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Long-Term Debt, Notes Payable and Capital Lease Obligations

12 Months Ended

Dec. 31, 2011

9.	Long-Term Debt, Notes Payable, and Capital Lease Obligations

Long-term debt notes and capital lease obligations, including debt related to discontinued operations, totaling $542,000, consist of the following:

	As of December 31,
	2011		2010
	(In thousands)
Promissory note payable to Merlin Partners, LP, interest rate of 12.0% due by August 15, 2011 as extended, collateralized by second liens on two car washes and a security interest in the tradename “Mace.”	$	-	$	1,288

Promissory note payable to Merlin Partners, LP, interest rate of 6% due by March 30, 2013, callable through March 27, 2012, collateralized by a security interest in the tradename “Mace”, a pledge of the stock of Mace CSSS, Inc. and a security interest in the assets of Mace CSSS, Inc. Note amount excludes unamortized discounts for warrants and a conversion option totaling $549,000 at December 31, 2011.		851		-

Notes payable to Chase, interest rate of prime plus 0.25% (3.5% at December 31, 2011) payable in monthly principal payments totaling $2,172 plus interest maturing March 2013, collateralized by equipment of Mace CSSS, Inc.		33		59

Note payable to Western National Bank, interest rate of 3.75%, (the interest rate was established every 5 years, based on prime rate plus 0.5%), due in monthly installments of $16,921 including interest, through October 2014, collateralized by real property and equipment in Lubbock, Texas.		-		697

Note payable to Chase, interest rate of prime plus 0.95% (4.2% at December 31, 2011) due in monthly fixed principal payments of $17,627 plus interest collateralized by real property and equipment of Mace Security Products, Inc. and certain of the Colonial Car Wash locations.		428		1,134

Note Payable to Chase, interest rate of prime plus 0.25% (3.5% at December 31, 2011) due in monthly installments of $3,182, including interest (adjusted annually) through February 2013, collateralized by real property and equipment of certain of the Colonial Car Wash locations.		114		148

Various capital lease obligations related to equipment at Mace CSSS, Inc. at various interest rates from 9.0% to 13.27%, due in monthly installments totaling $5,679 maturing from August 2012 through February 2014, collateralized by equipment.		96		128

Note payable to Lyon Financial Services, interest rate of 7.99% due in monthly installments of $510 including interest, through September 2013, collateralized by a vehicle.		10		15
		1,532		3,469

Less: current portion, including debt related to discontinued operations		1,499		3,356
	$	33	$	113

At December 31, 2011, the Company had borrowings, including capital lease obligations, and borrowings related to discontinued operations, of approximately $1.53 million, including $542,000 of long-term debt included in liabilities related to assets held for sale, which is reported as current as it is due or expected to be repaid in less than twelve months from December 31, 2011 and net of unamortized discounts for warrants and a conversion option classified in stockholders’ equity totaling $549,000 at December 31, 2011.

We had two letters of credit outstanding at December 31, 2011 totaling $149,392 as collateral relating to workers’ compensation insurance policies. We maintain a $250,000 revolving credit facility to provide financing for additional electronic surveillance product inventory purchases and for commercial letters of credit. There was one commercial letter of credit outstanding for inventory purchases under the revolving credit facility at December 31, 2011 for $34,698.

Our most significant borrowings at December 31, 2011 included secured notes payable to JPMorgan Chase Bank, N.A. (“Chase”) and a $1.4 million debenture note with Merlin. The $1.4 million debenture note with Merlin, which is classified as a current liability and recorded at $851,000 at December 31, 2011, excluding the unamortized value of a conversion option and the value of warrants related to the debenture totaling $549,000, which are both classified in stockholders’ equity. The debenture note is secured by a security interest in the “Mace” name, a pledge of the stock of Mace CSSS, Inc. and a security interest in the assets of Mace CSSS, Inc. See Note 19. Related Party Transactions for additional information and terms regarding the debt instruments with Merlin. The secured notes payable to Chase, in the amount of $575,000, the majority of which is classified as current liabilities in current portion of long-term debt or liabilities related to assets held for sale at December 31, 2011, are secured by an Arlington, Texas car wash site which was sold on February 29, 2012. The Chase agreements contain affirmative and negative covenants, including covenants relating to the maintenance of certain levels of tangible net worth, limitations on capital spending and certain financial reporting requirements. As of December 31, 2011, a car wash was encumbered by mortgages. Additionally, upon sale of the Company’s Farmers Branch, Texas warehouse which was used as collateral against the Company’s Chase revolving credit facility, $439,000 of the Company’s cash was deposited into a restricted cash account at Chase as security against the Company’s revolving credit facility and certain letters of credit provided by Chase as collateral relating to workers’ compensation insurance policies.

The Chase term loan agreement also limits capital expenditures annually to $1.0 million, requires the Company to provide Chase with an Annual Report on Form 10-K and audited financial statements within 120 days of the Company’s fiscal year end and a Quarterly Report on Form 10-Q within 60 days after the end of each fiscal quarter. The Chase agreement also contained a covenant that required the maintenance of a minimum total unencumbered cash and marketable securities balance of $1.5 million, which was eliminated through a credit agreement amendment effective December 31, 2011. We were in compliance with the ongoing financial covenants as of December 31, 2011.

If we default on any of the Chase covenants and are not able to obtain amendments or waivers, Chase debt totaling $575,000 at December 31, 2011 could become due and payable on demand and Chase could foreclose on the assets pledged in support of the relevant indebtedness.

Maturities of long-term debt and capital lease obligations including debt related to discontinued operations, are as follows: 2012 - $1,420 and 2013 - $112.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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