS BY BORROWERS.
EACH BORROWER WAIVES (i) THE RIGHT TO TRIAL BY JURY (WHICH
LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF
ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS, THE
OBLIGATIONS OR THE COLLATERAL; (ii)
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PRESENTMENT, DEMAND AND PROTEST AND NOTICE OF PRESENTMENT, PROTEST, DEFAULT,
NON PAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL
OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS,
INSTRUMENTS, CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY LENDER ON WHICH
ANY BORROWER MAY IN ANY WAY BE LIABLE AND HEREBY RATIFIES AND CONFIRMS
WHATEVER LENDER MAY DO IN THIS REGARD; (iii) NOTICE PRIOR TO LENDER'S TAKING
POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT
BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF LENDER'S
REMEDIES; (iv) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS;
AND (v) NOTICE OF ACCEPTANCE HEREOF. EACH BORROWER ACKNOWLEDGES THAT THE
FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO LENDER'S ENTERING INTO THIS
AGREEMENT AND THAT LENDER IS RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE
DEALINGS WITH BORROWERS. EACH BORROWER WARRANTS AND REPRESENTS THAT IT HAS
REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND
VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
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IN WITNESS WHEREOF, this Agreement has been duly executed in
Chicago, Illinois, on the day and year specified at the beginning of this
Agreement.
AMERICAN CONSUMER PRODUCTS, INC., a
Delaware corporation
By\S\ Robert E. Altenbach _________________
Title Secretary ___________________________
PRODUCTS MERCHANDISERS, INC., a
Minnesota corporation
By\S\ Robert E. Altenbach _________________
Title Secretary ___________________________
BOSS MANUFACTURING COMPANY, a
Delaware corporation
By\S\ Robert E. Altenbach _________________
Title Secretary ___________________________
Accepted in Chicago, Illinois:
FLEET CAPITAL CORPORATION
By\S\ Karl L. Slosberg ___________________
Title Vice President _____________________
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APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement dated as of May ___,
1997, by and among Fleet Capital Corporation and American Consumer Products,
Inc., Product Merchandisers, Inc. and Boss Manufacturing Company, the
following terms shall have the following meanings (terms defined in the
singular to have the same meaning when used in the plural and vice versa):
ACCOUNT DEBTOR - any Person who is or may become obligated under
or on account of an Account.
ACCOUNTS - all accounts, contract rights, chattel paper,
instruments and documents, whether now owned or hereafter created or
acquired by any Borrower or in which any Borrower now has or hereafter
acquires any interest.
AFFILIATE - a Person (other than a Subsidiary): (i) which directly
or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, a Person; (ii) which
beneficially owns or holds 5% or more of any class of the Voting Stock
of a Person; or (iii) 5% or more of the Voting Stock (or in the case of
a Person which is not a corporation, 5% or more of the equity interest)
of which is beneficially owned or held by a Person or a Subsidiary of a
Person.
AGREEMENT - the Loan and Security Agreement referred to in the
first sentence of this Appendix A, all Exhibits thereto and this
Appendix A.
APPLICABLE MARGIN - the percentages set forth below with respect to
the Base Rate Portion, and the LIBOR Portion, which percentages shall be
set on the Closing Date and adjusted from time to time thereafter
(effective prospectively as of the first day of the fiscal quarter of
Borrowers next following the fiscal quarter during which either the
mid-fiscal year (i.e. 6 month) unaudited financial statements of
Borrowers or the annual audited financial statements of Borrowers are
delivered to Lender pursuant to Section 8.1.3 and continuing for the
next 2 fiscal quarters by reference to the Interest Coverage Ratio for
the previous 2 fiscal quarters in accordance with the following:
INTEREST
COVERAGE RATIO APPLICABLE MARGIN
-------------- -----------------
LIBOR PORTION BASE RATE PORTION
------------- -----------------
less than 3.00:1 2.50% .50%
3.01:1 to 3.50:1 2.25% .25%
3.50:1 or greater 2.0% 0%
<PAGE>
Interest Coverage Ratio as used in this definition means the ratio
of ACPI's Consolidated earnings (or loss) before interest expenses and
taxes to consolidated interest expense.
AVAILABILITY - the amount of money which Borrowers are entitled to
borrow from time to time as Revolving Credit Loans, such amount being
the difference derived when the sum of the principal amount of Revolving
Credit Loans then outstanding (including any amounts which Lender may
have paid for the account of Borrower pursuant to any of the Loan
Documents and which have not been reimbursed by Borrower), the LC Amount
and the amount of any reserves is subtracted from the Borrowing Base. If
the amount outstanding is equal to or greater than the Borrowing Base,
Availability is 0.
BANK - Fleet National Bank.
BASE RATE - the rate of interest announced or quoted by Bank from
time to time as its prime rate for commercial loans, whether or not such
rate is the lowest rate charged by Bank to its most preferred borrowers;
and, if such prime rate for commercial loans is discontinued by Bank as
a standard, a comparable reference rate designated by Bank as a
substitute therefor shall be the Base Rate.
BASE RATE PORTION - that portion of the Revolving Credit Loans that
is not subject to a LIBOR Option.
BORROWING BASE - as at any date of determination thereof, an amount
equal to the lesser of:
(i) $28,000,000; or
(ii) an amount equal to:
(1) 85% of the net amount of Eligible Accounts
outstanding at such date;
PLUS
(2) the lesser of i) $15,000,000 or ii) 60%, of the value
of Eligible Inventory not in transit consisting of raw materials
and the brass component of work in process at such date PLUS 65%
of the value of Eligible Inventory not in transit consisting of
finished goods at such date, plus the lesser of 60% of the value
of Eligible Inventory in transit and $1,320,000 in each case
calculated on the basis of the lower of cost or market with the
cost calculated on a first-in, first-out basis.
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For purposes hereof, the net amount of Eligible Accounts at any
time shall be the face amount of such Eligible Accounts less any
and all returns, rebates, discounts (which may, at Lender's option,
be calculated on shortest terms), credits, allowances or excise
taxes of any nature at any time issued, owing, claimed by Account
Debtors, granted, outstanding or payable in connection with such
Accounts at such time.
BUSINESS DAY - (i) when used with respect to the LIBOR
Option, shall mean a day on which dealings may be effected in
deposits of United States Dollars in the London interbank foreign
currency deposits market and on which Lender is conducting and
other banks may conduct business in London, England, in the State
of Wisconsin or the State of Illinois and (ii) when used with
respect to any other provision of the Agreement, any day excluding
Saturday, Sunday and any day which is a legal holiday under the
laws of the State of Wisconsin or the State of Illinois or is a day
on which banking institutions located in either of such states are
closed.
