10-K 1 d95116e10-k.txt FORM 10-K FOR FISCAL YEAR END DECEMBER 31, 2001 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________to_________ Commission File Number: 0-26580 AMERICAN COIN MERCHANDISING, INC. (Exact name of registrant as specified in its charter) DELAWARE 84-1093721 (State or other jurisdiction of (IRS Employer Identification Number) incorporation or organization) 5660 CENTRAL AVENUE, BOULDER, COLORADO 80301 (Address of principal executive offices) (Zip Code) (303) 444-2559 (Registrant's telephone number) Securities registered under Section 12(b) of the Exchange Act: ASCENDING RATE CUMULATIVE TRUST PREFERRED SECURITIES, LIQUIDATION AMOUNT $10 PER SECURITY Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ( ) As of March 22, 2002, the registrant had 1,000 shares of its $0.01 par value common stock outstanding. None of the registrant's common stock is held by non-affiliates of the registrant. AMERICAN COIN MERCHANDISING, INC. ANNUAL REPORT ON FORM 10-K DECEMBER 31, 2001 TABLE OF CONTENTS

Page PART I Item 1 Business..................................................................................... 3 Item 2 Properties................................................................................... 10 Item 3 Legal Proceedings............................................................................ 10 Item 4 Submission of Matters to a Vote of Security Holders.......................................... 10 PART II Item 5 Market for Registrant's Common Equity and Related Stockholder Matters....................... 11 Item 6 Selected Financial Data..................................................................... 1211 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations....... 1312 Item 8 Financial Statements and Supplementary Data................................................. 1920 Item 9 Changes in and disagreements with Accountants on Accounting and Financial Disclosure........ 20 PART III Item 10 Directors and Executive Officers of the Registrant.......................................... 1921 Item 11 Executive Compensation...................................................................... 1922 Item 12 Security Ownership of Certain Beneficial Owners and Management.............................. 1925 Item 13 Certain Relationships and Related Transactions.............................................. 1925 PART IV Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................ 2027-28

2 Statements in this report that are not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements with respect to the financial condition and results of operations of the Company involve risks and uncertainties related to Shoppe performance and dependence on suppliers and foreign sourcing. These factors are more fully discussed later in this report under the heading "Risk Factors." In addition, the Company's results could also be affected by a number of other risks and uncertainties which are more fully discussed under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this report. PART I ITEM 1. BUSINESS American Coin Merchandising, Inc. (the "Company") is the leading owner, operator and franchisor in the United States of coin-operated amusement vending equipment with more than 26,000 pieces of equipment on location. Over 14,000 of these machines are skill-crane machines ("Shoppes") that dispense plush toys, watches, jewelry, novelties and other items. For up to 50(cent) a play, customers maneuver the skill-crane into position and attempt to retrieve the desired item in the machine's enclosed display area before play is ended. The Company's Shoppes are placed in supermarkets, mass merchandisers, restaurants, bowling centers, truckstops, bingo halls, bars, warehouse clubs and similar locations ("Retail Accounts") to take advantage of the regular customer traffic at these locations. The Company utilizes appealing displays of quality merchandise, new product introductions, including Company-designed products, licensed products and seasonal items, and other merchandising techniques to attract new and repeat customers. The Company also places supplementary amusement vending equipment generally at existing Shoppe locations, including kiddie rides, bulk vending (novelty items, candy, gum, etc.) and video games. On February 11, 2002 the Company was acquired by ACMI Holdings, Inc., a newly formed corporation organized by two investment firms, Wellspring Capital Management LLC and Knightsbridge Holdings, LLC. The transaction was approved at a stockholders meeting held on February 5, 2002. Stockholders received $8.50 in cash for each outstanding share of the Company's common stock. The Company's common stock is no longer publicly traded. The Company's mandatorily redeemable preferred securities remain outstanding and continue to trade on the American Stock Exchange. BUSINESS STRATEGY The Company's business strategy is to differentiate itself from traditional amusement vending operators and to strengthen its position as a leading owner and operator of amusement vending equipment in the U.S. The key elements of the Company's business strategy are as follows: Quality Products. The Company's Shoppes offer a mix of products, including selected products of higher quality than the carnival-type products traditionally associated with skill-crane and other prize-dispensing equipment. The plush toys offered in the Company's Shoppes are made with 100% polyester fiberfill and high-grade outer covers and the watches include dependable movements. In addition, the Company's Shoppes offer licensed products featuring recognizable characters (such as Disney and Looney Tunes characters), regional-based and theme-based items (such as Christmas and Easter items). All products offered in the Shoppes must adhere to the Company's safety and quality standards. Machine Appearance, Merchandise and Merchandising Techniques. The Company's Shoppes are distinctively marked with the SugarLoaf logo and other signage that is readily identifiable with the Company in order to create brand recognition. In addition, the Shoppes are well lit and are cleaned and serviced regularly to maintain their attractive appearance. The Shoppes contain an appealing mix of products arranged by size, color, shape and type. Products with higher perceived value are prominently displayed, and the Company frequently incorporates new items into the merchandise mix to maintain the Shoppes' fresh appearance. Management believes the Shoppes' appearance and the Company's merchandising techniques are important factors in gaining acceptance of the Company's Shoppes by retailers. Product Procurement and Company-Designed Product. The Company controls product cost by purchasing a significant portion of its products directly from manufacturers in large quantities and acquiring merchandise that has been discontinued or is subject to substantial "close-out" discounts. The Company also controls product cost by pre-packing products that it distributes to Company-owned offices and sells to its franchisees and non-franchisees for use in filling and merchandising the Shoppes. These pre-packed units include a predetermined mix or "recipe" of 3 different types, sizes, shapes and colors of product, which achieve the Company's merchandising objectives while also controlling average product cost. The Company is able to frequently introduce new product in its Toy Shoppes by designing a significant portion of the product and by purchasing licensed and other product from suppliers. Designing products at various price points furthers the Company's objective of controlling product cost. See "Suppliers -- Product." Vend Ratio and Revenue Management. The Company closely monitors the revenue per product dispensed, or the Vend Ratio, of each of its Shoppes to maintain customer satisfaction and to optimize Shoppe revenue and profitability. A lower than optimal vend frequency reduces customer satisfaction, resulting in less frequent plays and lower revenue at a given location, while a higher than optimal vend frequency reduces profitability. If the Vend Ratio falls outside of the Company's target range, the route merchandiser can influence various factors affecting the Vend Ratio, including the mix of products by size and weight, the placement of products within the Shoppe's display area, the number of products and the density of the products within the Shoppe. If a Shoppe's weekly revenue consistently falls below the Company's minimum weekly revenue goal, the Company will consider relocating the Shoppe. During 2001, the Company redeployed certain underperforming Shoppes as a result of the Company's review of the machines' average weekly revenue. Location Selection. The Company concentrates its sales efforts on placing Shoppes in Retail Accounts such as Wal-Mart, Kmart, Denny's, Safeway, Flying J Truckstop and Furrs Family Dining, which have good reputations for quality and attract a high level of foot traffic. Within these accounts, the Company seeks to secure sites with the greatest visibility and accessibility to potential customers. See "Operations -- Account Acquisition, Location Selection and Shoppe Placement." Timely Installation and National Operations. The Company provides Retail Accounts with an integrated system of Shoppe and vending installation, maintenance, service and an accounting of revenue and commissions on a local or national basis. Such services have been deployed rapidly across the country to large Retail Accounts. Training. The Company conducts comprehensive training for new general managers through its "Sugarloaf University" program, which includes a five-day seminar and field training held at its corporate offices. It also provides operations manuals, training videos and other materials relating to office management and route merchandising to assure the achievement of the Company's business objectives. See "Operations -- Supervision, Training and Support." SHOPPES The Company has sought to position its Shoppes as an entertaining way to "purchase" quality products. Management believes that the quality of the Shoppes' products and the entertainment and amusement afforded by their skill-crane format have broad appeal to adults and adolescents. While skill-crane machines have been in operation for over 75 years, the Company has incorporated into its Shoppes several improvements and refinements. The Company increased the size of the Shoppes to enhance their visibility and to display and vend more products and created bright, distinctive signage, which is readily identifiable with the Company. The Company also added exterior lighting, brightened interior lighting and selected exterior colors of the machines to attract and focus customer attention on the products in the Shoppes. In addition, the Company has upgraded the Shoppes' operating mechanisms to achieve consistency of play and reliability of performance. The SugarLoaf Toy Shoppe has been operated by the Company since its inception. The Company introduced the SugarLoaf Fun Shoppe in 1993, the SugarLoaf Treasure Shoppe in 1994, the SugarLoaf Bean Bag Shoppe in 1997 and the SugarLoaf Stop Shoppe in 1998. Management believes that the introduction of new types of skill-crane and other machines has enabled the Company to capitalize on its current routes and existing relationships by placing additional machines in existing locations, thereby increasing revenue at each location with little incremental service costs. The introductions of SugarLoaf Treasure Shoppes, SugarLoaf Fun Shoppes, SugarLoaf Bean Bag Shoppes and SugarLoaf Stop Shoppes are typically made in locations where a SugarLoaf Toy Shoppe is already located. Currently the Company operates five types of Shoppes as described below. 4 The SugarLoaf Toy Shoppe. The SugarLoaf Toy Shoppe features a play price of 50(cent) and dispenses plush toys and other toys. The estimated retail values of products offered in the SugarLoaf Toy Shoppe generally range from $4.00 to $30.00. As of December 31, 2001, the Company and its franchisees were operating 8,859 SugarLoaf Toy Shoppes. The SugarLoaf Treasure Shoppe. The SugarLoaf Treasure Shoppe features a play price of 50c. and dispenses jewelry, watches, bolo ties and belt buckles. The SugarLoaf Treasure Shoppe improves upon traditional skill-crane machines of this type by dispensing products with estimated retail values ranging from $4.00 to $30.00 instead of carnival-type merchandise of low retail value. As of December 31, 2001, the Company and its franchisees were operating 2,093 SugarLoaf Treasure Shoppes, approximately 90% of which were placed within locations in which another Shoppe was already in operation. The SugarLoaf Bean Bag Shoppe. The SugarLoaf Bean Bag Shoppe features a play price of 50(cent) and dispenses Bean-bag type stuffed toys with estimated retail values ranging from $3.00 to $6.00. As of December 31, 2001, the Company and its franchisees were operating 2,433 SugarLoaf Bean Bag Shoppes. The SugarLoaf Stop Shoppe. The SugarLoaf Stop Shoppe features a play price of 50c. and dispenses key-chains featuring NASCAR, bean bags, licensed items and sports figures. The estimated retail values of products offered in the SugarLoaf Stop Shoppe generally range from $2.00 to $10.00. As of December 31, 2001, the Company and its franchisees were operating 1,082 SugarLoaf Stop Shoppes. The SugarLoaf Fun Shoppe. The SugarLoaf Fun Shoppe features a play price of 25(cent) and dispenses small toys, novelties and candy. The SugarLoaf Fun Shoppe is designed to appeal primarily to adolescents and children. The estimated retail values of products offered in the SugarLoaf Fun Shoppe are generally under $5.00. As of December 31, 2001, the Company and its franchisees were operating 301 SugarLoaf Fun Shoppes. The following chart indicates the number of certain Company-owned amusement vending equipment in operation at the indicated date:

DECEMBER 31, ~~2000~~2001 DECEMBER 31, ~~1999~~2000 DECEMBER 31, ~~1998~~1999 --------------------- --------------------- --------------------- TYPE NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT ---- ------ ------- ------ ------- ------ ------- Toy Shoppes .............. 7,863 46.8% 7,580 47.6% 6,402 47.5% ~~6,397 50.9%~~ Treasure Shoppes ......... 1,~~633~~766 10.35 1,~~530~~633 1110.3 1,~~447~~530 11.53 Bean Bag Shoppes ......... 2,413 14.4 2,344 14.7 2,151 15.9 ~~1,963 15.6~~ Stop Shoppes ............. 1,079 6.4 1,058 6.6 932 6.9 ~~647 5.2~~ Fun Shoppes .............. 190 1.1 129 0.8 171 1.3 ~~217 1.7~~ ------ ----- ------ ----- ------ ----- Total Shoppes ........ 13,311 79.2 12,744 80.0 11,186 82.9 ~~10,671 84.9~~ Video Games .............. 2,087 12.4 1,792 11.3 1,298 9.6 ~~837 6.7~~ Kiddie Rides ............. 1,401 8.4 1,387 8.7 1,011 7.5 ~~1,057 8.4~~ ------ ----- ------ ----- ------ ----- 1516,~~923~~799 100.0% 1315,~~495~~923 100.0% 1213,~~565~~495 100.0% ====== ===== ====== ===== ====== =====

OPERATIONS Management believes that the Company's operations program provides for efficient and cost-effective purchasing and distribution of product. In addition, the Company has a route-servicing system that facilitates the development of a good working relationship with location managers in regional and national chain accounts. The Company offers its franchisees the same training programs, product and machine purchasing programs used by the Company, and they are required to use substantially the same procedures, systems and methods the Company employs in its own operations. Retail Accounts. Currently, the Company's Shoppes are located, in order of prevalence, in supermarkets, mass merchandisers, restaurants, bingo halls and bowling centers, bars and similar locations. The Company is focusing on placing Shoppes in national and regional Retail Accounts to take advantage of the regular customer traffic of these locations. The following chart identifies some of the Company's Retail Accounts: 5

RETAIL ACCOUNTS ---------------~~----------------------------------------------------~~ MASS MERCHANDISERS SUPERMARKETS RESTAURANTS OTHER ------------------ ------------~~-----~~ -----------~~----------~~ -----~~----------------~~ Wal Mart Kroger Denny's Truckstops of America Kmart Safeway Ponderosa Steak House Flying J Truckstop Fred Meyer Stores Shoney's, Inc. Cub Foods Golden Corral Smith's Furr's Family Dining

