<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 13, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
COINMACH LAUNDRY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7215 11-3258015
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
----------------
55 LUMBER ROAD
ROSLYN, NEW YORK 11576
(516) 484-2300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ROBERT M. DOYLE
55 LUMBER ROAD
ROSLYN, NEW YORK 11576
(516) 484-2300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
----------------
COPIES TO:
RONALD S. BRODY, ESQ. WILLIAM M. HARTNETT, ESQ.
ANDERSON KILL OLICK & OSHINSKY, P.C. CAHILL GORDON & REINDEL
1251 AVENUE OF THE AMERICAS 80 PINE STREET
NEW YORK, NEW YORK 10020 NEW YORK, NEW YORK 10005
(212) 278-1000 (212) 701-3000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and
list the Securities Act Registration statement number of the earlier effective
registration statement for the same offering. [_] 333-
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] 333-
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED(1) PER SHARE OFFERING PRICE(2) FEE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock.......... 4,025,000 shares $18.00 $72,450,000 $24,983
</TABLE>
(1) Includes 525,000 shares of Common Stock that may be sold pursuant to the
Underwriters' over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c).
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE>
COINMACH LAUNDRY CORPORATION
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K, SHOWING LOCATION
IN PROSPECTUS OF INFORMATION REQUIRED BY PART I OF FORM S-1
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION IN FORM S-1 LOCATION OR CAPTION IN PROSPECTUS
----------------------------------- ---------------------------------
<C> <S> <C>
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus... Outside Front Cover Page
2. Inside Front and Outside
Back Cover Pages of
Prospectus................. Inside Front and Outside Back Cover
Pages; Available Information
3. Summary Information, Risk
Factors and Ratio of
Earnings to Fixed Charges.. Prospectus Summary; Risk Factors;
Selected Historical Consolidated
Financial Data
4. Use of Proceeds............. Prospectus Summary; Use of Proceeds
5. Determination of Offering
Price...................... Underwriting
6. Dilution.................... Dilution
7. Selling Security Holders.... Not Applicable
8. Plan of Distribution........ Outside Front Cover Page; Underwriting
9. Description of Securities to
Be Registered.............. Outside Front Cover Page; Prospectus
Summary; Description of Capital Stock
10. Interests of Named Experts
and Counsel................ Legal Matters; Experts
11. Information with Respect to
Registrant................. Prospectus Summary; Risk Factors; The
Company; Use of Proceeds; Dividend
Policy; Dilution; Capitalization;
Unaudited Pro Forma Financial Data;
Selected Historical Consolidated
Financial Data; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Business;
Management; Principal Stockholders;
Certain Relationships and Related
Transactions; Description of Capital
Stock; Shares Eligible for Future
Resale; Experts; Index to Financial
Statements
12. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................ Not Applicable
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 13, 1996
PROSPECTUS
[LOGO] 3,500,000 SHARES
COINMACH LAUNDRY CORPORATION
COMMON STOCK
-------------
All the shares of voting common stock, par value $.01 per share (the "Common
Stock"), offered hereby are being sold by Coinmach Laundry Corporation
("Coinmach Laundry" and, together with its consolidated subsidiaries, the
"Company"). Prior to this offering, there has been no public market for
the Common Stock. It is currently estimated that the initial public
offering price per share will be between $16.00 and $18.00. See
"Underwriting" for a discussion of the factors considered in
determining the initial public offering price. The Company has
applied to list the Common Stock for quotation on
the Nasdaq National Market under the trading symbol "WDRY."
-------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.SEE "RISK
FACTORS" BEGINNING AT PAGE 5.
-------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
Underwriting Discounts Proceeds to
Price to Public and Commissions(1) Company(2)
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<S> <C> <C> <C>
Per Share............... $ $ $
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Total(3)................ $ $ $
</TABLE>
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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an aggregate of 525,000 additional shares of Common Stock on the same
terms as set forth above solely to cover over-allotments, if any. If such
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
-------------
The shares of Common Stock offered by this Prospectus are offered by the
Underwriters subject to prior sale, to withdrawal, cancellation or modification
of the offer without notice, to delivery to and acceptance by the Underwriters
and to certain further conditions. It is expected that the delivery of the
shares of Common Stock will be made at the office of Lehman Brothers Inc., New
York, New York on or about July , 1996.
-------------
LEHMAN BROTHERS
DILLON, READ & CO. INC.
FIELDSTONE
FPCG SERVICES, L .P.
-------------
June , 1996
<PAGE>
[INSERT PICTURE]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial data, including
the consolidated financial statements and related notes thereto, presented
elsewhere in this Prospectus. As used in this Prospectus, unless the context
otherwise requires, all references to the "Company" herein refer to Coinmach
Laundry Corporation and its consolidated subsidiaries and their respective
predecessors and subsidiaries, in each case as applicable. References to the
"Offering" shall refer to the offering of the Common Stock in the United States
and Canada by the Underwriters (as defined). Except as otherwise indicated
herein, all information in this Prospectus (a) assumes no exercise of the
Underwriters' over-allotment option and (b) has been adjusted to give effect to
a reclassification and an approximate 23.2:1 stock split of the Common Stock.
THE COMPANY
GENERAL
The Company, established in 1948, is a leading supplier of coin-operated
laundry equipment services for multi-family properties in the United States.
The Company leases laundry rooms from building owners and management companies,
installs and services the laundry equipment and collects the revenues generated
from the machines. The Company owns and operates over 245,000 coin-operated
washers and dryers on routes in over 26,000 buildings located in 28 states and
the District of Columbia. The Company's routes are located throughout the
Northeast, Mid-Atlantic, Southeast, South-Central and Mid-West regions of the
United States. Based upon its knowledge of the industry, management believes
that the Company is the second largest such supplier in the United States and
the largest in the eastern United States.
The Company's business strategy is to increase operating cash flow and
profitability through a combination of internal expansion and selective
acquisitions. Internal expansion is comprised of: (i) increasing the installed
machine base by adding new customers, (ii) converting owner-operated facilities
into Company managed facilities, and (iii) implementing selective price
increases within the Company's operating regions. The Company's acquisition
strategy is to acquire local, regional and multi-regional route businesses from
independent operators. Management believes that by pursuing its business
strategy the Company will be positioned to realize: (i) additional operating
leverage and economies of scale associated with expanding its installed base of
machines, (ii) reduced operating expenses through consolidation of overhead
functions and facilities, and (iii) reduced equipment and parts costs on a per
unit basis due to increased purchasing requirements.
In January 1995, management, with its equity sponsor, Golder, Thoma, Cressey,
Rauner, Fund IV, L.P. ("GTCR"), acquired the Company's Northeast regional route
business and initiated a strategy of growth through acquisitions. This strategy
was designed to increase the Company's installed machine base in its existing
operating regions and to provide the Company with a leading market position in
new regions. The Company has grown its installed base from 54,000 machines as
of January 1995 to 245,000 machines as of May 1, 1996. Revenues and EBITDA(1)
have grown from $72.9 million and $13.6 million, respectively, for the twelve
months ended March 31, 1995, to $189.4 million and $56.2 million, respectively,
for the twelve months ended March 29, 1996, on a pro forma basis. See
"Unaudited Pro Forma Financial Data." These acquisitions have enabled the
Company to improve its operating margins and compete more aggressively for new
strategic contracts.
The coin-operated laundry services industry is characterized by stable cash
flows generated by long-term, renewable lease contracts with multi-family
property owners and management companies. Laundry service equipment is
installed and serviced in multi-family properties, including rental buildings,
condominium and cooperative associations and university and other institutional
housing. The coin-operated laundry services industry is fragmented nationally,
with many small, private and family-owned route businesses continuing to operate
throughout all major metropolitan areas. According to information provided by
the Multi-housing Laundry Association, the industry consists of over 280
independent operators. Based upon industry estimates, management believes there
are approximately 3.5 million machines installed in locations throughout the
United States, 2.5 million of which are managed by independent operators such as
the Company and 1.0 million of which are operated by the owners of such
locations.
Management believes that the Company maintains its strong market position in
each of its operating regions due to: (i) its long-standing reputation with
customers for providing reliable, quality service through the entire service
cycle (from installation to collection to service and maintenance), (ii) its
ability to manage information through its proprietary, fully-automated
management
1
<PAGE>
information and control systems (the "Integrated Computer Systems") that
coordinate its marketing efforts and monitor all aspects of its operations, and
(iii) its experienced senior management team.
RECENT DEVELOPMENTS
On April 1, 1996, the Company acquired the route business of Allied Laundry
Equipment Company, located in St. Louis, Missouri (the "Allied Acquisition"), as
part of its acquisition strategy and its plan to establish a larger market
presence in the Mid-West. This acquisition increased the Company's installed
base by approximately 24,000 machines. On a pro forma basis for the year ending
March 29, 1996, the Allied Acquisition contributed an increase of approximately
$3.3 million of EBITDA and approximately $10.6 million of revenue. In addition,
the Company is evaluating several other local and regional route acquisition
opportunities. The Company has not, however, entered into any definitive
agreements or letters of intent for such prospective acquisitions. Moreover,
there can be no assurance that, subsequent to ongoing negotiations and due
diligence reviews, the Company will complete any such acquisitions.
_________________
(1) EBITDA represents earnings from continuing operations before deductions for
interest, income taxes, depreciation and amortization. EBITDA is not
intended to represent cash flows for the period, nor has it been presented
as an alternative to operating income as an indicator of operating
performance and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with generally accepted
accounting principles. Management believes that EBITDA is an appropriate
measure of the Company's ability to service its cash requirements. Given
that EBITDA is not a measurement determined in accordance with generally
accepted accounting principles and is thus susceptible to varying
calculations, EBITDA as presented may not be comparable to other similarly
titled measures of other companies. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
2
<PAGE>
THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Common Stock offered by the Company................. 3,500,000 shares
Total Common Stock and Non-Voting Common Stock
to be outstanding after the Offering............... 9,836,176 shares(1)
Common Stock to be outstanding after
the Offering........................................ 9,352,464 shares(1)
Non-Voting Common Stock, $.01 par value per share
(the "Non-Voting Common Stock") to be outstanding
after the Offering................................. 483,712 shares
Proposed Nasdaq National Market Symbol.............. "WDRY"
Use of Proceeds..................................... The net proceeds to be received by the Company from the Offering
will be utilized by the Company: (i) to redeem the Preferred Stock
(as defined) for an aggregate redemption price equal to $19,132,583
(see "Description of Capital Stock -- The Reclassification and Stock
Split"), (ii) to pay GTCR IV, L.P., the general partner of GTCR, a
termination fee in an amount equal to $500,000 in connection with
the termination of the Company Management Agreement (see
"Certain Relationships and Related Transactions -- Management and
Consulting Services Agreements"), (iii) to repay in full all
outstanding indebtedness under the Company's revolving credit
facility and (iv) for general corporate purposes, which may include
certain selected acquisitions or open market purchases from time to
time of the Company's outstanding indebtedness. See "Use of
Proceeds."
</TABLE>
BACKGROUND
Coinmach Industries Co., L.P. ("Coinmach Industries") was established as a
private coin-operated laundry equipment services company in 1947. On January
31, 1995, The Coinmach Corporation ("TCC"), a company formed by GTCR, members of
the Company's senior management and certain other investors, acquired all of the
partnership interests of Coinmach Industries and Super Laundry Equipment Co.,
L.P. from CIC I Acquisition Corp. ("CIC"). In 1948, Solon Automated Services,
Inc. ("Solon"), began as a private coin-operated laundry equipment services
business. On April 5, 1995, GTCR and substantially all of the other
stockholders of TCC formed the Company to acquire all of the capital stock of
Solon (the "Solon Acquisition"). On November 30, 1995, TCC merged (the
"Merger") with Solon and entered into a series of refinancing transactions (the
"Refinancing"), whereupon the surviving corporation changed its name to
"Coinmach Corporation." Coinmach Corporation ("Coinmach") is the principal
operating subsidiary of the Company. See "The Company - History."
_____________
(1) Does not include (i) 694,318 shares of Common Stock issuable upon exercise
of stock options outstanding after the Offering, 138,864 of which will be
exercisable immediately after the Offering, and (ii) 1,041,477 shares of
Common Stock reserved for issuance under the 1996 Stock Option Plan (as
defined). See "Management - Grant of Options; 1996 Employee Stock Option
Plan."
3
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(in thousands, except ratios and machine data)
The following table presents summary historical financial data of the Company
for the twelve months ended March 31, 1995, and March 29, 1996, and pro forma
financial data of the Company for the twelve months ended March 29, 1996, giving
effect to the Offering, the Allied Acquisition and operating efficiencies
resulting from the Merger, as if such transactions occurred at the beginning of
the period (or in the case of Balance Sheet Data, as of the date of such data).
The unaudited pro forma combined financial data are not necessarily indicative
of either future results of operations or results that might have been achieved
if the foregoing transactions had been consummated as of the indicated dates.
The financial data set forth below should be read in conjunction with the
Company's combined consolidated financial statements and the related notes
thereto presented elsewhere in this Prospectus and with "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
Coinmach Laundry Corporation
---------------------------------
Pro Forma
Twelve Months Twelve Months Twelve Months
Ended March 31, Ended March 29, Ended March 29,
1995(1) 1996 1996
--------------- ------------ ---------------
(Unaudited) (Unaudited)
----------- ----------
<S> <C> <C> <C>
OPERATING DATA:
Revenues...................................... $72,943 $178,789 $189,357
Laundry operating expenses.................... 56,829 123,441 129,903
General and administrative expenses........... 2,468 4,195 3,298
Depreciation and amortization................. 13,585 36,635 38,336
Operating income.............................. 61 12,318 17,820
Loss before extraordinary item................ (5,986) (8,639) (5,977)
BALANCE SHEET DATA (AT END OF PERIOD):
Property and equipment, net................... $24,330 $ 82,699 $ 90,899
Total assets.................................. 61,035 249,148 284,475
FINANCIAL RATIOS AND OTHER DATA (UNAUDITED):
EBITDA(2)..................................... $13,646 $ 48,953 $ 56,156
EBITDA margin(3).............................. 18.7% 27.4% 29.7%
Capital expenditures.......................... 6,420 27,338 28,950
Number of machines (rounded).................. 54,000 221,000 245,000
</TABLE>
- -----------------
(1) Includes combined historical financial data for CIC and TCC and is
presented to reflect the combined financial results of the entities under
the control of the existing management team for such period. The period
presented is derived by combining the twelve months ended December 31,
1994, with the one month ended January 31, 1995, and the two months ended
March 31, 1995, and by excluding from such combined periods the three
months ended March 31, 1994.
(2) EBITDA represents earnings from continuing operations before deductions for
interest, income taxes, depreciation and amortization. EBITDA is not
intended to represent cash flows for the period, nor has it been presented
as an alternative to operating income as an indicator of operating
performance and should not be considered in isolation or as a substitute
for measures of performance prepared in accordance with generally accepted
accounting principles. Management believes that EBITDA is an appropriate
measure of the Company's ability to service its cash requirements. Given
that EBITDA is not a measurement determined in accordance with generally
accepted accounting principles and is thus susceptible to varying
calculations, EBITDA as presented may not be comparable to other similarly
titled measures of other companies. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
(3) EBITDA margin represents EBITDA as a percentage of revenues.
4
<PAGE>
RISK FACTORS
The following risk factors should be considered carefully in addition to
the other information contained in this Prospectus before purchasing the
Common Stock offered hereby.
Substantial Indebtedness
The Company will continue to have substantial indebtedness and debt
service requirements after the Offering. As of March 29, 1996, on a pro
forma basis after giving effect to the Offering, assuming no reductions to
indebtedness resulting from the application of the net proceeds therefrom,
the Company's indebtedness would have been approximately $202.8 million and
stockholders' equity of $33.4 million.
The Company's level of indebtedness will have several important
effects on its future operations, including the following: (i) a
significant portion of the Company's cash flow from operations will be
required to pay interest on its indebtedness and will not be available for
other purposes; (ii) the financial covenants and other restrictions
contained in certain of the financing agreements governing the Company's
indebtedness will require the Company to meet certain financial tests and
will limit its ability to borrow additional funds or to dispose of assets;
(iii) the Company's ability to obtain additional financing in the future
for working capital, capital expenditures, acquisitions and general
corporate purposes may be impaired; and (iv) the Company's ability to adapt
to changes in the coin-operated laundry equipment services industry and to
economic conditions in general could be limited. Coinmach Laundry is a
holding company that will be dependent upon its principal operating
subsidiary, Coinmach, as its primary source of revenue subsequent to the
Offering. The financial covenants contained in the financing agreements
governing the Company's indebtedness restrict Coinmach's ability to make
dividends, distributions or other payments to Coinmach Laundry.
Additionally, the Company's ability to meet its debt service obligations
and to reduce its total debt will be dependent upon its future performance,
which will be subject to general economic conditions and to financial,
business and other factors affecting the operations of the Company, many of
which are beyond its control. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
An inability of the Company to comply with the financial covenants or
other conditions contained in the financing agreements governing the
Company's indebtedness could result in an acceleration of amounts due
thereunder. If the Company is unable to meet its debt service obligations,
it could be required to take certain actions such as reducing or delaying
capital expenditures, selling assets, refinancing or restructuring its
indebtedness, selling additional equity capital or other actions. There is
no assurance that any of such actions could be effected on commercially
reasonable terms, if at all, or on terms permitted under the applicable
financing agreements. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
Historical Net Losses
In the past, the Company has experienced net losses. The Company
incurred a loss before extraordinary items of $6.1 million and $2.5 million
for the period commencing April 5, 1995 to September 29, 1995, and the six
months ended March 29, 1996, respectively. As of March 29, 1996, the
Company had an accumulated deficit of approximately $18.7 million. No
assurance can be given that net losses will not occur in future periods.
Dependence Upon Lease Renewals
The Company's business is highly dependent upon the renewal of its
lease contracts with property owners and management companies. The
Company's business strategy has historically focused on obtaining long-
term, renewable lease contracts. Management estimates that over 89% of its
customers are subject to long-term leases with initial terms of three to
ten years. Management estimates that although approximately 13% of the
Company's leases expire each year, the Company annually loses only 1-2% of
its overall installed machine base to competitors or owner-operators.
These losses, however, do not take into account and may be offset by, the
addition of new locations to its installed base of machines achieved
through the Company's sales and marketing efforts. There can be no
assurance that the Company's high retention rate will continue or that its
new leases will contain the same renewal and related material terms. See
"Business -- Description of Operations -- Location Leasing."
5
<PAGE>
Risks of Acquisitions and the Failure to Integrate Acquired Businesses
As part of its business strategy, the Company will continue to
evaluate opportunities to acquire local, regional and multi-regional route
businesses. There can be no assurance that the Company will find
attractive acquisition candidates or effectively manage the integration of
acquired business into its existing business. If the expected operating
efficiencies from such transactions do not materialize, if the Company
fails to integrate new businesses into its existing business, or if the
costs of such integration exceed expectations, the Company's operating
results and financial condition could be adversely affected. Future
acquisitions by the Company could result in the incurrence of debt, the
potentially dilutive issuance of equity securities and the incurrence of
contingent liabilities and amortization expenses related to goodwill and
other intangible assets, any of which could adversely affect the Company's
operating results and financial condition.
Capital Requirements
The Company must continue to make capital expenditures to maintain
its operating base, including investments in equipment and contract
maintenance. The Company spent approximately $27.3 million on capital
expenditures for the year ended March 29, 1996. While the Company
estimates that it will generate sufficient cash flow from operations to
finance anticipated capital expenditures, there can be no assurance that it
will be able to do so on commercially reasonable terms, if at all.
Reduced Occupancy Levels
Extended periods of reduced occupancy can adversely affect the
Company's operations. In a period of occupancy decline, the Company could
be faced with reductions in revenues and cash flow from operations in
certain areas. In past periods of occupancy decline, management designed
incentive programs that were successful in maintaining revenues while
offering owners and management companies the ability to market the laundry
facilities to attract new residents. Although the Company is
geographically diversified, there can be no assurance that the Company will
maintain its revenue levels or cash flow from operations in periods of low
occupancy.
Historical Decline in Revenues
Due to previous capital constraints and debt service requirements,
the Company experienced declines in revenues from operations during certain
periods over the past three fiscal years. Growth in revenues is driven by
a number of factors, including market conditions, the size of the operating
base of machines, the number of installed machines, the ability to maintain
and expand the machine base through an appropriate level of capital
expenditures (which was limited in each of the last three fiscal years),
and actual revenue generated on a per-machine basis. The Company is
continually monitoring and maintaining its operating base by purchasing and
maintaining equipment and pursuing its business strategy of acquiring route
businesses to increase operating leverage. There can be no assurance that
revenues from operations will increase or maintain current levels in future
periods.
Dependence on Key Personnel
The Company's continued success will depend largely on the efforts
and abilities of its executive officers and certain other key employees.
The Company's operations could be affected adversely if, for any reason,
such officers or key employees do not remain with the Company. See
"Management."
Control by Principal Shareholder
Immediately after the Offering, GTCR will own approximately 46.61% of
the outstanding shares of Common Stock (before giving effect to shares of
Common Stock issuable upon exercise of options which are currently vested
and exercisable). Upon consummation of the Offering, GTCR will enter into
a Voting Agreement (as defined) with the holders of Common Stock prior to
the Offering that will give GTCR the ability to designate for election a
majority of the Company's directors and determine the outcome of
substantially all issues submitted to the Company's stockholders, including
mergers, sales of all or substantially all of the Company's assets and
similar fundamental corporate changes. Approximately $19,132,583 of the
net proceeds to the Company from the Offering will be used to redeem all of
the shares (including all unpaid dividends thereon) of Preferred Stock (as
defined), owned by GTCR and certain other holders. In addition, GTCR shall
receive $500,000 of the net proceeds
6
<PAGE>
to the Company from the Offering as consideration for its termination of
the Company Management Agreement (as defined). See "Certain Relationships
and Related Transactions."
Competition
The coin-operated laundry equipment services industry is highly
competitive, capital intensive and requires reliable, quality service. The
industry is fragmented nationally, with many small, private and family-
owned businesses operating throughout most major metropolitan areas. The
Company competes against many privately-owned businesses that may have
greater or more flexible financial resources than the Company.
Significant Intangible Assets
At March 29, 1996, approximately $103.8 million or 41.7% of the
Company's total assets are intangible assets consisting primarily of
contract rights and goodwill. Adjusted for the Offering and the Allied
Acquisition, approximately $111.2 million or 39.1% of the Company's total
assets would have been intangible assets as of March 29, 1996. In the
event of a sale or liquidation, there can be no assurance that the value of
the Company's intangible assets would be realized.
Dividend Policy
The Company has not declared or paid any cash dividends on its
capital stock and does not intend to pay cash dividends on its capital
stock in the foreseeable future. Declaration of dividends on the Common
Stock will depend upon, among other things, the Company's results of
operations, financial condition, capital requirements and general business
condition. At the present time, the Company's ability to pay dividends on
the Common Stock is subject to restrictions contained in certain of the
Company's outstanding debt and financing agreements. See "Dividend
Policy."
Dilution
The proposed initial public offering price is substantially higher
than the book value per outstanding share of Common Stock. Accordingly,
purchasers in the Offering will suffer immediate and substantial dilution
in net tangible book value in the amount of $24.80 per share based on an
assumed initial public offering price of $17.00 per share (representing a
midpoint in the range of the initial public offering price in the
Offering). Additional dilution will occur upon the exercise of outstanding
options granted by the Company to members of management and certain
employees pursuant to the 1996 Stock Option Plan. See "Dilution";
"Management -- 1996 Stock Option Plan."
Environmental Regulation
The Company's business and operations are subject to federal, state
and local environmental laws and regulations that impose limitations on the
discharge of, and establish standards for the handling, generation,
emission, release, discharge, treatment, storage and disposal of, certain
materials, substances and wastes. To the best of management's knowledge,
there are no existing or potential environmental claims against the
Company, nor has the Company received any notification of responsibility
for, or any inquiry or investigation regarding, any disposal, release or
threatened release of any hazardous material, substance or waste generated
by the Company that is likely to have a material adverse effect on the
Company's business or financial condition. However, the Company cannot
predict with any certainty that it will not in the future incur any
liability under environmental laws and regulations that could have a
material adverse effect on the Company's business or financial condition.
Anti-Takeover Provisions
Certain provisions of the Company's Second Amended and Restated
Certificate of Incorporation (the "Second Amended and Restated Certificate
of Incorporation") and the Second Amended and Restated Bylaws (the "Second
Amended and Restated Bylaws") may discourage, delay or make more difficult
a change in control of the Company, or prevent the removal of incumbent
directors even if some, or a majority, of the Company's stockholders were
to deem such an attempt to be in the best interest of the Company. Among
other things, the Second Amended and Restated Certificate of Incorporation
allows the Board of Directors of the Company (the "Board") to issue shares
of preferred stock in the future and fix the rights, privileges and
preferences of those shares
7
<PAGE>
without any further vote or action by the stockholders. The rights of the
holders of Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any preferred stock that may be issued in
the future. While the Company has no present intention to issue shares of
preferred stock, any such issuance could have the effect of making it more
difficult for a third party to acquire a majority of the outstanding voting
stock of the Company. In addition, the Company is subject to the anti-
takeover provisions of Section 203 of the Delaware General Corporation Law,
which could have the effect of delaying or preventing a change in control
of the Company. See "Description of Capital Stock."
Shares Eligible for Future Sale; Registration Rights
Sales of substantial amounts of Common Stock in the public market
following the Offering could adversely affect the market price of the
Common Stock. Of the 9,836,176 shares of Common Stock and Non-Voting
Common Stock that will be outstanding following the Offering prior to
giving effect to the exercise of any options to purchase Common Stock
granted by the Company, 3,500,000 shares of Common Stock offered hereby
will be freely tradeable, except those purchased by "affiliates" of the
Company, as such term is defined under Rule 144 of the Securities Act of
1933, as amended (the "Securities Act"). The remaining 6,336,176
outstanding shares of Common Stock and Non-Voting Common Stock are
considered "restricted securities" for the purpose of Rule 144 under the
Securities Act. The sale of these restricted securities, together with any
shares purchased in the Offering by affiliates, is limited by lock-up
agreements under which the holders of the restricted shares have agreed
that they will not, without the prior written consent of Lehman Brothers
Inc., offer, sell, contract to sell or otherwise dispose of their shares
for a period of 180 days from the date of this Prospectus. After
expiration of such lock-up agreements, all of the 6,336,176 restricted
securities will be eligible for sale under Rule 144 of the Securities Act.
See "Shares Eligible for Future Sale."
Absence of Prior Public Market; Possible Volatility of Stock Price
Prior to the Offering, there has been no public market for the
Common Stock. Although the Company has applied to list the Common Stock on
the Nasdaq National Market, there can be no assurance that an active public
market for the Common Stock will develop or, if it does develop, that it
will be sustained after the completion of the Offering. The initial
offering price will be determined through negotiations between the Company
and the Underwriters (as defined) and may not be indicative of the market
price for the Common Stock after the Offering. There can be no assurance
that the market price of the Common Stock will not decline below the
initial public offering price. The trading price of the Common Stock may
be volatile and may fluctuate based upon a number of factors, including
business performance, announcements by the Company or changes in general
market conditions. See "Underwriting."
8
<PAGE>
THE COMPANY
GENERAL
The Company is a leading supplier of coin-operated laundry equipment
services for multi-family properties in the United States. The Company
owns and operates over 245,000 coin-operated washers and dryers on routes
in over 26,000 buildings in 28 states and the District of Columbia. The
Company operates in the Northeast, Mid-Atlantic, Southeast, South-Central
and Mid-West regions of the United States. Based upon its knowledge of the
industry, management believes that the Company is the second largest such
supplier in the United States and the largest in the eastern United States.
The Company is a Delaware corporation with executive offices located
at 55 Lumber Road, Roslyn, New York 11576, and its telephone number is
(516) 484-2300.
HISTORY
Coinmach Industries was established as a private, coin-operated
laundry equipment service company in 1947. On January 31, 1995, TCC, a
company formed by GTCR, members of the Company's senior management and
certain other investors, acquired all of the partnership interests of
Coinmach Industries and Super Laundry Equipment Co., L.P. from CIC (the
"Coinmach Acquisition"). In 1948, Solon Automated Services, Inc.
("Solon"), began as a coin-operated laundry equipment service business. On
April 5, 1995, GTCR and substantially all of the other stockholders of TCC
formed the Company and acquired all of the capital stock of Solon (the
"Solon Acquisition"). On November 30, 1995, TCC merged (the "Merger") with
Solon, whereupon the surviving corporation changed its name to "Coinmach
Corporation." Coinmach Corporation ("Coinmach") is the principal operating
subsidiary of the Company.
Prior to the transactions described above, on October 20, 1989, CIC,
a non-operating holding company, acquired, through a series of related
transactions, a controlling general partnership interest in Coinmach
Industries and all of the issued and outstanding capital stock of Super
Laundry Equipment Corp. (the "1989 Transaction"). CIC incurred
approximately $44.0 million of bank debt and approximately $31.5 million of
subordinated indebtedness in connection with the 1989 Transaction and
subsequent related borrowings. As a result of the 1989 Transaction and
such subsequent borrowings, CIC's capital structure became over-leveraged
and unsustainable. Consequently, on December 15, 1993, CIC filed a
voluntary prepackaged petition for reorganization under Chapter 11 of the
United States Bankruptcy Code (the "Plan"). On January 21, 1994, the
United States Bankruptcy Court confirmed the Plan, which resulted in
ownership of CIC being transferred to its subordinated lenders. The Plan
provided for CIC's existing senior subordinated notes, junior subordinated
promissory notes, preferred stock and common stock to be exchanged for
87,000 shares of common stock of CIC valued at approximately $24.2 million.
The Merger and Refinancing
On November 30, 1995, in connection with the Merger, the Company
implemented the Refinancing, consisting of: (i) an exchange offer, (ii) a
debt offering, (iii) a new $35 million revolving credit facility (the
"Revolving Credit Facility"), (iv) repayment of Coinmach Industries' then-
existing credit facility and (v) repayment of certain other secured
indebtedness of the Company. The Company implemented the Refinancing to
extend the maturity of its debt obligations, repay indebtedness and improve
its financial flexibility to pursue its business strategy and achieve
improved consolidated operating performance.
As of ___________, 1996, after giving effect to the Refinancing, the
Company had [$_____] of indebtedness outstanding under the Revolving Credit
Facility, $196.7 million of issued and outstanding 11 3/4% Senior Notes due
2005 (the "Senior Notes"), and $5.0 million of issued and outstanding 12
3/4% Senior Notes due 2001 ("Old Senior Notes").
9
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,500,000 shares
of Common Stock offered hereby are estimated to be approximately $54.3
million, (approximately $62.6 million if the Underwriters' over-allotment
option is exercised in full), assuming an initial public offering price of
$17.00 per share (the midpoint of the estimated range). The Company
intends to use such net proceeds: (i) to redeem the Preferred Stock (as
defined) for an aggregate redemption price equal to $19,132,583, see
"Description of Capital Stock -- The Reclassification and Stock Split",
(ii) to pay GTCR IV, L.P. ("GTCR IV, L.P."), the general partner of GTCR, a
termination fee in an amount equal to $500,000 in connection with the
termination of the Company Management Agreement, see "Certain Relationships
and Related Transactions -- Management and Consulting Services Agreements,"
(iii) to repay in full all indebtedness outstanding under the Revolving
Credit Facility; and (iv) for general corporate purposes, which may include
certain selected acquisitions or open market purchases from time to time of
the Company's outstanding indebtedness. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources."
Outstanding borrowings under the Revolving Credit Facility were
$_______ as of ____________, 1996. Amounts under the Revolving Credit
Facility repaid with proceeds from the Offering may be re-borrowed, and any
such re-borrowing will be used for general corporate purposes, which may
include making certain selected acquisitions.
10
<PAGE>
DIVIDEND POLICY
The Company has not declared or paid any cash dividends on the Common
Stock. The Company currently intends to retain its earnings to finance the
development and expansion of its business. The decision whether to apply
legally available funds to the payment of dividends on the Common Stock
will be made by the Board from time to time in its discretion, taking into
account, among other things, the Company's results of operations, financial
condition, capital requirements, contractual restrictions, any then
existing or proposed commitments for the use of available funds by the
Company, the Company's obligations with respect to any then outstanding
class or series of its preferred stock and other factors deemed relevant by
the Board. The Company does not anticipate paying any cash dividends on
its Common Stock at any time in the foreseeable future.
At the present time, dividend payments to the Company by its
principal operating subsidiary, Coinmach, are subject to restrictions
contained in certain of Coinmach's outstanding debt and financing
agreements. Additionally, the Company may in the future enter into other
agreements or issue debt securities or preferred stock that restrict the
payment of cash dividends. See "Management's Discussion and Analysis of
Financial Condition and Results of Operation -- Liquidity and Capital
Resources" and "Description of Capital Stock -- Payment of Dividends on the
Common Stock."
11
<PAGE>
DILUTION
The net tangible book value (deficit) of the Company as of March 29,
1996 was approximately $(105.1) million, or $(16.23) per share of Common
Stock (pro forma for the Reclassification). See "Description of Capital
Stock -- The Reclassification and Stock Split." Net tangible book value
per share is equal to the Company's total tangible assets less its total
liabilities, divided by the number of shares of Common Stock outstanding
(pro forma for the Reclassification). After giving effect to the Offering,
the Reclassification (as defined), the Stock Split (as defined) and the
application of the estimated net proceeds therefrom (including the
redemption of the Preferred Stock), assuming an initial public offering
price of $17.00 per share (the midpoint of the estimated range), the pro
forma net tangible book value (deficit) of the Company as of March 29, 1996
would have been approximately $(77.8) million, or $(7.80) per share. This
adjustment represents an immediate increase in net tangible book value of
$8.43 per share to the existing shareholders and an immediate net tangible
book value dilution of $24.80 per share to investors purchasing shares of
Common Stock in the Offering. The following table illustrates this per
share dilution:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed initial public offering price per share............................... $17.00
Net tangible book value (deficit) per share at March 29, 1996............. $(16.23)
Increase in net tangible book value per share attributable to
new investors............................................................. $ 8.43
---------
Pro forma net tangible book value (deficit) per share after the
Offering.................................................................... $(7.80)
----------
Dilution per share to new investors........................................... $24.80
==========
</TABLE>
The foregoing computations assume no exercise of the Underwriters'
over-allotment option.
The following table summarizes, based on the assumptions set forth
herein, as of March 29, 1996, the number of shares of Preferred Stock,
Common Stock and Non-Voting Common Stock purchased from the Company, the
total consideration paid and the average price per share paid by the
existing stockholders and by new stockholders purchasing shares in the
Offering.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- --------- ------- ------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders.. 6,475,040 64.9% $20,806,957 25.9% $ 3.21
New investors(1)....... 3,500,000 35.1% $59,500,000 74.1% $17.00
----------- --------- ---------- -------
Total............... 9,975,040 100.0% $80,306,957 100.0% $ 8.05
=========== ========= ========== =======
</TABLE>
The computations in the tables set forth above (i) include an
aggregate of 138,864 shares of Common Stock issuable upon exercise of the
portion of the MCS Capital Options (as defined) and the Additional Options
(as defined), in each case, which are vested and currently exercisable,
(ii) exclude 1,041,477 shares of Common Stock reserved for issuance under
the 1996 Stock Option Plan (as defined), none of which shares will be
outstanding upon completion of the Offering, and (iii) exclude 555,454
shares of Common Stock reserved for issuance upon exercise of the portion
of the MCS Capital Options and the Additional Options (as defined), in each
case, which are not currently vested. To the extent any of the foregoing
options excluded from the computations above are exercised in the future,
there will be further dilution to the purchasers of Common Stock in the
Offering. See "Management - 1996 Stock Option Plan - Additional Management
Options."
_____________________
(1) Excludes additional shares of Common Stock that may be sold pursuant to
the Underwriter's over-allotment option.
12
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 29, 1996 on (i) an actual basis, after giving effect to the
Reclassification (as defined) and the Stock Split (as defined) and (ii) as
adjusted, to give effect to (a) the sale by the Company of 3,500,000 shares
of Common Stock in the Offering, at an assumed initial public offering
price of $17.00 per share (the midpoint of the estimated range of the
initial public offering price), and (b) the application of the net proceeds
therefrom. This table should be read in conjunction with the unaudited pro
forma financial data and the combined and consolidated financial statements
of the Company and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 29, 1996
-----------------------------
AS ADJUSTED FOR
ACTUAL THE OFFERING
-----------------------------
($ IN THOUSANDS)
<S> <C> <C>
Short-term debt, including current maturities of long-term debt(1)........... $ -- $ --
=============================
Long-term debt:
11 3/4% Senior Notes due 2005............................................... $196,655 $196,655
Revolving Credit Facility(2)................................................ -- --
12 3/4% Senior Notes due 2001............................................... 5,000 5,000
Other long-term debt........................................................ 1,110 1,110
-----------------------------
Total long-term debt....................................................... 202,765 202,765
Stockholders' equity (deficit):
Preferred Stock, $.01 par value: 1,000 shares authorized and no
shares issued and outstanding actual; 1,000 shares authorized and
no shares issued and outstanding as adjusted(3)............................ -- --
Common Stock, $.01 par value: 15,000,000 shares authorized and
5,852,464 shares issued and outstanding actual; 15,000,000 shares
authorized and 9,491,328 shares issued and outstanding as adjusted(4)...... 59 95
Non-Voting Common Stock, $.01 par value: 1,000,000 shares authorized and
483,712 shares issued and outstanding actual; 1,000,000 shares authorized
and 483,712 shares issued and outstanding as adjusted(5)................... 5 5
Additional paid-in capital.................................................. 17,839 52,562
Accumulated deficit......................................................... (18,719) (18,780)
Less Management Loans....................................................... (445) (445)
-----------------------------
Total stockholders' equity (deficit)....................................... (1,308) 33,436
-----------------------------
Total capitalization......................................................... $201,457 $236,201
=============================
</TABLE>
____________________
(1) See Note 5 to the Company's Combined Consolidated Financial Statements
included elsewhere in this Prospectus.
(2) At March 29, 1996, on a pro forma basis after giving effect to the
Offering and the application of the net proceeds therefrom, the Company
would have had $35.0 million of unused borrowing capacity under the
Revolving Credit Facility. See "Management's Discussion and Analysis
of Financial and Condition and Results of Operations - Liquidity and
Capital Resources."
(3) The Preferred Stock (as defined) was issued by the Company to certain
holders of certain classes of the Company's common stock in connection
with the Reclassification (as defined). The Preferred Stock shall be
redeemed from a portion of the proceeds of the Offering. See "Use of
Proceeds", "Description of Capital Stock -- Preferred Stock" and
"Description of Capital Stock - The Reclassification and Stock Split."
(4) As of March 29, 1996, (i) includes an aggregate of 138,864 shares of
Common Stock issuable upon exercise of the portion of the MCS Capital
Options (as defined) and the Additional Options (as defined), in each
case, which are currently vested and exercisable, (ii) excludes up to
1,041,477 shares of Common Stock issuable upon exercise of options
granted or to be granted pursuant to the 1996 Stock Option Plan and
(iii) excludes in the aggregate 555,454 shares of Common Stock issuable
upon exercise of that portion of the MCS Capital Options and the
Additional Options, in each case, which are not currently vested. See
"Management - 1996 Stock Option Plan; - Additional Management Options."
(5) Shares of Non-Voting Common Stock are not being sold in the Offering.
See "Description of Capital Stock."
13
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma balance sheet as of March 29, 1996,
gives effect to the Allied Acquisition, the Offering and the application of
the proceeds therefrom as if such transactions occurred as of March 29,
1996, and the unaudited pro forma combined statement of operations of the
Company for the year ended March 29, 1996, gives effect to the Offering and
the application of the proceeds therefrom as if such transactions occurred
on April 5, 1995. For information regarding the Offering, see "Use of
Proceeds."
The pro forma adjustments are based upon currently available
information as well as upon certain assumptions that management believes
are reasonable. The Allied Acquisition was accounted for as a purchase
with assets recorded at their estimated fair market value. There can be no
assurance that the actual adjustments will not differ significantly from
the pro forma adjustments reflected in the pro forma financial information.
The unaudited pro forma combined financial statements are not
necessarily indicative of either future results of operations or results
that might have been achieved if the foregoing transactions had been
consummated as of the indicated dates. The unaudited pro forma combined
financial statements should be read in conjunction with the historical
consolidated financial statements of the Company, Solon and TCC (or their
respective predecessors), together with the related notes thereto,
presented elsewhere in this Prospectus.
14
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
March 29, 1996
(in thousands)
<TABLE>
<CAPTION>
Company Pro Forma Pro Forma
Historical Adjustments Combined
----------- ------------ ------------
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents................................ $ 19,858 $ 53,835 (c) $ 38,960
(19,133)(d)
(15,600)(f)
Receivables, net......................................... 5,758 5,758
Inventories and prepayments.............................. 7,084 7,084
Advance payments to location owners...................... 20,320 20,320
Property and equipment, net.............................. 82,699 8,200 (f) 90,899
Contract rights, net..................................... 59,745 7,400 (f) 67,145
Goodwill, net............................................ 44,071 44,071
Other assets............................................. 9,613 625 (f) 10,238
-------- -------- --------
Total assets.......................................... $249,148 $ 35,327 $284,475
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
LIABILITIES
Accounts payable and accrued liabilities................. $ 28,767 $ 625 (f) $ 29,392
12 3/4% Senior Notes due 2001............................ 5,000 5,000
11 3/4% Senior Notes due 2005............................ 196,655 196,655
Other long-term debt..................................... 1,110 1,110
Deferred income taxes.................................... 18,924 (42)(e) 18,882
-------- -------- --------
Total liabilities..................................... 250,456 583 251,039
-------- -------- --------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock.......................................... -- 19,133 (b) --
(19,133)(d)
Common stock and capital in excess of par value.......... 17,903 56 (a) 52,661
(19,133)(b)
53,835 (c)
Accumulated deficit...................................... (18,719) (61)(e) (18,780)
-------- -------- --------
(816) 34,697 33,881
Loans to management...................................... (492) (56)(a) (445)
103 (e)
--------
Total stockholders' equity (deficit).................. (1,308) 34,744 33,436
-------- -------- --------
Total liabilities and stockholders' equity (deficit).. $249,148 $ 35,327 $284,475
======== ======== ========
</TABLE>
See "Notes to Unaudited Pro Forma Balance Sheet."
15
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
(in thousands)
(a) Reflects Common Stock purchases by certain management personnel
subsequent to March 29, 1996 and related loans.
(b) Reflects issuance of Preferred Stock in connection with the
Reclassification.
(c) Reflects as set forth in the following table the Offering and the
application of the proceeds.
<TABLE>
<CAPTION>
<S> <C> <C>
Gross proceeds from issuance of 3,500,000 shares of
Common Stock at the midpoint of the estimated
range of the initial public offering price......... $59,500
Deduct transaction fees and expenses:
Transaction fees................................ $4,165
Expenses........................................ 1,000
GTCR termination fee............................ 500 5,665
------- -------
Net cash to the Company $53,835
=========
</TABLE>
(d) Reflects retirement of Preferred Stock.
(e) Reflects forgiveness of principal amounts due in 1996 on loans to
management of $103, less income tax benefits of $42.
(f) Reflects allocation of purchase prices of businesses acquired during
April 1996. The acquisitions were accounted for as purchases.
16
<PAGE>
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
Year Ended March 29, 1996
(in thousands; except per share amounts)
<TABLE>
<CAPTION>
Company Historical
----------------------------------
Pro Forma
Combined
April 5, 1995 Six Months Year Ended
to Ended Acquired Pro Forma March 29,
Sept. 29, 1995 March 29, 1996 Businesses (a) Adjustments 1996
---------------- -------------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Revenues............................................. $ 89,719 $ 89,070 $10,568 $ -- $189,357
Laundry operating expenses........................... 62,905 60,536 7,812 (850)(b) 129,903
(500)(c)
General and administrative expenses.................. 2,351 1,844 (1,000)(b) 3,298
103 (d)
Restructuring costs.................................. 2,200 -- (2,200)(e) --
Depreciation......................................... 9,498 9,392 1,413 (330)(f) 19,973
Amortization......................................... 8,925 8,820 493 (g) 18,363
125 (h)
---------------- -------------- -------------- ----------- -------------
Operating Income..................................... 3,840 8,478 1,343 4,159 17,820
Interest expense..................................... 11,818 11,999 517 473 (i) 24,807
---------------- -------------- -------------- ----------- -------------
(Loss) income before income taxes and extraordinary
item............................................... (7,978) (3,521) 826 3,686 (6,987)
---------------- -------------- -------------- ----------- -------------
Provision for income taxes:
Currently payable........................... 420 50 -- -- 470
Deferred.................................... (2,282) (1,048) -- 1,850 (j) (1,480)
---------------- -------------- -------------- ----------- -------------
(1,862) (998) -- 1,850 (1,010)
---------------- -------------- -------------- ----------- -------------
(Loss) income before extraordinary item.............. $ (6,116) $ (2,523) $ 826 $ 1,836 $ (5,977)
================ ============== ============== =========== =============
Loss per share before extraordinary item............. $ (0.81) $ (0.33) $ (0.60)
================ ============== =============
Cash flows from operating activities................. $ 12,066 $ 12,337 $ 2,756 $ 3,974 $ 31,133
Cash used in investing activities.................... (25,039) (14,162) (1,674) (40,875)
Cash flows from (used in) financing activities....... 12,510 11,372 23,882
EBITDA(1)............................................ 22,263 26,690 2,756 4,447 56,156
EBITDA margin(2)..................................... 24.8% 30.0% 26.1% 29.7%
Capital Expenditures................................. $ 13,114 $ 14,162 $ 1,674 $ 28,950
</TABLE>
See "Notes to Unaudited Pro Forma Combined Statements of Operations."
________________________
(1) EBITDA represents earnings from continuing operations before deductions for
interest, income taxes, depreciation and amortization. EBITDA is not
intended to represent cash flows for the period, nor has it been presented
as an alternative to operating income as an indicator of operating
performance and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with generally accepted
accounting principles. Management believes that EBITDA is an appropriate
measure of the Company's ability to service its cash requirements. Given
that EBITDA is not a measurement determined in accordance with generally
accepted accounting principles and is thus susceptible to varying
calculations, EBITDA as presented may not be comparable to other similarly
titled measures of other companies. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
(2) EBITDA margin represents EBITDA as a percentage of revenues.
17
<PAGE>
NOTES TO UNAUDITIED PRO FORMA
COMBINED STATEMENTS OF OPERATIONS
(in thousands)
(a) Represents historical operating results for the year ended December 31, 1995
of businesses acquired since March 29, 1996.
(b) On September 29, 1995, management implemented cost savings programs
affecting corporate financial and administrative functions and regional
operations which amounted to $2,000 and $1,700, respectively, on an annual
basis. The development of cost savings programs was a direct result of the
plan to combine the two companies pursuant to the Merger that was
consummated on November 30, 1995. The $2,000 cost savings arise principally
as personnel cost savings resulting from the closing of Solon's corporate
office in Philadelphia, Pennsylvania and relocation to Roslyn, New York.
The $1,700 cost savings are personnel cost savings resulting from reduction
and consolidation of regional operations. One half of the cost savings were
recognized during the six months ended March 29, 1996.
(c) Reflects cost savings of $500 for the Allied Acquisition, which resulted
from consolidation of administrative functions in Roslyn, New York
consisting primarily of personnel cost savings.
(d) Reflects forgiveness of principal amount due in 1996 on loans to management.
(e) Reflects the exclusion of restructuring costs of $2,200.
(f) Represents the difference in historical depreciation of business acquired of
$1,418 and the depreciation of $1,088 on purchase price allocated to
property and equipment by the Company with useful lives of 3 to 8 years.
(g) Represents amortization of purchase price allocated to contract rights.
Contract rights are amortized over 15 years.
(h) Represents amortization of covenant not to compete.
(i) The following table presents a reconciliation of pro forma interest expense:
<TABLE>
<CAPTION>
Year Ended
March 29, 1996
----------------
<S> <C>
Historical interest expense............................................... $ 24,334
--------
Add:
Interest on 11 3/4% Senior Notes due 2005............................... 23,107
Amortization of deferred financing costs on new debt:
11 3/4% Senior Notes due 2005.......................................... 479
Revolving Credit Facility.............................................. 26
Deduct:
Interest on retired 12 3/4% Senior Notes due 2001 and 13 3/4% Senior
Subordinated Debentures due 2002...................................... (10,742)
Interest on Solon revolving credit facility............................. (126)
Interest on TCC revolving credit facility............................... (3,121)
Interest on 11 3/4% Senior Notes due 2005 from November 30, 1995 to
March 29, 1996........................................................ (7,529)
Interest of acquired business........................................... (517)
Amortization of deferred financing costs on retired debt:
12 3/4% Senior Notes due 2001 and 13 3/4% Senior Subordinated
Debentures due 2002.................................................. (409)
Original issue discount on 13 3/4% Senior Subordinated Debentures
due 2002............................................................. (125)
Solon revolving credit facility........................................ (28)
TCC revolving credit facility.......................................... (383)
Amortization of deferred finance cost on new debt from November 30,
1995 to March 29, 1996.............................................. (159)
----------------
Pro forma adjustment...................................................... 473
----------------
Pro forma interest expense................................................ $ 24,807
================
</TABLE>
(j) Represents income tax impact of $1,511 on pro forma adjustments and
$339 on income before income taxes of acquired businesses.
18
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following tables present summary historical consolidated financial
information of the Company and its subsidiaries. Such tables include the
combined consolidated financial information of the Company for the six
month period ended September 29, 1995 and the six months ended March 29,
1996, giving effect to the Solon Acquisition, the Coinmach Acquisition, the
Merger and the Refinancing. Also included in such tables is summary
historical consolidated financial information of (i) TCC and its
predecessor, including the two month period ended March 31, 1995, the one
month period ended January 31, 1995, and fiscal years ended December 31,
1994, 1993, 1992 and 1991 and (ii) Solon, including the six month period
from October 1, 1994 to April 4, 1995, and fiscal years ended September 30,
1994, 1993, 1992 and 1991. The financial data set forth below should be
read in conjunction with each of TCC's, Solon's and the Company's audited
historical consolidated financial statements and the related notes thereto
presented elsewhere in this Prospectus and with "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
THE COMPANY
(in thousands, except ratios)
Six Months Six Months Twelve Months
Ended Ended Ended
September 29, 1995 March 29, 1996 March 29, 1996
------------------- --------------- ---------------
OPERATING DATA:
<S> <C> <C> <C>
Revenues................................ $ 89,719 $ 89,070 $178,789
Laundry operating expenses.............. 62,905 60,536 123,441
General and administrative expenses..... 2,351 1,844 4,195
Depreciation and amortization........... 18,423 18,212 36,635
Restructuring costs..................... 2,200 -- 2,200
-------- -------- --------
Operating income........................ 3,840 8,478 12,318
Interest expense........................ 11,818 11,999 23,817
Income taxes (benefits)................. (1,862) (998) (2,860)
-------- -------- --------
Loss before extraordinary item.......... (6,116) (2,523) (8,639)
Extraordinary loss (net of tax)(1)...... -- 8,925 8,925
-------- -------- --------
Net loss................................ $ (6,116) $(11,448) $(17,564)
======== ======== ========
Net loss per share...................... $(0.81) $(1.51) $(2.32)
BALANCE SHEET DATA (AT END OF PERIOD):
Property and equipment, net............. $ 80,706 $ 82,699
Total assets............................ 241,433 249,148
Total debt.............................. 176,415 202,765
Stockholders' equity (deficit).......... 10,140 (1,308)
FINANCIAL RATIOS AND OTHER DATA (UNAUDITED):
Cash flow from operating activities..... $ 12,066 $ 12,337 $ 24,403
Cash used for investing activities...... (25,039) (14,162) (39,201)
Cash from financing activities.......... 12,510 11,372 23,882
EBITDA(2)............................... 22,263 26,690 48,953
EBITDA margin(3)........................ 24.8% 30.0% 27.4%
Capital expenditures(4)................. 13,119 14,219 27,338
</TABLE>
____________________
(1) Extraordinary loss on the early extinguishment of debt on November 30,
1995. Extraordinary loss is $1.18 per share.
(2) EBITDA represents earnings from continuing operations before deductions
for interest, income taxes, depreciation and amortization. EBITDA is
not intended to represent cash flows for the period, nor has it been
presented as an alternative to operating income as an indicator of
operating performance and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
generally accepted accounting principles. Management believes that
EBITDA is an appropriate measure of the Company's ability to service
its cash requirements. Given that EBITDA is not a measurement
determined in accordance with generally accepted accounting principles
and is thus susceptible to varying calculations, EBITDA as presented
may not be comparable to other similarly titled measures of other
companies. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(3) EBITDA margin represents EBITDA as a percentage of revenues.
(4) Capital expenditures include additions to property and equipment and
advance rental payments to location owners.
19
<PAGE>
The TCC fiscal year end was March 31. TCC's predecessor had a fiscal year
end of December 31, thus creating a three-month transition period. On January
31, 1995, TCC was formed by certain of the Company's current owners, and
accordingly, periods prior to and after January 31, 1995 are reflected in their
financial statements as predecessor and successor periods, respectively.
<TABLE>
<CAPTION>
THE COINMACH CORPORATION ("TCC")
----------------------------------------------------------------------
Predecessor(1) Successor(1)
----------------------------------------------------------------------
(in thousands, except ratios and machine data)
One Month Two Months
Ended Ended
Years Ended December 31, January 31, March 31,
----------------------------------------------------------------------
1991 1992 1993 1994 1995 1995
-------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues................................... $ 71,595 $ 72,172 $ 71,859 $ 73,857 $ 5,879 $11,515
Laundry operating expenses................. 53,289 53,163 52,805 54,737 4,229 8,951
General and administrative expenses........ 6,483 5,712 5,570 4,938 450 799
Depreciation and amortization.............. 15,463 16,755 15,256 14,504 980 2,144
-------- -------- -------- -------- -------- -------
Operating income (loss).................... (3,640) (3,458) (1,772) (322) 220 (379)
Interest expense........................... 9,990 9,573 10,509 4,012 395 774
Other expense (income)..................... (611) -- -- 1,341 -- --
Income taxes............................... 12 (4) 17 27 -- 2
-------- -------- -------- -------- -------- -------
Loss before extraordinary gain............. (13,031) (13,027) (12,298) (5,702) (175) (1,155)
Extraordinary gain(2)...................... -- -- -- 20,420 -- --
-------- -------- -------- -------- -------- -------
Net income (loss).......................... $(13,031) $(13,027) $(12,298) $ 14,718 $ (175) $(1,155)
======== ======== ======== ======== ======== =======
BALANCE SHEET DATA (AT END OF PERIOD):
Property and equipment, net................ $ 21,045 $ 19,030 $ 17,293 $ 16,285 $ 16,120 $24,330
Total assets............................... 61,933 52,114 47,443 36,924 36,069 61,035
Total debt................................. 77,945 76,409 75,827 42,184 41,800 42,351
Stockholders' equity (deficit)............. (39,398) (53,995) (68,003) (13,416) (13,591) 9,729
FINANCIAL RATIOS AND OTHER DATA (UNAUDITED):
Cash flow from operating activities........ $ 7,221 $ 7,613 $ 7,736 $ 8,724 $ 1,197 $ 73
Cash used for investing activities......... (6,187) (5,124) (6,119) (6,577) (611) (990)
Cash from (used for) financing activities.. (1,405) (1,945) (1,405) (2,547) (411) (327)
EBITDA(3).................................. 11,823 13,297 13,484 14,182 1,200 1,765
Capital expenditures....................... 5,632 4,884 5,879 6,571 576 990
</TABLE>
____________________
(1) The term "Predecessor" refers to the period in time prior to the Coinmach
Acquisition. The term "Successor" refers to the period in time after the
Coinmach Acquisition. Successor is presented on a different basis of
accounting and therefore, is not comparable to the Predecessor. The
Successor period reflects the effects of purchase accounting, whereby assets
and liabilities were adjusted to their estimated fair values at the date of
the Coinmach Acquisition.
(2) Extraordinary gain on the early extinguishment of debt in 1994.
(3) EBITDA represents earnings from continuing operations before deductions for
interest, income taxes, depreciation and amortization. EBITDA is not
intended to represent cash flows for the period, nor has it been presented
as an alternative to operating income as an indicator of operating
performance and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with generally accepted
accounting principles. Management believes that EBITDA is an appropriate
measure of the Company's ability to service its cash requirements. Given
that EBITDA is not a measurement determined in accordance with generally
accepted accounting principles and is thus susceptible to varying
calculations, EBITDA as presented may not be comparable to other similarly
titled measures of other companies. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
20
<PAGE>
The fiscal year end of Solon was the Friday closest to September 30.
On April 5, 1995, the voting stock of Solon was acquired by the Company,
and accordingly, periods prior to and after April 5, 1995 are reflected as
predecessor and successor periods, respectively, in their financial
statements.
<TABLE>
<CAPTION>
SOLON(1)
-----------------------------------------------------------
Predecessor(2)
-----------------------------------------------------------
(in thousands, except ratios and machine data)
-----------------------------------------------------------
October 1,
Years Ended September 30, 1994 to
--------------------------------------------- April 4,
1991 1992(3) 1993 1994 1995
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues.................................................. $105,268 $104,311 $104,888 $104,553 $52,207
Laundry operating expenses................................ 67,665 67,138 67,420 66,418 33,165
General and administrative expenses....................... 2,773 3,125 2,576 2,839 1,539
Depreciation and amortization............................. 18,878 20,745 21,002 21,347 10,304
Restructuring costs....................................... -- -- -- -- --
-------- -------- -------- -------- -------
Operating income.......................................... 15,952 13,303 13,890 13,949 7,199
Interest expense.......................................... 15,888 15,857 17,453 18,105 8,928
-------- -------- -------- -------- -------
Income (loss) before income taxes and extraordinary item.. 64 (2,554) (3,563) (4,156) (1,729)
-------- -------- -------- -------- -------
Provision (benefit) for income taxes:
Currently payable.................................. 100 200 400 200 270
Deferred........................................... 2,412 (616) (1,168) 2,562 (220)
-------- -------- -------- -------- -------
2,512 (416) (768) 2,762 50
-------- -------- -------- -------- -------
Loss before extraordinary item............................ (2,448) (2,138) (2,795) (6,918) (1,779)
Extraordinary item (net of tax)(4)........................ -- (833) -- -- (848)
-------- -------- -------- -------- -------
Net loss.................................................. $ (2,448) $ (2,971) $ (2,795) $ (6,918) $(2,627)
======== ======== ======== ======== =======
BALANCE SHEET DATA (AT END OF PERIOD):
Property and equipment, net............................... $ 52,123 $ 50,679 $ 50,593 $ 48,727 --
Total assets.............................................. 147,972 155,827 150,402 143,589 --
Total debt................................................ 118,315 128,737 128,299 128,487 --
Stockholders' equity (deficit)............................ 2,022 1,004 (1,636) (8,721) --
FINANCIAL RATIOS AND OTHER DATA (UNAUDITED):
Cash flow from operating activities....................... $ 16,814 $ 11,842 $ 16,547 $ 17,914 $10,216
Cash used for investing activities........................ (7,946) (16,168) (18,500) (16,763) (6,537)
Cash from (used for) financing activities................. (9,691) 10,272 (636) (270) (1,068)
EBITDA(5)................................................. 34,830 34,048 34,892 35,296 17,503
Capital expenditures(6)................................... 15,919 16,563 18,556 16,779 6,944
</TABLE>
____________________
(1) Certain amounts have been reclassified to conform the presentation
above with TCC.
(2) The term "Predecessor" refers to the period in time prior to the Solon
Acquisition.
(3) Fiscal year 1992 was a 53-week year. All other fiscal years were 52-
week years.
(4) Extraordinary loss on early extinguishment of debt in 1992 and change
of control in the Solon Acquisition on April 5, 1995.
(5) EBITDA represents earnings from continuing operations before deductions
for interest, income taxes, depreciation and amortization. EBITDA is
not intended to represent cash flows for the period, nor has it been
presented as an alternative to operating income as an indicator of
operating performance and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
generally accepted accounting principles. Management believes that
EBITDA is an appropriate measure of the Company's ability to service
its cash requirements. Given that EBITDA is not a measurement
determined in accordance with generally accepted accounting principles
and is thus susceptible to varying calculations, EBITDA as presented
may not be comparable to other similarly titled measures of other
companies. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(6) Capital expenditures include additions to property and equipment and
advance rental payments to location owners.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is principally engaged in the business of supplying coin-
operated laundry equipment services for multi-family properties in 28
states and the District of Columbia with locations throughout the
Northeast, Mid-Atlantic, Southeast, South-Central and Mid-West regions of
the United States.
The Company's most significant revenue source is derived from its
routes, which are comprised of over 245,000 coin-operated washing machines
and dryers. The Company provides coin-operated laundry equipment services
to locations by leasing designated laundry rooms in buildings, typically on
a long-term, renewable basis. In return for the exclusive right to provide
laundry equipment services, most of the Company's leases provide for
commission payments to the location owners. Commission expense (also
referred to as rent expense), the largest single expense item, is included
in laundry operating expenses and represents the payments to location
owners. Commissions may be fixed amounts or a percentage of revenues and
are generally paid monthly. Also included in laundry operating expenses
are the cost of sales associated with Super Laundry Equipment Corp. ("Super
Laundry"), a wholly-owned subsidiary of Coinmach and the cost of servicing
and collections in the route business, including payroll, parts, vehicles
and other related items.
In addition to commission payments to location owners, many of the
Company's leases require the Company to make advance rental payments or
bonuses to the location owners. These advance payments or bonuses are
capitalized and amortized over the life of the lease.
On January 31, 1995, in connection with the acquisition of Coinmach
Industries and Super Laundry Equipment Co., L.P., certain asset values,
primarily contract rights and fixed assets, were recorded at their then
fair market value, adjusted to reflect a pro rata allocation of the excess
of fair value of net assets acquired, based on an independent appraisal,
over the purchase price.
On November 30, 1995, TCC merged with Solon through an exchange of
stock, whereupon the surviving corporation, changed its name to Coinmach
Corporation. Both Solon and TCC were under common ownership commencing
April 5, 1995. The Merger was accounted for in a manner similar to a
pooling of interests.
In connection with the Refinancing, the Company issued a total of
approximately $196.7 million of Senior Notes which enabled the Company to,
among other things, extend the maturity of its debt obligations, retire the
remaining debt of TCC and provide additional working capital. On November
30, 1995, the Company also entered into the Revolving Credit Facility,
which provides for borrowings of up to a maximum of $35 million.
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the condensed consolidated financial statements and related notes
thereto included elsewhere in this Prospectus.
22
<PAGE>
Coinmach Laundry Corporation
SIX MONTHS ENDED MARCH 29, 1996 COMPARED TO SIX MONTHS ENDED MARCH 31,
1995
This discussion below should be read in conjunction with the following
table which combines the predecessor period for the six months ended March
31, 1995 (in thousands):
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended March 31, 1995
March 29, 1996 ----------------------------------
(Predecessor)(1),(2)
(Successor)(1) TCC Solon Combined
----------------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Revenues.............................. $ 89,070 $35,789 $52,207 $87,996
Laundry operating expenses............ 60,536 28,253 33,165 61,418
General and administrative expenses... 1,844 1,345 1,539 2,884
Depreciation and amortization......... 18,212 6,009 10,304 16,313
-------- ------- ------- -------
Operating income (loss)............... 8,478 182 7,199 7,381
Interest expense, net................. 11,999 2,464 8,928 11,392
Other expense......................... - 1,341 - 1,341
-------- ------- ------- -------
Loss before extraordinary item
and income taxes.................... (3,521) (3,623) (1,729) (5,352)
Income tax (benefit) expense.......... (998) 4 50 54
-------- ------- ------- -------
Loss before extraordinary item........ (2,523) (3,627) (1,779) (5,406)
Extraordinary item, net of tax........ (8,925) -- (848) (848)
-------- ------- ------- -------
Net loss.............................. $(11,448) $(3,627) $(2,627) $(6,254)
======== ======= ======= =======
</TABLE>
- -----------------------------------
(1) The term "Predecessor" refers to the period in time prior to the Solon
Acquisition. The term "Successor" refers to the period in time after
the Solon Acquisition and includes the historical results of Solon
which have been restated to include the pooling of interests of TCC.
Successor is presented on a different basis of accounting and
therefore, is not comparable to the Predecessor.
(2) Certain reclassifications have been made to conform to the 1996
presentation.
Revenues of approximately $89.1 million for the six months ended March
29, 1996 were approximately $1.1 million, or 1.2% higher than combined
revenues for the prior year's corresponding period. The improvement in
revenues consisted primarily of increased revenues from Super Laundry of
approximately $2.5 million. Such improvement was partially offset by a
decrease of approximately $1.4 million in revenues from routes. The
average machine base for the six months ended March 29, 1996 was
approximately 1.4% lower than the average machine base during the six
months ended March 31, 1995. The decrease in the machine base was
primarily the result of constraints on available capital prior to the
Merger. From September 30, 1995, through March 29, 1996, the Company
successfully implemented a program to maintain its base of installed
machines and eliminate any additional erosion. The effect of the decreased
number of machines was partially offset by increased revenue per machine
from price increases.
Laundry operating expenses decreased by approximately $0.9 million, or
1.4%, to approximately $60.5 million. The decrease is primarily the result
of decreased expenses of approximately $0.8 million related to
implementation of cost savings programs in the Company's field operations
and a decrease in commission expense of approximately 2.3%. These
decreases were partially offset by an increase in the cost of sales related
to the increased volume of Super Laundry.
General and administrative expenses decreased by approximately $1.0
million, or 36.1%, to approximately $1.8 million, primarily due to the
consolidation of corporate staff by closing Solon's Philadelphia,
Pennsylvania office and combining its operations into the Company's
existing facility in Roslyn, New York on September 29, 1995.
Depreciation and amortization increased by approximately $1.9 million
or 11.6% due primarily to purchase accounting adjustments resulting from
the Solon Acquisition.