CAPITAL EXPENDITURES - expenditures made or liabilities
incurred for the acquisition of any fixed assets or improvements,
replacements, substitutions or additions thereto which have a
useful life of more than one year, including the total principal
portion of Capitalized Lease Obligations.
CAPITALIZED LEASE OBLIGATION - any Indebtedness represented
by obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
CLOSING DATE - the date on which all of the conditions
precedent in Section 9 of the Agreement are satisfied and the
initial Loan is made or the initial Letter of Credit or LC Guaranty
is issued under the Agreement.
CODE - the Uniform Commercial Code as adopted and in force in
the State of Illinois, as from time to time in effect.
COLLATERAL - all of the Property and interests in Property
described in Section 5 of the Agreement, and all other Property and
interests in Property that now or hereafter secure the payment and
performance of any of the Obligations.
CONSOLIDATED - the consolidation in accordance with GAAP of
the accounts or other items as to which such term applies.
CURRENT ASSETS - at any date means the amount at which all of
the current assets of a Person would be properly classified as
current assets shown on a balance sheet at such date in accordance
with GAAP.
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DEFAULT - an event or condition the occurrence of which
would, with the lapse of time or the giving of notice, or both,
become an Event of Default.
DEFAULT RATE - as defined in subsection 2.1.2 of the
Agreement.
DISTRIBUTION - in respect of any corporation means and
includes:
ELIGIBLE ACCOUNT - an Account arising in the ordinary course
of Borrower's business from the sale of goods or rendition of
services which Lender, in its sole credit judgment, deems to be an
Eligible Account. Without limiting the generality of the foregoing,
no Account shall be an Eligible Account if:
(i) it arises out of a sale made by any Borrower to
a Subsidiary or an Affiliate of any Borrower or to a Person
controlled by an Affiliate of any Borrower; or
(ii) it is a dated account and is due more than 180
days after the original invoice date or remains unpaid for
more than 30 days after the original due date shown on the
invoice; or
(iii) it is an open account and remains unpaid more
than 90 days after the original invoice date or more than 60
days from the due date; or
(iv) 50% or more of the Accounts from the Account
Debtor are not deemed Eligible Accounts hereunder; or
(v) the total unpaid Accounts of the Account Debtor
exceed 5% of the net amount of all Eligible Accounts, to the
extent of such excess, unless the Account Debtor's credit is
rated 5A2 or better by Dunn & Bradstreet, in which case no
limit shall apply under this clause (v); or
(vi) any covenant, representation or warranty
contained in the Agreement with respect to such Account has
been breached; or
(vii) the Account Debtor is also a Borrower's creditor
or supplier, or the Account Debtor has disputed liability
with respect to such Account, or the Account Debtor has made
any claim with respect to any other Account due
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from such Account Debtor to a Borrower, or the Account
otherwise is or may become subject to any right of setoff by
the Account Debtor; or
(viii) the Account Debtor has commenced a voluntary
case under the federal bankruptcy laws, as now constituted or
hereinafter amended, or made an assignment for the benefit of
creditors, or a decree or order for relief has been entered
by a court having jurisdiction in the premises in respect of
the Account Debtor in an involuntary case under the federal
bankruptcy laws, as now constituted or hereinafter amended,
or any other petition or other application for relief under
the federal bankruptcy laws has been filed against the
Account Debtor, or if the Account Debtor has failed,
suspended business, ceased to be Solvent, or consented to or
suffered a receiver, trustee, liquidator or custodian to be
appointed for it or for all or a significant portion of its
assets or affairs; or
(ix) it arises from a sale to an Account Debtor
outside the United States or Canada (0ther than the Province
of Quebec), unless the sale is on letter of cretid, guaranty
or acceptance terms, in each case acceptable to Lender in its
sole discretion; or
(x) it arises from a sale to the Account Debtor on
bill-and-hold, guaranteed sale, sale-or-return,
sale-on-approval, consignment or any other repurchase or
return basis; or
(xi) the Account Debtor is the United States of
America or any department, agency or instrumentality thereof,
unless the relevant Borrower assigns its right to payment of
such Account to Lender, in a manner satisfactory to Lender,
so as to comply with the Assignment of Claims Act of 1940 (31
U.S.C. Section 203 ET SEQ., as amended); or
(xii) it is not at all times subject to Lender's duly
perfected, first priority security interest and to no other
Lien that is not a Permitted Lien; or
(xiii) the goods giving rise to such Account have not
been delivered to and accepted by the Account Debtor or the
services giving rise to such Account have not been performed
by the relevant Borrower and accepted by the Account Debtor
or the Account otherwise does not represent a final sale; or
(xiv) the Account is evidenced by chattel paper or an
instrument of any kind, or has been reduced to judgment; or
(xv) any Borrower has made any agreement with the
Account Debtor for any deduction therefrom, except for
discounts or allowances which are made in the ordinary course
of business for prompt payment and which discounts or
allowances are reflected in the calculation of the face value
of each invoice related to such Account; or
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(xvi) any Borrower has made an agreement with the
Account Debtor to extend the time of payment thereof.
ELIGIBLE INVENTORY - such Inventory of a Borrower (other than
packaging materials, supplies, displays, key machines and parts)
which Lender, in its sole credit judgment, deems to be Eligible
Inventory. Without limiting the generality of the foregoing, no
Inventory shall be Eligible Inventory if:
(i) it is not raw materials or finished goods, or
brass in work-in-process; or
(ii) it is not in good, new and saleable condition; or
(iii) it is slow-moving, obsolete or unmerchantable; or
(iv) it does not meed all standards imposed by any
governmental agency or authority; or
(v) it does not conform in all respects to the
warranties and representations set forth in the Agreement; or
(vi) it is not at all times subject to Lender's duly
perfected, first priority security interest and no other Lien
except a Permitted Lien; or
(vii) it is not situated at a location in compliance
with the Agreement or is in transit.
ENVIRONMENTAL LAWS - all federal, state and local laws,
rules, regulations, ordinances, programs, permits, guidances,
orders and consent decrees relating to health, safety and
environmental matters.