The Company or its franchisees provide the Shoppes and pay certain installation costs, while the retailer provides a site within the location and electrical power. The retailers are paid commissions based upon a percentage of gross revenue, which for the year ended December 31, 2001, generally ranged from 25% to 30%, depending on the dollar volume, number of Shoppes installed and total number of locations the retailer controls. Management believes that national and regional supermarket, mass merchandise and restaurant chain accounts are increasingly aware of the economic benefits of amusement vending equipment such as the Company's Shoppes, which can provide retailers greater revenue per square foot than alternative uses of available floor space. In individual-location accounts, the Company and its franchisees generally place Shoppes pursuant to oral agreements with location managers. While the Company has written agreements with certain major Retail Accounts, the Company and its franchisees also have placed Shoppes in national and regional Retail Accounts pursuant to oral or other agreements, which may be terminated at any time. Management believes that the Company and its franchisees generally have good relations with their retail accounts. Account Acquisition, Location Selection and Shoppe Placement. The Company acquires new individual-location accounts for the placement of its Shoppes through regional sales representatives and field office general managers. To augment its field office general managers' account acquisition activities, the Company's field sales representatives assist in the marketing effort to national and regional chain accounts and has entered into new agreements with national and regional supermarket and mass merchandise chain accounts covering the placement of Shoppes within the locations of such accounts. In August 2000, the Company signed a new two-year agreement with Wal-Mart that designates the Company as Wal-Mart's principal amusement vending operator. As of December 31, 2001, the Company had installed more than 9,000 amusement vending machines in 1,515 Wal-Mart stores nationwide. The Company's largest account, Wal-Mart accounted for approximately 38% of total revenue in 2001. In March 2000, the Company signed a new three-year agreement with Safeway that designates the Company as Safeway's principal operator of skill-cranes through April 1, 2003. As of December 31, 2001, the Company and its franchisees had installed more than 828 amusement vending machines in 518 Safeway stores nationwide. In May 2000, the Company signed a new four-year agreement with Denny's that designates the Company as Denny's exclusive skill-crane operator for its company-owned restaurants through June 30, 2005. As of December 31, 2001, the Company and its franchisees had installed 610 Shoppes in company-owned Denny's restaurants nationwide. Other than Wal-Mart, no account represented 10% or more of the Company's total revenue in 2001. Once the Company enters into a national or regional chain account agreement, it contacts each location manager to arrange for a review of the location to confirm its suitability and to obtain the manager's agreement to the placement of one or more Shoppes within the location. The Company and its regional sales representatives or franchisee work together to place Shoppes at national and regional chain account locations. For accounts other than national chain accounts, the Company's regional sales representatives and general managers identify viable locations, contact the location's owner or manager to confirm the suitability of the location and obtain the owner's or manager's agreement to the placement of the Shoppes and related compensation arrangements. The suitability of a location is based upon a thorough assessment by the Company, including an analysis of the surrounding trade area in order to determine the neighborhood demographics, local regulations, the level of overall retail activity and the cost-effectiveness of servicing the location through existing route merchandisers. The Company also reviews each site within the location for its visibility and accessibility to customers. 6 The Company and its franchisees compete for limited sites within supermarkets with purveyors of seasonal and specialty items and with owners and operators of other amusement and vending machines, ATM machines and coin counting and redemption equipment. The Company's amusement vending equipment also competes with vending machine and coin-operated amusement device operators for sites in mass merchandise and restaurant chains, bowling centers and other locations. Competition for such sites is based primarily on the amount of revenue to the location owner that can be generated by a particular use of a site. Management believes that the revenue potential of the Company's amusement vending equipment compares favorably to that of competing uses for available sites within retail locations. Other Vending. The Company has introduced new types of complementary amusement vending machines at existing Shoppe locations which management believes will expand the potential customers for the Company. As of December 31, 2001, the Company and its franchisees had 1,401 kiddie rides installed in Retail Accounts nationwide. As of December 31, 2001, the Company and its franchisees had 7,800 pieces of bulk vending equipment in operation. Bulk vending refers to the sale of unsorted confections, nuts, gumballs, toys and novelty items (in or out of capsules) selected by the customer and dispensed through vending machines. As of December 31, 2001, the Company and its franchisees had 2,087 simulator and traditional video games in operation. From time to time, the Company has placed, and may continue to place in the future, other types of coin-operated vending machines in retail accounts in order to leverage the Company's existing national distribution and service network. Supervision, Training and Support. The Company's division vice presidents are primarily responsible for hiring and training the Company's general managers and for on-going support and supervision of the Company's field offices. Each Company field office is managed by an area general manager or general manager who is responsible for the management of the office, including inventory management, and training and monitoring route merchandisers. The Company has developed a comprehensive training program for area general managers, general managers and franchisees covering office management, new account acquisition, inventory control, route merchandising, site selection, machine servicing and all other aspects of the operation of the business. The area general managers and general managers attend training programs and receive ongoing field training. The Company considers its route merchandisers to be a key element of its merchandising efforts. The Company's area general managers and general managers provide training of route merchandisers in all aspects of route management, machine servicing, revenue collection, Vend Ratio monitoring and product merchandising. See "Employees." Route Merchandising. Frequent, regular and reliable service and support is an important element in the operation of the Company's Shoppes and other amusement vending equipment. The Company's route merchandisers and franchisee personnel are trained to perform regularly scheduled merchandising and service procedures. A route merchandiser has a route consisting of 10 to 33 locations, depending upon volume, which are visited and serviced two to ten times per week. The route merchandiser cleans and services the Shoppe, takes inventory of the Shoppe, replaces product as needed, monitors the Vend Ratio and arranges the product within the Shoppe in accordance with the Company's merchandising techniques. The route merchandiser records the number of units of product placed in the Shoppes and the number of plays for both Shoppes and other amusement vending equipment from nonresettable meters. The meter readings are subsequently reconciled against actual collections. All collections are delivered to and verified by another employee at the field office for deposit. Inventory Management and Distribution. The Company's distribution system is designed to allow efficient and cost-effective distribution of its product to Company field offices and franchise offices. After the product is procured from the Company's suppliers, it is shipped to a distribution center where it is sorted and pre-packed. The Company maintains inventory for the products offered through its Toy Shoppes, Treasure Shoppes, Bean Bag Shoppes, Stop Shoppes and Fun Shoppes in a warehouse facility in Kent, Washington and in its regional distribution warehouse centers in Atlanta, Georgia; Clearwater, Florida; Chicago, Illinois; and Allentown, Pennsylvania. The Company communicates appropriate product mix requirements to its warehouse employees on a weekly basis. The warehouse employees sort the products according to the Company's specified mix requirements and pack the product for each type of Shoppe into pre-packed units for shipment to Company field offices and franchises on a weekly basis. At December 31, 2001, the Company was operating in 47 states through a national network of 34 offices. The field offices average approximately 4,091 square feet and comprise a small office area and a warehouse area where out-of-service Shoppes and other amusement vending equipment are repaired and product inventory is maintained. Part of the 7 route merchandisers' daily route servicing responsibilities is to distribute product to Shoppes. Pre-packing aids in controlling product cost and facilitates new product introductions. Pre-packing also substantially reduces the warehouse space required for inventory, allowing the Company-owned and franchise offices to service a greater number of Shoppes without a commensurate increase in warehouse space. In addition, pre-packing significantly reduces the time general managers and franchise personnel spend on inventory management, which allows more time for acquiring new accounts and monitoring the quality of Shoppe merchandising in the field. Management Information Systems. In late 2000, the Company implemented new financial software and a new centralized data base route management information system that utilizes customized software for monitoring field office amusement vending equipment results. The software allows the Company to monitor individual amusement vending equipment placements, revenue, Vend Ratio for Shoppes and tax and commission payments through reports generated at the corporate offices. The software also allows the Company to monitor total vending revenue, average weekly revenue and equipment on location. MERCHANDISING Merchandising Mix. The Company offers merchandise for the Shoppes in pre-pack bags and in bulk. The pre-pack bags include an assortment of exclusive SugarLoaf designs, along with licensed and other domestic product. The merchandise variety is regularly updated, and the Company offers at least 1,500 new items each year. Seasonal goods are placed in Shoppes for all major holidays. The Company also creates several theme product collectibles and many players attempt to retrieve all of the products in the series. Merchandise Sourcing and Vendor Relationships. The Company purchases product from several overseas factories and has developed good relationships with these suppliers over the past ten years. The Company also utilizes several domestic sources and attempts to take advantage of licensed and closeout merchandise. SUPPLIERS Product. The Company maintains a purchasing and development staff at its corporate headquarters and contracts with foreign and domestic manufacturers and outside vendors for its supply of products. The SugarLoaf Toy Shoppes offer a combination of Company-designed products that are manufactured to the Company's specifications and "off the shelf" products available from foreign manufacturers and third-party vendors. Since 1988, all Company-designed toys have been manufactured to its specifications by foreign manufacturers. Currently, the Company relies on multiple manufacturers in China to produce its custom designs, each of whom has the capability to produce a range of the toys required by the Company. Decisions regarding the choice of manufacturer are based on price, quality of workmanship, reliability and the ability of a manufacturer to meet the Company's delivery requirements. Shoppes. The Company currently purchases Shoppes from three principal approved crane manufacturers and may seek to add new suppliers. Management believes that suitable skill-crane machines are available from a number of domestic and foreign manufacturers. FRANCHISE RELATIONS As of December 31, 2001, the Company had franchise agreements in effect with 9 franchisees covering 12 territories in the U.S. covering, in the aggregate, 1,457 pieces of amusement vending equipment. The Company does not currently intend to grant any additional franchises. In the event any franchisee proposes to transfer to any third party its SugarLoaf business or any rights or interests granted by the franchise agreement, the Company has up to 45 days to exercise a right of first refusal to purchase such business, rights or interests on the same terms and conditions as the franchisee's proposed transfer of such business rights or interests. COMPETITION The Company competes with a number of regional and local operators of skill-crane machines. Many of these competitors are engaged in aggressive expansion programs, and the Company has experienced and expects to continue to experience intense competition for new locations. There can be no assurance that the Company will be able to compete effectively with these companies in the future. The Company's amusement vending equipment also competes 8 with other vending machines, coin-operated amusement devices, coin counting and redemption machines and seasonal and bulk merchandise for sites in retail locations. There can be no assurance that the Company will be able to maintain its current sites in retail locations or that it will be able to obtain sites in the future on attractive terms or at all. There also are few barriers to entry in the Company's business, and it would be possible for well-financed vending machine manufacturers or other vending machine operators with existing relationships with supermarkets, mass merchandisers and other venues targeted by the Company to compete readily with the Company in certain markets. INTELLECTUAL PROPERTY The Company has no patents or patent applications pending and relies primarily on a combination of trademark, trade dress and unfair competition laws, trade secrets, confidentiality procedures and agreements to protect its proprietary rights. The Company owns a number of trademarks that have been registered with the United States Patent and Trademark Office, including "Shoppe," "SugarLoaf," "Sugar Loaf," "Toy Shoppe," "Treasure Shoppe," "Fun Shoppe," "Shoppe of Stickers" and "Kid Shoppe." In addition, the Company claims common law trademark protection for the mark "A Test of Skill," "ACMI," "American Coin," "American Coin Merchandising," and various ones of its logos and symbols. The Company considers its operations manual, training videos, and other related materials and portions of its licensed methods to be proprietary and confidential, and the terms of the Company's franchise agreements require franchisees to maintain the confidentiality of such information and procedures and to adopt reasonable precautions to prevent unauthorized disclosure of these secrets and information. Despite the Company's efforts to protect its proprietary rights, unauthorized parties may attempt to copy aspects of the Company's amusement vending equipment and products or to obtain and use information that the Company regards as proprietary. The Company also may be involved from time to time in litigation to determine the enforceability, scope and validity of proprietary rights. The Company believes it has significant intellectual property protection for its business. Management believes that its success is likely to depend more upon merchandising skill, location selection and consumer support than on legal protection of the Company's proprietary rights. GOVERNMENT REGULATION The Company's business is subject to federal, state and local regulations relating to product labeling and safety, coin-operated games and franchising. The Federal Hazardous Substances Act, as amended by the Child Protection Act of 1966, the Child Protection and Toy Safety Act of 1969, the Toy Safety Act of 1984 and the Child Safety Protection Act of 1994 requires the labeling of articles that bear or contain a hazardous substance as defined in such statutes. In addition, the Consumer Product Safety Commission may, under these statutes, ban from the market toys or other articles intended for use by children which contain hazardous substances or present a public health or safety hazard, and require the repurchase and reimbursement of certain expenses by the manufacturer of such banned toys or other articles. The distribution and operation of skill-crane machines may be subject to federal, state and local regulations, including gaming regulations, which vary from jurisdiction to jurisdiction. Certain jurisdictions may require licenses, permits and approvals to be held by companies and their key personnel in connection with the distribution or operation of skill-crane machines. Currently, the Company believes that it has obtained all necessary governmental licenses, permits and approvals necessary for the distribution or operation of Shoppes in Company-owned operations. However, no assurance can be given that such licenses, permits or approvals will be given or renewed in the future. Franchisees are responsible for their own regulatory compliance. As a franchisor, the Company is subject to various federal and state franchise and business opportunity laws and regulations. The Company does not currently intend to grant any additional franchises and it believes it is in material compliance with such laws in the states in which the Company has offered and sold franchises. INSURANCE The Company carries property, liability, workers' compensation and directors and officers liability insurance policies, which it believes are customary for businesses of its size and type. However, there can be no assurance that the Company's insurance coverage will be adequate or that insurance will continue to be available to the Company at reasonable rates. The Company may be subject to claims for personal injuries resulting from the use of its Shoppes or from products and other merchandise dispensed from the Shoppes. To date, the Company has not experienced any material product liability claims or costs, and it currently maintains product liability insurance that it believes to be 9 adequate. The Company's product liability insurance coverage is limited, however, and there can be no assurance that such insurance would adequately cover future product liability costs or claims. EMPLOYEES As of February 28, 2002, the Company had a total of 770 employees, including 48 employees at its headquarters in Boulder, Colorado. None of the Company's employees are represented by labor unions or are covered by any collective bargaining contract. Management believes it has a good relationship with the Company's employees. Generally, each of the Company's field offices employ approximately 10 to 45 persons, including a general manager, an office assistant and an adequate number of route merchandisers to properly service the Company's Shoppes and other amusement vending equipment and equipment service managers. The general manager is responsible for the daily operations of the office, monitoring route merchandisers and acquiring new accounts. The area general managers oversee the operations of certain Company field offices and report directly to the Company's division vice presidents. The Company has an incentive bonus program pursuant to which area general managers, general managers and field office personnel may be eligible to receive incentive compensation based on office and route profitability. Management believes that this program rewards excellence in management, gives field office personnel an incentive to improve operations and results in an overall reduction in the cost of operations. Corporate personnel are also eligible to receive incentive compensation based on overall Company performance. ITEM 2. PROPERTIES The Company's principal executive offices are located at 5660 Central Avenue, Boulder, Colorado and the Denver, Colorado operation occupy approximately 28,000 square feet of office and warehouse space under a lease that expires February 28, 2003. The Company's fulfillment warehouse in Kent, Washington occupies approximately 106,000 square feet under a lease that expires August 31, 2003. The Company's machine repair and refurbishment facility in Denver, Colorado occupies approximately 11,000 square feet under a lease that expires September 30, 2003. The Company also is a party to 53 other leases which are used for office and warehouse space which average approximately 4,000 square feet, provide for monthly rental payments ranging from $450 to $5,240 and expire at various times over the period April 30, 2002 to May 31, 2006. ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company did not submit any matters to a vote of its stockholders during the fourth quarter of 2001. 10 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock is no longer publicly traded. As of March 22, 2002, ACMI Holdings, Inc. owns all of the Company's outstanding common stock. The Company has not declared or paid a cash dividend on its common stock. The payment of future dividends will be within the discretion of the Company's Board of Directors and will depend on the earnings, capital requirements, and restrictions in current and future debt agreements, credit agreements and operating and financial condition of the Company, among other factors. ITEM 6. SELECTED FINANCIAL DATA The selected financial data set forth below has been derived from the consolidated financial statements of the Company.

~~HIGH~~YEAR ~~LOW~~ENDED DECEMBER 31, ----- ------------------------------------------------------------- ~~For~~2001 ~~the~~2000 ~~Fiscal~~1999 ~~Year~~1998 ~~Ended~~1997 ~~December~~---------- 31---------- ---------- ---------- ---------- (IN THOUSANDS, ~~1999~~EXCEPT PER SHARE AND OPERATING DATA) STATEMENT OF OPERATIONS DATA: ~~First~~Revenue: ~~Quarter~~Vending ............................................ $ 139,670 $ 127,076 $ 115,835 $ 92,854 $ 52,866 Franchise and other ..... $5.94.......................... $2,257 2,681 4~~.00~~,630 ~~Second~~4,857 ~~Quarter~~6,218 ---------- ---------- ---------- ---------- ---------- Total revenue .................................... 141,927 129,757 120,465 97,711 59,084 ---------- ---------- ---------- ---------- ---------- Cost of revenue: Vending ............ 8.~~31 3~~.~~69 Third Quarter~~.............................. 104,758 93,315 84,997 66,070 37,506 Franchise and other ................... 6.50............ 1,921 1,936 3~~.19~~,104 ~~Fourth~~3,108 ~~Quarter~~3,967 ---------- ---------- ---------- ---------- ---------- Total cost of revenue ............................ 106,679 95,251 88,101 69,178 41,473 ---------- ---------- ---------- ---------- ---------- Gross profit .................... 3.69................ 235,248 34,506 32,364 28,533 17,611 General and administrative expenses .00................. ~~For~~26,518 ~~the~~25,080 ~~Fiscal~~25,668 ~~Year~~19,413 ~~Ended~~10,314 ~~December~~Write 31off of costs in excess of assets acquired, ~~2000:~~severance ~~First~~and ~~Quarter~~other costs .......................... -- -- 7,536 -- -- ---------- ---------- ---------- ---------- ---------- Operating earnings (loss) ....................... 3.25 28,730 9,426 (840) 9,120 7,297 Interest expense, net .44............................... ~~Second~~6,127 ~~Quarter~~7,775 6,866 3,368 612 ---------- ---------- ---------- ---------- ---------- Earnings (loss) before income taxes and extraordinary loss.............................. 2,603 1,651 (7,706) 5,752 6,685 Income tax (expense) benefit ......................... (989) (627) 3~~.00~~,200 (1,854) (2,256) ---------- ---------- ---------- ---------- ---------- Earnings (loss) before extraordinary loss .31....... ~~Third~~1,614 ~~Quarter~~1,024 (4,506) 3,898 4,429 Extraordinary loss on debt refinancing, net of income tax benefit of $101 ......................... -- 165 -- -- -- ---------- ---------- ---------- ---------- ---------- Net earnings (loss) ........................ 2.88..... $ 1~~.75~~,614 ~~Fourth~~$ ~~Quarter~~859 $ (4,506) $ 3,898 $ 4,429 ========== ========== ========== ========== ========== Basic earnings (loss) per share ...................... $ 0.25 $ 0.13 $ (0.70) $ 0.60 $ 0.80 Diluted earnings (loss) per share .................... $ 0.24 3$ 0.13 2$ (0.0070) $ 0.58 $ 0.78 Basic weighted average common shares ................. 6,526 6,493 6,475 6,467 5,565 Diluted weighted average common shares ............... 6,729 6,493 6,475 6,713 5,694

~~YEAR~~2001 ~~ENDED DECEMBER 31, ----------------------------------------------------------------~~ 2000 1999 1998 1997 ~~1996~~ --------- -~~--------~~ --------- -~~--------~~ --------- (IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA) STATEMENT OF OPERATIONS DATA: Revenue: Vending ........................................... $ 127,076 $ 115,835 $ 92,854 $ 52,866 $ 30,439 Franchise and other ............................... 2,681 4,630 4,857 6,218 7,828 -~~--------~~ --------- -~~--------~~ --------- -~~--------~~ ~~Total~~BALANCE ~~revenue~~SHEET ~~................................... 129,757 120,465 97,711 59,084 38,267 --------- --------- --------- --------- --------- Cost of revenue~~DATA: ~~Vending~~Working ~~...........................................~~capital ~~93,315 84,997 66,070 37,506 21,283 Franchise and other~~ ............................... ~~1,936 3,104 3,108 3,967 5,659 --------- --------- --------- --------- --------- Total cost of revenue~~ .......~~....................~~ ~~95,251~~$ 88,101 69,178 41,473 26,942 --------- --------- --------- --------- --------- Gross profit .................................... 34,506 32,364 28,533 17,611 11,325 General and administrative expenses ................. 25,080 25,668 19,413 10,314 7,053 Write off of costs in excess of assets acquired, severance and other costs ......................... -- 7,536 -- -- -- --------- --------- --------- --------- --------- Operating earnings (loss) ....................... 9,426 (840) 9,120 7,297 4,272 Interest expense, net ............................... 7,775 6,866 3,~~368 612 375 --------- --------- --------- --------- --------- Earnings (loss) before income taxes and extraordinary loss ............................ 1,~~651 (7,706) 5,752 6,685 3,897 Income tax benefit (expense) ........................ (627) 3,200 (1,854) (2,256) (1,311) --------- --------- --------- --------- --------- Earnings (loss) before extraordinary loss ....... 1,024 (4,506) 3,898 4,429 2,586 Extraordinary loss on debt refinancing, net of income tax benefit of $~~101~~ ....................... 165 -- -- -- -- --------- --------- --------- --------- --------- Net earnings (loss) ............................. $ 859 $ (4,506) $ 3,898 $ 4,429 $ 2,586 ========= ========= ========= ========= ========= Basic earnings (loss) per share ..................... $ 0.13 $ (0.70) $ 0.60 $ 0.80 $ 0.51 Diluted earnings (loss) per share ................... $ 0.13 $ (0.70) $ 0.58 $ 0.78 $ 0.48 Basic weighted average common shares ................ 6,493 6,475 6,467 5,565 5,092 Diluted weighted average common shares .............. 6,493 6,475 6,713 5,694 5,417 2000 1999 1998 1997 1996 --------- --------- --------- --------- --------- BALANCE SHEET DATA: Working capital ..................................... $ 691 $ 9,367 $ 9,235 $ 3,626 ~~$ 2,914~~ Total assets ......................................... 103,362 107,907 104,134 111,782 37,077 ~~19,758~~ Short-term debt and current portion of long-term debt .....................................~~.........~~ 7,700 7,233 2,463 2,155 1,619 ~~1,109~~ Long-term debt, excluding current portion ............ 37,276 44,224 50,230 50,310 1,292 ~~5,059~~ Company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated debentures ..................... 15,644 15,593 15,542 15,492 -- -- Total stockholders' equity ........................... 31,763 30,089 29,154 33,648 30,092 ~~11,676~~ NUMBER OF SHOPPES: Company operations ................................... 13,311 12,744 11,186 10,671 6,166 ~~3,967~~ Franchise operations ................................. 1,457 1,724 1,878 1,998 3,952 ~~3,981~~ ---------- ---------- ---------- ---------- ---------- Total ............................................ 14,768 14,468 13,064 12,669 10,118 ~~7,948~~ ========== ========== ========== ========== ==========