Interest expense increased by approximately $0.6 million or 5.3% to
approximately $12.0 million. Approximately $1.8 million of such increase
was due primarily to the increased debt level that resulted from the
23
<PAGE>
Refinancing on November 30, 1995 and December 14, 1995. Offsetting this
increase is approximately $0.8 million of decrease in interest expense due
to the decrease in the effective interest rate as the result of the
Refinancing. The increased debt resulted in an excess cash balance of
approximately $12.3 million, which excess is contemplated to be used for
working capital purposes and for future acquisition opportunities.
CIC recorded a non-cash charge of $1.3 million in 1994 relating to the
imputed value of an equity conversion feature related to management loans
pursuant to CIC's plan of reorganization. Such feature was surrendered in
connection with the Coinmach Acquisition.
The extraordinary item for the period ending March 29, 1996, consist
of costs related to the extinguishment of debt in connection with the
Refinancing. The extraordinary item for the six months ended March 31,
1995, consist of costs related to the change in control in connection with
the Solon Acquisition.
EBITDA (earnings before deductions for interest, income taxes,
depreciation and amortization) is a widely accepted financial indicator of
a company's ability to service debt. EBITDA was approximately $26.7
million for the six months ended March 29, 1996, compared to approximately
$23.7 million for the corresponding period in 1995.
The Company's effective income tax rate differs from the amount
computed by applying the U.S. federal statutory rate to loss before income
taxes as a result of state taxes and permanent book/tax differences
(largely goodwill amortization).
SIX MONTHS ENDED SEPTEMBER 29, 1995 COMPARED TO SIX MONTHS ENDED SEPTEMBER
30, 1994
The discussion below should be read in conjunction with the following
table which combines the Predecessor period for the six months ended
September 30, 1994 (in thousands):
<TABLE>
<CAPTION>
Six Months Ended September 30, 1994
Six Months Ended --------------------------------------
September 29, 1995 (Predecessor)(1),(2)
(Successor)(1) TCC Solon Combined
------------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues............................. $89,719 $37,154 $51,577 $88,731
Laundry operating expenses........... 62,905 28,576 32,337 60,913
General and administrative expenses.. 2,351 1,123 1,444 2,567
Depreciation and amortization........ 18,423 7,576 10,966 18,542
Restructuring costs.................. 2,200 -- -- --
------- ------- ------- -------
Operating income (loss).............. 3,840 (121) 6,830 6,709
Interest expense, net................ 11,818 2,214 9,053 11,267
------- ------- ------- -------
Loss before income taxes............. (7,978) (2,335) (2,223) (4,558)
Income tax (benefit) expense......... (1,862) 24 3,208 3,232
------- ------- ------- -------
Net Loss............................. $(6,116) $(2,359) $(5,431) $(7,790)
======= ======= ======= =======
</TABLE>
________________________
(1) The term "Predecessor" refers to the period in time prior to the Solon
Acquisition. The term "Successor" refers to the period in time after
the Solon Acquisition and includes the historical results of Solon
which have been restated to include the pooling of interests of TCC.
Successor is presented on a different basis of accounting and
therefore, is not comparable to the Predecessor.
(2) Certain reclassifications have been made to conform to the 1995
presentation.
Revenues of approximately $89.7 million for the six months ended
September 29, 1995 were approximately $1.0 million, or 1.1% higher than
combined revenues for the prior year's corresponding period. The
improvement in revenues consisted primarily of increased revenues from
Super Laundry of approximately $1.3 million. Such improvement was
partially offset by a decrease of approximately $0.3 million in revenues
from routes, primarily due to a 2.0% decline in the average number of
laundry machines on location, due to constraints on capital prior to the
Merger. The effect of the decreased number of machines was partially
offset by increased revenue per machine of approximately 1.6% primarily due
to price increases.
Laundry operating expenses increased by approximately $2.0 million, or
3.3%, to $62.9 million. This increase is comprised of a $1.0 million
increase in the cost of sales related to the increase in Super Laundry
revenue. The remaining increase is primarily the result of the method of
accounting for installation costs applied in the Successor period. This
increase is the result of increased cost of sales related to the increased
volume of Super Laundry. In addition, the Company's commission expense
decreased by approximately 1.0%.
24
<PAGE>
General and administrative expenses decreased by approximately $0.2
million, or 8.4% primarily due to a decrease in the corporate staff.
The Company provided for one-time restructuring costs of approximately
$2.2 million to cover severance payments to certain of Solon's management,
administrative and regional personnel, costs to relocate Solon's financial
and administrative functions to Roslyn, New York, costs to integrate
certain financial and operating systems, and costs related to the
consolidation of certain of Solon's regional offices.
Interest expense increased by approximately $0.6 million or
approximately 4.9%. This increase is primarily due to an increase in the
interest rate on TCC's revolver, which was based on prime rate.
EBITDA (earnings before deductions for interest, income taxes,
depreciation and amortization) is a widely accepted financial indicator of
a company's ability to service debt. EBITDA was approximately $24.5
million, before the deduction for restructuring costs, for the six months
ended September 29, 1995, compared to approximately $25.3 million for the
corresponding period in 1994. The 1995 results include periods prior to
the Merger, the closing of the corporate office and the field
reorganization.
The Company's effective income tax rate differs from the amount
computed by applying the U.S. federal statutory rate to loss before income
taxes as a result of state taxes and permanent book/tax differences
(primarily goodwill amortization).
TCC (and CIC, its Predecessor)
THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO THREE MONTHS ENDED MARCH 31,
1994
The discussion of three months ended March 31, 1995 is based on
management's combination of the one month ended January 31, 1995 for TCC's
predecessor and the two months ended March 31, 1995 for TCC.
Although the Coinmach Acquisition was completed during this period,
management does not believe there was a material impact on TCC's day to day
operations and thus believes the combination of the two periods is
appropriate. Despite the change in accounting basis, management believes
it can make a meaningful comparison to the prior year's comparable three
month period.
Revenues were $17.4 million for the three month period ended March 31,
1995, a decrease of $0.9 million or 5.0% compared to the three month period
ended March 31, 1994. This decrease was primarily the result of a decrease
in Super Laundry revenues of approximately $1.2 million, which was due to
the timing of completed contracts. Super Laundry recognizes revenue on a
completed contract basis. During the three months ended March 31, 1995,
Super Laundry completed fewer contracts than in the corresponding period in
the prior year. This shortfall was eliminated in the subsequent quarter.
Increases in route revenues of approximately $0.3 million, primarily due to
increased revenue per machine of approximately 1%, partially offset this
shortfall. The increase in revenue per machine was primarily due to TCC's
price review program whereby vend prices are regularly monitored and price
increases or decreases are instituted with the goal of maximizing revenue
per machine.
Laundry operating expenses decreased by $0.4 million or 2.7% to $13.2
million as compared to the three month period ended March 31, 1994. The
decrease in Super Laundry revenues resulted in a corresponding reduction in
laundry operating expenses of approximately $0.8 million. Offsetting this
decrease is an increase in commission expense of approximately $0.2
million, which is based on increased route revenues. The remaining
increase of $0.2 million is due to a general increase in expenses.
General and administrative expenses were generally unchanged for the
two periods.
Depreciation and amortization expense decreased in the three month
period ended March 31, 1995 by $0.5 million compared to the three month
period ended March 31, 1994. The decrease was primarily the result of
purchase accounting adjustments associated with the Coinmach Acquisition.
As a result of the above, operating loss was approximately $0.2
million for each period.
25
<PAGE>
Interest expense for the three month period ended March 31, 1995
increased by $0.3 million or 30.9% compared to the three month period ended
March 31, 1994, primarily due to an increase in the effective interest rate
to approximately 11% from approximately 8%, due to the increase in the
prime rate.
Income taxes were insignificant in both periods and resulted from
state and local taxes. TCC had no Federal income tax benefit in either
period because of the valuation allowances established against deferred tax
assets generated from net operating losses.
FISCAL YEAR ENDED DECEMBER 31, 1994 COMPARED TO FISCAL YEAR ENDED DECEMBER
31, 1993
Revenues were $73.9 million in fiscal 1994, an increase of $2.0
million or 2.8% compared to fiscal 1993. The favorable change is
attributable to improvements in Super Laundry of approximately $1.5 million
and improvements in route operations of approximately $0.5 million. The
increase in Super Laundry revenue is primarily the result of access to more
attractive financing options for Super Laundry customers. The increase in
route revenues is due to a 3.8% increase in revenue per machine, partially
offset by a 1% decrease in the machine base. The increase in revenue per
machine was primarily due to the Company's price review program.
Laundry operating expenses increased by $1.9 million or 3.7% to $54.7
million as compared to fiscal 1993. The increase is attributed to costs
associated with the increase in Super Laundry revenue and increased laundry
operating expenses of the route operations.
General and administrative expenses decreased by $0.6 million or 11.3%
in fiscal 1994 compared to fiscal 1993 due to decreased salaries, benefits
and professional fees.
Depreciation and amortization expense decreased in fiscal 1994 by $0.8
million or 4.9% compared to fiscal 1993. The decrease was primarily the
result of certain assets acquired in the 1989 Transaction becoming fully
depreciated in fiscal 1994.
As a result, operating loss decreased by $1.5 million to $0.3 million
or 81.8% for the year ended December 31, 1994.
Income taxes were insignificant in both periods and resulted from
state and local taxes. CIC had no Federal income tax benefit in either
period because of the valuation allowances established against deferred tax
assets generated from net operating losses.
Interest expense for fiscal 1994 decreased by $6.5 million or 61.8%
compared to fiscal 1993 primarily due to the conversion of subordinated
notes to common stock pursuant to CIC's prepackaged bankruptcy plan of
reorganization filed on December 15, 1993. This decrease was partially
offset by an increase of $0.3 million in interest expense resulting from an
increase in interest rates on its long term debt obligations.
CIC recorded a non-cash charge of $1.3 million in 1994 relating to the
imputed value of an equity conversion feature related to management loans
pursuant to CIC's plan of reorganization. Such feature was surrendered in
connection with the Coinmach Acquisition.
CIC recognized an extraordinary gain of $20.4 million on the early
extinguishment of debt in 1994 in connection with CIC's plan of
reorganization.
FISCAL YEAR ENDED DECEMBER 31, 1993 COMPARED TO FISCAL YEAR ENDED DECEMBER
31, 1992
Revenues were $71.9 million in fiscal 1993, a decrease of $0.3 million
or 0.4% compared to fiscal 1992. This decrease is primarily due to the
elimination of an unprofitable division involved in the sale of non-coin
operated machinery to commercial establishments. Revenues from Coinmach
increased by $0.7 million, primarily the result of an increase in the
average revenue per machine of approximately 2%. This increase was offset
by a decrease in revenues from Super Laundry. The increase in revenue per
machine was primarily due to the Company's price review program.
Laundry operating expenses decreased by $0.4 million or 0.7% to $52.8
million as compared to fiscal 1992, principally relating to the decrease in
revenues.
26
<PAGE>
General and administrative expenses decreased by $0.1 million or 2.5%
in fiscal 1993 compared to fiscal 1992, primarily due to the elimination of
the unprofitable division.
Depreciation and amortization expense decreased in fiscal 1993 by $1.5
million or 8.9% to $15.3 compared to fiscal 1992. The decrease was
primarily attributable to the completion of the amortization of certain
contract rights and deferred financing costs associated with the 1989
Transaction.
As a result, operating loss decreased by $1.7 million to $1.8 million
or 48.8% for the year ended December 31, 1993.
Interest expense for fiscal 1993 increased by $0.9 million or 9.8%
compared to fiscal 1992 primarily due to an increase in penalty interest
associated with certain subordinated notes which were converted to common
stock pursuant to CIC's plan of reorganization.
Income taxes were insignificant in both periods due to the valuation
allowances established against deferred tax assets generated from net
operating losses.
Solon
FISCAL YEAR ENDED SEPTEMBER 29, 1995 COMPARED TO FISCAL YEAR ENDED
SEPTEMBER 30, 1994
The discussion should be read in conjunction with the following table
which combines the Predecessor and Successor periods for fiscal 1995 (in
thousands).
<TABLE>
<CAPTION>
Fiscal Year Ended September 29, 1995
----------------------------------------------
April 5, October 1, Fiscal Year
1995 to 1994 to Ended
September 29, April 4, September 30,
1995 1995 Total 1994
----------------- -------------- --------- ------------------
Successor(1) Predecessor(1) Predecessor(1),(2)
<S> <C> <C> <C> <C>
Revenues......................................... $89,719 $52,207 $141,926 $104,553
Laundry operating expenses....................... 62,905 33,165 96,070 66,527
Depreciation and amortization.................... 18,423 10,304 28,727 21,347
General and administrative expenses.............. 2,458 1,539 3,997 2,839
Gain on sale of equipment........................ -- -- -- (109)
Restructuring costs.............................. 2,200 -- 2,200 --
----------------- -------------- --------- ------------------
Operating income................................. 3,733 7,199 10,932 13,949
Interest expense, net............................ 11,541 8,928 20,469 18,105
----------------- -------------- --------- ------------------
Loss before income taxes and extraordinary item.. (7,808) (1,729) (9,537) (4,156)
----------------- -------------- --------- ------------------
Provision (benefit) for income taxes:
Currently payable.............................. 420 270 690 200
Deferred....................................... (2,282) (220) (2,502) 2,562
----------------- -------------- --------- ------------------
(1,862) 50 (1,812) 2,762
----------------- -------------- --------- ------------------
Loss before extraordinary item................... (5,946) (1,779) (7,725) (6,918)
Extraordinary item, net of income taxes of $0.... -- 848 848 --
----------------- -------------- --------- ------------------
Net loss......................................... $(5,946) $(2,627) $ (8,573) $ (6,918)
================= ============== ========= ==================
</TABLE>
____________________
(1) The term "Predecessor" refers to the period in time prior to the Solon
Acquisition. The term "Successor" refers to the period in time after
the Solon Acquisition and includes the historical results of Solon
which have been restated to include the pooling of interests of TCC.
Successor is presented on a different basis of accounting and
therefore, is not comparable to the Predecessor.
(2) Certain reclassifications have been made to conform to the 1995
presentation.
Excluding revenues of TCC of $38.5 million for the Successor period,
revenues of $103.4 million for fiscal 1995 were $1.1 million or 1.1% lower
than revenues for fiscal 1994. A favorable change of approximately $1.8
million in revenues resulting from increases in revenue per machine was
offset by approximately $2.9 million in losses caused by a decline in the
average number of laundry machines on location. The decline in the average
number of laundry machines on location was primarily due to the lack of
available capital prior to the Refinancing.
27
<PAGE>
Revenue per machines rose slightly primarily because of price increases and
improved occupancy levels in the Southeast and South-Central regions.
Excluding laundry operating expenses of TCC of $29.8 million for the
Successor period, laundry operating expenses of $66.3 million for fiscal
1995 were $0.2 million or 0.3% lower than laundry operating expenses for
fiscal 1994. Commissions expense decreased by approximately $1.0 million
due to lower revenues and a reduction in the average commissions rate from
44.7% of revenues during fiscal 1994 to 44.1% of revenues during fiscal
1995. The decrease in the commissions rate was primarily attributable to
Solon's ongoing commission control programs and a shift away from higher
commission locations primarily in the Washington, D.C. Metropolitan area.
Laundry operating expenses other than commissions expense rose by
approximately $0.8 million in fiscal 1995 compared to fiscal 1994 primarily
due to inflationary increases.
Excluding depreciation and amortization expenses of TCC of $5.5
million for the Successor period, depreciation and amortization increased
by $1.9 million or 8.6% for fiscal 1995, compared to the prior year. The
increase was due primarily to purchase accounting adjustments resulting
from the Solon Acquisition.
Excluding general and administrative expenses of TCC of $0.9 million
for the Successor period, general and administrative expenses of $3.1
million for fiscal 1995 were $0.3 million or 10.7% higher than such
expenses for fiscal 1994. General and administrative expenses include a
charge of approximately $0.3 million for the cost of a severance agreement
with the former chief executive officer of Solon.
Solon provided for one-time restructuring costs of approximately $2.2
million to cover severance payments to certain of Solon's management,
administrative and regional personnel, costs to relocate Solon's financial
and administrative functions to Roslyn, New York, costs to integrate
certain financial and operating systems, and costs related to the
consolidation of certain of Solon's regional offices.
Excluding interest expense of TCC of $2.7 million for the Successor
period, interest expense for fiscal 1995 decreased by $0.3 million or 1.7%
compared to the prior year primarily due to an increase in interest income,
and to a lesser extent, a decrease in interest caused by a repurchase and
retirement of $1.0 million of the Old Senior Notes in November 1994.
Solon's income tax benefit was $1.8 million in fiscal 1995 compared to
a tax provision of $2.8 million for fiscal 1994. As further discussed in
the consolidated financial statements, the tax provision for fiscal 1994
included a $3.7 million charge to establish a valuation allowance for
previously recorded deferred tax assets. The deferred tax asset of $2.0
million recorded in the Successor period does not reflect a valuation
allowance because the loss can be utilized against the deferred tax
liabilities in the carryforward periods. In addition to this benefit,
Solon's effective income tax rate differs from the amount computed by
applying the U.S. federal statutory rate to loss before income taxes as a
result of state taxes and permanent book/tax differences.
Solon incurred costs aggregating $0.8 million in connection with the
Solon Acquisition, including a total of $0.4 million in lump sum payments
made to fourteen management employees pursuant to certain contractual
arrangements relating to the acquisition. The total costs have been
reflected as an extraordinary item in the financial statements.
FISCAL YEAR ENDED SEPTEMBER 30, 1994 COMPARED TO FISCAL YEAR ENDED OCTOBER
1, 1993
Revenues were $104.5 million in fiscal 1994, a decrease of $0.4
million or 0.4% compared to fiscal 1993. The unfavorable change in
revenues consisted of approximately a $1.2 million increase due to
increases in revenue per machine offset by a $1.6 million decrease in
revenues caused by a decline in the average number of machines on location.
Price increases and improved occupancy levels in apartment buildings in the
Carolinas, Georgia and Texas were the primary reasons for the increases in
revenue per machine. Severe winter weather in the mid-Atlantic states and
more significantly a decline in the average number of machines on location
due primarily to competitive pressures in the Washington, D.C. Metropolitan
area were responsible for the offsetting decline in revenues.
Laundry operating expenses decreased by $0.9 million or 1.5% to $66.5
million in fiscal 1994 as compared to fiscal 1993. The decline was
primarily the result of lower revenues and a reduction in the average
commission rates as a percentage of revenues from 45.4% in fiscal 1993 to
44.7% in fiscal 1994. The decrease in the commission rate was primarily
attributable to Solon's ongoing commission control programs. Additionally,
a gain on divestiture of $0.1 million was netted against these expenses in
fiscal 1994.
28
<PAGE>
General and administrative expenses increased by $0.2 million or 10.2%
in fiscal 1994 compared to fiscal 1993 primarily due to adjustments
totalling approximately $0.4 million in fiscal 1993 related to a re-
evaluation of certain accrual and other liability balances.
Depreciation and amortization increased in fiscal 1994 approximately
$0.3 million or 1.6% compared to fiscal 1993 primarily as a result of a
higher level of capital expenditures in fiscal 1993.
Interest expense for fiscal 1994 increased by $0.7 million or 3.7%
compared to fiscal 1993. The increase was due primarily to the expiration
of an interest rate exchange agreement in fiscal 1993 in which a benefit of
$0.5 million was realized in fiscal 1993 reducing Solon's interest expense.
Additionally, borrowing costs on Solon's revolving line of credit were
somewhat higher in fiscal 1994 over fiscal 1993 due to higher average
balances borrowed.
Solon's income tax provision was $2.8 million in 1994 as compared to
an income tax benefit of $0.8 million recorded in 1993. As further
discussed in the consolidated financial statements, the tax provision for
1994 includes a $3.7 million charge to establish a valuation allowance for
previously recorded deferred tax assets. In addition to this charge,
Solon's effective income tax rate differs from the amount computed by
applying the U.S. federal statutory rate to loss before income taxes as a
result of state taxes and permanent book/tax differences (primarily
goodwill amortization).
IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of", which requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount.
Statement No. 121 also addresses the accounting for long-lived assets that
are expected to be disposed. The Company will adopt Statement No. 121 in
the first quarter of fiscal year 1997 and, based on current circumstances,
does not believe the effect of the adoption will be material.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock Based Compensation", is effective for fiscal years beginning after
December 15, 1995. Statement No. 123 provides companies with a choice to
follow the provisions of Statement No. 123 in determination of stock-based
compensation expense or to continue with the provisions of APB 25,
"Accounting for Stock Issued to Employees." The Company will continue to
follow APB 25 and will provide pro forma disclosures as required by
Statement No. 123 in the March 28, 1997 notes to the consolidated financial
statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to have substantial indebtedness and debt
service requirements. At March 29, 1996, the Company had outstanding long-
term debt of approximately $202.8 million and stockholders' deficit after
restructuring charges and writeoffs related to the Merger and the
Refinancing of approximately $1.3 million. As of ___________, 1996, the
Company has approximately [$___] outstanding under the Revolving Credit
Facility.
FINANCING ACTIVITIES
Coinmach Senior Notes
In connection with the Refinancing, the Company issued 11 3/4% Senior
Notes due 2005 pursuant to the terms of an indenture, dated as of November
30, 1995, between Coinmach and Shawmut Bank Connecticut, National
Association, as amended by the First Supplemental Indenture, dated as of
December 11, 1995, between Coinmach and Fleet Bank of Connecticut (formerly
known as Shawmut Bank Connecticut, National Association) (as amended, the
"Indenture") in an aggregate principal amount of $196,655,000. In April
1996, pursuant to a registration statement declared effective by the
Commission on March 28, 1996, the Company consummated a registered exchange
offer, which expired on April 29, 1996, pursuant to which all issued and
outstanding 11 3/4% Senior Notes due 2005 were exchanged for Series B 11
3/4% Senior Notes due 2005. The Company also has $5 million of 12 3/4%
Senior Notes due 2001 issued and outstanding that were not exchanged in the
exchange offer.
The Senior Notes, which mature on November 15, 2005, are unsecured
senior obligations of Coinmach and are redeemable, at Coinmach's option, in
whole or in part at any time or from time to time, on and after
29
<PAGE>
November 15, 2000, upon not less than 30 nor more than 60 days notice, at
the redemption prices set forth in the Indenture, plus, in each case,
accrued and unpaid interest thereon, if any, to the date of redemption.
The Indenture contains a number of restrictive covenants and
agreements including covenants with respect to the following matters: (i)
limitation on Indebtedness (as defined in the Indenture); (ii) limitation
on restricted payments (in the form of the declaration or payment of
certain dividends or distributions on the capital stock of Coinmach or its
subsidiaries, the purchase, redemption or other acquisition of any capital
stock of Coinmach, the voluntary prepayment of subordinated Indebtedness,
or an Investment (as defined in the Indenture) in any other person); (iii)
limitation on transactions with affiliates; (iv) limitation on liens; (v)
limitation on sales of assets; (vi) limitation on sale and leaseback
transactions; (vii) limitation on conduct of business; (viii) limitations
on dividends and other payment restrictions affecting subsidiaries; and
(ix) limitations on consolidations, mergers and sales of substantially all
of Coinmach's assets.
The events of default under the Indenture include provisions that are
typical of senior debt financings. Upon the occurrence and continuance of
certain events of default, the trustee or the holders of not less than 25%
in aggregate principal amount of outstanding Senior Notes may declare all
unpaid principal and accrued interest on all of the Senior Notes to be
immediately due and payable.
Upon the occurrence of a Change of Control (as defined in the
Indenture), each holder of Senior Notes will have the right to require that
Coinmach purchase all or a portion of such holder's Senior Notes pursuant
to the offer described in the Indenture, at a purchase price equal to 101%
of the principal amount thereof plus accrued and unpaid interest, if any,
to the date of purchase.
Revolving Credit Facility
On November 30, 1995, Coinmach entered into the Revolving Credit
Facility with Heller Financial, Inc. ("Heller"), as amended on December 9,
1995, pursuant to which Heller agreed, subject to a borrowing base, to lend
on a revolving basis to Coinmach up to a maximum of $35 million for an
initial period of five years. Of that $35 million, Heller may extend up to
$3 million of letter of credit accommodations to Coinmach. Additionally,
availability under the Revolving Credit Facility is reduced by an amount
equal to a pro-rated portion of one semi-annual interest payment on the
Senior Notes.
Interest on Coinmach's borrowings under the Revolving Credit Facility
is payable monthly in arrears at a rate per annum of no greater than (i)
LIBOR plus 2.50% or (ii) the Base Rate (as defined in the Revolving Credit
Facility) plus 1.00%. Coinmach is obligated to pay an unused line fee in
an amount equal to 0.5% of unused availability payable monthly in arrears.
Indebtedness under the Revolving Credit Facility is secured by all of
the Company's real and personal property. The Company has guaranteed the
indebtedness under the Revolving Credit Facility and pledged to Heller its
interests in all of the issued and outstanding shares of capital stock of
Coinmach. In addition to customary restrictive covenants and agreements,
the Revolving Credit Facility contains certain covenants including, but not
limited to, a minimum fixed charge coverage ratio, limitations on
indebtedness, guarantees, capital expenditures, mergers and acquisitions,
dividends, stock repurchases, management fees, transactions with affiliates
and investments.
The Revolving Credit Facility contains certain events of default,
including the following: (i) the failure of Coinmach to pay any of its
obligations under the Revolving Credit Facility when due or within five
days after the due date; (ii) certain failures by Coinmach to pay principal
or interest on indebtedness or certain breaches or defaults by Coinmach of
certain indebtedness, in each case after any applicable grace period; (iii)
certain defaults by Coinmach in the performance or observance of the
agreements or covenants under the Revolving Credit Facility or related
agreements, beyond any applicable cure period; (iv) the falsity in any
material respect of certain of Coinmach's representations or warranties
under the Revolving Credit Facility; (v) certain judgments against
Coinmach; or (vi) certain events of bankruptcy or insolvency of Coinmach or
the Company.
OPERATING ACTIVITIES
The Company's level of indebtedness will have several important
effects on its future operations including the following: (i) a
significant portion of the Company's cash flow from operations will be
required to pay interest on its indebtedness and will not be available for
other purposes; (ii) the financial covenants and other restrictions
contained in certain of the financing agreements governing the Company's
indebtedness will require the Company to meet certain financial tests and
will limit its ability to borrow additional funds or to dispose of assets;
(iii) the
30
<PAGE>
Company's ability to obtain additional financing in the future
for working capital, capital expenditures, acquisitions and general
corporate purposes may be impaired; and (iv) the Company's ability to adapt
to changes in the coin-operated laundry equipment services industry and to
economic conditions in general could be limited. Coinmach Laundry is a
holding company that will be dependent upon its principal operating
subsidiary, Coinmach, as its primary source of revenue subsequent to the
Offering. At March 29, 1996, no amounts were outstanding under the
Revolving Credit Facility. The interest rate as of March 29, 1996 was
9.25%.
The expenses of the Company include significant amounts of
depreciation and amortization (approximately $36.6 million for the twelve
months ended March 29, 1996) which have the effect of reducing net income
but not operating cash flow. In accordance with generally accepted
accounting principles, a significant amount of the purchase price of
businesses acquired by the Company is allocated to "contract rights", which
costs are amortized over periods of up to 15 years. Although such
accounting treatment has a favorable effect on cash flow by reducing taxes,
it also reduces net income. The Company expects to continue this practice
with future acquisitions so as to maximize cash flows through the
recognition of related smaller net income caused by the increased
amortization. Such a practice will be employed until the purchase price
has been fully amortized.
The Company anticipates that it will continue to utilize cash flow
from its operations to finance its capital expenditures and working capital
needs, including interest payments on its outstanding indebtedness.
Capital expenditures for the twelve months ended March 29, 1996 were
approximately $27.3 million, including approximately $2.1 million of non-
recurring costs associated with the consolidation of certain of the
Company's facilities and a capital replacement program designed to offset
deficiencies resulting from prior capital constraints. The Company
instituted the capital replacement program to upgrade certain equipment of
the Company formerly maintained by Solon. The Company is not subject to
contractual commitments to vendors with respect to any material portion of
the capital expenditures anticipated for the next twelve months. Under the
terms of the Revolving Credit Facility, the Company is obligated to incur
capital expenditures to maintain and repair equipment in varying amounts up
to $14 million per year after April 1, 1996. On a pro forma basis, after
giving effect to all route acquisitions consummated through May 1996 as if
such transactions occurred at the beginning of such period, the Company
spent $29.0 million on capital expenditures for the year ended March 29,
1996. The Company anticipates that capital expenditures, including those
relating to maintaining its existing installed machine base, will be
approximately $25 million for the twelve months ending March 28, 1997.
Management believes that the Company has adequate resources to address such
capital requirements in the near future.
The Company's working capital requirements are, and will continue to
be, minimal since a significant portion of the Company's operating expenses
are not paid until after cash is collected from the installed machines. In
connection with the Refinancing, the Company is required to make semi-
annual cash interest payments on the Senior Notes, and will be required to
make monthly interest payments under the Revolving Credit Facility.
Management believes that the Company's future operating activities will
generate sufficient cash flow to repay borrowings under the Senior Notes
and the Revolving Credit Facility or permitted refinancings thereof. An
inability of the Company, however, to comply with covenants or other
conditions contained in the Indenture or in the Revolving Credit Facility
could result in an acceleration of the amounts due thereunder. If the
Company is unable to meet its debt service obligations, it could be
required to take certain actions such as reducing or delaying capital
expenditures, selling assets, refinancing or restructuring its
indebtedness, selling additional equity capital or other actions. There is
no assurance that any of such actions could be effected on commercially
reasonable terms, if at all, or on terms permitted under the Revolving
Credit Facility or the Indenture or that the assets of the Company would be
sufficient to repay in full such indebtedness and other indebtedness of the
Company if such indebtedness were to be accelerated.
INFLATION AND SEASONALITY
In general, the Company's laundry operating expenses and general and
administrative expenses are affected by inflation and the effects of
inflation may be experienced by the Company in future periods. Management
believes that such effects have not been nor will be material to the
Company. The Company's business generally is not seasonal.
31
<PAGE>
BUSINESS
OVERVIEW
The Company, established in 1948, is a leading supplier of coin-
operated laundry equipment services for multi-family properties in the
United States. The Company leases laundry rooms from building owners and
management companies, installs and services the laundry equipment and
collects the revenues generated from the machines. The Company typically
sets pricing for the use of the machines on location, and the owner or
property manager maintains the premises and provides utilities such as gas,
electricity and water.
The Company's existing customer base is comprised of landlords,
property management companies, and owners of rental apartment buildings,
condominiums and cooperatives, university and institutional housing and
other multi-family properties. The Company owns and operates over 245,000
coin-operated washers and dryers on routes in over 26,000 buildings located
in 28 states and the District of Columbia. The Company's routes are
located throughout the Northeast, Mid-Atlantic, Southeast, South-Central
and Mid-West regions of the United States. Management believes, based on
its knowledge of the industry, that the Company is the second largest
supplier of coin-operated laundry equipment services for multi-family
buildings in the United States and the largest in the eastern United
States.
The Company coordinates its regional operations from its headquarters
in Roslyn, New York. While financial and administrative activities of the
Company are located in Roslyn, operating activities, including sales,
service and collections, are conducted through its regional offices. The
following table sets forth certain information relating to the Company's
regional operations on a pro forma basis for the year ended March 29, 1996:
<TABLE>
<CAPTION>
MID-
NORTHEAST ATLANTIC SOUTHEAST SOUTH-CENTRAL MID-WEST TOTAL
---------------- ------------- ------------------ ---------------- --------------------- --------
<S> <C> <C> <C> <C> <C> <C>
States...................... NY, NJ, CT D.C., MD, VA, WV, NC, SC, TX, LA, FL, IL, IA, SD, NE
PA, DE GA, KY, AL, TN AK, MS, OK MO, KS, IN, MI
Approximate Revenue (in
millions)................ $76.6 $30.8 $24.9 $46.5 $10.6 $189.4
Employees................... 242(2) 87 109 199 52(1) 689(2)
____________________
(1) Represents employees hired by the Company on April 2, 1996, in connection with the Allied Acquisition.
(2) Includes 40 executive, financial and administrative personnel at the Company's headquarters located in Roslyn, New York.
</TABLE>
BUSINESS STRATEGY
The Company's business strategy is to increase operating cash flow and
profitability through a combination of internal expansion and selective
acquisitions. Internal expansion is comprised of: (i) increasing the
installed machine base by adding new customers, (ii) converting owner-
operated facilities to Company managed facilities, and (iii) implementing
selective price increases within the Company's operating regions. The
Company's acquisition strategy is to acquire additional local, regional and
multi-regional route businesses from independent operators. Management
believes that by pursuing its business strategy the Company will be
positioned to realize: (i) additional operating leverage and economies of
scale associated with expanding its installed base of machines, (ii)
reduced operating expenses through consolidation of overhead functions and
facilities, and (iii) reduced equipment and parts costs on a per unit
basis due to increased purchasing requirements.
In January 1995, management, with its equity sponsor, GTCR, acquired
the Company's Northeast regional route business and initiated a strategy of
growth through acquisitions. This strategy was designed to increase the
installed machine base in its existing operating regions and to provide the
Company with a leading market position in new regions. Since January 1995,
the Company has grown its installed base from 54,000 machines to 245,000
machines as of May 1, 1996. Revenues and EBITDA (earnings before
deductions for income taxes, depreciation and amortization) have grown from
$72.9 million and $13.6 million, respectively, for the twelve months ended
March 31, 1995, to $189.4 million and $56.2 million, respectively, for the
twelve months ended March 31, 1996, on a pro forma basis. See "Unaudited
Pro Forma Financial Data." These acquisitions have enabled the Company to
improve its operating margins and compete more aggressively for new
strategic contracts.
Internal Expansion
New Locations. The Company's aggressive sales and marketing efforts
-------------
focus on two areas of expansion within its existing operating regions. The
Company's primary means of internal expansion is by marketing the Company's
products and services to building managers and property owners whose leases
with other laundry
32
<PAGE>
equipment servicers are near expiration. Many large customers require
competitive bids for expiring lease contracts. The Company's Integrated
Computer Systems track information on the lease expirations of its
competitors. The Company secures leases with these buildings through
effective data management on competition, its ability to quickly coordinate
and target its marketing efforts, aggressive bidding for new contracts and
its long standing industry reputation for prompt and reliable service.
Conversions. Management believes, based on industry estimates, that
-----------
there are approximately 1.0 million machines installed in locations that
are managed by owner-operators. Building owners or managers can forgo
significant cash outlays by contracting with the Company to purchase,
service and maintain laundry equipment. Accordingly, in conjunction with
its Integrated Computer Systems, the Company aggressively pursues building
owners and managers to convert from owner-operated laundry facilities. The
Company offers a full range of services from the design, construction and
installation of new laundry facilities to the refurbishment of existing
facilities. Management believes these services provide a competitive
advantage in securing new customers.
Price Increases. In addition to growing the Company's installed base
---------------
of machines, management regularly reviews its pricing policies and
procedures under all existing leases. Management expects that the Company
should realize increases in revenue and cash flow from operations through
selective price increases and other pricing procedures in the forthcoming
year, provided, however, that due to competition and certain other factors
beyond the Company's control, there can be no assurance that such increases
will occur. The leases at 58% of the Company's locations allow price
increases without corresponding adjustments in rental payments or
commissions.
Management believes that its strategy of growth within its existing
operating regions will result in additional economies of scale and
operating efficiencies associated with an expanded machine base.
Selective Acquisitions
The Company intends to capitalize on opportunities inherent within the
fragmented laundry services industry through selective acquisitions of
local, regional and multi-regional route businesses. In particular, there
are numerous private, family-owned businesses that may lack the financial
resources to provide advance rental payments, install new equipment, make
laundry room improvements or otherwise compete effectively with larger
independent operators such as the Company to secure new or renewal
locations. Consequently, such independent operators, many of which are
undergoing generational ownership changes, may represent potential
acquisition opportunities for the Company within its operating regions.
Management believes the Company is well positioned to capitalize on
such opportunities for growth and expansion due to its operating
efficiencies, its access to capital resources, and senior management's
extensive experience and relationships in the industry. The Company
evaluates potential acquisitions based on important criteria, including the
size of the business (in terms of revenues and machine base), the
geographic concentration of the business, market penetration, service
history, customer relations, existing contract terms and other potential
operating efficiencies and cost savings. The Company considers three types
of acquisition candidates: (i) small local route operators (including
owner-operators); (ii) regional route operators; and (iii) large, multi-
regional route operators.
Local route operators. The purchase of small, local operators
---------------------
(businesses operating within one of the Company's existing regions) results
in lowering the target's existing cost structure through the complete
absorption of the machine base into the Company's operations. The Company
expects to evaluate opportunities to acquire route businesses from
independent operators to further increase operating leverage within its
operating regions. In many regions, the Company may be able to acquire
routes adjacent to its existing areas of operation without incurring
significant incremental operating, collection, security, service and
maintenance costs.
Regional route operators. A regional acquisition provides the
------------------------
opportunity to improve the Company's cash flow by eliminating duplicative
corporate and administrative functions, reducing capital expenditures
through improved purchasing power and implementing the Company's Integrated
Computer Systems. The Allied Acquisition, completed on April 1, 1996,
represented such an acquisition, which management estimates will result in
cost savings of approximately $0.5 million annually. The Company completed
the Allied Acquisition as part of its acquisition strategy and its plan to
establish a larger market presence in the Midwest. This acquisition
increased the Company's installed machine base by approximately 25,000
machines. On a pro forma basis for the period ending March 29, 1996, the
Allied Acquisition contributed an increase of approximately $3.3 million of
EBITDA (earnings before deductions for income taxes, depreciation and
amortization) and approximately $10.6 million of consolidated revenue.
33
<PAGE>
Multi-regional route operators. The acquisition of a large, multi-
------------------------------
regional route operator may result in a number of operating efficiencies,
including, significant cost savings through the elimination of duplicative
financial and administrative functions and related fixed costs. In
addition, the increased volume of equipment purchases may result in reduced
per unit capital expenditures. Moreover, as is the case with all types of
acquisitions, the Company's Integrated Computer Systems would be utilized
to provide further operating efficiencies and related cost savings. The
combination of Solon and TCC on November 30, 1995, is an example of a
multi-regional acquisition and has resulted in approximately $3.7 million
of annual cost savings. In addition to the cost savings, the combination of
Solon and TCC enabled the Company to significantly increase its operating
base, add several experienced regional managers to its management team,
penetrate new markets as a leader in each of the acquired regions and
become the second largest supplier of coin-operated laundry equipment
services in the United States.
INDUSTRY
The coin-operated laundry services industry is fragmented nationally
with many small, private and family-owned route businesses continuing to
operate throughout all major metropolitan areas. According to information
provided by the Multi-housing Laundry Association, the industry is
comprised of over 280 independent operators. Based upon industry
estimates, management believes there are approximately 3.5 million machines
installed throughout the United States, 2.5 million of which are managed by
independent operators such as the Company and 1.0 million of which are
managed by owner-operators. Despite the overall fragmentation of the
industry, there are currently three companies including the Company with
significant operations in multiple regions throughout the United States.
Management believes that its two major multi-regional competitors are
strongest in California and Chicago, Illinois, where the Company currently
has a minimal presence.
The industry is highly capital intensive and requires prompt and
reliable service. The majority of capital costs are incurred upon
procurement of new contracts. Such initial costs include replacing or
repairing existing washers and dryers, refurbishing laundry rooms and
making advance rental payments to secure long-term, renewable leases.
After the initial expenditures, ongoing working capital requirements are
minimal, as machines operate for many years if serviced properly, and
variable costs are paid out of revenues collected from the machines.
Historically, the industry has been characterized by stable demand and
has proven to be resistant to changing market conditions and general
economic cycles. Management believes that this is due to the consistent
demand for laundry services by building occupants. In addition, the
Company has experienced consistent pricing increases of approximately 2-3%
per year on a revenue per machine basis; however, there can be no assurance
that the Company will achieve such increases in the future.
Management believes that the industry's consistent and predictable
revenue and cash flow from operations are primarily due to: (i) the long-
term nature of location leases; (ii) the stable demand for laundry
services; and (iii) minimal ongoing working capital requirements.
DESCRIPTION OF OPERATIONS
The principal aspects of the Company's operations include: (i)
location leasing, (ii) service, (iii) remanufacturing, (iv) security, (v)
information management and (vi) sales and marketing.
Location Leasing
The Company's leases provide the Company the exclusive right to
operate and service the laundry equipment, including repairs and
maintenance. The Company typically sets pricing for the use of the
machines on location, and the property owner or manager maintains the
premises and provides utilities such as gas, electricity and water.
In return for the exclusive right to provide laundry equipment
services, most of the Company's leases provide for monthly commission
payments to the location owners. Under the majority of leases, these
commissions are based on a percentage of the cash collected from the
laundry machines. Many of the Company's leases require the Company to make
advance rental payments or bonuses to the location owner in addition to
commissions. The Company's leases typically include provisions that allow
for unrestricted price increases, a right of first refusal (an opportunity
to match competitive bids at the expiration of the lease term) and
termination rights if the Company does not receive minimum net proceeds
from a contract. The Company has some flexibility in negotiating its
leases and, subject to regional competitive factors, may vary the terms and
conditions of a lease, including commission rates and lease bonuses. The
Company evaluates each lease opportunity through its Integrated Computer
Systems which are designed to achieve certain targeted levels of
profitability.
34
<PAGE>
Management estimates that over 89% of its locations are subject to
long-term leases with initial terms of three to ten years. Of the remaining
locations not subject to long term leases, the Company believes that it has
retained a majority of such customers through long-standing relationships
and intends to continue to service such customers. Approximately 67% of the
Company's leases renew automatically, and the Company has a right of first
refusal on termination in approximately 56% of its leases. The Company's
automatic renewal clause typically provides that, if the building owner
fails to take any action prior to the end of the original lease term or any
renewal term, the lease will automatically renew on substantially similar
terms. As of March 31, 1996, the Company's leases have an average remaining
life to maturity of 42 months.
Management estimates that approximately 13% of its leases expire each
year. Although the timing of lease renewals may not coincide with the
applicable expiration dates of such leases, management believes that, with
respect to the 13% of leases scheduled to expire each year, approximately
75% of such leases are retained by the Company through its lease renewal
efforts. Additionally, with respect to the remaining 25% of such leases
scheduled to expire each year, the Company historically has determined not
to pursue approximately one-half of these leases due to profitability
concerns. The remaining half of these leases scheduled to expire each year
(or approximately 1-2% of the Company's installed machine base) are lost to
competitors or owner-operators. These losses, however, do not take into
account the Company's addition of new locations to its installed base of
machines achieved through its sales and marketing efforts.
Service
The Company's employees deliver, install, service and collect from
coin-operated washers and dryers in laundry facilities at its leased
locations.
The Company's fleet of 270 radio-equipped service vehicles allows the
quick dispatch of service technicians in response to both computer-
generated (for preventive maintenance) and customer-generated service
calls. On a daily basis, the Company receives and responds to
approximately 1,000 service calls. Management estimates that less than 1%
of the Company's machines are out of service on any given day. The ability
to reduce machine down time, especially during peak usage, serves to
enhance revenue and improve the Company's reputation with its customers.
In a business that emphasizes prompt and efficient service, management
believes that the Company's Integrated Computer Systems provide a
significant competitive advantage in terms of responding promptly to
customer needs. Computer-generated service calls for preventive
maintenance are based on previous service history, repeat service call
analysis and monitoring of all serviced areas. These operations coordinate
the Company's radio-equipped service vehicles that allow the Company to
address customer needs quickly and efficiently.
Remanufacturing
The Company's remanufacturing operations provide approximately one-
third of its annual machine installation requirements. The Company
rebuilds and reinstalls a portion of its machines at approximately one-
third the cost of acquiring new machines, providing significant cost
savings. Remanufactured machines are restored to virtually new condition
with the same estimated average life and service requirements as new
machines. Machines that can no longer be remanufactured are stripped and
added to the Company's inventory of spare parts, generating additional cost
savings.
Since January 1995, the Company has consolidated the number of
remanufacturing facilities from twelve local facilities to three larger,
regional facilities, providing for consistency in machine quality and
efficient operations strategically located to service each of its operating
regions. Management believes the Company will be able to remanufacture a
comparable number of machines despite the reduction in the number of such
facilities.
Security
Management believes that it provides the highest level of security
control in the laundry equipment services industry. The Company utilizes
numerous precautionary procedures with respect to cash collection,
including frequent alteration of collection patterns, extensive monitoring
of collections and other control mechanisms. The Company practices
stringent employee standards and screening procedures with prospective
employees. Employees responsible for or who have access to the collection
of funds are tested randomly and frequently. Additionally, the Company's
security department performs trend and variance analyses of daily
collections by location. Security personnel monitor locations, conduct
investigations, and implement additional security procedures as necessary.
35
<PAGE>
Information Management
Management believes that the Company's proprietary Integrated Computer
Systems significantly enhance its operating efficiencies as well as its
sales and marketing efforts. The Integrated Computer Systems provide speed
and accuracy throughout the entire service cycle by integrating the
functions of service call entry, dispatching service personnel, parts and
equipment purchasing, installation, distribution and collection.
Management is able to obtain daily, monthly, quarterly and annual reports
on location performance, coin collection, service and sales activity by
salesperson.
Management also believes that the Integrated Computer Systems enhance
the Company's ability to successfully integrate acquired businesses into
its existing operations. With the Solon Acquisition, the Company initiated
a comprehensive systems review and upgrade throughout the operating
regions. To date, the collection phase of the upgrade, which has the
greatest impact on revenue enhancement and cost reduction, has been
implemented over approximately 50% of the Company's machine base.
Management anticipates this phase of the integration will be completed by
September 1996. Management believes that a regional acquisition, such as
the Allied Acquisition, can be fully integrated within 60-90 days.
In addition to coordinating all aspects of the service cycle, the
Company's Integrated Computer Systems track contract performance which
indicate unreported machine failure or pilferage and provide data to
forecast future equipment failures. Data on machine performance is used by
the sales staff to forecast revenue by location. The purchasing department
tracks bids on the Company's equipment requirements to support an
aggressive competitive bidding process. The Integrated Computer Systems
also provide the sales staff with an extensive database essential to the
Company's marketing strategy to obtain new business through competitive
bidding or owner-operator conversion opportunities.
Sales and Marketing
The Company markets its products and services through a sales staff
with an average industry experience of over ten years. The principal
responsibility of the sales staff is to solicit and negotiate lease
arrangements with building owners and managers. All sales personnel are
paid commissions that comprise 50% or more of their annual compensation.
Selling commissions are based on a percentage of a location's annualized
earnings before interest and taxes. Management believes that its sales
staff is among the most competent and effective in the industry. Sales
personnel must be proficient with the application of sophisticated
financial analyses to achieve their targeted goals in securing location
contracts and renewals.
The Company's marketing strategy emphasizes service excellence offered
by its experienced, highly skilled personnel and its quality equipment that
maximizes efficiency and revenue and minimizes machine down-time.
Additionally, the Integrated Computer Systems monitor performance, repairs
and maintenance, as well as the profitability of locations on a daily
basis. The Company's sales staff targets potential lease locations by
utilizing its Integrated Computer Systems' extensive database that provides
information on the Company's, as well as its competitors' locations. All
sales activity, from sale entries to data on service and installation is
recorded and monitored daily on a custom-designed, computerized sales
planner.
No single customer represents more than 2% of the Company's revenues
or installed machine base. In addition, the Company's ten largest
customers taken together account for less than 10% of the Company's
revenues.
COMPETITION
The coin-operated laundry equipment services industry is highly
competitive, capital intensive and requires reliable, quality service.
Despite the overall fragmentation of the industry, there are currently
three companies including the Company with significant operations in
multiple regions throughout the United States. Management believes that
the Company's two major multi-regional competitors are strongest in
California and Chicago, Illinois, where the Company currently has a minimal
presence.
SUPER LAUNDRY
Super Laundry Equipment Corp., a wholly owned subsidiary of Coinmach,
is a construction and laundromat equipment distribution company. Super
Laundry's business consists of constructing complete turnkey laundromat
retail stores, retrofitting existing laundromat retail stores, distributing
exclusive lines of commercial coin and non-coin machines and parts, and
selling service contracts. The construction of laundromats and related
equipment sales constitute in excess of 95% of the revenues of Super
Laundry. Super Laundry's customers generally enter
36
<PAGE>
into sales contracts whereby Super Laundry will construct and equip a
complete laundromat operation, including location identification,
construction, plumbing, electrical wiring and all required permits. Super
Laundry generated $17.2 million in revenues and $2.6 million in EBITDA
(earnings before deductions for income taxes, depreciation and
amortization) for the year ended March 29, 1996.
FACILITIES
As of May 1996, the Company leases 16 offices in its various operating
regions for sales and service activities. The Company presently maintains
a facility that functions as its headquarters in Roslyn, New York, leasing
approximately 40,000 square feet on a month-to-month basis, however, such
leasing arrangement may only be terminated by the Company or its landlord
upon 6 months notice. Management believes the Company can readily lease
equivalent office space on similar terms if necessary. The Company's
Roslyn facility is used for general corporate purposes, as well as for
remanufacturing and warehouse space for the Northeast operating region.
The Company has the option to purchase the Roslyn facility, which it
presently does not intend to exercise. The Company also leases
approximately 30,000 square feet in Elkridge, Maryland for sales, and
warehouse space for the Mid-Atlantic region.
The Company is in the process of establishing a corporate development
office and relocating certain members of management to Charlotte, North
Carolina for the purpose of pursuing the Company's acquisition strategy.
EMPLOYEES
As of May 1996, the Company employed 689 full time employees. Hourly
workers in the Northeast region are represented by Local 966, affiliated
with the International Brotherhood of Teamsters (the "Union"). Management
believes that the Company has maintained a good relationship with the Union
employees and has never experienced a work stoppage since its inception.
The current labor contract with the Union expires in September 1996. The
Company has no relationship with other unions.
LEGAL PROCEEDINGS
The Company has been named as a defendant in a number of legal
actions arising in the ordinary course of its business. Although the
amount of any liability that could arise with respect to these actions can
not be accurately predicted, based on the advice of counsel, management
believes that any such liability, individually or in the aggregate, will
not have a material adverse effect on the Company.
37
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The directors and executive officers of the Company are:
<TABLE>
<CAPTION>
Name Title Age
---- ----- ---
<S> <C> <C>
Stephen R. Kerrigan.. Chairman of the Board and Chief Executive 42
Officer, Director
Mitchell Blatt....... President, Chief Operating Officer, Director 44
Robert M. Doyle...... Chief Financial Officer, Senior Vice President 39
Treasurer, Secretary
John E. Denson....... Senior Vice President - Corporate Development 58
Michael E. Stanky.... Senior Vice President 44
R. Daniel Osborne.... Area Vice President 40
David A. Siegel...... Area Vice President 38
Bruce V. Rauner...... Director 40
David A. Donnini..... Director 31
James N. Chapman..... Director 34
To be determined..... Director
To be determined..... Director
</TABLE>
Pursuant to the terms of a Stockholders Agreement (the "SAS
Stockholders Agreement"), dated July 26, 1995, among the Company, GTCR and
the stockholders of the Company at such time (the "SAS Stockholders"), the
right of certain of the SAS Stockholders to elect members of the Board as
set forth therein automatically terminates upon an initial public offering
of the Company's common stock having an aggregate offering value of at
least $25 million. Upon the consummation of the Offering, holders of the
Common Stock of the Company prior to the Offering, who, after consummation
of the Offering will own in the aggregate approximately 64.9% of the
outstanding Common Stock, will enter into a Voting Agreement (the "Voting
Agreement"), providing for, among other things, the nomination and election
of up to seven directors of the Company by such stockholders. Pursuant to
the Voting Agreement, each of the stockholders party to such agreement will
agree to vote its shares in favor of: (i) two individuals designated by
GTCR, (ii) two members of management, employees or officers of the Company
designated by the holders of a majority of the Common Stock held by the
executive officers (the "Executives") of the Company, which individuals
initially shall be Stephen R. Kerrigan (the "Management Director") and
Mitchell Blatt, (iii) an individual designated by GTCR and reasonably
acceptable to the Management Director, which individual initially shall be
James N. Chapman, and (iv) two independent directors to be jointly
designated by GTCR and the Management Director. The SAS Stockholders
Agreement will terminate upon consummation of the Offering.
The Board, consisting of seven directors, will be divided into
three classes as nearly equal in number as possible. At each annual
meeting of stockholders, successors to the class of directors whose term
expires at such meeting will be elected to serve for three-year terms or
until their successors are duly elected and qualified. The Board has the
power to appoint the officers of the Company. Each officer will hold
office for such terms as may be prescribed by the Board and until such
person's successor is chosen and qualified or until such person's death,
resignation or removal.
38
<PAGE>
BACKGROUND AND EXPERIENCE
Mr. Kerrigan has been Chief Executive Officer of the Company since
April, 1996, and of Coinmach since November, 1995. Mr. Kerrigan was
President and Treasurer of Solon and the Company from April, 1995 until
April, 1996, and Chief Executive Officer of TCC from January, 1995, until
November, 1995. Mr. Kerrigan was appointed Chairman of the Board of the
Company in April, 1995 and of Coinmach in November, 1995. Mr. Kerrigan has
been a director of the Company's predecessor, TCC, since January, 1995 and
of Solon since April, 1995. Mr. Kerrigan served as Vice President and
Chief Financial Officer of TCC's predecessor from 1987 until 1994. Mr.
Kerrigan was an executive officer of CIC which filed a voluntary petition
for reorganization under Chapter 11 of the United States Bankruptcy Code in
1993.
Mr. Blatt has been President and Chief Operating Officer of the
Company since April, 1996 and of Coinmach since November, 1995 and its
predecessor, TCC, since January, 1995. Mr. Blatt has been a director of
the Company and Coinmach since November, 1995. Mr. Blatt joined Coinmach's
predecessor as Vice President-General Manager in 1982 and was Vice
President and Chief Operating Officer from January 1988 to February 1994.
Mr. Blatt was an executive officer of CIC, which filed a voluntary petition
for reorganization under Chapter 11 of the United States Bankruptcy Code in
1993.
Mr. Doyle has been Chief Financial Officer, Senior Vice President and
Secretary of the Company since April, 1996 and Chief Financial Officer,
Senior Vice President, Treasurer and Secretary of Coinmach since November,
1995. Mr. Doyle served as Vice President, Treasurer and Secretary of
Coinmach's predecessor since January, 1995. Mr. Doyle joined Coinmach's
predecessor in 1987 as Controller. In 1988, he became Director of
Accounting, and was promoted in 1989 to Vice President and Controller. Mr.
Doyle was an executive officer of CIC which filed a voluntary petition for
reorganization under Chapter 11 of the United States Bankruptcy Code in
1993.
Mr. Denson has been Senior Vice President of the Company since April,
1996 and of Coinmach since November, 1995. Mr. Denson was Senior Vice
President, Finance of Solon from June, 1987 until the Merger. He has
served as an officer of Solon under various titles since 1973. He served
as a director and Co-Chief Executive Officer of Solon from November, 1994
to April, 1995.
Mr. Stanky has been Senior Vice President of the Company since April,
1996 and of Coinmach since November, 1995. Mr. Stanky has been Senior Vice
President of Solon since July, 1995. He joined Solon in 1976 as a sales
manager. Mr. Stanky served Solon in various capacities since 1976, and in
1985 was promoted to Area Vice President responsible for the South-Central
Region. Mr. Stanky served as a Co-Chief Executive Officer from November,
1994 to April, 1995.
Mr. Osborne has been Area Vice President of the Company since April,
1996 and of Coinmach since November, 1995. Mr. Osborne has served Solon in
various capacities since 1987. In July, 1995, he was promoted to Area Vice
President responsible for the Southeast Region.
Mr. Siegel has been Area Vice President of the Company since April,
1996 and of Coinmach since November, 1995. Mr. Siegel joined Solon in 1985
as a sales manager. Mr. Siegel served Solon in various capacities since
1985, and in August, 1995 was promoted to Area Vice President responsible
for the Mid-Atlantic Region.
Mr. Rauner has been a Director of the Company since April, 1995,
Coinmach since November, 1995 and its predecessor, TCC, since January,
1995. Mr. Rauner serves as a director of ERO, Inc., COREStaff, Inc. and
Polymer Group, Inc. Mr. Rauner has been a Principal and General Partner
with GTCR since 1984, where he is responsible for originating and making
new investments, monitoring portfolio companies and recruiting and training
associates.
Mr. Donnini has been a Director of the Company since April, 1995,
Coinmach since November 1995 and its predecessor, TCC, since January, 1995.
Mr. Donnini serves as a director of Polymer Group, Inc. Mr. Donnini has
been a Principal of GTCR since 1993. From 1991 to 1993, Mr. Donnini was an
Associate with GTCR.
Mr. Chapman has been a Director of the Company since April, 1995,
Coinmach since November 1995 and its predecessor, TCC, since January, 1995.
Mr. Chapman has been a Principal of Fieldstone Private Capital Group, L.P.
since its inception in 1990.
39
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the
compensation of the Chief Executive Officer and the other four most highly
compensated executive officers (the "Named Executive Officers") of the
Company whose total annual compensation and bonus exceeded $100,000 during
the fiscal years ended September 30, 1994 and 1995 in the case of Solon,
and December 31, 1994 and 1995, in the case of TCC, each a predecessor of
the Company, and the fiscal year ended March 29, 1996, in the case of the
Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation(1)
--------------------------------- ----------------------------
Awards
Other -----------
Annual Securities All other
Fiscal Compen- Underlying Compen-
Name and Principal Occupation Year(2) Salary ($) Bonus ($) sation ($) Options/SARs (#) sation
- -------------------------------- ---------- ---------- --------- ----------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Stephen R. Kerrigan 1996 215,000 400,000 --- --- 8,425(3)
Chief Executive Officer 1995 195,607 91,250 --- --- 9,790(3)
1994 202,481 --- --- --- 15,705(3)
Mitchell Blatt 1996 215,000 112,500 --- --- 12,849(4)
President, Chief Operating Officer 1995 194,469 91,250 --- --- 19,254(4)
1994 198,506 --- --- --- 21,505(4)
Robert M. Doyle 1996 110,577 62,500 --- --- 2,338(5)
Senior Vice President 1995 96,069 25,000 --- --- 1,781(5)
1994 80,351 --- --- --- 3,723(5)
John E. Denson 1996 125,300 25,000 --- --- 2,233(6)
Senior Vice President 1995 125,299 --- --- --- 68,867(6)
1994 124,500 33,590 --- --- 4,136(6)
Michael E. Stanky 1996 141,425 37,500 --- --- 1,253(7)
Senior Vice President 1995 129,646 --- --- --- 65,255(7)
1994 125,100 57,256 --- --- 2,360(7)
</TABLE>
- -------------------------------
(1) The Company presently does not have a long term incentive plan, and
neither the Company nor TCC in the past has offered a long term
incentive plan. The Company does not presently intend to offer such a
program to its executive officers or other employees.
(2) Due to a change in the Company's fiscal year in 1995, fiscal year 1996
has been pro-rated as necessary to reflect the applicable compensation
for such period.
(3) Includes club membership fees for fiscal years 1996, 1995 and 1994 of
$4,600 each year; expense allowances for fiscal years 1996, 1995 and
1994 of $3,596, $3,052 and $8,705, respectively; use of a company car
for fiscal years 1996, 1995 and 1994 of $2,688, $2,688 and $2,400,
respectively; and contribution by TCC to the Company Profit Sharing
Plan for fiscal years 1996 and 1995 of $2,140 and $2,138,
respectively; in each case for Mr. Kerrigan.
(4) Includes club membership fees for fiscal years 1996, 1995 and 1994 of
$10,000 each year; expense allowances for fiscal years 1996, 1995 and
1994 of $7,310 and $6,091 and $10,105, respectively; use of a company
car for fiscal years 1996, 1995 and 1994 of $3,417, $1,025 and $1,400,
respectively; and contribution by TCC to the Company Profit Sharing
Plan for fiscal years 1996 and 1995 of $2,122 and $2,138,
respectively; in each case for Mr. Blatt.
(5) Includes use of a company car for fiscal years 1996, 1995 and 1994, of
$1,004, $712 and $3,723, respectively; and contribution by TCC to the
Company Profit Sharing Plan for fiscal years 1996 and 1995 of $1,334
and $1,069, respectively; in each case for Mr. Doyle.
(6) Includes use of a company car for fiscal years 1996, 1995 and 1994, of
$1,150, $4,200 and $4,136, respectively; and contributions by Solon to
the Solon Retirement Savings Plan for fiscal years 1996 and 1995 of
$1,083 and $2,167, respectively; in each case for Mr. Denson. It also
includes a $62,500 lump sum payment to Mr. Denson on April 6, 1995 due
to a change in control of Solon.
(7) Includes contributions by Solon to the Solon Retirement Savings Plan
for fiscal years 1996, 1995 and 1994 of $1,253, $2,505 and $2,360,
respectively, for Mr. Stanky. It also includes a $62,750 lump sum
payment to Mr. Stanky on April 6, 1995 due to a change in control of
Solon.
EMPLOYMENT CONTRACTS
Employment Agreements of Stephen R. Kerrigan, Mitchell Blatt and
Robert M. Doyle. On January 31, 1995, TCC and each of Stephen R. Kerrigan,
Mitchell Blatt and Robert M. Doyle (each, a "Senior Manager"), entered into
Senior Management Agreements (the "Senior Management Agreements"). In
connection with the
40
<PAGE>
Merger, the obligations of TCC under the Senior Management Agreements were
assumed by the Company and certain amendments to such agreements were
effected pursuant to the Omnibus Agreement, dated as of November 30, 1995
(the "Omnibus Agreement"). The Senior Management Agreements provide for
annual base salaries of $225,000, $225,000 and $100,000 for each of Messrs,
Kerrigan, Blatt and Doyle, respectively, which amounts are reviewed
annually by the Board. In 1996, the Board approved increases in annual
salaries for each of Messrs. Kerrigan, Blatt and Doyle to $350,000,
$250,000 and $150,000, respectively. The Board, in its sole discretion, may
grant each Senior Manager an annual bonus. Each Senior Management Agreement
is terminable at the will of the Senior Managers or in the discretion of
the Board. Senior Managers are entitled to severance pay upon termination
of their employment. If employment is terminated by the Company without
Cause (as defined in such agreement) and no Event of Default (as defined in
such agreement) has occurred and is continuing under the Revolving Credit
Facility or the Indenture, Senior Managers are entitled to receive
severance pay in an amount equal to 1.5 times their respective annual base
salaries then in effect, payable in 18 equal monthly installments. If
employment is terminated by the Company and an Event of Default under the
Revolving Credit Facility or Indenture has occurred and is continuing,
Senior Managers are entitled to receive severance pay in an amount equal to
their respective annual base salaries then in effect, payable in 12 equal
monthly installments. Under limited circumstances, Senior Managers are
entitled to receive half of the severance pay to which they are otherwise
entitled if employment with the Company is terminated by them.
Employment Agreement of John E. Denson. The Company entered into
an employment agreement with Mr. Denson on August 4, 1995 for a term of
eight months, subject to certain renewal options for Solon. The Company
renewed Mr. Denson's employment agreement through May 1996. The Company
entered into an employment agreement with Mr. Denson commencing June 1996
for a term of one year which is automatically renewable each year for
successive one-year terms. Such agreement provides for an annual base
salary of $110,000, which amount is reviewed each December by the Board,
and, in the discretion of the Board, a performance-based annual bonus. The
agreement is terminable at the will of Mr. Denson or at the discretion of
the Board. Under the terms of such employment agreement, Mr. Denson is
entitled to receive severance pay upon termination of employment in an
amount equal to one-quarter of his annual base salary then in effect if
employment is terminated by him. If employment is terminated by the
Company, however, Mr. Denson is entitled to receive severance pay in an
amount equal to the greater of $110,000 or his annual base salary then in
effect.
Employment Agreement of Michael E. Stanky. On July 1, 1995, the
Company entered into an employment agreement with Mr. Stanky providing for
an annual base salary of $150,000. The terms and conditions of Mr.
Stanky's employment agreement are substantially similar to the Senior
Management Agreements.
COINMACH PROFIT SHARING AND RETIREMENT SAVINGS PLAN
The Company offers a profit sharing and retirement savings plan
(the "Profit Sharing Plan") to all current eligible employees of the
Company (other than those employees employed by Solon prior to the Merger)
who have completed one year of service. Pursuant to the Profit Sharing
Plan, eligible employees may defer from 2% up to 15% of their salaries up
to a maximum level imposed by applicable federal law ($9,240 in 1995). The
percentage of compensation contributed to the plan is deducted from each
eligible employee's salary and considered tax-deferred savings under
applicable federal income tax law. Pursuant to the Profit Sharing Plan,
the Company contributes increasing matching contribution amounts, based
upon the number of years of service completed by eligible participants, up
to a maximum contribution of 1.5% of an eligible employee's salary (subject
to the Internal Revenue Code limitation on compensation taken into account
for such purpose). Matching contribution percentages range from 5% for one
to two years of service up to 25% for five or more years of service.
Eligible participants become vested with respect to matching contributions
made by the Company pursuant to a vesting schedule based upon an eligible
employee's years of service. After two years of service, an eligible
employee is 20% vested in all matching contributions made to the Profit
Sharing Plan. Such employee becomes vested in equal increments thereafter
through the sixth year of service, at which time such employee becomes 100%
vested. Eligible participants are always 100% vested in their own
contributions, including investment earnings on such amounts.
The Company made the following matching contributions during its
fiscal year ended March 29, 1996 to the Named Executive Officers and
directors appearing in the Summary Compensation Table above: Mr. Kerrigan
$2,140; Mr. Doyle $1,334; and Mr. Blatt $2,122.