EQUIPMENT - all machinery, apparatus, equipment, fittings,
furniture, fixtures, motor vehicles and other tangible personal
Property (other than Inventory) of every kind and description used
in any Borrower's operations or owned by any Borrower or in which
any Borrower has an interest, whether now owned or hereafter
acquired by a Borrower and wherever located, and all parts,
accessories and special tools and all increases and accessions
thereto and substitutions and replacements therefor.
ERISA - the Employee Retirement Income Security Act of 1974,
as amended, and all rules and regulations from time to time
promulgated thereunder.
EVENT OF DEFAULT - as defined in Section 10.1 of the
Agreement.
GAAP - generally accepted accounting principles in the United
States of America in effect from time to time.
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GENERAL INTANGIBLES - all personal property of any Borrower
(including things in action) other than goods, Accounts, chattel
paper, documents, instruments and money, whether now owned or
hereafter created or acquired by a Borrower.
GUARANTORS - ACPI Real Estate, Inc., Boss Balloon Company,
Boss Manufacturing Real Estate, Inc., Boss Canada, Boss de Mexico
and any other Person who may hereafter guarantee payment or
performance of the whole or any part of the Obligations.
GUARANTY AGREEMENTS - the Continuing Guaranty Agreements
which are to be executed by each Guarantor in form and substance
satisfactory to Lender.
INDEBTEDNESS - as applied to a Person means, without
duplication
(i) all items which in accordance with GAAP would be
included in determining total liabilities as shown on the
liability side of a balance sheet of such Person as at the
date as of which Indebtedness is to be determined, including,
without limitation, Capitalized Lease Obligations,
(ii) all obligations of other Persons which such
Person has guaranteed,
(iii) all reimbursement obligations in connection with
letters of credit or letter of credit guaranties issued for
the account of such Person, and
(iv) in the case of Borrowers (without duplication),
the Obligations.
INVENTORY - all of any Borrower's inventory, whether now
owned or hereafter acquired including, but not limited to, all
goods intended for sale or lease by any Borrower, or for display or
demonstration; all work in process; all raw materials and other
materials and supplies of every nature and description used or
which might be used in connection with the manufacture, printing,
packing, shipping, advertising, selling, leasing or furnishing of
such goods or otherwise used or consumed in any Borrower's
business; and all documents evidencing and General Intangibles
relating to any of the foregoing, whether now owned or hereafter
acquired by a Borrower.
INVESTMENT PROPERTY - all of any Borrower's investment
property, whether now owned or hereafter acquired, including, but
not limited to, all securities (certificated or uncertificated),
securities accounts, securities entitlements, commodity accounts
and commodity contracts.
LC AMOUNT - at any time, the aggregate undrawn face amount of
all Letters of Credit and LC Guaranties then outstanding.
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LC GUARANTY - any guaranty pursuant to which Lender or any
Affiliate of Lender shall guaranty the payment or performance by
any Borrower of its reimbursement obligation under any letter of
credit.
LEGAL REQUIREMENT - any requirement imposed upon Lender by
any law of the United States of America or the United Kingdom or by
any regulation, order, interpretation, ruling or official directive
(whether or not having the force of law) of the Federal Reserve
Board, the Bank of England or any other board, central bank or
governmental or administrative agency, institution or authority of
the United States of America, the United Kingdom or any political
subdivision of either thereof.
LETTER OF CREDIT - any letter of credit issued by Lender or
any of Lender's Affiliates for the account of any Borrower.
LIBOR INTEREST PAYMENT DATE - with respect to any LIBOR
Portion, the last day of each calendar month during the applicable
LIBOR Period.
LIBOR OPTION - the option granted pursuant to subsection 2.3
of the Agreement to have the interest on all or any portion of the
principal amount of the Revolving Credit Loans based on a LIBOR
Rate.
LIBOR PERIOD - any period of one month, two months or three
months commencing on a Business Day, selected as provided in
subsection 2.3(i); provided, however that no LIBOR Period shall
extend beyond the last day of the Term unless Borrowers and Lender
have agreed to an extension of the Term beyond the expiration of
the LIBOR Period in question. If any LIBOR Period so selected shall
end on a date that is not a Business Day, such LIBOR Period shall
instead end on the next preceding or succeeding Business Day as
determined by Lender in accordance with the then current banking
practice in London; provided, that Borrowers shall not be required
to pay double interest, even though the preceding LIBOR Period ends
and the new LIBOR Period begins on the same day. Each determination
by Lender of the LIBOR Period shall, in the absence of manifest
error, be conclusive.
LIBOR PORTION - that portion of the Revolving Credit Loans
specified in a LIBOR Request (including any portion of Revolving
Credit Loans which is being borrowed by Borrower concurrently with
such LIBOR Request) which is not less than $1,000,000 and is an
integral multiple of $100,000, which does not exceed the
outstanding balance of Revolving Credit Loans not already subject
to a LIBOR Option and, which, as of the date of the LIBOR Request
specifying such LIBOR Portion, has met the conditions for basing
interest on the LIBOR Rate in Section 2.3 of the Agreement and the
LIBOR Period of which was commenced and not terminated.
LIBOR RATE - with respect to any LIBOR Portion for the
related LIBOR Period, an interest rate per annum (rounded upwards,
if necessary, to the next higher
A-8
<PAGE>
1/8 of 1% equal to the product of (i) the Base LIBOR Rate (as
hereinafter defined) MULTIPLIED by (ii) Statutory Reserves. For
purposes of this definition, the term "Base LIBOR Rate" shall mean
the rate (rounded to the nearest 1/8 of 1% or, if there is no
nearest 1/8 of 1%, the next higher 1/8 of 1%) at which deposits of
U.S. dollars approximately equal in principal amount to the LIBOR
Portion specified in the applicable LIBOR Request are offered to
Lender by prime banks in the London interbank foreign currency
deposits market at approximately 11:00 a.m., London time, 2
Business Days prior to the commencement of such LIBOR Period, for
delivery on the first day of such LIBOR Period. Each determination
by Lender of any LIBOR Rate shall, in the absence of manifest
error, be conclusive.
LIBOR REQUEST - a notice in writing (or by telephone
confirmed by telex, telecopy or other facsimile transmission on the
same day as the telephone request) from a Borrower to Lender
requesting that interest on a Revolving Credit Loan be based on the
LIBOR Rate, specifying: (i) the first day of the LIBOR Period; (ii)
the length of the LIBOR Period consistent with the definition of
that term; and (iii) the dollar amount of the LIBOR Portion
consistent with the definition of such term.