11 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company and its franchisees own and operate coin-operated amusement vending equipment with more than 26,000 pieces of equipment on location. Over 14,000 of these machines are Shoppes that dispense plush toys, watches, jewelry, novelties and other items. The Company's Shoppes are placed in Retail Accounts and similar high traffic locations and the Company typically pays 25-30% of gross revenue to the location owner as a location commission. The Company has also introduced new types of supplementary vending and amusement machines at existing Shoppe locations. At December 31, 2001, the Company was operating in 47 states with a national network of 34 offices and there were 9 Company franchisees operating in 12 territories in the United States. The Company sells product vended in the machines to its franchisees and collects continuing royalties ranging from 2% to 5% of its franchisees' gross machine revenue. On February 11, 2002 the Company was acquired by ACMI Holdings, Inc., a newly formed corporation organized by two investment firms, Wellspring Capital Management LLC and Knightsbridge Holdings, LLC. The transaction was approved at a stockholders meeting held on February 5, 2002. Stockholders received $8.50 in cash for each outstanding share of the Company's common stock. The Company's common stock is no longer publicly traded. The Company's mandatorily redeemable preferred securities remain outstanding and continue to trade on the American Stock Exchange. For the year ended December 31, 2001, approximately 87% of the Company's revenue and gross profit were derived from Company-owned Shoppes. The Company's revenue and gross profit in a particular period is directly related to the number of Shoppes in operation during the period. Management believes that the Company's business is somewhat seasonal, with average revenue per machine per week historically higher during the Easter and Christmas periods. Vending revenue represents cash receipts from customers using amusement vending equipment and is recognized when collected. The cost of vending revenue is comprised of the cost of vended products, location commissions, depreciation and direct service cost. Franchise and other revenue represents the Company's percentage of gross vending revenue generated by Shoppes owned and operated by franchisees, as well as product sold to the franchisees and non-franchisee customers. Product sold to the franchisees and non-franchisee customers consists of goods to vend in Shoppes. The Company anticipates that franchise and other revenue will remain consistent with 2001 levels, subject to further franchisee acquisitions. RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 2001 VS. YEAR ENDED DECEMBER 31, 2000 Revenue The Company's total revenue increased 9.4% from $129.8 million in 2000 to $141.9 million in 2001. Vending revenue increased $12.6 million or 9.9% in 2001 to $139.7 million, primarily as a result of a 7.1% increase in the average number of amusement vending equipment in use during 2001, over the average number of amusement vending equipment in use during 2000. Franchise and other revenue decreased $424,000 or 15.8% in 2001 as compared to 2000, due to the acquisition of a franchise during the second quarter of 2001. Cost of Revenue and Gross Profit The cost of vending operations increased $11.4 million in 2001 to $104.8 million. The vending operations' contribution to 2001 gross profit increased to $34.9 million, which represents a 3.4% increase over gross profit from vending operations realized in 2000. The vending gross profit achieved in 2001 was 25.0% of vending revenue, which represents a 1.6 percentage point decrease from the gross profit percentage achieved in 2000. The cash vending gross profit (vending revenue minus cost of vended product, location commissions and direct service cost) achieved in 2001 was 33.6% of vending revenue, which is .9 percentage points lower than in 2000. The decrease in cash vending gross 12 profit is primarily attributable to higher location payments. The cash vending gross profit achieved during the fourth quarter of 2001 was 34.1%, which is .8 percentage points lower than the comparable period in 2000. Gross profit on franchise and other revenue in 2001 decreased to $336,000, or 14.9% of franchise and other revenue, which is 12.9 percentage points lower than the gross margin achieved in 2000. The decrease in gross margin as a percentage of franchise and other revenue resulted primarily from increased importing related costs partially offset by lower unit costs and lower product sales to franchisees and non-franchisees. Operating Expense General and administrative expenses including depreciation and amortization as a percentage of revenue for 2001 decreased to 18.7%, as compared to 19.3% of revenue in 2000. The decrease in general and administrative expenses resulted primarily from tighter control on discretionary spending during the year. Operating Earnings Operating earnings in 2001 were $8.7 million or 6.2% of total revenue as compared to operating earnings of $9.4 million in 2000 or 7.4% of total revenue. The decrease in operating results is primarily attributable to increased location payments and placement fees. Non Operating Income (Expense) Interest expense decreased $1.6 million to $6.1 million in 2001 as compared to 2000. The Company's interest expense is directly related to its level of borrowings and changes in the underlying interest rates. Net Earnings and Earnings Per Share The net earnings for the year ended December 31, 2001 were $1.6 million, as compared to net earnings of $859,000 for 2000. Diluted net earnings per share for 2001 were $0.24, compared to diluted net earnings per share of $0.13 in 2000. YEAR ENDED DECEMBER 31, 2000 VS. YEAR ENDED DECEMBER 31, 1999 Revenue The Company's total revenue increased 7.7% from $120.5 million in 1999 to $129.8 million in 2000. Vending revenue increased $11.2 million or 9.7% in 2000 to $127.1 million, primarily as a result of a 9.6% increase in the average number of amusement vending equipment in use during 2000, over the average number of amusement vending equipment in use during 1999. Franchise and other revenue decreased $2.0 million or 42.1% in 2000 as compared to 1999, due to the closure of Plush 4 Play operations in the third quarter of 1999. Cost of Revenue and Gross Profit The cost of vending operations increased $8.3 million in 2000 to $93.3 million. The vending operations' contribution to 2000 gross profit increased to $33.8 million, which represents a 9.5% increase over gross profit from vending operations realized in 1999. The vending gross profit achieved in 2000 was 26.6% of vending revenue, which is consistent with the gross profit percentage achieved in 1999. The cash vending gross profit (vending revenue minus cost of vended product, location commissions and direct service cost) achieved in 2000 was 34.5% of vending revenue, which is 1.1 percentage points higher than in 1999. The increase in cash vending gross profit is attributable to lower costs associated with product vended partially offset by higher location payments. The cash vending gross profit achieved during the fourth quarter of 2000 was 34.9%, which is .5 percentage points higher that the comparable period in 1999. 13 Gross profit on franchise and other revenue in 2000 decreased to $745,000, or 27.8% of franchise and other revenue, which is 5.2 percentage points lower than the gross margin achieved in 1999. The decrease in gross margin as a percentage of franchise and other revenue resulted primarily from increased warehousing costs, lower product sales to franchisees and non-franchisees resulting from the closure of Plush 4 Play. Operating Expense General and administrative expenses including depreciation and amortization as a percentage of revenue for 2000 decreased to 19.3%, as compared to 21.3% of revenue in 1999. The decrease in general and administrative expenses resulted primarily from the closing of four offices during the year and tighter control on discretionary spending during the year. Operating Earnings (Loss) Operating earnings in 2000 were $9.4 million or 7.3% of total revenue as compared to an operating loss of $840,000 in 1999. The increase in operating results is primarily attributable to the lower cost of products vended through the Company's Shoppes, the reduction in general and administrative expenses discussed above and the write-off of one-time charges recognized in the third quarter of 1999. Non Operating Income (Expense) Interest expense increased $909,000 to $7.8 million in 2000 as compared to 1999. The Company's interest expense is directly related to its level of borrowings and changes in the underlying interest rates. Extraordinary Loss The extraordinary loss of $165,000, net of tax benefit, for the year ended December 31, 2000 relates to the refinancing of the Company's $50 million reducing revolving loan agreement in December 2000, which was scheduled to mature in July 2001. The extraordinary loss results from the write-off of loan origination fees related to the previous credit facility. Net Earnings (Loss) and Earnings (Loss) Per Share The net earnings for the year ended December 31, 2000 were $859,000, as compared to a net loss of $4.5 million for 1999. Diluted earnings per share for 2000 were $0.13, compared to a diluted net loss per share of $0.70 in 1999. CRITICAL ACCOUNTING POLICIES Management's Discussion and Analysis of Financial Condition and Results of Operations discusses the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to income taxes, inventory, property and equipment and costs in excess of assets acquired and other intangible assets. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financial statements. 14 Deferred Taxes The Company recognizes deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities. The Company regularly reviews its deferred tax assets for recoverability and has historically established valuation allowances based on its taxable income, projected future taxable income, and the expected timing of the reversals of existing temporary differences. If the Company operates at a loss or is unable to generate sufficient future taxable income, or if there is a material change in the actual effective tax rates or time period within which the underlying temporary differences become taxable or deductible, the Company could be required to establish a valuation allowance against all or a significant portion of our deferred tax assets resulting in a substantial increase in our effective tax rate and a material adverse impact on our operating results. This could be mitigated by the reversal of future taxable temporary differences in property, plant and equipment that could create taxable income to help utilize the deferred tax assets. Inventory The Company writes down its inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. The Company recognized a valuation reserve of $394,000 in the third quarter of 1999 primarily to write-down the cost of inventory being carried at Plush 4 Play a business that was discontinued. If actual future demand or market conditions are less favorable than those projected by management, additional inventory write-downs may be required. Property and Equipment Property and equipment is stated at cost. Major replacements and improvements are capitalized. When assets are sold, retired or otherwise disposed of, the cost and related accumulated depreciation are eliminated from the accounts and the gain or loss is recognized. Repair and maintenance costs are generally charged to expense as incurred. Vending machines are depreciated using the straight-line method over useful lives ranging from three to ten years. Valuation of long-lived and intangible assets and costs in excess of assets acquired The Company assesses the impairment of identifiable intangibles, long-lived assets and related costs in excess of assets acquired whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors considered important that could trigger an impairment review include significant underperformance relative to expected historical or projected future operating results, changes in the manner of our use of the acquired assets and the strategy for our overall business and negative industry or economic trends. When the Company determines that the carrying value of costs in excess of assets acquired and other intangible assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, the Company measures any impairment based on the projected discounted cash flow method using a discount rate determined by our management to be commensurate with the risk inherent in the Company's current business model. In 2002, Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" became effective and as a result, the Company will cease to amortize approximately $33.3 million of costs in excess of assets acquired. The Company has recorded approximately $2.0 million of amortization related to these assets during 2001 and would have amortized approximately $2.0 during 2002. In lieu of amortization, the Company is required to perform an initial impairment review of our costs in excess of assets acquired in 2002 and an annual impairment review thereafter. The Company expects to complete its initial review during the first quarter of 2002. The Company currently does not expect to record an impairment charge upon completion of the initial impairment review. However, there can be no assurance that at the time the review is completed an impairment charge will not be recorded, which may be material. 15 LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of liquidity and capital resources historically have been cash flows from operations, borrowings under the Company's credit facilities and issuances of its equity securities. These sources of cash flows have been offset by cash used for acquisitions, investment in amusement vending equipment and payment of long-term borrowings. Net cash provided by operating activities was $15.8 million, $23.4 million and $7.4 million in 2001, 2000 and 1999, respectively. The decline in 2001 net cash provided by operating activities results primarily from an increase in inventory levels and a reduction in level of accounts payable. The Company anticipates that cash will continue to be provided by operations as additional skill-crane machines and other amusement devices are placed in service. Cash required in the future is expected to be funded by existing cash and cash provided by operations and borrowings under the Company's credit facility. Net cash used in investing activities was $7.6 million, $18.1 million and $9.3 million in 2001, 2000 and 1999, respectively. Capital expenditures amounted to $4.9 million, $15.6 million and $8.3 million in 2001, 2000 and 1999, respectively, of which $4.0 million, $15.0 million and $7.9 million were used for the acquisition of amusement vending equipment. The acquisition of franchisees and others used $273,000 and $180,000 in 2001 and 1999, respectively. Net cash used by financing activities was $7.0 million and $3.0 million in 2001 and 2000 respectively and consisted primarily of payments on credit facilities and principal payments on long-term debt. Net cash provided by financing activities was $240,000 in 1999 and consisted primarily of borrowings on the Company's credit facility and principal payments on long-term debt. In conjunction with the acquisition by ACMI Holdings, Inc., in February 2002, the Company has a $65.0 million senior secured credit facility comprised of a $10.0 million revolving credit facility and $55.0 million of term loans comprised of a $25.0 million term loan A and a $30.0 million term loan B. Under the revolving credit facility, the Company may borrow up to $10.0 million through February 11, 2007, and at February 28, 2002, there was approximately $2.7 million outstanding and $7.3 million available under the revolving credit facility. Under both term loan A and B, the Company is required to make quarterly principal installments that increase in amount through February 11, 2007 for term loan A and February 11, 2008 for term loan B. The revolving facility and the term loans bear interest at a floating rate at the Company's option equal to either LIBOR plus the applicable margin or a base rate that is equal to the higher of the prime rate or the federal funds rate plus one-half percent plus the applicable margin. The effective rate of interest on both facilities at February 28, 2002 was 6.0%. The credit facility provides that certain financial ratios be met and places restrictions on, among other things, the incurrence of additional debt financing and certain payments to the Company's parent company. The Company was in compliance with such financial ratios and restrictions at February 11, 2002. The Company has also issued $25.0 million of senior subordinated notes due in 2009. Interest on these notes is payable on a quarterly basis at the rate of 17% per annum; however, at the option of the Company the minimum cash interest due on these notes is 13% with the balance of interest due being paid in the form of additional notes or payment in kind notes in an aggregate amount equal to the amount of interest that would be payable with respect to the notes, if such interest were paid in cash. The note agreement provides that certain financial ratios be met and places restrictions on, among other things, the incurrence of additional senior subordinated indebtedness and certain restricted payments. The Company was in compliance with such financial ratios and restrictions at February 11, 2002. The Company has noncancelable commitments for operating leases, debt and employment contracts. These commitments expire at various times over the next five years. Future minimum commitments as of December 31, 2001 are as follows (in thousands):

~~(A)~~YEAR ~~EXHIBITS~~ENDING ~~--------~~DECEMBER ~~3.1+~~31, --2002 ~~Certificate~~2003 of2004 ~~Incorporation~~2005 of2006 ~~the~~TOTAL ~~Registrant.~~Operating 3leases.~~2+ -- Bylaws of the Registrant~~. 3.~~3Y -- Certificate of Designation of Series A Junior Participating Preferred Stock of the Registrant~~. 4.~~1+ -- Reference is made to Exhibits 3~~.~~1 and 3~~.2. 4.~~2+ -- Specimen Stock Certificate~~. 4.~~3o -- Certificate of Trust of American Coin Merchandising Trust I~~. 4.~~4o -- Trust Agreement of American Coin Merchandising Trust I~~. 4.~~5o -- Amended and Restated Trust Agreement of American Coin Merchandising Trust I~~. 4.~~6o -- Form of Junior Subordinated Indenture between the Registrant and Wilmington Trust Company, as Trustee~~. 4.~~7o -- Form of Guarantee Agreement with respect to Trust Preferred Securities of American Coin Merchandising Trust I~~. 4.~~8o -- Form of Agreement as to Expenses and Liabilities between the Registrant and American Coin Merchandising Trust I~~. 4.~~9o -- Form of Certificate Evidencing Trust Preferred Securities~~. 4.~~10o -- Form of Certificate Evidencing Trust Common Securities~~. ~~4.11o~~2,673 ~~-- Form of Ascending Rate Junior Subordinated Deferrable Interest Debenture. 4.12Y -- Rights Agreement dated as of April 29~~1,411 ~~1999~~542 ~~between~~335 ~~the~~133 ~~Registrant and Norwest Bank Minnesota~~5,094 ~~N.A. 4.13Y~~ Long--term ~~Form~~debt of Rights Certificate. 10.1+ -- Form of Indemnity Agreement to be entered into between the Registrant and its directors and executive officers. 10.2+X -- Amended and Restated Stock Option Plan of the Registrant (~~the~~not ~~"Option~~including ~~Plan"~~interest). 10.3+. --7,700 ~~Form~~9,719 of11,857 ~~Incentive~~15,700 ~~Stock Option under the Option Plan. 10.4+~~ -- ~~Form~~44,976 ofEmployment ~~Nonstatutory Stock Option under the Option Plan~~contracts. 10.~~5+X -- 1995 Non-Employee Director Stock Option Plan (the "Director Plan")~~. 10.~~6+ -- Form of Nonstatutory Stock Option under the Director Plan~~. 10.~~35# -- Commercial Lease Amendment Agreement, between the Registrant and Technical Building Company, dated as of November 20, 1997~~. 10.~~47V -- Premier Amusement Vendor Agreement, dated January 28, 2000, between the Registrant and Best Vendor Co~~. 10.~~48V -- Addendum to Premier Amusement Vendor Agreement, dated January 28, 2000, between the Registrant and Best Vendor Co~~. 10.~~49V -- Addendum #2 to Premier Amusement Vendor Agreement, dated February 14, 2000, between the Registrant and Best Vendor Co~~. 10.~~50@ -- Amusement Vending Agreement, effective as of July 1, 2000, between the Registrant and Denny's Inc~~. 10.~~51@ -- Other Income Supplier Agreement--Coin Operated Equipment, dated August 1, 2000 between the Registrant and Wal-Mart Stores, Inc~~. 10.~~52n -- Credit agreement, dated December 29, 2000, between and among the Registrant and GE Capital and Comerica~~. 10.~~53X -- Consulting Agreement dated December 1, 2000, between the Registrant and John A~~. ~~Sullivan~~. ~~10.54X~~350 300 -- ~~Executive Employment Agreement dated December 1, 2000, between the Registrant and Randall J. Fagundo. 10.55X~~ -- ~~Executive Employment Agreement dated December 1, 2000, between the Registrant and W. John Cash. 23.1~~ -- ~~Consent of KPMG LLP.~~650