41
<PAGE>
SOLON PROFIT SHARING AND RETIREMENT SAVINGS PLAN
The Company offers a profit sharing retirement savings plan (the
"Solon Retirement Savings Plan") to all current eligible employees who were
employed by Solon prior to the Merger and who have completed one year of
service. Participation in the Solon Retirement Savings Plan is voluntary
and enables eligible employees to contribute from 1% to 8% of annual
compensation, provided, such contributions do not exceed certain levels
imposed by applicable federal law ($9,240 in 1995). A discretionary
matching contribution is determined annually by the Company. Eligible
participants become vested with respect to matching contributions made by
the Company pursuant to a vesting schedule based upon an eligible
employee's years of service. After three years of service, an eligible
employee is 50% vested in all matching contributions made to the Solon
Retirement Savings Plan. After four and five years of service, an eligible
employee is 75% and 100% vested, respectively, in all such matching
contributions. Eligible participants are always 100% vested in their own
contributions, including investment earnings on such amounts.
The Company made the following matching contributions during its
last completed fiscal year to the Named Executive Officers and directors
appearing in the Summary Compensation Table above: Mr. Denson $1,083; and
Mr. Stanky $1,253.
In connection with the Merger, the Company is in the process of
integrating benefits to be provided to all its current employees, including
those employed by Coinmach prior to the Merger.
1996 EMPLOYEE STOCK OPTION PLAN
Prior to consummation of the Offering, the Company shall adopt,
subject to stockholder approval, the 1996 Employee Stock Option Plan (the
"1996 Stock Option Plan"). The 1996 Stock Option Plan will be administered
by disinterested members of the Compensation Committee of the Board. Any
person who is a full-time, salaried employee of the Company (excluding non-
management directors) will be eligible to participate in the 1996 Stock
Option Plan (a "Participant"). Subject to the terms of the 1996 Stock
Option Plan, the Compensation Committee will select the Participants and
determine the terms and conditions of the options, including the type of
award granted, number of shares granted, vesting schedule, type of
consideration to be paid by the Company upon exercise of the options and
the term of each option. The 1996 Stock Option Plan provides for the
issuance of options to Participants covering 1,041,477 shares of Common
Stock, subject to certain adjustments reflecting changes in the Company's
capitalization. Options granted under the 1996 Stock Option Plan may be
either incentive stock options ("ISOs") or such other forms of non-
qualified stock options ("NQOs") as the Board may determine. ISOs are
intended to qualify as "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
The exercise price of the options will be at least 100% of the fair market
value of a share of Common Stock on the date of grant.
Options granted under the 1996 Stock Option Plan may be subject to
time vesting and certain other restrictions at the Compensation Committee's
sole discretion. Subject to certain exceptions, the right to exercise an
option generally terminates at the earlier of (i) the first date on which
the grantee of such option is not employed by the Company for any reason
other than termination without cause, death, voluntary retirement or
permanent disability or (ii) the expiration date of the option. If the
grantee of an option dies or suffers a permanent disability while still
employed by the Company, the right to exercise all unexpired installments
of such option may be accelerated and shall accrue as of the date of such
death or the later of the date of such permanent disability or the
discovery of such permanent disability, and such option may be exercisable,
subject to certain exceptions, for 90 days after such date in the case of
death and for one year in the case of disability. If the employee
voluntarily retires, the option may be exercisable for up to three years
following the date of retirement, as long as the employee does not engage
in conduct that the Compensation Committee determines to be not in the best
interest of the Company. If the employment of the grantee of an option is
terminated without cause, to the extent the option has been vested, such
option shall be exercisable for 30 days after such date.
The 1996 Stock Option Plan provides that the total number of shares
covered by such plan, the number of shares covered by each option and the
exercise price per share may be proportionately adjusted by the Board or
the Compensation Committee in the event of a stock split, reverse stock
split, stock dividend or similar capital
42
<PAGE>
adjustment effected without receipt of consideration by the Company. Upon a
change in control of the Company, the Compensation Committee may take any
actions it deems appropriate with regard to stock options outstanding under
such plan. Such actions may include, but are not limited to accelerating
exercisability of options and requiring the optionee to surrender options
held for certain consideration described in such plan. In the event of
recapitalization or reorganization in which the Company is not the
surviving corporation, the Compensation Committee may adjust the number,
type, or price of options to reflect the restructuring event.
The Board generally has the power and authority to amend the 1996
Stock Option Plan at any time without the approval of the Company's
stockholders; provided that, without the approval of the Company's
stockholders, the Board shall not amend such plan to cause any outstanding
ISOs to no longer qualify as ISOs. In addition, the Board shall not amend
the 1996 Stock Option Plan to materially and adversely affect the rights of
an option holder under such option without the consent of such option
holder. The 1996 Stock Option Plan will terminate in __________ 2006,
unless sooner terminated by the Board.
The Company does not expect to grant any options under the 1996
Stock Option Plan to executive officers or other employees of the Company
concurrently with the Offering. There are 1,041,477 shares of Common Stock
reserved for issuance under the 1996 Stock Option Plan (representing
approximately 9% of the outstanding shares of Common Stock and Non-Voting
Common Stock, on a fully diluted basis).
GRANT OF OPTIONS
In connection with the Offering, the Board shall approve the
granting of non-qualified stock options to (i) MCS Capital, Inc., an entity
beneficially owned by Mr. Kerrigan (the "MCS Capital Options"), to purchase
up to 289,299 shares of Common Stock (representing approximately 2.5% of
the Common Stock and Non-Voting Common Stock outstanding after giving
effect to the Offering, on a fully diluted basis) and (ii) Messrs. Doyle,
Stanky, Denson, Siegel, Osborne and Chapman and certain other individuals
(the "Additional Options"), to purchase up to an aggregate of 405,019
shares of Common Stock (representing an aggregate of approximately 3.5% of
the Common Stock and Non-Voting Common Stock outstanding after giving
effect to the Offering, on a fully diluted basis). Twenty percent (20%) of
each of the MCS Capital Options and the Additional Options to be granted
upon the consummation of the Offering shall vest at such time, with an
additional twenty percent (20%) thereof vesting on each successive
anniversary of the date of grant. The MCS Capital Options and Additional
Options are exercisable at any time after vesting at a per share price
representing a 15% discount of the initial public offering price in the
Offering.
SOLON 1987 INCENTIVE STOCK OPTION PLAN
Solon's Incentive Stock Option Plan (the "Solon Stock Option Plan")
was terminated by the Board on ____________, 1996. In connection with the
Merger, the Company purchased all outstanding options under the Solon Stock
Option Plan for approximately $34,000.
COMPENSATION OF DIRECTORS
Upon consummation of the Offering, each non-employee director shall
receive a $5,000 annual retainer, which shall cover attendance at four
quarterly meetings of the Board, and $500 for any committee meeting
attended on a day other than a Board meeting. Outside directors are also
reimbursed for out-of-pocket expenses incurred in connection with attending
meetings. Directors who are employees of the Company receive no director's
compensation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not have a compensation committee during fiscal
1995. The functions of a compensation committee were performed by the
Board. The compensation for the executive officers for fiscal 1995 and for
the year ended March 29, 1996 was fixed by employment agreements between
such executive officers and
43
<PAGE>
the Company and/or by the Board. Messrs. Kerrigan and Blatt, each of whom
are executive officers of the Company, served on the Board and participated
in deliberations of the Board concerning executive officer compensation,
except with respect to their own compensation. See " -- Committees of the
Board."
COMMITTEES OF THE BOARD OF DIRECTORS
Following the consummation of the Offering, the Board will establish
an Audit Committee and a Compensation Committee.
Audit Committee
The Audit Committee shall consist of three directors, two of whom
shall be independent directors. The Audit Committee will be responsible
for policies, procedures and other matters relating to accounting, internal
financial controls and financial reporting, including the engagement of
independent auditors and the planning, scope, timing and cost of any audit
and any other services they may be asked to perform, and will review with
the auditors their report on the Company's financial statements following
completion of each such audit.
Compensation Committee
The Compensation Committee shall consist of three directors, two
of whom shall be independent directors. The Compensation Committee is
responsible for policies, procedures and other matters relating to
compensation and benefits of the executive officers as a group and the
chief executive officer individually.
44
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's equity securities as of the date of
this Prospectus and gives effect to the Reclassification (as defined) and
the Stock Split (as defined) to take place immediately prior to the
Offering: (i) by each person who is known by the Company to own
beneficially more than 5% of the Common Stock, (ii) by each current
director of the Company, (iii) by each Named Executive Officer, and (iv) by
all officers and directors of the Company as a group. The numbers of
shares shown for each listed stockholder are based on an assumed initial
public offering price of $17.00 per share (representing a midpoint in the
range of the initial public offering price in the Offering). The
allocation of the aggregate number of outstanding shares of Common Stock
among the various stockholders will depend upon the actual initial public
offering price and the actual closing date, which may vary from such
assumptions. Except as otherwise indicated below, management believes that
each of the persons named in the table has sole voting and investment power
with respect to the securities beneficially owned by it or him as set forth
opposite its or his name.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIAL OWNERSHIP COMMON STOCK
AFTER RECLASSIFICATION BENEFICIAL OWNERSHIP
AND PRIOR TO OFFERING(1) AFTER OFFERING(2)
------------------------- -------------------------------
NUMBER
NAME AND ADDRESS OF NUMBER OF OF
BENEFICIAL OWNER SHARES PERCENT SHARES PERCENT
- ------------------------------------------------ ---------- -------- --------- --------------
<S> <C> <C> <C> <C>
Golder, Thoma, Cressey, Rauner Fund IV, L.P...... 4,585,167 72.36% 4,585,167 46.62%
6100 Sears Tower
Chicago, IL 60606
Stephen R. Kerrigan(3)(4)........................ 442,474 6.98% 500,334 5.05%
c/o Coinmach Laundry Corporation
55 Lumber Road
Roslyn, NY 11576
Mitchell Blatt................................... 397,545 6.27% 397,545 4.04%
c/o Coinmach Laundry Corporation
55 Lumber Road
Roslyn, NY 11576
Robert M. Doyle(4)............................... 109,500 1.73% 123,001 1.25%
c/o Coinmach Laundry Corporation
55 Lumber Road
Roslyn, NY 11576
John E. Denson................................... -- -- 5,400 *
c/o Coinmach Laundry Corporation
55 Lumber Road
Roslyn, NY 11576
Michael E. Stanky(4)............................. 46,707 * 66,149 *
c/o Coinmach Laundry Corporation
55 Lumber Road
Roslyn, NY 11576
Bruce V. Rauner(5)............................... 4,585,167 72.36% 4,585,167 46.62%
Golder, Thoma, Cressey, Rauner Fund IV, L.P.
6100 Sears Tower
Chicago, IL 60606
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIAL OWNERSHIP COMMON STOCK
AFTER RECLASSIFICATION BENEFICIAL OWNERSHIP
AND PRIOR TO OFFERING(1) AFTER OFFERING(2)
------------------------- -------------------------------
NUMBER
NAME AND ADDRESS OF NUMBER OF OF
BENEFICIAL OWNER SHARES PERCENT SHARES PERCENT
- ------------------------------------------------ ---------- -------- --------- --------------
<S> <C> <C> <C> <C>
David A. Donnini(6).............................. 4,585,167 72.36% 4,585,167 46.62%
Golder, Thoma, Cressey, Rauner Fund IV, L.P.
6100 Sears Tower
Chicago, IL 60606
James N. Chapman................................. 19,004 * 24,404 *
c/o Coinmach Laundry Corporation
55 Lumber Road
Roslyn, NY 11576
All directors and executive officers as a group.. 5,600,397 88.39% 5,712,800 57.42%
(twelve persons)
</TABLE>
* Represents less than 1% of the outstanding Common Stock of the Company.
(1) Based on 6,336,176 shares of Common Stock and Non-Voting Common Stock
outstanding prior to the Offering.
(2) Based on 9,836,176 shares of Common Stock and Non-Voting Common Stock
outstanding after the Offering without giving effect to any shares of
Common Stock that may be issued pursuant to the Underwriters' over-
allotment option. Includes, for each party listed, such party's
portion of the Additional Options or MCS Capital Options, as
applicable, which are currently vested and exercisable.
(3) Mr. Kerrigan owns his shares beneficially through MCS Capital, Inc.
(4) All such shares are held by GTCR of which GTCR IV, L.P. is the general
partner. Mr. Rauner is a principal of Golder, Thoma, Cressey, Rauner,
Inc., the general partner of GTCR IV, L.P. Mr. Rauner disclaims
beneficial ownership of such shares.
(6) All such shares are held by GTCR of which GTCR IV, L.P. is the general
partner. Mr. Donnini is a principal of Golder, Thoma, Cressey, Rauner,
Inc., the general partner of GTCR IV, L.P. Mr. Donnini disclaims
beneficial ownership of such shares.
46
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MANAGEMENT AND CONSULTING SERVICES AGREEMENTS
On July 26, 1995, the Company and GTCR IV, L.P. entered into a
Management and Consulting Services Agreement (the "Company Management
Agreement"), pursuant to which the Company engaged GTCR IV as a financial
and management consultant to consult with the Board on such business and
financial matters as may have been reasonably requested from time to time
by the Board, including corporate strategy, budgeting, corporate
investments, acquisition and divestiture strategies and debt and equity
financings. The Company was required to pay to GTCR IV an annual
management fee in the amount of $100,000 per year, which amount was subject
to increase from time to time until GTCR IV ceased to own at least 33% of
the outstanding common stock of the Company. Prior to the Merger, TCC and
GTCR IV entered into a Management and Consulting Services Agreement (the
"TCC Management Agreement") on the same terms and conditions as the Company
Management Agreement. In connection with the Merger on November 30, 1995,
(i) the TCC Management Agreement was terminated and (ii) the Company
Management Agreement was amended and restated to provide, among other
things, for an annual management fee of $200,000. GTCR has agreed to
terminate the Company Management Agreement in exchange for $500,000.
STOCKHOLDER AGREEMENTS OF TCC AND THE COMPANY
On January 31, 1995, TCC and the stockholders of TCC at such time
entered into a Stockholders Agreement (the "TCC Stockholders Agreement").
Effective November 30, 1995, (i) such stockholders received shares of
capital stock of the Company in accordance with the terms and conditions of
the Agreement and Plan of Merger, dated November 30, 1995 (the "Merger
Agreement"), and (ii) the TCC Stockholders Agreement was terminated. The
terms of the TCC Stockholders Agreement were substantially similar to the
terms of the SAS Stockholders Agreement entered into by the Company, GTCR
and the SAS Stockholders. The SAS Stockholders Agreement will terminate
upon consummation of the Offering. See "Management."
In connection with the Offering, the holders of Common Stock of the
Company prior to the Offering, who, after consummation of the Offering will
own in the aggregate approximately 63.1% of the outstanding Common Stock
will enter into the Voting Agreement, providing for, among other things,
the nomination and election of up to seven directors of the Company by such
stockholders. See "Management." Under the Voting Agreement, each of the
stockholders party to the Voting Agreement will agree to vote its shares in
favor of: (i) two individuals designated by GTCR, (ii) two members of
management, employees or officers of the Company designated by the holders
of a majority of the Common Stock held by the executive officers (the
"Executives") of the Company, which individuals initially shall be Stephen
R. Kerrigan (the "Management Director") and Mitchell Blatt, (iii) an
individual designated by GTCR and reasonably acceptable to the Management
Director, which individual initially shall be James N. Chapman, and (iv)
two independent directors to be jointly designated by GTCR and the
Management Director. Each director nominated by parties to the Voting
Agreement may be removed only at the request of the party who nominated
such director. The Voting Agreement terminates at such time as GTCR and
its affiliates cease to own at least 20% of the Common Stock. The
stockholders who are parties to the Voting Agreement will hold, in the
aggregate, a substantial amount of the voting power of the Company and
thus, if acting in unison or in various combinations, could likely be able
to elect a majority of the directors of the Company even if the Voting
Agreement were not in place.
REGISTRATION RIGHTS AGREEMENTS OF TCC AND THE COMPANY
On July 26, 1995, the SAS Stockholders and the Company entered into
a registration rights agreement (the "Company Registration Agreement")
pursuant to which the SAS Stockholders were granted certain rights with
respect to the registration under the Securities Act, for resale to the
public, of their respective Registrable Securities (as defined in the
Company Registration Agreement). The Company Registration Agreement
provides that, among other things, at any time after the Company has
completed an Initial Public Offering (as defined in the Company
Registration Agreement), GTCR has the right to "demand" registrations under
the Securities Act with respect to all or a portion of GTCR's Registrable
Securities. The Company Registration Agreement also provides for customary
provisions regarding: (i) the priority among holders of securities with
respect to the number of shares to be registered pursuant to any demand or
piggyback registration; and (ii) indemnification by the Company of the
holders of Registrable Securities.
Other holders of Registrable Securities are entitled to include in
such registration all Registrable Securities with respect to which the
Company has received written requests for inclusion therein, subject to
certain limitations, including priority provisions (the "Piggyback
Rights"). In connection with the Offering and conditioned
47
<PAGE>
upon the consummation thereof, the holders of the Registrable Securities
have agreed to waive their Piggyback Rights under the Company Registration
Agreement. Additionally, each holder of Registrable Securities has agreed
not to effect any public sale or distribution of such securities during the
seven days prior to and the 180-day period commencing on the effective date
of the Offering (the "Lock-up Period") without the consent of the
Underwriters (as defined).
Prior to the Merger, TCC, GTCR and the SAS Stockholders entered
into a Registration Agreement (the "TCC Registration Agreement"), dated as
of January 31, 1995. The TCC Registration Agreement provided the parties
thereto the same rights on the same terms and conditions with respect to
TCC that such parties have under the Company Registration Agreement with
respect to the Company. In connection with the Merger, the shareholders of
TCC received shares of capital stock of the Company in accordance with the
terms and conditions of the Merger Agreement, and the TCC Registration
Agreement was terminated on November 30, 1995.
CERTAIN LOANS TO MEMBERS OF MANAGEMENT OF SOLON AND TCC
In order to finance, in part, their purchase of shares of Common
Stock (prior to the Reclassification), certain executive officers of the
Company obtained loans from the Company.
On January 31, 1995, promissory notes in the principal amount of
$140,000 were executed by each of MCS Capital, Inc. (which was guaranteed
by Mr. Kerrigan) and Mr. Blatt (the "TCC Executive Notes"), in favor of the
Company in connection with the purchase by each of them of 6,000 shares of
common stock (prior to the Reclassification), each as amended by the
Omnibus Agreement. Pursuant to the TCC Executive Notes, each of MCS
Capital, Inc. and Mr. Blatt are obligated to repay such notes in four equal
annual installments commencing June 1, 1996. Interest on the TCC Executive
Notes accrues at a rate equal to 8% per annum and is payable at such time
as the principal of such notes become due and payable.
On July 26, 1995, promissory notes in the principal amount of
$52,370 were executed by each of MCS Capital, Inc. (which was guaranteed by
Mr. Kerrigan) and Mr. Blatt (the "Company Executive Notes") in favor of the
Company in connection with the purchase by each of them of 4,000 shares of
common stock (prior to the Reclassification), each as amended by the
Omnibus Agreement. Pursuant to the Company Executive Notes, each of MCS
Capital, Inc. and Mr. Blatt are obligated to repay such notes in eight
equal annual installments commencing July 26, 1996. Interest on the
Company Executive Notes accrues at a rate equal to 8% per annum and is
payable at such time as the principal of such notes become due and payable.
The Board has determined that upon consummation of the Offering,
the Company shall forgive the first of the four equal annual installments
of the indebtedness evidenced by the TCC Executive Notes and the first of
the eight equal annual installments of the indebtedness evidenced by the
Company Executive Notes, including the accrued and unpaid interest thereon,
which indebtedness, including accrued and unpaid interest thereon,
aggregates approximately $89,740.
CERTAIN LOANS TO MEMBERS OF MANAGEMENT OF THE COMPANY
In order to finance the establishment of the Company's corporate
development office in Charlotte, North Carolina, the Board may approve
loans to Mr. Kerrigan (in an amount not to exceed $500,000) and to certain
other members of management to cover moving and other related expenses.
GRANT OF OPTIONS
In connection with the Offering, the Board shall approve the
granting of (i) the MCS Capital Options to MCS Capital, Inc., an entity
beneficially owned by Mr. Kerrigan, to purchase up to 289,299 shares of
Common Stock (representing approximately 2.5% of the Common Stock and Non-
Voting Common Stock outstanding after giving effect to the Offering, on a
fully diluted basis), and (ii) the Additional Options to Messrs. Doyle,
Stanky, Denson, Siegel, Osborne and Chapman to purchase up to 67,504;
97,206; 27,001; 27,001; 27,001; and 27,001, shares of Common Stock,
respectively (representing an aggregate of approximately 2.4% of the Common
Stock and Non-Voting Common Stock outstanding after giving effect to the
Offering, on a fully diluted basis). Twenty percent (20%) of each of the
MCS Capital Options and the Additional Options granted upon the
consummation of the Offering will vest on such date, with an additional
twenty percent (20%) of such options vesting on each successive anniversary
of the date of grant. The MCS Capital Options and Additional Options are
exercisable at any time after vesting at a per share price representing a
15% discount of the initial public offering price in the Offering.
48
<PAGE>
INTERCOMPANY LOAN
On July 26, 1995, as part of the financing for the Solon
Acquisition, TCC loaned the Company $2.0 million (the "Company/TCC Loan")
at the then-applicable interest rate contained in the Company's then
existing credit facility. In connection with the Merger, the Company/TCC
Loan was paid in full, including accrued interest through November 30,
1995.
THE COMPANY AND TCC STOCK PURCHASE AGREEMENTS
On January 31, 1995 and July 26, 1995, TCC and the Company,
respectively, entered into Equity Purchase Agreements with GTCR, pursuant
to which GTCR became a securityholder of more than five percent of TCC's
and the Company's voting securities (the "GTCR Purchase Agreements"). In
consideration for the issuance of such voting securities, GTCR paid
approximately $10,500,000 to TCC and approximately $5,517,582 to the
Company. In connection with the Merger, the GTCR Purchase Agreements were
subsequently amended by the Omnibus Agreement, whereby, among other things,
(i) obligations of TCC thereunder were assigned to and assumed by the
Company, and (ii) such agreements were in all other respects amended
appropriately to contemplate the transactions effected in connection with
the Merger and Refinancing.
Additionally, the GTCR Purchase Agreements contain certain
restrictions on the Company's ability to, among other things, pay any
dividends or make any distributions upon any of its equity securities or
redeem, purchase or acquire any of the Company's equity securities without
the prior written consent of the holders of a majority of the holders of
Investor Stock (as defined in the GTCR Purchase Agreements). The Company
has obtained contents from such holders in connection with each of the
transactions contemplated by the Offering.
On January 31, 1995, TCC, GTCR and each of MCS Capital, Inc., a
Delaware corporation controlled by Mr. Kerrigan ("MCS"), MCS Capital
Management, Inc., a Delaware corporation controlled by Mr. Kerrigan ("MCS
Management") and President and Fellows of Harvard College ("Harvard")
entered into Investor Purchase Agreements, pursuant to which such parties
became securityholders of capital stock of TCC (collectively, the "TCC
Management Purchase Agreements"). In consideration for the issuance of
such capital stock, MCS, MCS Management and Harvard paid $38,805.43,
$176,362.00 and $349,972.85, respectively. On July 26, 1995, the Company,
GTCR and the SAS Stockholders entered into an Investor Purchase Agreement,
pursuant to which such parties became securityholders of capital stock of
the Company (the "Investor Purchase Agreement", together with the TCC
Management Purchase Agreements, the "Management Purchase Agreements"). In
consideration for the issuance of such capital stock pursuant to the
Investor Purchase Agreement, Heller, Jackson National Life Insurance
Company and MCS paid $291,047.06, $261,911.77 and $113,100, respectively.
In connection with the Merger, the Management Purchase Agreements were
subsequently amended by the Omnibus Agreement, whereby, among other things,
(i) obligations of TCC thereunder were assigned to and assumed by the
Company, and (ii) such agreements were in all other respects amended
appropriately to contemplate the transactions effected in connection with
the Merger and Refinancing.
ISSUANCE OF PREFERRED STOCK IN CONNECTION WITH RECLASSIFICATION
In connection with the reclassification of the Company's capital
stock and prior to consummation of the Offering, holders of Class A Common
Stock, Class E Common Stock and Class F Common Stock (in each case, as
defined) will be issued additional shares of Preferred Stock and Common
Stock representing: (i) the aggregate accrued and unpaid yield on the
Class A Common Stock, Class E Common Stock and Class F Common Stock as
of the date of issuance thereof; plus (ii) the Unreturned Preferred Amount
(as defined in the Amended and Restated Certificate of Incorporation of
Coinmach Laundry) of the Class A Common Stock, Class E Common Stock and
Class F Common Stock on the date of issuance thereof (collectively, the
"Preferred Yield"). Set forth below are the number of shares of Preferred
Stock and Common Stock, after giving effect to the Reclassification and the
Stock Split, to be issued to the parties listed below in respect of the
Preferred Yield:
<TABLE>
<CAPTION>
Stockholder Preferred Stock Common Stock
<S> <C> <C>
GTCR 923.8 --
Heller Financial, Inc. 16.8 --
Jackson National Life Insurance Company 8.4 --
Jackson National Life Insurance Company of Michigan 8.4 --
James N. Chapman 3.8 --
MCS Capital, Inc. -- 13,778
Mitchell Blatt -- 5,739
Robert M. Doyle -- 1,741
Michael E. Stanky -- 2,058
</TABLE>
49
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL MATTERS
Upon completion of the Offering, the total amount of authorized
capital stock of the Company will consist of (i) 1,000 shares of Preferred
Stock, none of which will be issued and outstanding, (ii) 15,000,000 shares
of Common Stock, of which 9,352,464 shares will be issued and outstanding,
and (iii) 1,000,000 shares of Non-Voting Common Stock, of which 483,712
shares will be issued and outstanding prior to giving effect to the
exercise of any options to purchase Non-Voting Common Stock granted by the
Company. The Company's Second Amended and Restated Certificate of
Incorporation and Second Amended and Restated Bylaws, upon stockholder
approval, will become effective upon consummation of the Offering. The
discussion herein describes the Company's capital stock and certain
material provisions of the Second Amended and Restated Certificate of
Incorporation and the Second Amended and Restated Bylaws anticipated to be
in effect upon consummation of the Offering. The following discussion does
not purport to be complete and is subject to, and qualified in its entirety
by, the Second Amended and Restated Certificate of Incorporation and the
Second Amended and Restated Bylaws of the Company that are included as
exhibits to the Registration Statement (as defined) of which this
Prospectus forms a part and by the provisions of applicable law.
PREFERRED STOCK
In connection with the Reclassification, the Company shall issue an
aggregate of 1,000 shares of non-participating, non-voting preferred stock,
par value $.01 per share, having the rights, preferences and limitations
set forth in the Company's Certificate of Powers, Designations, Preferences
and Relative, Participating, Optional and other Special Rights of Preferred
Stock and Qualifications, Limitations and Restructurings thereof (the
"Preferred Stock"). Holders of Preferred Stock are entitled to a
cumulative dividend in an aggregate amount of $1,793,521 before any
dividends may be paid on the Common Stock and a liquidation preference on
liquidation in an aggregate approximate amount of $17,339,062. Cumulative
unpaid dividends on the Preferred Stock are calculated based on an 8% yield
on the original consideration paid for the Class A Common Stock, Class E
Common Stock and Class F Common Stock (in each case, as defined) from the
date of issuance thereof through the date of redemption of the Preferred
Stock. The shares of Preferred Stock are redeemable at any time. See "--
The Reclassification and Stock Split." The Preferred Stock shall be
redeemed immediately after the Offering from a portion of the proceeds
received therefrom in an aggregate amount of $19,132,583. See "Use of
Proceeds."
The Board may, without further action by the Company's
stockholders, from time to time, direct the issuance of shares of preferred
stock in one or more series and may, at the time of issuance, determine the
rights, preferences and limitations of each series. Satisfaction of any
dividend preferences of outstanding shares of preferred stock (including
the Preferred Stock to the extent not fully redeemed after the Offering)
would reduce the amount of funds available for the payment of dividends on
shares of Common Stock and Non-Voting Common Stock. Holders of shares of
preferred stock (including the Preferred Stock) to the extent not fully
redeemed after the Offering) may be entitled to receive a preference
payment in the event of any liquidation, dissolution or winding-up of the
Company before any distribution is made to the holders of shares of Common
Stock and Non-Voting Common Stock. Under certain circumstances, the
issuance of shares of preferred stock may render more difficult or tend to
discourage or delay a merger, tender offer or proxy contest, the assumption
of control by a holder of a large block of the Company's securities or the
removal of incumbent management. The Board, without stockholder approval,
may issue shares of preferred stock with voting and conversion rights which
could adversely affect the holders of Common Stock and Non-Voting Common
Stock. The Company has no present intention of issuing any shares of
preferred stock in the foreseeable future.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share in the
election of directors and on all other matters submitted to a vote of
stockholders and do not have cumulative voting rights. Holders of a
majority of the shares of Common Stock voting for the election of directors
therefore can elect all of the directors of the Company.
Following consummation of the Offering, the shares of Common Stock
will not be redeemable, and the holders thereof will have no preemptive or
conversion rights or other subscription rights to purchase any
securities of the Company. There are also no redemption or sinking fund
provisions applicable to the Common Stock. All shares of Common Stock to
be outstanding upon completion of the Offering contemplated by this
Prospectus will be validly issued, fully paid and non-assessable.
Subject to preferences that may be applicable to any outstanding
preferred stock, the holders of Common Stock are entitled to receive
ratably such dividends, if any, as may be declared from time to time by the
50
<PAGE>
Board out of funds legally available therefor. See "Dividend Policy." In
the event of liquidation, dissolution or winding up of the Company, the
holders of Common Stock are entitled to receive, after payment of the
Company's debts and liabilities, the remaining assets of the Company on a
ratable basis. This right, however, is subject to: (i) any prior
liquidation rights of preferred stock then outstanding (to the extent such
rights are designated by the Board) and (ii) any rights of holders of
preferred stock to share ratably with holders of Common Stock in all assets
remaining after payment of liabilities and liquidation preferences (to the
extent such rights are designated by the Board).
The Company has applied to list the Common Stock for quotation on
the Nasdaq National Market under the trading symbol "WDRY." Prior to the
Offering, there has been no public market for the Common Stock, and no
assurance can be given that a significant public market for the Common
Stock will develop or be sustained after the Offering.
NON-VOTING COMMON STOCK
Except as required by applicable law, the holders of Non-Voting
Common Stock are not entitled to vote in the election of directors or on
any other matters submitted to a vote of stockholders. Except for the
restrictions on ownership, voting and conversion, the Non-Voting Common
Stock is substantially similar to the Common Stock.
THE RECLASSIFICATION AND STOCK SPLIT
Immediately prior to the completion of the Offering and before
giving effect to the Reclassification and the Stock Split (each, as
hereinafter defined), the Company's authorized capital stock consisted of:
(i) 85,000 shares of Class A common stock, par value $.01 per share ("Class
A Common Stock"), 77,388 of which were issued and outstanding; (ii) 15,000
shares of Class B common stock, par value $0.01 per share ("Class B Common
Stock"), 14,935 of which were issued and outstanding; (iii) 13,243 shares
of Class C common stock, par value $0.01 per share ("Class C Common
Stock"), 13,242.915 of which were issued and outstanding; (iv) 13,243
shares of Class D common stock, par value $.01 per share ("Class D Common
Stock"), no shares of which were issued and outstanding; (v) 7,612 shares
of Class E common stock, par value $.01 per share (the "Class E Common
Stock"), 7,612 of which were issued and outstanding; (vi) 133,901 shares of
Class F common stock, par value $.01 per share (the "Class F Common
Stock"), 133,900.985 of which were issued and outstanding; (vii) 26,833
shares of Class G common stock, par value $.01 per share ("Class G Common
Stock"), 25,100.95 of which were issued and outstanding; and (viii) 10,000
shares of preferred stock, no shares of which were issued and outstanding
(the foregoing equity securities, collectively, "Pre-Offering Securities").
Subject to consummation of the Offering, the Company shall approve:
(i) a reclassification (the "Reclassification") of the Company's capital
stock pursuant to which, immediately prior to consummation of the Offering,
all issued and outstanding Pre-Offering Securities will be converted into
shares of Preferred Stock, Common Stock and Non-Voting Common Stock, in
each case, in the manner set forth in a reclassification agreement by and
among the Company and each of the holders of the Pre-Offering Securities
(the "Reclassification Agreement"); and (ii) a 23.2-to-1 stock split (the
"Stock Split"), effected in the form of a stock dividend, payable to
stockholders of record on _____________, 1996. Without giving effect to
the Offering, there shall be issued and outstanding immediately prior to
the Offering (i) 1,000 shares of Preferred Stock, (ii) 5,852,464 shares of
Common Stock, and (iii) 483,712 shares of Non-Voting Common Stock, in each
case, as adjusted by the Reclassification and Stock Split.
In connection with the Reclassification, holders of Class A Common
Stock, Class E Common Stock and Class F Common Stock will be issued
additional shares of Preferred Stock and Common Stock representing the
Preferred Yield equal to: (i) the aggregate accrued and unpaid yield on the
Class A Common Stock, Class E Common Stock and Class F Common Stock as of
the date of issuance thereof; plus (ii) the Unreturned Preferred Amount (as
defined in the Amended and Restated Certificate of Incorporation of
Coinmach Laundry) of the Class A Common Stock, Class E Common Stock and
Class F Common Stock on the date of issuance thereof. See "Certain
Relationships and Related Transactions -Issuance of Preferred Stock in
Connection with the Reclassification."
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<PAGE>
PAYMENT OF DIVIDENDS ON THE COMMON STOCK
Subject to the prior rights of the holders of any Preferred Stock,
the holders of outstanding shares of Common Stock and Non-Voting Common
Stock are entitled to receive dividends out of assets legally available
therefor at such times and in such amounts as the Board may from time to
time determine. See "Dividend Policy."
CERTAIN PROVISIONS OF THE SECOND AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION AND SECOND AMENDED AND RESTATED BYLAWS AND STATUTORY
PROVISIONS
The Second Amended and Restated Certificate of Incorporation to be
effective upon consummation of the Offering and the Second Amended and
Restated Bylaws of the Company contain provisions that could have an anti-
takeover effect. These provisions are intended to enhance the likelihood
of continuity and stability in the composition of the Board and in the
policies formulated by the Board and to discourage certain types of
transactions which may involve an actual or threatened change of control of
the Company. The provisions are designed to reduce the vulnerability of
the Company to an unsolicited takeover proposal that does not contemplate
the acquisition of all its outstanding shares or an unsolicited proposal
for the restructuring or sale of all or part of the Company.
The Second Amended and Restated Certificate of Incorporation will
provide that the Board will be divided into three classes, with each class,
after a transitional period, serving for three years, and one class being
elected each year. A majority of the remaining directors then in office,
though less than a quorum, or the sole remaining director, will be
empowered to fill any vacancy on the Board which arises during the term of
a director. The provision for a classified Board may be amended, altered
or repealed only upon the affirmative vote of the holders of at least 80%
of the outstanding shares of the voting stock of the Company. The
classification of the Board may discourage a third party from making a
tender offer or otherwise attempting to gain control of the Company and may
have the effect of maintaining the incumbency of the Board. Since the Board
has the power to retain and discharge officers of the Company, these
provisions could also make it more difficult for existing shareholders or
another party to effect a change in management.
The Second Amended and Restated Certificate of Incorporation will
require that any action required or permitted to be taken by the Company's
stockholders must be effected at a duly called annual or special meeting of
stockholders and may not be effected by written consent unless a majority
of the Board approves the use of such written consent with respect to the
taking of such action. This provision makes it difficult for stockholders
to initiate or effect an action by written consent, and thereby effect an
action opposed by the Board. Additionally, the Second Amended and Restated
Certificate of Incorporation will require that special meetings of the
stockholders of the Company be called only by the affirmative vote of at
least two members of the Board then in office or by certain officers.
The Second Amended and Restated Bylaws will provide that
stockholders seeking to bring business before or to nominate directors at
any annual meeting of stockholders must provide timely notice thereof in
writing. To be timely, a stockholder's notice must be delivered to, or
mailed and received at, the principal executive offices of the Company not
less than 60 days nor more than 90 days prior to such meeting or, if less
than 70 days' notice was given for the meeting, within 10 days following
the date on which such notice was given. The Second Amended and Restated
Bylaws also will specify certain requirements for a stockholder's notice to
be in proper written form. These provisions will restrict the ability of
stockholders to bring matters before the stockholders or to make
nominations for directors at meetings of stockholders.
The Second Amended and Restated Certificate of Incorporation
further provides that the Board, by a majority vote, may adopt, alter,
amend or repeal provisions of the Second Amended and Restated Bylaws.
However, stockholders may only adopt, alter, amend or repeal provisions of
the Second Amended and Restated Bylaws by a vote of 66 2/3% or more of the
outstanding Common Stock.
Following the consummation of the Offering, the Company will be
subject to the "business combination" provisions of the Delaware General
Corporation Law. In general, such provisions prohibit a publicly held
Delaware corporation from engaging in various "business combination"
transactions with any Interested Stockholder (defined as a person who,
together with its affiliates and associates, owns (or within the three
prior years did own) 15% or more of the corporation's outstanding voting
stock) for a period of three years after the date of the transaction in
which the person became an Interested Stockholder, unless (i) the
transaction is approved by the Board prior to the date the Interested
Stockholder obtained such status, (ii) upon consummation of the transaction
which resulted in the stockholder becoming an Interested Stockholder, the
Interested Stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares outstanding those shares
owned by (a) persons who are directors and also officers and (b) employee
stock plans in which employee participants do not have the right to
determine
52
<PAGE>
confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer, or (iii) on or subsequent to such
date the "business combination" is approved by the Board and authorized at
an annual or special meeting of stockholders by the affirmative vote of at
least 66 2/3% of the outstanding Common Stock which is not owned by the
Interested Stockholder. A "business combination" is defined to include
mergers, asset sales and other transactions resulting in financial benefit
to a stockholder. The statute could prohibit or delay mergers or other
takeover or change in control attempts with respect to the Company and,
accordingly, may discourage attempts to acquire the Company. See "Risk
Factors -- Anti-Takeover Considerations."
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is The Bank
of New York.
53
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon the closing of the Offering, there will be 9,352,464 shares of
Common Stock and 483,712 shares of Non-Voting Common Stock outstanding
prior to giving effect to the exercise of the options granted by the
Company . The 3,500,000 shares of Common Stock sold in the Offering will
be freely tradeable without restriction or further registration under the
Securities Act, unless held by an "affiliate" of the Company as that term
is defined in Rule 144 under the Securities Act, which shares will be
subject to the resale limitations of Rule 144. Of the outstanding shares
of Common Stock and Non-Voting Common Stock, 6,336,176 will not have been
registered under the Securities Act and may not be sold unless they are
registered or unless an exemption from registration is available such as
the exemption provided by Rule 144 or, to the extent applicable, Rule 701.
All of such unregistered shares would be eligible for sale on expiration of
a 180 day lockup period, subject to certain volume and other resale
limitations under Rule 144.
In general, under Rule 144 as currently in effect, a stockholder (or
stockholders whose shares are aggregated) who has beneficially owned shares
constituting "restricted securities" (generally defined as securities
acquired from the Company or an affiliate of the Company in a non-public
transaction) for at least two years is entitled to sell within any three-
month period a number of shares that does not exceed the greater of (i) one
percent of then outstanding Common Stock and Non-Voting Common Stock
(93,525 shares of Common Stock immediately after the Offering without
giving effect to additional shares issued pursuant to the Underwriters'
over-allotment option) or (ii) the average weekly reported trading volume
in the Common Stock during the four calendar weeks preceding the date on
which notice of such sale is filed pursuant to Rule 144. Sales under Rule
144 are also subject to certain provisions regarding the manner of sale,
notice requirements and the availability of current public information
about the Company. A stockholder (or stockholders whose shares are
aggregated) who is not an affiliate of the Company for at least 90 days
prior to a sale and who has beneficially owned "restricted securities" for
at least three years is entitled to sell such shares under Rule 144 without
regard to the limitations described above. In June 1995, the Commission
proposed shortening such three-year holding period to two years and the
two-year holding period to one year.
In general, under Rule 701 under the Securities Act, as currently in
effect, any employee, officer, or director of or consultant to the Company
who purchased his or her shares pursuant to a written compensatory plan or
contract is entitled to rely on the resale provisions of Rule 701. Such
provisions permit nonaffiliates to sell their Rule 701 shares without
having to comply with the public information, holding period, volume
limitation, or notice provisions of Rules 144 and permit affiliates to sell
their Rule 701 shares without having to comply with the Rule 144 holding
period restrictions.
The Company, its executive officers and directors, its pre-Offering
stockholders and certain other members of management of the Company who are
stockholders have agreed not to offer, sell, contract to sell or otherwise
dispose of any shares of Common Stock or rights to acquire such shares or
securities convertible into or exchangeable for Common Stock other than
sales contemplated hereby or issued or to be issued pursuant to employee
stock option plans or in connection with other employee incentive
compensation arrangements or agreements, in each case in effect on the date
of this Prospectus, for a period of 180 days after the date of this
Prospectus, without the prior written consent of Lehman Brothers, Inc., as
a representative of the Underwriters (as defined).
Pursuant to the Company Registration Agreement, the pre-Offering
stockholders of the Company, who will hold in the aggregate 6,336,176
shares of Registrable Securities following the Offering, are entitled to
certain registration rights. At any time following the Offering, GTCR may
request registration of all or a portion of the Registrable Securities it
holds on Form S-1 (a "Long-Form Registration") and may request registration
on Form S-2 or S-3 ("Short-Form Registration"), if available. GTCR is
entitled to request up to four Long-Form Registrations and an unlimited
number of Short-Form Registrations. The Company is responsible for all
registration expenses in connection with all such registrations.
Additionally, if the Company proposes to register any of its Common Stock
under the Securities Act, whether for its own account or otherwise, all
holders of Registrable Securities are entitled to notice of such
registration and, subject to certain priority provisions, are entitled to
include their Registrable Securities in such registration. The
registration expenses of the holders of Registrable Securities would be
paid by the Company in all such registrations. The holders of Registrable
Securities have agreed to waive their rights under the Company Registration
Agreement to include their Registrable Securities in the Offering.
Additionally, each holder of Registrable Securities has agreed not to
effect any public sale or distribution of such securities during the Lock-
up Period.
Prior to the Offering, there has been no public market for shares of
Common Stock, and no assurance can be given that such a market will develop
or, if it develops, will be sustained after the Offering or that the
purchasers of the shares will be able to resell such shares at a price
higher than the initial public offering price or otherwise.
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<PAGE>
If such a market develops, no prediction can be made as to the effect, if
any, that future sales of shares, or the availability of shares for future
sale, to the public will have on the market price of the Common Stock
prevailing from time to time. Sales of substantial amounts of Common Stock
in the public market, whether such shares are presently outstanding or
subsequently issue, or the perception that such sales could occur, could
adversely affect prevailing market prices for the Common Stock and could
impair the Company's ability to raise capital in the future through an
offering of its equity securities. The Company cannot predict when or how
many of such additional shares of Common Stock may be offered for sale or
sold to the public in the future. See "Risk Factors -- Shares Eligible for
Future Sale."
UNDERWRITING
The underwriters of the Offering of the Common Stock (the
"Underwriters"), for whom Lehman Brothers Inc., Dillon, Read & Co. Inc. and
Fieldstone FPCG Services, L.P. are serving as representatives, have
severally agreed, subject to the terms and conditions of the Underwriting
Agreement (the "Underwriting Agreement") (the form of which is filed as an
exhibit to the Registration Statement (as defined) of which this Prospectus
is a part), to purchase from the Company and the Company has agreed to sell
to each Underwriter, the aggregate number of shares of Common Stock set
forth opposite their respective names below:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
- ------------ ---------
<S> <C>
Lehman Brothers Inc. .......................
Dillon, Read & Co. Inc......................
Fieldstone FPCG Services, L.P...............
Total.......................................
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters to purchase shares of Common Stock are subject to certain
other conditions and that if any of the shares of Common Stock are
purchased by the Underwriters pursuant to the Underwriting Agreement, all
shares of Common Stock agreed to be purchased by the Underwriters pursuant
to the Underwriting Agreement must be so purchased.
The Company has been advised that the Underwriters propose to offer
the shares of Common Stock directly to the public initially at the public
offering price set forth on the cover page of this Prospectus and to
certain selected dealers (who may include the Underwriters) at such public
offering price less a selling concession not in excess of $ per share. The
Underwriters may allow, and the selected dealers may reallow, a concession
not in excess of $ per share to certain other brokers and dealers. After
the initial public offering of the Common Stock, the concession to selected
dealers and the reallowance to other dealers may be changed by the
Underwriters.
The Company has granted to the Underwriters an option to purchase
up to an additional shares of Common Stock at the public offering
price less the aggregate underwriting discounts and commissions shown on
the cover page of this Prospectus solely to cover over-allotments, if any.
The option may be exercised at any time up to 30 days after the date of
this Prospectus. To the extent that the Underwriters exercise such option,
the Underwriters will be committed (subject to certain conditions) to
purchase a number of option shares proportionate to such Underwriter's
initial commitment.
The Company has agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act, or to
contribute to payments that the Underwriters may be required to make in
respect thereof.
55
<PAGE>
The Company has applied to list the Common Stock for quotation on
the Nasdaq National Market under the trading symbol "WDRY."
The Underwriters have informed the Company that they do not intend
to confirm sales to any account over which they exercise discretionary
authority.
The Company, its existing stockholders and each of the directors
and executive officers of the Company have agreed not to offer, sell or
contract to sell, or otherwise dispose of, or announce the offering of, any
shares of Common Stock, or any securities convertible into, or exchangeable
for, shares of Common Stock, except the shares of Common Stock offered
hereby, for a period of 180 days from and after the date of this Prospectus
without the prior written consent of Lehman Brothers Inc.
From time to time, certain of the Underwriters or their affiliates
may provide investment banking services to the Company. Fieldstone FPCG
Services, L.P. ("Fieldstone") has provided, and will continue to provide,
financial advisory services to the Company. Upon consummation of the
Offering, two members of Fieldstone will receive a portion of the
Additional Options from the Company to purchase an aggregate of 54,002
shares of Common Stock.
James N. Chapman, a principal of Fieldstone, is a director of the
Company. See "Management"; "Principal Stockholders"; and "Certain
Relationships and Related Transactions - Grant of Options; Issuance of
Preferred Stock in Connection with Reclassification."
Prior to this Offering there has been no public market for the
Common Stock. The initial public offering price for the Common Stock
offered hereby will be determined by negotiation between the Company and
the Underwriters and will be based on, among other things, the Company's
financial and operating history and condition, the prospects of the Company
and its industry in general, the management of the Company and the market
prices of securities of companies engaged in businesses similar to those of
the Company.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby have been
passed upon for the Company by Anderson Kill Olick & Oshinsky, P.C., New
York, New York and for the Underwriters by Cahill Gordon & Reindel (a
partnership including a professional corporation), New York, New York.
Upon consummation of the Offering, a member of Anderson Kill Olick &
Oshinsky, P.C. will receive a portion of the Additional Options from the
Company to purchase 54,003 shares of Common Stock.
EXPERTS
The combined consolidated financial statements of the Company as of
March 29, 1996 and for the six month transition period then ended and as of
September 29, 1995 and for the period from April 5, 1995 to September 29,
1995, and the combined and consolidated financial statements of Coinmach
(formerly Solon) at September 29, 1995 and for the year then ended included
in this Prospectus and Registration Statement (as defined) have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon appearing elsewhere herein, and are included in reliance
upon such reports given upon the authority of such firm as experts in
accounting and auditing.
The financial statements of CIC as of December 31, 1994 and 1993
and for each of the years in the three-year period ended December 31, 1994,
and as of and for the one month period ended January 31, 1995, and the
financial statements of TCC as of and for the two-month period ended March
31, 1995, included in this Prospectus have been audited by KPMG Peat
Marwick LLP, independent certified public accountants, as indicated in
their reports with respect thereto and are included in this Prospectus and
Registration Statement in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
The financial statements of Solon as of September 30, 1994, and for
each of the two fiscal years then ended, included in this Prospectus have
been audited by Arthur Andersen LLP, independent public accountants, as
56
<PAGE>
indicated in their report with respect thereto and is included in this
Prospectus and in the Registration Statement in reliance upon such report
given upon the authority of such firm as experts in accounting and
auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement
on Form S-1 (the "Registration Statement") under the Securities Act with
respect to the Common Stock being offered hereby. This Prospectus does not
contain all the information set forth in the Registration Statement and the
exhibits and schedules thereto, certain items of which are omitted in
accordance with the rules and regulations of the Commission. Statements
contained in this Prospectus concerning the provisions of documents filed
with the Registration Statement as exhibits are necessarily summaries of
such documents, and each such statement is qualified in its entirety by
reference to the applicable document filed as an exhibit to the
Registration Statement. For further information with respect to the
Company and the shares of Common Stock offered hereby, reference is made to
the Registration Statement, including the exhibits and schedules thereto.
Copies of the Registration Statement, including the exhibits and schedules
thereto, can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549; at its Chicago Regional Office, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511; and at its New York
Regional Office, Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can be obtained from the public reference
section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549,
upon payment of the prescribed rates. For further information pertaining
to the Company and the Common Stock being offered hereby, reference is made
to the Registration Statement, including the exhibits thereto and the
financial statements, notes and schedules filed as a part thereof.
As a result of the Offering, the Company will become subject to
the informational and reporting requirements of the Securities Exchange Act
of 1934, as amended, and in accordance therewith will file periodic
reports, proxy statements and other information with the Commission.
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<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
COINMACH LAUNDRY CORPORATION
- ----------------------------
Combined consolidated balance sheets of Coinmach Laundry
Corporation and Subsidiaries as of March 29, 1996 and
September 29, 1995, and the related combined consolidated
statements of operations, shareholders' equity (deficit),
and cash flows for the six-month transition period ended March
29, 1996 and the period from April 5, 1995 to September 29,
1995 with accompanying notes and Report of Independent
Auditors thereon...................................................... F-2
COINMACH CORPORATION (formerly Solon Automated Services, Inc.)
- --------------------------------------------------------------
Combined and consolidated balance sheets of Coinmach
Corporation (formerly Solon) as of September 29, 1995 and
September 30, 1994 and related combined and consolidated
statements of operations, shareholders' equity (deficit) and
cash flows for each of the years in the three years ended
September 29, 1995 with accompanying notes and Reports of
Independent Auditors thereon.......................................... F-25
TCC (as successor to CIC)
- -------------------------
Consolidated balance sheets of CIC as of December 31, 1994
and 1993 and related consolidated statements of operations,
stockholders' equity (deficiency) and cash flows for each
of the years in the three-year period ended December 31, 1994
with accompanying notes and Independent Auditors' Report
thereon.............................................................. F-52
Consolidated balance sheet of CIC as of January 31, 1995
and related consolidated statements of operations and
accumulated deficit and cash flows for the month ended
January 31, 1995 with accompanying notes and Independent
Auditors' Report thereon............................................. F-67
Consolidated balance sheet of TCC as of March 31, 1995 and
related consolidated statements of operations and accumulated
deficit and cash flows for the two months ended March 31, 1995
with accompanying notes and Independent Auditors' Report thereon..... F-81
F-1
<PAGE>
Report of Independent Auditors
To the Board of Directors of
Coinmach Laundry Corporation
We have audited the accompanying combined consolidated balance sheets of
Coinmach Laundry Corporation and Subsidiaries (the "Company") as of March 29,
1996 and September 29, 1995, and the related combined consolidated statements of
operations, shareholders' equity (deficit), and cash flows for the six-month
transition period ended March 29, 1996 and the period from April 5, 1995 to
September 29, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined consolidated financial position of Coinmach
Laundry Corporation and Subsidiaries at March 29, 1996 and September 29, 1995,
and the combined consolidated results of its operations and its cash flows for
the six-month transition period ended March 29, 1996 and for the period from
April 5, 1995 to September 29, 1995, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Melville, NY
May 3, 1996, except for Note 11, as
to which the date is May , 1996
________________________________________________________________________
The foregoing report is the form that will be signed upon the completion of the
restatement of capital accounts described in Note 11 to the combined
consolidated financial statements.
Melville, NY
May 8, 1996
F-2
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Combined Consolidated Balance Sheets
(In thousands of dollars)
<TABLE>
<CAPTION>
MARCH 29, SEPTEMBER 29,
1996 1995
-----------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 19,858 $ 10,311
Receivables, less allowance of $454 and $360 5,758 4,392
Inventories 4,443 3,902
Prepaid expenses 2,641 2,084
Advance rental payments 20,320 19,772
Property and equipment:
Laundry equipment and fixtures 89,394 81,599
Land, building and improvements 10,965 8,027
Trucks and other vehicles 1,849 1,400
-----------------------
102,208 91,026
Less accumulated depreciation 19,509 10,320
-----------------------
Net property and equipment 82,699 80,706
Contract rights, net of accumulated amortization of
$8,925 and $4,869 59,745 63,801
Goodwill, net of accumulated amortization of $2,386
and $1,226 44,071 45,231
Other assets, principally debt issuance costs 9,613 11,234
-----------------------
Total assets $249,148 $241,433
=======================
</TABLE>
F-3
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Combined Consolidated Balance Sheets (continued)
(In thousands of dollars)
<TABLE>
<CAPTION>
MARCH 29, SEPTEMBER 29,
1996 1995
----------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Accounts payable $ 6,085 $ 6,278
Accrued commissions 7,380 8,456
Accrued interest 7,745 4,551
Other accrued expenses 7,557 10,316
Deferred income taxes 18,924 25,277
12 3/4% senior notes 5,000 99,000
11 3/4% senior notes 196,655 --
13 3/4% senior subordinated debentures, net of
unamortized discount of $1,326 -- 28,674
Long-term credit facility -- 42,880
Other long-term debt 1,110 5,861
Shareholders' equity:
Common stock 61 22
Capital in excess of par value 17,842 17,881
Accumulated deficit (18,719) (7,271)
----------------------------
(816) 10,632
Receivables from shareholders (492) (492)
----------------------------
Total shareholders' (deficit) equity (1,308) 10,140
----------------------------
Total liabilities and shareholders'
(deficit) equity $249,148 $241,433
============================
</TABLE>
See accompanying notes.
F-4
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Combined Consolidated Statements of Operations
(In thousands of dollars, except per share data)
<TABLE>
<CAPTION>
SIX-MONTH
TRANSITION APRIL 5, 1995
PERIOD ENDED TO
MARCH 29, SEPTEMBER 29,
1996 1995
----------------------------------------
<S> <C> <C>
Revenues $ 89,070 $89,719
Costs and expenses:
Laundry operating expenses 60,536 62,905
Depreciation and amortization 18,212 18,423
General and administrative 1,844 2,351
Restructuring costs -- 2,200
----------------------------------------
80,592 85,879
----------------------------------------
Operating income 8,478 3,840
Interest expense, net 11,999 11,818
----------------------------------------
Loss before income taxes and extraordinary item (3,521) (7,978)
----------------------------------------
Provision (benefit) for income taxes:
Currently payable 50 420
Deferred (1,048) (2,282)
----------------------------------------
(998) (1,862)
----------------------------------------
Loss before extraordinary item (2,523) (6,116)
Extraordinary item, net of income tax benefit of $5,305 (8,925) --
Net loss $(11,448) $(6,116)
========================================
Pro forma loss per share:
Before extraordinary item $ (.33) $ (.81)
Extraordinary item (1.18) --
Pro forma net loss per share $ (1.51) $ (.81)
========================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Combined Consolidated Statements of Shareholders' Equity (Deficit)
(In thousands of dollars, except par value and shares)
<TABLE>
<CAPTION>
Balance Balance Recapitalization Balance
April 5, Net September 29, Net of common March 29,
1995 loss 1995 loss stock 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A common stock, par value $.01:
Authorized shares - 1,971,515
Issued shares, end of period - 1,971,515 and
1,794,960 $ 19 $ - $ 19 $ - $ (2) $ 17
Class B common stock, par value $.01:
Authorized shares - 347,914
Issued shares, end of each period - 266,734 3 - 3 - - 3
Class C common stock, par value $.01:
Authorized shares - 307,162
Issued shares, end of each period - 0 and 307,162 - - - - 3 3
Class D common stock, par value $.01:
Authorized shares - 307,162
Issued shares, end of each period - 0 - - - - - -
Class E common stock, par value $.01:
Authorized shares - 176,555
Issued shares, end of period - 0 and 176,555 - - - - 2 2
Class F common stock, par value $.01:
Authorized shares - 3,105,739
Issued shares, end of period - 0 and 3,105,739 - - - - 30 30
Class G common stock, par value $.01:
Authorized shares - 622,372
Issued shares, end of period - 0 and 582,200 - - - 6 6
Preferred stock, par value $.01:
10,000 authorized, none issued - - - - -
Capital in excess of par value 17,881 - 17,881 - (39) 17,842
Accumulated deficit (1,155) (6,116) (7,271) (11,448) - (18,719)
-------------------------------------------------------------------------------
16,748 (6,116) 10,632 (11,448) - (816)
Receivables from shareholders (492) - (492) - - (492)
-------------------------------------------------------------------------------
Total shareholders' equity (deficit) $16,256 $(6,116) $10,140 $(11,448) $ - $ (1,308)
===============================================================================
</TABLE>
See accompanying notes.
F-6
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Combined Consolidated Statements of Cash Flows
(In thousands of dollars)
<TABLE>
<CAPTION>
SIX-MONTH APRIL 5,
TRANSITION 1995
PERIOD ENDED TO
MARCH 29, SEPTEMBER 29,
1996 1995
-------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(11,448) $ (6,116)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 18,212 18,423
Deferred income taxes (1,048) (2,000)
Amortization of debt discount
and deferred issue costs 508 735
Extraordinary item, net of
taxes 8,925 --
Decrease (increase) in other
assets 24 (1,054)
Increase in receivables, net (1,489) (197)
(Increase) decrease in
inventories and prepayments (1,100) 930
Decrease in accounts payable (6) (610)
Increase (decrease) in
accrued interest 3,193 (25)
(Decrease) increase in other
accrued expenses, net (3,434) 1,980
-------------------------------
Net cash provided by operating
activities 12,337 12,066
-------------------------------
INVESTING ACTIVITIES
Additions to property and equipment (10,757) (9,550)
Advance payments to location owners (3,462) (3,569)
Acquisition of net assets of Solon -- (11,925)
Sales of property and equipment 57 5
-------------------------------
Net cash used in investing activities (14,162) (25,039)
-------------------------------
FINANCING ACTIVITIES
Proceeds from issuance of 11 3/4%
senior notes 65,835 --
Net (repayments) borrowings of bank and
other borrowings (48,053) 6,126
Principal payments of capitalized lease
obligations (262) (143)
Deferred debt issuance costs (5,397) --
Debt extinguishment costs (751) --
Loans to shareholders -- (154)
Sale of common stock -- 6,681
-------------------------------
Net cash provided by financing
activities 11,372 12,510
-------------------------------
Net increase (decrease) in cash and
cash equivalents 9,547 (463)
Cash and cash equivalents, beginning of
period 10,311 10,774
-------------------------------
Cash and cash equivalents, end of period $ 19,858 $ 10,311
===============================
</TABLE>
See accompanying notes.
F-7
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Combined Consolidated Financial Statements
March 29, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION AND CONSOLIDATION
The accompanying consolidated financial statements of Coinmach Laundry
Corporation (formerly SAS Acquisitions, Inc.) and Subsidiaries (the "Company"),
include the accounts of its wholly-owned subsidiary, Coinmach Corporation and
Subsidiaries, formerly Solon Automated Services, Inc. ("Solon") combined with
the consolidated accounts of The Coinmach Corporation ("TCC"). The Company was
formed on April 5, 1995, at which time it acquired Solon, and is controlled by
Golder Thoma Cressey Rauner ("GTCR"). TCC was formed in January 1995 by an
investor group, comprised principally of the same investors who formed the
Company, and acquired Coinmach Industries Co. ("Industries") and Super Laundry
Equipment Co. L.P. ("Super Laundry") on January 31, 1995 (the "TCC
Acquisition"). Both the Solon Acquisition and the TCC Acquisition were accounted
for as purchases and, accordingly, the acquired assets and liabilities were
recorded at their estimated fair values at the respective acquisition dates.
As described in Note 2, Solon completed a merger with TCC on November 30, 1995.
This transaction was accounted for in a manner similar to a pooling of
interests. As a result of the common investor group's control over both Solon
and TCC, the accompanying consolidated financial statements have been prepared
to reflect the accounts of the Company, Solon and TCC and their wholly-owned
subsidiaries on a combined basis since the date of common control, April 5,
1995.
The Company is primarily engaged in providing coin-operated laundry equipment
services to multi-family housing complexes throughout much of the United States.
The Company owns and operates over 220,000 coin-operated washers and dryers on
routes in over 20,000 multi-family housing units in 20 states and the District
of Columbia. Such routes are located throughout the Northeast, Mid-Atlantic,
Southeast, South-Central and Mid-West regions of the United States. The Company,
through its subsidiary, Super Laundry, also is a supplier of coin-operated
laundromat equipment and turnkey laundromat retail stores in the New York
Metropolitan area.
F-8
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Combined Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
All material intercompany accounts and transactions have been eliminated in
combination and consolidation.
FISCAL YEAR
Prior to the merger of Solon and TCC, the Company's fiscal year was the fifty-
two or fifty-three week period which ended on the Friday nearest September 30th.
Effective with the merger of Solon and TCC, the Company changed its fiscal year
end to the Friday in March nearest to March 31. The period from April 5, 1995 to
September 29, 1995 is referred to as "1995", while the period from September 30,
1995 to March 29, 1996 is referred to as "1996T."
RECOGNITION OF LAUNDRY REVENUES
The Company has agreements with various property owners which provide for the
Company's installation and operation of laundry machines at various locations in
return for a commission. These agreements provide for both contingent
(percentage of revenues) and fixed commission payments. The Company reports
revenues from laundry machines on the accrual basis and has accrued the cash
computed to be in the machines at the end of the fiscal period.
Super Laundry's customers generally sign sales contracts pursuant to which Super
Laundry constructs and equips complete laundromat operations, including location
identification, construction, plumbing, electrical wiring and all required
permits. Revenue is recognized on the completed contract method. A contract is
considered complete when all costs have been incurred and either the
installation is operating according to specifications or has been accepted by
the customer. The duration of such contracts is normally less than six months.
Sales of laundromats were approximately $7.8 million and $7.9 million in 1996T
and 1995, respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
F-9
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Combined Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out) or market and
consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 29, SEPTEMBER 29,
1996 1995
--------------------------
<S> <C> <C>
Machine repair parts $2,384 $1,941
Laundry equipment 2,059 1,961
--------------------------
$4,443 $3,902
==========================
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost and are depreciated on a straight-
line basis over the following estimated useful lives:
Laundry equipment and fixtures 3 to 10 years
Improvements 4 to 10 years
Trucks and other vehicles 3 to 4 years
Upon sale or retirement of property and equipment, the cost and related
accumulated depreciation are eliminated from the respective accounts, and the
resulting gain or loss is included in income. Maintenance and repairs are
charged to operations currently, and replacements of laundry machines and
significant improvements are capitalized.
Depreciation expense was $9.4 million and $9.5 million for 1996T and 1995,
respectively.
GOODWILL
Goodwill represents the excess of cost over fair value of net assets acquired
arising from the purchase of Solon on April 5, 1995 (see Note 2) and is being
amortized over 20 years. Management periodically evaluates the realizability of
the goodwill balance based upon
F-10
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Combined Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the Company's expectations of nondiscounted cash flows and operating income.
Based upon present operations and strategic plans, management believes that no
impairment of goodwill has occurred.
CONTRACT RIGHTS
Contract rights represent amounts expended for location contracts arising from
the acquisition of laundry machines on location. These amounts, which arose
solely from purchase price allocations, are amortized on a straight-line basis
over the period of expected benefit ranging from 3 to 15 years based on
independent appraisals.
ADVANCE RENTAL PAYMENTS
Advance payments to location owners are amortized on a straight-line basis over
the contract term, which generally ranges from 5 to 10 years.
INTEREST EXPENSE
Interest expense is reported net of interest income of $277,000 and $148,000 for
1996T and 1995, respectively.
PRO FORMA LOSS PER SHARE
Pro forma loss per share was calculated based upon the weighted average number
of common shares outstanding giving effect to the transactions discussed in Note
11. Weighted average shares outstanding were 7,562,463 for 1996T and 1995.
INCOME TAXES
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("Statement 109"). Statement
109 requires the asset and liability method of accounting for income taxes.
Under the asset and liability method of Statement 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Statement 109 requires that any
tax benefits recognized for net operating loss carryforwards and other items be
reduced by a valuation allowance where it is more likely than not that the
benefits may not be realized. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
F-11
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Combined Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
which those temporary differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment
date.
IMPAIRMENT OF LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" ("Statement 121"), which requires impairment losses to
be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. Statement 121 also
addresses the accounting for long-lived assets that are expected to be disposed
of. The Company was required to adopt Statement 121 effective for the year
beginning March 30, 1996 and, based on current circumstances, does not believe
the effect of adoption is material.
2. BUSINESS COMBINATIONS
THE SOLON ACQUISITION
Solon entered into a Stock Purchase Agreement, dated as of March 7, 1995, with
Ford Coin Laundries, Inc. ("Ford"), Kwik Wash Laundries, Inc. ("Kwik Wash"), and
certain stockholders of the predecessor company (the "Sellers"), whereby Ford
purchased from the Sellers all of the Solon's outstanding Common Stock (the
"Common Stock") and substantially all of the Solon's Class A Common Stock (the
"Class A Common Stock") (collectively, the "Shares"). The purchase price for the
Shares was $11.5 million. The foregoing transaction closed on April 5, 1995. The
source of funds used by Ford for the Shares was the cash proceeds from the sales
by Ford to (i) the Company of the Ford Non-Voting Common Stock, pursuant to a
Stock Purchase Agreement, dated April 4, 1995, and (ii) to the holders of the
Ford Voting Common Stock (collectively, the "Ford Holders"), an option pursuant
to a Letter Agreement dated April 4, 1995. As of April 5, 1995, Ford
beneficially owned, and had the sole power to dispose of, the Shares. The Shares
beneficially owned by Ford represented 100% of the outstanding Common Stock and
approximately 97% of the outstanding Class A Common Stock.