LIEN - any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property,
whether such interest is based on common law, statute or contract.
The term "Lien" shall also include rights of seller under
conditional sales contracts or title retention agreements,
reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting Property. For the purpose of
the Agreement, Borrower shall be deemed to be the owner of any
Property which it has acquired or holds subject to a conditional
sale agreement or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person for
security purposes.
LOAN ACCOUNT - the loan account established on the books of
Lender pursuant to Section 3.6 of the Agreement.
LOAN DOCUMENTS - the Agreement, the Other Agreements and the
Security Documents.
LOANS - all loans and advances of any kind made by Lender
pursuant to the Agreement.
MONEY BORROWED - means (i) Indebtedness arising from the
lending of money by any Person to any Borrower; (ii) Indebtedness,
whether or not in any such case arising from the lending by any
Person of money to any Borrower, (1) which is represented by notes
payable or drafts accepted that evidence extensions of credit, (2)
which constitutes obligations evidenced by bonds, debentures, notes
or similar instruments, or (3) upon which interest charges are
customarily paid (other than
A-9
<PAGE>
accounts payable) or that was issued or assumed as full or partial
payment for Property; (iii) Indebtedness that constitutes a
Capitalized Lease Obligation; (iv) reimbursement obligations with
respect to letters of credit or guaranties of letters of credit and
(v) Indebtedness of any Borrower under any guaranty of obligations
that would constitute Indebtedness for Money Borrowed under clauses
(i) through (iii) hereof, if owed directly by any Borrower.
MORTGAGES - the mortgage to be executed by any Borrower on or
about the Closing Date in favor of Lender and by which such
Borrower shall grant and convey to Lender, as security for the
Obligations, a Lien upon the real Property of such Borrower located
at 221 West First Street, Kewanee, Illinois, 1134 West South
Street, Kewanee, Illinois and 300 Industrial Park, Greenville,
Alabama 36037.
MULTIEMPLOYER PLAN - has the meaning set forth in Section
4001(a)(3) of ERISA.
OBLIGATIONS - all Loans and all other advances, debts,
liabilities, obligations, covenants and duties, together with all
interest, fees and other charges thereon, owing, arising, due or
payable from any Borrower to Lender of any kind or nature, present
or future, whether or not evidenced by any note, guaranty or other
instrument, whether arising under the Agreement or any of the other
Loan Documents or otherwise whether direct or indirect (including
those acquired by assignment), absolute or contingent, primary or
secondary, due or to become due, now existing or hereafter arising
and however acquired.
OTHER AGREEMENTS - any and all agreements, instruments and
documents (other than the Agreement and the Security Documents),
heretofore, now or hereafter executed by any Borrower, any
Subsidiary of any Borrower or any other third party and delivered
to Lender in respect of the transactions contemplated by the
Agreement.
OVERADVANCE - the amount, if any, by which the outstanding
principal amount of Revolving Credit Loans PLUS the LC Amount plus
reserves, if any, exceeds the Borrowing Base.
PARTICIPATING LENDER - each Person who shall be granted the
right by Lender to participate in any of the Loans described in the
Agreement and who shall have entered into a participation agreement
in form and substance satisfactory to Lender.
PERMITTED LIENS - any Lien of a kind specified in subsection
8.2.5 of the Agreement.
PERMITTED PURCHASE MONEY INDEBTEDNESS - Purchase Money
Indebtedness of any Borrower incurred after the date hereof which
is secured by a Purchase Money Lien and which, when aggregated with
the principal amount of all other such Indebtedness and Capitalized
Lease Obligations of all Borrowers at the time
A-10
<PAGE>
outstanding, does not exceed $250,000. For the purposes of this
definition, the principal amount of any Purchase Money Indebtedness
consisting of capitalized leases shall be computed as a Capitalized
Lease Obligation.
PERSON - an individual, partnership, corporation, limited
liability company, joint stock company, land trust, business trust,
or unincorporated organization, or a government or agency or
political subdivision thereof.
PLAN - an employee benefit plan now or hereafter maintained
for employees of any Borrower that is covered by Title IV of ERISA.
PROJECTIONS - ACPI's forecasted Consolidated and
consolidating (i) balance sheets, (ii) profit and loss statements,
(iii) cash flow statements, and (iv) capitalization statements, all
prepared on a consistent basis with ACPI's historical financial
statements, together with appropriate supporting details and a
statement of underlying assumptions.
PROPERTY - any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
PURCHASE MONEY INDEBTEDNESS - means and includes (i)
Indebtedness (other than the Obligations) for the payment of all or
any part of the purchase price of any fixed assets, (ii) any
Indebtedness (other than the Obligations) incurred at the time of
or within 10 days prior to or after the acquisition of any fixed
assets for the purpose of financing all or any part of the purchase
price thereof, and (iii) any renewals, extensions or refinancings
thereof, but not any increases in the principal amounts thereof
outstanding at the time.
PURCHASE MONEY LIEN - a Lien upon fixed assets which secures
Purchase Money Indebtedness, but only if such Lien shall at all
times be confined solely to the fixed assets the purchase price of
which was financed through the incurrence of the Purchase Money
Indebtedness secured by such Lien.
RENTALS - as defined in subsection 8.2.13 of the Agreement.
REPORTABLE EVENT - any of the events set forth in Section
4043(b) of ERISA.
RESTRICTED INVESTMENT - any investment made in cash or by
delivery of Property to any Person, whether by acquisition of
stock, Indebtedness or other obligation or Security, or by loan,
advance or capital contribution, or otherwise, or in any Property
except the following:
(i) investments, to the extent existing on the
Closing Date, in one or more Subsidiaries of any Borrower by
such Borrower;
A-11
<PAGE>
(ii) Property to be used in the ordinary course of
business;
(iii) Current Assets arising from the sale of goods
and services in the ordinary course of business of Borrower
or any and its Subsidiary of any Borrower;
(iv) investments in direct obligations of the United
States of America, or any agency thereof or obligations
guaranteed by the United States of America, provided that
such obligations mature within one year from the date of
acquisition thereof;
(v) investments in certificates of deposit maturing
within one year from the date of acquisition issued by a bank
or trust company organized under the laws of the United
States or any state thereof having capital surplus and
undivided profits aggregating at least $100,000,000; and
(vi) investments in commercial paper given the
highest rating by a national credit rating agency and
maturing not more than 270 days from the date of creation
thereof.