The Company's long-term debt as described above has materially changed since December 31, 2001 due to the acquisition of the Company by ACMI Holdings and the Company's incurrence of additional debt in the form of the $65.0 million senior secured credit facility and $25.0 million of senior subordinated notes. 16 The Company may use a portion of its capital resources to effect acquisitions of franchisees. Because the Company cannot predict the timing or nature of acquisition opportunities, or the availability of acquisition financing, the Company cannot determine the extent to which capital resources may be used. Company management believes that funds expected to be generated from operations and borrowings available under its credit facility and the Company's ability to negotiate additional and enhanced credit agreements will be sufficient to meet the Company's foreseeable operating and capital expenditure needs. The Company's liquidity through operating cash flows is subject to multiple risks associated with the Company's operations including fluctuations in Shoppe performance, management of growth, payment of the Company's indebtedness, dependence upon major accounts and competition, among others. The section entitled "Risk Factors" beginning on page 18 sets forth several of the risks associated with the Company's operations and is incorporated herein by reference. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS On June 30, 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") 141, "Business Combinations", and SFAS 142, "Goodwill and Intangible Assets". Major provisions of these Statements are as follows: all business combinations initiated after June 30, 2001 must use the purchase method of accounting; the pooling of interest method of accounting is prohibited except for transactions initiated before July 1, 2001; intangible assets acquired in a business combination must be recorded separately from goodwill if they arise from contractual or other legal rights or are separable from the acquired entity and can be sold, transferred, licensed, rented or exchanged, either individually or as part of a related contract, asset or liability; goodwill and intangible assets with indefinite lives are not amortized but are tested for impairment annually, except in certain circumstances, and whenever there is an impairment indicator; all acquired goodwill must be assigned to reporting units for purposes of impairment testing and segment reporting; and effective January 1, 2002, goodwill will no longer be subject to amortization. The amortization of costs in excess of assets acquired and other intangible assets was $2.3 million in 2001. In June 2001, the FASB issued SFAS 143, Accounting for Asset Retirement Obligations, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The standard applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or normal use of the asset. SFAS 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. The liability is accreted at the end of each period through charges to operating expense. If the obligation is settled for other than the carrying amount of the liability, the Company will recognize a gain or loss on settlement. The Company does not expect the impact of adopting SFAS 143 to be significant. On October 3, 2001, the FASB issued SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. While SFAS 144 supersedes SFAS 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, it retains many of the fundamental provisions of that Statement. SFAS 144 also supersedes the accounting and reporting provisions of APB Opinion 30, Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for the disposal of a segment of a business. The Company does not expect the impact of adopting SFAS 144 to be significant. 17 RISK FACTORS This report contains forward-looking statements. Because such statements include risks and uncertainties, actual results could differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and in the sections entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." Shoppe Performance. A primary key to the financial success of the Company is the weekly revenue generated per Shoppe, which has a history of fluctuating. The Company has attributed some of this fluctuation to the effectiveness of its product mix and has taken steps to address this problem; however, there can be no assurance that such efforts will continue to have a positive impact on the performance of the Shoppes. The average weekly revenue generated per Shoppe may decline or fluctuate in the future, which could have a material adverse effect on the Company's business, financial condition and results of operations. Growth and Management of Growth. The Company has recently experienced growth. There can be no assurance that the Company will continue to grow at historical rates or at all. The Company's ability to generate increased revenue and achieve higher levels of profitability will depend upon its ability and the ability of its franchisees to place additional Shoppes in Retail Accounts as well as to maintain or increase the average financial performance of the Shoppes. The Company's ability to place additional Shoppes depends on a number of factors beyond the Company's control, including general business and economic conditions. Installation of additional Shoppes will also depend, in part, upon the Company's ability to secure additional national and regional Retail Accounts and to obtain approval to place additional Shoppes in individual locations of such accounts. The Company, its franchisees and their suppliers also may be unable to place and adequately service additional Shoppes, which could have a material adverse effect on the Company's business, financial condition and results of operations. There can be no assurance that the Company will be able to manage its expanding operations effectively or that it will be able to maintain or accelerate its growth. The Company's growth has placed, and is expected to continue to place, significant demands on all aspects of the Company's business, including Shoppe servicing, merchandising, financial and administrative personnel and systems. The Company's future operating results are substantially dependent upon the ability of the Company's officers and key personnel to manage anticipated growth and increased demand effectively; to attract, train and retain additional qualified personnel; and to implement and improve technical, service, administrative, financial control and reporting systems. Either deterioration in Shoppe performance or the Company's failure to manage growth effectively could adversely and materially affect the Company's business, financial condition and results of operations. Substantial Indebtedness; Effect of Financial Leverage. The Company intends to use funds available under its revolving credit facility ($7.3 million at February 28, 2002) for a number of purposes, including future acquisitions of franchisees. Further use of funds from the credit facility could result in the Company incurring additional indebtedness that is substantial in relation to its stockholders' equity and cash flow available for debt service. As a result of the issuance of the Ascending Rate Cumulative Trust Preferred Securities and the amount the Company owes pursuant to its senior secured facilities and senior subordinated notes, fixed charges could exceed earnings for the foreseeable future. Substantial leverage poses the risk that the Company may not be able to generate sufficient cash flow to service its indebtedness, or to adequately fund its operations. There can be no assurance that the Company will be able to increase its revenue and leverage the acquisitions it has made to achieve sufficient cash flow to meet its potential debt service obligations. In particular, there can be no assurance that the Company's operating cash flow will be sufficient to meet its debt service obligations under its senior secured facilities. The Company's leverage also could limit its ability to effect future financings or may otherwise restrict the Company's operations and growth. Trade Relations and Dependence on Major Accounts. The Company's largest account, Wal-Mart, accounted for approximately 38% of total revenue in 2001. The loss of the Wal-Mart account, or the loss of a significant number of other major accounts, or a significant reduction in the number of Shoppes and other amusement vending equipment placed at such accounts, for any reason, could have a material adverse effect on the Company's business, financial condition and results of operations. Competition. The Company competes with a number of regional and local operators of skill-crane machines. Many of these competitors are engaged in aggressive expansion programs, and the Company has experienced and expects to 18 continue to experience intense competition for new locations and acquisition candidates. There can be no assurance that the Company will be able to compete effectively with these companies in the future. The Company's amusement vending equipment also competes with other vending machines, coin-operated amusement devices, coin counting and redemption machines and seasonal and bulk merchandise for sites within retail locations. There can be no assurance that the Company will be able to maintain its current sites in the retail locations or that it will be able to obtain sites in the future on attractive terms or at all. There also are few barriers to entry in the Company's business, and it would be possible for well-financed vending machine manufacturers or other vending machine operators with existing relationships with Retail Accounts targeted by the Company to compete readily with the Company in certain markets. Dependence on Suppliers and Foreign Sourcing. Substantially all of the plush toys and other products dispensed from the Shoppes are produced by foreign manufacturers. A majority is purchased directly by the Company from manufacturers in China. The Company purchases its other products indirectly from vendors who obtain a significant percentage of such products from foreign manufacturers. As a result, the Company is subject to changes in governmental policies, the imposition of tariffs, import and export controls, transportation delays and interruptions, political and economic disruptions and labor strikes that could disrupt the supply of products from such manufacturers. Among other things, the loss of China's "most favored nation" status under U.S. tariff laws could result in a substantial increase in the import duty of certain products manufactured in China, which could result in substantially increased costs for certain products purchased by the Company which could have a material adverse effect on the Company's business, financial condition and results of operations. The Company also could be affected by labor strikes in the sea shipping, trucking and railroad industries, all of which the Company utilizes to varying degrees. Although the Company believes that alternative means of transportation would be available for its products in the event of a labor strike affecting a particular mode of transportation, such a disruption could increase the Company's transportation costs and thereby reduce its profit margins in a particular period. The Company does not have a long-term supply agreement with any of its crane suppliers. While the Company believes that it will continue to be able to purchase skill-crane machines from existing or alternative suppliers, no assurance can be given that skill-cranes will be available on a cost-efficient basis or that shortages or other disruptions in the Company's sources of supply for skill-crane machines and components would not have a material and adverse effect on the Company's business, financial condition and results of operations. Seasonality and Variability of Results. The financial performance of amusement vending equipment is substantially dependent on the level of retail traffic at a particular location. Accordingly, the business, financial condition and results of operations of the Company can be materially and adversely affected by factors that reduce retail traffic at such locations. These include numerous factors beyond the Company's control such as weather, labor strikes and other disruptions of the business at Retail Accounts and local and national business and economic conditions. The Company's results are also linked to seasonal increases in foot-traffic at Retail Accounts, and disruptions of past trends, including traditional increases during holiday seasons, could decrease the Company's revenue. As a result, the Company's operating results may vary significantly over time. Accordingly, period-to-period comparisons of its results of operations are not necessarily meaningful and the Company's past results should not be relied upon as an indication of future performance. Changing Consumer Trends; Technological Innovations. Consumer preferences are constantly changing and difficult to predict, and consumer interest in the Company's Shoppes or the products dispensed could decline suddenly or other prize-dispensing equipment or amusement devices could replace the Shoppes in consumer preference. The Company's success will depend in part on its ability to offer new and appealing products and on the continuing appeal of its Shoppes' skill-crane format in both existing markets and in new markets into which the Company may expand. There can be no assurance that the use of skill-crane machines and the Company's operating results will not be adversely affected by changing consumer trends. The Company's business also is susceptible to advances in the design and manufacture of skill-crane machines and other vending technology. The Company's failure to anticipate or respond adequately to such technological changes could adversely affect the Company's business and results of operations. Dependence on Key Employees. The Company's success to date has been dependent in part upon the efforts and abilities of Randall J. Fagundo (its Chief Executive Officer and President), W. John Cash (its Senior Vice President, Chief Financial Officer, Treasurer and Secretary), Robert A. Kaslon (its Senior Vice President of Merchandising) and certain other key personnel. The Company's continued success will depend upon its ability to retain a number of its current key employees and to attract, train and retain new key management and operational personnel. There can be no assurance that the Company will be able to retain its existing key employees or attract and retain qualified employees in the future. The Company does maintain "key man" insurance on Randall J. Fagundo. In addition, executives or other 19 employees with knowledge of the Company's operations and policies may leave the Company and establish competitive businesses. There can be no assurance that the Company would be able to effectively enforce non-compete provisions against these individuals. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and related notes thereto required by this item are listed and set forth herein beginning on page 29. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 20 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth certain information concerning the directors and executive officers of the Company as of March 22, 2002:

~~PAGE~~PRINCIPAL ~~Independent~~OCCUPATION/ ~~Auditors'~~NAME ~~Report..................................................................................~~AGE FPOSITION HELD WITH THE COMPANY -1--- ~~Consolidated~~--- ~~Financial~~------------------------------ ~~Statements:~~William ~~Balance~~F. ~~Sheets~~Dawson Jr.......................~~....................................................................~~ ~~F-2~~37 ~~Statements~~Partner, Wellspring Capital Management LLC, Chairman of ~~Operations~~the Board of Directors Randall J. Fagundo......................... 42 President, Chief Executive Officer and Director Greg S. Feldman............................~~..........................~~ ~~F-3~~45 ~~Statements~~Managing ofPartner, ~~Stockholders'~~Wellspring ~~Equity~~Capital Management LLC and Director Pericles Navab............................. 34 President, Cadigan Investment Partners and Director Bruce W. Krysiak........................... 50 Chairman, EDABB, Inc.~~.............~~ ~~F-4~~and ~~Statements~~Executive ofChairman, ~~Cash~~Cadigan ~~Flows~~Investment Partners and Director W. John Cash...............................~~.................................................~~ ~~F-5~~54 ~~Notes~~Senior toVice ~~Consolidated~~President, Chief Financial ~~Statements~~Officer, Treasurer and Secretary Robert A. Kaslon...........................~~...................................~~ ~~F-6~~37 Senior Vice President of Merchandising

---------- William F. Dawson, Jr. has served as Chairman of the Board since February 2002. Mr. Dawson has been employed by Wellspring Capital Management LLC, a private equity firm, since May 2001. Mr. Dawson was employed by Whitney & Co., an investment management firm, where he served as Managing Director from May 2000 to April 2001. Prior to Whitney & Co., Mr. Dawson was employed by Donaldson, Lufkin & Jenrette, Inc. from September 1991 to April 2000. Randall J. Fagundo, a co-founder of the Company, has served as President and Chief Executive Officer since June 1999 and served as Senior Vice President and Chief Operating Officer from January 1999 to June 1999. Mr. Fagundo served as Secretary from May 1991 to June 1999 and as a director since February 2002. Mr. Fagundo served as Vice President of Operations from May 1991 to January 1999. Greg S. Feldman, has served as a director since February 2002. Mr. Feldman is co-founder and has been the Managing Partner of Wellspring Capital Management LLC since its inception in January 1995. Pericles Navab, has served as a director since February 2002. Mr. Navab is the founder and president of Cadigan Investment Partners, an investment firm specializing in management buyouts. Prior to Cadigan, Mr. Navab was a Principal at Arena Capital Partners, LLC, and investment holding company, from January 1999 to December 2000. Previously, Mr. Navab was a Principal at GarMark Partners, a private investment firm, from August 1996 to December 1999. Bruce W. Krysiak, has served as a director since February 2002. Mr. Krysiak joined Cadigan Investment Partners in January 2001 and serves as an Executive Chairman. Mr. Krysiak has served as Chairman of EDABB, Inc., an investment firm, for ten years and Executive Partner with Arena Capital Partners, LLC, an investment holding company, since October 1999. From April 1998 to March 1999, Mr. Krysiak served as the President, Chief Operating Officer and a director of Toys "R" Us, Inc., (NYSE:TOY), a toy retailing company. From January 1997 until April 1998, Mr. Krysiak served as the President and Chief Operating Officer of Dollar General Corporation, (NYSE:DG), a large retail merchandise company, and from April 1995 until May 1996 he served as Chief Operating Officer of the Circle K Corporation, a convenience store operator. Mr. Krysiak is a director of one of the portfolio companies of Cadigan. W. John Cash has served as Senior Vice President since January 1999, Secretary since June 1999 and Chief Financial Officer since July 1995. Prior to joining the Company he was Vice President and Chief Financial Officer of Kasler Holding Company, a diversified construction company, from May 1991 to March 1995. From July 1984 to April 1991, Mr. Cash served as a partner of KPMG LLP. Robert A. Kaslon has served as a Senior Vice President since May 1999. Mr. Kaslon served as Vice President of Operations from May 1997 to May 1999. From May 1994 to May 1997 Mr. Kaslon served as Director of Operations and Franchisee Relations. 21 SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act") requires the Company's directors and executive officers, and persons who own more than ten percent of a registered class of the Company's equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. To the Company's knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, during the fiscal year ended December 31, 2001, all Section 16(a) filing requirements applicable to its officers, directors and greater than ten percent beneficial owners were complied with. ITEM 11. EXECUTIVE COMPENSATION COMPENSATION OF DIRECTORS Director Compensation Prior to the Acquisition of the Company by ACMI Holdings, Inc. Prior to the acquisition of the Company by ACMI Holdings, Inc., each non-employee director of the Company received $8,000 of annual cash compensation, an initial grant of 15,000 shares of common stock upon election to the Board of Directors and an annual grant of options for 7,500 shares of common stock for service as a director each year after the first year of election. All non-employee directors also receive reimbursement for their reasonable out-of-pocket expenses related to attendance at Board meetings. In the fiscal year ended December 31, 2001, the total compensation paid to non-employee directors was $32,000. Prior to the acquisition of the Company by ACMI Holdings, Inc., each non-employee director of the Company was eligible to receive stock option grants under the 1995 Non-Employee Director Stock Option Plan (the "Directors' Plan"). Only non-employee directors of the Company or an affiliate of such directors (as defined in the Internal Revenue Code of 1986, as amended) were eligible to receive options under the Directors' Plan. Options granted under the Directors' Plan were intended by the Company not to qualify as incentive stock options under the Code. In connection with ACMI Holdings' acquisition of the Company, the Directors' Plan was terminated in February 2002. During 2001, the Company granted 30,000 options to non-employee directors of the Company. On February 11, 2002, all options granted under the Directors' Plan were terminated pursuant to the Agreement and Plan of Merger and the directors holding such options were paid the difference between $8.50 and the exercise price of such options. Director Compensation Following the Acquisition of the Company by ACMI Holdings, Inc. Following the acquisition of the Company by ACMI Holdings, Inc., the Company expects that each each non-employee director of the Company will receive $8,000 of annual cash compensation and reimbursement for their reasonable out-of-pocket expenses related to attendance at Board meetings. 22 SUMMARY COMPENSATION TABLE The following table shows for the fiscal years ended December 31, 2001, 2000 and 1999, compensation awarded or paid to, or earned by, the Company's Chief Executive Officer and its two other most highly compensated executive officers for the year ended December 31, 2001 (the "Named Executive Officers"):