Pursuant to the Stock Purchase Agreement with Ford, the Company purchased from
Ford all of the outstanding shares of Ford's non-voting Class A Common Stock
(the "Ford Non-Voting Common Stock"). The purchase price for the Ford Non-Voting
Common Stock was of $11.4 million. The sources of the funds used by the Company
for the Ford
F-12
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Combined Consolidated Financial Statements (continued)
2. BUSINESS COMBINATIONS (CONTINUED)
Non-Voting Common Stock were certain shareholders of TCC, including GTCR. As of
April 5, 1995, the Company beneficially owns, and has the sole power to dispose
of, 1,000 shares of the Ford Non-Voting Common Stock.
Pursuant to the Letter Agreement dated April 4, 1995, with the Ford Holders and
TCC, the Ford Holders granted to the Company, among other things, an option (the
"Option") to purchase from the Ford Holders, subject to the terms and conditions
contained therein, all of the voting shares of Ford's Common Stock (the "Ford
Voting Common Stock"), for an aggregate purchase price of $100,000. On April 28,
1995, the Company exercised the Option. The sources of funds used by the Company
to exercise the Option were substantially the same sources used to purchase the
Ford Non-Voting Common Stock. As of April 28, 1995, the Company beneficially
owns, and has the sole power to vote and dispose of, ten shares of the Ford
Voting Common Stock.
The Stock Purchase Agreement was accounted for as a purchase and, as of April 5,
1995, Solon adjusted its consolidated assets and liabilities to their estimated
fair values, based on preliminary independent appraisals, evaluations,
estimations and other studies. Reflected below is a summary of these adjustments
(in thousands):
<TABLE>
<CAPTION>
<S> <C>
Increase in property and equipment $ 9,065
Increase in contract rights 34,063
Increase in goodwill 1,268
Increase in deferred income taxes (19,465)
Other (1,515)
----------
Increase in shareholders' equity $ 23,416
==========
</TABLE>
THE TCC ACQUISITION
TCC was incorporated in January 1995 and was capitalized primarily through an
equity investment by an investor group led by the majority shareholder, GTCR,
and senior management and bank financing.
TCC is a holding company which was formed to acquire partnership interests in
Industries and Super Laundry. On January 31, 1995, TCC acquired its partnership
interests in Industries and Super Laundry from CIC I Acquisition Corp. ("CIC
I"). The transaction resulted in TCC owning 100% interests in both Industries
and Super Laundry. The aggregate purchase price for these interests was $8.57
million, paid in cash. The acquisition was accounted for using the purchase
method of accounting. The fair value of assets acquired (based on an independent
appraisal for certain assets) less liabilities
F-13
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Combined Consolidated Financial Statements (continued)
2. BUSINESS COMBINATIONS (CONTINUED)
assumed exceeded the purchase price by approximately $7.7 million. The excess
was allocated against property, equipment and intangible assets ratably based on
their respective fair values.
THE MERGER WITH TCC
On November 30, 1995, Solon completed a merger ("Merger") with TCC through an
exchange of stock. Shares of common stock of the Company were issued in exchange
for all of the issued and outstanding shares of common stock of TCC. The Company
then contributed its stock of TCC to Solon. Solon became the surviving
corporation after the merger, whereupon it changed its name to Coinmach
Corporation. Details of the results of operations of TCC and Solon for the
periods prior to the merger are as follows (in thousands):
<TABLE>
<CAPTION>
APRIL 5, 1995 SEPTEMBER 30,
TO 1995 TO
SEPTEMBER 29, NOVEMBER 29,
1995 1995
--------------------------------------
<S> <C> <C>
REVENUES
Solon $51,256 $17,909
TCC 38,463 13,018
--------------------------------------
Combined $89,719 $30,927
======================================
NET INCOME (LOSS)
Solon $(5,496) $ (525)
TCC (450) 49
--------------------------------------
Combined $(5,946) $ (476)
======================================
</TABLE>
The combined financial results presented above include an adjustment to decrease
TCC's net loss by approximately $180,000 in 1995 and $70,000 for the period from
September 30, 1995 to November 29, 1995, to conform its accounting policy for
the capitalization of machine installation costs to that of Solon. Intercompany
transactions between the two companies for the period presented were not
material.
F-14
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Combined Consolidated Financial Statements (continued)
3. RECEIVABLES
Receivables consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 29, SEPTEMBER 29,
1996 1995
-------------------------------
<S> <C> <C>
Trade receivables $3,431 $1,653
Notes receivable 1,811 1,783
Finance lease receivables 625 905
Other 345 411
-------------------------------
6,212 4,752
Allowance for doubtful accounts 454 360
-------------------------------
$5,758 $4,392
===============================
</TABLE>
Notes receivable, which arise from the sale of laundromats, bear interest at a
weighted average rate of approximately 10% per annum and mature through 1998.
The notes are collateralized by the underlying laundry equipment. The Company
periodically sells notes receivable arising from the sale of laundromats to
third party finance companies. Included in other receivables are finance
reserves, which arise when the Company sells notes and a portion of the proceeds
are retained by the finance company. As the notes are collected, the finance
companies remit a portion of the collections to the Company. Many of the notes
receivable are sold with recourse to the Company (see Note 10). Control of the
notes sold with recourse is surrendered by the Company on the date of transfer.
The Company generally sells its receivables with recourse at cost, recognizing
no gain or loss.
Finance lease receivables relate to lease agreements that the Company has
entered into with one customer. Pursuant to the agreements, the Company installs
and services laundry equipment at apartment complexes owned and operated by the
customer. The difference between the aggregate lease rentals and the cost of the
related equipment is earned over the terms of the leases, which range from 40 to
60 months. Annual future payments due under these leases at March 29, 1996, are
as follows (in thousands); 1997 -- $258; 1998 -- $177; 1999 -- $146; and 2000 --
$44.
4. RESTRUCTURING COSTS
Restructuring charges consist of one-time costs aggregating approximately $2.2
million, which include approximately $1.3 million of severance payments for 55
of Solon's management, administrative and regional personnel, approximately
$300,000 of costs to relocate Solon's financial and administrative functions to
Roslyn, New York, approximately $100,000 of costs to integrate certain financial
and operating systems, and approximately $500,000 of costs related to the
consolidation of certain of Solon's regional offices. Of the total restructuring
costs of $2.2 million, approximately $300,000
F-15
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Combined Consolidated Financial Statements (continued)
4. RESTRUCTURING COSTS (CONTINUED)
was paid during the period ended September 29, 1995, approximately $1.3 million
was paid during the six months ended March 29, 1996, and the remaining portion
of approximately $600,000 is expected to be paid during the fiscal year ending
March 28, 1997. The 55 employee terminations include 5 management employees, 17
corporate staff financial and administrative employees and 33 regional laundry
operational employees. Notifications to employees were made on various dates
through September 1995.
5. DEBT
On June 18, 1992, Solon sold in concurrent private offerings (i) $100 million
principal amount of 12 3/4% Senior Notes due 2001 (the "Senior Notes") and (ii)
$30 million principal amount of 13 3/4% Senior Subordinated Debentures due 2002
(the "Debentures") and effective November 6, 1992, exchanged such securities for
securities with similar terms and form which were registered under the
Securities Act of 1933.
Interest was payable semiannually on January 15 and July 15 for the Senior Notes
and April 15 and October 15 for the Subordinated Debentures. The Senior Notes
were entitled to mandatory sinking fund payments of $15 million on July 15, 1998
and July 15, 1999, and $20 million on July 15, 2000. In addition, Solon was
obligated annually to offer to purchase Senior Notes at par in an amount equal
to 75% of its excess cash flow (as defined) and the proceeds of asset
dispositions ("Annual Mandatory Purchases"). Solon would have received credit
against Annual Mandatory Purchases for any amounts paid in open market or other
purchases. Solon would have received a credit against the sinking fund payment
requirements for the principal amount of Senior Notes acquired. The Debentures
had no mandatory principal repayment requirements until they matured on October
15, 2002.
The Senior Notes were redeemable at Solon's option at a price equal to 106 3/8%
after January 15, 1997, declining to par if redeemed after January 15, 1999. The
Subordinated Debentures were redeemable at a price equal to 106 7/8% after
October 15, 1997, declining to par if redeemed after October 15, 1999.
Debt issue costs totaling $5.4 million incurred in connection with the 1992
debt offerings were included in other assets and were being amortized over the
term of the Senior Notes and Debentures. Accumulated amortization was $2.2
million at September 29, 1995.
F-16
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Combined Consolidated Financial Statements (continued)
5. DEBT (CONTINUED)
On November 30, 1995, Solon completed an exchange offer with substantially all
the holders of the Senior Notes and Subordinated Debentures. Through December
14, 1995, Solon issued a total of $196.7 million of 11 3/4% Senior Notes due
2005 (the "Notes") which enabled Solon to complete this exchange offer,
consummate the merger with TCC and retire its remaining debt, and provide
additional working capital. Solon incurred costs of $4.0 million, net of income
taxes, related to a 5.5% premium paid to retire its Senior Notes and
Subordinated Debentures, wrote-off the unamortized balance of the related
original issue discount and deferred finance costs of approximately $1.3 million
and $1.8 million, net of income taxes, respectively, and also incurred costs
related to the retirement of a revolving credit facility of TCC of approximately
$1.8 million, net of income taxes. The aggregate of the foregoing items totaling
$8.9 million, net of income taxes, is shown as an extraordinary item in 1996T.
Interest on the Notes is payable semi-annually on May 15 and November 15. The
Notes are redeemable at the option of Coinmach Corporation at any time after
November 15, 2000 at a price equal to 105 7/8% declining to par if redeemed
after November 15, 2002. The Notes contain certain financial covenants and a
registration rights agreement, whereby such debt has been registered under the
Securities Act of 1933. Additionally, the Notes contain substantial restrictions
on the payment of dividends from Coinmach Corporation to the Company.
The estimated fair value of the Notes at March 29, 1996, based upon limited
quoted market activity, approximated its recorded value.
On December 30, 1992, Solon entered into a loan and security agreement ("Solon
Credit Facility") which provided for a three-year revolving line of credit in
the amount of up to $5 million. Interest on the borrowing was based on prime
plus 2.875%, but in no event would the interest be less than the greater of 8%
per annum or $15,000 per month. Solon was also required to pay a monthly service
fee of $2,000 and an annual facility fee of 1% of the $5 million available under
the Solon Credit Facility. Borrowings under the Solon Credit Facility were
secured by accounts receivable, bank deposit accounts, equipment and general
intangibles of Solon. Additionally, Solon was required to maintain a joint cash
depository account with the lender. All cash collections were required to be
deposited in this account before being transferred to Solon's account. Amounts
borrowed and repaid during fiscal 1995 totaled $2.0 million. No borrowings were
outstanding under the Solon Credit Facility at September 29, 1995.
F-17
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Combined Consolidated Financial Statements (continued)
5. DEBT (CONTINUED)
Debt outstanding under the long-term credit facility of TCC (the "TCC Credit
Facility") as of September 29, 1995, consisted of the following (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Revolving line of credit, due January
31, 2000. Interest at prime plus 1.25%
(10.25% at September 29, 1995) $ 2,880
Term loan A, quarterly payments of $250
commencing April 1, 1996, and
increasing to $500 April 1, 1997,
$1,250 April 1, 1998 and $1,500 April
1, 1999. Interest at prime plus 1.25%
(10.25% at September 29, 1995) 14,000
Term loan B, quarterly payments of
$1,750 commencing April 1, 2000 and
increasing to $2,000 April 1, 2001
with the final two payments of $1,750
on April 1, 2002 and July 1, 2002.
Interest at prime plus 1.75% (10.75%
at September 29, 1995) 18,500
Term loan C, due July 1, 2002. Interest
at 12.5%. 7,500
---------
$42,880
=========
</TABLE>
The TCC Credit Facility provided for $40 million in term loans and $10 million
in the aggregate for revolving line of credit and acquisition loan facilities.
The revolving line of credit facility provided for up to $5 million in
borrowings, including letters of credit up to a maximum of $1 million. There was
a one-half of one percent fee per annum on the unused portion of this facility
and a two percent letter of credit fee. The acquisition loan facility provided
up to $5 million in borrowings. The acquisition loans were to be used to finance
acquisitions or capital expenditures attributed to growth. Any amounts
outstanding under the acquisition line as of January 31, 2000 were to be repaid
in equal quarterly installments through July 1, 2002. The interest rate on
borrowings under the acquisition line was at prime plus 1.75%. There were no
acquisition loans outstanding as of September 29, 1995.
The financing agreement relating to the TCC Credit Facility required TCC, among
other things, to maintain certain financial ratios and restricted additional
investments and indebtedness. Loans outstanding under this agreement were
subject to prepayment upon the occurrence of certain events such as asset
dispositions, public offerings and the generation of excess cash flow, as
defined. Industries and Super Laundry were the borrowers under this agreement
and it was guaranteed by TCC. Borrowings were secured by all of the assets of
TCC.
F-18
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Combined Consolidated Financial Statements (continued)
5. DEBT (CONTINUED)
On November 30, 1995, Coinmach Corporation entered into a new revolving credit
facility, ("Credit Facility"), which provides up to a maximum of $35 million and
which replaced the Solon Credit Facility and the TCC Credit Facility.
Availability under the Credit Facility is limited by an amount equal to one
semi-annual interest payment on the Notes. Interest on the borrowings is payable
monthly at a rate per annum no greater than the sum of LIBOR plus 2.50%. The
Company is obligated to pay an unused line fee in an amount equal to 0.5% of the
unused availability payable monthly in arrears. Borrowings under the Credit
Facility are secured by real and personal property of the Company and also
require the Company, among other things, to maintain certain financial ratios
and restrict additional investments and indebtedness. At March 29, 1996, there
were no amounts outstanding under the Credit Facility.
In addition, at September 29, 1995, the Company had $5 million outstanding under
a loan agreement with a financial institution, which was repaid in connection
with the exchange offer on November 30, 1995.
The Company made cash payments for interest of $8.5 million and $10.9 million
for 1996T and 1995, respectively.
6. RETIREMENT SAVINGS PLAN
Effective October 1, 1987, Solon formed the Solon Automated Services Retirement
Savings Plan (the "Plan"). The Plan is a defined contribution plan available to
all full-time Solon employees who have completed one year of service. Under the
terms of the Plan, Solon matches employee contributions at a percentage
determined annually by the Board of Directors. The number of shares issued to
the Plan is based upon the appraised value of the stock which is determined
annually by an independent appraiser. Contributions to the Plan for the six-
month periods ending September 29, 1995 and March 29, 1996 were not material.
TCC has established a defined contribution plan for substantially all of its
employees. TCC's contributions to the plan for 1996T and 1995 amounted to
approximately $43,000 in each period.
The Company does not provide any other postretirement benefits.
F-19
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Combined Consolidated Financial Statements (continued)
7. STOCK OPTION PLAN
Solon adopted a stock option plan (the "Plan") in September 1987. The Plan
authorized the granting of incentive stock options, nonqualified options, or a
combination of the foregoing, to certain key employees and directors.
Under the terms of the Plan, 1,250,000 common shares were reserved for issuance
upon exercise of options. Shares for options that had expired or had been
surrendered or canceled without having been exercised may again have been
optioned under the Plan.
Each option granted was exercisable into one common share of Solon. In general,
50% of stock options granted became exercisable five years after the date of
grant, with 12 1/2% of the options becoming exercisable in each of the
subsequent four years.
As of September 29, 1995, there was a total of 212,000 stock options
outstanding, exercisable at prices between $.98 and $1.23 per common share. No
options had been exercised since Solon adopted the Plan. As a result of the
merger with TCC, the Plan was canceled; participants in the Plan received in
aggregate consideration of approximately $34,000.
8. INCOME TAXES
The components of the Company's net deferred tax liabilities were as follows (in
thousands):
<TABLE>
<CAPTION>
MARCH 29, SEPTEMBER 29,
1996 1995
--------------------------------
<S> <C> <C>
Deferred tax liabilities:
Accelerated tax depreciation $28,920 $26,804
Other, net 1,449 3,355
-------------------------------
30,369 30,159
-------------------------------
Deferred tax assets:
Net operating loss carryforwards 8,549 4,600
Book over tax depreciation 2,383 742
Other 973 --
Valuation allowance for deferred tax assets (460) (460)
-------------------------------
11,445 4,882
-------------------------------
Net deferred tax liabilities $18,924 $25,277
===============================
</TABLE>
F-20
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Combined Consolidated Financial Statements (continued)
8. INCOME TAXES (CONTINUED)
As of April 5, 1995, the deferred tax asset and related valuation allowance
relating to Solon were netted and reduced to $2.6 million to reflect the net
operating loss available pursuant to limitations imposed under provisions of the
Internal Revenue Code regarding changes in ownership. In addition, as of April
5, 1995, TCC had recorded a deferred tax asset of $460,000 with a valuation
allowance of the same amount. The deferred tax assets recorded subsequently do
not reflect a valuation allowance because the loss can be utilized against the
deferred tax liabilities in the carryforward period. The net operating loss
carryforwards, which expire between fiscal years 2001 through 2007, consist of
approximately $7 million (after the limitation) relating to the predecessor of
Solon and approximately $13.7 million relating to the Company.
The provision (benefit) for income taxes consists of (in thousands):
<TABLE>
<CAPTION>
SIX-MONTH APRIL 5,
TRANSITION 1995
PERIOD ENDED TO
MARCH 29, SEPTEMBER 29,
1996 1995
------------------------------------
<S> <C> <C>
Federal $(758) $(1,760)
State (240) (102)
------------------------------------
$(998) $(1,862)
====================================
</TABLE>
Deferred taxes relate primarily from timing differences resulting from using
accelerated depreciation for tax purposes and straight-line depreciation for
financial reporting purposes.
The effective income tax rate differs from the amount computed by applying the
U.S. federal statutory rate to loss before taxes as a result of state taxes and
permanent book/tax differences as follows (in thousands):
<TABLE>
<CAPTION>
SIX-MONTH APRIL 5,
TRANSITION 1995
PERIOD ENDED TO
MARCH 29, SEPTEMBER 29,
1996 1995
------------------------------------
<S> <C> <C>
Expected tax benefit $(1,201) $(2,655)
State tax benefit, net of federal taxes (170) (320)
Permanent book/tax differences:
Goodwill and other 373 1,113
------------------------------------
Recorded tax provision/(benefit) $ (998) $(1,862)
====================================
</TABLE>
F-21
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Combined Consolidated Financial Statements (continued)
8. INCOME TAXES (CONTINUED)
The Company made cash payments for income taxes of approximately $36,000, and
$494,000 for 1996T and 1995, respectively.
9. COMMON STOCK
The Company's classes of common stock contain various privileges which are
summarized as follows:
Holders of Common Stock Classes A, B, D, F and G are each entitled to one vote
per share on all matters to be voted on by the Company. Holders of Common Stock
Classes C and E have certain voting rights in connection with mergers or
consolidations of the Company.
Holders of Common Stock Classes A, E and F are entitled to certain rights upon
liquidation, dissolution or winding up of the Company, with respect to
distributions and unpaid yields. Holders of Common Stock Classes B and G are
entitled to similar but subordinate privileges.
Holders of Common Stock Class C are entitled to convert their shares into the
same number of shares of Common Stock Class D upon the occurrence of a
conversion event, as defined. Holders of Common Stock Classes A, D and E are
entitled to convert their shares at any time into the same number of Common
Stock Classes E, C and A, respectively, with certain limitations, as defined.
Holders of Common Stock Classes A, E and F are entitled to unpaid yields upon
the occurrence of certain events.
Certain of the Company's shares of common stock have been purchased by
shareholders through loans made by the Company. Such loans are presented as a
reduction of stockholder's equity.
10. COMMITMENTS AND CONTINGENCIES
Rental expense for all operating leases, which principally cover office
facilities and vehicles, was $1,235,000, and $1,139,000 for 1996T and 1995,
respectively.
F-22
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Combined Consolidated Financial Statements (continued)
10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The following is a schedule of the future minimum rental commitments under all
noncancelable leases as of March 29, 1996 (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1997 $1,683
1998 1,096
1999 759
2000 460
2001 and future periods 1,143
--------
$5,141
========
</TABLE>
The Company is contingently liable on receivables sold with recourse to finance
companies by TCC. The total amount of such receivables outstanding as of March
29, 1996 is approximately $3.7 million.
The Company is party to various legal proceedings incidental to its business.
Although the ultimate disposition of these proceedings is not presently
determinable, management does not believe that adverse determinations in any or
all such proceedings would have a material adverse effect upon the financial
condition or results of operations of the Company.
In connection with insurance coverages, which include workers compensation,
general liability and other coverages, annual premiums are subject to limited
retroactive adjustment based on actual loss experience.
11. SUBSEQUENT EVENTS
In April 1996, the Company completed certain acquisitions of businesses,
with the purchase price aggregating $15.6 million, utilizing cash on hand.
The Company is in the process of filing a Registration Statement with the
Securities and Exchange Commission in connection with the offering by the
Company of 3,500,000 shares of a new class of common stock for sale to the
public (the "Offering"). In contemplation of the Offering, the Company issued an
additional 79,533 shares of its Class B Common Stock to certain members of
management. These shares were purchased through loans made by the Company
totalling approximately $56,000. In addition, approximately $103,000 of
receivables from shareholders outstanding at March 29, 1996 were forgiven.
F-23
<PAGE>
Coinmach Laundry Corporation and Subsidiaries
Notes to Combined Consolidated Financial Statements (continued)
11. SUBSEQUENT EVENTS (CONTINUED)
The Offering contemplates the exercise of shares of a new class of preferred
stock to the current holders of Class A, E and F Common Stock subsequently, of
which 23,316 shares of new common stock will be issued in exchange for the new
preferred stock issued to the management holders of the preferred stock, and
approximately $19.1 million from the proceeds of the Offering will be used to
retire the remaining shares of preferred stock. The following table presents
unaudited pro forma and shareholders' deficit at March 29, 1996:
Pro Forma
Dividend and
Shareholders'
Deficit
March 29, March 29,
1996 1996
------------- ---------
Dividend Payable $ 19,133 $ --
Shareholders' equity:
Common Stock $ 61 $ 61
Capital in excess of par value 903 17,842
Accumulated deficit (20,913) (18,719)
-----------------------------
(19,949) (816)
Receivables from stockholders (492) (492)
-----------------------------
Total shareholders' (deficit) equity $(20,441) $ (1,308)
=============================
The Offering also contemplates the Company will grant options to purchase
694,318 shares of common stock at 85% of the Offering price to certain
individuals, including management and certain officers of the Company.
In addition, the Offering contemplates a management stock option plan for the
issuance of up to 9% of the Company's stock at an exercise price equal to the
prevailing market price on the grant date. These options will contain a vesting
schedule to be determined prior to the Offering.
The Company's Board of Directors has also approved an approximate 23.2 to 1
stock split. All common share data has been restated to reflect the stock split.
The weighted average shares outstanding reflect as outstanding for all periods
presented the shares issued and options granted discussed above using the
treasuring stock method and the shares which would have been sold at the assumed
Offering price of $17.00 to fund the cash paid and common shares issued to
retire the preferred stock.
F-24
<PAGE>
Report of Independent Auditors
To the Board of Directors of
Coinmach Corporation
We have audited the accompanying combined consolidated balance sheet of Coinmach
Corporation and Subsidiaries (formerly Solon Automated Services, Inc., which was
combined with The Coinmach Corporation and Subsidiaries, a company under common
control, beginning April 5, 1995) (the "Company") as of September 29, 1995, and
the related combined consolidated statements of operations, shareholders' equity
(deficit), and cash flows for the period from April 5, 1995 to September 29,
1995 ("Successor period") and the related consolidated statements of operations,
shareholders' equity (deficit) and cash flows for the period from October 1,
1994 to April 4, 1995 ("Predecessor period"). These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined consolidated financial position of Coinmach
Corporation and Subsidiaries at September 29, 1995, and the combined
consolidated results of its operations and its cash flows for the Successor
period from April 5, 1995 to September 29, 1995 and the consolidated results of
its operations and its cash flows for the Predecessor period from October 1,
1994 to April 4, 1995, in conformity with generally accepted accounting
principles.
F-25
<PAGE>
As more fully described in Note 2 to the combined consolidated financial
statements, SAS Acquisitions Inc. purchased Solon Automated Services, Inc.
("Solon") as of April 5, 1995 in a business combination accounted for as a
purchase. Subsequent thereto, on November 30, 1995, The Coinmach Corporation, a
company under common control with Solon, was merged into Solon, who thereupon
changed its name to Coinmach Corporation, in a business combination accounted
for as though it were a pooling of interests. As a result, the combined and
consolidated financial statements for the Successor are presented on a different
basis of accounting than that of the Predecessor and, therefore, are not
comparable.
Melville, NY
March 20, 1996 /s/ Ernst & Young LLP
F-26
<PAGE>
LETTERHEAD OF ARTHUR ANDERSEN
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Solon Automated Services, Inc.:
We have audited the consolidated balance sheets of Solon Automated Services,
Inc. (a Delaware corporation) and subsidiaries as of September 30, 1994 and the
related consolidated statements of operations, shareholders' equity (deficit)
and cash flows for each of the two fiscal years in the period ended September
30, 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Solon Automated Services, Inc.
and subsidiaries as of September 30, 1994, and the results of their operations
and their cash flows for each of the two fiscal years in the period ended
September 30, 1994, in conformity with generally accepted accounting principles.
As further discussed in Note 1 to the consolidated financial statements,
effective October 2, 1993, the Company implemented the provisions of Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes".
Philadelphia, Pa., /s/ Arthur Andersen LLP
December 19,1994
F-27
<PAGE>
Coinmach Corporation and Subsidiaries
(formerly Solon Automated Services, Inc.)
Combined and Consolidated Balance Sheets
(In thousands of dollars, except par value)
<TABLE>
<CAPTION>
SEPTEMBER 29 SEPTEMBER 30
1995 1994
----------------------------
SUCCESSOR PREDECESSOR
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 9,282 $ 7,241
Receivables, less allowance of $360 and $34 4,268 1,702
Inventories 3,902 1,257
Prepaid expenses 2,084 833
Advance rental payments 19,772 17,646
Property and equipment:
Laundry equipment and fixtures 81,599 84,576
Land, building and improvements 8,027 13,239
Trucks and other vehicles 1,400 254
----------------------------
91,026 98,069
Less accumulated depreciation 10,320 49,342
----------------------------
Net property and equipment 80,706 48,727
Contract rights, net of accumulated
amortization of $4,869 and $15,171 63,801 15,432
Goodwill, net of accumulated
amortization of $1,226 and $9,694 45,231 45,881
Other assets, principally debt issuance
costs 10,897 4,870
----------------------------
Total assets $239,943 $143,589
============================
</TABLE>
F-28
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 29 SEPTEMBER 30
1995 1994
-----------------------------
SUCCESSOR PREDECESSOR
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT)
<S> <C> <C>
Accounts payable $ 6,220 $ 3,186
Accrued commissions 8,456 4,553
Accrued interest 4,551 4,657
Other accrued expenses 10,241 3,395
Deferred income taxes 25,277 8,032
12 3/4% senior notes 99,000 100,000
13 3/4% senior subordinated debentures,
net of unamortized discount of $1,326
and $1,513 28,674 28,487
Long-term credit facility 43,477
Other long-term debt 264
Shareholders' equity (deficit)
Common stock, par value $.01:
Authorized shares -- 1,000 and 20,000,000
Issued shares -- 100 and 12,174,257 -- 122
Class A common stock, par value $.01:
3,247,885 shares authorized and
issued in 1994 -- 33
Capital in excess of par value 23,222 14,221
Accumulated deficit (7,101) (23,097)
-----------------------------
16,121 (8,721)
Receivables from shareholders (2,338) --
-----------------------------
Total shareholders' equity (deficit) 13,783 (8,721)
-----------------------------
Total liabilities and shareholders'
equity (deficit) $239,943 $143,589
=============================
</TABLE>
See accompanying notes.
F-29
<PAGE>
Coinmach Corporation and Subsidiaries
(formerly Solon Automated Services, Inc.)
Combined and Consolidated Statements of Operations
(In thousands of dollars, except per share data)
<TABLE>
<CAPTION>
APRIL 5, 1995 OCTOBER 1,
TO 1994 TO YEAR ENDED
SEPTEMBER 29, APRIL 4, SEPTEMBER 30, OCTOBER 1,
1995 1995 1994 1993
------------------------------------------------------------
SUCCESSOR PREDECESSOR PREDECESSOR PREDECESSOR
<S> <C> <C> <C> <C>
Revenues $89,719 $52,207 $104,553 $104,888
Costs and expenses:
Laundry operating expenses 62,905 33,165 66,527 67,420
Depreciation and amortization 18,423 10,304 21,347 21,002
General and administrative 2,458 1,539 2,839 2,576
Gain on sale of equipment -- -- (109) --
Restructuring costs 2,200 -- -- --
----------------------------------------------------
85,986 45,008 90,604 90,998
----------------------------------------------------
Operating income 3,733 7,199 13,949 13,890
Interest expense, net 11,541 8,928 18,105 17,453
----------------------------------------------------
Loss before income taxes and extraordinary item (7,808) (1,729) (4,156) (3,563)
----------------------------------------------------
Provision (benefit) for income taxes:
Currently payable 420 270 200 400
Deferred (2,282) (220) 2,562 (1,168)
----------------------------------------------------
(1,862) 50 2,762 (768)
----------------------------------------------------
Loss before extraordinary item (5,946) (1,779) (6,918) (2,795)
Extraordinary item, net of income taxes of $0 -- 848 -- --
----------------------------------------------------
Net loss $(5,946) $(2,627) $ (6,918) $ (2,795)
====================================================
Loss per share:
Before extraordinary item $ -- $ (.12) $ (.44) $ (.18)
Extraordinary item -- (.05) -- --
----------------------------------------------------
Net loss per share $ -- $ (.17) $ (.44) $ (.18)
====================================================
</TABLE>
See accompanying notes.
F-30
<PAGE>
Coinmach Corporation and Subsidiaries
(formerly Solon Automated Services, Inc.)
Combined and Consolidated Statements of Shareholders' Equity (Deficit)
(In thousands of dollars)
<TABLE>
<CAPTION>
Capital in
Common Class A common excess of Accumulated Receivables from Total shareholders'
stock stock par value deficit Shareholder equity (deficit)
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, October 2, 1992 $ 123 $ 33 $14,232 $(13,384) $ -- $ 1,004
Net loss -- -- -- (2,795) -- (2,795)
Repurchase of 10,000 shares
of common stock -- -- (10) -- -- (10)
Contribution to retirement
savings plan 1 -- 164 -- -- 165
-------------------------------------------------------------------------------------------------------
Balance, October 1, 1993 124 33 14,386 (16,179) -- (1,636)
Net loss -- -- -- (6,918) -- (6,918)
Repurchase of 270,000 shares
of common stock (3) -- (267) -- -- (270)
Contribution to retirement
savings plan 1 -- 102 -- -- 103
-------------------------------------------------------------------------------------------------------
Balance, September 30, 1994 122 33 14,221 (23,097) -- (8,721)
Net loss -- Predecessor
period -- -- -- (2,627) -- (2,627)
Repurchase of 45,459
shares of common stock -- -- (68) -- -- (68)
Purchase accounting adjustments -- -- (2,308) 25,724 -- 23,416
Recapitalization of common
stock (122) (33) 155 -- --
Merger of TCC -- -- 11,222 (1,155) (338) 9,729
Advance to SAS -- -- -- -- (2,000) (2,000)
Net loss -- Successor period -- -- -- (5,946) -- (5,946)
-------------------------------------------------------------------------------------------------------
Balance, September 29, 1995 $ -- $ -- $23,222 $ (7,101) $(2,338) $13,783
=======================================================================================================
See accompanying notes.
</TABLE>
F-31
<PAGE>
Coinmach Corporation and Subsidiaries
(formerly Solon Automated Services, Inc.)
Combined and Consolidated Statements of Cash Flows
(In thousands of dollars)
<TABLE>
<CAPTION>
APRIL 5, 1995 OCTOBER 1,
TO 1994 TO YEAR ENDED
SEPTEMBER 29, APRIL 4, SEPTEMBER 30, OCTOBER 1,
1995 1995 1994 1993
-----------------------------------------------------------
SUCCESSOR PREDECESSOR PREDECESSOR PREDECESSOR
OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net loss $ (5,946) $(2,627) $ (6,918) $ (2,795)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization 18,423 10,304 21,347 21,002
Deferred income taxes (2,000) (220) 2,649 (1,168)
Amortization of debt discount
and deferred issue costs 735 440 878 867
Deferred debt issuance cost -- -- -- (178)
Decrease (increase) in other assets (717) 106 (233) (609)
Decrease (increase) in receivables,
net (73) 164 78 631
Decrease (increase) in
inventories and prepayments 930 (676) 2,074 (392)
Increase (decrease) in accounts
payable (668) 1,725 (2,173) (766)
Decrease in accrued interest (25) (81) (24) (267)
Increase in other accrued expenses,
net 1,980 1,081 236 222
-----------------------------------------------------------
Net cash provided by operating 12,639 10,216 17,914 16,547
activities
-----------------------------------------------------------
INVESTING ACTIVITIES
Additions to property and equipment (9,550) (4,815) (11,224) (12,993)
Advance payments to location owners (3,569) (2,129) (5,555) (5,525)
Additions to assets from acquisitions -- -- -- (38)
Sales of property and equipment 5 407 16 56
-----------------------------------------------------------
Net cash used in investing activities (13,114) (6,537) (16,763) (18,500)
-----------------------------------------------------------
FINANCING ACTIVITIES
Advance to SAS (2,000) -- -- --
Repurchase of senior notes -- (1,000) -- --
Net borrowings (repayments) of bank and
other borrowings 1,126 -- -- (626)
Principal payments of capitalized lease
obligations (143) -- -- --
Repurchases of common stock -- (68) (270) (10)
-----------------------------------------------------------
Net cash used in financing activities (1,017) (1,068) (270) (636)
-----------------------------------------------------------
Net increase (decrease) in cash (1,492) 2,611 881 (2,589)
Cash and cash equivalents, beginning of
period 10,774 7,241 6,360 8,949
-----------------------------------------------------------
Cash and cash equivalents, end of period $ 9,282 $ 9,852 $ 7,241 $ 6,360
===========================================================
See accompanying notes.
</TABLE>
F-32
<PAGE>
Coinmach Corporation and Subsidiaries
(formerly Solon Automated Services, Inc.)
Notes to Combined and Consolidated Financial Statements
September 29, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION AND CONSOLIDATION
The accompanying successor financial statements combine the consolidated
accounts of Coinmach Corporation and Subsidiaries, formerly Solon Automated
Services, Inc. ("Solon") with the consolidated accounts of The Coinmach
Corporation ("TCC") (collectively, the "Company") for the periods under common
control. The Predecessor financial statements reflect the consolidated accounts
of Solon only. Solon was acquired on April 5, 1995 by SAS Acquisitions, Inc.
("SAS") (the "Solon Acquisition") a company controlled by Golder Thoma Cressey
Rauner ("GTCR"). TCC was formed in January 1995 by an investor group, comprised
principally of the same investors who formed SAS, and acquired Coinmach
Industries Co. and Super Laundry Equipment Co. L.P. on January 31, 1995 (the
"TCC Acquisition"). Both the Solon Acquisition and the TCC Acquisition were
accounted for as purchases and, accordingly, the acquired assets and liabilities
were recorded at their estimated fair values at the respective acquisition
dates.
As described in Note 2, Solon completed a merger with TCC on November 30, 1995.
This transaction was accounted for in a manner similar to a pooling of
interests. As a result of the common investor groups control over both Solon and
TCC, the accompanying financial statements have been prepared to reflect the
accounts of Solon and TCC and their wholly-owned subsidiaries on a combined
basis since the date of common control, April 5, 1995.
References to the Successor refer to the Company during the common control
period, while references to the Predecessor refer to Solon for prior periods.
The Predecessor period from October 1, 1994 to April 4, 1995 is referred to as
1995P while the Successor period from April 5, 1995 to September 29, 1995 is
referred to as 1995S. As a result of the acquisition of Solon by SAS and the
subsequent merger with TCC, the combined consolidated financial statements for
the Successor are presented on a different basis of accounting than that for the
Predecessor and therefore, are not comparable.
The Company is primarily engaged in providing coin-operated laundry equipment
services to multi-family housing complexes throughout much of the United States.
The Company owns and operates over 220,000 coin-operated washers and dryers on
routes in over 20,000 multi-family housing units in 20 states and the District
of Columbia. Such routes are located throughout the New York Metropolitan, Mid-
Atlantic, Southeast and South-Central regions of the United States. The Company,
through its subsidiary, Super
F-33
<PAGE>
Coinmach Corporation and Subsidiaries
(formerly Solon Automated Services, Inc.)
Notes to Combined and Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Laundry, also is a supplier of coin-operated laundromat equipment and turnkey
laundromat retail stores in the New York Metropolitan area.
Certain reclassifications have been made to the 1994 and 1993 financial
statements to conform to the 1995 presentation.
All material intercompany accounts and transactions have been eliminated in
consolidation.
FISCAL YEAR
Prior to the merger with TCC, Solon's fiscal year was the fifty-two or fifty-
three week period which ended on the Friday nearest September 30th. The fiscal
years ended September 29, 1995, September 30, 1994 and October 1, 1993 are
fifty-two week periods. Effective with the merger of Solon and TCC, the Company
has changed its fiscal year end to the Friday nearest to March 31.
RECOGNITION OF LAUNDRY REVENUES
The Company has agreements with various property owners which provide for the
Company's installation and operation of laundry machines at various locations in
return for a commission. These agreements provide for both contingent
(percentage of revenues) and fixed commission payments. The Company reports
revenues from laundry machines on the accrual basis and has accrued the cash
computed to be in the machines at the end of the fiscal period.
Super Laundry's customers generally sign sales contracts pursuant to which Super
Laundry constructs and equips complete laundromat operations, including location
identification, construction, plumbing, electrical wiring and all required
permits. Revenue is recognized on the completed contract method. A contract is
considered complete when all costs have been incurred and either the
installation is operating according to specifications or has been accepted by
the customer. The duration of such contracts is normally less than six months.
Sales of laundromats were approximately $7.9 million for 1995S.
F-34
<PAGE>
Coinmach Corporation and Subsidiaries
(formerly Solon Automated Services, Inc.)
Notes to Combined and Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out) or market and
consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 29 1995 SEPTEMBER 30 1994
--------------------------------------
SUCCESSOR PREDECESSOR
<S> <C> <C>
Machine repair parts $1,941 $1,257
Laundry equipment 1,961 --
--------------------------------------
$3,902 $1,257
======================================
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost and are depreciated on a straight-
line basis over the following estimated useful lives:
Laundry equipment and fixtures 3 to 10 years
Improvements 4 to 10 years
Trucks and other vehicles 3 to 4 years
Upon sale or retirement of property and equipment, the cost and related
accumulated depreciation are eliminated from the respective accounts, and the
resulting gain or loss is included in income. Maintenance and repairs are
charged to operations currently, and replacements of laundry machines and
significant improvements are capitalized.
F-35
<PAGE>
Coinmach Corporation and Subsidiaries
(formerly Solon Automated Services, Inc.)
Notes to Combined and Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Depreciation expense was $9.5 million, $6.2 million, $13.0 million and $12.9
million for 1995S, 1995P, and fiscal years 1994 and 1993, respectively.
On April 5, 1995, TCC revised its estimate of the useful life of its laundry
equipment from 5 to 8 years. The effect of this change in estimate was to
decrease loss before extraordinary item and net loss for the Successor period by
approximately $470,000.
GOODWILL
Goodwill as of September 30, 1994 represents the excess of cost over fair value
of net assets acquired, arising primarily as a result of the purchase of Solon
in 1987 by an investor group. Goodwill as of September 29, 1995 represents the
excess of cost over fair value of net assets acquired arising from the purchase
of Solon on April 5, 1995 (see Note 2). Goodwill was amortized on a straight-
line basis over 40 years for the Predecessor and is being amortized over 20
years for the Successor. Management periodically evaluates the realizability of
the goodwill balance based upon the Company's expectations of nondiscounted cash
flows and operating income. Based upon present operations and strategic plans,
management believes that no impairment of goodwill has occurred.
CONTRACT RIGHTS
Contract rights represent amounts expended for location contracts arising from
the acquisition of laundry machines on location. These amounts, which arose
solely from purchase price allocations, are amortized on a straight-line basis
over the period of expected benefit of approximately 13 years for the
Predecessor, and ranging from 3 to 15 years for the Successor based on
independent appraisals.
ADVANCE RENTAL PAYMENTS
Advance payments to location owners are amortized on a straight-line basis over
the contract term, which generally ranges from 5 to 10 years.
INTEREST EXPENSE
Interest expense is reported net of interest income of $148,000, $112,000,
$75,000 and $106,000 for 1995S, 1995P, and fiscal years 1994 and 1993,
respectively.
F-36
<PAGE>
Coinmach Corporation and Subsidiaries
(formerly Solon Automated Services, Inc.)
Notes to Combined and Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LOSS PER SHARE
In the 1995P period and in fiscal 1994 and 1993, loss per share for the
Predecessor company was calculated based upon the weighted average number of
common shares and Class A common shares outstanding. Stock options outstanding,
which are common stock equivalents, have not been included as they are
antidilutive. Weighted average shares outstanding were 15,455,000 for 1995P,
15,559,000 for fiscal 1994 and 15,640,000 for fiscal 1993. Loss per share data
is not presented for the 1995S period as Solon became a wholly-owned subsidiary
of GTCR.
TRANSACTIONS WITH AFFILIATES
During 1995S, the Company reimbursed its parent company $114,000 for certain
restructuring costs.
A former principal shareholder provided certain administrative and clerical
services to Solon through October 1, 1993. Charges for such services, including
office rental, were $270,000 for fiscal year 1993.
INCOME TAXES
Effective October 2, 1993, Solon implemented the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("Statement 109"). The accounting change had an immaterial effect on the
consolidated financial statements. Statement 109 requires the asset and
liability method of accounting for income taxes. Under the asset and liability
method of Statement 109, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Statement 109 requires that any tax benefits recognized
for net operating loss carryforwards and other items be reduced by a valuation
allowance where it is more likely than not that the benefits may not be
realized. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
F-37
<PAGE>
Coinmach Corporation and Subsidiaries
(formerly Solon Automated Services, Inc.)
Notes to Combined and Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" ("Statement 121"), which requires impairment losses to
be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. Statement 121 also
addresses the accounting for long-lived assets that are expected to be disposed
of. The Company is required to adopt Statement 121 effective March 30, 1996 and,
based on current circumstances, does not believe the effect of adoption will be
material.
2. BUSINESS COMBINATIONS
THE SOLON ACQUISITION
Solon entered into a Stock Purchase Agreement, dated as of March 7, 1995, with
Ford Coin Laundries, Inc. ("Ford"), Kwik Wash Laundries, Inc. ("Kwik Wash"), and
certain stockholders of the Predecessor company (the "Sellers"), whereby Ford
purchased from the Sellers all of the Solon's outstanding Common Stock (the
"Common Stock") and substantially all of the Solon's Class A Common Stock (the
"Class A Common Stock") (collectively, the "Shares"). The purchase price for the
Shares was $.7457 per share, for an aggregate purchase price of $11.5 million.
The foregoing transaction closed and the purchase price was funded on April 5,
1995. The source of funds used by Ford for the Shares was the cash proceeds from
the sales by Ford to (i) SAS of the Ford Non-Voting Common Stock, pursuant to a
Stock Purchase Agreement, dated April 4, 1995, and (ii) to the holders of the
Ford Voting Common Stock (collectively, the "Ford Holders"), an option pursuant
to a Letter Agreement dated April 4, 1995. As of April 5, 1995, Ford
beneficially owned, and had the sole power to dispose of, the Shares. The Shares
beneficially owned by Ford represented 100% of the outstanding Common Stock and
approximately 97% of the outstanding Class A Common Stock.
Pursuant to the Stock Purchase Agreement with Ford, SAS purchased from Ford all
of the outstanding shares of Ford's non-voting Class A Common Stock (the "Ford
Non-Voting Common Stock"). The purchase price for the Ford Non-Voting Common
Stock was $11,400 per share, for an aggregate purchase price of $11.4 million.
The sources of the funds used by SAS for the Ford Non-Voting Common Stock were
certain shareholders of TCC, including Golder Thoma Cressey Rauner Fund IV, L.P.
("GTCR"). As of April 5,
F-38
<PAGE>
Coinmach Corporation and Subsidiaries
(formerly Solon Automated Services, Inc.)
Notes to Combined and Consolidated Financial Statements (continued)
2. BUSINESS COMBINATIONS (CONTINUED)
1995, SAS beneficially owns, and has the sole power to dispose of, 1,000 shares
of the Ford Non-Voting Common Stock.
Pursuant to the Letter Agreement dated April 4, 1995, with the Ford Holders and
TCC, the Ford Holders granted to SAS, among other things, an option (the
"Option") to purchase from the Ford Holders, subject to the terms and conditions
contained therein, all of the voting shares of Ford's Common Stock (the "Ford
Voting Common Stock"), for an aggregate purchase price of $100,000. On April 28,
1995, SAS exercised the Option. The sources of funds used by SAS to exercise the
Option were substantially the same sources used to purchase the Ford Non-Voting
Common Stock. As of April 28, 1995, SAS beneficially owns, and has the sole
power to vote and dispose of, ten shares of the Ford Voting Common Stock.
Current shareholders of TCC and their affiliates were entitled to participate in
the equity of entities that control Solon on a pro rata basis generally in
accordance with their respective equity interests in TCC.
Solon incurred costs aggregating $848,000 in connection with the foregoing
transactions (collectively, the "Change of Control"), including a total of
$387,000 in lump sum payments made to fourteen management employees pursuant to
certain contractual arrangements relating to the Change of Control. The total
costs have been reflected as an extraordinary item in the accompanying financial
statements.
The Stock Purchase Agreement was accounted for as a purchase and, according to a
practice known as "push-down" accounting, as of April 5, 1995, Solon adjusted
its consolidated assets and liabilities to their estimated fair values, based on
preliminary independent appraisals, evaluations, estimations and other studies.
Reflected below is a summary of these adjustments (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Increase in property and equipment $ 9,065
Increase in contract rights 34,063
Increase in goodwill 1,268
Increase in deferred income taxes (19,465)
Other (1,515)
----------
Increase in shareholders' equity $ 23,416
==========
</TABLE>
F-39
<PAGE>
Coinmach Corporation and Subsidiaries
(formerly Solon Automated Services, Inc.)
Notes to Combined and Consolidated Financial Statements (continued)
2. BUSINESS COMBINATIONS (CONTINUED)
THE TCC ACQUISITION
TCC was incorporated in January 1995 and was capitalized primarily through an
equity investment by an investor group led by the majority shareholder, GTCR,
and senior management and bank financing.
TCC is a holding company which was formed to acquire partnership interests in
Coinmach Industries Co. ("Industries") and Super Laundry Equipment Co. L.P.
("Super Laundry"). On January 31, 1995, TCC acquired its partnership interests
in Industries and Super Laundry from CIC I Acquisition Corp. ("CIC I"). The
transaction resulted in TCC owning 100% interests in both Industries and Super
Laundry. The aggregate purchase price for these interests was $8.57 million,
paid in cash. The acquisition was accounted for using the purchase method of
accounting. The fair value of assets acquired (based on an independent appraisal
for certain assets) less liabilities assumed exceeded the purchase price by
approximately $7.7 million. The excess was allocated to property, equipment and
intangible assets ratably based on their respective fair values.
THE MERGER WITH TCC
On November 30, 1995, Solon completed a merger ("Merger") with TCC and Solon
through an exchange of stock. Shares of common stock of SAS were issued in
exchange for all of the issued and outstanding shares of common stock of TCC.
SAS then contributed its stock of TCC to Solon. Solon became the surviving
corporation after the merger, whereupon it changed its name to Coinmach
Corporation. Details of the results of operations of TCC and Solon for the
period prior to the merger are as follows (in thousands):
<TABLE>
<CAPTION>
APRIL 5, 1995 TO SEPTEMBER 29, 1995
---------------------------------------
SOLON TCC COMBINED
---------------------------------------
<S> <C> <C> <C>
Revenues $51,256 $38,463 $89,719
Operating income 1,410 2,323 3,733
Net loss (5,496) (450) (5,946)
</TABLE>
The combined financial results presented above include an adjustment to decrease
TCC's net loss by approximately $185,000, to conform its accounting policy for
the capitalization of machine installation costs to that of Solon. Intercompany
transactions between the two companies for the period presented were not
material.
F-40
<PAGE>
Coinmach Corporation and Subsidiaries
(formerly Solon Automated Services, Inc.)
Notes to Combined and Consolidated Financial Statements (continued)
3. RECEIVABLES
Receivables consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 29 1995 SEPTEMBER 30 1994
--------------------------------------
SUCCESSOR PREDECESSOR
<S> <C> <C>
Trade receivables $1,529 $ 236
Notes receivable 1,783 --
Finance lease receivables 905 816
Other 411 684
--------------------------------------
4,628 1,736
Allowance for doubtful accounts 360 34
--------------------------------------
$4,268 $1,702
======================================
</TABLE>
Notes receivable, which arise from the sale of laundromats, bear interest at a
weighted average rate of approximately 10% per annum and mature through 1998.
The notes are collateralized by the underlying laundry equipment. The Company
periodically sells notes receivable arising from the sale of laundromats to
third party finance companies. Included in other receivables are finance
reserves, which arise when the Company sells notes and a portion of the proceeds
are retained by the finance company. As the notes are collected, the finance
companies remit a portion of the collections to the Company. Many of the notes
receivable are sold with recourse to the Company (see Note 7). Control of the
notes sold with recourse is surrendered by the Company on the date of transfer.
The Company generally sells its receivables with recourse at cost; recognizing
no gain or loss.
Finance lease receivables relate to lease agreements that the Company has
entered into with one customer. Pursuant to the agreements, the Company installs
and services laundry equipment at apartment complexes owned and operated by the
customer. The difference between the aggregate lease rentals and the cost of the
related equipment is earned over the terms of the leases, which range from 40 to
60 months. Annual future payments due under these leases at September 29, 1995,
are as follows (in thousands) 1996 -- $232; 1997 -- $222; 1998 -- $185; 1999 --
$126; 2000 -- $81 and 2001 -- $59.
4. SALE OF EQUIPMENT
Effective September 30, 1994, Solon sold approximately 600 machines for a total
of $407,000 resulting in a pretax gain of $109,000 and a related tax of $84,000.
Prior to the
F-41
<PAGE>
Coinmach Corporation and Subsidiaries
(formerly Solon Automated Services, Inc.)
Notes to Combined and Consolidated Financial Statements (continued)
4. SALE OF EQUIPMENT (CONTINUED)
sale, these machines contributed revenues of $343,000 and operating income of
$78,000 for fiscal year 1994.
5. RESTRUCTURING COSTS
Restructuring charges consist of one-time costs aggregating approximately $2.2
million, which include approximately $1.3 million of severance payments for 55
of Solon's management, administrative and regional personnel, approximately
$300,000 of costs to relocate Solon's financial and administrative functions to
Roslyn, New York, approximately $100,000 of costs to integrate certain financial
and operating systems, and approximately $500,000 of costs related to the
consolidation of certain of Solon's regional offices. Of the total restructuring
costs of $2.2 million, approximately $300,000 was paid during the period ended
September 29, 1995, approximately $1.4 million is expected to be paid during the
six months ending March 29, 1996, and the remaining portion of approximately
$500,000 is expected to be paid during the fiscal year ending March 28, 1997.
The 55 employee terminations include 5 management employees, 17 corporate staff
financial and administrative employees and 33 regional laundry operational
employees. Notifications to employees were made on various dates through
September 1995.
6. DEBT
Substantially all of the Company's debt was retired on November 30, 1995 through
an exchange offer (see Note 12).
On June 18, 1992, Solon sold in concurrent private offerings (i) $100 million
principal amount of 12 3/4% Senior Notes due 2001 (the "Senior Notes") and (ii)
$30 million principal amount of 13 3/4% Senior Subordinated Debentures due 2002
(the "Debentures") with 3,247,885 shares (the "Shares") of the newly granted
Class A Common Stock. Effective November 6, 1992, Solon completed an exchange
offer whereby the holders of the Senior Notes and Senior Subordinated Debentures
exchanged such securities for securities with similar terms and form which were
registered under the Securities Act of 1933.
Interest was payable semiannually on January 15 and July 15 for the Senior Notes
and April 15 and October 15 for the Subordinated Debentures. The Senior Notes
were entitled to mandatory sinking fund payments of $15 million on July 15, 1998
and July 15, 1999, and $20 million on July 15, 2000. In addition, Solon was
obligated annually to offer to
F-42
<PAGE>
Coinmach Corporation and Subsidiaries
(formerly Solon Automated Services, Inc.)
Notes to Combined and Consolidated Financial Statements (continued)
6. DEBT (CONTINUED)
purchase Senior Notes at par in an amount equal to 75% of its excess cash flow
(as defined) and the proceeds of asset dispositions ("Annual Mandatory
Purchases"). Solon would have received credit against Annual Mandatory Purchases
for any amounts paid in open market or other purchases. Solon would have
received a credit against the sinking fund payment requirements for the
principal amount of Senior Notes acquired. No annual mandatory purchases have
been required in 1994 or 1993. The Debentures had no mandatory principal
repayment requirements until they matured on October 15, 2002.
The Senior Notes were redeemable at Solon's option at a price equal to 106 3/8%
after January 15, 1997, declining to par if redeemed after January 15, 1999. The
Subordinated Debentures were redeemable at a price equal to 106 7/8% after
October 15, 1997, declining to par if redeemed after October 15, 1999. During
November 1994, Solon purchased in the open market and immediately retired $1.0
million of the Senior Notes.
The estimated fair value of Solon's Senior Notes and Subordinated Debentures at
September 29, 1995, based upon limited quoted market activity, approximated its
recorded value.
Debt issue costs totaling $5.4 million incurred in connection with the 1992
debt offerings are included in other assets and were being amortized over the
term of the Senior Notes and Debentures. Accumulated amortization is $2.2
million and $1.5 million at September 29, 1995 and September 30, 1994,
respectively.
On December 30, 1992, Solon entered into a loan and security agreement ("Credit
Facility") which provided for a three-year revolving line of credit in the
amount of up to $5 million. Interest on the borrowing was based on prime plus
2.875%, but in no event would the interest be less than the greater of 8% per
annum or $15,000 per month. Solon was also required to pay a monthly service fee
of $2,000 and an annual facility fee of 1% of the $5 million available under the
Credit Facility. Borrowings under the Credit Facility were secured by accounts
receivable, bank deposit accounts, equipment and general intangibles of Solon.
Additionally, Solon was required to maintain a joint cash depository account
with the lender. All cash collections were required to be deposited in this
account before being transferred to Solon's account. Amounts borrowed and repaid
during fiscal 1995 and 1994 totaled $2.0 million and $10.1 million,
respectively. No borrowings were outstanding under the Credit Facility at
September 29, 1995 and September 30, 1994.
F-43
<PAGE>
Coinmach Corporation and Subsidiaries
(formerly Solon Automated Services, Inc.)
Notes to Combined and Consolidated Financial Statements (continued)
6. DEBT (CONTINUED)
At the time of the purchase of Solon in 1987, Solon entered into interest rate
exchange agreements on $70 million notional principal. These agreements were
accounted for as hedges and reduced the effective interest rate on Solon's 14%
Subordinated Sinking Fund Debentures due 1999 (the "Debentures") to
approximately 13% through June 16, 1993. The Debentures were retired in 1992.
Solon recorded a reduction of interest expense of $539,000 for fiscal year 1993
as a result of these agreements.
Debt outstanding under the long-term credit facility and other debt of TCC as of
September 29, 1995, consists of the following (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Revolving line of credit, due January
31, 2000. Interest at prime plus 1.25%
(10.25% at September 29, 1995) $ 2,880
Term loan A, quarterly payments of $250
commencing April 1, 1996, and
increasing to $500 April 1, 1997,
$1,250 April 1, 1998 and $1,500 April
1, 1999. Interest at prime plus 1.25%
(10.25% at September 29, 1995) 14,000
Term loan B, quarterly payments of
$1,750 commencing April 1, 2000 and
increasing to $2,000 April 1, 2001
with the final two payments of $1,750
on April 1, 2002 and July 1, 2002.
Interest at prime plus 1.75% (10.75%
at September 29, 1995) 18,500
Term loan C, due July 1, 2002. Interest
at 12.5%. 7,500
---------
42,880
Other debt 597
---------
$43,477
=========
</TABLE>
The long-term credit facility provided for $40 million in term loans and $10
million in aggregate for revolving credit and acquisition loan facilities.
The revolving line of credit agreement provided for up to $5 million in
borrowings, including letters of credit up to a maximum of $1 million. There was
a one-half of one percent fee per annum on the unused portion of this facility
and a two percent letter of credit fee.
The long-term credit facility also provided for acquisition loans of up to $5
million. The acquisition loans were to be used to finance acquisitions or
capital expenditures attributed to growth. Any amounts outstanding under the
acquisition line as of January 31, 2000
F-44
<PAGE>
Coinmach Corporation and Subsidiaries
(formerly Solon Automated Services, Inc.)
Notes to Combined and Consolidated Financial Statements (continued)
6. DEBT (CONTINUED)
were to be repaid in equal quarterly installments through July 1, 2002.
Borrowings under the acquisition line bear interest at prime plus 1.75%. There
were no acquisition loans outstanding as of September 29, 1995.
The Financing Agreement relating to the long-term credit facility required TCC,
among other things, to maintain certain financial ratios and restricted
additional investments and indebtedness. Management believes TCC was in
compliance with all covenants contained in this Financing Agreement. Loans
outstanding under this agreement were subject to prepayment upon the occurrence
of certain events such as asset dispositions, public offerings and the
generation of excess cash flow, as defined. TCC may be subject to prepayment
penalty on any fixed rate borrowings.
Industries and Super Laundry are the borrowers under the Financing Agreement.
The facility is guaranteed by TCC. Borrowings are secured by all of the assets
of TCC.
Other debt includes payments due under noncompete agreements.
Maturities of debt for TCC at September 29, 1995 are contractually payable as
follows (in thousands):
<TABLE>
<CAPTION>
Years ending September:
<S> <C>
1996 $ 873
1997 1,724
1998 3,500
1999 5,500
2000 7,630
Thereafter 24,250
==========
$43,477
==========
</TABLE>
The Company made cash payments for interest of $10.9 million, $8.5 million,
$17.1 million and $17.3 million for 1995S, 1995P, and fiscal years 1994 and
1993, respectively.
7. RETIREMENT SAVINGS PLAN
Effective October 1, 1987, Solon formed the Solon Automated Services Retirement
Savings Plan (the "Plan"). The Plan is a defined contribution plan available to
all full-time Solon employees who have completed one year of service. Under the
terms of the
F-45
<PAGE>
Coinmach Corporation and Subsidiaries
(formerly Solon Automated Services, Inc.)
Notes to Combined and Consolidated Financial Statements (continued)
7. RETIREMENT SAVINGS PLAN (CONTINUED)
Plan, Solon matches employee contributions at a percentage determined annually
by the Board of Directors. Solon provided for matching contributions of 25% in
1995, 25% in 1994 and 50% in 1993. During fiscal 1994 and 1993, Solon issued
$103,000 and $165,000, respectively, of its Common Stock to satisfy its accrued
obligations to the Plan. The number of shares issued to the Plan is based upon
the appraised value of the stock which is determined annually by an independent
appraiser. During fiscal 1995, Solon made a cash contribution of $80,000 to
satisfy its fiscal 1994 obligations to the Plan. Solon will fund the fiscal 1995
Company match through a cash contribution in 1996.
TCC has established a defined contribution plan for substantially all of its
employees. TCC's contributions to the plan for 1995S amounted to approximately
$42,500.
The Company has no obligations for other postretirement benefits.
8. STOCK OPTION PLAN
Solon adopted a stock option plan (the "Plan") in September 1987. The Plan
authorized the granting of incentive stock options, nonqualified options, or a
combination of the foregoing, to certain key employees and directors.
Under the terms of the Plan, 1,250,000 common shares were reserved for issuance
upon exercise of options. Shares for options that had expired or had been
surrendered or canceled without having been exercised may again have been
optioned under the Plan.
Each option granted was exercisable into one common share of Solon. In general,
50% of stock options granted became exercisable five years after the date of
grant, with 12 1/2% of the options becoming exercisable in each of the
subsequent four years.
As of September 29, 1995, September 30, 1994 and October 1, 1993, there was a
total of 212,000, 970,000, and 1,174,000 stock options outstanding,
respectively, exercisable at prices between $.98 and $1.23 per common share. No
options had been exercised since Solon adopted the Plan. As a result of the
merger with TCC, the Plan was canceled; participants in the Plan received in
aggregate consideration of approximately $34,000.
F-46
<PAGE>
Coinmach Corporation and Subsidiaries
(formerly Solon Automated Services, Inc.)
Notes to Combined and Consolidated Financial Statements (continued)
9. INCOME TAXES
As of September 29, 1995 and September 30, 1994, the components of the Company's
net deferred tax liabilities were as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 29 SEPTEMBER 30
1995 1994
----------------------------------
SUCCESSOR PREDECESSOR
<S> <C> <C>
Deferred tax liabilities:
Accelerated tax depreciation $26,804 $ 9,239
Other, net 3,355 2,293
----------------------------------
30,159 11,532
----------------------------------
Deferred tax assets:
Net operating loss carryforwards 4,600 7,200
Book over tax depreciation 742 --
Valuation allowance for deferred tax
assets (460) (3,700)
----------------------------------
4,882 3,500
----------------------------------
Net deferred tax liabilities $25,277 $ 8,032
==================================
</TABLE>
As of April 5, 1995, the deferred tax asset and related valuation allowance
relating to Solon were netted and reduced to $2.6 million to reflect the net
operating loss available pursuant to limitations imposed under provisions of the
Internal Revenue Code regarding changes in ownership. In addition, as of April
5, 1995, TCC recorded a deferred tax asset of $460,000 with a valuation
allowance of the same amount. The deferred tax asset recorded in the Successor
period does not reflect a valuation allowance because the loss can be utilized
against the deferred tax liabilities in the carryforward period. The net
operating loss carryforwards, which expire between fiscal years 2001 through
2007, consist of approximately $7 million (after the limitation) relating to the
Predecessor company and approximately $5 million relating to the Successor
company.
During the fourth quarter of fiscal 1994, Solon evaluated the realizability of
previously recorded deferred tax assets and concluded that due to certain
transactions which have occurred subsequent to October 1, 1993, it was more
likely than not that such assets would not be fully realizable. Accordingly,
Solon established a $3.7 million valuation allowance as of September 30, 1994.
The charge for this valuation allowance is included in the deferred tax
provision in the accompanying Consolidated Statement of Operations.
F-47
<PAGE>
Coinmach Corporation and Subsidiaries
(formerly Solon Automated Services, Inc.)
Notes to Combined and Consolidated Financial Statements (continued)
9. INCOME TAXES
The provision (benefit) for income taxes consists of (in thousands):
<TABLE>
<CAPTION>
APRIL 5, 1995 OCTOBER 1,
TO 1994 TO YEAR ENDED
SEPTEMBER 29, APRIL 4, SEPTEMBER 30, OCTOBER 1,
1995 1995 1994 1993
---------------------------------------------------------
SUCCESSOR PREDECESSOR PREDECESSOR PREDECESSOR
<S> <C> <C> <C> <C>
Federal $(1,760) $ -- $2,517 $(649)
State (102) 50 245 (119)
---------------------------------------------------------
$(1,862) $ 50 $2,762 $(768)
=========================================================
</TABLE>
Deferred taxes relate primarily from timing differences resulting from using
accelerated depreciation for tax purposes and straight-line depreciation for
financial reporting purposes. The 1993 deferred tax benefit results from the
reversal of previously provided deferred tax credits in recognition of current
losses.
The effective income tax rate differs from the amount computed by applying the
U.S. federal statutory rate to loss before taxes as a result of state taxes and
permanent book/tax differences as follows (in thousands):
<TABLE>
<CAPTION>
APRIL 5, 1995 OCTOBER 1,
TO 1994 TO YEAR ENDED
SEPTEMBER 29, APRIL 4, SEPTEMBER 30, OCTOBER 1,
1995 1995 1994 1993
-----------------------------------------------------------
SUCCESSOR PREDECESSOR PREDECESSOR PREDECESSOR
<S> <C> <C> <C> <C>
Expected tax benefit $(2,655) $(588) $(1,413) $(1,238)
State tax benefit, net of federal taxes (320) (69) (55) (140)
Permanent book/tax differences:
Goodwill and other 1,113 394 530 610
Valuation allowance -- 313 3,700 --
-----------------------------------------------------------
Recorded tax provision/(benefit) $(1,862) $ 50 $ 2,762 $ (768)
===========================================================
</TABLE>
F-48
<PAGE>
Coinmach Corporation and Subsidiaries
(formerly Solon Automated Services, Inc.)
Notes to Combined and Consolidated Financial Statements (continued)
9. INCOME TAXES (CONTINUED)
The Company made cash payments for income taxes of approximately $280,000,
$29,000 and $268,000 for 1995S and fiscal years 1994 and 1993, respectively.
There were no income tax payments made in 1995P.
10. COMMON STOCK
Solon and its stockholders had entered into a Stockholders' Agreement dated as
of September 28, 1987. Pursuant to this Agreement, Solon was required to
purchase shares of its common stock from selling management stockholders or
their estates in the event of death, disability, termination of employment, and
certain other circumstances. Pursuant to the terms of the Stockholders'
Agreement, such purchases were made based on the higher of the stockholders'
cost or by an earnings related formula defined in the Agreement. During fiscal
1994 and 1993, Solon acquired 270,000 and 10,000 shares, respectively, pursuant
to this Agreement at a total cost of $270,000 and $10,000, respectively, from
management stockholders. Such shares have been retired and canceled. The
Stockholders' Agreement was terminated effective July 12, 1994.