REVOLVING CREDIT LOAN - a Loan made by Lender as provided in
Section 1.1 of the Agreement.
SCHEDULE OF ACCOUNTS - as defined in subsection 6.2.1 of the
Agreement.
SECURITY - shall have the same meaning as in Section 2(1) of
the Securities Act of 1933, as amended.
SECURITY DOCUMENTS - the Guaranty Agreements, the Mortgages
and all other instruments and agreements now or at any time
hereafter securing the whole or any part of the Obligations.
SOLVENT - as to any Person, such Person (i) owns Property
whose fair saleable value is greater than the amount required to
pay all of such Person's Indebtedness (including contingent debts),
(ii) is able to pay all of its Indebtedness as such Indebtedness
matures and (iii) has capital sufficient to carry on its business
and transactions and all business and transactions in which it is
about to engage.
STATUTORY RESERVES - a fraction (expressed as a decimal) the
numerator of which is the number one, and the denominator of which
is the number one MINUS the aggregate of the maximum reserve
percentages (including, without limitation, any marginal, special,
emergency or supplemental reserves), expressed as a decimal,
established by the Board of Governors of the Federal Reserve System
and any other banking authority to which Bank or any Lender is
subject for Eurocurrency Liabilities (as defined in Regulation D of
the Board of Governors of the Federal Reserve System
A-12
<PAGE>
or any successor thereto). Such reserve percentages shall include,
without limitation, those imposed under such Regulation D. LIBOR
Portions shall be deemed to constitute Eurocurrency Liabilities and
as such shall be deemed to be subject to such reserve requirements
without benefit of or credit for proration, exceptions or offsets
which may be available from time to time to Bank or any Lender
under such Regulation D. Statutory Reserves shall be adjusted
automatically on and as of the effective date of any change in any
reserve percentage.
SUBORDINATED DEBT - Indebtedness of any Borrower that is
subordinated to the Obligations in a manner satisfactory to Lender.
SUBSIDIARY - any corporation of which a Person owns, directly
or indirectly through one or more intermediaries, more than 50% of
the Voting Stock at the time of determination.
TAX - in relation to any LIBOR Portion and the applicable
LIBOR Rate, any tax, levy, impost, duty, deduction, withholding or
charges of whatever nature required by any Legal Requirement (i) to
be paid by Lender and/or (ii) to be withheld or deducted from any
payment otherwise required hereby to be made by any Borrower to
Lender; provided, that the term "Tax" shall not include any taxes
imposed upon the net income of Lender by the United States of
America, United Kingdom or any political subdivision thereof.
TERM - as defined in Section 4.1 of the Agreement.
TOTAL CREDIT FACILITY - $30,000,000.
VOTING STOCK - Securities of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors
(or Persons performing similar functions).
OTHER TERMS. All other terms contained in the Agreement shall
have, when the context so indicates, the meanings provided for by the Code
to the extent the same are used or defined therein.
CERTAIN MATTERS OF CONSTRUCTION. The terms "herein", "hereof"
and "hereunder" and other words of similar import refer to the Agreement as
a whole and not to any particular section, paragraph or subdivision. Any
pronoun used shall be deemed to cover all genders. The section titles,
table of contents and list of exhibits appear as a matter of convenience
only and shall not affect the interpretation of the Agreement. All
references to statutes and related regulations shall include any amendments
of same and any successor statutes and regulations. All references to any
of the Loan Documents shall include any and all modifications thereto and
any and all extensions or renewals thereof.
A-13
<PAGE>
LIST OF EXHIBITS
Exhibit B Borrower's and each Subsidiary's Business Locations
Exhibit C Jurisdictions in which Borrower and each Subsidiary is
Authorized to do Business
Exhibit D Capital Structure of Borrower
Exhibit E Corporate Names
Exhibit F Tax Identification Numbers of Subsidiaries
Exhibit G Patents, Trademarks, Copyrights and Licenses
Exhibit H Contracts Restricting Borrower's Right to Incur Debts
Exhibit I Litigation
Exhibit J Capitalized Leases
Exhibit K Operating Leases
Exhibit L Pension Plans
Exhibit M Labor Contracts
Exhibit N Compliance Certificate
Exhibit O Permitted Indebtedness
Exhibit P Permitted Liens
Exhibit Q Schedule of Documentary Letter of Credit Charges
Exhibit R Financial Covenants
<PAGE>
EXHIBIT B
BUSINESS LOCATIONS
1. Borrower currently has the following business locations, and no
others:
Chief Executive Office:
Other Locations:
2. Borrower maintains its books and records relating to Accounts and
General Intangibles at:
3. Borrower has had no office, place of business or agent for process
located in any county other than as set forth above, except:
4. Each Subsidiary currently has the following business locations, and
no others:
Chief Executive Office:
Other Locations:
5. Each Subsidiary maintains its books and records relating to Accounts
and General Intangibles at:
6. Each Subsidiary has had no office, place of business or agent for
process located in any county other than as set forth above, except:
7. The following bailees, warehouseman, similar parties and consignees hold
inventory of Borrower or one of its Subsidiaries:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Owner of
Name and Address of Party Nature of Relationship Amount of Inventory Inventory
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
B-1
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Owner of
Name and Address of Party Nature of Relationship Amount of Inventory Inventory
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
B-2
<PAGE>
EXHIBIT C
JURISDICTIONS IN WHICH BORROWER
AND ITS SUBSIDIARIES
ARE AUTHORIZED TO DO BUSINESS
Name of Entity Jurisdictions
C-1
<PAGE>
EXHIBIT D
CAPITAL STRUCTURE
1. The classes and number of authorized shares of Borrower and each Subsidiary
and the record owner of such shares are as follows:
Borrower:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Number of Shares Number of Shares
Class of Stock Issued and Outstanding Record Owners Authorized but Unissued
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
Subsidiaries:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Number of Shares Number of Shares
Class of Stock Issued and Outstanding Record Owners Authorized but Unissued
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
2. The number, nature and holder of all other outstanding Securities of
Borrower and each Subsidiary are as follows:
3. The correct name and jurisdiction of incorporation of each Subsidiary
of Borrower and the percentage of its issued and outstanding shares
owned by Borrower are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Percentage of Shares
Name Jurisdiction of Incorporation Owned by Borrower
- --------------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
D-1
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Percentage of Shares
Name Jurisdiction of Incorporation Owned by Borrower
- --------------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------------
</TABLE>
4. The name of each of Borrower's corporate or joint venture Affiliates
and the nature of the affiliation are as follows:
D-2
<PAGE>
EXHIBIT E
CORPORATE NAMES
1. Borrower's correct corporate name, as registered with the Secretary of
State of the State of ______________, is:
2. In the conduct of its business, Borrower has used the following names:
3. Each Subsidiary's correct corporate name, as registered with the
Secretary of State of the State of its incorporation, is:
4. In the conduct of its business, each Subsidiary has used the
following names:
E-1
<PAGE>
EXHIBIT F
TAX IDENTIFICATION NUMBERS OF SUBSIDIARIES
Subsidiary Number
F-1
<PAGE>
EXHIBIT G
PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES
1. Borrower's and its Subsidiaries' patents:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Status in Federal Registration Registration
Patent Owner Patent Office Number Date
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
2. Borrower's and its Subsidiaries' trademarks:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Status in Federal Registration Registration
Trademark Owner Patent Office Number Date
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
3. Borrower's and its Subsidiaries' copyrights:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Status in Federal Registration Registration
Copyrights Owner Patent Office Number Date
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
4. Borrower's and its Subsidiaries' licenses (other than routine business
licenses, authorizing them to transact business in local jurisdictions):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Name of License Nature of License Licensor Term of License
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
G-1
<PAGE>
EXHIBIT H
CONTRACTS RESTRICTING BORROWER'S RIGHT TO INCUR DEBTS
Contracts that restrict the right of Borrower to incur Indebtedness:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Title of Contract Identity of Parties Nature of Restriction Term of Contract
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
H-1
<PAGE>
EXHIBIT I
LITIGATION
1. Actions, suits, proceedings and investigations pending against
Borrower or any Subsidiary:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Title of Action Nature of Action Complaining Parties Jurisdiction or Tribunal
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
2. The only threatened actions, suits, proceedings or investigations of
which Borrower or any Subsidiary is aware are as follows:
I-1
<PAGE>
EXHIBIT J
CAPITALIZED LEASES
Borrower and its Subsidiaries have the following capitalized leases:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Lessee Lessor Term of Lease Property Covered
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
J-1
<PAGE>
EXHIBIT K
OPERATING LEASES
Borrower and its Subsidiaries have the following operating leases:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Lessee Lessor Term of Lease Property Covered
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
K-1
<PAGE>
EXHIBIT L
PENSION PLANS
Borrower and its Subsidiaries have the following Plans:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Party Type of Plan
- --------------------------------------------------------------------------------
<S> <C>
- --------------------------------------------------------------------------------
Borrower
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[Subsidiaries]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
L-1
<PAGE>
EXHIBIT M
COLLECTIVE BARGAINING AGREEMENTS; LABOR CONTROVERSIES
1. Borrower and its Subsidiaries are parties to the following collective
bargaining agreements:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Type of Agreement Parties Term of Agreement
- --------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
2. Material grievances, disputes of controversies with employees are as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Parties Involved Nature of Grievance, Dispute or Controversy
- --------------------------------------------------------------------------------
<S> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
3. Threatened strikes, work stoppages and asserted pending demands for
collective bargaining are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Parties Involved Nature of Matter
- --------------------------------------------------------------------------------
<S> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
M-1
<PAGE>
EXHIBIT N
COMPLIANCE CERTIFICATE
[Letterhead of Borrower]
__________________, 19__
_______________________________
_______________________________
_______________________________
_______________________________
The undersigned, the chief financial officer of _________
_______________________, a _______________ [corporation] [limited
partnership] ("Borrower"), gives this certificate to Fleet Capital
Corporation ("Lender") in accordance with the requirements of subsection
8.1.2 of that certain Loan and Security Agreement dated ______________,
19__, between Borrower and Lender ("Loan Agreement"). Capitalized terms
used in this Certificate, unless otherwise defined herein, shall have the
meanings ascribed to them in the Loan Agreement.
1. Based upon my review of the balance sheets and statements of
income of Borrower for the [fiscal year] [quarterly period] ending
__________________, 19__, copies of which are attached hereto, I hereby
certify that:
(i) [[Consolidated] Working Capital is $_________;]
(ii) [[Consolidated] Adjusted Tangible Net Worth is $____________;]
(iii) [The Current Ratio is ____ to 1;]
(iv) [Adjusted Net Earnings From Operations for the period was
$_______________;]
(v) [The Debt to Net Worth Ratio is ____ to 1;]
(vi) [Cash Flow is $_____________;]
(vii) [The Interest Coverage Ratio is ____ to ____;]
(viii) [Cash Flow to Fixed Charges Ratio is ____ to ____;]
(ix) [Excess Availability is $___________];
N-1
<PAGE>
(x) [Consolidated Stockholder's Equity is $_______; and]
(xi) Capital Expenditures during the period and for the fiscal
year to date total $__________ and $__________, respectively.
2. No Default exists on the date hereof, other than: __________________
________________________________________________ [if none, so state]; and
3. No Event of Default exists on the date hereof, other than __________
____________________________________________________ [if none, so state].
Very truly yours,
_______________________________
Chief Financial Officer
[Counsel should select the financial information
to be included in paragraph 1 of the Compliance
Certificate to include only the financial
covenants inserted in Section 8.3 of the Loan and
Security Agreement]
N-2
<PAGE>
EXHIBIT O
PERMITTED LIENS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Secured Party Nature of Lien
- --------------------------------------------------------------------------------
<S> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
O-1
<PAGE>
INTRODUCTION
Additional Provisions permitting tax distributions to shareholders of S
Corporations, members of limited liability companies and partners of
partnerships.
When tax distributions are to be permitted,
(i) the words "Except as permitted on Exhibit P," should be inserted
at the beginning of subsection 8.2.7;
(ii) Exhibit P should be referred to on the list of exhibits and
added to the Loan and Security Agreement in the form provided; and
(iii) each shareholder, member or partner, as the case may be, should
be required to execute a Contribution and Repayment Undertaking in the form
provided.