~~DECEMBER~~LONG-TERM ~~31,~~COMPENSATION ~~2000~~ANNUAL ~~1999~~AWARDS COMPENSATION ------------ --------------------- ~~ASSETS~~SECURITIES ~~Current~~SALARY ~~assets:~~BONUS ~~Cash~~UNDERLYING ~~and~~ALL ~~cash~~OTHER ~~equivalents~~NAME ~~............................................................~~OF $PRINCIPAL ~~2,986~~POSITION YEAR ($)(1) ~~579 Trade accounts and other receivables, net ............................................ 608 691 Income tax receivable ................................................................~~ ($)(2~~,098~~) --OPTIONS ~~Inventories,~~(3) ~~net~~COMPENSATION ~~.....................................................................~~$(4) ~~10,126 14,806 Prepaid expenses and other assets .................................................... 1,800 2,260~~ --------- --------- ~~Total current assets ............................................................. 17,618 18,336~~ --------- ---- ------ Property and equipment, at cost: Vending machines ..................................................................... 67,906 53,079 Vehicles ............................................................................. 6,234 6,866 Office equipment, furniture and fixtures ............................................. 4,557 4,003 ------ --- --------- ~~78,697 63,948 Less accumulated depreciation ........................................................ (29,178) (20,305)~~ --------- --------- ~~Property~~Randall ~~and~~J. ~~equipment,~~Fagundo ~~net~~ .................~~.....................................~~ ~~49,519~~2001 43250,~~643~~000 ~~Placement fees~~129,398 ~~net~~-- ~~of accumulated amortization of $2~~8,~~339~~742 inPresident ~~2000~~ and ~~$1,090~~Chief inExecutive ~~1999 .... 2,114 930 Costs in excess of assets acquired and other intangible assets, net of accumulated amortization of $6,216 in~~ 2000 ~~and $3~~230,~~978~~733 in-- ~~1999 .................................... 36~~125,~~009~~000 387,~~247~~236 ~~Other~~Officer ~~assets, net of accumulated amortization of $871 in 2000 and $460 in~~ 1999 ~~.......... 2~~138,~~647~~533 ~~1,350 Deferred tax assets .....................................................................~~ -- 1150,~~628~~000 ~~---------~~9,977 ~~---------~~W. ~~Total~~John ~~assets~~Cash .......................~~..............................................~~ $2001 ~~107~~150,~~907~~000 ~~$ 104~~37,~~134~~471 ~~========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long~~-~~term~~- ~~debt .................................................... $~~ 7,~~233~~150 $Senior 2Vice President,~~463~~ ~~Accounts~~Chief ~~payable~~2000 ~~..................................................................... 6~~145,~~096~~222 ~~4,167~~-- ~~Accrued commissions .................................................................. 2~~50,~~122~~000 16,~~595~~979 ~~Other~~Financial ~~accrued expenses ............................................................... 1~~Officer,~~476~~ ~~744~~Treasurer ~~---------~~and ~~---------~~1999 ~~Total current liabilities ........................................................ 16~~138,~~927~~533 ~~8,969~~ --~~-------~~ --~~-------~~ ~~Long-term debt~~7,045 ~~net~~Secretary ofRobert ~~current portion~~ A.~~.................................................~~ ~~44,224~~Kaslon ~~50,230 Other liabilities~~ ...................~~....................................................~~ ~~449~~2001 239 Deferred tax liabilities ................................................................ 625 -- --------- --------- Total liabilities ................................................................ 62103,~~225~~333 5936,~~438~~434 --~~-------~~ ~~---------~~7,513 ~~Company~~Senior ~~obligated~~Vice ~~mandatorily~~President ~~redeemable preferred securities~~ of ~~subsidiary~~2000 ~~trust holding solely junior subordinated debentures ........................................ 15~~90,~~593~~000 1521,~~542~~039 ~~Stockholders' equity: Preferred stock~~5, ~~$.10 par value (Authorized 500 shares; none issued) ................. -- -- Common stock, $.01 par value (Authorized 20,~~000 ~~shares; issued and outstanding~~ 6,~~514~~708 ~~shares~~Merchandising ~~in 2000 and 6,480 in~~ 1999) ~~................................ 66 65 Additional paid-in-capital ........................................................... 22~~90,~~076~~000 ~~22,001 Retained earnings .................................................................... 7,947 7,088~~ --~~-------~~ --~~-------~~ ~~Total stockholders' equity ....................................................... 30~~8,~~089 29,154 --------- --------- Commitments Total liabilities and stockholders' equity ....................................... $ 107,907 $ 104,134 ========= =========~~050

---------- (1) Includes amounts deferred pursuant to Section 401(k) and 125 of the Internal Revenue Code of 1986, as amended. (2) Represents bonus earned during 2000 and paid in 2001 and the 2000 bonus was earned and paid during 2000. (3) Pursuant to the terms of the Agreement and Plan of Merger, the options were exercised as of February 11, 2002 and the Named Executive Officers received the difference between $8.50 and the exercise price of the options. (4) Includes value of Company provided automobile, health insurance premiums paid by the Company and funds contributed by the Company as matching contributions to the Named Executive Officers' 401(k) Plan account. STOCK OPTION GRANTS IN LAST FISCAL YEAR The Company did not grant any options to any of the Named Executive Officers during the fiscal year ended December 31, 2001. AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES The following table shows for the fiscal year ended December 31, 2001 certain information regarding options exercised and held at year-end by the Named Executive Officers:

~~YEAR~~NUMBER ~~ENDED~~OF ~~DECEMBER~~SECURITIES ~~31,~~VALUE ~~2000~~OF ~~1999~~UNDERLYING ~~1998~~UNEXERCISED ~~---------~~UNEXERCISED IN-THE-~~-------~~MONEY ~~---------~~OPTIONS ~~Revenue:~~OPTIONS ~~Vending~~AT ~~...........................................................~~SHARES $AT ~~127,076~~12/31/01 $12/31/01 ~~115,835~~ACQUIRED $VALUE ~~92,854~~EXERCISABLE/ ~~Franchise~~EXERCISABLE/ ~~and~~Name ~~other~~ON ~~...............................................~~EXERCISE(#) ~~2,681~~REALIZED($)(1)(3) ~~4,630~~UNEXERCISABLE(#) ~~4,857~~UNEXERCISABLE($)(2) ----~~-----~~ --------- -----~~----~~ ~~Total revenue ................................................. 129,757 120,465 97,711~~ --------- --------- --------- ~~Cost of revenue: Vending, excluding related depreciation and amortization .......... 83,282 77,100 60,066 Depreciation and amortization ..................................... 10,033 7,897 6,004~~ --------- --------- ---------- ~~Total~~Randall ~~cost of vending~~ J.~~........................................~~ ~~93,315 84,997 66,070 Franchise and other~~ Fagundo...........................~~....................~~ ~~1,936 3,104 3,108~~ --~~-------~~ --~~-------~~ ~~--------- Total cost of revenue ......................................... 95~~212,~~251 88~~500/62,~~101~~500 69834,~~178 --------- --------- --------- Gross profit .................................................. 34~~813/350,~~506~~312 ~~32,364 28,533 General and administrative expenses~~ W.~~.................................~~ ~~21,924~~John ~~22,141 17,526 Depreciation and amortization~~ Cash.................................~~.......~~ ~~3,156 3,527 1,887 Write off of costs in excess of assets acquired, severance and other costs .......................................................~~ -- ~~7,536~~ -- ~~--------- --------- --------- Operating earnings (loss) ..................................... 9~~45,~~426 (840) 9~~000/25,~~120~~000 ~~Interest expense~~214, ~~net ................................................ 7~~725/140,~~775~~125 ~~6,866~~Robert ~~3,368 --------- --------- --------- Earnings (loss) before income taxes and extraordinary loss~~ A.~~...~~ ~~1,651 (7,706) 5,752 Income tax (expense) benefit~~ Kaslon.............................~~............~~ ~~(627) 3,200 (1,854)~~ --~~-------~~ --~~-------~~ ~~--------- Earnings (loss) before extraordinary loss ..................... 1~~5,~~024 (4~~500/2,~~506)~~500 322,~~898 Extraordinary loss on debt refinancing~~113/14, net of income tax benefit of $101 ................................................... 165 -- -- --------- --------- --------- Net earnings (loss) ........................................... $ 859 $ (4,506) $ 3,898 ========= ========= ========= Basic earnings (loss) per share of common stock ............... $ 0.13 $ (0.70) $ 0.60 Diluted earnings (loss) per share of common stock ............. 0.13 (0.70) 0.58 Basic weighted average common shares .......................... 6,493 6,475 6,467 Diluted weighted average common shares ........................ 6,493 6,475 6,713012

---------- (1) Based on the fair market value of the common stock as of the date of exercise, minus the exercise price, multiplied by the number of shares acquired. (2) Based on the fair market value of the common stock as of December 31, 2001 of $8.23 per share, minus the exercise price of "in-the-money" unexercised options, multiplied by the number of shares represented by such options. 23 (3) Pursuant to the terms of the Agreement and Plan of Merger, the options were exercised as of February 11, 2002 and the Named Executive Officers received the difference between $8.50 and the exercise price of the options. CONSULTING AGREEMENT John A. Sullivan served as the non-executive Chairman of the Company's Board of Directors prior to his resignation pursuant to the acquisition of the Company by ACMI Holdings. The Company entered into a consulting agreement with Mr. Sullivan as of December 1, 2000 to render services to the Company as a member of the Company's Board of Directors through December 31, 2003 which consulting agreement was subsequently amended on July 31, 2001 (the "Consulting Agreement"). The Consulting Agreement provided that Mr. Sullivan would receive compensation of $100,000 as partial consideration for his past services to the Company. Commencing January 1, 2001, Mr. Sullivan was to receive compensation of $100,000 per year for his past and present services through December 31, 2003. In connection with the Consulting Agreement, Mr. Sullivan received a stock option to purchase 50,000 shares of the Company's common stock pursuant to the Company's Directors' Plan, effective November 21, 2000. Such option was granted with an exercise price of $2.625 per share, which was equal to the market price as of the date of grant and was immediately exercisable. The Consulting Agreement contains a provision that in the event Mr. Sullivan is terminated without cause, including after a change of control of the Company, the Company is obligated to pay Mr. Sullivan an amount equal to Mr. Sullivan's earned compensation plus an amount equal to the remaining amount payable under the Consulting Agreement. The Consulting Agreement also contains confidentiality and noncompete provisions that prohibit Mr. Sullivan from soliciting employees of the Company, engaging in business similar to the Company's or disclosing confidential information without the specific authorization of the Company's Board of Directors after the termination of the Consulting Agreement. In connection with the acquisition of the Company by ACMI Holdings, Mr. Sullivan resigned from the Company's Board of Directors. Accordingly, Mr. Sullivan received accelerated payment of approximately $200,000 under the Consulting Agreement. EMPLOYMENT AGREEMENTS The Company entered into employment agreements with its Chief Executive Officer and President, Randall J. Fagundo and Senior Vice President, Chief Financial Officer, Treasurer and Secretary, W. John Cash, (each an "Executive") as of December 1, 2000 and such agreements were subsequently amended on July 31, 2001 (the "Employment Agreements"). The Employment Agreement with Mr. Fagundo provides that commencing January 1, 2001 he will receive an annual salary of $250,000. Mr. Fagundo's annual salary will be increased to $275,000 on January 1, 2002, and to $300,000 on January 1, 2003. The Employment Agreement with Mr. Cash provides that commencing January 1, 2001 he will receive an annual salary of $150,000. In connection with the Employment Agreements, Mr. Fagundo received a stock option for 125,000 shares and Mr. Cash received a stock option for 50,000 shares of the Company's common stock pursuant to the Company's Amended and Restated Stock Option Plan, effective November 21, 2000. Each of these options had an exercise price of $2.625 per share, which was equal to the market price as of the date of grant and were subject to vesting over a two year period. The Employment Agreements with Mr. Fagundo and Mr. Cash expire on December 31, 2003 and June 30, 2002, respectively. The Employment Agreements also provide that each Executive will be entitled to (i) participate in any employee benefits plans the Company makes available to its other employees and (ii) use of an automobile provided by the Company. Each Employment Agreement also provides that the Company may terminate the Executive's employment at any time for cause and with 90 days written notice without cause. If the Executive is terminated without cause, the Company is obligated to pay the Executive's earned salary plus an amount equal to one times Mr. Fagundo's current salary and one-half of Mr. Cash's current salary. The Employment Agreements also provide that after a change of control of the Company, if the Executive is terminated without cause, if the Executive terminates the Employment Agreement for good reason or requires the Executive to move outside the Boulder, Colorado area then the Executive will be entitled to receive a cash amount equal to three times and one and one-half times the current annual base salary for Mr. Fagundo and Mr. Cash, respectively. The Employment Agreements also contain confidentiality and noncompete provisions which prohibit the Executives from soliciting employees of the Company, engaging in business similar to the Company's or disclosing confidential information without the specific authorization of the Company's Board of Directors after the termination of the Executive's employment with the Company. 24 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION During the Company's fiscal year ended December 31, 2001, the Company's Compensation Committee consisted of Messrs. Krysiak, Bermingham and Sullivan. Following the acquisition of the Company by ACMI Holdings, Inc., the Company's Compensation Committee consists of Messrs. Dawson, Feldman and Krysiak. No member of the Compensation Committee of the Company, as constituted before or after the acquisition by ACMI Holdings, serves as a member of the Board of Directors or compensation committee of any entity that has one or more executive officers serving as a member of the Company's Board of Directors or Compensation Committee. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information regarding the ownership of the Company's common stock as of March 22, 2002 by: (i) each director; (ii) each of the Named Executive Officers; (iii) all Named Executive Officers and directors of the Company as a group; and (iv) all those known by the Company to be beneficial owners of more than five percent of its common stock. Unless otherwise indicated, the address for each of the persons listed in the table is c/o American Coin Merchandising, Inc. 5660 Central Avenue, Boulder, Colorado 80301.

~~UNEARNED~~BENEFICIAL ~~STOCK~~OWNERSHIP ~~TOTAL~~(1) ~~ADDITIONAL OPTION STOCK~~- ~~COMMON PAID~~-IN-------- ~~COMPEN~~------------- ~~RETAINED~~NUMBER ~~HOLDERS'~~OF ~~STOCK~~PERCENT ~~CAPITAL~~OF ~~SATION~~BENEFICIAL ~~EARNINGS~~OWNER ~~EQUITY~~SHARES TOTAL -------- -------- -- -------- -------- -----~~---~~ ~~DECEMBER~~ACMI 31Holdings, ~~1997~~Inc. (2)...................................................... $1,000 65100% $c/o ~~22,352~~Wellspring $Capital ~~(21)~~Management $LLC ~~7,696~~620 $Fifth 30Avenue,~~092~~ ~~Acquisition~~Suite of216 70New York,~~000~~ ~~warrants~~New toYork ~~purchase~~10020-1571 ~~common~~William ~~stock~~F. Dawson, Jr....................... ~~-- (492) -- -- (492) Amortization of deferred compensation~~ ......... ~~-- -- 19 -- 19 Exercise of employee stock options~~ ............ ~~-- 131 -- -- 131 Termination of employee stock options~~ ............ -- ~~(2) 2~~ -- --Randall ~~Net~~J. ~~earnings~~ Fagundo........................................................... -- -- --Greg ~~3,898~~S. ~~3,898 -------- -------- -------- -------- -------- DECEMBER 31, 1998~~ Feldman................................ ~~65 21,989 -- 11,594 33,648 Issuance of 5,125 shares of common stock in employee stock purchase plan~~ .............................. -- 12 -- --Pericles ~~12 Net loss~~ Navab............................................................... -- -- --Bryce ~~(4,506)~~W. ~~(4,506) -------- -------- -------- -------- -------- DECEMBER 31, 1999~~ Krysiak................................ ~~65 22,001 -- 7,088 29,154 Issuance of 33,725 shares of common stock in employee stock purchase plan~~ ............................. ~~1 75~~ -- -- 76W. ~~Net~~John ~~earnings~~ Cash................................................................. -- -- --Robert ~~859~~A. ~~859 -------- -------- -------- -------- -------- DECEMBER 31, 2000~~ Kaslon............................................................. $-- 66-- $All ~~22,076~~executive $officers --and $directors ~~7,947~~as $a ~~30,089~~group ~~========~~(7 ~~========~~persons) ~~========~~................. ~~========~~-- ~~========~~--%