Class A Common stockholders have no voting rights other than on matters
involving consolidation or merger, sale or transfer of all or substantially all
assets or any liquidation, dissolution or winding up of Solon. Solon's
Certificate of Incorporation provides that immediately prior to the closing of
any initial public offering of Common Stock, all outstanding shares of Class A
Common Stock will be deemed to have been converted into a like number of shares
of Common Stock.
On November 30, 1995, the Company effected a recapitalization, whereby it
reduced its authorized $.01 par value common stock to 1,000 shares and issued
100 shares to the holders of the then outstanding stock. All references in the
Successor period reflect this recapitalization.
Receivables from shareholders reflect advances to SAS of $2,000,000 and notes
receivable from management who are shareholders of SAS of $338,000. Such amounts
have been reflected as reductions of shareholders' equity in the accompanying
Successor period balance sheet.
F-49
<PAGE>
Coinmach Corporation and Subsidiaries
(formerly Solon Automated Services, Inc.)
Notes to Combined and Consolidated Financial Statements (continued)
11. COMMITMENTS AND CONTINGENCIES
Rental expense for all operating leases, which principally cover office
facilities and vehicles, was $1,139,000, $807,000, $1,577,000 and $1,769,000 for
1995S, 1995P, and fiscal years 1994 and 1993, respectively.
The following is a schedule of the future minimum rental commitments under all
noncancelable leases as of September 29, 1995 (in thousands):
<TABLE>
<S> <C>
1996 $1,885
1997 1,359
1998 943
1999 534
2000 and future periods 1,217
--------
$5,938
========
</TABLE>
The Company is contingently liable on receivables sold with recourse to finance
companies by TCC. The total amount of such receivables outstanding as of
September 29, 1995 is approximately $4 million.
The Company is party to various legal proceedings incidental to its business.
Although the ultimate disposition of these proceedings is not presently
determinable, management does not believe that adverse determinations in any or
all such proceedings would have a material adverse effect upon the financial
condition or results of operations of the Company.
In connection with insurance coverages, which include workers compensation,
general liability and other coverages, annual premiums are subject to limited
retroactive adjustment based on actual loss experience.
As of September 30, 1994, Solon had a program pursuant to which change of
control and severance payments would be made to 14 management employees
following any sale of all of the Common Stock held by nonemployee stockholders.
Change of control payments were based on annual salaries at the time of such
sale. Severance payments were provided if, following any such sale, the
participant was not retained in a position comparable to that held prior to the
sale for a period between three to four months. In connection with the change in
control described in Note 2, payments aggregating $387,000 were made pursuant to
this program.
F-50
<PAGE>
Coinmach Corporation and Subsidiaries
(formerly Solon Automated Services, Inc.)
Notes to Combined and Consolidated Financial Statements (continued)
12. SUBSEQUENT EVENT
On November 30, 1995, the Company completed an exchange offer with substantially
all the holders of the Senior Notes and Subordinated Debentures. Through
December 14, 1995, the Company issued a total of $196.7 million of 11 3/4%
Senior Notes due 2005 (the "Notes") which enabled the Company to complete this
exchange offer, consummate the merger with TCC and retire its remaining debt,
and provide additional working capital. The Company incurred costs of $4.2
million, net of income taxes, related to a 5.5% premium paid to retire its
Senior Notes and Subordinated Debentures and wrote-off the unamortized balance
of the related original issue discount and deferred finance costs of
approximately $800,000 and $1.9 million, net of income taxes, respectively. The
Company also incurred costs related to the retirement of a revolving credit
facility of TCC of approximately $1.9 million, net of income taxes.
Interest on the Notes is payable semi-annually on May 15 and November 15. The
Notes are redeemable at the option of the Company at any time after November 15,
2000 at a price equal to 105 7/8% declining to par if redeemed after November
15, 2002. The Notes contain certain financial covenants and a registration
rights agreement, whereby the Company has agreed to file a Registration
Statement with the Securities and Exchange Commission.
On November 30, 1995, the Company entered into a new revolving credit facility,
("New Credit Facility"), which provides up to a maximum of $35.0 million.
Availability under the New Credit Facility is limited by an amount equal to one
semi-annual interest payment on the Notes. Interest on the borrowings is payable
monthly at a rate per annum no greater than the sum of LIBOR plus 2.50%. The
Company is obligated to pay an unused line fee in an amount equal to 0.5% of the
unused availability payable monthly in arrears. Borrowings under the New Credit
Facility are secured by real and personal property of the Company.
F-51
<PAGE>
LETTERHEAD OF KPMG PEAT MARWICK
Independent Auditors' Report
----------------------------
The Board of Directors
CIC I Acquisition Corp.:
We have audited the accompanying consolidated balance sheets of CIC I
Acquisition Corp. and subsidiaries (the Company) as of December 31, 1994 and
1993, and the related consolidated statements of operations, stockholders'
deficiency and cash flows for each of the years in the three-year period ended
December 31, 1994. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in note 14 of the accompanying notes to the consolidated financial
statements, on January 31, 1995, the Company sold its partnership interests in
its operating subsidiaries to a new corporation, The Coinmach Corporation.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CIC I Acquisition
Corp. and subsidiaries as of December 31, 1994 and 1993, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1994, in conformity with generally accepted accounting
principles.
New York, New York /s/ KPMG Peat Marwick LLP
April 28, 1995
F-52
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1994 and 1993
(dollars in thousands)
ASSETS
------
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Cash $ 987 $ 1,387
Receivables, net of reserves of $473
in 1994 and $433 in 1993 4,198 5,159
Inventories 2,154 1,805
Prepaid commissions 3,264 2,880
Property and equipment:
Laundry equipment 21,487 34,359
Leasehold improvements 10,438 8,808
Office equipment 1,900 1,799
Automobiles and trucks 2,903 2,669
------- -------
36,728 47,635
Less accumulated depreciation 20,443 30,342
------- -------
Net property and equipment 16,285 17,293
Contract rights, net of accumulated
amortization of $25,369
in 1993 0 3,443
Goodwill, net of accumulated
amortization of $1,845 and $1,537
in 1994 and 1993 6,710 7,018
Other intangibles, net of accumulated
amortization of $8,678 and $8,712
in 1994 and 1993 2,209 4,577
Other assets 1,117 3,881
------- -------
$36,924 $47,443
======= =======
</TABLE>
(Continued)
The accompanying notes are an integral part of these consolidated financial
statements.
F-53
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Consolidated Balance Sheets, continued
December 31, 1994 and 1993
(dollars in thousands)
LIABILITIES, SENIOR EXCHANGEABLE PREFERRED STOCK AND COMMON STOCKHOLDERS'
-------------------------------------------------------------------------
DEFICIENCY
----------
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Accounts payable $ 2,365 $ 1,991
Accrued expenses 2,012 2,870
Accrued interest -- 16,149
Commissions payable 3,156 3,415
Long-term debt (including $350
of management loans in 1994) 42,184 75,827
Other long-term liabilities 488 685
Minority interest 135 145
Senior exchangeable preferred stock -- 14,364
Common stockholders' deficiency:
Common stock, par value $.01; authorized
1,000,000 shares; issued and outstanding
87,000 shares in 1994 and 148,729 shares
in 1993 1 1
Consideration to continuing predecessor
interests in excess of book value -- (11,756)
Additional paid-in capital 39,869 --
Accumulated deficit (53,286) (56,248)
-------- --------
Total stockholders' deficiency (13,416) (68,003)
-------- --------
$ 36,924 $ 47,443
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-54
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Consolidated Statements of Operations
For the years ended December 31, 1994, 1993 and 1992
(dollars in thousands)
<TABLE>
<CAPTION>
1994 1993 1992
-------- ---------- ----------
<S> <C> <C> <C>
Revenues $73,857 $ 71,859 $ 72,172
Laundry operating expenses 54,737 52,805 53,163
General and administrative expenses 4,938 5,570 5,712
Depreciation and amortization of property
and equipment 7,785 8,011 7,206
Amortization of intangibles and other assets 6,719 7,245 9,549
------- --------- ---------
Operating loss (322) (1,772) ( 3,458)
Interest expense 4,012 3,685 4,020
Interest expense - subordinated notes 0 6,824 5,553
Non-cash charges related to management loans 1,341 0 0
------- --------- ---------
Loss before income taxes and extraordinary item (5,675) (12,281) ( 13,031)
Income taxes 27 17 (4)
------- --------- ---------
Loss before extraordinary item (5,702) (12,298) (13,027)
Extraordinary item - early extinguishment
of debt 20,420 0 0
------- --------- ---------
Net (loss) income $14,718 ($12,298) ($13,027)
======= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-55
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Deficiency
For the years ended December 31, 1994, 1993 and 1992
(dollars in thousands)
<TABLE>
<CAPTION>
CONSIDERATION TO TOTAL
COMMON STOCK CONTINUING PREDECESSOR STOCK-
-------------------------- INTERESTS IN EXCESS ADDITIONAL ACCUMULATED HOLDERS'
SHARES AMOUNT OF BOOK VALUE PAID-IN CAPITAL DEFICIT DEFICIENCY
-------------------------- ----------------------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance January 1, 1992 148,729 $ 1 ($11,756) ($27,643) ($39,398)
Accrued preferred dividends (1,570) (1,570)
Net loss (13,027) (13,027)
________ _______ _______ _______ -------- --------
Balance December 31, 1992 148,729 1 (11,756) 0 (42,240) (53,995)
Accrued preferred dividends (1,710) (1,710)
Net loss (12,298) (12,298)
________ _______ _______ _______ -------- --------
Balance December 31, 1993 148,729 1 (11,756) 0 (56,248) (68,003)
Net income 14,718 14,718
Effects of restructuring
transaction (see note 7):
Shares surrendered pursuant
to restructuring (148,729) (1) 11,756 (11,756) (1)
Shares issued pursuant
to restructuring 87,000 1 24,164 24,164
Surrender of preferred stock 14,364 14,364
Non-cash charge related to
issuance of management loan 1,341 1,341
________ _______ _______ ------- ________ ________
Balance December 31, 1994 87,000 $ 1 $0 $39,869 ($53,286) ($13,416)
====== === == ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-56
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the years ended December 31, 1994, 1993 and 1992
(dollars in thousands)
<TABLE>
<CAPTION>
1994 1993 1992
--------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $ 14,718 ($12,298) ($13,027)
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization 14,504 15,256 16,755
Minority interest in loss of consolidated subsidiary (10) (19) (15)
Provision for bad debts 229 73 143
Increase in accrued interest 0 6,824 5,657
Non-cash charges relating to management loans 1,341 0 0
Non-cash portion of extraordinary item (23,487) 0 0
Changes in assets and liabilities:
Change in receivables 732 (160) 736
Change in prepaid commissions,
net of commissions payable (1,236) (1,600) (1,579)
(Increase) decrease in inventories (349) 500 (674)
(Increase) decrease in other assets 2,766 (2,025) (511)
(Decrease) increase in accounts payable and accrued expenses (484) 1,185 128
-------- --------- ---------
Net cash provided by operating activities 8,724 7,736 7,613
-------- --------- ---------
Cash flows from investing activities:
Purchase of laundry equipment (4,710) (4,089) (3,501)
Purchase of fixed assets (1,861) (1,790) (1,383)
Additions to intangibles (6) (240) (240)
-------- --------- ---------
Net cash used in investing activities (6,577) (6,119) (5,124)
-------- --------- ---------
Cash flows from financing activities:
Net repayments under revolving credit facility (2,019) (857) (1,425)
Payment of other debt (474) (200) (185)
Management loans 350 0 0
Principal payments of capital lease obligations (404) (348) (335)
-------- --------- ---------
Net cash used in financing activities (2,547) (1,405) (1,945)
-------- --------- ---------
Net (decrease) increase in cash (400) 212 544
Cash at beginning of period 1,387 1,175 631
-------- --------- ---------
Cash at end of period $ 987 $ 1,387 $ 1,175
-------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-57
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
(Dollars in thousands)
(1) ORGANIZATION AND BASIS OF PRESENTATION
--------------------------------------
See note 14 for subsequent event.
CIC I Acquisition Corp. ("CIC" or "Company") is a holding company that owns
Coinmach Industries Co. ("Coinmach") and Super Laundry Equipment Co. L.P.
("Super Laundry"). CIC was formed in 1989 expressly for the purpose of
acquiring an 85% general partnership interest in Coinmach and all of the
common stock of Super Laundry Equipment Corp., a predecessor company to
Super Laundry.
Coinmach is principally engaged in providing laundry equipment and related
services to multi-family housing complexes in the New York metropolitan
area. Super Laundry is principally a supplier of coin-operated laundromat
equipment, and turnkey laundromat retail stores in the New York
metropolitan area.
On January 31, 1995, the Company sold its partnership interest in Coinmach
and Super Laundry to a new corporation, The Coinmach Corporation (see note
14).
On December 15, 1993, CIC, on a stand alone basis, completed a "pre-
packaged" voluntary petition for reorganization under Chapter 11 of the
United States Bankruptcy Code (the "Plan"), which was approved by 100% of
the Company's shareholders and creditors. Neither Coinmach nor Super
Laundry were parties to this agreement. The Plan provided for the
Company's existing senior subordinated notes, junior subordinated
promissory notes, preferred stock and common stock to be exchanged for
87,000 shares of common stock valued at $24,163. The Plan, which was
confirmed and court approved on January 21, 1994, and became effective
February 4, 1994, has been reflected in the 1994 financial statements and
has been recorded in accordance with the guidelines provided by the
Financial Accounting Standards Board (FASB 15 "Accounting for Troubled Debt
Restructuring"). Pursuant to the Plan, the Company also amended its then
existing revolving and term loan agreement (see note 6(a)). As a result of
the above, the Company recognized an extraordinary gain, net of legal fees
and other direct costs of $20,420 on the early extinguishment of the debt.
The Company also incurred $1,341 in non-cash expenses related to the
estimated fair value of the equity conversion feature of debt issued
pursuant to the Plan (see note 6). In addition, the minority partners in
Coinmach extinguished their ownership positions and the Company now
effectively owns 100% of Coinmach (see note 7).
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
(a) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of CIC, Coinmach
and Super Laundry. All significant intercompany balances and transactions
have been eliminated in consolidation.
(b) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is principally
determined using the first-in, first-out method. Inventories include
laundry equipment, spare parts and construction costs.
(c) REVENUE RECOGNITION
Super Laundry's customers generally sign sales contracts whereby Super
Laundry will construct and equip a complete laundromat operation, including
location identification, construction, plumbing, electrical wiring and all
required permits. Revenue is recognized on the completed contract method.
A contract is considered complete when all costs have been incurred and
either the installation is operating according
(continued)
F-58
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
(Dollars in thousands)
to specifications or has been accepted by the customer. The duration of
such contracts is normally less than six months.
Sales of laundromats were approximately $14,579, $13,054, and $14,763 for
the years ended December 31, 1994, 1993, and 1992, respectively.
(d) PROPERTY AND EQUIPMENT
Laundry equipment, consisting primarily of commercial washers and dryers,
and fixed assets, are stated at cost. The cost of remanufacturing
equipment is included in the cost of laundry equipment. The cost of
laundry room improvements is included in leasehold improvements. The
Company capitalized remanufacturing and laundry room improvement costs of
approximately $2,848, $2,639 and $2,149 for the years ended December 31,
1994, 1993 and 1992, respectively.
Depreciation of laundry equipment and fixed assets is calculated using the
straight-line method over their estimated useful lives, generally five
years. Leasehold improvements are amortized using the straight line method
over the shorter of the lease term or estimated useful life of the asset.
The Company's policy is to write-off fully depreciated assets and the
related accumulated depreciation and amortization. Depreciation expense
was approximately $7,785, $8,011 and $7,206, for the years ended December
31, 1994, 1993 and 1992, respectively.
The Company reviews the undiscounted cash flows of its laundry locations in
assessing whether its property and equipment (primarily laundry equipment
and laundry room improvements) may be impaired. The Company does not
believe that the adoption of Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long
Lived Assets to be Disposed Of" will have a material impact on the
Company's financial position or results of operations.
(e) PREPAID COMMISSIONS
The Company capitalizes contractually required advance commissions and
certain incentive payments paid in connection with the acquisition of its
contractual rights to laundry room locations. Such amounts are amortized
on a straight-line basis over the life of the related lease or the related
contractual agreement. Amortization expense on prepaid commissions
amounted to approximately $593, $557 and $557 for the years ended December
31, 1994, 1993 and 1992, respectively.
(f) CONTRACTS RIGHTS
Contract rights represent amounts expended for location contracts arising
from the acquisition of laundry machines on location. These amounts are
amortized on a straight-line basis over the remaining life of the
corresponding contract. Amortization expense on contract rights was
$3,443, $4,075 and $5,178 for the years ended December 31, 1994, 1993 and
1992, respectively.
(g) INTANGIBLES
Intangibles, consisting principally of covenants not to compete, computer
software and deferred financing costs are amortized over their estimated
useful lives. Amortization expense on intangibles amounted to
approximately $2,375, $2,100 and $3,300 for the years ended December 31,
1994, 1993 and 1992, respectively.
(continued)
F-59
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
(Dollars in thousands)
(h) GOODWILL
Goodwill is being amortized, using the straight-line method, over 40 years.
Amortization expense on goodwill amounted to $308, $301 and $301 for the
years ended December 31, 1994, 1993 and 1992, respectively. The Company
periodically evaluates the recoverability of goodwill based on the
undiscounted cash flows of the businesses acquired.
(i) INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes.
Statement 109 required a change from the deferred method of accounting for
income taxes of APB Opinion 11 to the asset and liability method of
accounting for income taxes. Under the asset and liability method of
Statement 109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
Under Statement 109, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. The Company adopted Statement 109 as of January 1, 1993,
the effect of which was not material to the Company's consolidated
financial statements.
(3) RECEIVABLES
-----------
Receivables consist of the following:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Accounts receivable $1,627 $1,679
Notes receivable 2,437 2,916
Finance reserves 607 997
------ ------
4,671 5,592
Allowance for doubtful
accounts ( 473) ( 433)
------ ------
$4,198 $5,159
====== ======
</TABLE>
At December 31, 1994, notes receivable bear interest at a weighted average
interest rate of approximately 10% and mature through 1998. The notes are
collateralized by the underlying laundry equipment. The Company
periodically sells notes receivable arising from the sale of laundromats to
third party finance companies. Finance reserves arise when the Company
sells notes and a portion of the proceeds are retained by the finance
company. As the notes are collected, the finance companies remit a portion
of the collections to the Company. Many of the notes receivable are sold
with recourse to the Company (see note 8). Control of the notes sold with
recourse is surrendered by the Company on the date of transfer. The
Company generally sells its receivables with recourse at cost, recognizing
no gain or loss.
(4) TRANSACTIONS WITH AFFILIATES
----------------------------
The company sold certain trade notes receivable to Cointrol Credit Co.,
L.P. ("Credit"), a company created in 1991 and owned by certain officers
and directors of the Company and outside investors.
All such notes were sold to yield a fair market rate of return as
determined by rates available from unrelated finance companies for similar
notes. The aggregate outstanding balance of all notes sold to Credit as of
December 31, 1994 was $641. These notes are with recourse to the Company
and mature
(continued)
F-60
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
(Dollars in thousands)
through 1998. In April 1995, the Company entered into an agreement with
Credit to repurchase the remaining receivables outstanding at their then
face value.
(5) INTANGIBLES
-----------
Intangibles consist of the following:
<TABLE>
<CAPTION>
Estimated
1994 1993 useful lives
-------------- ------- ------------
<S> <C> <C> <C>
Covenants not to compete $ 4,313 $ 4,644 5 years
Computer software 4,050 4,050 5 years
Deferred financing costs 1,552 3,623 Life of debt
Other 972 972 5 years
------- -------
10,887 13,289
Accumulated amortization 8,678 8,712
------- -------
$ 2,209 $ 4,577
======= =======
(6) LONG-TERM DEBT
--------------
Long Term debt consists of the following:
1994 1993
------- ------------
Revolving line of credit, due
February 28, 1995 interest at
prime plus 1.75% (a) $25,848 $27,867
Term loan, due February 28, 1995 (a) 15,000 15,000
Senior subordinated notes,
originally due October 1999,
interest at 14.5% (c) -- 30,000
Junior subordinated promissory
notes, originally due
October 2000. (d) -- 1,500
Management loans, due February,
2004, interest at prime plus
1.75%, convertible into 7,000
shares of common stock after
February, 1999. (b) 350 --
Other (e) 986 1,460
------- ------------
$42,184 $75,827
======= ============
</TABLE>
On January 31, 1995, the Company sold its partnership interests in Coinmach
and Super Laundry to a new corporation, The Coinmach Corporation.
In connection with this sale, the Company paid off all amounts owed under
its revolver and term loan debt (see note 14). The accompanying financial
statements do not reflect the sale or the related repayment of debt.
(continued)
F-61
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
(Dollars in thousands)
On December 15, 1993, the Company finalized negotiations with the holders
of the revolving line of credit, term loan, senior subordinated note
holders, and the junior subordinated promissory note holders. Pursuant to
the Plan, the holders of the subordinated note and the junior notes
exchanged their notes, including accrued interest through December 15,
1993, for 87,000 shares of the restructured company's common stock. The
Plan was confirmed and court approved in January 1994.
(a) On March 16, 1990, the Company entered into a bank agreement that
provided for a term loan of $15,000 originally payable in eight
quarterly installments of $1,875 commencing April 1, 1994, and a
revolving line of credit of up to $35,000 for a term of five years.
On February 4, 1994, the maximum revolver facility was reduced to
$29,413. In addition, commencing March 1, 1994 and continuing on the
first day of each month thereafter, the revolving credit facility will
be reduced by $175 per month through June 1994, and then $212 per
month, until the termination of the facility, including the term loan,
on February 28, 1995.
The interest rate for bank borrowing is the prime rate plus 1.75%. As
of December 31, 1994, the interest rate on these loans was 10.25%. In
addition, the agreement provides for the payment of a facility fee of
.125% per annum on average daily outstanding balances and an unused
line fee of .50% per annum on the average daily balance of the
revolving loans. The agreement contains certain restrictive covenants
and requires the Company, among other things, to maintain certain
financial ratios and to restrict investments, additional indebtedness
and payment of dividends. The loan is secured by all of the assets of
the Company. See Note 14 for description of subsequent event.
(b) Pursuant to the Plan, senior management loaned the Company $350 due
February 4, 2004. Interest is payable monthly, at the rate of 1.75%
over prime. As of December 31, 1994, the interest rate on these loans
was 10.25%. The loans are convertible, upon the earlier of five years
or upon certain circumstances, into 7% of the Company's fully diluted
common stock. These loans, which are subordinated to the revolving
line of credit and the term loan, were funded February 4, 1994 (see
note 7). Based on an independent appraisal, the estimated value of
the 7% interest of the Company (issuable upon conversion of the loans)
exceeded the principal amount of the loans by $1,341. Accordingly, a
non-cash charge equal to such amount was recorded in 1994. The loans
were repaid in connection with the subsequent event described in Note
14.
(c) In 1989 and 1990, the Company sold $30,000 of its 14.5% senior
subordinated notes due October 1999. Interest was payable on April 15
and October 15 of each year commencing April 15, 1990. The notes were
redeemable, at the option of the Company, at amounts decreasing from
114.5% of par value at October 15, 1989 to par value at October 15,
1998. Pursuant to the Plan, the notes were cancelled and an
extraordinary gain was recognized on the early extinguishment of the
debt in 1994 (see note 7).
(d) In 1989, the Company issued junior subordinated promissory notes to
the prior owners of Coinmach. The notes, along with accrued interest,
were cancelled in 1994 pursuant to the Plan (see note 7).
(continued)
F-62
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
(Dollars in thousands)
(e) Other debt includes payments due under non-compete agreements.
Maturities of long-term debt at December 31, 1994 are contractually
payable as follows:
<TABLE>
<S> <C>
1995 $41,329
1996 376
1997 129
1998 0
Thereafter 350
-------
$42,184
=======
</TABLE>
(7) RESTRUCTURING
-------------
On January 31, 1995, the Company sold its partnership interests in Coinmach
and Super Laundry to a new corporation, The Coinmach Corporation (see note
14).
On December 15, 1993, CIC, on a stand alone basis, completed a "pre-
packaged" voluntary petition for reorganization under Chapter 11 for the
United States Bankruptcy Code, which was approved by 100% of the Company's
shareholders and creditors (see note 1). Neither Coinmach nor Super
Laundry were parties to this agreement. The Plan provided for the
Company's existing senior subordinated notes, junior subordinated
promissory notes, preferred stock and common stock to be exchanged for
87,000 shares of common stock valued at $24,163. The carrying value of the
senior subordinated notes, junior subordinated notes and related accrued
interest was $30,000, $1,500, and $16,149, respectively. The preferred
stock and common stock had a net carrying value of $2,609, consisting of
preferred stock of $14,364, and common stock of $1, offset by the carrying
value of the consideration to continuing predecessor interests in excess of
book value of $11,756. The Plan was confirmed and court approved on
January 21, 1994, became effective February 4, 1994, and has been reflected
in the 1994 financial statements. In addition, pursuant to the Plan, the
Company amended its then existing revolving and term loan agreement. As a
result of the above, the Company recognized an extraordinary gain of
$20,420, net of legal fees and other direct costs of $3,067, on the early
extinguishment of the debt in 1994. In addition, $14,364, representing the
carrying value of the preferred stock, is included in stockholders'
deficiency. Pursuant to the Plan, the equity position of the shareholder
to which the continuing predecessor interests were attributed surrendered
such position. Consequently, the carrying value of the continuing
predecessor interests has been charged to the accumulated deficit account.
The restructuring has been treated as a tax free exchange of debt for
equity in accordance with the provisions of the Internal Revenue Service
Code.
The Plan required two members of senior management to loan the Company
$350. These loans have an interest rate of prime plus 1.75% and are due in
2004. The loans were funded February 4, 1994, and are reflected in the
accompanying financial statements as long-term debt.
Also pursuant to the Plan the Company entered into non-compete agreements
with two former shareholders totaling approximately $954.
(continued)
F-63
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
(Dollars in thousands)
(8) COMMITMENTS AND CONTINGENCIES
-----------------------------
Coinmach is obligated under long-term leases relating to revenue equipment
locations. The terms of these leases principally range from three to six
years, most of which provide for fixed monthly commission payments and
contain renewal options. The majority of these leases contain provisions
permitting the cancellation of the lease and/or adjustment of the
commission by Coinmach if minimum revenue levels are not achieved. In
addition, Coinmach rents office and warehouse space from SSB Corporation
("SSB"). SSB is owned by certain individuals who were also owners of the
Company, prior to the Plan. The lease, expiring on May 1, 1995, provides
for annual rentals of $368 and for the payment by Coinmach of all operating
expenses.
Super Laundry leases its facilities from a related party under an operating
lease that expires on December 31, 1996 and provides for a minimum annual
rental of $57 in 1993 increasing to $60 in 1994 and $63 in 1996. Under the
terms of the lease, Super Laundry is required to pay operating costs.
Rental expense for this lease amounted to $72, $71 and $67 for the years
ended December 31, 1994, 1993 and 1992, respectively. In addition, Super
Laundry also leases a warehouse from a related party on a month-to-month
basis. Rental expense for this lease amounted to $39, $42 and $42 for the
years ended December 31, 1994, 1993 and 1992, respectively. Effective
January 1, 1993, Super Laundry entered into a five year lease for a sales
office. This lease expires December 31, 1997 and provides for a minimum
annual rental of $23 in 1993, increasing by 4% each successive year through
1997. The lease also calls for Super Laundry to pay operating costs.
Rental expense including operating costs for this lease amounted to $24 and
$30 for the years ended December 31, 1994 and 1993, respectively.
Future minimum lease payments under noncancellable operating leases
(excluding commissions for laundry equipment locations) as of December 31,
1994 are as follows:
<TABLE>
<S> <C>
1995 $367
1996 108
1997 27
----
Total future minimum lease payments $502
====
</TABLE>
Rent expense, excluding commission payments for laundry equipment
locations, amounted to approximately $642, $599 and $607 for the years
ended December 31, 1994, 1993 and 1992, respectively.
Super Laundry is contingently liable on receivables sold, with recourse, to
finance companies. The total amount outstanding is approximated at $7,919
and $9,040 as of December 31, 1994 and 1993, respectively.
Under agreements between Super Laundry and certain finance companies, a
portion of the notes receivable sales price is retained by the finance
company until the receivable is collected. Amounts retained under the
agreements amounted to $607 and $997 as of December 31, 1994 and 1993,
respectively, and are shown in the accompanying consolidated balance sheets
as receivables.
(continued)
F-64
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
(Dollars in thousands)
Coinmach has entered into leasing arrangements for automobiles and trucks
and office equipment which are accounted for as capital leases. At
December 31, 1994 and 1993, respectively, the gross amount of such assets
amounted to $1,646 and $1,438, and accumulated amortization amounted to
$889 and $741. Future minimum lease payments as of December 31, 1994 are
as follows:
<TABLE>
<CAPTION>
<S> <C>
1995 $359
1996 133
1997 99
----
Minimum lease payments 591
Less amount representing interest 103
----
Present value of net minimum lease payments $488
====
</TABLE>
The Company is party to certain lawsuits and claims relating to its
operations. It is the opinion of management, based on the advice of
outside counsel, that such lawsuits and claims will be resolved without
material effect to the Company's consolidated financial statements.
(9) INCOME TAXES
------------
Income tax expense (benefit) of $27, $17 and ($4) for the years ended
December 31, 1994, 1993 and 1992, respectively, represents state and local
taxes.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at December 31, 1994 and 1993 are
presented below:
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 21,200 $ 9,754
Fixed and intangible assets, principally
due to differences between tax and
financial reporting bases 3,117 3,684
Allowance for doubtful accounts 189 173
-------- --------
Gross deferred tax assets 24,506 13,611
Less valuation allowance (24,506) (13,611)
-------- --------
Net deferred tax asset $ -0- $ -0-
======== ========
</TABLE>
CIC files a consolidated Federal income tax return with Super Laundry and
includes its equity in the earnings or loss of Coinmach. At December 31,
1994, net operating loss carryforwards of approximately $53,000 are
available to offset future taxable income and expire commencing 2004
through 2009.
(10) MULTI-EMPLOYER PLAN
-------------------
Coinmach participated with other companies in making contributions to a
multi-employer pension plan for the benefit of its union employees.
Contributions to the Plan were $40 and $37 for the years ended December 31,
1993 and 1992, respectively. Effective January 1, 1994, Coinmach no longer
participates in the pension plan.
(continued)
F-65
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
(Dollars in thousands)
(11) STOCK OPTION PLAN
-----------------
Pursuant to the Plan, the Company adopted two stock option plans, which
provide for the grant and exercise of options to purchase up to 6,000
shares of the Company's common stock upon attainment of certain annual
earnings performance goals through 1997. One of the plans is for the
employees of the Company, and provides for the grant and exercise of 5,000
shares. On February 4, 1994, options representing 1,000 shares under this
plan were granted to certain employees and were immediately vested but were
not to be exercisable unless 1994 earnings performance goals were attained.
The employee plan also provides for the grant of options to purchase an
additional 1,000 shares in 1994 and each year through December 31, 1997.
Such options will be vested when granted. The second stock option plan
provides for the grant of options to purchase 1,000 shares to a financial
advisor upon attainment of annual earnings performance goals through 1995.
Under both plans, the options were to expire ten years from the dates of
grant and were exercisable at $50 per share. No options have been
exercised and in connection with the subsequent event described in note 14,
the stock option plans were terminated and all outstanding options were
cancelled.
(12) PROFIT SHARING PLAN
-------------------
Effective April 1, 1994, the Company established a profit sharing and
retirement plan (the "Coinmach Profit Sharing Plan") for substantially all
of its employees. Pursuant to the Coinmach Profit Sharing Plan, eligible
employees may defer up to 15% of their salaries up to a maximum level
imposed by applicable federal law. Coinmach makes matching contributions
in increasing amounts, based upon the number or years of service performed
by eligible participants, up to a maximum of 6% of an eligible employee's
salary. Matching contribution percentages range from 5% for one to two
years of service up to 25% for five or more years of service and vest over
a six year period. Company contributions to the plan for the year ended
December 31, 1994 amounted to $64.
(13) SUPPLEMENTAL CASH FLOW INFORMATION
----------------------------------
The Company paid approximately $4,012, $3,744 and $3,956 for interest for
the years ended December 31, 1994, 1993 and 1992, respectively.
The Company entered into leasing arrangements accounted for as capital
leases in the amount of approximately $207, $406 and $307 for the years
ended December 31, 1994, 1993 and 1992, respectively.
(14) SUBSEQUENT EVENT
----------------
On January 31, 1995, the Company sold its partnership interests in Coinmach
and Super Laundry to a new corporation, The Coinmach Corporation ("Corp.").
In connection with this sale, the Company, Coinmach and Super Laundry paid
off all amounts owed under their existing revolver and term loan debt (see
note 6). Corp. is owned by an investor group (83%) and the management of
Coinmach and Super Laundry (17%). Corp. financed the transaction with
approximately $11,600 of new equity, and debt financing of up to $50,000.
Under the terms of the financing, no principal payments on the debt are due
until April 1996.
F-66
<PAGE>
LETTERHEAD OF KPMG PEAT MARWICK
Independent Auditors' Report
----------------------------
The Board of Directors
CIC I Acquisition Corp.:
We have audited the accompanying consolidated balance sheet of CIC I
Acquisition Corp. and subsidiaries (the Company) as of January 31, 1995,
and the related consolidated statements of operations and accumulated
deficit and cash flows for the one-month period then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
As discussed in note 13 of the accompanying notes to the consolidated
financial statements, on January 31, 1995, the Company sold its partnership
interests in its operating subsidiaries to a new corporation, The Coinmach
Corporation. The accompanying consolidated financial statements reflect
the financial position, results of operations and cash flows of the Company
immediately prior to the sale.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CIC I
Acquisition Corp. and subsidiaries as of January 31, 1995, and the results
of their operations and their cash flows for the one-month period then
ended, in conformity with generally accepted accounting principles.
New York, New York /s/ KPMG Peat Marwick LLP
April 28, 1995
F-67
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Consolidated Balance Sheet
January 31, 1995
(dollars in thousands)
ASSETS
------
<TABLE>
<CAPTION>
<S> <C>
Cash $ 1,162
Receivables, net of reserve of $447 3,261
Inventories 2,353
Prepaid commissions 3,333
Property and equipment:
Laundry equipment 21,848
Leasehold improvements 10,604
Office equipment 1,917
Automobiles and trucks 2,934
-------
37,303
Less accumulated depreciation 21,183
-------
Net property and equipment 16,120
Goodwill, net of accumulated
amortization of $1,883 6,672
Other intangibles, net of accumulated
amortization of $8,802 2,053
Other assets 1,115
-------
$36,069
=======
</TABLE>
(Continued)
The accompanying notes are an integral part of these consolidated financial
statements.
F-68
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Consolidated Balance Sheet, continued
January 31, 1995
(dollars in thousands)
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Accounts payable $ 2,197
Accrued expenses 2,134
Commissions payable 2,935
Long-term debt (including $350 of
management loans) 41,800
Other long-term liabilities 461
Minority interest 133
Stockholders' deficiency:
Common stock, par value $.01;
authorized 1,000,000 shares; issued
and outstanding 87,000 shares 1
Additional paid-in capital 39,869
Accumulated deficit (53,461)
--------
Total stockholders' deficiency (13,591)
--------
$36,069
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-69
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Consolidated Statement of Operations
and Accumulated Deficit
For the month ended
January 31, 1995
(dollars in thousands)
<TABLE>
<CAPTION>
<S> <C>
Revenues $5,879
Laundry operating expenses 4,229
General and administrative expenses 450
Depreciation and amortization of property
and equipment 739
Amortization of intangibles and other assets 241
------
Operating income 220
Interest expense 395
------
Net loss (175)
Accumulated deficit at
beginning of period (53,286)
-------
Accumulated deficit at end of period $(53,461)
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-70
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For the month ended January 31, 1995
(dollars in thousands)
<TABLE>
<CAPTION>
Cash flows from operating activities:
<S> <C>
Net loss ($175)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 980
Minority interest in loss of consolidated subsidiary (2)
Changes in assets and liabilities:
Decrease in receivables 937
Change in prepaid commissions, net of commission payable (302)
(Increase) in inventories (199)
Decrease in other assets 2
(Decrease) in accounts payable and accrued expenses (44)
------
Net cash provided by operating activities 1,197
------
Cash flows from investing activities:
Purchase of laundry equipment (361)
Purchase of other fixed assets (215)
Additions to intangibles (35)
------
Net cash used in investing activities (611)
------
Cash flows from financing activities:
Net repayments under revolving credit facility (332)
Payment of other debt (52)
Principal payments of capital lease obligations (27)
------
Net cash used in financing activities (411)
------
Net increase in cash 175
Cash at beginning of period 987
------
Cash at end of period $1,162
------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-71
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 31, 1995
(Dollars in Thousands)
(1) ORGANIZATION AND BASIS OF PRESENTATION
--------------------------------------
See note 13 for subsequent event.
CIC I Acquisition Corp. ("CIC" or "Company") is a holding company that
owns Coinmach Industries Co. ("Coinmach") and Super Laundry Equipment
Co. L.P. ("Super Laundry"). CIC was formed in 1989 expressly for the
purpose of acquiring an 85% general partnership interest in Coinmach
and all of the common stock of Super Laundry Equipment Corp., a
predecessor company to Super Laundry.
Coinmach is principally engaged in providing laundry equipment and
related services to multi-family housing complexes in the New York
metropolitan area. Super Laundry is principally a supplier of coin-
operated laundromat equipment, and turnkey laundromat retail stores in
the New York metropolitan area.
On January 31, 1995, the Company sold its partnership interests in
Coinmach and Super Laundry to a new corporation, The Coinmach
Corporation (see note 13). The accompanying consolidated financial
statements reflect the financial position, results of operations, and
cash flows of the Company immediately prior to the sale.
On December 15, 1993, CIC, on a stand alone basis, completed a "pre-
packaged" voluntary capital restructuring (the "Plan") which was
approved by 100% of the Company's shareholders and creditors. Neither
Coinmach nor Super Laundry were parties to this agreement. The Plan
provided for the Company's existing senior subordinated notes, junior
subordinated promissory notes, preferred stock and common stock to be
exchanged for 87,000 shares of common stock valued at $24,163. The
Plan, which was confirmed and court approved on January 21, 1994, and
became effective February 4, 1994, was reflected in the 1994 financial
statements, and was recorded in accordance with the guidelines
provided by the Statement of Financial Accounting Standards Board
(FASB 15 "Accounting for Troubled Debt Restructuring"). Pursuant to
the Plan, the Company also amended its existing revolving and term
loan agreement (see note 6(a)). As a result of the above, the Company
recognized an extraordinary gain, net of legal fees and other direct
costs, of $20,420 on the early extinguishment of the debt in 1994.
The Company also incurred $1,341 in non-cash expenses related to the
estimated fair value of the equity conversion feature of debt issued
pursuant to the Plan (see note 6). In addition, the minority partners
in Coinmach extinguished their ownership positions and the Company
effectively owned 100% of Coinmach (see note 7).
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
(a) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of CIC,
Coinmach and Super Laundry. All significant intercompany balances and
transactions have been eliminated in consolidation.
(b) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
principally determined using the first-in, first-out method.
Inventories include laundry equipment, spare parts and construction
costs.
(continued)
F-72
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 31, 1995
(Dollars in Thousands)
(c) REVENUE RECOGNITION
Super Laundry's customers generally sign sales contracts whereby Super
Laundry will construct and equip a complete laundromat operation,
including location identification, construction, plumbing, electrical
wiring and all required permits. Revenue is recognized on the
completed contract method. A contract is considered complete when all
costs have been incurred and either the installation is operating
according to specifications or has been accepted by the customer. The
duration of such contracts is normally less than six months.
Sales of laundromats were $451 for the one month ended January 31,
1995.
(d) PROPERTY AND EQUIPMENT
Laundry equipment, consisting primarily of commercial washers and
dryers, and other fixed assets, are stated at cost. The cost of
remanufacturing equipment is included in the cost of laundry
equipment. The cost of laundry room improvements is included in
leasehold improvements. The Company capitalized remanufacturing and
laundry room improvement costs of approximately $273 for the month
ended January 31, 1995.
Depreciation of laundry equipment and fixed assets is calculated using
the straight-line method over their estimated useful lives, generally
five years. Leasehold improvements are amortized using the straight-
line method over the shorter of the lease term or estimated useful
life of the asset. The Company's policy is to write-off fully
depreciated assets and the accumulated depreciation and amortization.
Depreciation and amortization expense was approximately $739 for the
month ended January 31, 1995.
The Company reviews the undiscounted cash flows of its laundry
locations in assessing whether its property and equipment (primarily
laundry equipment and laundry room improvements) may be impaired. The
Company does not believe that the adoption of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long Lived Assets to be Disposed Of" will have a
material impact on the Company's financial position or results of
operations.
(e) PREPAID COMMISSIONS
The Company capitalizes contractually required advanced commissions
and certain incentive payments paid in connection with the acquisition
of its contractual rights to laundry room locations. Such amounts are
amortized on a straight-line basis over the life of the related lease
or the related contractual agreement. Amortization expense on prepaid
commission amounted to approximately $12 for the month ended January
31, 1995.
(f) CONTRACT RIGHTS
Contract rights represent amounts expended for location contracts
arising from the acquisition of laundry machines on location. These
amounts are amortized on a straight-line basis over the remaining life
of the corresponding contract. Such amounts were fully amortized as
of January 31, 1995.
(continued)
F-73
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 31, 1995
(Dollars in Thousands)
(g) INTANGIBLES
Intangibles, consisting principally of covenants not to compete,
computer software and deferred financing costs are amortized over
their estimated useful lives. Amortization expense on intangibles
amounted to approximately $191 for the month ended January 31, 1995.
(h) GOODWILL
Goodwill is being amortized, using the straight-line method, over 40
years. Amortization expense on goodwill amounted to $38 for the month
ended January 31, 1995.
(i) INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes".
Statement 109 requires the asset and liability method of accounting
for income taxes. Under the asset and liability method of Statement
109, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
recovered or settled. Under Statement 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
(3) RECEIVABLES
-----------
<TABLE>
<CAPTION>
1995
----
<S> <C>
Accounts receivable $ 1,033
Notes receivable 2,153
Finance reserves 522
-------
3,708
Allowances for doubtful accounts ( 447)
-------
$ 3,261
=======
</TABLE>
At January 31, 1995, notes receivable bear interest at a weighted
average interest rate of approximately 10% and mature through 1998.
The notes are collateralized by the underlying equipment. The Company
periodically sells notes receivable arising from the sale of
laundromats to third party finance companies. Finance reserves arise
when the Company sells notes and a portion of the proceeds are
retained by the finance company. As the notes are collected, the
finance companies remit a portion of the collections to the Company.
Many of the notes receivable are sold with recourse to the Company
(see note 8). Control of the notes sold with recourse is surrendered
by the Company on the date of transfer. The Company generally sells
its receivables with recourse at cost, recognizing no gain or loss.
(4) TRANSACTIONS WITH AFFILIATES
----------------------------
The Company sold certain trade notes receivable to Cointrol Credit
Co., L.P. ("Credit"), a company created in 1991 and owned by certain
officers and directors of the Company and outside investors.
(continued)
F-74
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 31, 1995
(Dollars in Thousands)
All such notes are sold to yield a fair market rate of return as
determined by rates available from unrelated finance companies for
similar notes. The aggregate outstanding balance of all notes sold to
Credit as of January 31, 1995 was $590. These notes are with recourse
to the Company and mature through 1998. In April 1995, the Company
entered into an agreement with Credit to repurchase the remaining
receivables outstanding.
(5) INTANGIBLES
-----------
<TABLE>
<CAPTION>
Estimated
1995 useful lives
---- ------------
<S> <C> <C>
Covenants not to compete $ 4,281 5 years
Computer software 4,050 5 years
Deferred financing costs 1,552 Life of debt
Other 972 5 years
-------
10,855
Accumulated amortization 8,802
-------
$ 2,053
=======
</TABLE>
(6) LONG-TERM DEBT
--------------
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1995
----
<S> <C>
Revolving line of credit, due February 28, 1995
interest at prime plus 1.75% (a) $25,516
Term loan, due February 28, 1995 (a) 15,000
Management loans, due February, 2004, interest at
prime plus 1.75%, convertible into 7,000 shares
of common stock after February, 1999 (b) 350
Other (c) 934
-------
$41,800
=======
</TABLE>
On January 31, 1995, the Company sold its partnership interests in
Coinmach and Super Laundry to a new corporation, The Coinmach
Corporation.
In connection with this sale, the Company paid off all amounts owed
under its revolver and term loan debt (see note 13). The accompanying
financial statements do not reflect the sale or the related repayment
of debt.
On December 15, 1993, the Company finalized negotiations with the
holders of the revolving line of credit, term loan, senior
subordinated note holders, and the junior subordinated promissory note
holders. Pursuant to the Plan, the holders of senior subordinated
notes in the amount of $30,000 and junior subordinated promissory
notes in the amount of $1,979 exchanged their notes, including accrued
interest of approximately $16,150 through December 15, 1993, for
87,000 shares of the restructured company's common stock.
(continued)
F-75
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 31, 1995
(Dollars in Thousands)
(a) On March 16, 1990, the Company entered into a bank agreement that
provided for a term loan of $15,000 originally payable in eight
quarterly installments of $1,875 commencing April 1, 1994, and a
revolving line of credit of up to $35,000 for a term of five
years. On February 4, 1994, the maximum revolver facility was
reduced to $29,413. In addition, commencing March 1, 1994 and
continuing on the first day of each month thereafter, the
revolving credit facility will be reduced by $175 per month
through June 1994, and then $212 per month, until the termination
of the facility, including the term loan, on February 28, 1995.
The interest rate for bank borrowings is the prime rate plus
1.75%. As of January 31, 1995, the interest rate on these loans
was 10.25%. In addition, the agreement provides for the payment
of a facility fee of .125% per annum on average daily outstanding
balances and an unused line fee of .50% per annum on the average
daily balance of the revolving loans. The agreement contains
certain restrictive covenants and requires the Company, among
other things, to maintain certain financial ratios and to
restrict investments, additional indebtedness and payment of
dividends. The loan is secured by all of the assets of the
Company. See note 13 for a description of the subsequent event.
(b) Pursuant to the Plan, senior management loaned the Company $350
due February 4, 2004. Interest is payable monthly, at the rate
of 1.75% over prime. As of January 31, 1995, the interest rate
on these loans was 10.25%. The loans are convertible, upon the
earlier of five years or upon certain circumstances, into 7% of
the Company's fully diluted common stock. These loans, which are
subordinated to the revolving line of credit and the term loan,
were funded February 4, 1994 (see note 7). The loans were repaid
in connection with the subsequent event described in note 13.
(c) Other debt includes payments due under non-compete agreements.
Maturities of long-term debt at January 31, 1995 are
contractually payable as follows:
<TABLE>
<CAPTION>
Years ending January 31,
------------------------
<S> <C>
1996 $40,945
1997 376
1998 129
2005 350
-------
$41,800
=======
</TABLE>
(7) RESTRUCTURING
-------------
On January 31, 1995, the Company sold its partnership interests in
Coinmach and Super Laundry to a new corporation, The Coinmach
Corporation (see note 13).
On December 15, 1993, CIC, on a stand alone basis, completed a "pre-
packaged" voluntary capital restructuring which was approved by 100%
of the Company's shareholders and creditors (see note 1). Neither
Coinmach nor Super Laundry were parties to this agreement. The Plan
provided for the Company's existing senior subordinated notes, junior
subordinated promissory notes, preferred stock and common stock to be
exchanged for 87,000 shares of common stock valued at $24,163. The
carrying value of the senior subordinated notes, junior subordinated
notes and related accrued interest was $30,000, $1,500, and $16,149,
respectively. The preferred stock
(continued)
F-76
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 31, 1995
(Dollars in Thousands)
and common stock had a net carrying value of $2,609, consisting of
preferred stock of $14,364, and common stock of $1, offset by the
carrying value of the consideration to continuing predecessor
interests in excess of book value of $11,756. The Plan, which was
confirmed and court approved on January 21, 1994 and became effective
February 4, 1994, was reflected in the 1994 financial statements. In
addition, pursuant to the Plan, the Company amended its existing
revolving and term loan agreement. As a result of the above, the
Company recognized an extraordinary gain of $20,420, net of legal fees
and other direct costs of $3,067, on the early extinguishment of the
debt. In addition, $14,364, representing the carrying value of the
preferred stock, is included in common stockholders' deficiency.
Pursuant to the Plan, the equity position of the shareholder to which
the continuing predecessor interests was attributed surrendered such
position. Consequently, the carrying value of the continuing
predecessor interests was charged to the accumulated deficit account.
The restructuring has been treated as a tax free exchange of debt for
equity in accordance with the provisions of the Internal Revenue
Service Code.
The Plan required two members of senior management to loan the Company
$350. These loans have an interest rate of prime plus 1.75% and are
due in 2004. The loans were funded February 4, 1994, and are
reflected in the accompanying financial statements as long-term debt
(see note 6).
Also pursuant to the Plan the Company entered into non-compete
agreements with two former shareholders totaling approximately $954.
(8) COMMITMENTS AND CONTINGENCIES
-----------------------------
Coinmach is obligated under long-term leases relating to revenue
equipment locations. The terms of these leases principally range from
three to six years, most of which provide for fixed monthly commission
payments and contain renewal options. The majority of these leases
contain provisions permitting the cancellation and/or adjustment of
the commission by Coinmach if minimum revenue levels are not achieved.
In addition, Coinmach rents office and warehouse space from SSB
Corporation ("SSB"). SSB is owned by certain individuals who were
also owners of the Company, prior to the Plan. The lease, expiring on
May 1, 1995, provides for annual rentals of $368 and for the payment
by Coinmach of all operating expenses.
Super Laundry leases its facilities from a related party under an
operating lease that expires on December 31, 1996 and provides for a
minimum annual rental of $60 in 1995 increasing to $63 in 1996. Under
the terms of the lease, Super Laundry is required to pay operating
costs. Rental expense for this lease amounted to $5 for the month
ended January 31, 1995. In addition, Super Laundry also leases a
warehouse from a related party on a month-to-month basis. Rental
expense for this lease amounted to $3 for the month ended January 31,
1995. Effective January 1, 1993, Super Laundry entered into a five
year lease for a sales office. This lease expires December 31, 1997
and provides for a minimum annual rental of $23 in 1993, increasing by
4% each successive year through 1997. The lease also calls for Super
Laundry to pay operating costs. Rental expense including operating
costs for this lease amounted to $9 for the month ended January 31,
1995.
(continued)
F-77
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 31, 1995
(Dollars in Thousands)
Future minimum lease payments under noncancellable operating leases
(excluding commissions for laundry equipment locations) as of January
31, 1995 are as follows:
<TABLE>
<CAPTION>
Years ending January 31,
------------------------
<S> <C>
1996 $314
1997 108
1998 27
----
Total future minimum
lease payments $449
====
</TABLE>
Rent expense, excluding commission payments for laundry equipment
locations, amounted to approximately $54 for the month ended January
31, 1995.
Super Laundry is contingently liable on receivables sold, with
recourse, to finance companies. The total amount outstanding is
approximately $7,822 as of January 31, 1995.
Under agreements between Super Laundry and certain finance companies,
a portion of the notes receivable sales price is retained by the
finance company until the receivable is collected. Amounts retained
under the agreements amounted to $522 as of January 31, 1995, and are
shown in the accompanying consolidated balance sheets as receivables.
Coinmach has entered into leasing arrangements for automobiles and
trucks and office equipment which are accounted for as capital leases.
At January 31, 1995, the gross amounts of such assets amounted to
$1,646 and accumulated amortization amounted to $901. Future minimum
lease payments as of January 31, 1995 are as follows:
<TABLE>
<CAPTION>
Years ending January 31,
- ------------------------
<S> <C>
1996 $356
1997 144
1998 49
----
Minimum lease payments 549
Less amount representing interest 88
----
Present value of net minimum lease payments $461
====
</TABLE>
The Company is party to certain lawsuits and claims relating to its
operations. It is the opinion of management, based on the advice of
outside counsel, that such lawsuits and claims will be resolved
without material effect to the Company's consolidated financial
statements.
(continued)
F-78
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 31, 1995
(Dollars in Thousands)
(9) INCOME TAXES
------------
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at January 31, 1995 are presented
below:
<TABLE>
<CAPTION>
<S> <C>
Deferred tax assets:
Net operating loss carryforwards $ 21,278
Fixed and intangible assets, principally due to
differences between tax and financial reporting bases 3,117
Allowance for doubtful accounts 178
---------
Gross deferred tax assets 24,573
Less valuation allowance ( 24,573)
Net deferred tax asset $ - 0 -
==========
</TABLE>
CIC files a consolidated Federal income tax return with Super Laundry
and includes its equity in the earnings or loss of Coinmach. At
January 31, 1995, net operating loss carryforwards of approximately
$53,200 are available to offset future taxable income and expire
commencing 2004 through 2009.
(10) STOCK OPTION PLAN
-----------------
Pursuant to the Plan, the Company adopted two stock option plans,
which provided for the grant and exercise of options to purchase up to
6,000 shares of the Company's common stock upon attainment of certain
annual earnings performance goals through 1997. One of the plans was
for the employees of the Company, and provided for the grant and
exercise of 5,000 shares. On February 4, 1994, options representing
1,000 of the shares under this plan were granted to certain employees
and were immediately vested but were not to be exercisable unless 1994
earnings performance goals were attained. The employee plan also
provided for the grant of options to purchase an additional 1,000
shares in 1994 and each year through December 31, 1997. The second
stock option plan provided for the grant of options to purchase 1,000
shares to a financial advisor upon attainment of annual earnings
performance goals through 1995. Under both plans, the options were to
expire ten years from the dates of grant and were exercisable at $50
per share. No options have been exercised and in connection with the
subsequent event described in note 13, the stock option plans were
terminated and all outstanding options were cancelled.
(11) PROFIT SHARING PLAN
-------------------
Effective April 1, 1994, The Company established a profit sharing and
retirement plan (the "Coinmach Profit Sharing Plan") for substantially
all of its employees. Pursuant to the Coinmach Profit Sharing Plan,
eligible employees may defer up to 15% of their salaries up to a
maximum level imposed by applicable federal law. Coinmach makes
matching contributions in increasing amounts, based upon the number or
years of service performed by eligible participants, up to a maximum
of 6% of an eligible employee's salary. Matching contribution
percentages range from 5% for one to two years of service up to 25%
for five or more years of service and vest over a six year period.
Company contributions to the plan for the month ended January 31, 1995
amounted to $6.
(continued)
F-79
<PAGE>
CIC I ACQUISITION CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 31, 1995
(Dollars in Thousands)
(12) SUPPLEMENTAL CASH FLOW INFORMATION
----------------------------------
The Company paid approximately $395 for interest for the month ended
January 31, 1995.
(13) SUBSEQUENT EVENT
----------------
On January 31, 1995, the Company sold its partnership interests in
Coinmach and Super Laundry to a new corporation, The Coinmach
Corporation ("Corp."). In connection with this sale, the Company,
Coinmach and Super Laundry paid off all amounts owed under their
existing revolver and term loan debt (see note 6). Corp. is owned by
an investor group (83%) and the management of Coinmach and Super
Laundry (17%). Corp. financed the transaction with approximately
$11,600 of new equity, and debt financing of up to $50,000. Under the
terms of the financing, no principal payments on the debt are due
until April 1996.
F-80
<PAGE>
LETTERHEAD OF KPMG PEAT MARWICK
Independent Auditors' Report
----------------------------
The Board of Directors
The Coinmach Corporation:
We have audited the accompanying consolidated balance sheet of The Coinmach
Corporation and subsidiaries (the Company) as of March 31, 1995, and the
related consolidated statements of operations and accumulated deficit and
cash flows for the two-month period then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides 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 The
Coinmach Corporation and subsidiaries as of March 31, 1995, and the results
of their operations and their cash flows for the two-month period then
ended, in conformity with generally accepted accounting principles.
New York, New York /s/ KPMG Peat Marwick LLP
July 7, 1995
F-81
<PAGE>
THE COINMACH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
March 31, 1995
(dollars in thousands)
ASSETS
------
<TABLE>
<CAPTION>
<S> <C>
Cash $ 922
Receivables 3,163
Inventories 2,584
Prepaid commissions 3,222
Property and equipment:
Laundry equipment 20,039
Leasehold improvements 3,418
Office equipment 578
Automobiles and trucks 1,154
-------
25,189
Less accumulated depreciation 859
-------
Net property and equipment 24,330
Contract rights, net of accumulated amortization of $813 19,327
Other intangibles, net of accumulated amortization of $364 6,692
Other assets 795
-------
$61,035
=======
</TABLE>
(Continued)
The accompanying notes are an integral part of these consolidated financial
statements.
F-82
<PAGE>
THE COINMACH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
March 31, 1995
(dollars in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Accounts payable $ 2,198
Accrued expenses 3,230
Commissions payable 2,994
Long-term debt 42,351
Other long-term liabilities 407
Minority interest 126
Stockholders' equity:
Class A Common, par value $.01; 77,350
shares authorized, issued and outstanding 1
Class B Common, par value $.01; 15,500
shares authorized; 14,500 shares issued
and outstanding --
Class C Common, par value $.01; 7,650
shares authorized, issued and outstanding --
Class D Common, par value $.01; 7,650
shares authorized; no shares issued
or outstanding --
Preferred stock, par value $.01; 10,000
shares authorized; no shares issued
or outstanding --
Additional paid-in capital 11,221
Accumulated deficit (1,155)
-------
10,067
Notes receivable from management (338)
-------
Total stockholders' equity 9,729
-----
$61,035
=======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-83
<PAGE>
THE COINMACH CORPORATION AND SUBSIDIARIES
Consolidated Statement of Operations and Accumulated Deficit
For the two months ended March 31, 1995
(dollars in thousands)
<TABLE>
<CAPTION>
<S> <C>
Revenues $11,515
Laundry operating expenses 8,951
General and administrative expenses 799
Depreciation and amortization of
property and equipment 859
Amortization of intangibles and
prepaid commissions 1,285
-------
Operating loss (379)
Interest expense 774
-------
Loss before income taxes (1,153)
Income taxes 2
-------
Net loss (1,155)
Accumulated deficit, beginning
of period --
-------
Accumulated deficit, end of period $(1,555)
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-84
<PAGE>
THE COINMACH CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For the two months ended March 31, 1995
(dollars in thousands)
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net loss ($1,155)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization 2,144
Minority interest in loss of consolidated
subsidiary (7)
Provision for bad debts 3
Changes in assets and liabilities:
Decrease in receivables 94
Decrease in prepaid commissions
net of decrease in commissions payable (438)
(Increase) in inventories (231)
Decrease in other assets 209
(Decrease) in accounts payable and
accrued liabilities (546)
---
Net cash provided by operating activities 73
--
Cash flows from investing activities:
Purchase of laundry equipment (918)
Purchase of fixed assets (72)
----
Net cash used in investing activities (990)
-----
Cash flows from financing activities:
Repayments under revolving
credit facility (191)
Payment of other debt (82)
Principal payments of capital lease
obligations (54)
----
Net cash used in financing activities (327)
----
Net decrease in cash (1,244)
Cash at beginning of period 2,166
-----
Cash at end of period $ 922
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-85
<PAGE>
THE COINMACH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1995
(Dollars in Thousands)
(1) ORGANIZATION AND ACQUISITION
----------------------------
The Coinmach Corporation ("Corp."; together with its subsidiaries, the
"Company") was incorporated in January 1995. The Company was
capitalized primarily through an equity investment by an investor
group led by the majority shareholder (the "Majority Shareholder") and
senior management and bank financing (see note 3 and note 6).
Corp. is a holding company which was formed to acquire partnership
interests in Coinmach Industries Co. ("Coinmach") and Super Laundry
Equipment Co. L.P. ("Super Laundry"). Coinmach is principally engaged
in providing laundry equipment and related services to multi-family
housing complexes in the New York metropolitan area. Super Laundry is
principally a supplier of coin-operated laundromat equipment and
turnkey laundromat retail stores in the New York metropolitan area.
On January 31, 1995, the Company acquired its partnership interests in
Coinmach and Super Laundry from CIC I Acquisition Corp. ("CIC I").
The transaction resulted in the Company owning 100% interests in both
Coinmach and Super Laundry. The aggregate purchase price for these
interests was $8,570, paid in cash.
The acquisition was accounted for using the purchase method of
accounting. The fair value of assets acquired (based on an
independent appraisal for certain assets) less liabilities assumed
exceeded the purchase price by approximately $7,700. The excess was
allocated to property, equipment and intangible assets ratably based
on their respective fair values as prescribed by Accounting Principles
Board Opinion No. 16, "Business Combinations." The acquisition was
funded by a net equity investment (see Note 3) of approximately
$10,884 and the assumption of liabilities aggregating approximately
$52,627. The total purchase price of $63,511 was allocated to assets
acquired, based on fair market value, as follows:
<TABLE>
<CAPTION>
<S> <C>
Cash $ 2,166
Receivables 3,260
Inventories 2,353
Prepaids and other assets 4,337
Property and equipment 24,199
Contract rights 20,140
Covenants not to compete 915
Computer software 3,271
Deferred financing costs 2,870
-------
$63,511
=======
</TABLE>
The Company was capitalized, acquired its interests in Coinmach and
Super Laundry, and entered into the financing agreement described in
note 6 on January 31, 1995. The Company's fiscal year-end is March
31.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
(a) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany balances
and transactions have been eliminated in consolidation.
F-86
<PAGE>
THE COINMACH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1995
(Dollars in Thousands)
(b) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
principally determined using the first-in, first-out method.
Inventories include laundry equipment, spare parts and construction
costs.
(c) REVENUE RECOGNITION
Super Laundry's customers generally sign sales contracts whereby Super
Laundry will construct and equip a complete laundromat operation,
including location identification, construction, plumbing, electrical
wiring and all required permits. Revenue is recognized on the
completed contract method. A contract is considered complete when all
costs have been incurred and either the installation is operating
according to specifications or has been accepted by the customer. The
duration of such contracts is normally less than six months.
Sales of laundromats were $1,574 for the two months ended March 31,
1995.
(d) PROPERTY AND EQUIPMENT
Laundry equipment, consisting primarily of commercial washers and
dryers, and fixed assets acquired in the purchase, are stated as
described in Note 1, with subsequent additions recorded at cost. The
cost of remanufacturing equipment is included in the costs of laundry
equipment. The cost of laundry room improvements relating to new
locations is included in leasehold improvements. The Company
capitalized remanufacturing and laundry room improvement costs of
approximately $259 for the two months ended March 31, 1995.
Depreciation of laundry equipment and fixed assets is calculated using
the straight-line method over their estimated useful lives, generally
five years. Leasehold improvements are amortized using the straight-
line method over the shorter of the lease term or estimated useful
life of the asset. The Company's policy is to write-off fully
depreciated assets and the related accumulated depreciation and
amortization. Depreciation and amortization expense was approximately
$859 for the two months ended March 31, 1995.
The Company reviews the undiscounted cash flows of its laundry
locations in assessing whether its property and equipment (primarily
laundry equipment and laundry room improvements) may be impaired. The
Company does not believe that the adoption of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long Lived Assets to be Disposed Of" will have a
material impact on the Company's financial position or results of
operations.
(e) PREPAID COMMISSIONS
The Company capitalizes contractually required advance commissions and
certain incentive payments paid in connection with the acquisition of
its contractual rights to laundry room locations. Such amounts are
amortized on a straight-line basis over the life of the related lease
or the related contractual agreement. Amortization expense on prepaid
commissions amounted to approximately $108 for the two months ended
March 31, 1995.
(f) CONTRACT RIGHTS
Contract rights represent amounts expended for location contracts
arising from the acquisition of laundry machines on location. The
carrying amount of contract rights acquired in connection with
(continued)
F-87
<PAGE>
THE COINMACH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1995
(Dollars in Thousands)
the purchase transaction is based on the accounting described in note
1, and are amortized over periods ranging from 3 to 15 years.
Contract rights relating to written contracts are amortized on a
straight-line basis over the remaining life of the corresponding
contract, and verbal contracts are amortized over an estimated useful
life based on a turnover analysis performed by an independent
appraisal company. Amortization expense on contract rights was $813
for the two months ended March 31, 1995.
(g) INTANGIBLES
Intangibles, consisting principally of covenants not to compete,
computer software and deferred financing costs are amortized over
their estimated useful lives. Amortization expense on intangibles
amounted to $364 for the two months ended March 31, 1995.
(h) INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes".
Statement 109 requires the asset and liability method of accounting
for income taxes. Under the asset and liability method of Statement
109, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
recovered or settled. Under Statement 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
(3) CAPITAL STOCK
-------------
In connection with the initial capitalization of the Company, 77,350
shares of Class A, 14,500 shares of Class B and 7,650 shares of Class
C Common Stock were issued in exchange for gross proceeds of
approximately $11,200, $422 and $0, respectively. Such amounts
aggregated approximately $11,222, net of a transaction fee of $400
paid to the Majority Shareholder.
The Class A Common Stock is guaranteed a yield before any other class
of common stock receives dividends. In addition, the Class A Common
Stock has full liquidation preference, including its guaranteed yield,
over all other classes of common stock. The liquidation preference
for Class A Common Stock as of March 31, 1995, including the
guaranteed yield, was approximately $11,350. Class A and Class B
Common Stock have equal voting rights.