P-1
<PAGE>
EXHIBIT P
PERMITTED DISTRIBUTIONS
l. With respect to each Estimated Tax Period (as defined below),
Borrower shall be entitled to make distributions to its
[stockholder/stockholders/members/partners] relating to the federal and state
income taxes arising out of Borrower's operations in an amount which when
added to all prior distributions as reduced by any repayments made by
Borrower's [stockholder/stockholders/members/partners] pursuant to the
Contribution and Repayment Undertaking[s] (as defined below) made hereunder,
does not exceed the aggregate Stand-Alone Taxes for all Estimated Tax Periods
as described in paragraph 3 below, provided that:
(i) Borrower has been and will be, during the entire taxable
period to which the distribution relates, [an S Corporation/a limited
liability company, and not an association taxable as a corporation/a
partnership, and not an association taxable as a corporation], for federal
income tax purposes;
(ii) No Default or Event of Default is in existence at the time of
the distribution;
(iii) The distribution will not cause a Default or an Event of
Default;
(iv) The recipient[s] of a distribution [each] enter[s] into [an]
undertaking[s] in form and substance acceptable to Bank (the "Contribution
and Repayment Undertaking[s]") obligating [the recipient/each] [(or in the
case of a qualified S corporation trust, its individual beneficiary)] to
return to Borrower an amount equal to the excess, if any, of distributions
made hereunder to [the/such] recipient (or [his/her/its] predecessor-in-
interest) over [the aggregate/such recipient's share of] Stand-Alone Taxes,
calculated as of the end of each calendar year;
(v) The Bank receives from Borrower at least five (5) days advance
written notice of a proposed distribution with sufficient documentation of
Borrower's calculations to enable Bank to verify to its reasonable
satisfaction that the proposed distribution does not exceed the amount
specified in paragraph 1 and that the proposed distribution meets all
requirements contained in this Exhibit; and
(vi) The distribution is made not earlier than fifteen (15) days
before the first to occur of the estimated tax payment date relating to
income earned during such Estimated Tax Period and the due date for the tax
return relating to the Estimated Tax Period.
2. If, at the end of any tax year of the
[stockholder/stockholders/members/partners] of Borrower, the sum of all
distributions (as reduced by any repayments made by Borrower's
[stockholder/stockholders/members/partners] pursuant to the Contribution and
Repayment Undertaking[s] in respect of any such distributions) made pursuant
to paragraph l, exceeds the
P-2
<PAGE>
aggregate Stand-Alone Taxes for all Estimated Tax Periods ending on or before
the end of such tax year, Borrower's [stockholder/stockholders/members/partners]
will be required to return such excess to Borrower but only in accordance with
the terms of [his/her/its/their]Contribution and Repayment Undertaking[s].
Distributions which comply with the requirements of A. above may be made in one
or more installments, including without limitation installments at or after the
end of a tax period or tax year.
3. Definitions:
(i) "Estimated Tax Period" means one of the following periods:
January l to March 31, April 1 to May 31, June 1 to August 31 and September
1 to December 31, provided that the first Estimated Tax Period begins on
__________ and ends on __________;
(ii) "Stand-Alone Tax" means an amount computed as of the end of any
Estimated Tax Period for the total U.S. federal and state income taxes for
which Borrower's [stockholder/stockholders/members/partners] would be
liable (or if losses are being incurred, refunds to which [he/she/it/they]
would be entitled) if [his/her/its/their] income was only from the items of
income, gain, loss, deduction or credit attributable to Borrower for the
period beginning on the first day of such Estimated Tax Period and ending
on the last day of such Estimated Tax Period, determined on an annualized
basis. The tax rates applied to such income are to be based on the
[Individual/Corporate] Rates described below; and
(iii) "Individual Rates" means the individual U.S. federal and state
income tax rates imposed by Section 1 of the Internal Revenue Code of 1986,
as amended and as it may be amended ("Code"), or if 4(v) applies, Section
55, and by the equivalent provisions of state income tax law (based on the
assumption that all tax payments are subject to state tax in __________ and
no other state).
(iv) "Corporate Rates" means the corporate U.S. federal and state
income tax rates imposed by Section 11 of the Code or, if 4(v) below
applies, Section 55, and by the equivalent provisions of state income tax
law (based on the assumption that all the payments are subject to state
tax in __________ and no other state.)
4. Tax computations shall be made according to the following requirements:
(i) The taxpayer will be deemed to have no item of income, gain, loss,
deduction or credit from any source other than [his/her/its/their] holdings
in Borrower;
(ii) The full benefit of the lower rate brackets, as well as the cost
of any surtaxes, if applicable, will be taken into consideration;
(iii) Penalties and interest will be excluded;
P-3
<PAGE>
(iv) The benefits of the deductibility of state income taxes and
allowable credits in effect for each of the respective tax periods will be
taken into consideration;
(v) Borrower's alternative maximum taxable income and alternative
minimum tax rates will be used if and only if the taxpayer actually pays
the alternative minimum tax;
(vi) The benefits of net operating loss carryforwards will be taken
into consideration, including without limitation, carryforwards from
periods which end on or before the first day of the first Estimated Tax
Period;
(vii) The benefits of net operating losses arising during an Estimated
Tax Period shall be determined as if Borrower's first taxable period began
on __________, without regard to whether the taxpayer carries the actual
loss to a period prior to the first Estimated Tax Period and without regard
to any elections relating to carrybacks and carryforwards; and
(viii) The benefits of all other carryforwards and carrybacks shall be'
determined in a manner consistent with (vi) and (vii) above.
[Optional language to be used when borrower will be permitted to make
distributions with respect periods prior to the commencement of the term of the
Loan Agreement:]
5. Borrower shall be entitled to make distributions to its
[stockholder/ stockholders/partners] relating to federal and state income
taxes relating to Borrower's operations in an aggregate amount not to exceed
$__________ prior to the First Estimated Tax Period, provided that (i)
distributions shall not exceed the Stand-Alone Tax computed for the following
periods: __________, __________, __________, minus any distributions
theretofore made with respect to such periods; and (ii) the requirements of
paragraphs 1(i), (ii), (iii) and (v) are met with respect to any such
distributions.
P-4
<PAGE>
EXHIBIT Q
FEE SCHEDULE FOR DOCUMENTARY LETTER OF CREDIT
<TABLE>
<CAPTION>
Documentary Letters of Credit
<S> <C>
Issuance $150.00
Amendment $85.00 a maximum of six amendments per
l/c will be allowed. An amendment
to increase and/or extend l/c will
be treated as an issuance.
Negotiation/Payment 1/4% flat (min $85.00)
Acceptance/Deferred Payment 1 3/4$ p.a. (min. $125.00) (If applicable)
Cancellation of Unused Credits $100.00
Transfer/Assignment of LC 1/4% flat (min. $250.00)
Shipping Gty/Airway Release $100.00
Wire Transfer $35.00 per transfer
Mail/Courier Handling $15.00 per mailing/courier
Plus any and all out-of-pocket expenses such as communication costs, etc.