---------- (1) Applicable percentages are based on 1,000 shares outstanding on March 22, 2002, adjusted as required by rules promulgated by the SEC. (2) The Company became a wholly owned subsidiary of ACMI Holdings, Inc., a Delaware corporation, on February 11, 2002. Pursuant to the terms of the Guarantee and Collateral Agreement, dated as of February 11, 2002, made by the Company and ACMI Holdings, Inc., in favor of Madison Capital Funding LLC, as agent for the lenders under the Company's senior secured credit facility, ACMI Holdings has pledged all of the common stock of the Company as collateral to secure the Company's obligations under the senior secured credit facility. Accordingly, upon the occurrence of an even of default under the senior secured credit facility, ACMI Holdings' ownership in the Company's common stock would transfer to Madison Capital as agent for the lenders resulting in a change of control of the Company. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Acquisition of the Company by ACMI Holdings, Inc. and Related Transactions On September 9, 2001, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with ACMI Holdings, Inc. and Crane Mergerco Inc., a wholly owned subsidiary of ACMI Holdings, Inc. ("Merger Sub"). On February 11, 2002, in accordance with the terms of the Merger Agreement, Merger Sub merged with and into the Company with the Company as the surviving corporation (the "Merger"). By virtue of the Merger, the Company 25 became a wholly owned subsidiary of ACMI Holdings, Inc. As a result of the Merger, each share of the Company's common stock outstanding immediately prior to the Merger was converted into the right to receive $8.50 in cash and each option to purchase shares of the Company's common stock was converted into the right to receive an amount in cash equal to the number of shares of the Company's common stock subject to such option multiplied by the excess, if any, of $8.50 over the exercise price of such stock option. The Company retained Batchelder & Partners, Inc., an investment banking and financial advisory firm, to act as the Company's financial advisor in connection with the Merger and the transactions contemplated by the Merger Agreement. John A. Sullivan served as chairman of the Company's Board of Directors prior to the Merger and is also employed by Relational Investors, an affiliate of Batchelder & Partners. Batchelder & Partners received a fee of approximately $1.18 million for services rendered in connection with the Merger. Mr. Sullivan was also party to a consulting agreement with the Company regarding his service as a member of the Company's Board of Directors through December 31, 2003. Pursuant to the terms of the Merger Agreement, Mr. Sullivan resigned from the Company's Board of Directors and his consulting agreement with the Company terminated prior to the Merger. Accordingly, Mr. Sullivan received accelerated payment of approximately $200,000 under his consulting agreement. The summary of Mr. Sullivan's consulting agreement contained in Item 11. Executive Compensation - Consulting Agreement is incorporated herein by reference. In connection with the Merger, the Company entered into a Services and Fee Agreement with Wellspring Capital Management LLC and Knightsbridge Holdings, LLC on February 11, 2002 (the "Fee Agreement"). See Exhibit. Pursuant to the terms of the Fee Agreement, the Company will pay an annual consulting fee of $400,000 in arrears in equal monthly installments and reimburse Wellspring and Knightsbridge for all reasonable out-of-pocket costs and expenses incurred in connection with the performance of their consulting services. The consulting fee is allocated 66 2/3% to Wellspring and 33 1/3% to Knightsbridge. The Fee Agreement further provides that the Company will not pay any portion of the consulting fee to the extent that such payment conflicts with the Company's covenants pursuant to its senior secured credit facility or senior subordinated notes. However, such unpaid fees will continue to accrue, without interest, and the Company will pay such fees if and when such payment is no longer prohibited under the senior secured credit facility or senior subordinated notes. Pursuant to the terms the Fee Agreement, the Company has paid to date closing fees of $1,350,000 and $650,000 to Wellspring and Knightsbridge, respectively. The Fee Agreement further provides that the Company shall pay all fees and expenses payable to the lenders pursuant to the terms of the senior secured credit facility and senior subordinated notes. Any other consulting or similar fees that may be payable under the Fee Agreement are allocated 65% to Wellspring and 35% to Knightsbridge. Knightsbridge's entitlement to the fees set forth in the Fee Agreement is contingent upon its continuous ownership of certain warrants to purchase shares of ACMI Holdings and its maintenance of a representative on the Board of Directors of ACMI Holdings. Under the terms of the Fee Agreement, the Company agrees to indemnify Wellspring and Knightsbridge and their respective representatives in connection with any liabilities or judgments with respect to the Fee Agreement. William F. Dawson, Jr., a director of the Company following the Merger, is a partner at Wellspring. Greg S. Feldman, a director of the Company following the Merger, is the managing partner at Wellspring. Wellspring holds a majority interest in ACMI Holdings, of which the Company is a wholly owned subsidiary. Bruce W. Krysiak, a director of the Company, holds an interest in Knightsbridge. Pericles Navab, a director of the Company following the Merger, holds an interest in Knightsbridge. Knightsbridge holds an interest in ACMI Holdings, which is controlled by Wellspring Capital Management LLC. Knightsbridge has assigned its rights and duties under the Fee Agreement to its affiliate, Cadigan Investment Partners. Mr. Krysiak is the Executive Chairman of Cadigan Investment Partners and Mr. Navab is its President. Other Transactions J. Gregory Theisen was a director of the Company prior to his resignation pursuant to the Merger Agreement. The Company purchases certain kiddie rides from Theisen Vending, Inc., which is wholly owned by Thomas N. Theisen, the brother of J. Gregory Theisen. The Company purchased approximately $662,000 of kiddie rides and related parts from Theisen Vending, Inc. in the fiscal year ended December 31, 2001. The Company has also entered into employment agreements with Randall J. Fagundo and W. John Cash. The summary of the terms of the Company's employment agreements with Messrs. Fagundo and Cash contained in Item 11. Executive Compensation - Employments is incorporated herein by reference. 26 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Exhibits 2.1+ -- Agreement and Plan of Merger, dated as of September 9, 2001, among Crane Mergerco Holdings, Inc., a Delaware corporation, Crane Mergerco Inc., a Delaware corporation and Registrant. 2.2+ -- Form of Voting Agreement, dated as of September 9, 2001, among Crane Mergerco Holdings, Inc., a Delaware corporation and each of Richard P. Bermingham, Randall J. Fagundo, Richard D. Jones, John A. Sullivan and J. Gregory Theisen. 3.1++ -- Certificate of Incorporation of the Registrant. 3.3 -- Certificate of Merger of the Registrant. 3.4 -- Restated Certificate of Incorporation. 3.5 -- Amended and Restated Bylaws of the Registrant. 4.1++ -- Reference is made to Exhibits 3.1 through 3.5. 4.2 -- Specimen Stock Certificate. 4.3* -- Certificate of Trust of American Coin Merchandising Trust I. 4.4* -- Trust Agreement of American Coin Merchandising Trust I. 4.5* -- Amended and Restated Trust Agreement of American Coin Merchandising Trust I. 4.6* -- Form of Junior Subordinated Indenture between the Registrant and Wilmington Trust Company, as Trustee. 4.7* -- Form of Guarantee Agreement with respect to Trust Preferred Securities of American Coin Merchandising Trust I. 4.8* -- Form of Agreement as to Expenses and Liabilities between the Registrant and American Coin Merchandising Trust I. 4.9* -- Form of Certificate Evidencing Trust Preferred Securities. 4.10* -- Form of Certificate Evidencing Trust Common Securities. 4.11* -- Form of Ascending Rate Junior Subordinated Deferrable Interest Debenture. 4.12 -- 17% Senior Subordinated Notes Due 2009 between the Registrant and each of the parties listed on the attached schedule, dated February 11, 2002. 10.1++ -- Form of Indemnity Agreement to be entered into between the Registrant and its directors and executive officers. 10.35# -- Commercial Lease Amendment Agreement, between the Registrant and Technical Building Company, dated as of November 20, 1997. 10.47~ -- Premier Amusement Vendor Agreement, dated January 28, 2000, between the Registrant and Best Vendor Co. 10.48~ -- Addendum to Premier Amusement Vendor Agreement, dated January 28, 2000, between the Registrant and Best Vendor Co. 10.49~ -- Addendum #2 to Premier Amusement Vendor Agreement, dated February 14, 2000, between the Registrant and Best Vendor Co. 10.50= -- Amusement Vending Agreement, effective as of July 1, 2000, between the Registrant and Denny's Inc. 10.51= -- Other Income Supplier Agreement--Coin Operated Equipment, dated August 1, 2000 between the Registrant and Wal-Mart Stores, Inc. 10.54@X -- Executive Employment Agreement dated December 1, 2000, between the Registrant and Randall J. Fagundo. 10.55@X -- Executive Employment Agreement dated December 1, 2000, between the Registrant and W. John Cash. 10.57$X -- Amendment to Executive Employment Agreement dated December 1, 2000, between the Registrant and Randall J. Fagundo.

27 10.58$X -- Amendment to Executive Employment Agreement dated December 1, 2000, between the Registrant and W. John Cash. 10.60 -- Services and Fee Agreement, dated February 11, 2002, between and among the Registrant, Wellspring Capital Management LLC and Knightsbridge Holdings, LLC d/b/a Krysiak Navab & Co. 10.61 -- Credit Agreement, dated February 11, 2002, between and among the Registrant and Madison Capital Funding LLC and The Royal Bank of Scotland PLC. 10.62 -- Guarantee and Collateral Agreement, dated February 11, 2002, between and among the Registrant, ACMI Holdings and Audax Mezzanine Fund, L.P., Royal Bank of Scotland PLC and Upper Colombia Capital Company, LLC. 10.63 -- Purchase Agreement among ACMI Holdings, Inc., the Registrant, as Issuer and the Purchasers named therein, dated as of February 11, 2002.

---------- + Incorporated by reference to the Company's Current Report on Form 8-K, dated September 10, 2001. ++ Incorporated by reference to the Company's Registration Statement on Form SB-2, File No. 33-95446-D. * Incorporated by reference to the Company's Registration Statement on Form S-3, File No. 333-60267. # Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1997. ** Incorporated by reference to the Company's Current Report on Form 8-K, dated April 29, 1999. ~ Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2000. = Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2000. @ Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000. $ Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2001. X Indicates management contract or compensatory plan, contract or arrangement. (b) REPORTS ON FORM 8-K. None. 28 AMERICAN COIN MERCHANDISING, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE YEARS ENDED DECEMBER 31, 2001

~~YEAR~~PAGE ~~ENDED DECEMBER 31, 2000 1999 1998~~ ----~~----~~ ~~--------~~Independent ~~--------~~Auditors' ~~Operating activities: Net earnings (loss)~~ Report....................................................... ~~$ 859 $ (4,506) $ 3,898 Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation and amortization~~ .........~~................................~~ ~~13,699 11,950 8,092 Write off of costs in excess of assets acquired, severance and other costs .........................................................~~ F--1 ~~7,536~~Consolidated --Financial Compensation expense related to stock options ......................... -- -- 19 Deferred income tax expense (benefit) ................................. 2,725 (3,200) 925 Changes in operating assets and liabilities, net of acquisitionsStatements: ~~Trade~~Balance ~~accounts and other receivables~~ Sheets.............................. ~~(2,015) 1,123 (878) Inventories~~ ...........................................~~............~~ ~~4,680 (2,227) (4,046) Prepaid expenses and other assets ................................. 84 (1,223) (2,295) Income taxes payable ..............................................~~ F-~~- -- (317) Accounts payable, accrued expenses and other liabilities .......... 3,398 (~~2~~,086)~~ ~~2,995~~Statements ~~-------- -------- -------- Net cash provided by operating activities ........................... 23,430 7,367 8,393 -------- -------- -------- Investing activities: Acquisitions~~ of ~~property and equipment, net~~ Operations............................... ~~(15,618) (8,267) (23,475) Acquisitions of franchisees and others~~ ................................~~....~~ F--3 ~~(180)~~Statements (43,036) Placement fees ............................................................ (2,441) (828) (746) -------- -------- -------- Net cash used in investing activities ............................... (18,059) (9,275) (67,257) -------- -------- -------- Financing activities: Issuance of ~~company~~Stockholders' ~~obligated mandatorily redeemable preferred securities, net of discount and issuance costs~~ Equity................ ~~-- -- 15,479 Net borrowings (payments) on credit facility, net of issuance costs~~ ....... ~~(576) 2,386 46,610 Principal payments on long-term debt~~ ..............................~~........~~ ~~(2,464) (2,158) (1,872) Principal payments on notes payable to Control Group ......................~~ F--4 --Statements ~~(674) Acquisition~~ of ~~warrants~~Cash Flows................................................... ~~-- -- (492) Issuance of common stock, net of offering costs~~ ............~~...............~~ ~~76 12 131~~ F-~~-------~~5 ~~--------~~Notes ~~--------~~to ~~Net~~Consolidated ~~cash~~Financial ~~(used) provided by financing activities~~ Statements.................... ~~(2,964) 240 59,182 -------- -------- -------- Net increase (decrease) in cash and cash equivalents~~ ................ ~~2,407 (1,668) 318 Cash and cash equivalents at beginning of year~~ .........~~......................~~ ~~579 2,247 1,929~~ F-~~------- -------- -------- Cash and cash equivalents at end of year ..................................... $ 2,986 $ 579 $ 2,247 ======== ======== ========~~6

All schedules are omitted because of the absence of conditions under which they are required or because the required information is provided in the financial statements or notes thereto. 29 Independent Auditors' Report The Board of Directors and Stockholders American Coin Merchandising, Inc.: We have audited the accompanying consolidated balance sheets of American Coin Merchandising, Inc. and subsidiaries ("Company") as of December 31, 2001 and 2000, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2001. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of American Coin Merchandising, Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Boulder, Colorado February 12, 2002 F-1 AMERICAN COIN MERCHANDISING, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE DATA)

~~YEAR ENDED~~ DECEMBER 31, 2001 2000 ~~1999~~---------- ~~1998~~---------- ASSETS Current assets: Cash and cash equivalents ........................................................... $ 4,066 $ 2,986 Trade accounts and other receivables ................................................ 738 608 Income tax receivable ............................................................... 725 2,098 Inventories ......................................................................... 11,981 10,126 Prepaid expenses and other assets ................................................... 2,736 1,800 ---------- ---------- Total current assets ............................................................ 20,246 17,618 ---------- ~~Cash~~---------- ~~paid~~Property ~~during~~and ~~the~~equipment, ~~year~~at cost: ~~Interest~~Vending machines .................................................................... 71,758 67,906 Vehicles ............................................................................ 5,683 6,234 Office equipment, furniture and fixtures ............................................ 5,534 4,557 ---------- ---------- 82,975 78,697 Less accumulated depreciation ....................................................... (38,943) (29,178) ---------- ---------- Property and equipment, net ..................................................... 44,032 49,519 Placement fees, net of accumulated amortization of $4,758 7in 2001 and $2,~~172~~339 in 2000 ... 2,218 2,114 Costs in excess of assets acquired and other intangible assets, net of accumulated amortization of $8,481 in 2001 and $6,~~914~~216 in 2000 ................................... 34,660 36,009 Other assets, net of accumulated amortization of $1,274 in 2001 and $871 in 2000 ....... 2,~~588~~206 ~~Income~~2,647 ~~taxes~~---------- ---------- Total assets .................................................................... 69$ 90103,362 1$ 107,~~803~~907 ~~Significant~~========== ~~noncash~~========== ~~investing~~LIABILITIES ~~and~~AND ~~financing~~STOCKHOLDERS' ~~activities~~EQUITY Current liabilities: ~~Notes~~Current portion of long-term debt ................................................... $ 7,700 $ 7,233 Accounts payable ~~issued~~.................................................................... ~~for~~4,322 ~~acquisitions~~6,096 Accrued commissions ................................................................. 2,766 2,122 Other accrued expenses .............................................................. 1,807 1,476 ---------- ---------- Total current liabilities ....................................................... 16,595 16,927 ---------- ---------- Long-term debt, net of ~~franchisees~~current ~~and~~portion ~~others~~................................................. 37,276 44,224 Other liabilities ...................................................................... 627 449 Deferred tax liabilities ............................................................... 1,457 625 ---------- ---------- 5Total liabilities ............................................................... 55,~~490~~955 ~~Earn~~62,225 -~~out~~--------- ~~and~~---------- ~~hold~~Company ~~backs~~obligated ~~related~~mandatorily toredeemable ~~acquisition~~preferred securities of subsidiary trust holding solely junior subordinated debentures ....................................... 15,644 15,593 Stockholders' equity: Preferred stock, $.10 par value (Authorized 500 shares; none issued) ................ -- -- Common stock, $.01 par value (1Authorized 20,~~442)~~000 2shares; issued and outstanding 6,~~500~~538 shares in 2001 and 6,514 shares in 2000 ......................... 66 66 Additional paid-in-capital .......................................................... 22,136 22,076 Retained earnings ................................................................... 9,561 7,947 ---------- ---------- Total stockholders' equity ...................................................... 31,763 30,089 ---------- ---------- Commitments Total liabilities and stockholders' equity ...................................... $ 103,362 $ 107,907 ========== ==========

See accompanying notes to consolidated financial statements. F-2 AMERICAN COIN MERCHANDISING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)

YEAR ENDED DECEMBER 31, 2001 2000 1999 ---------- ---------- ~~Senior~~---------- ~~secured~~Revenue: ~~credit~~Vending ~~facilities~~........................................................... ~~(see~~$ ~~note~~139,670 4)$ 127,076 $ 115,835 Franchise and other ............................................... $2,257 502,~~224~~681 $4,630 48---------- ---------- ---------- Total revenue ................................................. 141,~~996~~927 ~~Notes~~129,757 ~~payable~~120,465 to---------- ~~former~~---------- ~~franchisees~~---------- ~~and~~Cost ~~others~~of revenue: Vending, ~~due~~excluding inrelated ~~monthly~~depreciation and ~~quarterly~~amortization ~~installments~~.......... ~~with~~92,768 ~~interest~~83,282 ~~ranging~~77,100 ~~from~~Depreciation 8%and toamortization ~~9%;~~..................................... ~~due~~11,990 in10,033 ~~2001~~7,897 ~~secured~~---------- by---------- ~~certain~~---------- ~~property~~Total ~~and~~cost ~~equipment~~of vending ......................................... 104,758 93,315 84,997 Franchise and other ............................................... 1,~~233~~921 1,936 3,~~697~~104 ---------- ---------- ---------- Total ~~long~~cost of revenue ......................................... 106,679 95,251 88,101 -~~term~~--------- ~~debt~~---------- ---------- Gross profit .................................................. 35,248 34,506 32,364 General and administrative expenses .................................. 5123,~~457~~386 5221,~~693~~924 ~~Less~~22,141 ~~current~~Depreciation ~~portion~~and amortization ........................................ 3,132 3,156 3,527 Write off of costs in excess of assets acquired, severance and other costs ....................................................... (-- -- 7,~~233~~536 ---------- ---------- ---------- Operating earnings (loss) ..................................... 8,730 9,426 (840) Interest expense, net ................................................ 6,127 7,775 6,866 ---------- ---------- ---------- Earnings (loss) before income taxes and extraordinary loss .... 2,~~463~~603 1,651 (7,706) Income tax (expense) benefit ......................................... (989) (627) 3,200 ---------- ---------- ~~Long~~-~~term~~--------- Earnings (loss) before extraordinary loss ..................... 1,614 1,024 (4,506) Extraordinary loss on debt refinancing, net of ~~current~~income ~~portion~~tax benefit of $101 ................................................... -- 165 -- ---------- ---------- ---------- Net earnings (loss) ........................................... $ 441,~~224~~614 $ 50859 $ (4,~~230~~506) ========== ========== ========== Basic earnings (loss) per share of common stock ............... $ 0.25 $ 0.13 $ (0.70) Diluted earnings (loss) per share of common stock ............. 0.24 0.13 (0.70) Basic weighted average common shares .......................... 6,526 6,493 6,475 Diluted weighted average common shares ........................ 6,729 6,493 6,475

See accompanying notes to consolidated financial statements. F-3 AMERICAN COIN MERCHANDISING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE DATA)

~~YEAR~~TOTAL ~~ENDING~~ADDITIONAL STOCK- COMMON PAID-IN RETAINED HOLDERS' STOCK CAPITAL EARNINGS EQUITY ------------ ------------ ------------ ------------ DECEMBER 31, ~~2001~~1998 ................................ $ 765 $ 21,~~233~~989 ~~2002~~$ 11,594 $ 33,648 Issuance of 5,125 shares of common stock in employee stock purchase plan ............. -- 12 -- 12 Net loss ...................................... 8-- -- (4,~~000~~506) ~~2003~~(4,506) ------------ ------------ ------------ ------------ DECEMBER 31, 1999 ................................ 1065 22,~~000~~001 ~~2004~~7,088 29,154 Issuance of 33,725 shares of common stock in employee stock purchase plan ............. 1 75 -- 76 Net earnings .................................. 12-- -- 859 859 ------------ ------------ ------------ ------------ DECEMBER 31,~~400~~ ~~2005~~2000 ................................ 1366 22,~~824~~076 7,947 30,089 Issuance of 21,722 shares of common stock in employee stock purchase plan ............. -- 56 -- 56 Exercise of employee stock options ............ -- 4 -- 4 Net earnings .................................. -- -- 1,614 1,614 ------------ ------------ ------------ ------------ DECEMBER 31, 2001 ................................ $51 66 $ 22,~~457~~136 $ 9,561 $ 31,763 ============ ============ ============ ============