The Class B Common Stock was purchased by certain members of
management of the Company. Certain members of management also
purchased Class A shares. A portion of the purchase price of Class B
Common Stock was financed through the Company in the form of
promissory notes. The notes, which bear interest at 8% and are
payable in four equal annual installments commencing January 31, 1996,
are presented as a reduction of stockholders' equity in the
accompanying consolidated balance sheet. The underlying stock
purchased was pledged as collateral against these notes. The
liquidation preference for Class B Common Stock, which is subordinated
to Class A Common Stock, as of March 31, 1995 was approximately $422.
The Class C Common Stock, which was purchased by the lenders described
in note 6 for a nominal amount and whose value was deemed to not be
material at the date of purchase, is subordinated in liquidation to
both Class A and Class B Common Stock. Class C Common Stock has no
voting rights and is convertible into Class D Common Stock (which has
voting rights) upon
(continued)
F-88
<PAGE>
THE COINMACH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1995
(Dollars in Thousands)
the occurrence of certain conversion events including public offerings
of the Company's stock or changes in control. No such events have
occurred.
All of the agreements pursuant to which common stock was purchased
contain restrictions on the transfer of Company stock. In addition,
pursuant to management agreements with the purchasers of the Class B
Common stock, the Company may exercise certain call provisions based
on agreed upon formulae.
Pursuant to a stockholders agreement with the Company, certain
stockholders are granted co-sale rights, whereby, if the Majority
Shareholder proposes to transfer (other than pursuant to a public
offering or sale of the Company), any shares of common stock that
results in the Majority Shareholder owning directly or indirectly less
than 60% of the then outstanding common stock of the Company, any
stockholder of the Company is given the opportunity to sell a ratable
portion of his or her shares of common stock contemporaneously with
such sale by the Majority Shareholder.
The Majority Shareholder and other stockholders of the Company are
also entitled to certain registration rights pursuant to the terms of
a registration rights agreement entered into between such stockholders
and the Company.
The Company incurred fees and expenses in connection with the purchase
transaction and the related financing agreement aggregating $2,870.
Such fees are being amortized over the five year term of the revolving
line of credit agreement and are included in other intangibles in the
accompanying consolidated balance sheets.
The Company has entered into a management agreement with the Majority
Shareholder which provides for a fee of $100 per year.
(4) RECEIVABLES
-----------
Receivables consist of the following:
<TABLE>
<CAPTION>
<S> <C>
Accounts receivable $1,045
Notes receivable 1,705
Finance reserves 413
------
$3,163
</TABLE>
At March 31, 1995, notes receivable bear interest at a weighted
average interest rate of approximately 10% and mature through 1998.
The notes are collateralized by the underlying laundry equipment. The
Company periodically sells notes receivable arising from the sale of
laundromats to third party finance companies. Finance reserves arise
when the Company sells notes and a portion of the proceeds are
retained by the finance company. As the notes are collected, the
finance companies remit a portion of the collections to the Company.
Many of the notes receivable are sold with recourse to the Company
(see note 7). Control of the notes sold with recourse is surrendered
by the Company on the date of transfer. The Company generally sells
its receivables with recourse at cost, recognizing no gain or loss.
(continued)
F-89
<PAGE>
THE COINMACH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1995
(Dollars in Thousands)
(5) INTANGIBLES
-----------
Intangibles consist of the following:
Estimated
useful lives
------------
Covenants not compete $ 915 Lives of Contract
Computer software 3,271 3 years
Deferred financing costs 2,870 5 years
------
7,056
Accumulated Amortization ( 364)
------
$ 6,692
======
(6) LONG-TERM DEBT
--------------
Long-term debt consists of the following:
Revolving line of credit, due
January 31, 2000 interest at prime
plus 1.25% (10.25% at March 31,
1995) (a) $ 1,499
Term loan A, quarterly payments of
$250 commencing April 1, 1996, and
increasing to $500 April 1, 1997,
$1,250 April 1, 1998 and $1,500
April 1, 1999. Interest at prime
plus 1.25% (10.25% at March 31,
1995) (a) 14,000
Term loan B, quarterly payments of
$1,750 commencing April 1, 2000 and
increasing to $2,000 April 1, 2001
with the final two payments of
$1,750 on april 1, 2002 and July 1,
2002. Interest at prime plus 1.75%
(10.75% at March 31, 1995) (a) 18,500
Term loan C, due July 1, 2002.
Interest at 12.5% (a) 7,500
Other (b) 852
-------
$42,351
=======
(a) In connection with the purchase transaction described in note 1, the
Company entered into a financing agreement (the "Financing Agreement")
with a group of lenders (the "Lenders"). The Financing Agreement
provides for $40,000 in term loans and $10,000 in aggregate for
revolving credit and acquisition loan facilities.
(continued)
F-90
<PAGE>
THE COINMACH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1995
(Dollars in Thousands)
The revolving line of credit agreement provides for up to $5,000 in
borrowings, including letters of credit up to a maximum of $1,000.
There is a one-half of one percent fee per annum on the unused portion
of this facility and a two percent letter of credit fee.
The Financing Agreement also provides for acquisition loans of up to
$5,000. The acquisition loans must be used to finance acquisitions or
capital expenditures attributed to growth. Any amounts outstanding
under the acquisition line as of January 31, 2000 will be repaid in
equal quarterly installments through July 1, 2002. Borrowings under the
acquisition line bear interest at prime plus 1.75%. The Company has no
acquisition loans outstanding as of March 31, 1995.
The Financing Agreement requires the Company, among other things, to
maintain certain financial ratios and restricts additional investments,
indebtedness and the payment of dividends. The Company is in compliance
with all covenants contained in the Financing Agreement. Loans
outstanding under this agreement are subject to prepayment upon the
occurrence of certain events such as asset dispositions, public
offerings and the generation of excess cash flow, as defined. The
Company may be subject to prepayment penalty on any fixed rate
borrowings.
Coinmach and Super Laundry are the borrowers under the Financing
Agreement. The facility is guaranteed by Corp. Borrowing under the
Financing Agreement are secured by all of the assets of the Company.
(b) Other debt includes payments due under noncompete agreements.
Maturities of long-term debt at March 31, 1995 are contractually payable
as follows:
<TABLE>
<CAPTION>
Years Ending March 31,
----------------------
<S> <C>
1996 $ 417
1997 1,380
1998 2,055
1999 5,000
2000 7,499
Thereafter 26,000
-------
$42,351
</TABLE>
(7) COMMITMENTS AND CONTINGENCIES
-----------------------------
Coinmach is obligated under long-term leases relating to revenue
equipment locations. The terms of these leases principally range from
three to six years, most of which provide for fixed monthly commission
payments and contain renewal options. The majority of these leases
contain provisions permitting cancellation of the lease and/or
adjustment of the commission by Coinmach if minimum revenue levels are
not achieved. In addition, Coinmach rents office and warehouse space.
The lease, which expired on May 1, 1995, provided for annual rentals of
$368 and for the payment by Coinmach of all operating expenses. The
lease is currently on a month-to-month basis under the same terms.
Super Laundry leases its facilities from a related party under an
operating lease that expires on December 31, 1996 and provides for a
minimum annual rental of $60 in 1995 increasing to $63 in 1996. Under
the terms of the lease, Super Laundry is required to pay operating
costs. Rental expense for this lease amounted to $17 for the two months
ended March 31, 1995. In addition, Super Laundry also leases a
warehouse from a related party on a month-to-month basis. Rental
(continued)
F-91
<PAGE>
THE COINMACH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1995
(Dollars in Thousands)
expense for this lease amounted to $6 for the two months ended March 31,
1995. Effective January 1, 1993, Super Laundry entered into a five year
lease for a sales office. This lease expires December 31, 1997 and
provides for a minimum annual rental of $23 in 1993, increasing by 4%
each successive year through 1997. The lease also calls for Super
Laundry to pay operating costs. Rental expense including operating
costs for this lease amounted to $5 for the two months ended March 31,
1995.
Future minimum lease payments under noncancellable operating leases
(excluding commissions for laundry equipment locations) as of March 31,
1995 are as follows:
<TABLE>
<CAPTION>
Years ending March 31,
----------------------
<S> <C>
1996 $558
1997 167
1998 37
----
Total future minimum lease
payments $762
====
</TABLE>
Rent expense, excluding commission payments for laundry equipment
locations, amounted to approximately $90 for the two months ended March
31, 1995.
Super Laundry is contingently liable on receivables sold, with recourse,
to finance companies. The total amount outstanding is approximately
$7,442 as of March 31, 1995.
Coinmach has entered into leasing arrangements for automobiles and
trucks and office equipment which are accounted for as capital leases.
Future minimum lease payments as of March 31, 1995 are as follows:
<TABLE>
<CAPTION>
Years ending March 31,
----------------------
<S> <C>
1996 $307
1997 123
1998 32
----
Minimum lease payments 462
Less amount representing interest 55
----
Present value of net minimum
lease payments $407
====
</TABLE>
The Company is party to certain lawsuits and claims relating to its
operations. It is the opinion of management, based on the advice of
outside counsel, that such lawsuits and claims will be resolved without
material effect to the Company's consolidated financial statements.
(8) INCOME TAXES
------------
Income tax expense of $2 for the two months ended March 31, 1995
primarily represents state and local taxes.
Corp. will file a consolidated Federal Income tax return with Super
Laundry and include its equity in the earnings or loss of Coinmach. It
is anticipated that no Federal taxes will be due for the period ended
March 31, 1995.
(continued)
F-92
<PAGE>
THE COINMACH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1995
(Dollars in Thousands)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets are presented below:
March 31,
1995
----
Deferred tax assets:
Difference between book and tax basis
of long-lived assets $ 460
Less valuation allowance (460)
---
Net deferred tax assets $ -0-
====
(9) PROFIT SHARING PLAN
-------------------
Effective April 1, 1994, the Company established a profit sharing and
retirement plan (the "Coinmach Profit Sharing Plan") for
substantially all of its employees. Pursuant to the Coinmach Profit
sharing Plan, eligible employees may defer up to 15% of their salaries
up to a maximum level imposed by applicable federal law. Coinmach
makes matching contributions in increasing amounts, based upon the
number of years of service performed by eligible participants, up to a
maximum of 6% of an eligible employee's salary. Matching contribution
percentages range from 5% for one to two years of service up to 25%
for five or more years of service and vest over a six year period.
Company contributions to the plan for the two months ended March 31,
1995 amounted to $16.
(10) SUPPLEMENTAL CASH FLOW INFORMATION
----------------------------------
The Company paid approximately $774 for interest for the two months
ended March 31, 1995.
F-93
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO,
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED OR INCOR-
PORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 5
The Company.............................................................. 9
Use of Proceeds.......................................................... 10
Dividend Policy.......................................................... 11
Dilution................................................................. 12
Capitalization........................................................... 13
Unaudited Pro Forma Financial Data....................................... 14
Selected Historical Consolidated Financial Data.......................... 19
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
Business................................................................. 32
Management............................................................... 38
Principal Stockholders................................................... 45
Certain Relationships and Related Transactions........................... 47
Description of Capital Stock............................................. 50
Shares Eligible for Future Sale.......................................... 54
Underwriting............................................................. 55
Legal Matters............................................................ 56
Experts.................................................................. 56
Available Information.................................................... 57
Index to Financial Statements............................................ F-1
</TABLE>
-----------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIRE-
MENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3,500,000 SHARES
COINMACH LAUNDRY
CORPORATION
[LOGO]
COMMON STOCK
-----------------
PROSPECTUS
June , 1996
-----------------
LEHMAN BROTHERS
DILLON, READ & CO. INC.
FIELDSTONE
FPCG SERVICES, L.P.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses payable by the
Company in connection with the filing of this Registration Statement. All
of such expenses, other than the filing fees for the Commission and the
NASD, are estimates.
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission registration fee........................ $24,983
National Association of Securities Dealers fee............................. 7,745
Blue sky fees and expenses (including attorneys' fees and expenses)........ [_____]
Printing and engraving expenses............................................ [_____]
Transfer agent's fees and expenses......................................... [_____]
Accounting fees and expenses............................................... [_____]
Legal fees and expenses.................................................... [_____]
Directors and Officers insurance premiums.................................. [_____]
----------
Total.................................................................... $[_____]
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Second Amended and Restated Bylaws provide that the
Company shall indemnify and hold harmless, to the fullest extent which it
is empowered to do so unless prohibited from doing so by the Delaware
General Corporation Law, as it exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment
permits the corporation to provide broader indemnification rights than said
law permitted the corporation to provide prior to such amendment), any
person who was or is a party or is threatened to be made a party to or is
otherwise involved (including involvement as a witness) in any action,
suit, or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she was a director or
officer of the Company, or while a director or officer of the Company, is
or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust, or other enterprise, including service with respect to an employee
benefit plan, against all expense, liability and loss (including attorneys'
fees, judgements, fines, ERISA exercise taxes or penalties and amounts paid
in settlement) reasonably incurred or suffered by such person in connection
therewith and that such indemnification shall continue as to any such
person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of such person's heirs, executors and
administrators; and that the Company may, by action of its board of
directors, provide indemnification to employees and agents of the Company
with the same scope and effect as indemnification of directors and
officers.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation) by reason of the fact
that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interest of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful; and further that a corporation may
indemnify such person against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with the defense or settlement
of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to
be liable to the corporation unless and only to the extent that the Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem
II-1
<PAGE>
proper. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any such action, suit or proceeding, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
The Second Amended and Restated Bylaws further provide that the Company
shall indemnify any such person seeking indemnification in connection with
a proceeding initiated by such person only if such proceeding was
authorized by the board of directors of the Company, except that it shall
be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any proceeding in advance of its
final disposition where the required undertaking, if any, has been tendered
to the Company) that the claimant has not met the standards of conduct (as
set forth above) which make it permissible under the Delaware General
Corporation Law for the Company to indemnify the claimant for the amount
claimed, but the burden of such defense shall be on the Company.
The Second Amended and Restated Bylaws further provide that the right
to indemnification shall be a contract right and shall include the right to
be paid by the Company for the expenses incurred in defending any such
proceeding in advance of its final disposition unless otherwise determined
by the board of directors of the Company in the specific case upon receipt
of an undertaking by or on behalf of the director or officer to repay such
amount if it shall ultimately be determined that he or she is not entitled
to be indemnified by the Company; and that such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any,
as the board of directors of the Company deems appropriate. The rights
conferred in the Second Amended and Restated Bylaws to indemnification and
the payment of expenses incurred in defending a proceeding in advance of
its final disposition are not exclusive of any other right which any person
may have or hereafter acquire under any statute, provision of the
certificate of incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 102 of the Delaware General Corporation Law allows a
corporation to eliminate or limit the personal liability of a director of a
corporation to the corporation or to any of its stockholders for monetary
damage for a breach of fiduciary duty as a director, except in the case
where the director (i) breaches his duty of loyalty to the corporation or
its stockholders, (ii) fails to act in good faith, engages in intentional
misconduct or knowingly violates a law, (iii) authorizes the payment of a
dividend or approves a stock purchase or redemption in violation of Section
174 of the Delaware General Corporation Law or (iv) obtains an improper
personal benefit. Article Eleven of the Company's Second Amended and
Restated Certificate of Incorporation includes a provision which eliminates
directors' personal liability to the fullest extent permitted under the
Delaware General Corporation Law.
II-2
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Sale of Capital Stock
In connection with the Solon Acquisition, Inc. in April 1995, Coinmach
Laundry (formerly, SAS Acquisitions Inc. ("SAS")) issued the following
securities to the persons and for the consideration described below:
(1) 72,153 shares of Class A Common Stock to GTCR for $5,517,582.35
cash;
(2) 300 shares of Class A Common Stock James N. Chapman for $22,941.18
cash;
(3) 228 shares of Class A Common Stock to Michael E. Marrus for
$17,435.30 cash;
(4) 398 shares of Class A Common Stock to Mitchell Blatt for $30,435.29
cash;
(5) 3,806 shares of Class A Common Stock to Heller Financial, Inc. for
$291,047.06 cash;
(6) 3,425 shares of Class A Common Stock to Jackson National Life
Insurance Company for $261,911.77 cash;
(7) 381 shares of Class A Common Stock to Jackson National Life
Insurance Company of Michigan for $29,135.29 cash;
(8) 2,405 shares of Class A Common Stock to President and Fellows of
Harvard College for $183,911.76 cash;
(9) 1,479 shares of Class A Common Stock to MCS Capital, Inc. for
$113,100.00 cash;
(10) 425 shares of Class A Common Stock to Michael Stanky for
$32,500.00 cash;
(11) 2,000 shares of Class B Common Stock to Robert M. Doyle for
$4,620.80 cash and a promissory note in the aggregate principal
amount of $26,184.80;
(12) 1,500 shares of Class B Common Stock to Michael Stanky for
$3,465.64 cash and a promissory note in the aggregate principal
amount of $19,638.56;
(13) 4,000 shares of Class B Common Stock to MCS Capital, Inc. for
$9,241.68 cash and a promissory note in the aggregate principal
amount of $52,369.52; and
(14) 4,000 shares of Class B Common Stock to Mitchell Blatt for
$9,241.68 cash and a promissory note in the aggregate principal
amount of $52,369.52.
In connection with the Merger in November 1995, SAS issued the
following securities to the persons and for the consideration described
below:
(1) 125,532.4476 shares of Class F Common Stock to GTCR in exchange for
72,516 shares of Class A Common Stock of TCC;
(2) 4,184.0687 shares of Class F Common Stock to President and Fellows
of Harvard College in exchange for 2,417 shares of Class A Common
Stock of TCC;
(3) 463.9348 shares of Class F Common Stock to MCS Capital, Inc. in
exchange for 268 shares of Class A Common Stock of TCC;
(4) 2,108.4798 shares of Class F Common Stock to MCS Capital
Management, Inc. for 1,218 shares of Class A Common Stock of TCC;
(5) 692.44 shares of Class F Common Stock to Mitchell Blatt in exchange
for 400 shares of Class A Common Stock of TCC;
(6) 519.33 shares of Class F Common Stock to James N. Chapman in
exchange for 300 shares of Class A Common Stock of TCC;
(7) 399.8841 shares of Class F Common Stock to Michael E. Marrus in
exchange for 231 shares of Class A Common Stock of TCC;
(8) 10,386.6 shares of Class G Common Stock to MCS Capital, Inc. in
exchange for 6,000 shares of Class B Common Stock of TCC;
(9) 10,386.6 shares of Class G Common Stock to Mitchell Blatt in
exchange for 6,000 shares of Class B Common Stock of TCC;
(10) 1,731.1 shares of Class G Common Stock to Robert M. Doyle in
exchange for 1,000 shares of Class B Common Stock of TCC;
(11) 1,298.3250 shares of Class G Common Stock to Charles Prato in
exchange for 750 shares of Class B Common Stock of TCC;
(12) 865.55 shares of Class G Common Stock to David Tulkop in exchange
for 500 shares of Class B Common Stock of TCC;
(13) 432.775 shares of Class G Common Stock to Russell Harrison in
exchange for 250 shares of Class B Common Stock of TCC;
II-3
<PAGE>
(14) 6,621.4575 shares of Class C Common Stock to Heller Financial,
Inc. in exchange for 3,825 shares of Class C Common Stock of TCC;
(15) 5,960.1773 shares of Class C Common Stock to Jackson National Life
Insurance Company in exchange for 3,443 shares of Class C Common
Stock of TCC;
(16) 661.2802 shares of Class C Common Stock to Jackson National Life
Insurance Company of Michigan in exchange for 382 shares of Class
C Common Stock of TCC;
(17) 3,806 shares of Class E Common Stock to Heller Financial, Inc. in
exchange for 3,806 shares of Class A Common Stock of SAS;
(18) 3,425 shares of Class E Common Stock to Jackson National Life
Insurance Company in exchange for 3,425 shares of Class A Common
Stock of SAS; and
(19) 381 shares of Class E Common Stock to Jackson National Life
Insurance Company of Michigan in exchange for 381 shares of Class
A Common Stock of SAS.
Such sales and issuances of securities were deemed exempt from
registration under the Securities Act of 1933, as amended, by virtue of
Section 4(2) thereof, as transactions not involving a public offering.
The Solon Exchange Offer
On November 30, 1995, the Company consummated, pursuant to an exemption
from registration set forth in Section 4(2) of the Securities Act, an
offering (the "Solon Exchange Offer") to holders of the Company's 12 3/4%
Senior Notes due 2001 (the "Old Senior Notes") and 13 3/4% Senior
Subordinated Debentures due 2002 (the "Old Subordinated Debentures," and,
together with the Old Senior Notes, the "Solon Notes") to exchange, for
each $1,000 principal amount of Solon Notes, $1,055 principal amount of 11
3/4% Senior Notes due 2005 of Coinmach Corporation (the "Private Notes"),
plus payment in cash of accrued and unpaid interest on the Solon Notes to
the exchange date. An aggregate principal amount of $127,123,000 of
Private Notes were issued in exchange for the Old Solon Notes. As of
November 29, 1995, the expiration date of the Solon Exchange Offer, (i)
$90,500,000 in aggregate principal amount of the Old Senior Notes were
tendered out of a total of $99,000,000 in aggregate principal amount issued
and outstanding, and (ii) $30,000,000 in aggregate principal amount of the
Old Subordinated Debentures were tendered for exchange out of a total of
$30,000,000 in aggregate principal amount issued and outstanding. The
underwriting discount and commission was $1,652,300.
The 144A Private Placements and Additional Exchange Offer
Concurrently with the Solon Exchange Offer, the Company successfully
consummated an offering (the "Debt Offering") of an additional $50,840,000
of Private Notes in a Rule 144A private placement transaction under the
Securities Act. On December 14, 1995, following the consummation of the
Solon Exchange Offer and the Debt Offering, the Company issued (i) an
additional $15,000,000 aggregate principal amount of Private Notes in a
Rule 144A transaction (the "Additional Debt Offering"), and (ii) an
additional $3,692,000 aggregate principal amount of Private Notes in
exchange for $3,500,000 aggregate principal amount of Old Senior Notes in a
privately negotiated transaction on the same terms applicable to the Solon
Exchange Offer. Pursuant to the Debt Offering and the Additional Debt
Offering, the Company sold an aggregate $65,840,000 face amount of Private
Notes. Lazard Freres & Co. LLC, acting as initial purchaser in the Debt
Offering and Additional Debt Offering, acquired the Private Notes from the
Company (prior to resale under Rule 144A) in reliance on an exemption from
registration set forth in Section 4(2) of the Securities Act. The
underwriting discount and commission was $1,175,000.
ITEM 16. EXHIBITS
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
------- -----------
1.1* Form of Underwriting Agreement
2.1 Agreement and Plan of Merger, dated November 30, 1995, of
TCC, Solon and SAS Acquisitions Inc. ("SAS") (incorporated by
reference from exhibit number 2.1 to Coinmach's Registration
Statement on Form S-1, file number 333-00620)
II-4
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1* Form of Second Amended and Restated Certificate of
Incorporation of the Company
3.2* Certificate of Powers, Designations, Preferences and
Relative Participating, Optional and other Special Rights of
Preferred Stock and Qualifications, Limitations and
Restructurings Thereof
3.3* Form of Second Amended and Restated Bylaws of the Company
4.1* Form of certificate representing Common Stock of the Company
5.1* Opinion and Consent of Anderson Kill Olick & Oshinsky, P.C.
regarding the validity of the Common Stock
9.1* Form of Voting Agreement among the Company, Golder, Thoma,
Cressey, Rauner Fund IV, L.P. ("GTCR Fund IV"), and the
signatories thereto
10.1 Indenture, dated as of November 30, 1995, by and between
Coinmach, as Issuer, and Fleet National Bank of Connecticut
(formerly, Shawmut Bank Connecticut, National Association),
as Trustee (incorporated by reference from exhibit number
4.1 to Coinmach's Registration Statement on Form S-1, file
number 333-00620)
10.2 First Supplemental Indenture, dated as of December 11, 1995,
by and between Coinmach, as Issuer, and Fleet National Bank
of Connecticut (formerly, Shawmut Bank Connecticut, National
Association), as Trustee (incorporated by reference from
exhibit number 4.2 to Coinmach's Registration Statement on
Form S-1, file number 333-00620)
10.3 First Supplemental Indenture, dated as of November 28, 1995,
by and between Solon and U.S. Trust Company of New York, as
Trustee (incorporated by reference from exhibit number 4.3
to Coinmach's Registration Statement on Form S-1, file
number 333-00620)
10.4 Registration Rights Agreement, dated as of November 30,
1995, by and between Coinmach and Lazard Freres & Co. LLC
("Lazard"), as Initial Purchaser (incorporated by reference
from exhibit number 4.6 to Coinmach's Registration Statement
on Form S-1, file number 333-00620)
10.5 Addendum to Registration Rights Agreement, dated December
14, 1995, by and between Coinmach and Lazard, as Initial
Purchaser (incorporated by reference from exhibit number 4.8
to Coinmach's Registration Statement on Form S-1, file
number 333-00620)
10.6 Purchase Agreement, dated as of January 31, 1995, by and
among TCC, CIC I Acquisition Corp. ("CIC"), the stockholders
of CIC and Coinmach Holding Corp. (incorporated by reference
from exhibit number 10.1 to Coinmach's Registration
Statement on Form S-1, file number 333-00620)
10.7 Equity Purchase Agreement, dated as of January 31, 1995, by
and between TCC and GTCR Fund IV, subsequently amended by
the Omnibus Agreement (as hereinafter defined) (incorporated
by reference from exhibit number 10.2 to Coinmach's
Registration Statement on Form S-1, file number 333-00620)
- ----------
* To be filed by amendment.
II-5
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.8 Investor Purchase Agreement, dated as January 31, 1995, by
and between TCC, GTCR Fund IV and President and Fellows of
Harvard College, subsequently amended by the Omnibus
Agreement (as hereinafter defined) (incorporated by reference
from exhibit number 10.3 to Coinmach's Registration Statement
on Form S-1, file number 333-00620)
10.9 Investor Purchase Agreement, dated as January 31, 1995, by
and between TCC, GTCR Fund IV, MCS Capital Management, Inc.
and Stephen R. Kerrigan, subsequently amended by the Omnibus
Agreement (as hereinafter defined) (incorporated by reference
from exhibit number 10.4 to Coinmach's Registration Statement
on Form S-1, file number 333-00620)
10.10 Stock Pledge Agreement, dated as of January 31, 1995, by and
between TCC and MCS Capital, Inc. (incorporated by reference
from exhibit number 10.5 to Coinmach's Registration Statement
on Form S-1, file number 333-00620)
10.11 Stock Pledge Agreement, dated as of January 31, 1995, by and
between TCC and Mitchell Blatt (incorporated by reference
from exhibit number 10.6 to Coinmach's Registration Statement
on Form S-1, file number 333-00620)
10.12 Promissory Note, dated January 31, 1995, of MCS Capital, Inc.
in favor of TCC, subsequently amended by the Omnibus
Agreement (as hereinafter defined) (incorporated by reference
from exhibit number 10.7 to Coinmach's Registration Statement
on Form S-1, file number 333-00620)
10.13 Promissory Note, dated January 31, 1995, of Mitchell Blatt in
favor of TCC, subsequently amended by the Omnibus Agreement
(as hereinafter defined) (incorporated by reference from
exhibit number 10.8 to Coinmach's Registration Statement on
Form S-1, file number 333-00620)
10.14 Management and Consulting Services Agreement, dated as of
January 31, 1995, by and between GTCR Fund IV and TCC,
subsequently amended by the Omnibus Agreement (as hereinafter
defined) (incorporated by reference from exhibit number 10.9
to Coinmach's Registration Statement on Form S-1, file number
333-00620)
10.15 Senior Management Agreement, dated as of January 31, 1995, by
and between TCC, Stephen R. Kerrigan, MCS Capital, Inc. and
GTCR Fund IV, subsequently amended by the Omnibus Agreement
(as hereinafter defined) (incorporated by reference from
exhibit number 10.10 to Coinmach's Registration Statement on
Form S-1, file number 333-00620)
10.16 Senior Management Agreement, dated as of January 31, 1995, by
and between TCC, Coinmach Industries Co., L.P., Mitchell
Blatt and GTCR Fund IV, subsequently amended by the Omnibus
Agreement (as hereinafter defined) (incorporated by reference
from exhibit number 10.11 to Coinmach's Registration
Statement on Form S-1, file number 333-00620)
10.17 Senior Management Agreement, dated January 31, 1995, by and
between TCC, Coinmach Industries Co., L.P., Robert M. Doyle
and GTCR Fund IV, subsequently amended by the Omnibus
Agreement (as hereinafter defined) (incorporated by reference
from exhibit number 10.12 to Coinmach's Registration
Statement on Form S-1, file number 333-00620)
- ----------
* To be filed by amendment.
II-6
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.18 Employment Agreement, dated as of August 4, 1995, by and
between Solon and John E. Denson (incorporated by
reference from exhibit number 10.13 to Coinmach's
Registration Statement on Form S-1, file number 333-00620)
10.19 Employment Agreement, dated as of July 1, 1995, by and
between Solon, Michael E. Stanky and GTCR Fund IV
(incorporated by reference from exhibit number 10.14 to
Coinmach's Registration Statement on Form S-1, file number
333-00620)
10.20 Stock Purchase Agreement, dated as of March 7, 1995, by
and among Ford Coin Laundries, Inc., Kwik Wash Laundries,
Inc., Solon and the Sellers (incorporated by reference
from exhibit number 10.15 to Coinmach's Registration
Statement on Form S-1, file number 333-00620)
10.21 Equity Purchase Agreement, dated as of July 26, 1995,
between GTCR Fund IV and SAS, subsequently amended by the
Omnibus Agreement (as hereinafter defined)
10.22 Investor Purchase Agreement, dated as of July 26, 1995,
among SAS, GTCR Fund IV, Heller, Jackson National Life
Insurance Company, Jackson National Life Insurance Company
of Michigan, James N. Chapman, Michael E. Marrus,
President and Fellows of Harvard College, MCS Capital,
Inc., Mitchell Blatt, and Michael Stanky, subsequently
amended by the Omnibus Agreement (as hereinafter defined)
10.23 Executive Stock Agreement, dated as of July 26, 1995,
among SAS, GTCR Fund IV, MCS Capital, Inc., Mitchell
Blatt, Robert M. Doyle and Michael Stanky (with spousal
consents), subsequently amended by the Omnibus Agreement
(as hereinafter defined)
10.24 Stockholders Agreement, dated as of July 26, 1995, among
SAS and GTCR Fund IV, Robert M. Doyle, Heller, Jackson
National Life Insurance Company, Jackson National Life
Insurance Company of Michigan, James N. Chapman, Michael
E. Marrus, President and Fellows of Harvard College, MCS
Capital, Inc., Mitchell Blatt, and Michael Stanky
(collectively, the "SAS Stockholders")
10.25 Registration Agreement, dated as of July 26, 1995, among
SAS and each of the SAS Stockholders
10.26 Management Consulting Services Agreement, dated as of July
26, 1995, between SAS Acquisitions Inc. and GTCR IV, L.P.
10.27 Supply Agreement, dated July 26, 1995, by and among SAS
Acquisitions Inc., Solon and Speed Queen Company
(incorporated by reference from exhibit number 10.16 to
Coinmach's Registration Statement on Form S-1, file number
333-00620)
10.28 Dealer Manager Agreement, dated October 20, 1995, by and
among TCC, Solon, Lazard and Fieldstone Private Capital
Group, L.P. (incorporated by reference from exhibit number
10.17 to Coinmach's Registration Statement on Form S-1,
file number 333-00620)
- ----------
* To be filed by amendment.
II-7
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.29 Purchase Agreement, dated November 15, 1995, by and among
TCC, Solon and Lazard (incorporated by reference from
exhibit number 10.18 to Coinmach's Registration Statement
on Form S-1, file number 333-00620)
10.30 Addendum to Purchase Agreement, dated December 11, 1995,
by and between Coinmach and Lazard (incorporated by
reference from exhibit number 10.19 to Coinmach's
Registration Statement on Form S-1, file number 333-
00620)
10.31 Omnibus Agreement, dated as of November 30, 1995, among
SAS, Solon, TCC and each of the other parties executing a
signature page thereto (the "Omnibus Agreement")
(incorporated by reference from exhibit number 10.20 to
Coinmach's Registration Statement on Form S-1, file
number 333-00620)
10.32 Credit Agreement, dated as of November 30, 1995, by and
between Coinmach, as Borrower and Heller (incorporated by
reference from exhibit number 10.21 to Coinmach's
Registration Statement on Form S-1, file number 333-
00620)
10.33 First Amendment to Credit Agreement, dated as of December
9, 1995, by and among Coinmach, Heller, SAS, and Super
Laundry Equipment Corp. ("SLEC") (incorporated by
reference from exhibit number 10.22 to Coinmach's
Registration Statement on Form S-1, file number 333-
00620)
10.34 Form of Note, dated November 30, 1995, of Coinmach in
favor of Heller (included as an exhibit to Exhibit 10.26
hereto) (incorporated by reference from exhibit number
10.23 to Coinmach's Registration Statement on Form S-1,
file number 333-00620)
10.35 Pledge Agreement, dated as of November 30, 1995, by and
between Coinmach and Heller (incorporated by reference
from exhibit number 10.24 to Coinmach's Registration
Statement on Form S-1, file number 333-00620)
10.36 Guaranty, dated as of January 31, 1995, by Super Laundry
Management Corp. in favor of Heller (incorporated by
reference from exhibit number 10.25 to Coinmach's
Registration Statement on Form S-1, file number 333-
00620)
10.37 Guaranty, dated as of November 30, 1995, by SLEC in favor
of Heller (incorporated by reference from exhibit number
10.26 to Coinmach's Registration Statement on Form S-1,
file number 333-00620)
10.38 Security Agreement, dated as of November 30, 1995, by and
between Coinmach and Heller (incorporated by reference
from exhibit number 10.27 to Coinmach's Registration
Statement on Form S-1, file number 333-00620)
10.39 Security Agreement, dated as of November 30, 1995, by and
between SLEC and Heller (incorporated by reference from
exhibit number 10.28 to Coinmach's Registration Statement
on Form S-1, file number 333-00620)
10.40 Collateral Assignment of Leases of Coinmach to Heller,
dated as of November 30, 1995 (incorporated by reference
from exhibit number 10.29 to Coinmach's Registration
Statement on Form S-1, file number 333-00620)
- ----------
* To be filed by amendment.
II-8
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.41 Collateral Assignment of Leases of SLEC to Heller, dated as
of November 30, 1995 (incorporated by reference from
exhibit number 10.30 to Coinmach's Registration Statement
on Form S-1, file number 333-00620)
10.42* 1996 Employee Stock Option Plan of the Company
10.43* Promissory Note, dated _______, 1996, of Stephen R.
Kerrigan in favor of the Company
10.44* Promissory Note, dated _______, 1996, of Robert M. Doyle in
favor of the Company
10.45* Promissory Note, dated _______, 1996, of Michael E. Stanky
in favor of the Company
10.46* Promissory Note, dated _______, 1996, of James N. Chapman
in favor of the Company
10.47* Promissory Note, dated _______, 1996, of John E. Denson in
favor of the Company
10.48* Promissory Note, dated _______, 1996, of David A. Siegel in
favor of the Company
10.49* Promissory Note, dated _______, 1996, of R. Daniel Osborne
in favor of the Company
10.50* Reclassification Agreement, dated _______, 1996, among the
Company and the SAS Stockholders
10.51* Option Agreement, dated _______, 1996, between the Company
and MCS Capital, Inc.
10.52* Lock-Up Agreement, dated _______, 1996, among the Company,
GTCR Fund IV, President and Fellows of Harvard Collage, MCS
Capital, Inc., Heller, Mitchell Blatt, Robert M. Doyle,
Michael E. Stanky, James N. Chapman, Michael E. Marrus,
Charles Prato, David Tulkop, Russell Harrison, Jackson
National Life Insurance Company and Jackson National Life
Insurance Company of Michigan
10.53* Waiver of Registration Rights, dated _______, 1996, among
the Company and the SAS Stockholders
11.1 Pro Forma Computation of Loss Per Common Share
12.1 Computation of ratios
16.1 Letter, dated June 29, 1995, from Arthur Andersen LLP to
the Securities and Exchange Commission regarding change in
certifying accountants (incorporated by reference from
exhibit number 16.1 to Coinmach's Registration Statement on
Form S-1, file number 333-00620)
21.1 Subsidiaries of the Company
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Ernst & Young LLP
- ----------
* To be filed by amendment.
II-9
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of Anderson Kill Olick & Oshinsky, P.C. (Included in
Exhibit 5.1)
24.1 Power of Attorney (included on the signature pages to this
Registration Statement)
27.1 Financial Data Schedule
(b) Financial Statements Schedules
None.
ITEM 17. UNDERTAKINGS.
The Company (or the "Registrant") hereby undertakes that:
(1) for purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall
be deemed to be part of this Registration Statement as of the time
it was declared effective; and
(2) for the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933, as amended, and, is
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Securities Act of 1933, as amended, and will be governed by the final
adjudication of such issue.
The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters
to permit prompt delivery to each purchaser.
- ----------
* To be filed by amendment.
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Roslyn, State of New
York on May 10, 1996.
COINMACH LAUNDRY CORPORATION
By: STEPHEN R. KERRIGAN
--------------------
Stephen R. Kerrigan
Chief Executive Officer
POWER OF ATTORNEY
The undersigned directors and officers of Coinmach Laundry Corporation
hereby constitute and appoint Stephen R. Kerrigan and Robert M. Doyle, and
each of them, with full power to act without the other and with full power
of substitution and resubstitution, our true and lawful attorneys-in-fact
and agents, for him and in his name, place, and stead, in any and all
capacities, to sign on his behalf any and all amendments (including post-
effective amendments and amendments thereto) to this Registration Statement
and any other registration statement (and any amendments thereto) filed for
the purpose of registering additional shares of Common Stock pursuant to
Rule 462 under the Securities Act, and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Commission
granting unto said attorney-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing
requisite and necessary to be done in about the premises as fully as to all
intents and purposes as he or she might or could do in person, and hereby
ratify and confirm that all such attorneys-in-fact or agents, or any of
them, or their substitutes shall lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons
in the capacities indicated on May 10, 1996.
Signature Title
--------- -----
/s/ STEPHEN R. KERRIGAN Chairman of the Board of Directors
------------------------- and Chief Executive Officer
Stephen R. Kerrigan
/s/ MITCHELL BLATT Director, President and Chief
------------------------- Operating Officer
MITCHELL BLATT
/s/ ROBERT M. DOYLE Chief Financial Officer and Senior
------------------------- Vice President
Robert M. Doyle
/s/ JOHN E. DENSON Senior Vice President
-------------------------
John E. Denson
/s/ MICHAEL STANKY Senior Vice President
-------------------------
Michael Stanky
/s/ DAVID A. DONNINI Director
-------------------------
David A. Donnini
/s/ JAMES N. CHAPMAN Director
-------------------------
James N. Chapman
/s/ BRUCE V. RAUNER Director
-------------------------
Bruce V. Rauner
II-11
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ----------
<S> <C> <C>
1.1* Form of Underwriting Agreement
2.1 Agreement and Plan of Merger, dated November 30, 1995, of
TCC, Solon and SAS Acquisitions Inc. ("SAS") (incorporated by
reference from exhibit number 2.1 to Coinmach's Registration
Statement on Form S-1, file number 333-00620)
3.1* Form of Second Amended and Restated Certificate of
Incorporation of the Company
3.2* Certificate of Powers, Designations, Preferences and
Relative Participating, Optional and other Special Rights of
Preferred Stock and Qualifications, Limitations and
Restructurings Thereof
3.3* Form of Second Amended and Restated Bylaws of the Company
4.1* Form of certificate representing Common Stock of the Company
5.1* Opinion and Consent of Anderson Kill Olick & Oshinsky, P.C.
regarding the validity of the Common Stock
9.1* Form of Voting Agreement among the Company, Golder, Thoma,
Cressey, Rauner Fund IV, L.P. ("GTCR Fund IV"), and the
signatories thereto
10.1 Indenture, dated as of November 30, 1995, by and between
Coinmach, as Issuer, and Fleet National Bank of Connecticut
(formerly, Shawmut Bank Connecticut, National Association),
as Trustee (incorporated by reference from exhibit number
4.1 to Coinmach's Registration Statement on Form S-1, file
number 333-00620)
10.2 First Supplemental Indenture, dated as of December 11, 1995,
by and between Coinmach, as Issuer, and Fleet National Bank
of Connecticut (formerly, Shawmut Bank Connecticut, National
Association), as Trustee (incorporated by reference from
exhibit number 4.2 to Coinmach's Registration Statement on
Form S-1, file number 333-00620)
10.3 First Supplemental Indenture, dated as of November 28, 1995,
by and between Solon and U.S. Trust Company of New York, as
Trustee (incorporated by reference from exhibit number 4.3
to Coinmach's Registration Statement on Form S-1, file
number 333-00620)
10.4 Registration Rights Agreement, dated as of November 30,
1995, by and between Coinmach and Lazard Freres & Co. LLC
("Lazard"), as Initial Purchaser (incorporated by reference
from exhibit number 4.6 to Coinmach's Registration Statement
on Form S-1, file number 333-00620)
10.5 Addendum to Registration Rights Agreement, dated December
14, 1995, by and between Coinmach and Lazard, as Initial
Purchaser (incorporated by reference from exhibit number 4.8
to Coinmach's Registration Statement on Form S-1, file
number 333-00620)
10.6 Purchase Agreement, dated as of January 31, 1995, by and
among TCC, CIC I Acquisition Corp. ("CIC"), the stockholders
of CIC and Coinmach Holding Corp. (incorporated by reference
from exhibit number 10.1 to Coinmach's Registration
Statement on Form S-1, file number 333-00620)
</TABLE>
- ----------
* To be filed by amendment.
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ----------
<S> <C> <C>
10.7 Equity Purchase Agreement, dated as of January 31, 1995, by
and between TCC and GTCR Fund IV, subsequently amended by
the Omnibus Agreement (as hereinafter defined) (incorporated
by reference from exhibit number 10.2 to Coinmach's
Registration Statement on Form S-1, file number 333-00620)
10.8 Investor Purchase Agreement, dated as January 31, 1995, by
and between TCC, GTCR Fund IV and President and Fellows of
Harvard College, subsequently amended by the Omnibus
Agreement (as hereinafter defined) (incorporated by reference
from exhibit number 10.3 to Coinmach's Registration Statement
on Form S-1, file number 333-00620)
10.9 Investor Purchase Agreement, dated as January 31, 1995, by
and between TCC, GTCR Fund IV, MCS Capital Management, Inc.
and Stephen R. Kerrigan, subsequently amended by the Omnibus
Agreement (as hereinafter defined) (incorporated by reference
from exhibit number 10.4 to Coinmach's Registration Statement
on Form S-1, file number 333-00620)
10.10 Stock Pledge Agreement, dated as of January 31, 1995, by and
between TCC and MCS Capital, Inc. (incorporated by reference
from exhibit number 10.5 to Coinmach's Registration Statement
on Form S-1, file number 333-00620)
10.11 Stock Pledge Agreement, dated as of January 31, 1995, by and
between TCC and Mitchell Blatt (incorporated by reference
from exhibit number 10.6 to Coinmach's Registration Statement
on Form S-1, file number 333-00620)
10.12 Promissory Note, dated January 31, 1995, of MCS Capital, Inc.
in favor of TCC, subsequently amended by the Omnibus
Agreement (as hereinafter defined) (incorporated by reference
from exhibit number 10.7 to Coinmach's Registration Statement
on Form S-1, file number 333-00620)
10.13 Promissory Note, dated January 31, 1995, of Mitchell Blatt in
favor of TCC, subsequently amended by the Omnibus Agreement
(as hereinafter defined) (incorporated by reference from
exhibit number 10.8 to Coinmach's Registration Statement on
Form S-1, file number 333-00620)
10.14 Management and Consulting Services Agreement, dated as of
January 31, 1995, by and between GTCR Fund IV and TCC,
subsequently amended by the Omnibus Agreement (as hereinafter
defined) (incorporated by reference from exhibit number 10.9
to Coinmach's Registration Statement on Form S-1, file number
333-00620)
10.15 Senior Management Agreement, dated as of January 31, 1995, by
and between TCC, Stephen R. Kerrigan, MCS Capital, Inc. and
GTCR Fund IV, subsequently amended by the Omnibus Agreement
(as hereinafter defined) (incorporated by reference from
exhibit number 10.10 to Coinmach's Registration Statement on
Form S-1, file number 333-00620)
10.16 Senior Management Agreement, dated as of January 31, 1995, by
and between TCC, Coinmach Industries Co., L.P., Mitchell
Blatt and GTCR Fund IV, subsequently amended by the Omnibus
Agreement (as hereinafter defined) (incorporated by reference
from exhibit number 10.11 to Coinmach's Registration
Statement on Form S-1, file number 333-00620)
</TABLE>
- ----------
* To be filed by amendment.
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ----------
<S> <C> <C>
10.17 Senior Management Agreement, dated January 31, 1995, by and
between TCC, Coinmach Industries Co., L.P., Robert M. Doyle
and GTCR Fund IV, subsequently amended by the Omnibus
Agreement (as hereinafter defined) (incorporated by reference
from exhibit number 10.12 to Coinmach's Registration
Statement on Form S-1, file number 333-00620)
10.18 Employment Agreement, dated as of August 4, 1995, by and
between Solon and John E. Denson (incorporated by
reference from exhibit number 10.13 to Coinmach's
Registration Statement on Form S-1, file number 333-00620)
10.19 Employment Agreement, dated as of July 1, 1995, by and
between Solon, Michael E. Stanky and GTCR Fund IV
(incorporated by reference from exhibit number 10.14 to
Coinmach's Registration Statement on Form S-1, file number
333-00620)
10.20 Stock Purchase Agreement, dated as of March 7, 1995, by
and among Ford Coin Laundries, Inc., Kwik Wash Laundries,
Inc., Solon and the Sellers (incorporated by reference
from exhibit number 10.15 to Coinmach's Registration
Statement on Form S-1, file number 333-00620)
10.21 Equity Purchase Agreement, dated as of July 26, 1995,
between GTCR Fund IV and SAS, subsequently amended by the
Omnibus Agreement (as hereinafter defined)
10.22 Investor Purchase Agreement, dated as of July 26, 1995,
among SAS, GTCR Fund IV, Heller, Jackson National Life
Insurance Company, Jackson National Life Insurance Company
of Michigan, James N. Chapman, Michael E. Marrus,
President and Fellows of Harvard College, MCS Capital,
Inc., Mitchell Blatt, and Michael Stanky, subsequently
amended by the Omnibus Agreement (as hereinafter defined)
10.23 Executive Stock Agreement, dated as of July 26, 1995,
among SAS, GTCR Fund IV, MCS Capital, Inc., Mitchell
Blatt, Robert M. Doyle and Michael Stanky (with spousal
consents), subsequently amended by the Omnibus Agreement
(as hereinafter defined)
10.24 Stockholders Agreement, dated as of July 26, 1995, among
SAS and GTCR Fund IV, Robert M. Doyle, Heller, Jackson
National Life Insurance Company, Jackson National Life
Insurance Company of Michigan, James N. Chapman, Michael
E. Marrus, President and Fellows of Harvard College, MCS
Capital, Inc., Mitchell Blatt, and Michael Stanky
(collectively, the "SAS Stockholders")
10.25 Registration Agreement, dated as of July 26, 1995, among
SAS and each of the SAS Stockholders
10.26 Management Consulting Services Agreement, dated as of July
26, 1995, between SAS Acquisitions Inc. and GTCR IV, L.P.
10.27 Supply Agreement, dated July 26, 1995, by and among SAS
Acquisitions Inc., Solon and Speed Queen Company
(incorporated by reference from exhibit number 10.16 to
Coinmach's Registration Statement on Form S-1, file number
333-00620)
10.28 Dealer Manager Agreement, dated October 20, 1995, by and
among TCC, Solon, Lazard and Fieldstone Private Capital
Group, L.P. (incorporated by reference from exhibit number
10.17 to Coinmach's Registration Statement on Form S-1,
file number 333-00620)
</TABLE>
- ----------
* To be filed by amendment.
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ----------
<S> <C> <C>
10.29 Purchase Agreement, dated November 15, 1995, by and among
TCC, Solon and Lazard (incorporated by reference from
exhibit number 10.18 to Coinmach's Registration Statement
on Form S-1, file number 333-00620)
10.30 Addendum to Purchase Agreement, dated December 11, 1995,
by and between Coinmach and Lazard (incorporated by
reference from exhibit number 10.19 to Coinmach's
Registration Statement on Form S-1, file number 333-
00620)
10.31 Omnibus Agreement, dated as of November 30, 1995, among
SAS, Solon, TCC and each of the other parties executing a
signature page thereto (the "Omnibus Agreement")
(incorporated by reference from exhibit number 10.20 to
Coinmach's Registration Statement on Form S-1, file
number 333-00620)
10.32 Credit Agreement, dated as of November 30, 1995, by and
between Coinmach, as Borrower and Heller (incorporated by
reference from exhibit number 10.21 to Coinmach's
Registration Statement on Form S-1, file number 333-
00620)
10.33 First Amendment to Credit Agreement, dated as of December
9, 1995, by and among Coinmach, Heller, SAS, and Super
Laundry Equipment Corp. ("SLEC") (incorporated by
reference from exhibit number 10.22 to Coinmach's
Registration Statement on Form S-1, file number 333-
00620)
10.34 Form of Note, dated November 30, 1995, of Coinmach in
favor of Heller (included as an exhibit to Exhibit 10.26
hereto) (incorporated by reference from exhibit number
10.23 to Coinmach's Registration Statement on Form S-1,
file number 333-00620)
10.35 Pledge Agreement, dated as of November 30, 1995, by and
between Coinmach and Heller (incorporated by reference
from exhibit number 10.24 to Coinmach's Registration
Statement on Form S-1, file number 333-00620)
10.36 Guaranty, dated as of January 31, 1995, by Super Laundry
Management Corp. in favor of Heller (incorporated by
reference from exhibit number 10.25 to Coinmach's
Registration Statement on Form S-1, file number 333-
00620)
10.37 Guaranty, dated as of November 30, 1995, by SLEC in favor
of Heller (incorporated by reference from exhibit number
10.26 to Coinmach's Registration Statement on Form S-1,
file number 333-00620)
10.38 Security Agreement, dated as of November 30, 1995, by and
between Coinmach and Heller (incorporated by reference
from exhibit number 10.27 to Coinmach's Registration
Statement on Form S-1, file number 333-00620)
10.39 Security Agreement, dated as of November 30, 1995, by and
between SLEC and Heller (incorporated by reference from
exhibit number 10.28 to Coinmach's Registration Statement
on Form S-1, file number 333-00620)
10.40 Collateral Assignment of Leases of Coinmach to Heller,
dated as of November 30, 1995 (incorporated by reference
from exhibit number 10.29 to Coinmach's Registration
Statement on Form S-1, file number 333-00620)
10.41 Collateral Assignment of Leases of SLEC to Heller, dated
as of November 30, 1995 (incorporated by reference from
exhibit number 10.30 to Coinmach's Registration Statement
on Form S-1, file number 333-00620)
</TABLE>
- ----------
* To be filed by amendment.
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ----------
<S> <C> <C>
10.42* 1996 Employee Stock Option Plan of the Company
10.43* Promissory Note, dated _______, 1996, of Stephen R.
Kerrigan in favor of the Company
10.44* Promissory Note, dated _______, 1996, of Robert M. Doyle in
favor of the Company
10.45* Promissory Note, dated _______, 1996, of Michael E. Stanky
in favor of the Company
10.46* Promissory Note, dated _______, 1996, of James N. Chapman
in favor of the Company
10.47* Promissory Note, dated _______, 1996, of John E. Denson in
favor of the Company
10.48* Promissory Note, dated _______, 1996, of David A. Siegel in
favor of the Company
10.49* Promissory Note, dated _______, 1996, of R. Daniel Osborne
in favor of the Company
10.50* Reclassification Agreement, dated _______, 1996, among the
Company and the SAS Stockholders
10.51* Option Agreement, dated _______, 1996, between the Company
and MCS Capital, Inc.
10.52* Lock-Up Agreement, dated _______, 1996, among the Company,
GTCR Fund IV, President and Fellows of Harvard Collage, MCS
Capital, Inc., Heller, Mitchell Blatt, Robert M. Doyle,
Michael E. Stanky, James N. Chapman, Michael E. Marrus,
Charles Prato, David Tulkop, Russell Harrison, Jackson
National Life Insurance Company and Jackson National Life
Insurance Company of Michigan
10.53* Waiver of Registration Rights, dated _______, 1996, among
the Company and the SAS Stockholders
11.1 Pro Forma Computation of Loss Per Common Share
12.1 Computation of ratios
16.1 Letter, dated June 29, 1995, from Arthur Andersen LLP to
the Securities and Exchange Commission regarding change in
certifying accountants (incorporated by reference from
exhibit number 16.1 to Coinmach's Registration Statement on
Form S-1, file number 333-00620)
21.1 Subsidiaries of the Company
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Ernst & Young LLP
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of Anderson Kill Olick & Oshinsky, P.C. (Included
in Exhibit 5.1)
</TABLE>
- ----------
* To be filed by amendment.
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ----------
<S> <C> <C>
24.1 Power of Attorney (included on the signature pages to this
Registration Statement)
27.1 Financial Data Schedule
</TABLE>
- ----------
* To be filed by amendment.
<PAGE>
Exhibit 10.21
EQUITY PURCHASE AGREEMENT
-------------------------
THIS AGREEMENT is made as of July 26, 1995, between SAS Acquisitions
Inc., a Delaware corporation (the "Company"), and Golder, Thoma, Cressey, Rauner
-------
Fund IV, L.P., a Delaware limited partnership (the "Purchaser"). Except as
---------
otherwise indicated herein, capitalized terms used herein are defined in
Section 6 hereof.
The parties hereto agree as follows:
Section 1. Authorization and Closing.
-------------------------
1A. Authorization of the Class A Common. The Company shall authorize the
-----------------------------------
issuance and sale to the Purchaser of 72,153 shares of its Class A Common Stock,
par value $0.01 per share (the "Class A Common"), having the rights and
--------------
preferences set forth in Exhibit 1A attached hereto.
----------
1B. Purchase and Sale of the Class A Common. At the Closing (as defined
---------------------------------------
in Section 1C below), the Company shall sell to the Purchaser and, subject to
the terms and conditions set forth herein, the Purchaser shall purchase from the
Company 72,153 shares of Class A Common (the "Stock") at a price of $76.4705882
-----
per share.
1C. The Closing. The closing of the purchase and sale of the Stock (the
-----------
"Closing") shall take place at the offices of Kirkland & Ellis, 200 East
- ----------
Randolph Drive, Chicago, Illinois 60601 at 10:00 a.m. on the date hereof or at
such other place or on such other date as may be mutually agreeable to the
Company and the Purchaser. At the Closing, the Company shall deliver to the
Purchaser stock certificates evidencing the Class A Common to be purchased by
the Purchaser, registered in the Purchaser's name, upon payment of the purchase
price thereof by a cashier's or certified check, or by wire transfer of
immediately available funds to such account as designated by the Company in the
amount of $517,582.35 and the surrender for cancellation of a certificate or
certificates representing 100 shares of the Company's common stock, par value
$.01 per share, and the surrender for cancellation the Demand Promissory Note,
dated April 4, 1995, issued by the Company in the amount of $3,600,000.
Section 2. Conditions of the Purchaser's Obligation at the Closing. The
--------------------------------------------------------
obligation of the Purchaser to purchase and pay for the Stock at the Closing is
subject to the satisfaction as of the Closing of the following conditions:
<PAGE>
2A. Representations and Warranties; Covenants. The representations and
-----------------------------------------
warranties contained in Section 5 hereof shall be true and correct at and as of
the Closing as though then made, except to the extent of changes caused by the
transactions expressly contemplated herein, and the Company shall have performed
in all material respects all of the covenants required to be performed by it
hereunder prior to the Closing.
2B. Amendment of Certificate of Incorporation. The Company's certificate
-----------------------------------------
of incorporation (the "Certificate of Incorporation") shall have been
----------------------------
amended to include the provisions set forth in Exhibit 1A hereto, shall be in
----------
full force and effect under the laws of Delaware as of the Closing as so amended
and shall not have been further amended or modified.
2C. Stock Purchase Agreement. The Stock Purchase Agreement, dated as
------------------------
of April 4, 1995, attached hereto as Exhibit 2C (the "Stock Purchase
---------- --------------
Agreement"), between the Company and Ford Coin Laundries, Inc., a Delaware
- ---------
corporation ("Ford"), shall not have been amended or modified and shall be in
----
full force and effect as of the Closing, and the Company shall have consummated
the transactions contemplated thereby.
2D. Option Agreement. The letter agreement, dated as of April 4, 1995,
----------------
attached hereto as Exhibit 2D (the "Option Agreement"), among the Company and
---------- ------ ----------
each of the Ford Holders (as defined therein), shall not have been amended or
modified and shall be in full force and effect as of the Closing, and the
Company shall have exercised its option as described therein to purchase all of
the Option Shares (as defined therein).
2E. Solon Purchase Agreement. The Stock Purchase Agreement, dated as of
------------------------
March 7, 1995, among Ford, Kwik Wash Laundries, Inc., Solon Automated Services,
Inc. ("Solon") and the Sellers (as defined therein), attached hereto as Exhibit
-----
2E (the "Solon Purchase Agreement" and, together with the Stock Purchase
------------------------
Agreement and the Option Agreement, the "Acquisition Agreements"), shall not
----------------------
have been amended or modified and shall be in full force and effect as of the
Closing, and the Company shall have consummated the transactions contemplated
thereby.
2F. Stockholders Agreement. The Company, the Purchaser, each of the
----------------------
Executives (as defined below), and each of the Investors (as defined below)
shall have entered into a stockholders agreement, in form and substance
substantially similar to Exhibit 2F attached hereto (the "Stockholders
---------- ------------
Agreement"), and the Stockholders Agreement shall be in full force and effect as
- ---------
of the Closing.
- 2 -
<PAGE>
2G. Professional Services Agreement. The Company and GTCR IV, L.P., a
-------------------------------
Delaware partnership, shall have entered into a management and consulting
services agreement, in form and substance substantially similar to Exhibit 2G
----------
attached hereto (the "Services Agreement"), and the Services Agreement shall be
------------------
in full force and effect as of the Closing.
2H. Registration Agreement. The Company, the Purchaser, each of the
----------------------
Executives and each of the Investors shall have entered into a registration
agreement in form and substance substantially similar to Exhibit 2H attached
----------
hereto (the "Registration Agreement"), and the Registration Agreement shall be
----------------------
in full force and effect as of the Closing.
2I. Loan Agreement. The Company and Finova Capital Corporation
--------------
("Finova") shall have entered into a loan agreement and related documents, in
------
form and substance satisfactory to the Purchaser (collectively, the "Loan
----
Agreement"), providing for a loan to the Company of $5 million, and the Loan
- ---------
Agreement shall be in full force and effect as of the Closing, and shall not
have been amended or modified.
2J. Guaranty. The Speed Queen Company ("Speed Queen") shall have
-------- ------------
entered into a guaranty and related documents, in form and substance
satisfactory to the Purchaser (collectively, the "Guaranty"), providing for a
--------
guaranty of the amounts owing pursuant to the Loan Agreement, and the Guaranty
shall be in full force and effect as of the Closing, and shall not have been
amended or modified.
2K. Promissory Note. The Company shall have entered into a promissory
---------------
note and related documents with Coinmach Industries Co., L.P., in form and
substance satisfactory to the Purchaser (collectively, the "Promissory Note"
---------------
and, together with the Loan Agreement and the Guaranty, the "Financing
---------
Agreements"), providing for a loan to the Company of $2 million, and the
- ----------
Promissory Note shall be in full force and effect as of the Closing, and shall
not have been amended or modified.
2L. Demand Note. The Company shall have paid to the Harris Trust and
-----------
Savings Bank all amounts outstanding in connection with the Demand Promissory
Note, dated April 4, 1995, issued by the Company to the Harris Trust and Savings
Bank (the "Demand Note"), and the Demand Note shall have been cancelled.
-----------
2M. Executive Stock Agreement. The Company shall have entered into an
-------------------------
executive stock agreement, in form and substance substantially similar to
Exhibit 2M attached hereto (the "Executive Stock Agreements" and, together with
- ---------- --------------------------
the Stockholders Agreement,
- 3 -
<PAGE>
the Registration Agreement, the Services Agreement and the Investor Purchase
Agreement, the "Other Equity Agreements"), with each of the Persons set forth on
-----------------------
"Schedule 2M - Executives" attached hereto (collectively, the "Executives"), and
----------
the Executive Stock Agreement shall not have been amended or modified and shall
be in full force and effect as of the Closing.
2N. Investor Purchase Agreement. The Company shall have entered into an
---------------------------
investor purchase agreement, in form and substance substantially similar to
Exhibit 2N attached hereto (the "Investor Purchase Agreement"), with each of the
---------------------------
Persons set forth on "Schedule 2N - Investors" attached hereto (collectively,
the "Investors"), and the Investor Purchase Agreement shall not have been
---------
amended or modified and shall be in full force and effect as of the Closing.
2O. Purchasing Agreement. The Company, Solon and Speed Queen shall
--------------------
have entered into a purchasing agreement, in form and substance satisfactory to
the Purchaser (the "Purchasing Agreement"), and the Purchasing Agreement shall
--------------------
not have been amended or modified and shall be in full force and effect as of
the Closing.
2P. Management Agreement. The Company and The Coinmach Corporation
--------------------
shall have entered into a management agreement, in form and substance
satisfactory to the Purchaser (the "Management Agreement"), and the Management
--------------------
Agreement shall not have been amended or modified and shall be in full force and
effect as of the Closing.
2Q. Blue Sky Clearance. The Company shall have made all filings under
------------------
applicable state securities laws necessary at the time of issuance to consummate
the issuance of the Stock pursuant to this Agreement in compliance with such
laws.
2R. Closing Documents. The Company shall have delivered to the
-----------------
Purchaser all of the following documents:
(i) an Officer's Certificate, dated the date of the Closing, stating
that the conditions specified in Section 1A and Sections 2A through 2Q,
inclusive, have been fully satisfied;
(ii) certified copies of the resolutions duly adopted by the Company's
board of directors (the "Board") authorizing the execution, delivery and
-----
performance of this Agreement, the Other Equity Agreements, the Acquisition
Agreements, the Financing Agreements, and each of the other agreements
contemplated hereby and thereby (the "Transaction Documents"),
---------------------
- 4 -
<PAGE>
the filing of the amendment to the Certificate of Incorporation referred to
in Section 2B, the issuance and sale of the Class A Common and the
consummation of all other transactions contemplated by this Agreement;
(iii) certified copies of the Certificate of Incorporation and the
Company's bylaws, each as in effect at the Closing; and
(iv) such other documents relating to the transactions contemplated by
this Agreement as the Purchaser or its counsel may reasonably request.
2S. Fees and Expenses. The Company shall have reimbursed the Purchaser
-----------------
for the fees and expenses as provided in Section 7A hereof.
2T. Compliance with Applicable Laws. The purchase of Stock by the
-------------------------------
Purchaser hereunder shall not be prohibited by any applicable law or
governmental regulation, shall not subject the Purchaser to any penalty,
liability or, in the Purchaser's sole judgment, other onerous condition under or
pursuant to any applicable law or governmental regulation, and shall be
permitted by laws and regulations of the jurisdictions to which the Purchaser is
subject.
2U. Waiver. Any condition specified in this Section 2 may be waived
------
only if such waiver is set forth in a writing executed by the Purchaser.
Section 3. Covenants.
---------
3A. Financial Statements and Other Information. The Company shall
------------------------------------------
deliver to the Purchaser (so long as the Purchaser holds any Investor Stock) and
to each holder of at least 25% of the Investor Stock:
(i) as soon as available but in any event within 45 days after the end
of each quarterly accounting period in each fiscal year, unaudited consolidating
and consolidated statements of income and cash flows of the Company and its
Subsidiaries for such quarterly period and for the period from the beginning of
the fiscal year to the end of such quarterly period, and consolidating and
consolidated balance sheets of the Company and its Subsidiaries as of the end of
such quarterly period, setting forth in each case comparisons to the annual
budget and to the corresponding period in the preceding fiscal year, and all
such statements shall be prepared in accordance with generally accepted
accounting
- 5 -
<PAGE>
principles, consistently applied, subject to the absence of footnote disclosures
and to normal year-end adjustments;
(ii) accompanying the financial statements referred to in paragraph (i),
an Officer's Certificate stating that neither the Company nor any of its
Subsidiaries is in default under any of its other material agreements or, if any
such default exists, specifying the nature and period of existence thereof and
what actions the Company and its Subsidiaries have taken and propose to take
with respect thereto;
(iii) within 90 days after the end of each fiscal year, consolidating
and consolidated statements of income and cash flows of the Company and its
Subsidiaries for such fiscal year, and consolidating and consolidated balance
sheets of the Company and its Subsidiaries as of the end of such fiscal year,
setting forth in each case comparisons to the annual budget and to the preceding
fiscal year, all prepared in accordance with generally accepted accounting
principles, consistently applied, and accompanied by (a) with respect to the
consolidated portions of such statements (except with respect to budget data),
an opinion containing no exceptions or qualifications (except for qualifications
regarding specified contingent liabilities) of an independent accounting firm of
recognized national standing acceptable to the holders of a majority of the
Investor Stock and (b) a copy of such firm's annual management letter to the
Board;
(iv) promptly upon receipt thereof, any additional reports, management
letters or other detailed information concerning significant aspects of the
Company's operations or financial affairs given to the Company by its
independent accountants (and not otherwise contained in other materials provided
hereunder);
(v) at least 30 days prior to the beginning of each fiscal year, an
annual budget prepared on a quarterly basis for the Company and its Subsidiaries
for such fiscal year (displaying anticipated statements of income and cash flows
and balance sheets), and promptly upon preparation thereof any other significant
budgets prepared by the Company and any revisions of such annual or other
budgets, and within 30 days after any quarterly period in which there is a
material adverse deviation from the annual budget, an Officer's Certificate
explaining the deviation and what actions the Company has taken and proposes to
take with respect thereto;
(vi) promptly (but in any event within five business days) after the
discovery or receipt of notice of any default
- 6 -
<PAGE>
under any material agreement to which it or any of its Subsidiaries is a party
or any other material adverse event or circumstance affecting the Company or any
Subsidiary (including the filing of any material litigation against the Company
or any Subsidiary or the existence of any dispute with any Person which involves
a reasonable likelihood of such litigation being commenced), an Officer's
Certificate specifying the nature and period of existence thereof and what
actions the Company and its Subsidiaries have taken and propose to take with
respect thereto; and
(vii) with reasonable promptness, such other information and financial
data concerning the Company and its Subsidiaries as any Person entitled to
receive information under this Section 3A may reasonably request.