</TABLE>
Q-1
<PAGE>
EXHIBIT R
FINANCIAL COVENANTS
1. CURRENT RATIO. Borrowers shall maintain a consolidated ratio of
current assets to current liabilities (including the principal of Revolving
Credit Loans outstanding), calculated in accordance with GAAP as in effect on
the Closing Date of not less than 1.15 to 1.0 at all times.
2. NET WORTH. Borrowers shall not permit "Adjusted Tangible Net Worth"
(as defined below) as measured on the last day of each fiscal month occurring
within the periods set forth below to be less than the amount set forth
opposite that period:
<TABLE>
<CAPTION>
Adjusted Tangible
Period Net Worth
<S> <C>
May 31, 1997 $18,500,000
June 30 through August 31, 1997 $18,800,000
September 30, 1997 $19,100,000
October 31, 1997 $19,350,000
November 31 and December 31, 1997 $19,600,000
January 31 and February 28, 1998 $19,600,000
March 31 through May 31, 1998 $19,800,000
June 30 through August 31, 1998 $20,000,000
September 30 through November 30, 1998 $20,200,000
December 31, 1998 through February 28, 1999 $20,400,000
March 31 through May 31, 1999 $20,600,000
June 30 through August 31, 1999 $20,800,000
September 30 through November 30, 1999 $21,000,000
December 31, 1999 through February 29, 2000 $21,200,000
March 31 through May 31, 2000 $21,400,000
</TABLE>
The term "Adjusted Tangible Net Worth" as used herein means, at any
particular date, all amounts which, in accordance with GAAP as in effect on
the Closing Date, would be included under the caption "total shareholders'
equity" (or an equivalent caption) on a consolidated balance sheet of ACPI
and its Subsidiaries, plus the amount of any Distributions paid by ACPI to
its shareholders, minus the amount of any prepaid expenses and intangibles
included in the assets as shown on such balance sheet.
3. INTEREST COVERAGE RATIO . Borrowers shall maintain a consolidated
ratio of "EBIT" (defined below) to "Interest Expense" (defined below) for any
period set forth below of not less than the ratio set forth opposite such
period:
R-1
<PAGE>
<TABLE>
<CAPTION>
Period Ratio
<S> <C>
Quarter ending March 31 of each year 2.00
Quarter ending June 30 of each year 1.50
Quarter ending September 30 of each year 1.50
Quarter ending December 31 of each year 2.50
Fiscal year ending on the Saturday of
the 52nd week of each calendar year 2.00
</TABLE>
As used herein, the term "EBIT" means, with respect to any period,
ACPI's consolidated net earnings (or loss) from operations before interest
expense and taxes for such period, as determined in accordance with GAAP as
in effect on the Closing Date; and the term "Interest Expense" with respect
to any period means the interest expense incurred for such period (whether or
not actually paid) as determined in accordance with GAAP as in effect on the
Closing Date.
4. PROFITABILITY. Borrowers shall not permit Excess Cash Flow (as
defined in subsection 8.2.7 of the Agreement) to be less than $500,000 for
any fiscal year of Borrowers.
5. DEFINED TERMS. Capitalized terms used in this Exhibit R and not
otherwise defined herein have the same meanings herein as in the Loan and
Security Agreement of which this Exhibit R is a part.
R-2
<PAGE>
EXHIBIT 11.1
------------
Share Computation
Six Months ended June 28, 1997
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
WEIGHTED
PREFERRED TOTAL LESS AVERAGE
STOCK TOTAL TREASURY TREASURY SHARES
------------ ------------ ---------- ------------ -------------
Shares outstanding at December 28, 1997..... 4,220 18,074,120 (341,341) 17,732,779 17,732,779
Treasury shares purchased................... 0
Exercise of warrants........................ 0
Exercise of stock options................... 2,662,500 2,662,500 453,503
Preferred stock sold........................ 0
Common stock sold........................... 0
Common stock issued to settle Class Action.. 14,226,111 14,226,111 4,142,769
------------ ------------ ---------- ------------ -------------
Shares outstanding at June 28, 1997......... 4,220 34,962,731 (341,341) 34,621,390 22,329,050
------------ ------------ ---------- ------------ -------------
------------ ------------ ---------- ------------ -------------
Net (Loss).................................. $ (1,902,000)
Weighted average shares..................... 22,329,050
(Loss) per share............................ ($ 0.09)
-------------
-------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 28,
1997 UNAUDITED FINANCIAL STATEMENTS OF VISTA 2000, INC., AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS IN FORM 10-Q FOR THE QUARTER
AND SIX MONTHS ENDED JUNE 28, 1997.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JUN-28-1997 JUN-28-1997
<PERIOD-START> MAR-30-1997 DEC-29-1996
<PERIOD-END> JUN-28-1997 JUN-28-1997
<CASH> 578,000 578,000
<SECURITIES> 0 0
<RECEIVABLES> 14,096,000 14,096,000
<ALLOWANCES> 1,498,000 1,498,000
<INVENTORY> 25,332,000 25,332,000
<CURRENT-ASSETS> 39,926,000 39,926,000
<PP&E> 17,032,000 17,032,000
<DEPRECIATION> 2,689,000 2,689,000
<TOTAL-ASSETS> 55,753,000 55,753,000
<CURRENT-LIABILITIES> 8,122,000 8,122,000
<BONDS> 0 0
0 0
3,985,000 3,985,000
<COMMON> 350,000 350,000
<OTHER-SE> 18,884,000 18,884,000
<TOTAL-LIABILITY-AND-EQUITY> 55,753,000 55,753,000
<SALES> 23,712,000 47,291,000
<TOTAL-REVENUES> 23,712,000 47,291,000
<CGS> 16,900,000 34,121,000
<TOTAL-COSTS> 6,523,000 12,559,000
<OTHER-EXPENSES> 1,359,000 1,375,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 569,000 1,111,000
<INCOME-PRETAX> (1,692,000) (1,875,000)
<INCOME-TAX> 3,000 27,000
<INCOME-CONTINUING> (1,695,000) (1,902,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,695,000) (1,902,000)
<EPS-PRIMARY> (0.06) (0.09)
<EPS-DILUTED> 0 0<F1>
<FN>
<F1>Not displayed since calculation would be anti-dilutive.
</FN>
</TABLE>