See accompanying notes to consolidated financial statements. F-4 AMERICAN COIN MERCHANDISING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)

YEAR ENDED DECEMBER 31, 2001 2000 1999 ~~1998~~ ---------- ---------- ---------- ~~CURRENT~~Operating ~~Federal~~activities: Net earnings (loss) ......................................................... $( 1,~~911)~~614 $ 859 $ (4,506) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation and amortization ........................................... 15,637 13,699 11,950 Write off of costs in excess of assets acquired, severance and other costs ........................................................... -- $-- ~~785~~7,536 ~~State~~Deferred income tax expense (benefit) ................................... 944 2,725 (~~187~~3,200) Changes in operating assets and liabilities, net of acquisitions: Trade accounts and other receivables ................................ 1,099 (2,015) 1,123 Inventories ......................................................... (1,809) 4,680 (2,227) Prepaid expenses and other assets ................................... (971) 84 (1,223) Accounts payable, accrued expenses and other liabilities ............ (751) 3,398 (2,086) ---------- ~~144~~---------- ---------- Net cash provided by operating activities ............................. 15,763 23,430 7,367 ---------- ---------- ---------- Investing activities: Acquisitions of property and equipment, net ................................. (4,857) (15,618) (8,267) Acquisitions of franchisees and others ...................................... (273) -- (180) Placement fees .............................................................. (2,~~098~~517) (2,441) (828) ---------- ~~929~~---------- ---------- Net cash used in investing activities ................................. (7,647) (18,059) (9,275) ---------- ---------- ~~DEFERRED~~---------- ~~Federal~~Financing activities: Net (payments) borrowings on credit facility, net of issuance costs ......... (5,724) (576) 2,386 Principal payments on long-term debt ........................................ (1,372) (2,~~438~~464) (2,~~812~~158) ~~779~~Issuance ~~State~~of common stock, net of offering costs ............................. ~~287~~60 76 12 ---------- ---------- ---------- Net cash provided by (~~388~~used in) ~~146~~financing activities ................... (7,036) (2,964) 240 ---------- ---------- ---------- Net increase (decrease) in cash and cash equivalents .................. 1,080 2,~~725~~407 (31,~~200~~668) ~~925~~Cash and cash equivalents at beginning of year ................................. 2,986 579 2,247 ---------- ---------- ---------- $Cash ~~627~~and cash equivalents at end of year ....................................... $(3 4,~~200)~~066 $ 12,~~854~~986 $ 579 ========== ========== ==========

See accompanying notes to consolidated financial statements. F-5 AMERICAN COIN MERCHANDISING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 AND 1999 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION American Coin Merchandising, Inc., d/b/a Sugarloaf Creations, Inc. and American Coin Merchandising Trust I (the "Company") and its franchisees own and operate over 14,000 coin-operated amusement vending machines. These machines dispense plush toys, watches, jewelry, novelties, and other items. The Company's amusement vending machines are placed in supermarkets, mass merchandisers, bowling centers, truck stops, bingo halls, bars, restaurants, warehouse clubs and similar locations. At December 31, 2001, the Company had 34 field offices with operations in 47 states. The Company also sells products to franchisees. At December 31, 2001, there were 9 franchisees operating in 12 territories. All significant intercompany balances and transactions have been eliminated in consolidation. See note 15. 2. ACQUISITIONS During 2001, the Company acquired certain assets and the business operations of one of its franchises for approximately $1,125,000. Of this amount, $487,000 was paid in cash with the balance to be paid over a three-year period in accordance with the terms of the promissory note issued in connection with the acquisition. The Company also assumed certain equipment leases in connection with the acquisition. The Company has recorded approximately $886,000 of costs in excess of assets acquired as a result of this acquisition that was accounted for using the purchase method of accounting. During 1999, the Company acquired certain assets and the business operations of one of its franchisees for approximately $180,000 in cash. The Company has recorded approximately $159,000 of costs in excess of assets acquired as a result of this acquisition that was accounted for using the purchase method of accounting. During the third quarter of 1999, the Company renegotiated a major contract that was originally assumed with the acquisition of Plush 4 Play. Company-owned equipment and personnel replaced the equipment and group operators previously utilized by Plush 4 Play to service these account locations; therefore, substantially all of the assets and operations obtained in the Plush 4 Play acquisition no longer have value to the Company. Accordingly, the remaining $6.3 million of net costs in excess of assets acquired and other costs associated with the Plush 4 Play acquisition were written off. All of the acquisitions were accounted for by the purchase method. Results of operations for all of these acquisitions are included in the consolidated financial statements from the respective acquisition dates forward. The pro forma difference between revenue and net earnings (loss) and actual is not material. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES VENDING Vending revenue represents cash receipts from customers using amusement vending machines and is recognized when collected. The cost of vending is comprised primarily of the cost of products vended through the machines, the servicing of machines and commissions paid to retail locations. FRANCHISE ROYALTIES Typically, franchisees are required to pay continuing royalties ranging from 2% to 5% of gross machine revenue. INCOME TAXES The Company accounts for income taxes under the asset and liability method of accounting for income taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. Deferred tax assets and liabilities are measured using enacted tax rates expected to be in effect for the year in which those temporary differences are expected to be recovered or settled. The effects on deferred tax assets and liabilities of a change in tax rates are recognized in income in the period that includes the enactment date. ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and F-6 AMERICAN COIN MERCHANDISING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to income taxes, inventory, property and equipment, costs in excess of assets acquired and other intangible assets, and placement fees and other assets. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ significantly from those estimates. CASH EQUIVALENTS The Company considers as cash equivalents all highly liquid investments with an original maturity of three months or less. INVENTORIES Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method. Inventories consist of purchased items ready for resale or use in vending operations. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation is calculated on the straight-line method over the estimated useful lives of the assets that range from 3 to 10 years. PLACEMENT FEES Placement fees are stated at cost and amortized on the straight-line basis over the term of the related contract. COSTS IN EXCESS OF ASSETS ACQUIRED Costs in excess of assets acquired represent the purchase amount paid in excess of the fair value of the tangible net assets acquired and is amortized using the straight-line method over 20 years. The Company assesses the impairment of costs in excess of assets acquired whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers important which could trigger an impairment review include significant underperformance relative to expected historical or projected future operating results, changes in the manner of our use of the acquired assets or the strategy for our overall business and negative industry or economic trends. IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF The Company reviews its long-lived assets and intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to the future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets. EARNINGS PER SHARE The Company discloses both basic and diluted earnings per share. Basic and diluted earnings per share are computed by dividing earnings (loss) by the weighted average number of common shares outstanding during the period and by all dilutive potential common shares outstanding during the year, respectively. RECLASSIFICATIONS Certain 1999 amounts were reclassified to conform to the December 31, 2000 presentation. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION A schedule of supplemental cash flow information follows (in thousands):

YEAR ENDED DECEMBER 31, 2001 2000 1999 ~~1998~~ -------- -------- -------- ~~Expected~~Cash ~~tax~~paid ~~expense~~during ~~(benefit) at~~ the ~~federal~~year: ~~statutory~~Interest ~~rate~~ ..... ~~$ 562 $(2,620) $ 1,956 State income taxes, net of federal taxes~~ ......................... ~~65 (305) 228 Change in valuation allowance~~ .............................~~.......~~ --$ ~~(270)~~5,451 ~~(270)~~$ ~~Other~~7,172 ~~net~~$ 6,914 Income taxes ....................................................... --35 ~~(5)~~69 ~~(60)~~90 Significant noncash investing and financing activities: Notes payable issued for acquisitions of franchisees and others .... 615 --~~-----~~ --~~-----~~ Earn-~~------~~out $and ~~627~~hold ~~$(3,200)~~backs $related ~~1,854~~to ~~=======~~acquisition ~~=======~~..................... ~~=======~~-- -- (1,442)

F-7 AMERICAN COIN MERCHANDISING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 4. CREDIT FACILITY In December 2000, the Company refinanced its $50 million reducing revolving loan agreement and replaced it with a $55 million senior secured credit facility. As a result of the refinancing, the Company recorded an after-tax extraordinary loss of $165,000, or $0.03 per diluted share, related to the write-off of loan origination fees related to the previous credit facility. The Company has a $55.0 million senior secured facility comprised of a $10.0 million revolving credit facility and a $45.0 million term loan. Under the revolving credit facility, the Company may borrow up to $10 million through December 2003 and at December 31, 2001 there was a principal amount of approximately $4.0 million outstanding and $6.0 million available under the revolving credit facility. Under the $45.0 million term loan facility, the Company is required to make quarterly principal installments that increase in amount over the four and one half year term of the facility. The revolving credit facility and term loan bear interest at a floating rate, at the Company's option, equal to either LIBOR plus the applicable margin or a base rate that is equal to the higher of the prime rate or the federal funds rate plus one-half percent plus the applicable margin. The effective rate of interest on both facilities at December 31, 2001 was 5.5%. The credit facility provides that certain financial ratios be met and places restrictions on, among other things, the incurrence of additional debt financing and the payment of dividends on common stock. The Company was in compliance with such financial ratios and restrictions at December 31, 2001. 5. LONG-TERM DEBT Long-term debt consists of the following (in thousands):

DECEMBER 31, 2001 2000 ~~1999~~ ---------- ------- ~~DEFERRED TAX ASSETS: Costs in excess of assets acquired~~-~~basis~~-- ~~and~~Senior ~~amortization~~secured ~~differences~~credit ~~.....~~facilities $(see ~~306~~note $4) ~~331 Net operating loss carry forward~~ ...................................~~.......~~ 3$ 44,~~361~~500 4$ 50,~~755~~224 ~~Allowance~~Notes ~~for~~payable ~~doubtful~~to ~~receivables~~former franchisees and others, due in monthly and quarterly installments with interest ranging from 8% to 9%; maturing between 2001 and 2004, secured by certain property and equipment ...............................~~.........~~ 21476 911,233 ~~Inventory~~---------- ~~reserves~~---------- Total long-term debt ......................................................... 444,976 ~~135~~51,457 ~~Accrued~~Less ~~expenses~~current portion ............................................................ ~~149~~(7,700) (7,233) -- -------- ------- ~~3,841 5,312 DEFERRED TAX LIABILITIES~~--- ~~property~~Long-term ~~and~~debt, ~~equipment-basis~~net ~~and~~of ~~depreciation~~current ~~differences~~portion ....................................... ~~(4,292)~~$ (337,~~458)~~276 ~~------- -------~~ $ ~~(451) $ 1~~44,~~854~~224 ========== ==========

The carrying amount of long-term debt approximates its fair value. Maturities of long-term debt as of December 31, 2001 are as follows (in thousands):

~~2000~~YEAR ~~1999~~ENDING ~~1998~~DECEMBER ~~---------~~31, ~~---------~~2002................................................. ~~--------- Net earnings (loss) As reported~~ $ ~~859 $ (4~~7,~~506)~~700 $2003................................................. 39,~~898~~719 ~~Pro~~2004................................................. ~~forma 501 (5~~11,~~336)~~857 ~~3,642 Diluted earnings (loss) per share As reported $ 0~~2005.~~13 $ (0~~.~~70) $ 0~~.58.............................................. ~~Pro~~15,700 ~~forma~~--------- ~~0.08~~$ ~~(0.82)~~44,976 ~~0.54~~=========

6. MANDATORILY REDEEMABLE PREFERRED SECURITIES In September 1998, American Coin Merchandising Trust I (the "Trust"), a wholly owned subsidiary trust created under the laws of the State of Delaware, completed a public offering of $17 million of Ascending Rate (10.5% at December 31, 1998 increasing to 12.0% at September 16, 2005) Cumulative Trust Preferred Securities (the "Trust Preferred Securities"). The Company recognizes periodic interest using the interest method over the outstanding term of the debt. The sole assets of the Trust are American Coin Merchandising, Inc. Ascending Rate Junior Subordinated Debentures (the "Subordinated Debentures") due September 15, 2028. The obligations of the Trust related to the Trust Preferred Securities are fully and unconditionally guaranteed by American Coin Merchandising, Inc. Distributions on the Trust Preferred Securities are payable quarterly by the Trust. The Trust Securities are subject to mandatory redemption upon the repayment of the Subordinated Debentures at their stated maturity at $10 per Trust Preferred Security. F-8 AMERICAN COIN MERCHANDISING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The Company may cause the Trust to defer the payment of distributions for successive periods up to eight consecutive quarters. During such periods, accrued distributions on the Trust Preferred Securities will compound quarterly and the Company may not declare or pay distributions on its common stock or debt securities that rank equal or junior to the Trust Preferred Securities. Issuance costs of approximately $1.5 million related to the Trust Preferred Securities were deferred and are being amortized on the interest method over the period until mandatory redemption at September 15, 2028. 7. INCOME TAXES Income tax expense (benefit) consists of the following (in thousands):

YEAR ENDED DECEMBER 31, 2001 2000 1999 ~~1998~~ -------- --------~~--------~~ --------~~---------------------------------------~~ ~~WEIGHTED-~~CURRENT ~~WEIGHTED-~~Federal ~~WEIGHTED-~~............ ~~AVERAGE~~$ ~~AVERAGE~~45 ~~AVERAGE~~$ ~~EXERCISE~~(1,911) ~~EXERCISE~~$ ~~EXERCISE~~-- ~~FIXED~~State ~~OPTIONS~~.............. ~~SHARES~~-- ~~PRICE~~(187) ~~SHARES PRICE SHARES PRICE~~ -- --------~~---------------~~ --------- --------- 45 (2,098) --~~-----~~ --------- -------- --------- ~~Outstanding~~DEFERRED atFederal ~~beginning of year~~ ............~~.........~~ ~~672,017~~790 ~~$ 7.10 461~~2,~~417~~438 ~~$ 8.30 316~~(2,~~000~~812) $State 7.~~75 Granted~~ .............~~........~~ ~~399,675~~154 ~~2.65~~287 ~~308,500~~(388) ~~5.76~~-------- ~~194,950 9.00 Exercised ...................~~ -------- -------- ~~(22,165)~~944 ~~5.81 Forfeited ................... (62~~2,~~900)~~725 ~~8.72~~ (973,~~900~~200) ~~8.52 (27,368) 8.88~~ --------- -------- -------- ~~Outstanding~~$ at989 ~~end~~$ of627 ~~year~~$ ~~..... 1~~(3,~~008,792~~200) ~~5.19 672,017 7.10 461,417 8.30~~ ========= ======== ======= ~~Options exercisable at year-end .................... 436,187 280,397 108,227~~=

A reconciliation of the expected tax expense (benefit), assuming income (loss) before taxes is taxed at the statutory federal tax rate of 34%, and the Company's actual provision for income taxes is as follows (in thousands):

~~OPTIONS~~YEAR ~~OUTSTANDING~~ENDED ~~OPTIONS~~DECEMBER ~~EXERCISABLE~~31, 2001 2000 1999 -------- --------~~-----------------------------------~~ --------~~-----------------------~~ ~~RANGE~~Expected ~~WEIGHTED~~tax ~~AVERAGE~~expense OF(benefit) ~~NUMBER~~at ~~REMAINING~~the ~~WEIGHTED~~federal ~~AVERAGE~~statutory ~~NUMBER~~rate ~~WEIGHTED~~..... ~~AVERAGE~~$ ~~EXERCISE~~885 ~~PRICES~~$ ~~OUTSTANDING~~562 ~~CONTRACTUAL~~$ ~~LIFE~~(2,620) ~~EXERCISE~~State ~~PRICE~~income ~~EXERCISABLE~~taxes, ~~EXERCISE~~net ~~PRICE~~of ~~---------------~~federal ~~-----------~~taxes ~~----------------~~......................... ~~----------------~~106 ~~-----------~~65 ~~----------------~~(305) ~~$2.00~~Change toin ~~$3.50~~valuation ~~399,675~~allowance 9.2................................... $-- ~~2.65~~-- 99(270) Other,~~500~~ $net 2.~~74 4~~.~~00 to 7~~.~~00 349,367 8~~.~~0 5~~.~~53 201,407 5~~.~~55 7~~.~~50 to 10~~.~~00 259,750 7~~.~~0 8~~.~~62 135,280 8~~.56............................................ (2) -- (5) -------- -------- -------- ~~2.00~~$ to989 ~~10.00~~$ ~~1,008,792~~627 ~~8.2~~$ ~~5.19 436~~(3,~~187~~200) ~~5.84~~ ========= ======== ========

The sources and tax effects of temporary differences between financial statement carrying amounts and the tax bases of assets and liabilities are as follows (in thousands):