Each of the financial statements referred to in Sections 3A(i) and 3A(iii) shall
be true and correct in all material respects as of the dates and for the periods
stated therein, subject in the case of the unaudited financial statements to
changes resulting from normal year-end audit adjustments (none of which would,
alone or in the aggregate, be materially adverse to the financial condition,
operating results, assets, operations or business prospects of the Company and
its Subsidiaries taken as a whole).
3B. Inspection of Property. The Company shall permit any
----------------------
representatives designated by the Purchaser (so long as the Purchaser holds any
Investor Stock) or any holder of at least 25% of the outstanding Investor Stock,
upon reasonable notice and during normal business hours and such other times as
any such holder may reasonably request, to (i) visit and inspect any of the
properties of the Company and its Subsidiaries, (ii) examine the corporate and
financial records of the Company and its Subsidiaries and make copies thereof or
extracts therefrom and (iii) discuss the affairs, finances and accounts of any
such corporations with the directors, officers, key employees and independent
accountants of the Company and its Subsidiaries.
3C. Restrictions. The Company shall not, without the prior written
------------
consent of the holders of a majority of the Investor Stock:
(i) directly or indirectly declare or pay any dividends or make any
distributions upon any of its equity securities;
(ii) except as contemplated in the Other Equity Agreements, directly or
indirectly redeem, purchase or otherwise acquire, or permit any Subsidiary to
redeem, purchase or otherwise acquire, any of the Company's equity
- 7 -
<PAGE>
securities (including, without limitation, warrants, options and other rights to
acquire equity securities);
(iii) except as expressly contemplated by this Agreement and the Other
Equity Agreements, authorize, issue or enter into, or permit any Subsidiary to
authorize, issue or enter into, any agreement providing for the issuance
(contingent or otherwise) of, (a) any notes or debt securities containing equity
features (including, without limitation, any notes or debt securities
convertible into or exchangeable for equity securities, issued in connection
with the issuance of equity securities or containing profit participation
features) or (b) any equity securities (or any securities convertible into or
exchangeable for any equity securities);
(iv) merge or consolidate with any Person or permit any Subsidiary to
merge or consolidate with any Person (other than a wholly owned Subsidiary);
(v) sell, lease or otherwise dispose of, or permit any Subsidiary to
sell, lease or otherwise dispose of, more than 5% of the consolidated assets of
the Company and its Subsidiaries (computed on the basis of book value,
determined in accordance with generally accepted accounting principles
consistently applied, or fair market value, determined by the Board in its
reasonable good faith judgment) in any transaction or series of related
transactions (other than sales of inventory in the ordinary course of business);
(vi) liquidate, dissolve or effect a recapitalization or reorganization
in any form of transaction (including, without limitation, any reorganization
into partnership form);
(vii) acquire, or permit any Subsidiary to acquire, any interest in any
business (whether by a purchase of assets, purchase of stock, merger or
otherwise), or enter into any joint venture;
(viii) enter into, or permit any Subsidiary to enter into, the
ownership, active management or operation of any business other than the
acquisition and operation of a business within the coin operated laundry
industry including, but not limited to, the business of constructing, selling
and financing complete turnkey laundromat stores;
(ix) other than this Agreement, the Other Equity Agreements, the
Guaranty, the Purchasing Agreement and the Management Agreement, enter into, or
permit any Subsidiary to enter into, any transaction with any of its or any
- 8 -
<PAGE>
Subsidiary's officers, directors, employees or Affiliates or any individual
related by blood, marriage or adoption to any such Person or any entity in which
any such Person or individual owns a beneficial interest, except for normal
employment arrangements and benefit programs on reasonable terms and except as
otherwise expressly contemplated by this Agreement;
(x) create, incur, assume or suffer to exist, or permit any Subsidiary to
create, incur, assume or suffer to exist, Indebtedness exceeding the amounts
approved therefor by the Board in the annual budget;
3D. Affirmative Covenants. So long as any Investor Stock remains
---------------------
outstanding, the Company shall, and shall cause each Subsidiary to:
(i) enter into and maintain appropriate nondisclosure and noncompete
agreements with its key employees;
(ii) comply with all applicable laws, rules and regulations of all
governmental authorities, the violation of which would reasonably be expected to
have a material adverse effect upon the financial condition, operating results,
assets, operations or business prospects of the Company and its Subsidiaries
taken as a whole and pay and discharge when payable all taxes, assessments and
governmental charges (to the extent that the same are being contested in good
faith and adequate reserves therefor have been established);
3E. Current Public Information. At all times after the Company has
--------------------------
filed a registration statement with the Securities and Exchange Commission
pursuant to the requirements of either the Securities Act or the Securities
Exchange Act, the Company shall file all reports required to be filed by it
under the Securities Act and the Securities Exchange Act and the rules and
regulations adopted by the Securities and Exchange Commission thereunder and
shall take such further action as any holder or holders of Investor Stock may
reasonably request, all to the extent required to enable such holders to sell
Investor Stock pursuant to (i) Rule 144 adopted by the Securities and Exchange
Commission under the Securities Act (as such rule may be amended from time to
time) or any similar rule or regulation hereafter adopted by the Securities and
Exchange Commission or (ii) a registration statement on Form S-2 or S-3 or any
similar registration form hereafter adopted by the Securities and Exchange
Commission. Upon request, the Company shall deliver to any holder of Investor
Stock a written statement as to whether it has complied with such requirements.
- 9 -
<PAGE>
3F. Amendment of Other Agreements. The Company shall not amend, modify
-----------------------------
or waive any provision of the Acquisition Agreements, the Financing Agreements,
the Purchasing Agreement or the Management Agreement without the prior written
consent of the holders of a majority of the Investor Stock unless such
amendment, modification or waiver would not have an adverse effect on GTCR or
any other holder of Investor Stock, and the Company shall enforce the provisions
of the Acquisition Agreements, the Financing Agreements, the Purchasing
Agreement or the Management Agreement and shall exercise all of its rights and
remedies thereunder (including, without limitation, any repurchase options,
first refusal and co-sale rights) unless it is otherwise directed by the holders
of a majority of the Investor Stock.
3G. Public Disclosures. The Company shall not, nor shall it permit any
------------------
Subsidiary to, disclose the Purchaser's name or identity as an investor in the
Company in any press release or other public announcement or in any document or
material filed with any governmental entity, without the prior written consent
of the Purchaser, unless such disclosure is required by applicable law or
governmental regulations or by order of a court of competent jurisdiction, in
which case prior to making such disclosure the Company shall give written notice
to the Purchaser describing in reasonable detail the proposed content of such
disclosure and shall permit the Purchaser to review and comment upon the form
and substance of such disclosure.
3H. Unrelated Business Taxable Income. Except with GTCR's knowledge and
---------------------------------
consent, the Company shall not knowingly engage, and shall not knowingly permit
any Subsidiary to engage, in any transaction which is reasonably likely to cause
any holder of Investor Stock or any of such holder's limited partners which are
exempt from income taxation under Section 501(a) of the Code and, if applicable,
any pension plan that any such limited partner may be a part of, to recognize
unrelated business taxable income as defined in Section 512 and Section 514 of
the Code.
3I. Hart-Scott-Rodino Compliance. In connection with any transaction
----------------------------
in which the Company or any of its Subsidiaries is involved, following the
Closing, which is required to be reported under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended from time to time (the "HSR Act"), the
-------
Company shall prepare and file all documents with the Federal Trade Commission
and the United States Department of Justice which may be required to comply with
the HSR Act, and shall promptly furnish all materials thereafter requested by
any of the regulatory agencies having jurisdiction over such filings, in
connection with the transactions contemplated thereby. The Company shall take
all reasonable actions and shall file and use reasonable best efforts
- 10 -
<PAGE>
to have declared effective or approved all documents and notifications with any
governmental or regulatory bodies, as may be necessary or may reasonably be
requested under federal antitrust laws for the consummation of the subject
transaction.
Section 4. Transfer of Investor Stock.
--------------------------
(i) Investor Stock is transferable only pursuant to (a) public offering
registered under the Securities Act, (b) Rule 144 or Rule 144A of the Securities
Act (or any similar rule or rules then in force) if such rule or rules are
available or (c) subject to the conditions specified in Section 4(ii) below, any
other legally available means of transfer.
(ii) In connection with the transfer of any Investor Stock (other than a
transfer described in Section 4(i)(a) or (b) above), the holder thereof shall
deliver written notice to the Company describing in reasonable detail the
transfer or proposed transfer, together with an opinion of Kirkland & Ellis or
other counsel which (to the Company's reasonable satisfaction) is knowledgeable
in securities law matters to the effect that such transfer of Investor Stock
may be effected without registration of such Investor Stock under the Securities
Act. In addition, if the holder of the Investor Stock delivers to the Company
an opinion of Kirkland & Ellis or such other counsel that no subsequent transfer
of such Investor Stock shall require registration under the Securities Act, the
Company shall promptly upon such contemplated transfer deliver new certificates
for such Investor Stock which do not bear the Securities Act legend set forth in
Section 7C hereof. If the Company is not required to deliver new certificates
for such Investor Stock not bearing such legend, the holder thereof shall not
transfer the same until the prospective transferee has confirmed to the Company
in writing its agreement to be bound by the conditions contained in this Section
and Section 7C hereof.
(iii) Upon the request of the Purchaser, the Company shall promptly
supply to the Purchaser or its prospective transferees all information regarding
the Company required to be delivered in connection with a transfer pursuant to
Rule 144A of the Securities and Exchange Commission.
(iv) Any transfer or attempted transfer of any Investor Stock in
violation of any provision of this Agreement shall be void, and the Company
shall not record such transfer on its books or treat any purported transferee of
such Investor Stock as the owner of such Investor Stock for any purpose.
- 11 -
<PAGE>
Section 5. Representations and Warranties of the Company. As
---------------------------------------------
a material inducement to the Purchaser to enter into this Agreement and
purchase the Investor Stock, the Company hereby represents and warrants to the
Purchaser that:
5A. Organization and Corporate Power. The Company is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of Delaware and
is qualified to do business in every jurisdiction in which the failure to so
qualify might reasonably be expected to have a material adverse effect on the
financial condition, operating results, assets, operations or business prospects
of the Company and its Subsidiaries taken as a whole. The Company has all
requisite corporate power and authority and all material licenses, permits and
authorizations necessary to own and operate its properties, to carry on its
businesses as now conducted and presently proposed to be conducted and to carry
out the transactions contemplated by this Agreement. The copies of the
Company's Certificate of Incorporation and bylaws which have been furnished to
the Purchaser's counsel reflect all amendments made thereto at any time prior to
the date of this Agreement and are correct and complete.
5B. Capital Stock and Related Matters.
---------------------------------
(i) As of the Closing and immediately thereafter, the authorized
capital stock of the Company shall consist of 100,000 shares of Common Stock
(the "Common Stock") (divided into 85,000 shares of Class A Common, (all of
------------
which will be issued and outstanding), and 15,000 shares of Class B Common Stock
(of which 11,500 shares will be issued and outstanding), and 10,000 shares of
Preferred Stock (none of which will be issued and outstanding). As of the
Closing, neither the Company nor any Subsidiary shall have outstanding any stock
or securities convertible or exchangeable for any shares of its Common Stock or
containing any profit participation features, nor shall it have outstanding any
rights or options to subscribe for or to purchase its Common Stock or any stock
appreciation rights or phantom stock plans other than pursuant to and as
contemplated by the Other Equity Agreements. As of the Closing, neither the
Company nor any Subsidiary shall be subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its Common
Stock or any warrants, options or other rights to acquire its Common Stock,
except pursuant to this Agreement and the Other Equity Agreements. As of the
Closing, all of the outstanding shares of the Company's Common Stock shall be
validly issued, fully paid and nonassessable.
(ii) There are no statutory or contractual stockholders preemptive rights
or rights of refusal with respect to the issuance of the Investor Stock
hereunder, except as expressly
- 12 -
<PAGE>
provided herein. Based in part on the investment representations of the
Purchaser in Section 7C, the Company has not violated any applicable federal or
state securities laws in connection with the offer, sale or issuance of any of
its Common Stock, and the offer, sale and issuance of the Investor Stock
hereunder and pursuant to Section 1B hereof do not and will not require
registration under the Securities Act or any applicable state securities laws.
There are no agreements among the Company's stockholders with respect to the
voting or transfer of the Company's Common Stock or with respect to any other
aspect of the Company's affairs, except for the Other Equity Agreements.
5C. Subsidiaries; Investments. Other than 1,000 shares of Class A
-------------------------
Common Stock, par value $. 01 per share, of Ford, the Option Shares, the capital
stock of Solon purchased pursuant to the Solon Purchase Agreement and the
capital stock of the Subsidiaries as set forth in Section 4.3 of the Solon
Purchase Agreement, the Company does not own or hold any shares of stock or any
other security or interest in any other Person or any rights to acquire any such
security or interest, and the Company has never had any Subsidiary.
5D. Authorization; No Breach. The execution, delivery and performance
------------------------
by the Company of the Transaction Documents and the filing of the amendment of
the Certificate of Incorporation each has been duly authorized by the Company
and each constitutes a valid and binding obligation of the Company, enforceable
in accordance with its terms. The execution and delivery by the Company of the
Transaction Documents, the offering, sale and issuance of the Stock hereunder
and pursuant to Section 1B, the amendment of the Certificate of Incorporation
and the fulfillment of and compliance with the respective terms hereof and
thereof by the Company, do not and shall not (i) conflict with or result in a
breach of the terms, conditions or provisions of, (ii) constitute a default
under, (iii) result in the creation of any lien, security interest, charge or
encumbrance upon the Company's Common Stock or assets pursuant to, (iv) give any
third party the right to modify, terminate or accelerate any obligation under,
(v) result in a violation of, or (vi) require any authorization, consent,
approval, exemption or other action by or notice to any court or administrative
or governmental body pursuant to, the Certificate of Incorporation or bylaws of
the Company, or any law, statute, rule or regulation to which the Company is
subject, or any agreement, instrument, order, judgment or decree to which the
Company is a party or by which it is bound.
5E. Purchase Agreement Representations. Except as set forth on
----------------------------------
"Schedule 5E - Representations and Warranties" attached hereto, the
representations and warranties made by Solon in Article
- 13 -
<PAGE>
IV of the Solon Purchase Agreement and by the Sellers in Article V of the Solon
Purchase Agreement are, to the best of the Company's knowledge, true and correct
in all material respects on the date of the Closing as though then made, except
for any change that results from events occurring after the Closing Date (as
defined therein) and prior to the Closing in the ordinary course of business of
Solon, and the representations and warranties of Ford in Section 2 of the Stock
Purchase Agreement are, to the best of the Company's knowledge, true and correct
in all material respects on the date of the Closing as though then made, except
for any change that results from events occurring after the Closing Date (as
defined therein) and prior to the Closing in the ordinary course of business of
Ford.
5F. Disclosure. Neither this Agreement nor any of the schedules,
----------
attachments, written statements, documents, certificates or other items prepared
or supplied to the Purchaser by or on behalf of the Company with respect to the
transactions contemplated hereby contain any untrue statement of a material fact
or omit a material fact necessary to make each statement contained herein or
therein not misleading. There is no fact which the Company has not disclosed to
the Purchaser in writing and of which any of its officers, directors or
executive employees is aware and which has had or might reasonably be
anticipated to have a material adverse effect upon the existing or expected
financial condition, operating results, assets, customer or supplier relations,
employee relations or business prospects of the Company and its Subsidiaries
taken as a whole.
5G. Closing Date. The representations and warranties of the Company
------------
contained in this Section 5 and elsewhere in this Agreement and all information
contained in any exhibit, schedule or attachment hereto or in any writing
delivered by, or on behalf of, the Company to the Purchaser shall be true and
correct in all material respects on the date of the Closing as though then made,
except as affected by the transactions expressly contemplated by this Agreement.
Section 6. Definitions. For the purposes of this Agreement, the
-----------
following terms have the meanings set forth below:
"Affiliate" of any particular person or entity means any other person or
---------
entity controlling, controlled by or under common control with such particular
person or entity.
"Indebtedness" means all indebtedness for borrowed money (including
------------
purchase money obligations) , all capitalized lease obligations and all
guarantees of any of the foregoing.
- 14 -
<PAGE>
"Investor Stock" means (i) the Class A Common issued hereunder and
--------------
(ii) any Common Stock issued or issuable with respect to the Class A Common
Stock referred to in clause (i) above by way of stock dividends or stock splits
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization. As to any particular shares of Investor
Stock, such shares shall cease to be Investor Stock when they have been (a)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them or (b) distributed to the public
through a broker, dealer or market maker pursuant to Rule 144 under the
Securities Act (or any similar rule then in force). Whenever any particular
securities cease to be Investor Stock, the holder thereof shall be entitled to
receive from the Company, without expense, new securities of like tenor not
bearing a Securities Act legend of the character set forth in Section 7C.
"Officer's Certificate" means a certificate signed by the Company's
---------------------
president, vice-president or its chief financial officer, stating that (i) the
officer signing such certificate has made or has caused to be made such
investigations as are necessary in order to permit him to verify the accuracy of
the information set forth in such certificate and (ii) to the best of such
officer's knowledge, such certificate does not misstate any material fact and
does not omit to state any fact necessary to make the certificate not
misleading.
"Person" means an individual, a partnership, a corporation, an
------
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
similar federal law then in force.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
-----------------------
amended, or any similar federal law then in force.
"Securities and Exchange Commission" includes any governmental body or
----------------------------------
agency succeeding to the functions thereof.
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership,
- 15 -
<PAGE>
association or other business entity, a majority of the partnership or other
similar ownership interest thereof is at the time owned or controlled, directly
or indirectly, by any Person or one or more Subsidiaries of that Person or a
combination thereof. For purposes hereof, a Person or Persons shall be deemed
to have a majority ownership interest in a partnership, association or other
business entity if such Person or Persons shall be allocated a majority of
partnership, association or other business entity gains or losses or shall be or
control the managing director or general partner of such partnership,
association or other business entity.
7. Miscellaneous.
-------------
7A. Expenses. The Company agrees to pay, and hold the
--------
Purchaser and all holders of Investor Stock harmless against
liability for the payment of (i) the fees and expenses of their counsel arising
in connection with the negotiation and execution of this Agreement and the
consummation of the transactions contemplated by the Transaction Documents, (ii)
the fees and expenses incurred with respect to any amendments or waivers
(whether or not the same become effective) under or in respect of the
Transaction Documents and the Certificate of Incorporation, (iii) stamp and
other taxes which may be payable in respect of the execution and delivery of
this Agreement or the issuance, delivery or acquisition of any shares of
Investor Stock purchased hereunder and (iv) the fees and expenses incurred with
respect to the interpretation or enforcement of the rights granted under the
Transaction Documents and the Certificate of Incorporation.
7B. Remedies. Each holder of Investor Stock shall have all rights and
--------
remedies set forth in this Agreement and the Certificate of Incorporation and
all rights and remedies which such holders have been granted at any time under
any other agreement or contract and all of the rights which such holders have
under any law. Any Person having any rights under any provision of this
Agreement shall be entitled to enforce such rights specifically (without posting
a bond or other security), to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by law.
7C. Purchaser's Investment Representations. The Purchaser hereby
--------------------------------------
represents that it is acquiring the Investor Stock purchased hereunder or
acquired pursuant hereto for its own account with the present intention of
holding such securities for purposes of investment, and that it has no intention
of selling such securities in a public distribution in violation of the federal
securities laws or any applicable state securities laws; provided that nothing
contained herein shall prevent the Purchaser and subsequent holders of Investor
Stock from transferring such
- 16 -
<PAGE>
securities in compliance with the provisions of Section 4 hereof. Each
certificate for Investor Stock shall be imprinted with a legend in substantially
the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON
JULY 26, 1995, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN
EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY
THIS CERTIFICATE ARE ALSO SUBJECT TO THE CONDITIONS SPECIFIED IN THE
EQUITY PURCHASE AGREEMENT, DATED AS OF JULY 26, 1995, BETWEEN THE ISSUER
AND A CERTAIN INVESTOR, AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE
TRANSFER OF SUCH SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED
WITH RESPECT TO SUCH TRANSFER. A COPY OF SUCH CONDITIONS SHALL BE
FURNISHED BY THE ISSUER TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND
WITHOUT CHARGE.
7D. Consent to Amendments. Except as otherwise expressly provided
---------------------
herein, the provisions of this Agreement may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
holders of a majority of each of the Investor Stock. No other course of dealing
between the Company and the holder of any Investor Stock or any delay in
exercising any rights hereunder or under the Certificate of Incorporation shall
operate as a waiver of any rights of any such holders. For purposes of this
Agreement, shares of Common Stock held by the Company or any Subsidiaries shall
not be deemed to be outstanding.
7E. Survival of Representations and Warranties. All representations
------------------------------------------
and warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by the Purchaser or on its behalf.
7F. Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not. In addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for the Purchaser's
- 17 -
<PAGE>
benefit as a purchaser or holder of Investor Stock are also for the benefit of,
and enforceable by, any subsequent holder of such Investor Stock.
7G. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
7H. Counterparts. This Agreement may be executed simultaneously in two
------------
or more counterparts, any one of which need not contain the signatures of more
than one party, but all such counterparts taken together shall constitute one
and the same Agreement.
7I. Descriptive Headings; Interpretation. The descriptive headings of
----------- --------- --------------
this Agreement are inserted for convenience only and do not constitute a Section
of this Agreement. The use of the word "including" in this Agreement shall be
by way of example rather than by limitation.
7J. Governing Law. The corporate law of Delaware shall govern all
-------------
issues concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity and interpretation of this
Agreement and the exhibits and schedules hereto shall be governed by and
construed in accordance with the internal laws of the State of Illinois, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Illinois or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Illinois.
7K. Notices. All notices, demands or other communications to be given
-------
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable express courier service (charges
prepaid) or mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to the Purchaser and to the Company at the address
indicated below:
- 18 -
<PAGE>
If to the Company:
-----------------
SAS Acquisitions Inc.
c/o Coinmach Industries Co., L.P.
55 Lumber Road
Roslyn, NY 11576
Attention: President
with a copy to:
--------------
Anderson Kill Olick & Oshinsky, P.C.
1251 Avenue of the Americas
New York, New York 10020
Attention: Ronald S. Brody
If to the Purchaser:
-------------------
Golder, Thoma, Cressey, Rauner Fund IV, L.P.
6100 Sears Tower
Chicago, Illinois 60606
Attention: Bruce V. Rauner
David A. Donnini
with a copy to:
--------------
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Kevin R. Evanich
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
- 19 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first written above.
SAS ACQUISITIONS INC.
By: /s/
--------------------------
Its:
-------------------------
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV, L.P.
By: GTCR IV, L.P.
Its: General Partner
By: Golder, Thoma, Cressey,
Rauner, Inc.
Its: General Partner
By: /s/
---------------------------
Its: Principal
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
SAS ACQUISITIONS INC.
By:
------------------------------
Its:
-----------------------------
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV, L.P.
BY: GTCR IV, L.P.
Its: General Partner
BY: Golder, Thoma, Cressey,
Rauner, Inc.
Its: General Partner
By:
------------------------------
Its: Principal
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit 1A - Certificate of Amendment
Exhibit 2C - Stock Purchase Agreement
Exhibit 2D - Option Agreement
Exhibit 2E - Solon Purchase Agreement
Exhibit 2F - Stockholders Agreement
Exhibit 2G - Services Agreement
Exhibit 2H - Registration Agreement
Exhibit 2M - Executive Stock Agreement
Exhibit 2N - Investor Purchase Agreement
LIST OF SCHEDULES
-----------------
Schedule 2M - Executives
Schedule 2N - Investors
Schedule 5E - Representations and Warranties
<PAGE>
Exhibit 1A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SAS ACQUISITIONS INC.
ARTICLE FIRST
-------------
The name of the Corporation is SAS Acquisitions Inc.
ARTICLE SECOND
--------------
The address of the Corporation's registered office in the State of
Delaware is 15 East North Street in the City of Dover, County of Kent 19901.
The name of its registered agent at such address is United Corporate Services,
Inc.
ARTICLE THIRD
-------------
The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
ARTICLE FOURTH
--------------
A. AUTHORIZED SHARES
-----------------
The total number of shares of capital stock which the Corporation has
authority to issue is 110,000 shares, consisting of:
(1) 85,000 shares of Class A Common Stock, par value $0.01 per share
(the "Class A Common");
--------------
(2) 15,000 shares of Class B Common Stock, par value $0.01 per share
(the "Class B Common"); and
--------------
(3) 10,000 shares of Preferred Stock, par value $0.01 per share (the
"Preferred Stock").
---------------
The Class A Common and Class B Common and any other common stock issued
hereafter are hereafter collectively referred to as the "Common Stock." The
------------
shares of Common Stock shall have
<PAGE>
the rights, preferences and limitations separately set forth below.
Capitalized terms used but not otherwise defined in this Article Fourth are
defined in Part D of this Article Fourth.
B. PREFERRED STOCK
---------------
Shares of Preferred Stock may be issued from time to time in one or
more series. The Board of Directors of the Corporation is hereby authorized to
determine and alter all rights, preferences and privileges and qualifications,
limitations and restrictions thereof (including, without limitation, voting
rights and the limitation and exclusion thereof) granted to or imposed upon any
wholly unissued series of Preferred Stock and the number of shares constituting
any such series and the designation thereof, and to increase or decrease (but
not below the number of shares of such series then outstanding) the number of
shares of any series subsequent to the issue of shares of that series then
outstanding. In case the number of shares of any series is so decreased, the
shares constituting such reduction shall resume the status which such shares had
prior to the adoption of the resolution originally fixing the number of shares
of such series.
C. COMMON STOCK
------------
Except as otherwise provided in this Part C or as otherwise required by
applicable law, all shares of Class A Common and Class B Common shall be
identical in all respects and shall entitle the holders thereof to the same
rights and privileges, subject to the same qualifications, limitations and
restrictions.
1. Voting Rights. Except as otherwise provided in this Part C or as
-------------
otherwise required by applicable law, holders of Class A Common and Class B
Common shall be entitled to one vote per share on all matters to be voted on by
the stockholders of the Corporation.
2. Distributions. Subject to the distribution rights set forth in
-------------
paragraphs 3(i) and 3(ii) below, at the time of each Distribution, such
Distribution shall be made to the holders of Class A Common and Class B Common
outstanding as of the time of such Distribution in the following priority:
(i) The holders of Class A Common, as a separate class, shall be
entitled to receive all or a portion of such Distribution (ratably among such
holders based upon the number of shares of Class A Common held by each such
holder as of the time of such
-2-
<PAGE>
Distribution) equal to the aggregate Unpaid Yield on the outstanding shares of
Class A Common as of the time of such Distribution, and no Distribution or any
portion thereof shall be made under paragraph 2(ii) or 2(iii) below until the
entire amount of the Unpaid Yield on the outstanding shares of Class A Common as
of the time of such Distribution has been paid in full. The Distributions made
pursuant to this paragraph 2(i) to holders of Class A Common shall constitute
payments of Yield on Class A Common.
(ii) After the required amount (if any) of the Distribution has been made
pursuant to paragraphs 2(i) above, the holders of Class A Common, as a separate
class, shall be entitled to receive all or a portion of such Distribution
(ratably among such holders based upon the number of shares of Class A Common
held by each such holder as of the time of such Distribution) so that the
aggregate amount of all Distributions made pursuant to this paragraph 2(ii) is
equal to the Unreturned Preferred Amount for the Class A Common, and no
Distribution or any portion thereof shall be made under paragraphs 2(iii) below
until the entire amount of the Unreturned Preferred Amount for the Class A
Common has been paid in full pursuant to this paragraph 2(ii). The
Distributions made pursuant to this paragraph 2(ii) to holders of Class A Common
shall constitute payments of the Unreturned Preferred Amount for the Class A
Common.
(iii) After the required amounts (if any) of a Distribution have been
made pursuant to paragraphs 2(i) and 2(ii) above, the holders of Class A Common
and Class B Common, as a group, shall be entitled to receive the remaining
portion of such Distribution (ratably among such holders based upon the number
of shares of Common Stock held by each such holder as of the time of such
Distribution).
3. Liquidation Preferences.
-----------------------
(i) Class A Common Liquidation Preference.
-------------------------------------
Upon any liquidation, dissolution or winding up of the Corporation, the
holders of Class A Common shall be entitled to be paid, before any Distribution
or payment is made upon any other Common Stock, an amount in cash equal to the
aggregate Unreturned Preferred Amount and the aggregate Unpaid Yield for the
Class A Common (ratably among such holders based upon the number of shares of
Class A Common held by each such holder as of the time of such Distribution) and
will then share ratably with the other shares of Common Stock in any remaining
Corporation assets (after the Distribution described in paragraph 3(ii) below).
If upon any such liquidation, dissolution or winding up of the Corporation, the
-3-
<PAGE>
Corporation's assets to be distributed among the holders of the Class A Common
are insufficient to permit payment to such holders of the aggregate amount which
they are entitled to be paid pursuant to this paragraph 3 (i) , then the entire
assets to be distributed shall be distributed ratably among such holders based
upon the aggregate Unreturned Preferred Amount and the aggregate Unpaid Yield
for the Class A Common held by each such holder. The Corporation shall mail
written notice of such liquidation, dissolution or winding up, not less than 60
days prior to the payment date stated therein, to each record holder of Class A
Common. Neither the consolidation or merger of the Corporation into or with any
other entity or entities, nor the sale or transfer by the Corporation of all or
any part of its assets, nor the reduction of the capital stock of the
Corporation, shall be deemed to be a liquidation, dissolution or winding up of
the Corporation within the meaning of this paragraph 3 (i).
(ii) Class B Common Liquidation Preference.
-------------------------------------
Upon any liquidation, dissolution or winding up of the Corporation,
after the required amounts have been paid pursuant to paragraph 3(i) above, the
holders of Class B Common shall be entitled to be paid, before any Distribution
or payment is made upon any other Common Stock, an amount in cash equal to the
aggregate Unreturned Preferred Amount of the Class B Common (ratably among such
holders based upon the number of shares of Class B Common held by each such
holder as of the time of such Distribution) and will then share ratably with the
other shares of Common Stock in any remaining Corporation assets. If upon any
such liquidation, dissolution or winding up of the Corporation, the
Corporation's assets to be distributed among the holders of the Class B Common
are insufficient to permit payment to such holders of the aggregate amount which
they are entitled to be paid pursuant to this paragraph 3(ii), then the entire
assets to be distributed shall be distributed ratably among such holders based
upon the aggregate Unreturned Preferred Amount of the Class B Common held by
each such holder. The Corporation shall mail written notice of such
liquidation, dissolution or winding up, not less than 60 days prior to the
payment date stated therein, to each record holder of Class B Common. Neither
the consolidation or merger of the Corporation into or with any other entity or
entities, nor the sale or transfer by the Corporation of all or any part of its
assets, nor the reduction of the capital stock of the Corporation shall be
deemed to be a liquidation, dissolution or winding up of the Corporation within
the meaning of this paragraph 3 (ii).
-4-
<PAGE>
4. Stock Splits and Stock Dividends. The Corporation shall not in any
--------------------------------
manner subdivide (by stock split, stock dividend or otherwise) or combine (by
reverse stock split or otherwise) the outstanding Common Stock of one class
unless the outstanding Common Stock of all the other classes shall be
proportionately subdivided or combined. All such subdivisions shall be payable
only in Class A Common to the holders of Class A Common and in Class B Common
only to the holders of Class B Common.
5. Events of Noncompliance.
-----------------------
5A. Definition. An "Event of Noncompliance" shall be deemed to have
---------- ----------------------
occurred if:
(i) the Corporation fails to pay on or prior to the eighth anniversary
of the initial issuance of the Class A Common the full amount of the Unreturned
Preferred Amount plus all Unpaid Yield with respect to the Class A Common,
whether or not such payment is legally permissible or is prohibited by any
agreement to which the Corporation is subject;
(ii) the Corporation breaches or otherwise fails to perform or observe
in any material respect any covenant or agreement set forth herein or in the
Equity Purchase Agreement (the "Purchase Agreement") or the Services Agreement
------------------
(as defined in the Purchase Agreement), and such breach or failure to perform is
not cured within 30 days after the occurrence thereof;
(iii) any representation or warranty contained in the Purchase
Agreement or required to be furnished to any holder of Class A Common pursuant
to the Purchase Agreement, or any information contained in writing required to
be furnished by the Corporation or any Subsidiary to any holder of Class A
Common, is false or misleading such that it would result in a material adverse
effect upon the business, operations, properties, assets or condition (financial
or otherwise) of the Corporation and its Subsidiaries taken as a whole on the
date made or furnished;
(iv) the Corporation or any Subsidiary makes an assignment for the
benefit of creditors or admits in writing its inability to pay its debts
generally as they become due; or an order, judgment or decree is entered
adjudicating the Corporation or any Subsidiary bankrupt or insolvent; or any
order for relief with respect to the Corporation or any Subsidiary is entered
under the United States Federal Bankruptcy Code; or the Corporation or any
Subsidiary petitions or applies to any tribunal for the appointment of a
custodian, trustee, receiver or liquidator of the Corporation or any Subsidiary
or of any substantial part of the
-5-
<PAGE>
assets of the Corporation or any Subsidiary, or commences any proceeding (other
than a proceeding for the voluntary liquidation and dissolution of a Subsidiary)
relating to the Corporation or any Subsidiary under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction; or any such petition or application is
filed, or any such proceeding is commenced, against the Corporation or any
Subsidiary and either (a) the Corporation or any such Subsidiary by any act
indicates its approval thereof, consent thereto or acquiescence therein or (b)
such petition, application or proceeding is not dismissed within 60 days;
(v) a judgment which exceeds any insurance available for the payment
thereof by more than $600,000 is rendered against the Corporation or any
Subsidiary and, within 60 days after entry thereof, such judgment is not
discharged or execution thereof stayed pending appeal, or within 60 days after
the expiration of any such stay, such judgment is not discharged; or
(vi) the Corporation or any Subsidiary defaults in the performance of
any obligation or agreement if the effect of such default is to cause an amount
exceeding $600,000 to become due prior to its stated maturity.
5B. Consequences of Certain Events of Noncompliance.
-----------------------------------------------
(i) If an Event of Noncompliance has occurred, the rate at which the
Yield on the Class A Common is calculated shall increase immediately by an
increment of 4 percentage point(s). Thereafter, until such time as no Event of
Noncompliance exists, the rate at which the Yield on the Class A Common is
calculated shall increase automatically at the end of each succeeding 90-day
period by an additional increment of 2 percentage point(s) (but in no event
shall such rate exceed 18%). Any increase of the dividend rate resulting from
the operation of this paragraph shall terminate as of the close of business on
the date on which no Event of Noncompliance exists, subject to subsequent
increases pursuant to this paragraph.
(ii) If any Event of Noncompliance has occurred, then the number of
directors constituting the Corporation's Board of Directors will, at the request
of the holders of a majority of the Class A Common then outstanding, be
increased by one member, and the holders of Class A Common will have the special
right, voting separately as a single class (with each share being entitled to
one vote) and to the exclusion of all other classes of the Corporation's stock,
to elect an individual to fill such newly created directorship, to fill any
vacancy of such directorship and to remove any individual elected to such
directorship. The newly
-6-
<PAGE>
created directorship will constitute a separate class of directors, and the
director elected by the holders of the Class A Common will be entitled to cast a
number of votes on each matter considered by the Board of Directors (including
for purposes of determining the existence of a quorum) equal to the sum of the
number of votes entitled to be cast by all of the other directors plus one. The
special right of the holders of Class A Common to elect such a member of the
Board of Directors may be exercised at the special meeting called pursuant to
this subparagraph (ii), at any annual or other special meeting of stockholders
and, to the extent and in the manner permitted by applicable law, pursuant to a
written consent of the holders of a majority of the Class A Common in lieu of a
stockholders meeting. Such special right shall continue until such time as
there is no longer any Event of Noncompliance in existence, at which time such
special right shall terminate subject to revesting upon the occurrence and
continuation of any Event of Noncompliance which gives rise to such special
right hereunder.
At any time when such special right has vested in the holders of Class A
Common, a proper officer of the Corporation shall, upon the written request of
the holder(s) of at least 10% of the Class A Common then outstanding, addressed
to the secretary of the Corporation, call a special meeting of the holders of
Class A Common for the purpose of electing a director pursuant to this
subparagraph. Such meeting shall be held at the earliest legally permissible
date at the principal office of the Corporation, or at such other place
designated by the holders of at least 10% of the Class A Common then
outstanding. If such meeting has not been called by a proper officer of the
Corporation within 10 days after personal service of such written request upon
the secretary of the Corporation or within 20 days after mailing the same to the
secretary of the Corporation at its principal office, then the holders of at
least 10% of the Class A Common then outstanding may designate in writing one of
their number to call such meeting at the expense of the Corporation, and such
meeting may be called by such Person so designated upon the notice required for
annual meetings of stockholders and shall be held at the Corporation's principal
office, or at such other place designated by the holders of at least 10% of the
Class A Common then outstanding. Any holder of Class A Common so designated
shall be given access to the stock record books of the Corporation for the
purpose of causing a meeting of stockholders to be called pursuant to this
paragraph.
At any meeting or at any adjournment thereof at which the holders of
Class A Common have the special right to elect a director pursuant to this
subparagraph, the presence, in person or by proxy, of the holders of a majority
of the Class A Common then outstanding shall be required to constitute a quorum
for the election or removal of any director by the holders of the Class A
-7-
<PAGE>
Common exercising such special right. The vote of a majority of such quorum
shall be required to elect or remove any such director.
Any director so elected by the holders of Class A Common shall continue
to serve as a director until the expiration of the lesser of (a) a period of six
months following the date on which there is no longer any Event of Noncompliance
in existence or (b) the remaining period of the full term for which such
director has been elected. After the expiration of such six-month period or when
the full term for which such director has been elected ceases (provided that the
special right to elect directors has terminated), as the case may be, the number
of directors constituting the Board of Directors of the Corporation shall
decrease to such number as constituted the whole Board of Directors of the
Corporation immediately prior to the occurrence of the Event or Events of
Noncompliance giving rise to the special right to elect directors.
(iii) If any Event of Noncompliance exists, each holder of Class A
Common shall also have any other rights which such holder is entitled to under
any contract or agreement at any time and any other rights which such holder may
have pursuant to applicable law.
6. Registration of Transfer. The Corporation shall keep at its
------------------------
principal office (or such other place as the Corporation reasonably designates)
a register for the registration of shares of Common Stock. Upon the surrender
of any certificate representing shares of any class of Common Stock at such
place, the Corporation shall, at the request of the registered holder of such
certificate, execute and deliver a new certificate or certificates in exchange
therefor representing in the aggregate the number of shares of such class
represented by the surrendered certificate, and the Corporation forthwith shall
cancel such surrendered certificate. Each such new certificate will be
registered in such name and will represent such number of shares of such class
as is requested by the holder of the surrendered certificate and will be
substantially identical in form to the surrendered certificate. The issuance
of new certificates shall be made without charge to the holders of the
surrendered certificates for any issuance tax in respect thereof or other cost
incurred by the Corporation in connection with such issuance.
7. Replacement. Upon receipt of evidence reasonably satisfactory to
-----------
the Corporation (an affidavit of the registered holder will be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing one or more shares of any class of Common Stock, and in the case of
any such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Corporation (provided that if the holder is a
-8-
<PAGE>
financial institution or other institutional investor its own agreement will be
satisfactory), or, in the case of any such mutilation upon surrender of such
certificate, the Corporation shall (at its expense) execute and deliver in lieu
of such certificate a new certificate of like kind representing the number of
shares of such class represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
8. Notices. All notices referred to herein shall be in writing, shall
-------
be delivered personally or by first class mail, postage prepaid, and shall be
deemed to have been given when so delivered or mailed to the Corporation at its
principal executive offices and to any stockholder at such holder's address as
it appears in the stock records of the Corporation (unless otherwise specified
in a written notice to the Corporation by such holder).
9. Amendment and Waiver. No amendment or waiver of any provision of
--------------------
this Part C shall be effective without the prior approval of the holders of a
majority of the then outstanding Common Stock.
D. DEFINITIONS
-----------
"Distribution" means each distribution made by the Corporation to
------------
holders of Common Stock, whether in cash, property, or securities of the
Corporation and whether by dividend, liquidation distributions or otherwise;
provided that neither of the following shall be a Distribution: (a) any
redemption or repurchase by the Corporation of any shares of Common Stock for
any reason or (b) any recapitalization or exchange of any shares of Common
Stock, or any subdivision (by stock split, stock dividend or otherwise) or any
combination (by reverse stock split or otherwise) of any outstanding shares of
Common Stock.
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, association or other business
-9-
<PAGE>
entity if such Person or Persons shall be allocated a majority of partnership,
association or other business entity gains or losses or shall be or control the
managing director or general partner of such partnership, association or other
business entity.
"Unpaid Yield" means an amount equal to the excess, if any, of (a) the
------------
aggregate Yield accrued on the outstanding shares of Class A Common over (b) the
aggregate amount of Distributions made by the Corporation pursuant to paragraph
2 (i) of Part C of this Article Fourth.
"Unreturned Preferred Amount" means, (A) with respect to the Class A
---------------------------
Common, an amount equal to the excess, if any, of (a) the product of (1) the
number of shares of Class A Common then outstanding and (2) $76.4705882 over (b)
the aggregate amount of Distributions made by the Corporation with respect to
such shares pursuant to paragraph 2(ii) or paragraph 3(i) of Part C of this
Article Fourth, and (B) with respect to the Class B Common, an amount equal to
the excess, if any, of (a) the product of (x) the number of shares of Class B
Common then outstanding and (y) $15.4028 over (b) the aggregate amount of
Distributions made by the Corporation with respect to such shares pursuant to
paragraph 3(ii) of Part C of this Article Fourth.
"Yield" means, with respect to the outstanding shares of Class A Common
-----
for any quarter, the amount accruing on such shares each day during such quarter
at the rate of 8% per annum of the sum of (a) the Unreturned Preferred Amount
from time to time during such quarter, plus (b) the Unpaid Yield thereon for all
prior quarters. In calculating the amount of any Distribution to be made during
a quarter, the portion of the Yield on the outstanding shares of Class A Common
for the portion of such quarter elapsing before such Distribution is made shall
be taken into account.
ARTICLE FIFTH
-------------
The Corporation is to have perpetual existence.
ARTICLE SIXTH
-------------
In furtherance and not in limitation of the powers conferred by
statute, the board of directors of the Corporation is expressly authorized to
make, alter or repeal the by-laws of the Corporation.
ARTICLE SEVENTH
---------------
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws of the Corporation may
-10-
<PAGE>
provide. The books of the Corporation may be kept outside the State of Delaware
at such place or places as may be designated from time to time by the board of
directors or in the by-laws of the Corporation. Election of directors need not
be by written ballot unless the by-laws of the corporation so provide.
ARTICLE EIGHTH
--------------
To the fullest extent permitted by the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended, a director of
this Corporation shall not be liable to the Corporation or its stockholders for
monetary damages for a breach of fiduciary duty as a director. Any repeal or
modification of this ARTICLE EIGHTH shall not adversely affect any right or
--------------
protection of a director of the Corporation existing at the time of such repeal
or modification.
ARTICLE NINTH
-------------
The Corporation expressly elects not to be governed by Section 203 of
the General Corporation Law of the State of Delaware.
ARTICLE TENTH
-------------
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this certificate of incorporation in the manner now
or hereafter prescribed herein and by the laws of the State of Delaware, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
-11-
<PAGE>
Exhibit 2C
----------
STOCK PURCHASE AGREEMENT
------------------------
Stock Purchase Agreement ("Agreement"), dated as of April 4, 1995,
entered into by and among SAS Acquisitions Inc., a Delaware corporation
("Buyer"), and Ford Coin Laundries, Inc., a Delaware corporation (the
"Company").
RECITALS
--------
A. The Company has authorized the issuance of 1,000 shares of common
stock, $.01 par value per share (the "Common Stock"), 7 shares of which are
owned by Kwik Wash Laundries, Inc., a Nevada corporation ("Kwik Wash"), 1-1/2
shares of which are owned by Robert Kyle Ford and 1-1/2 shares of which are
owned by Richard Franklin Ford, Jr., Trustee U/D/T February 4, 1994.
B. The Company has authorized the issuance of 1,000 shares of non-voting
Class A common stock, par value $.01 per share (the "Class A Common Stock"
and, together with the Common Stock, the "Capital Stock"), all of which shares
are to be issued to Buyer hereunder.
C. Buyer desires to purchase from the Company, and the Company desires
to sell to Buyer, all of the outstanding shares of Class A Common Stock subject
to the terms and conditions of this Agreement.
D. Buyer shall file an application with the Federal Trade Commission to
obtain approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), in connection with the prospective exercise by
Buyer of an option to purchase all the Common Stock of the Company, the sole
voting stockholder of Solon Automated Services, Inc. ("Solon").
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. Purchase and Sale of Common Stock; Closing.
------------------------------------------
(a) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Company agrees to sell to the Buyer, and the Buyer agrees to purchase from the
Company, 1,000 shares of Class A Common Stock at a per share cost of $11,400 for
an aggregate purchase price of $11,400,000.
(b) The closing of the sale and purchase of the Class A Common Stock by
the Buyer (the "Closing") shall take
<PAGE>
place on the date of this Agreement (the "Closing Date") at the offices of
Anderson Kill Olick & Oshinsky, P.C., 1251 Avenue of the Americas, New York, New
York 10020, at 10:00 a.m. New York City time. At the Closing, the Company will
deliver to the Buyer a certificate or certificates representing the Class A
Common Stock purchased and sold hereunder, dated the Closing Date and registered
in the Buyer's name or the names of the Buyer's nominees (as set forth on the
signature pages hereof), against payment of the purchase price therefor in
immediately available funds.
2. Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to Buyer as of the date hereof as follows:
(a) Corporate Existence, Power, etc. The Company has been duly
-------------------------------
incorporated and is validly existing as a corporation in good standing under the
laws of the State of Delaware with full corporate power and authority to own,
lease and operate its properties and carry on its business as proposed to be
conducted, and the Company will, at the Closing Date, be duly qualified as a
foreign corporation in good standing in all jurisdictions in which its ownership
or leasing of properties or the conduct of its business would require such
qualification, except where the failure to so qualify would not have a material
adverse effect upon the Company and its subsidiaries taken as a whole. The
Company has all requisite corporate power and authority to enter into and
perform all of its obligations under this Agreement and to consummate the
transactions contemplated hereby. The Company has taken all actions necessary
to authorize it to enter into and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby.
(b) No Violation. The execution and delivery by the Company of this
------------
Agreement and the performance hereof and the consummation of the transactions
herein contemplated do not and will not result in a breach or violation of any
of the terms and provisions of, or constitute a default under (i) any agreement
or instrument to which the Company is a party or by which it is bound or to
which any of its property is subject or (ii) the charter or by-laws of the
Company.
(c) No Approval. No approval, consent, exemption or other action by,
-----------
or notice to or filing with, any governmental authority is necessary in
connection with the execution, delivery, performance or enforcement of this
Agreement or any instrument or agreement required hereunder, except as may have
been obtained or contemplated hereby.
(d) No Judgment, Decree or Order. There is no law, rule or
----------------------------
regulation, nor is there any judgment, decree or order of any court or
governmental authority binding on the Company, which would be contravened by the
execution, delivery,
2
<PAGE>
performance or enforcement of this Agreement or any instrument or agreement
required of the Company hereunder.
(e) Legal, Valid and Binding Agreement. This Agreement is a legal, valid
----------------------------------
and binding agreement of the Company, enforceable against the Company in
accordance with its terms, and any other instrument or agreement required of the
Company hereunder, when executed and delivered, will be similarly legal, valid,
binding and enforceable, except as such enforceability may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors rights generally, and subject to rules of law governing specific
performance, injunctive relief and other equitable remedies.
(f) No Litigation. There is no pending, or to the Company's knowledge,
-------------
threatened, litigation or proceeding against or by the Company.
(g) Capital Stock and Related Matters. After the Closing, the
---------------------------------
authorized capital stock of the Company will consist of: (i) 1,000 shares of
Common Stock, 7 shares of which are owned by Kwik Wash, 1-1/2 shares of which
are owned by Robert Kyle Ford, 1-1/2 shares of which are owned by Richard
Franklin Ford, Jr., Trustee U/D/T February 4, 1994; and (ii) 1,000 shares of
Class A Common Stock, all of which shares are issued hereby to Buyer. After the
Closing, all of the outstanding shares of Capital Stock of the Company will upon
their issuance be duly authorized, validly issued, fully paid and nonassessable.
(h) Private Offering.
----------------
(A) The offer and sale of the Class A Common Stock hereunder is exempt
from the registration and prospectus delivery requirements of the Securities Act
of 1933, as amended, and the rules and regulations promulgated thereunder
(collectively, the "Securities Act"). The Company has not sold the Class A
Common Stock to anyone other than the Buyer. No other security of the Company
has been issued and sold by the Company within the six-month period immediately
prior to the date hereof. The Company agrees that it, or anyone acting on its
behalf, will neither offer any of the Capital Stock of the Company so as to
bring the issuance and sale thereof within the provisions of Section 5 of the
Securities Act, nor offer any similar securities for issuance or sale to, or
solicit any offer to acquire any of the same from, or otherwise approach or
negotiate with respect thereto with, any person if the sale of any of the Class
A Common Stock and any such securities would be integrated as a single offering
for the purposes of the Securities Act. Each share of Capital Stock shall have a
legend setting forth the restrictions on transferability and sale set forth in
Section 4 hereof for at least so long as such restrictions apply. The
representations of the Company in this Section 2(h) are based upon and subject
to the accuracy of the Buyer's representations contained in Section 3 hereof.
3
<PAGE>
(B) In the case of the offer and sale of the Class A Common
Stock, no form of general solicitation or general advertising was used by the
Company, including, but not limited to, advertisements, articles, notices or
other communications published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
were invited by any general solicitation or general advertising.
(i) Good Title. The Company has good and marketable title to
----------
its assets and properties, free and clear of all liens, mortgages, pledges,
security interests, charges or encumbrances of any kind or nature, whether
voluntary or involuntary (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
(j) No Conduct of Business. Since the formation of the
----------------------
Corporation on March 2, 1995 (the "Formation Date") through and including the
date hereof, the Corporation has not conducted any business whatsoever, owned
any assets other than the capital stock of Solon nor incurred any liabilities of
any kind or nature (other than with respect to that certain Stock Purchase
Agreement, dated as of March 7, 1995, among the Company, Solon and the Sellers
(as defined)).
(k) No Charter Amendments. Other than the Certificate of
---------------------
Amendment of Certificate of Incorporation of Ford filed with the Office of the
Secretary of State of the State of Delaware on April 3, 1995, the Corporation
has not restated, amended or modified in any way its original certificate of
incorporation filed on the Formation Date with the Office of the Secretary of
State of the State of Delaware.
3. Representations and Warranties of the Buyer. The Buyer
-------------------------------------------
represents, warrants and agrees for the benefit of the Company as follows:
(a) The Buyer has had an opportunity to discuss the business,
management and financial affairs of the Company, and the terms and conditions of
the proposed purchase, with the management of the Company.
(b) The Buyer is purchasing the Class A Common Stock for its
own account and not with a view to any resale or distribution of the Class A
Common Stock that would violate the Securities Act, and acknowledges that there
are substantial restrictions on the transferability of such Class A Common
Stock; and it understands that the Class A Common Stock have not been registered
under the Securities Act and that the certificates representing such Class A
Common Stock will bear the legend and be subject to the restrictions on transfer
and sale set forth in Section 4 of this Agreement.
4
<PAGE>
4. Certificates for Securities and Legend. The certificates
--------------------------------------
representing the Common Stock and the Class A Common Stock will bear the
following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
TRANSFERRED, SOLD OR DISPOSED OF IN THE ABSENCE OF REGISTRATION OR AN
EXEMPTION THEREFROM UNDER THE ACT.
5. Notices. All notices and other communications hereunder
-------
shall be in writing and shall only be deemed to have been duly given if mailed
by registered or certified mail or transmitted by any standard form of
telecommunication and if addressed, in the case of notices to the Buyer, to the
Buyer at the address appearing on the signature page hereof, Attention: Stephen
R. Kerrigan; and, in the case of the Company, to the Company at the address
appearing on the signature page hereof.
6. Parties and Beneficiaries. This Agreement shall inure to the
-------------------------
benefit of and be binding upon the Company, the Buyer and their respective
successors and assigns.
7. Applicable Law. This Agreement shall be governed by, and
--------------
construed in accordance with, the laws of the State of New York, without giving
effect to any conflicts of laws provisions thereof.
8. Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument.
9. Section Headings. The section headings in this Agreement are
----------------
for convenience of reference only and shall not be deemed to alter or affect any
provision hereof.
10. Survival. The representations and warranties made by the
--------
Company in this Agreement shall survive the execution and delivery of this
Agreement.
11. No Recourse. Notwithstanding any of the terms or provisions
-----------
of this Agreement, each of Buyer, on the one hand, and Seller, on the other
hand, agree that neither it nor any person acting on its behalf may assert any
claims or cause of action against any officer or director of the other party or
stockholders of such other party in connection with or arising out of this
Agreement or the transactions contemplated hereby.
[SIGNATURE PAGE TO FOLLOW]
5
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed and delivered
this Agreement as of the date first above stated.
FORD COIN LAUNDRIES, INC.
By: /s/ Robert E. Bailey
-----------------------
Name: Robert E. Bailey
Title: Vice President
Address of the Company:
c/o Kwik Wash Laundries, Inc.
4240 Bronze Way
Dallas, Texas 75237
Attention: Robert E. Bailey
Telephone: (214) 339-9351
Facsimile: (214)
--------
SAS ACQUISITIONS INC.
By: /s/ Stephen R. Kerrigan
------------------------
Name: Stephen R. Kerrigan
Title: President
Address of Buyer:
c/o The Coinmach Corporation
55 Lumber Road
Roslyn, New York 10022
Attention: Stephen R. Kerrigan
Telephone: (516) 484-2300
Facsimile: (516) 484-0905
Name of nominee, if any,
in whose name the Class A Common Stock
is to be registered:
- -------------------------
- -------------------------
- -------------------------
6
<PAGE>
Exhibit 2D
----------
SAS ACQUISITIONS INC.
c/o The Coinmach Corporation
55 Lumber Road
Roslyn, New York 11576
April 4, 1995
Kwik Wash Laundries, Inc.
4240 Bronze Way
Dallas, Texas 75237
Attention: Richard Enthoven
Re: Acquisition of Solon Automated Services, Inc.
---------------------------------------------
Ladies and Gentlemen:
In connection with the purchase (the "Acquisition") by Ford Coin Laundries,
Inc. ("Ford") of substantially all of the outstanding capital stock of Solon
Automated Services, Inc., a Delaware corporation ("Solon"), SAS Acquisitions
Inc., a Delaware corporation ("SAS"), Kwik Wash Laundries, Inc. ("Kwik Wash"),
Robert Kyle Ford ("R.K. Ford") and Richard Franklin Ford, Jr., Trustee U/D/T
February 4, 1994 ("R.F. Ford", together with Kwik Wash and R.K. Ford, the "Ford
Holders"), have each agreed to enter into this letter agreement (this
"Agreement") on the terms and subject to the conditions set forth below.
Accordingly, in consideration of the promises herein contained and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto agree
as follows:
1. GRANT OF OPTION TO SAS TO PURCHASE FORD CAPITAL STOCK.
-----------------------------------------------------
Grant of Option. The Ford Holders each hereby irrevocably grant to SAS the
---------------
exclusive, unconditional and irrevocable option (the "Option") to purchase from
the Ford Holders, subject to the terms and conditions contained in this
Agreement, all of the shares of common stock, par value $0.01 per share, of Ford
held by the Ford Holders (collectively, the "Option Shares"), for a cash
purchase price of $100,000 (the "Exercise Price").
(b) Term of Stock Option. The Option shall be exercisable at any time upon
--------------------
or after the expiration or termination of the applicable waiting period required
by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or the
granting of clearance by the Federal Trade Commission and
<PAGE>
the Department of justice (the "HSR Clearance Date"), in each case, in respect
of the Pre-Merger and Notification Form filed by SAS in connection therewith,
and shall expire on the earlier of (i) the end of the fifth business day
following the HSR Clearance Date or (ii) the first anniversary of the date
hereof (the "Option Period").
(c) Option Exercise.
---------------
(i) The Option may be exercised by SAS upon notice (the "Notice") to Kwik
Wash pursuant to the provisions of Section 5. The Notice shall state that SAS
elects to exercise its right under this Agreement to purchase the Option Shares
in accordance with the terms of this Agreement.
(ii) Upon execution and delivery of this Agreement, the Ford Holders shall
deliver the stock certificates evidencing the Option Shares, properly endorsed
or accompanied by duly executed stock powers, to Anderson Kill Olick & Oshinsky,
P.C., as transfer agent ("Transfer Agent"). Transfer Agent shall hold the Option
Shares during the Option Period and, upon the exercise by SAS of the Option,
shall transfer the Option Shares into the name of SAS on the books and records
of Ford.
(iii) Upon exercise of the Option (the "Exercise Date"), SAS shall
promptly (and as a condition precedent to the transfer of all of the Option
Shares in the manner provided above) pay the Exercise Price to the Ford Holders
by wire transfer of immediately available funds.
(d) Representations and Warranties of Kwik Wash. Kwik Wash represents and
-------------------------------------------
warrants as to itself and on behalf of the Ford Holders to SAS as of the date
hereof and as of the Exercise Date that:
(i) Kwik Wash is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and the
execution, delivery and performance of this Agreement has been duly authorized
by all necessary corporate action, and each of the other Ford Holders is
competent with respect to the execution, delivery and performance of this
Agreement;
(ii) each Ford Holder has full power and authority to execute, deliver and
perform this Agreement and to consummate the transactions contemplated hereby,
and this Agreement is a legal, valid and binding agreement, enforceable against
each Ford Holder in accordance with its terms;
(iii) the Option Shares are validly issued, fully paid and nonassessable;
2
<PAGE>
(iv) no Ford Holder has previously sold, pledged, encumbered, assigned,
transferred, disposed of, terminated, granted or conveyed its Option Shares or
any interest therein, in whole or in part, nor has any Ford Holder granted any
lien on or security interest in or to its Option Shares, and it has not entered
into any agreement to do any of the foregoing;
(v) each Ford Holder has good title to and is the sole owner, legal and
equitable, of its Option Shares, free and clear of all liens, claims, security
interests, charges or other encumbrances of any kind or nature;
(vi) other than information regarding the Woodhall Apartment and Fondren
Green Apartment leases, the Ford Holders acknowledge that no information has
been disclosed to any of them by Solon or its affiliates regarding the specific
location of leases with respect to the areas covered by the Texas Assets; and
(vii) to the actual knowledge of each of Kwik Wash's chief executive
officer, Richard Enthoven ("Enthoven"), Vice President and General Counsel,
Robert Bailey ("Bailey"), R.K. Ford and R.F. Ford: (a) since March 7, 1995,
there has been no development, event, condition or fact that, in their
reasonable judgment, has caused, or which could reasonably be expected to cause,
a material adverse effect on the Option Shares or on the business, condition
(financial or otherwise), or gross collections (net of lease commissions) of
Solon and its subsidiaries taken as a whole (it being understood that general
economic conditions are excepted from this representation and warranty); (b)
none of the representations and warranties (x) made by Kwik Wash in this
Agreement, or (y) made by Solon or the Sellers (as defined in the Stock Purchase
Agreement) in the Stock Purchase Agreement (the "Stock Purchase Agreement")
dated as of March 7, 1995 among Ford, Kwik Wash, Solon, and the Sellers contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(e) Additional Representations and Warranties of Kwik Wash. Kwik Wash
represents and warrants as to itself and on behalf of the Ford Holders to SAS as
of the date hereof that:
(i) the execution, delivery and performance of this Agreement does not and
will not (a) violate any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to any Ford Holder, (b) violate any provision of Kwik Wash's
charter or bylaws, (c) result in a breach or constitute a default under any
indenture or loan or credit agreement or other material agreement to which any
Ford Holder is a party or by which any Ford Holder is bound, or (d) except for
any requirements under
3
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the Hart-Scott-Rodino Antitrust Improvements Act of 1976, require any Ford
Holder to obtain any authorizations, consents or approvals, licenses, exemptions
from or filings or registrations with any person, court, executive or
legislative body, governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign provided, however, that with respect to
clauses (b), (c) and (d) (except with respect to any changes in any such legal
requirements in such clause (d) arising after the date hereof) of this paragraph
(ii), such representation shall be made as of the date hereof and on the
Exercise Date; and
(ii) there are no proceedings pending or, to the actual knowledge of
Enthoven, Bailey, R.K. Ford and R.F. Ford, threatened against or affecting any
Ford Holder or Ford before any federal, state or other governmental agency,
authority, administrator or regulatory body, arbitrator, court or other
tribunal, foreign or domestic, which, individually or in the aggregate, would
have a material adverse effect on any Option Shares or any action taken or to be
taken by any Ford Holder under this Agreement.
2. Covenants of Ford and the Ford Holders.
(a) The Ford Holders hereby covenant and agree, from and after the date
hereof until the termination of the Option Period (as defined in Section 1(b)),
that such Ford Holders will not vote their Option Shares so as to cause Solon
and any subsidiary of Ford or Solon, without the prior written approval of SAS:
(1) to incur any indebtedness for borrowed money, assume, guarantee,
endorse or otherwise expressly become responsible for obligations of any other
person, or make any loans or advances to any person or make any capital
expenditures, in each case, except in the ordinary course of business,
consistent with past practices;
(2) to prepay any debt, liability or obligation, or cancel, release or
assign any indebtedness owed to Solon or any claims held by Solon except in the
ordinary course of business, consistent with past practices;
(3) to declare, pay or incur any obligation to pay any dividend on any
security of Ford or Solon or declare, make or incur any obligation to make any
distribution or redemption with respect to such security;
(4) to make any change to the certificate of incorporation or bylaws of
either Ford or Solon;
(5) to issue, sell, assign, pledge, convey, dispose or otherwise encumber
any securities of Ford or Solon, or
4
<PAGE>
grant any right, option or warrant with respect to the purchase of such
securities or issue any security convertible or exchangeable into such
securities;
(6) to convey, sell, lease, sublease, transfer or otherwise dispose of, or
grant an option to acquire or, in one transaction or a series of related
transactions, any of the property, business or assets of Ford or Solon, whether
now owned or hereafter acquired, other than in the ordinary course of business,
consistent with past practices;
(7) to make any investment or purchase any property or assets of any other
person, except in the ordinary course of business, consistent with past
practices;
(8) to enter into or terminate any contract or agreement, or make any
material change in any of Solon's leases or contracts, other than in the
ordinary course of business, consistent with past practices;
(9) to increase compensation payable to senior management employees of Ford
or Solon and any other employees of Ford or Solon or make any discretionary
bonuses or promise to do any of the foregoing;
(10) to enter into any transaction of merger, reorganization or
consolidation, or wind up, liquidate, or dissolve, or agree to do any of the
following, with respect to Ford or Solon;
(11) to make any payments to or engage in transactions with related or
affiliated parties, in each case, other than in the ordinary course of business,
consistent with past practices;
(12) other than in the ordinary course of business, consistent with past
practice, or as may be required by applicable law, to discharge or satisfy any
claim, mortgage, deed of trust, restrictive covenant, lien, pledge, option,
charge, easement, security interest, right-of-way, encumbrance of any kind or
other rights of third parties, whether or not filed, recorded or otherwise
perfected under applicable law, as well as discharge or satisfy the interest of
any vendor, vendee or lessor or lessee under any conditional sale agreement,
capital lease or other title retention agreement, which is individually or in
the aggregate material to the business, operations, condition (financial or
otherwise), facilities, properties or assets of either Ford or Solon;
(13) other than in the ordinary course of business consistent with past
practice, consistent with past practice, to institute, settle or agree to settle
any litigation, action or proceeding before any court or governmental body which
5
<PAGE>
is individually or in the aggregate material to the business, operations,
condition (financial or otherwise), facilities, properties or assets of either
Ford or Solon;
(14) to remove any member of the board of directors of Ford or Solon or
increase or decrease the size of any such board of directors;
(15) other than in the ordinary course of business consistent with past
practice, to cancel or terminate any policies of insurance with respect to any
of insurable properties which are individually or in the aggregate material to
the business, operations, condition (financial or otherwise), facilities,
properties or assets of either Ford or Solon;
(16) to engage, directly or indirectly, in any line of business other than
the business of Solon as presently conducted, consistent with past practices;
(17) to change Solon's name or commence doing business under an assumed or
fictitious name or sell, license or otherwise dispose of Solon's name;
(18) to operate the business of Solon other than in the ordinary course of
business, consistent with past practice; or
(19) to agree to do any of the foregoing.
(b) It is expressly understood and agreed that the Ford Holders shall have
no duty or obligation to supervise any officer, director, employee, or agent of
Ford, Solon, or any of their respective subsidiaries ("Ford Personnel"), or to
remove or replace any Ford Personnel, regardless of the acts or omissions of
such Ford Personnel (whether or not such acts or omissions are known to the Ford
Holders), or to approve or adopt any transaction or other action recommended by
any Ford Personnel. Under no circumstances shall the Ford Holders have any
responsibility or liability hereunder for their failure to adopt or approve any
transaction or action recommended by any Ford Personnel, or for any action taken
or omitted to be taken by any Ford Personnel which has not been expressly
approved or adopted by the affirmative vote of the Ford Holders at a meeting of
Ford stockholders called for such purpose.