~~YEAR ENDED~~ DECEMBER 31, 2001 2000 ~~1999 1998~~ --------~~---~~ --------~~---~~ ~~-----------~~DEFERRED ~~Earnings~~TAX ~~(loss)~~ASSETS: ~~before~~Costs ~~extraordinary~~in ~~loss~~excess of assets acquired--basis and amortization differences ........~~.................~~ $ ~~1,024,000~~-- $~~(4,506,000)~~ $306 ~~3,898,000~~ Net ~~earnings~~operating (loss) carry forward ............................................... ~~859~~2,~~000~~425 ~~(4,506,000)~~ 3,~~898,000~~361 ~~Common~~Allowance ~~shares~~for ~~outstanding~~doubtful atreceivables ~~beginning of year~~ .................... ~~6,480,194 6,475,069 6,452,904 Effect of shares issued during the year~~ ........................ ~~12,318~~18 1421 ~~14,088~~Inventory ~~-----------~~reserves ~~----------- ----------- Basic weighted average common shares~~ ............................................................ ~~6,492,512~~-- ~~6,475,083~~4 ~~6,466,992~~Accrued ~~Incremental~~expenses ~~shares from assumed conversions: Stock options~~ ................................................ ~~-- -- 220,334 Warrants~~ .............. 173 149 Alternative minimum tax credit carryforward ...................................~~....~~ 76 -- -- ~~25,869~~ ------ ----- --- 2,692 3,841 -------- --------~~---~~ ~~Diluted~~DEFERRED ~~weighted~~TAX ~~average~~LIABILITIES: ~~common~~Property ~~shares~~and equipment--basis and depreciation differences ....................~~........~~ 6(3,~~492,512~~515) 6(4,~~475,083~~292) ~~6,713,195~~Costs ~~===========~~in ~~===========~~excess ~~===========~~of ~~Basic~~assets ~~earnings~~acquired-basis ~~(loss)~~and ~~per~~amortization ~~share~~differences ~~before extraordinary loss~~ ....... ~~$ 0~~.~~16 $ (0~~.~~70)~~ ~~$ 0.60 Diluted earnings~~ (~~loss~~443) ~~per~~-- ~~share~~Inventory ~~before~~capitalization ~~extraordinary loss~~ ..... 0.~~16 (0~~.~~70) 0~~.~~58 Basic earnings (loss) per share~~ ................................. 0.~~13 (0~~.~~70) 0~~.~~60 Diluted earnings (loss) per share~~ ..........~~.....................~~ ~~0.13~~(129) -- -------- -------- (~~0.70~~4,087) ~~0.58~~(4,292) -------- -------- $ (1,395) $ (451) ======== ========

Current deferred tax assets are included in prepaid expenses and other assets. F-9 AMERICAN COIN MERCHANDISING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 8. RETIREMENT PLAN The Company maintains a 401(k) profit sharing plan, which covers substantially all employees. Employees are permitted to contribute up to 15% of their eligible compensation. The Company makes contributions to the plan matching 50% of the employees' contribution up to 10% of compensation. The Company's matching contributions totaled $286,000, $264,000 and $319,000 in 2001, 2000 and 1999, respectively. The Company established a qualified Employee Stock Purchase Plan ("the Plan"), the terms of which allow for qualified employees (as defined) to participate in the purchase of designated shares of the Company's common stock at a price equal to the lower of 85% of the closing price at July 1 or the end of each quarterly stock purchase period. The Company suspended the Plan effective October 1, 2001. During 2001, 2000 and 1999 shares totaling 21,722, 33,725 and 5,125, respectively, were purchased under the plan at average prices of $2.61, $2.23 and $2.34 per share, respectively. 9. COMMITMENTS The Company has noncancelable operating leases, primarily for office and warehouse facilities, vehicles and certain types of equipment. These leases expire at various times over the next five years. Rent expense under these leases totaled $2,697,000, $2,225,000 and $2,063,000 for the years ended December 31, 2001, 2000 and 1999, respectively. Future minimum commitments under operating lease arrangements as of December 31, 2001 are as follows (in thousands):

~~DEC.~~YEAR 31ENDING ~~SEPT.~~DECEMBER ~~30 JUNE 30 MAR.~~ 31, ~~DEC~~2002. ~~31 SEPT~~. ~~30 JUNE 30 MAR~~. ~~31 2000 2000 2000 2000 1999 1999 1999 1999 -------- -------- -------- -------- -------- -------- -------- -------- (in thousands, except per share data) Total revenue~~............................. ~~$ 34,448 $ 32,933 $ 30,878 $ 31,499 $ 31,190 $ 29,887 $ 30,242 $ 29,147 Total cost of revenue~~..................... ~~25,494~~$ 242,~~242~~673 ~~22,704 22,812 22,356 22,317 22,302 21,124 ------ ------ ------ ------ ------ ------ ------ ------ Gross profit~~2003.......................... 8,954 8,691 8,174 8,687 8,834 7,570 7,940 8,023 General and administrative expenses 6,394 6,211 6,094 6,381 6,407 6,740 6,431 6,090 Write off of costs in excess of assets acquired, severance and other costs...........................~~...~~ ~~-- -- -- -- -- 7~~1,~~536~~411 ~~-- -- -------- -------- -------- -------- -------- -------- -------- -------- Operating earnings (loss)~~2004............. ~~2,560 2,480 2,080 2,306 2,427 (6,706) 1,509 1,933 Interest expense, net~~..................... ~~1,928 1,958 1,970 1,919 1,785 1,724 1,686 1,674 -------- -------- -------- -------- -------- -------- -------- -------- Earnings (loss) before income taxes and extraordinary loss~~...... ~~632 522 110 387 642 (8,430) (177) 259 Income tax (expense) benefit~~.............. ~~(239)~~542 ~~(199) (42) (147) (242) 3,469 58 (86) -------- -------- -------- -------- -------- -------- -------- -------- Earnings (loss) before extraordinary loss~~2005................ ~~393 323 68 240 400 (4,961) (119) 173 Extraordinary loss on debt refinancing, net of income tax benefit~~..................................... ~~165~~335 ~~-- -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- -------- -------- Net earnings (loss)~~2006................... ~~$ 228 $ 323 $ 68 $ 240 $ 400 $ (4,961) $ (119) $ 173 ======== ======== ======== ======== ======== ======== ========= ======== Basic and diluted earnings (loss) per share before extraordinary loss~~..... ~~$ 0~~.~~06 $ 0~~.~~05 $ 0~~.~~01 $ 0~~.~~04 $ 0~~.~~06 $ (0~~.~~77) $ (0~~.~~02) $ 0~~.~~03 Basic and diluted earnings (loss) per share~~..................... 133 --------- Total.............. 0.~~04 0~~.~~05 0~~.~~01 0~~.~~04 0~~.~~06 (0~~.~~77) (0~~.~~02) 0~~.~~03 Basic and diluted weighted average common shares~~............................ ~~6,505~~$ 65,~~497~~094 ~~6,488 6,480 6,475 6,475 6,475 6,475~~=========

10. STOCK OPTIONS The Company has two fixed option plans. Under the terms of the amended and restated stock option plan (the "Option Plan"), the Company may grant to employees, consultants and advisors options to purchase up to 1,400,000 shares of common stock. Under the Option Plan, the Company may grant both incentive stock options and non-statutory stock options, and the maximum term is ten years. Non-statutory options may be granted at no less than 85% of the fair value of the common stock at the date of grant. Stock options granted under the Option Plan vest over two to five year periods. Under terms of the amended 1995 Non-Employee Directors' Stock Option Plan (the "Directors Plan"), the Company may grant to non-employee directors options to purchase up to 200,000 shares of common stock. Under the Directors Plan, options granted vest immediately and have a maximum term of ten years. The Company applies APB Opinion No. 25 and related interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for options granted at fair value under the plans. Had compensation cost for the Company's stock-based compensation plans been determined consistent with SFAS No. 123, the Company's net earnings (loss) and diluted earnings (loss) per share would have been reduced or increased to the pro forma amounts indicated below (in thousands, except per share data):

~~SIGNATURE~~2001 ~~TITLE~~2000 ~~DATE~~1999 --------- -~~----~~ ---- ~~/s/ JOHN A. SULLIVAN* Chairman of the Board March 21, 2001~~ ------~~--------------------------------------~~ ~~John A. Sullivan /s/ RANDALL J. FAGUNDO President and Chief Executive March 21, 2001~~ ----------~~----------------------------------~~ ~~Randall~~Net J.earnings ~~Fagundo~~(loss) ~~Officer~~As ~~and~~reported ~~Director~~$ ~~/s/ W. JOHN CASH* Senior Vice President~~1,614 ~~Chief~~$ ~~Financial~~859 ~~March~~$ 21(4,506) ~~2001~~Pro ~~--------------------------------------------~~forma ~~Officer~~1,418 ~~Treasurer~~501 ~~and Secretary~~ (~~Principal~~5,336) ~~Financial~~Diluted ~~and~~earnings ~~Accounting Officer~~(loss) ~~/s/~~per J.share ~~GREGORY~~As THEISEN*reported ~~Director~~$ ~~March 21, 2001 -------------------------------------------- J~~0.24 ~~Gregory~~$ ~~Theisen /s/ RICHARD D~~0.13 JONES*$ ~~Director March 21, 2001 -------------------------------------------- Richard D~~(0.70) ~~Jones~~Pro ~~/s/~~forma ~~RICHARD P~~0. ~~BERMINGHAM* Director March~~ 21, ~~2001 -------------------------------------------- Richard P~~0.08 ~~Bermingham /s/ BRUCE W~~(0. KRYSIAK* Director March 21, 2001 -------------------------------------------- Bruce W. Krysiak * /s/ RANDALL J. FAGUNDO March 21, 2001 ----------------------------------------- Randall J. Fagundo Attorney-in-Fact82)

F-10 AMERICAN COIN MERCHANDISING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in 2001, 2000 and 1999: no dividend yield; expected volatility of 58 percent for 2001, 86 percent for 2000 and 73 percent for 1999; risk-free interest rates of 5.6 percent in 2001, 5.7 percent in 2000 and 6.8 percent in 1999; and expected lives of six years. A summary of the status of the Company's two fixed stock option plans as of December 31, 2001, 2000 and 1999, and changes during the years ended on those dates is presented below:

~~EXHIBIT~~2001 ~~NUMBER~~2000 ~~DESCRIPTION~~1999 -------- ----------- ~~3.1+~~ -- ~~Certificate of Incorporation of the Registrant. 3.2+~~ -- ~~Bylaws of the Registrant. 3.3Y~~ --- ~~Certificate of Designation of Series A Junior Participating Preferred Stock of the Registrant. 4.1+~~ -- ~~Reference is made to Exhibits 3.1 and 3.2. 4.2+~~ -- ~~Specimen Stock Certificate. 4.3o~~ -- ~~Certificate of Trust of American Coin Merchandising Trust I. 4.4o~~ -- ~~Trust Agreement of American Coin Merchandising Trust I. 4.5o~~ -- ~~Amended and Restated Trust Agreement of American Coin Merchandising Trust I. 4.6o~~ ---------------- ~~Form of Junior Subordinated Indenture between the Registrant and Wilmington Trust Company, as Trustee. 4.7o~~ -------------------------- ~~Form~~WEIGHTED- ofWEIGHTED- ~~Guarantee~~WEIGHTED- ~~Agreement~~AVERAGE ~~with~~AVERAGE ~~respect~~AVERAGE toEXERCISE ~~Trust~~EXERCISE ~~Preferred~~EXERCISE ~~Securities~~FIXED ofOPTIONS ~~American~~SHARES ~~Coin~~PRICE ~~Merchandising~~SHARES ~~Trust~~PRICE I.SHARES ~~4.8o~~PRICE ------------- ~~Form~~---------- of---------- ~~Agreement as to Expenses and Liabilities between the Registrant and American Coin Merchandising Trust I. 4.9o~~ ---------- ~~Form of Certificate Evidencing Trust Preferred Securities. 4.10o~~ ---------- ~~Form of Certificate Evidencing Trust Common Securities. 4.11o~~ ---------- ~~Form of Ascending Rate Junior Subordinated Deferrable Interest Debenture. 4.12Y~~ ---------- ~~Rights~~Outstanding ~~Agreement~~at ~~dated~~beginning as of ~~April~~year ~~29, 1999 between the Registrant and Norwest Bank Minnesota, N~~.A. 4.~~13Y -- Form of Rights Certificate~~. 10.~~1+ -- Form of Indemnity Agreement to be entered into between the Registrant and its directors and executive officers~~. 10.~~2+X -- Amended and Restated Stock Option Plan of the Registrant (the "Option Plan")~~. 10.~~3+ -- Form of Incentive Stock Option under the Option Plan~~. 10.~~4+ -- Form of Nonstatutory Stock Option under the Option Plan~~. 10.~~5+X -- 1995 Non-Employee Director Stock Option Plan (the "Director Plan")~~. 10.~~6+ -- Form of Nonstatutory Stock Option under the Director Plan~~. 10.~~35#~~ ~~-- Commercial Lease Amendment Agreement~~1, ~~between the Registrant and Technical Building Company~~008,792 ~~dated~~$ as5.19 ~~of November 20~~672,017 ~~1997.~~$ 107.~~47V~~10 ~~-- Premier Amusement Vendor Agreement~~461,417 ~~dated~~$ ~~January~~8.30 ~~28,~~Granted ~~2000, between the Registrant and Best Vendor Co~~. 10.~~48V~~................. ~~-- Addendum to Premier Amusement Vendor Agreement~~30,000 ~~dated~~3.75 ~~January 28~~399,675 ~~2000, between the Registrant and Best Vendor Co~~2.65 ~~10.49V -- Addendum #2 to Premier Amusement Vendor Agreement~~308,500 ~~dated~~5.76 ~~February~~Exercised ~~14, 2000, between the Registrant and Best Vendor Co~~. 10.~~50@~~............... ~~-- Amusement Vending Agreement, effective as of July~~ (1,938) ~~2000, between the Registrant and Denny's Inc~~2.63 ~~10.51@~~-- -- ~~Other~~-- ~~Income Supplier Agreement~~--~~Coin~~ ~~Operated~~Forfeited ~~Equipment,~~................. ~~dated August 1~~(10,800) ~~2000~~3.43 ~~between the Registrant and Wal-Mart Stores~~(62,900) ~~Inc~~8.72 ~~10.52n -- Credit agreement~~(97,900) ~~dated~~8.52 ~~December~~Cancelled ~~29,~~................. ~~2000~~(325,950) ~~between and among the Registrant and GE Capital and Comerica~~8.17 ~~10.53X~~-- -- ~~Consulting~~-- ~~Agreement~~-- ~~dated~~---------- ~~December~~---------- 1,---------- ~~2000,~~Outstanding ~~between~~at ~~the~~end ~~Registrant~~of ~~and~~year ~~John A~~. ~~Sullivan~~. 10.~~54X~~ --700,104 ~~Executive~~3.76 ~~Employment Agreement dated December~~ 1, ~~2000~~008,792 ~~between the Registrant and Randall J~~5.19 ~~Fagundo.~~672,017 107.~~55X~~10 --========== ~~Executive~~========== ~~Employment~~========== ~~Agreement~~Options ~~dated~~exercisable ~~December~~at 1,year-end ~~2000, between the Registrant and W~~. ~~John Cash~~. 23.1............... --531,886 ~~Consent~~436,187 ~~of KPMG LLP.~~280,397

The following table summarizes information about fixed stock options outstanding at December 31, 2001:

11. STOCKHOLDERS' EQUITY COMMON STOCK The Company was originally incorporated in Colorado in 1988 and was reincorporated in Delaware effective July 1995. In November 1997, the Company completed a follow-on public offering of its common stock, whereby the Company sold 1,000,000 shares at $15 per share. Total proceeds, net of underwriting commission and other expenses of $1,075,000, were $13,925,000. PREFERRED STOCK The Board of Directors has the authority to issue up to 500,000 shares of $.10 par value preferred stock in one or more series and to fix the rights, preferences, privileges and distributions thereof, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, without any further vote or action by stockholders. No shares of preferred stock have been issued. 12. CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS: SUPPLIERS Substantially all of the plush toys and other products dispensed from the Shoppes are produced by foreign manufacturers. A majority are purchased directly by the Company from manufacturers in the People's Republic of China ("China"). The Company purchases its other products indirectly from vendors who obtain a significant F-11 AMERICAN COIN MERCHANDISING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) percentage of such products from foreign manufacturers. As a result, the Company is subject to changes in governmental policies, the imposition of tariffs, import and export controls, transportation delays and interruptions, political and economic disruptions and labor strikes, which could disrupt the supply of products from such manufacturers. Among other things, the loss of China's "most favored nation" status under U.S. tariff laws could result in a substantial increase in the import duty of certain products manufactured in China, which could result in substantially increased costs for certain products purchased by the Company which could have a material adverse effect on the Company's financial performance. CUSTOMERS The Company had amusement vending machines placed with one retail customer that accounted for 38%, 37%, and 34% of the Company's revenue for the years ended December 2001, 2000, and 1999 respectively. 13. EARNINGS (LOSS) PER SHARE Basic and diluted earnings (loss) per share for 2001, 2000 and 1999 were computed as follows:

14. UNAUDITED QUARTERLY FINANCIAL INFORMATION (In thousands, except per share data)

The basic and diluted earnings per share before the extraordinary loss in the fourth quarter of 2000 was $0.06. F-12 AMERICAN COIN MERCHANDISING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 15. SUBSEQUENT EVENT On February 11, 2002 the Company was acquired by ACMI Holdings, Inc., a newly formed corporation organized by two investment firms, Wellspring Capital Management LLC and Knightsbridge Holdings, LLC. The transaction was approved at a stockholders meeting held on February 5, 2002. Stockholders received $8.50 in cash for each outstanding share of the Company's common stock. The Company's common stock is no longer publicly traded. The Company's mandatorily redeemable preferred securities remain outstanding and continue to trade on the American Stock Exchange. Bruce W. Krysiak, a director of the Company prior to the Merger, has a minority interest in Knightsbridge Holdings, LLC d/b/a Krysiak Navab & Company. Knightsbridge holds an interest in ACMI Holdings, Inc., which is controlled by Wellspring Capital Management LLC. F-13 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized. AMERICAN COIN MERCHANDISING, INC. By /s/ Randall J. Fagundo ------------------------------------- Randall J. Fagundo President and Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Randall J. Fagundo and W. John Cash, or any of them, his or her attorney-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this report, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

INDEX TO EXHIBITS

10.58$X -- Amendment to Executive Employment Agreement dated December 1, 2000, between the Registrant and W. John Cash. 10.60 -- Services and Fee Agreement, dated February 11, 2002, between and among the Registrant, Wellspring Capital Management LLC and Knightsbridge Holdings, LLC d/b/a Krysiak Navab & Co. 10.61 -- Credit Agreement, dated February 11, 2002, between and among the Registrant and Madison Capital Funding LLC and The Royal Bank of Scotland PLC. 10.62 -- Guarantee and Collateral Agreement, dated February 11, 2002, between and among the Registrant, ACMI Holdings and Audax Mezzanine Fund, L.P., Royal Bank of Scotland PLC and Upper Colombia Capital Company, LLC. 10.63 -- Purchase Agreement among ACMI Holdings, Inc., the Registrant, as Issuer and the Purchasers named therein, dated as of February 11, 2002.

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