3. SALE OF TEXAS ASSETS.
--------------------
(a) Grant of Put. SAS shall have an unconditional (except as provided
------------
below) and irrevocable option ("Put") exercisable at any time at the sole
discretion of SAS during the Put Period (as defined below) to cause Solon to
sell to Kwik Wash
6
<PAGE>
the Texas Assets (as defined below) for the Purchase Price (as defined below).
(b) Put Period. Upon delivery of written notice ("Put Notice") to Kwik
----------
Wash, SAS shall be entitled to exercise the Put at any time during the six month
period commencing on the date hereof (the "Put Period").
(c) Purchase Price. The purchase price (the "Purchase Price") for the Texas
--------------
Assets shall be forty-four million six hundred fifty-three thousand eight
hundred dollars ($44,653,800), payable at the Closing (as defined below) by wire
transfer of immediately available funds.
(d) Texas Assets. The assets of Solon subject to the Put (the "Texas
------------
Assets") shall consist of any and all of Solon's business locations, properties
(owned and leased), assets and operations (including the prorated assumption of
certain ordinary course current liabilities related thereto) currently operated
by Solon that generate the revenues for the regions of Dallas and Houston in
those certain Solon Automated Services Comparative Statements of Operations for
the twelve months ended September 30, 1994, forms of which are attached hereto
as Exhibits A-1 and A-2, respectively.
(e) Closing. Kwik Wash and SAS shall consummate the sale of the Texas
-------
Assets no later than forty-five (45) days after receipt by Kwik Wash of the Put
Notice from SAS (the "Closing"). Kwik Wash's obligations to consummate the
Closing shall be subject only to: (i) Solon's delivery to Kwik Wash of a written
representation (and the accuracy thereof) to the effect that (w) the Texas
Assets consist of approximately 40,000 machines which generate approximately
$25,600,000 in annual gross revenues, (x) Solon is conveying to Kwik Wash good
and indefeasible title to the Texas Assets (except with respect to any real
property), subject to permitted encumbrances, (y) there has been no material
adverse change in the business, condition (financial or otherwise), or gross
collections (net of lease commissions) of the Texas Assets, and (z) Solon has
been operated only in the ordinary course of business; and (ii) SAS's compliance
with its obligations under this Agreement. At the Closing, Solon shall execute
and deliver to Kwik Wash appropriate instruments of transfer containing general
title warranties reasonably satisfactory to Kwik Wash in form and substance. All
gross collections, lease commissions and other rental expenses, and ad valorem
taxes attributable to the Texas Assets shall be prorated between the parties as
of the date of the Closing (the "Closing Date"), with Solon being obligated to
pay when due all such items accrued on or prior to the Closing Date and Kwik
Wash being obligated to pay when due all such items accrued for periods
subsequent to the Closing Date. Except as expressly provided above, Kwik Wash
shall not assume or be responsible for any debts, liabilities, or obligations of
Solon or its subsidiaries
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<PAGE>
and Solon shall, by an instrument delivered at the Closing in form and
substance reasonably satisfactory to Kwik Wash, indemnify Kwik Wash against all
such debts, liabilities, and obligations.
(f) Confidential information. Prior to any sale of the Texas Assets during
------------------------
the Put Period, SAS agrees not to disclose to any person (other than The
Coinmach Corporation or any of its affiliates) any information regarding the
specific locations of leases or specific terms thereof (and any summary of any
of the foregoing) with respect to such area covered by the Texas Assets.
(g) Payment of Solon Tax Liability. In the event SAS elects to exercise the
------------------------------
Put in accordance with the terms and conditions of this Agreement, in addition
to the Purchase Price, Kwik Wash shall reimburse Solon for the lesser of: (a)
$1,000,000 or (b) 50% of the actual out-of-pocket increase in Taxes actually
paid by Solon, for its tax year in which the Closing occurs, solely as a result
of the sale by Solon of the Texas Assets. "Taxes" for this purpose means federal
and state income taxes (including any federal and state alternative minimum
taxes and including any state taxes denominated as franchise or privilege taxes
but computed on a base similar to taxable income ("Income Taxes")) and state
sales, use and transfer taxes exclusive of any penalties or interest. The
"increase" in actual out-of-pocket Income Taxes shall be computed by comparing
(i) the amount of Income Taxes actually payable by Solon, as reflected on its
federal and state tax returns as originally filed for the tax year in question
(the "Filed Returns") to (ii) hypothetical federal and state tax returns of
Solon for such tax year (the "Hypothetical Returns") prepared on a basis
identical to the Filed Returns except that the sale of the Texas Assets shall be
omitted. The Filed Returns and Hypothetical Returns shall be prepared in good
faith by SAS's independent certified public accountants, and shall make use of
and apply, in respect of the tax year in question, all of the loss carryforwards
and other credits and deductions available to Solon as allowable under
applicable provisions of the Internal Revenue Code of 1986, as amended, or
applicable state laws (such allowability to be determined by SAS's independent
certified public accountants). The payment, if any, due by Kwik Wash under this
Section 3(g) shall be due within 10 days after Solon files the Filed Returns. In
no event shall Kwik Wash have any further obligations based on any subsequent
adjustments to the Filed Returns, whether required by the Internal Revenue
Service, comparable state tax authorities or otherwise.
(h) Payment of Costs and Expenses. In the event SAS determines not to
-----------------------------
exercise the Put, SAS shall, upon expiration of the Put Period, pay to the Ford
Holders an amount (the "Reimbursement") equal to the lesser of: (a) $500,000 or
(b) fifty percent (50%) of the out-of-pocket transaction costs
8
<PAGE>
(including reasonable attorney's fees and disbursements) directly incurred by
the Ford Holders in connection with the consummation of the Acquisition (the
"Transaction Expenses"). All such Transaction Expenses shall be evidenced by
written documentation and receipts reasonably acceptable to SAS. SAS shall pay
the Reimbursement in twelve (12) equal monthly installments, commencing on the
expiration of the Put Period. If the Texas Assets are sold pursuant to the terms
hereof, no such Reimbursement will be required.
(i) Covenant Not to Compete. Kwik Wash and SAS acknowledge and agree that
-----------------------
the business of the Texas Assets are conducted primarily in the greater Houston
and Dallas, Texas, metropolitan areas (including certain locations in Oklahoma
and Louisiana) and that Solon's and Kwik Wash's reputation and goodwill in such
areas are an integral part of each of their business success throughout such
areas. If Kwik Wash deprives SAS of any of Solon's goodwill or in any manner
utilizes Kwik Wash's reputation and goodwill in competition with Solon in such
areas, SAS will be deprived of the benefits it has bargained for pursuant to
this Agreement. If SAS, either directly or indirectly through Solon, deprives
Kwik Wash of any of its goodwill or in any manner utilizes Solon's reputation
and goodwill in competition with Kwik Wash in such areas, Kwik Wash will be
deprived of the benefits it has bargained for pursuant to this Agreement.
Accordingly, as an inducement for each other to enter into this Agreement, Kwik
Wash and SAS agree that, during the Put Period (as defined above), neither Kwik
Wash nor SAS shall, without the prior written consent of the other, directly or
indirectly, within the geographic areas in which the Texas Assets are located:
(i) in any manner induce or attempt to induce any customer, landlord, supplier,
building or location owner or other business relation of the other, to leave or
cease doing business with the other or in any way interfere with the
relationship between the other and any such customer, landlord, supplier,
building or location owner or other business relation of the other, or enter
into or agree to enter into any agreement, arrangement or understanding of any
kind with any of the foregoing; (ii) solicit for employment any person who is an
employee of the other at any time during the Put Period (other than through
general solicitations); or (iii) take any extraordinary measures to acquire the
other's business. Kwik Wash and SAS (for the purpose of this sentence SAS shall
include TCC (as hereinafter defined) and its affiliates) agree to maintain in
confidence and not to disclose to any third party any ideas, methods,
developments, inventions, improvements and business plans and information which
are the confidential information of Solon or Kwik Wash, as applicable. In the
event the agreement in this section shall be determined by any court of
competent jurisdiction to be unenforceable by reason of its extending for too
great a period of time or over too great a geographical area or by reason of its
being too extensive in any other respect, it shall be interpreted to extend over
the maximum
9
<PAGE>
period of time for which it may be enforceable, and/or over the maximum
geographical area as to which it may be enforceable and/or to the maximum extent
in all other respects as to which it may be enforceable, all as determined by
such court in such action. Each of Kwik Wash and SAS acknowledge that a breach
of the covenants contained in this section will cause irreparable damage to the
other, the exact amount of which will be difficult to ascertain, and that the
remedies at law for any such breach will be inadequate. Accordingly, each of
Kwik Wash and SAS agrees that, if such party breaches the covenant contained in
this section in addition to any other remedy which may be available at law or in
equity, the non-breaching party shall be entitled to specific performance and
injunctive relief, without posting bond or other security. Notwithstanding the
foregoing, neither Kwik Wash nor Solon shall be precluded from taking any of the
actions contemplated above to the extent (x) it is advised in writing by its
counsel that the agreements contained above may be in violation of any
applicable law, including without limitation federal or state anti-trust laws;
or (y) such actions do not result in the installation of greater than 200
laundry machines which replace a like number of the other party, provided,
--------
however, that such actions will in no way affect the Purchase Price of the Texas
- -------
Assets.
4. REMEDIES. (a) The representations of Kwik Wash, contained in Section
1(d)(vii) shall survive one (1) year from the date hereof. Subject to Section
4(b) in the event the representation contained in Section 1(d)(vii) hereof shall
not be true and correct as of the Closing, SAS shall (subject to the first
sentence of this Section 4), immediately upon becoming aware of such breach,
have the right to sell its Option Shares and its other equity securities of Ford
to the Ford Holders. Within 10 business days after receipt from SAS of notice of
its determination to exercise its remedies hereunder, the Ford Holders shall be
obligated to purchase the Option Shares and its other equity securities of Ford
from SAS for a purchase price of $11,500,000 payable by wire transfer of
immediately available funds.
(b) SAS's rights under this Section 4 shall terminate and expire on April
4, 1996 if not exercised prior to such date. Kwik Wash shall have no liability
under this Section 4 for matters which have been publicly disclosed by Solon
prior to the date hereof, or any non-public information that is actually known
to Stephen R. Kerrigan or David A. Donnini as of the date hereof. It shall be a
condition of SAS's rights, and Kwik Wash's obligations under this Section 4 that
the Option Shares and other securities of Ford to be conveyed to Kwik Wash by
SAS shall represent 100% of the equity ownership of the business and assets of
Solon in substantially the same form as they exist on the date hereof, subject
to mutually acceptable adjustments in the event of the consummation of any
transaction outside the ordinary course of business. The rights of SAS under
this Section 4 shall
10
<PAGE>
be its exclusive remedy, at law or in equity, against Kwik wash or any other
Ford Holder in respect of SAS's purchase of the Option Shares or any other
securities of Ford. Notwithstanding any of the terms or provisions of this
Agreement (other than pursuant to Section 7), each of SAS and TCC, on the one
hand, and the Ford Holders, on the other hand, agrees that neither it nor any
person acting on its behalf may assert any claims or causes of action against
any officer or director of the other party (or parties) or stockholders of such
other parties in connection with or arising out of this Agreement or the
transactions contemplated hereby.
5. NOTICES. All notices (other than a notice of termination) and other
-------
communications hereunder shall be in writing and shall only be deemed to have
been duly given if mailed by registered or certified mail, delivered by
nationally recognized overnight delivery service, delivered by hand against
receipt, or transmitted by facsimile and if addressed, in the case of notices to
SAS, to SAS at the address appearing on the signature page hereof, Attention:
Stephen R. Kerrigan, Chief Executive Officer; and, in the case of the Ford
Holders, to Kwik Wash at Kwik Wash's address appearing on the signature page
hereof, Attention: Richard Enthoven, Chief Executive Officer.
6. MISCELLANEOUS. This Agreement constitutes the entire agreement among the
-------------
parties hereto pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties hereto and may only be amended, modified or supplemented
in writing signed by the parties hereto. This Agreement shall inure to the
benefit of, and shall bind, the heirs, successors and assigns of the respective
parties. This agreement may be executed in any number of counterparts, each of
which, when so executed and delivered, shall be an original, but all of which
together shall constitute one agreement binding all of the parties hereto. This
Agreement shall be governed and construed and the obligations of the parties
hereunder shall be determined in accordance with the laws of the State of
Delaware (without regard to any conflict of laws provisions thereof and each of
the parties submits to the exclusive jurisdiction of the courts of the State of
Delaware for the purpose of hearing and determining any dispute arising out of
this Agreement and for the enforcement of any judgment).
7. GUARANTY. The Coinmach Corporation, a Delaware corporation ("TCC"),
--------
hereby guaranties to the Ford Holders (and their permitted successors and
assigns) the full and timely performance by SAS of all of SAS's obligations
under this Agreement.
11
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Please acknowledge your consent to the terms outlined above by executing a
copy of this letter agreement and returning it to us.
SAS ACQUISITIONS INC.
By: /s/ Stephen R. Kerrigan
----------------------------
Stephen R. Kerrigan
Chief Executive Officer
c/o The Coinmach Corporation
55 Lumber Road
Roslyn, New York 11576
Fax: (516) 484-0905
Accepted and agreed to as
of the date first above written:
/s/ Robert Kyle Ford
- --------------------------------
Robert Kyle Ford
/s/ Richard Franklin Ford, Jr.,
- --------------------------------
Richard Franklin Ford, Jr.,
Trustee U/D/T February 4, 1994
KWIK WASH LAUNDRIES, INC.
By: /s/ Richard Enthoven
----------------------------
Richard Enthoven
Chief Executive Officer
Kwik Wash Laundries, Inc.
4240 Bronze Way
Dallas, Texas 75237
Fax: (214) 339-5555
THE COINMACH CORPORATION
BY: /s/ Stephen R. Kerrigan
----------------------------
Name: S. R. Kerrigan
-----------------------
Title: CEO
-----------------------
12
<PAGE>
Exhibit 2E
----------
STOCK PURCHASE AGREEMENT
Dated as of March 7, 1995
AMONG
FORD COIN LAUNDRIES, INC.
KWIK WASH LAUNDRIES, INC.
SOLON AUTOMATED SERVICES, INC.
AND
THE SELLERS
<PAGE>
TABLE OF CONTENTS
Page
No.
ARTICLE I
TRANSFER OF SHARES AND PURCHASE PRICE
Section 1.1 Agreement to Buy and Sell .................................. 1
Section 1.2 Purchase Price ............................................. 1
Section 1.3 Additional Contingent Consideration ........................ 2
ARTICLE II
THE CLOSING
Section 2.1 Closing .................................................... 3
Section 2.2 Actions to Occur at Closing ................................ 3
Section 2.3 Actions to Occur Immediately Prior to
Closing .................................................... 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
Section 3.1 Organization and Good Standing;
Authorization and Validity ................................. 3
Section 3.2 Investment Intent .......................................... 4
Section 3.3 No Violation ............................................... 4
Section 3.4 No Consents ................................................ 4
Section 3.5 Litigation ................................................. 4
Section 3.6 Financing .................................................. 5
Section 3.7 Finder's Fee ............................................... 5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SOLON
Section 4.1 Organization and Good Standing;
Authorization and Validity ................................. 5
Section 4.2 Capitalization ............................................. 5
Section 4.3 Ownership of Subsidiaries .................................. 6
Section 4.4 Financial Statements ....................................... 6
Section 4.5 Solon's SEC Reports ........................................ 6
Section 4.6 No Material Adverse Change ................................. 7
Section 4.7 Taxes ...................................................... 7
Section 4.8 Employee Benefit Plans; ERISA .............................. 7
Section 4.9 Litigation ................................................. 9
Section 4.10 No Violation ............................................... 9
Section 4.11 Loans with Affiliates ...................................... 10
Section 4.12 Labor Relations ............................................ 10
Section 4.13 No Consents ................................................ 10
Section 4.14 Insurance .................................................. 10
Section 4.15 Intellectual Property Rights ............................... 11
Section 4.16 Compliance with Laws ....................................... 11
<PAGE>
Section 4.17 Finder's Fee ............................................... 11
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Section 5.1 Organization and Good Standing;
Authorization and Validity ................................. 12
Section 5.2 Ownership of Shares ........................................ 12
Section 5.3 No Violation ............................................... 12
Section 5.4 No Consents ................................................ 12
Section 5.5 Finder's Fee ............................................... 13
ARTICLE VI
COVENANTS OF BUYER AND PARENT
Section 6.1 Obstruction of Purpose ..................................... 13
Section 6.2 Requests for Approvals ..................................... 13
Section 6.3 Reasonable Efforts ......................................... 13
Section 6.4 Hart-Scott-Rodino .......................................... 14
Section 6.5 Current Information ........................................ 14
ARTICLE VII
COVENANTS OF SOLON
Section 7.1 Obstruction of Purpose ..................................... 14
Section 7.2 Requests for Approval ...................................... 15
Section 7.3 Reasonable Efforts ......................................... 15
Section 7.4 Hart-Scott-Rodino .......................................... 15
Section 7.5 Current Information ........................................ 15
Section 7.6 Business Operations ........................................ 16
Section 7.7 Competing Proposals ........................................ 17
Section 7.8 Access ..................................................... 18
Section 7.9 Financial Statements; Solon SEC Reports .................... 18
ARTICLE VIII
COVENANTS OF SELLERS
Section 8.1 Obstruction of Purpose ..................................... 19
Section 8.2 Requests for Approval ...................................... 19
Section 8.3 Reasonable Efforts ......................................... 19
Section 8.4 Hart-Scott-Rodino .......................................... 19
Section 8.5 Competing Proposals ........................................ 20
Section 8.6 Current Information ........................................ 20
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF SELLERS
Section 9.1 Representations and Warranties ............................. 20
Section 9.2 Performance ................................................ 21
Section 9.3 No Legal Bar ............................................... 21
Section 9.4 Government Approvals ....................................... 21
<PAGE>
ARTICLE X
CONDITIONS TO OBLIGATIONS OF BUYER
Section 10.1 Representations and Warranties ............................. 21
Section 10.2 Performance ................................................ 21
Section 10.3 No Legal Bar ............................................... 22
Section 10.4 Government Approvals ....................................... 22
Section 10.5 Delivery of Shares ......................................... 22
ARTICLE XI
TERMINATION
Section 11.1 Termination ................................................ 22
Section 11.2 Effect of Termination ...................................... 23
ARTICLE XII
MISCELLANEOUS
Section 12.1 Notices .................................................... 23
Section 12.2 Extensions and Waivers ..................................... 24
Section 12.3 Costs and Expenses ......................................... 25
Section 12.4 Indemnification by the Sellers ............................. 25
Section 12.5 Agreements of Parties ...................................... 26
Section 12.6 Equity to Enforce Performance .............................. 26
Section 12.7 Governing Law .............................................. 26
Section 12.8 Attorney's Fees ............................................ 27
Section 12.9 Further Assurances ......................................... 27
Section 12.10 Successors and Assigns ..................................... 27
Section 12.11 Counterparts ............................................... 27
Section 12.12 Sellers Representative ..................................... 27
Section 12.13 Headings ................................................... 27
Section 12.14 Invalid Provisions ......................................... 27
Section 12.15 Amendment .................................................. 28
Section 12.16 Public Announcements ....................................... 28
Section 12.17 Non-Survival of Representations,
Warranties, Covenants and Agreements ..................... 28
Section 12.18 Guarantee .................................................. 28
Section 12.19 Directors' and officers' Indemnification
and Insurance ............................................ 28
Section 12.20 Signing Stockholders ........................................ 30
<PAGE>
This Stock Purchase Agreement (this "Agreement") dated as of March 7, 1995,
is made and entered into among Ford Coin Laundries, Inc. a Delaware corporation
("Buyer"), Kwik Wash Laundries, Inc. a Nevada corporation owning 78.9% of the
outstanding shares of common stock, par value $.01 per share, of Buyer
("Parent"), Solon Automated Services, Inc., a Delaware corporation ("Solon") and
the undersigned stockholders of Solon (collectively, the "Sellers"). As used
herein the term "Company" means Solon and its Subsidiaries.
RECITALS:
--------
WHEREAS, Sellers own the number of shares of Common Stock, par value $.01
per share ("Common Stock"), and Class A Common Stock, par value $.01 per share
("Class A Common Stock"), of Solon as set forth opposite their names on the
signature pages hereto (collectively, the "Shares"); and
WHEREAS, Sellers desire to sell to Buyer, and Buyer desires to purchase
from Sellers, the Shares on the terms and conditions herein set forth in this
Agreement (the "Transaction").
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
TRANSFER OF SHARES AND PURCHASE PRICE
-------------------------------------
Section 1.1 Agreement to Buy and Sell. On the terms and subject to the
-------------------------
conditions herein expressed, Sellers agree to sell, transfer, assign and deliver
the Shares to Buyer and Buyer agrees to purchase the Shares from Sellers at the
Closing (as hereinafter defined).
Section 1.2 Purchase Price. The purchase price for each Share shall be
--------------
$.7457 per Share. The aggregate purchase price (referred to herein as the
"Purchase Price") shall be payable by Buyer at the Closing by wire transfer of
immediately available funds to such account as the Representative (as defined in
Section 12.12 below) may reasonably direct by written notice delivered to Buyer
by the Representative at least two (2) business days before the Closing Date (as
hereinafter defined). If, between the date of this Agreement and the Closing,
the outstanding shares of Common Stock or Class A Common Stock shall have been
changed into a different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares or
readjustment, the purchase price for each share to be received pursuant to this
Section shall be adjusted as appropriate. The
<PAGE>
Representative shall be solely responsible for disbursing such funds received at
the Closing to the Sellers.
Section 1.3 Additional Contingent Consideration. If within five (5) years
-----------------------------------
from the Closing Date, either (i) an underwritten primary or secondary public
offering of equity securities of Parent is consummated or (ii) a private sale of
a majority equity interest in Parent to a third party in an arms-length
transaction is consummated (whether by stock sale, sale of assets or merger),
and the price at which such public offering or private sale is effected
indicates an Enterprise Value (determined as provided below) in excess of $290
million (an "Additional Payment Event"), then the Sellers collectively will be
entitled to a cash payment from Parent equal to three percent (3%) of the amount
by which such Enterprise Value exceeds $290 million (or a pro rata amount
thereof if less than all of the issued and outstanding shares of Common Stock
and Class A Common Stock are purchased by the Buyer in the Transaction). There
shall be no more than one (1) Additional Payment Event. Such payment of
additional consideration, if any, shall be payable to the Representative, as
agent for the Sellers. The obligation to pay such additional contingent
consideration shall expire if an Additional Payment Event does not occur by the
fifth (5th) anniversary of the Closing Date. For purposes of the foregoing,
"Enterprise Value" shall be an amount equal to the sum of (x) the aggregate
value of the equity securities of Parent outstanding immediately following such
private sale or public offering, determined on the basis of the price per share
paid in such private sale or public offering, (y) the principal amount of all
indebtedness of Parent and its subsidiaries immediately following such private
sale or public offering and (z) the aggregate amount of all cash and non-cash
consideration received by holders of equity securities of Parent from Parent in
respect of such securities during the period from the Closing Date through the
date of the consummation of such private sale or public offering (whether by way
of dividends, distributions, repurchases of shares or otherwise, but excluding
(i) for so long as such are treated as S corporations, those dividends or
distributions made by Parent or Solon to its shareholders equal to the amount
necessary for such shareholders to pay their taxes attributable to the income of
Parent or Solon, as applicable, (ii) any dividends or distributions made by
Parent to its shareholders during 1995, and (iii) any such dividend,
distribution or repurchase of shares to the extent of any new equity contributed
by the current shareholders of Parent subsequent to the Closing Date).
-2-
<PAGE>
ARTICLE II
THE CLOSING
-----------
Section 2.1 Closing. The closing of the Transaction under this Agreement
-------
(the "Closing") shall occur at the offices of Weil, Gotshal & Manges, 100
Crescent Court, Suite 1300, Dallas, Texas at 10:00 a.m. on the third business
day after the day following the expiration or termination of the applicable
waiting period under Section 7A of the Clayton Act (Title II of, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and the rules
and regulations promulgated thereunder (the "HSR Act"), or if the other
conditions to Closing are not satisfied at such time, as promptly as is
practicable, or such other date as is determined by mutual agreement thereafter
of Parent, Buyer, Solon and Sellers representing a majority of the Shares. The
time and date on which the Closing hereunder occurs is herein called the
"Closing Date."
Section 2.2 Actions to Occur at Closing. At the Closing, Sellers will
---------------------------
deliver to Buyer stock certificates duly endorsed in blank, or accompanied by
stock powers duly endorsed in blank representing the Shares and the other
documents referred to herein (all in form and substance reasonably satisfactory
to Buyer's counsel) required to be delivered to Buyer by Sellers at Closing
against simultaneous delivery by Buyer of the Purchase Price to the
Representative, as agent for the Sellers, and the other documents referred to
herein (all in form and substance reasonably satisfactory to Seller's counsel)
required to be delivered to Sellers by Buyer.
Section 2.3 Actions to Occur Immediately Prior to Closing. On the same day
---------------------------------------------
as, but immediately prior to, the Closing, Solon will deliver to Buyers, via
wire transfer of immediately available funds as directed by written notice
delivered to Solon by Buyers at least two (2) business days before the Closing
Date, the deposit in the amount of $500,000.00 made by Parent pursuant to the
release of funds to Solon under the Escrow Agreement, dated as of December 30,
1994 by and among Parent, Solon and NationsBank of Texas, N.A.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
--------------------------------------------------
Parent and Buyer, jointly and severally, represent and warrant to Sellers
as follows:
Section 3.1 Organization and Good Standing; Authorization and Validity.
----------------------------------------------------------
Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Parent is a corporation duly
-3-
<PAGE>
organized, validly existing and in good standing under the laws of the State of
Nevada. Each of Parent and Buyer has the requisite corporate power and authority
to enter into this Agreement and to perform its obligations hereunder. This
Agreement has been duly and validly authorized, executed and delivered by Parent
and Buyer and is a valid and binding agreement of Parent and Buyer enforceable
against each of them in accordance with its terms.
Section 3.2 Investment Intent. Buyer represents that it is and will be
-----------------
acquiring the Shares for its own account and not with a view to the distribution
or resale thereof within the meaning of the Securities Act of 1933, as amended
(the "Act"). Buyer will refrain from transferring or otherwise disposing of any
of the Shares, or any interest therein, in such manner as to cause Sellers or
Solon to be in violation of the registration requirements of the Act or
applicable state securities or blue sky laws.
Section 3.3 No Violation. Neither the execution of this Agreement nor the
------------
consummation of the Transaction contemplated hereby will result in the breach or
violation of any term or provision of, or constitute a default under, the
certificate of incorporation or bylaws (or other comparable corporate charter
documents) of Parent or Buyer, or any agreement, mortgage, note, bond, license,
indenture, instrument, order, decree, law or regulation to which Parent or Buyer
is a party or which is otherwise applicable to either of them, where such
breach, violation or default could reasonably be expected to have a material
adverse effect on (i) the validity or enforceability of this Agreement with
respect to Parent or Buyer, (ii) the consummation of the Transaction
contemplated under this Agreement or (iii) Parent or Buyer, as the case may be.
Section 3.4 No Consents. other than the expiration of any applicable
-----------
waiting period under the HSR Act, no consent, declaration, filing or approval or
authorization of, or registration with, any federal, state, municipal or local
governmental or regulatory authority or any other person or entity is required
in connection with the execution and delivery of this Agreement by Parent or
Buyer, or the consummation by Parent or Buyer of the Transaction contemplated
hereby, other than such consents, declarations, filings, approvals or
authorizations, which the failure to make or obtain, as the case may be,
individually or in the aggregate, could not reasonably be expected to have a
material adverse effect on (i) the validity or enforceability of this Agreement
with respect to Parent or Buyer, (ii) the consummation of the Transaction
contemplated by this Agreement or (iii) Parent or Buyer.
Section 3.5 Litigation. There are currently no pending, and to the
----------
knowledge of Parent or Buyer, any threatened, lawsuits or administrative
proceedings against Buyer or Parent,
-4-
<PAGE>
or to which any of their assets are subject, which could reasonably be expected
to have a material adverse effect on the ability of Parent or Buyer to
consummate the Transaction contemplated by this Agreement.
Section 3.6 Financing. Buyer has sufficient cash and/or available credit
---------
facilities (and has provided Sellers and Solon with evidence thereof) to pay the
Purchase Price and to make all other necessary payments of fees and expenses in
connection with the Transaction contemplated by this Agreement.
Section 3.7 Finder's Fee. Neither Buyer or Parent has incurred any
------------
obligation for any finder's, broker's or agent's fee in connection with the
Transaction contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SOLON
---------------------------------------
Solon represents and warrants to Buyer that, except as set forth on the
Disclosure Schedule delivered to Buyer prior to the execution hereof:
- -------------------
Section 4.1 Organization and Good Standing; Authorization and Validity.
----------------------------------------------------------
Solon and its Subsidiaries (as defined below) are corporations duly organized,
validly existing and in good standing under the laws of their respective
jurisdictions of incorporation, and are duly qualified in all foreign
jurisdictions in which they are required to so qualify, except for such failures
to be so qualified which, individually or in the aggregate, are not having or
could not be reasonably expected to have a material adverse effect on the
business, properties, financial condition, assets or properties of Solon and its
Subsidiaries, taken as a whole. Each of Solon and its Subsidiaries have full
corporate power to own the properties it owns and to conduct the business
currently being conducted by it. This Agreement has been duly and validly
authorized, executed and delivered by Solon and is a valid and binding agreement
of Solon enforceable against it in accordance with its terms. True and correct
copies of the certificate of incorporation and bylaws of Solon and each of the
Subsidiaries have been made available to Buyer.
Section 4.2 Capitalization. The authorized capitalization of Solon consists
--------------
solely of 20,000,000 shares of Common Stock and 3,247,885 shares of Class A
Common Stock. As of the date hereof, 12,174,257 shares of Common Stock and
3,247,885 shares of Class A Common Stock were issued and outstanding. The Shares
are validly issued, fully paid and nonassessable. Exhibit A sets forth the
outstanding options, warrants, commitments or other rights obligating Solon to
issue or sell any
-5-
<PAGE>
shares of Common Stock or Class A Common Stock or enter into any option with
respect thereto.
Section 4.3 Ownership of Subsidiaries. The authorized capitalization of
-------------------------
Massachusetts D&W Company, Inc., a Massachusetts corporation, D.C. D&W Company,
Inc., a Delaware corporation, The Laundry Room, Inc., a Virginia corporation,
Bakst Service, Inc., a Delaware corporation and Sped Laundry Service, Inc., a
Maryland corporation (collectively, the "Subsidiaries"), consists solely of
7,500 shares of common stock, no par value, 100 shares of common stock, no par
value, 225 shares of common stock, no par value, 200 shares of common stock, no
par value, and 500 shares of common stock, no par value, respectively. All of
the issued and outstanding shares of capital stock of such corporations are
owned beneficially and of record by Solon, free from all liens, claims and
encumbrances of any kind. There are no options, warrants, calls, commitments or
other rights of any party to acquire any of the capital stock of the
Subsidiaries.
Section 4.4 Financial Statements. The consolidated financial statements of
--------------------
Solon, as of and for the quarter ended December 30, 1994 and the fiscal years
ended September 30, 1994, and October 1, 1993, which have been delivered to
Buyer (the balance sheet at December 30, 1994, is sometimes hereinafter referred
to as the "Latest Balance Sheet") present fairly, in all material respects, the
financial position of Solon, and the results of its operations as of the
respective dates thereof and for the respective periods indicated, in accordance
with generally accepted accounting principles consistently applied during the
periods involved (except as may be otherwise indicated therein or in the notes
thereto, and subject, in the case of the unaudited interim financial statements,
to normal, recurring year-end audit adjustments). The consolidated financial
statements as of and for the fiscal years ended September 30, 1994, and October
1, 1993 have been audited by Arthur Andersen L.L.P., independent certified
public accountants. Except for matters reflected or reserved against in the
Latest Balance Sheet or in the notes thereto, or otherwise disclosed in the
Solon SEC Reports (as defined below), as of December 30, 1994, Solon had no
material liabilities, contingent or otherwise, whether due or to become due,
that would be required by generally accepted accounting principles to be
reflected on a consolidated balance sheet of the Company (including the notes
thereto).
Section 4.5 Solon's SEC Reports. Solon has made available to Buyer (i)
-------------------
Solon's Annual Reports on Form 10-K for the years ended September 30, 1994 and
October 1, 1993; (ii) Solon's Quarterly Reports on Form 10-Q for the quarter
ended December 30, 1994; and (iii) all other documents, reports and
registration statements (as amended or supplemented prior to the date hereof)
filed by Solon with the Securities and Exchange Commission (the "Commission")
since September 30, 1992, (all
-6-
<PAGE>
documents, reports and, registration statements referred to in (i) through (iii)
of this sentence together with those reports made available to Buyer pursuant to
Section 7.9(b) prior to the Closing being referred to herein as the "Solon SEC
Reports"). As of their respective dates, the Solon SEC Reports did not (or will
not with respect to reports made available to Buyer prior to the Closing
pursuant to Section 7.9(b)) contain any untrue statement of material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Solon has filed all registration statements, reports and
documents with the Commission required to be filed by it pursuant to the Act,
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations of the Commission promulgated thereunder, each of which
complied as to form, at the time such Solon SEC Report was filed, in all
material respects with the applicable requirements of the Act, the Exchange Act
and the applicable rules of the Commission thereunder.
Section 4.6 No Material Adverse Change. Other than as disclosed in the
--------------------------
Solon SEC Reports, since the date of the Latest Balance Sheets there has not
been (i) any change, event or development having, or which could reasonably be
expected to have, a material adverse effect on the business, properties,
financial condition, assets or properties of Solon and its Subsidiaries, taken
as a whole, other than those occurring as a result of general economic or
financial conditions or other developments which are not unique to Solon but
also generally affect other persons who participate or are engaged in the lines
of business in which Solon participates or is engaged or (ii) any action by
Solon which, if it had been taken after the date hereof, would not have been
permitted by the fourth sentence of Section 7.6 without the consent of Buyer.
Section 4.7 Taxes. Solon and each of its Subsidiaries (i) have timely filed
-----
all material tax returns required to be filed by any of them for tax years ended
prior to the date of this Agreement or requests for extensions have been timely
filed and any such request shall have been granted and not expired, and all such
returns are complete in all material respects, (ii) have paid or accrued all
taxes shown to be due and payable on such returns and (iii) have properly
accrued all such taxes for such periods subsequent to the periods covered by
such returns. Solon and its Subsidiaries have "open" years for federal income
tax returns only for the years 1988 through 1994. Solon has made available to
Buyer or Parent copies of all of Solon's federal income tax returns filed since
its fiscal year ending 1988.
Section 4.8 Employee Benefit Plans; ERISA.
-----------------------------
(a) Except as disclosed in the Solon SEC Reports filed prior to the date of
this Agreement:
-7-
<PAGE>
(i) there is no outstanding liability (except for premiums due) under
Title IV of ERISA with respect to any Company Employee Benefit Plan;
(ii) neither the Pension Benefit Guaranty Corporation (the "PBGC") nor
the Company has instituted proceedings to terminate any Company Employee
Benefit Plan that is subject to Title IV of ERISA;
(iii) full payment has been made of all amounts which the Company was
required to have paid as a contribution to the Company Employee Benefit
Plans as of the last day of the most recent fiscal year of each of the
Company Employee Benefit Plans ended prior to the date of this Agreement,
and none of the Company Employee Benefit Plans has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA and
Section 412 of the Code), whether or not waived, as of the last day of the
most recent fiscal year of each such Company Employee Benefit Plan ended
prior to the date of this Agreement;
(iv) each of the Company Employee Benefit Plans which is intended to
be "qualified" within the meaning of Section 401(a) of the Code has
received a favorable determination regarding such qualification from the
IRS;
(v) each of the Company Employee Benefit Plans is, and its
administration is and has been during the five-year period preceding the
date of this Agreement in compliance with, and Solon has not received any
claim or notice that any such Company Employee Benefit Plan is not in
compliance with, all applicable laws and orders and prohibited transaction
exemptions, including, without limitation, the requirements of ERISA,
except where the failure so to be in compliance would not have a material
adverse effect on the business, operations, financial condition, properties
or assets of Solon and its Subsidiaries, taken as a whole;
(vi) to the knowledge of Solon, there are no material pending,
threatened or anticipated claims involving any of the Company Employee
Benefit Plans;
(vii) the Company is not in default in performing any of its
contractual obligations under any of the Company Employee Benefit Plans or
any related trust agreement or insurance contract where such default would
have a material adverse effect on the business, operations, financial
condition, properties or assets of Solon and its Subsidiaries, taken as a
whole;
(viii) there are no material outstanding liabilities of any Company
Employee Benefit Plan other than liabilities for benefits to be paid to
participants in such Company Employee
-8-
<PAGE>
Benefit Plan and their beneficiaries in accordance with the terms of such
Company Employee Benefit Plan;
(ix) the Company does not maintain, and is not obligated to provide
benefits under, any life, medical or health plan which provides benefits to
retirees or other terminated employees other than benefit continuation
rights under the Consolidated Omnibus Reconciliation Act of 1985, as
amended, or any similar state laws; and
(x) neither the execution and delivery of this Agreement nor the
consummation of the Transaction contemplated hereby constitutes a change in
control or has or will accelerate benefits under any Company Employee
Benefit Plan.
(b) As used herein:
(i) "Company Employee Benefit Plan" means any Plan entered into,
-----------------------------
established, maintained, contributed to or required to be contributed to by
Solon and existing on the date of this Agreement or at any time subsequent
thereto and on or prior to the Closing Date and, in the case of a Plan
which is subject to Part 3 of Title I of ERISA, Section 412 of the Code or
Title IV of ERISA, at anytime during the five-year period preceding the
date of this Agreement; and
(ii) "Plan" means any employment, bonus, incentive compensation,
----
deferred compensation, pension, profit sharing, retirement, stock purchase,
stock option, stock ownership, stock appreciation rights, phantom stock,
cafeteria, life, health, medical, accident, disability or other insurance,
severance, separation, termination, change of control or other benefit
plan, agreement, practice, policy or arrangement.
Section 4.9 Litigation. Except as disclosed in Solon SEC Reports, there are
----------
currently no pending or, to the knowledge of Solon, any threatened, lawsuits or
administrative proceedings against the Company or to which any of its assets or
employees are subject, which have had, or could reasonably be expected to have,
a material adverse effect on the business, operations, financial condition,
properties or assets of Solon and its Subsidiaries, taken as a whole. The
Company is not subject to any currently existing order, writ, injunction or
decree relating to its operations or any of its assets which have, or could
reasonably be expected to have, a material adverse effect on the business,
operations, financial condition, properties or assets of Solon and its
Subsidiaries, taken as a whole.
Section 4.10 No Violation. The Company is not currently, and neither the
------------
execution of this Agreement nor the consummation of the Transaction contemplated
hereby will result in the breach or violation of any term or provision of, or
-9-
<PAGE>
constitute a default under, any charter provision, bylaw, agreement, mortgage,
note, bond, license, indenture, instrument, order, decree, law or regulation to
which the Company is a party or which is otherwise applicable to it, where such
breach, violation or default could reasonably be expected to have a material
adverse effect on (i) the validity or enforceability of this Agreement with
respect to Solon, (ii) the consummation of the Transaction contemplated by this
Agreement or (iii) the business, operations, financial condition, properties or
assets of Solon and its Subsidiaries, taken as a whole.
Section 4.11 Loans with Affiliates. Solon is not indebted to any of the
---------------------
Sellers or any entity controlled by any of the Sellers other than amounts due in
the ordinary course to those Sellers who are employees of the Company in their
capacity as such. As of the Closing, all advances or loans made by Solon to any
shareholder, officer or director of Solon will have been repaid in full, with
accrued interest to the date of repayment.
Section 4.12 Labor Relations. The Company has not been the subject of any
---------------
union activity or labor dispute which could reasonably be expected to have a
material adverse effect on the business, operations, financial condition,
properties or assets of Solon and its Subsidiaries, taken as a whole. The
Company has not violated any applicable federal or state law or regulation
relating to labor or labor practices, the violation of which would have a
material adverse effect on the business, operations, financial condition,
properties or assets of Solon and its Subsidiaries, taken as a whole.
Section 4.13 No Consents. Other than the expiration of any applicable
-----------
waiting period under the HSR Act, no consent, declaration, filing or approval or
authorization of, or registration with, any federal, state, municipal or local
government or regulatory authority or any other person or entity is required in
connection with the execution and delivery of this Agreement by Solon or the
consummation of the Transaction contemplated hereby, other than such consents,
declarations, filings, approvals or authorizations, which the failure to make or
obtain, as the case may be, individually or in the aggregate, could not
reasonably be expected to have, a material adverse effect on (i) the validity or
enforceability of this Agreement with respect to Solon, (ii) the consummation of
the Transaction contemplated by this Agreement or (iii) the business,
operations, financial condition, properties or assets of Solon and its
Subsidiaries, taken as a whole.
Section 4.14 Insurance. The insurable properties of the Company are insured
---------
for its benefit under policies issued by insurers of recognized responsibility
in amounts and against such risks and losses as is customary in the Company's
industry. A true, complete and correct list of all of the Company's material
insurance policies currently in effect that insure the material
-10-
<PAGE>
properties of the Company is set forth on the Disclosure Schedule.
Section 4.15 Intellectual Property Rights. The Company has all right, title
----------------------------
and interest in, or a valid and binding license to use, all Intellectual
Property (as defined below) individually or in the aggregate material to the
conduct of the business of Solon and its Subsidiaries, taken as a whole. The
Company is not in default (or with the giving of notice or lapse of time or
both, would be in default) in any material respect under any license to use such
Intellectual Property, such Intellectual Property is not being infringed by any
third party, and the Company is not infringing any Intellectual Property of any
third party, except for such defaults and infringements which, individually or
in the aggregate, are not having and could not be reasonably expected to have a
material adverse effect on the business, operations, financial condition,
properties or assets of Solon and its Subsidiaries, taken as a whole. For
purposes of this Agreement, "Intellectual Property" means patent and patent
rights, trademarks and trademark rights, trade names and trade name rights,
service marks and service mark rights, service names and service name rights,
copyright and copyright rights and other proprietary intellectual property
rights and all pending applications for and registrations of any of the
foregoing.
Section 4.16 Compliance with Laws. The Company has all approvals, licenses
--------------------
and orders of and from all governmental and regulatory authorities necessary or
required to conduct its business as it is currently being conducted, to own or
hold under lease the properties and assets it owns or holds under lease and to
perform all of its obligations under the agreements to which it is a party, the
failure of which to have would have a material adverse effect on the business,
properties, financial condition, assets or properties of Solon and its
Subsidiaries, taken as a whole. The Company is, in all material respects, in
compliance with all applicable laws, regulations and administrative orders of
any country, state, or municipality or of any subdivision thereof to which its
business and its employment of labor or its use or occupancy of properties or
any part thereof are subject, where the failure to comply with such laws,
regulations and orders would have a material adverse effect on the business,
properties, financial condition, assets or properties of Solon and its
Subsidiaries, taken as whole.
Section 4.17 Finder's Fee. Solon has not incurred any obligation for any
------------
finder's, broker's or agent's fee in connection with the Transaction
contemplated hereby. Without limitation to the foregoing, Goldman, Sachs & Co.
("Goldman, Sachs") has waived any rights it may have to receive any such fee in
connection with the Transaction contemplated hereby.
-11-
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
---------------------------------------------
Each Seller, severally and not jointly, represents and warrants to Buyer,
but only as to such Seller and only as to such Seller's Shares, that:
Section 5.1 Organization and Good Standing; Authorization and Validity. The
----------------------------------------------------------
Seller, if other than an individual, is an entity duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization. The Seller has the requisite power and authority to enter into
this Agreement and to perform its obligations hereunder. This Agreement has been
duly and validly authorized, executed and delivered by the Seller and is a valid
and binding agreement of the Seller enforceable against such Seller in
accordance with its terms.
Section 5.2 Ownership of Shares. The number of Shares set forth opposite
-------------------
such Seller's name on the signature page hereto are owned of record and
beneficially by such Seller, free and clear of all liens. Upon transfer of such
Shares to Buyer hereunder at the Closing in accordance with Section 2.2 hereof,
Buyer will receive good and valid title to such Shares, free and clear of all
liens, claims and encumbrances (other than those created or suffered to exist by
Buyer or Parent).
Section 5.3 No Violation. Neither the execution of this Agreement nor the
------------
consummation of the Transaction contemplated hereby will result in the breach or
violation of any term or provision of, or constitute a default under, any
organizational document, agreement, mortgage, note, bond, license, indenture,
instrument, order, decree, law or regulation to which the Seller is a party or
which is otherwise applicable to it, where such breach, violation or default
could reasonably be expected to have a material adverse effect on (i) the
validity or enforceability of this Agreement with respect to such Seller, (ii)
the consummation of the Transaction contemplated by this Agreement or (iii) such
Seller.
Section 5.4 No Consents. Other than the expiration of any applicable
-----------
waiting period under the HSR Act, no consent, declaration, filing or approval or
authorization of, or registration with, any federal, state, municipal or local
government or regulatory authority or any other person is required in connection
with the execution and delivery of this Agreement by such Seller or the
consummation of the Transaction contemplated hereby by such Seller other than
such consents, declarations, filings, approvals or authorizations, which the
failure to make or obtain, as the case may be, individually or in the aggregate,
could not be reasonably expected to have a material adverse effect on (i) the
validity or enforceability of
-12-
<PAGE>
this Agreement with respect to such Seller, (ii) the consummation of the
Transaction contemplated hereby or (iii) such Seller.
Section 5.5 Finder's Fee. Such Seller has not incurred any obligation for
------------
any finder's, broker's or agent's fee in connection with the Transaction
contemplated hereby for which a claim could be made against Solon, Buyer or
Parent.
ARTICLE VI
COVENANTS OF BUYER AND PARENT
-----------------------------
Buyer and Parent covenant and agree that between the date hereof and the
Closing, except to the extent Sellers representing a majority of the Shares may
otherwise consent in writing (which consent shall not be unreasonably withheld):
Section 6.1 Obstruction of Purpose. Buyer and Parent shall not take any
----------------------
action which would cause or tend to cause the conditions upon the obligations of
the parties hereto to effect the Transaction contemplated hereby not to be
fulfilled; including, without limitation, taking, causing to be taken, or
permitting or suffering to be taken or to exist any action, condition or thing
which would cause the representations and warranties made by Buyer and Parent
herein not to be true, correct and accurate in all material respects as of the
Closing.
Section 6.2 Requests for Approvals. Buyer and Parent shall (a) promptly
----------------------
file or submit and diligently prosecute any and all applications or notices with
public authorities, federal, state or local, domestic or foreign, and all other
requests for approvals to any private persons, the filing or granting of which
is necessary for the consummation by Buyer of the Transaction contemplated
hereby, (b) provide such other information and communications to such parties as
they may reasonably request in connection therewith and (c) provide reasonable
cooperation to Sellers and Solon, in obtaining all consents, approvals or
actions of, making all filings with and giving all notices to the parties
referred to in clause (a) above required of Sellers or Solon, as the case may
be, to consummate the Transaction contemplated hereby. Buyer will provide prompt
notification to Solon and Sellers when any such consent, approval, action,
filing or notice referred to in clause (a) above is obtained, taken, made or
given, as applicable, and will advise Solon and Sellers of any communications
(and, unless precluded by law, provide copies of any such communications that
are in writing) with any of such parties regarding the Transaction contemplated
by this Agreement.
Section 6.3 Reasonable Efforts. Each of Buyer and Parent shall take all
------------------
commercially reasonable steps which are within its power to cause to be
fulfilled those of the conditions
-13-
<PAGE>
precedent to the Sellers', obligations to consummate the Transaction
contemplated hereby which are dependent upon the actions of Buyer or Parent.
Section 6.4 Hart-Scott-Rodino. In addition to and without limiting the
-----------------
covenants contained in Section 6.2, Buyer and Parent will (i) take promptly all
actions necessary to make the filings required of Buyer and Parent or their
affiliates under the HSR Act with respect to the Transaction contemplated by
this Agreement, (ii) comply at the earliest practicable date with any request
for additional information received by Buyer or Parent or their affiliates from
the Federal Trade Commission or the Antitrust Division of the Department of
Justice pursuant to the HSR Act and (iii) cooperate with Solon and any Seller in
connection with the filing by or on behalf of Solon or such Seller under the HSR
Act with respect to the Transaction contemplated by this Agreement and in
connection with resolving any investigation or other inquiry concerning the
Transaction contemplated by this Agreement commenced by either the Federal Trade
Commission or the Antitrust Division of the Department of Justice or state
attorneys general.
Section 6.5 Current Information. Buyer or Parent will advise Solon and the
-------------------
Sellers in writing as soon as practicable after it becomes known to Buyer or
Parent, as the case may be, prior to the Closing:
(i) of the occurrence of any event that renders any of the
representations or warranties of Buyer and Parent set forth herein
inaccurate in any material respect;
(ii) that any representation or warranty of Buyer and Parent set forth
herein was not accurate in all material respects when made; and
(iii) of the failure of Buyer or Parent to comply or accomplish any of
the covenants or agreements set forth herein in any material respect.
ARTICLE VII
COVENANTS OF SOLON
------------------
Solon covenants and agrees that between the date hereof and the Closing,
except to the extent Buyer may otherwise consent in writing (which consent shall
not be unreasonably withheld):
Section 7.1 Obstruction of Purpose. Solon shall not take any action which
----------------------
would cause or tend to cause the conditions upon the obligations of the parties
hereto to effect the Transaction contemplated hereby not to be fulfilled;
including, without limitation, taking, causing to be taken, or permitting or
-14-
<PAGE>
suffering to be taken or to exist any action, condition or thing which would
cause the representations and warranties made by Solon herein not to be true,
correct and accurate in all material respects as of the Closing.
Section 7.2 Requests for Approval. Solon shall (a) promptly file or submit
---------------------
and diligently prosecute any and all applications or notices with public
authorities, federal, state or local, domestic or foreign, and all other
requests for approvals to any private persons, the filing or granting of which
is necessary for the consummation by Solon of the Transaction contemplated
hereby, (b) provide such other information and communications to such parties as
they may reasonably request in connection therewith and (c) provide reasonable
cooperation to Buyer and/or Parent, in obtaining all consents, approvals or
actions of, making all filings with and giving all notices to the parties
referred to in clause (a) above required of Buyer and/or Parent to consummate
the Transaction contemplated hereby. Solon will provide prompt notification to
Buyer when any such consent, approval, action, filing or notice referred to in
clause (a) above is obtained, taken, made or given, as applicable, and will
advise Buyer of any communications (and, unless precluded by law, provide copies
of any such communications that are in writing) with any of such parties
regarding the Transaction contemplated by this Agreement.
Section 7.3 Reasonable Efforts. Solon shall take all commercially
------------------
reasonable steps which are within its power to cause to be fulfilled those of
the conditions precedent to Buyer's obligations to consummate the Transaction
contemplated hereby which are dependent upon the actions of Solon.
Section 7.4 Hart-Scott-Rodino. In addition to and without limiting the
-----------------
covenants contained in Section 7.2, Solon will (i) take promptly all actions
necessary to make the filings required of Solon or its affiliates under the HSR
Act with respect to the Transaction contemplated by this Agreement, (ii) comply
at the earliest practicable date with any request for additional information
received by Solon or its affiliates from the Federal Trade Commission or the
Antitrust Division of the Department of Justice pursuant to the HSR Act and
(iii) cooperate with Buyer and Parent in connection with the filing by or on
behalf of Buyer under the HSR Act with respect to the Transaction contemplated
by this Agreement and in connection with resolving any investigation or other
inquiry concerning the Transaction contemplated by this Agreement commenced by
either the Federal Trade Commission or the Antitrust Division of the Department
of Justice or state attorneys general.
Section 7.5 Current Information. Solon will advise the Buyer in writing as
-------------------
soon as practicable after it becomes known to Solon, prior to the Closing:
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<PAGE>
(i) of the occurrence of any event that renders any of the
representations or warranties of Solon set forth herein inaccurate in any
material respect;
(ii) that any representation or warranty of Solon set forth herein was
not accurate in all material respects when made; and
(iii) of the failure of Solon to comply or accomplish any of the
covenants or agreements set forth herein in any material respect.
Section 7.6 Business Operations. The Company will operate its business, in
-------------------
all material respects, in accordance with its respective current methods of
transacting business (which are consistent with past practices or methods) and
shall use its commercially reasonable efforts to preserve the goodwill of
employees, suppliers, customers and others having significant business dealings
with it. The Company shall make all normal and customary repairs, replacements
and improvements to its equipment and facilities in the ordinary course of
business, consistent with its past practices. The Company will not dispose of
any material assets other than at fair market value and in the ordinary course
of business. Without limiting the generality of the foregoing, Solon will not,
nor will Solon cause any Subsidiary to, without Buyer's prior written consent:
(i) change its articles of incorporation or bylaws or merge or
consolidate with or into any entity or obligate itself to do so;
(ii) issue, sell or pledge, or authorize or propose the issuance, sale
or pledge of additional shares of capital stock of any class (including
shares of Common Stock or Class A Common Stock), or securities convertible
into any such shares, or any rights, warrants or options to acquire any
such shares or other convertible securities or declare, set aside or pay
any dividend or other distribution on or in respect of shares of its
capital stock, or redeem, retire or purchase any of such shares;
(iii) other than in the ordinary course of its business, discharge or
satisfy any lien, charge, encumbrance or indebtedness which is individually
or in the aggregate material to the business, operations, financial
condition, properties or assets of Solon and its Subsidiaries, taken as a
whole, except those required to be discharged or satisfied (excluding those
required to be discharged or satisfied as a result of any acceleration or
default);
(iv) other than in the ordinary course of its business, authorize,
guarantee or incur indebtedness or make any capital expenditures, other
than as permitted under the
-16-
<PAGE>
indentures (the "Indentures") governing Solon's $100,000,000 12 3/4%
Senior Notes due 2001 and $30,000,000 13 3/4% Senior Subordinated
Debentures due 2002 and the Loan and Security Agreement dated December 30,
1992 between Solon and Foothill Capital Corporation, in each case as in
effect as of the date hereof (without regard to any waivers or amendments
to any of the foregoing given or entered into after the date hereof);
(v) other than in the ordinary course of its business, institute,
settle or agree to settle any litigation, action or proceeding before any
court or governmental body which is individually or in the aggregate
material to the business, operations, financial condition, properties or
assets of Solon and its Subsidiaries, taken as a whole;
(vi) other than in the ordinary course of its business, mortgage,
pledge or subject to any other encumbrance, any of its property or assets,
tangible or intangible which is individually or in the aggregate material
to the business, operations, financial condition, properties or assets of
Solon and its Subsidiaries, taken as a whole;
(vii) authorize any compensation increases of any kind whatsoever for
any employee except for normal increases in the ordinary course of business
that, in the aggregate, do not result in a material increase in benefits or
compensation expense to Solon and its Subsidiaries, taken as a whole;
(viii) other than in the ordinary course of its business, cancel or
terminate any policies of insurance with respect to any of the Company's
insurable properties which are individually or in the aggregate material to
the business, operations, financial condition, properties or assets of
Solon and its Subsidiaries, taken as a whole; or
(ix) other than in the ordinary course of its business, cancel leases
to which the Company is a party which is individually or in the aggregate
material to the business, operations, financial condition, properties or
assets of Solon and its Subsidiaries, taken as a whole.
Section 7.7 Competing Proposals. From and after the date hereof, Solon (i)
-------------------
will not, directly or indirectly, encourage or solicit any inquiries or
proposals by, engage in any discussions or negotiations whatsoever with, or
furnish any confidential information to, any person concerning a transaction
involving a merger, acquisition or purchase of the Company or any portion of its
capital stock or assets (an "Alternative Transaction"), provided, however, that
Solon shall be permitted to engage in discussions or negotiations with any
holder of Common Stock or Class A Common Stock to give effect to Section
-17-
<PAGE>
12.20 of this Agreement; and (ii) will promptly communicate to Buyer the
substance of any inquiry or proposal (including a copy of any written proposals)
concerning an Alternative Transaction which may be received. Upon the execution
of this Agreement, (a) to the extent that any confidential information regarding
the Company has been furnished to any third party in connection with an
Alternative Transaction proposed by such third party, Solon shall, as promptly
as practicable, require such third party to return to Solon or destroy such
confidential information and (b) Solon shall cancel any meetings scheduled with
any such third party for the purpose of such third party conducting a due
diligence investigation of the Company.
Section 7.8 Access. (a) Prior to the Closing, Solon shall permit the
------
authorized representatives of Buyer or Parent to meet with the management of
Solon and its representatives and to have access (upon reasonable prior notice)
during normal business hours to all the properties, financial, accounting and
business records and documents of the Company, but only to the extent that such
access does not unreasonably interfere with the business and operations of the
Company, and shall furnish to Buyer and its representatives such financial
records and other documents, or, at Buyer's reasonable request, copies thereof,
with respect to the Company's operations and business as Buyer shall reasonably
request in order that the Buyer may conduct, among other things, a commercial,
accounting and legal investigation of the business and affairs of the Company,
except that the furnishing of any such records or documents or other information
to Buyer or Parent hereunder shall be limited, or reasonable procedures shall be
implemented, to the extent necessary to avoid any potential violation of law or
legitimate anticompetitive concerns.
(b) Buyer and Parent acknowledge and agree that any information provided to
Buyer or Parent pursuant to Section 7.8 (a) above, or otherwise in connection
with this Agreement and the Transaction contemplated hereby, shall be subject to
the Confidentiality Agreement dated September 27, 1994 between Goldman, Sachs
and Parent (the "Confidentiality Agreement").
Section 7.9 Financial Statements; Solon SEC Reports. Solon (a) will provide
---------------------------------------
Buyer, as soon as practicable, copies of all interim consolidated financial
statements of the Company that are prepared by Solon in the ordinary course of
its business prior to the Closing and (b) shall make available to the Buyer, as
soon as practicable, all registration statements, reports and documents which
Solon files with the Commission prior to the Closing.
-18-
<PAGE>
ARTICLE VIII
COVENANTS OF SELLERS
--------------------
Each Seller, severally and not jointly, covenants and agrees that between
the date hereof and the Closing, except to the extent Buyer may otherwise
consent in writing (which consent shall not be unreasonably withheld):
Section 8.1 Obstruction of Purpose. The Seller shall not take any action
----------------------
which would cause or tend to cause the conditions upon the obligations of the
parties hereto to effect the Transaction contemplated hereby not to be
fulfilled; including without limitation, taking, causing to be taken, or
permitting or suffering to be taken or to exist any action, condition or thing
which would cause the representations and warranties made by the Sellers herein
not to be true, correct and accurate in all material respects as of the Closing.
Section 8.2 Requests for Approval. The Seller shall (a) promptly file or
---------------------
submit and diligently prosecute any and all applications or notices with public
authorities, federal, state or local, domestic or foreign, and all other
requests for approvals to any private persons, the filing or granting of which
is necessary for the consummation by the Seller of the Transaction contemplated
hereby, (b) provide such other information and communications to such parties as
they may reasonably request in connection therewith and (c) provide reasonable
cooperation to Buyer, Parent and Solon in obtaining all consents, approvals or
actions of, making all filings with and giving all notices to the parties
referred to in clause (a) above required of Buyer, Parent and Solon to
consummate the Transaction contemplated hereby. The Seller will provide prompt
notification to Buyer when any such consent, approval, action, filing or notice
referred to in clause (a) above is obtained, taken, made or given, as
applicable, and will advise Buyer of any communications (and, unless precluded
by law, provide copies of any such communications that are in writing) with any
of such parties regarding the Transaction contemplated by this Agreement.
Section 8.3 Reasonable Efforts. The Seller shall take all commercially
------------------
reasonable steps which are within its power to cause to be fulfilled those of
the conditions precedent to Buyer's obligations to consummate the Transaction
contemplated hereby which are dependent upon the actions of the Seller.
Section 8.4 Hart-Scott-Rodino. In addition to and without limiting the
-----------------
covenants contained in Section 8.2, the Seller will (i) take promptly all
actions necessary to make any filings required of the Seller under the HSR Act
with respect to the Transaction contemplated by this Agreement, (ii) comply at
the earliest practicable date with any request for additional information
received by the Seller from the Federal Trade
-19-
<PAGE>
Commission or the Antitrust Division of the Department of Justice pursuant to
the HSR Act and (iii) cooperate with Buyer in connection with the filing by or
on behalf of Buyer under the HSR Act with respect to the Transaction
contemplated by this Agreement and in connection with resolving any
investigation or other inquiry concerning the Transaction contemplated by this
Agreement commenced by either the Federal Trade Commission or the Antitrust
Division of the Department of Justice or state attorneys general.
Section 8.5 Competing Proposals. From and after the date hereof, the Seller
-------------------
(i) will not, directly or indirectly, encourage or solicit any inquiries or
proposals by, engage in any discussions or negotiations whatsoever with, or
furnish any confidential information to, any person concerning an Alternative
Transaction; provided, however, that the Seller shall be permitted to engage in
discussions or negotiations with any holder of Common Stock or Class A Common
Stock to give effect to Section 12.20 of this Agreement; and (ii) will promptly
communicate to Buyer the substance of any inquiry or proposal (including a copy
of any written proposals) an Alternative Transaction which may be received.
Section 8.6 Current Information. The Seller will advise the Buyer in
-------------------
writing as soon as practicable after it becomes known to the Seller, prior to
the Closing:
(i) of the occurrence of any event that renders any of the
representations or warranties of the Seller set forth herein inaccurate in
any material respect;
(ii) that any representation or warranty of the Seller set forth
herein was not accurate in all material respects when made; and
(iii) of the failure of the Seller to comply or accomplish any of the
covenants or agreements set forth herein in any material respect.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF SELLERS
------------------------------------
The obligations of each of the Sellers under this Agreement are
subject to the satisfaction at or prior to the Closing of each of the following
conditions:
Section 9.1 Representations and Warranties. The representations and
------------------------------
warranties of Buyer and Parent contained in this Agreement shall be true and
correct in all material respects at and as of the Closing Date with the same
effect as though such representations and warranties were made at and as of the
Closing
-20-
<PAGE>
Date, except in the case of representations and warranties made as of a
specified date earlier than the Closing Date.
Section 9.2 Performance. Buyer and Parent shall have performed and complied
-----------
with in all material respects all the covenants and agreements required by this
Agreement to be performed or complied with by Buyer and Parent at or prior to
the Closing. The Sellers shall have received a certificate to such effect signed
by an executive officer of Buyer and Parent and dated the Closing Date.
Section 9.3 No Legal Bar. There shall not be in effect on the Closing Date
------------
any law, order, writ, injunction or decree of any governmental body of competent
jurisdiction prohibiting or making illegal the consummation of the Transaction
contemplated by this Agreement.
Section 9.4 Government Approvals. All required governmental or regulatory
--------------------
filings, permits and approvals, including without limitation the expiration or
termination of the applicable waiting periods under HSR, shall have been made or
received, as the case may be.
ARTICLE X
CONDITIONS TO OBLIGATIONS OF BUYER
----------------------------------
The obligations of Buyer under this Agreement are subject to the
satisfaction at or prior to the Closing of each of the following conditions:
Section 10.1 Representations and Warranties. The representations and
------------------------------
warranties of Solon and the Sellers contained in this Agreement shall be true
and correct in all material respects at and as of the Closing Date with the same
effect as though such representations and warranties were made at and as of the
Closing Date, except in the case of representations and warranties made as of a
specified date earlier than the Closing Date.
Section 10.2 Performance. Solon and the Sellers shall have performed and
-----------
complied with in all material respects all the covenants and agreements required
by this Agreement to be performed or complied with by them at or prior to the
Closing. Buyer shall have received certificates to such effect signed by an
executive officer of Solon and of each of the respective Sellers and dated the
Closing Date.
-21-
<PAGE>
Section 10.3 No Legal Bar. There shall not be in effect on the Closing Date
------------
any law, order, writ, injunction or decree of any governmental body of competent
jurisdiction prohibiting or making illegal the consummation of the Transaction
contemplated by this Agreement.
Section 10.4 Government Approvals. All required governmental or regulatory
--------------------
filings, permits and approvals, including without limitation the expiration or
termination of the applicable waiting periods under HSR, shall have been made or
received, as the case may be.
Section 10.5 Delivery of Shares. The Sellers shall have delivered to Buyer
------------------
at the Closing at least 67% of the outstanding shares of Common Stock.
ARTICLE XI
TERMINATION
-----------
Section 11.1 Termination. This Agreement may be terminated and the
-----------
Transaction contemplated hereby may be abandoned at any time prior to the
Closing:
(a) By mutual written consent of the Buyer and Sellers owning a majority of
the Shares.
(b) By Sellers owning a majority of the Shares or Buyer, if the Closing
shall not have occurred on or before March 31, 1995 (the "Termination Date");
provided, however, that (i) Buyer or Sellers representing a majority of the
Shares shall have the right to extend the time period in this Section ll.l(b) up
to an additional 30 days in the event all applicable waiting periods under the
HSR Act shall not have expired or been terminated by the Termination Date and
(ii) the right to terminate this Agreement pursuant to this Section ll.l(b)
shall not be available to any party whose breach of this Agreement has been the
cause of, or resulted in, the failure of the Closing to occur by the Termination
Date.
(c) By Sellers owning a majority of the Shares, if there has been a
material breach by Buyer or Parent, as the case may be, of any of its
representations, warranties, covenants, obligations or agreements set forth in
this Agreement or in any writing delivered pursuant hereto by Buyer or Parent,
as the case may be, which breach has not been cured within 20 business days
following receipt by Buyer or Parent, as the case may be, of notice of such
breach from such Sellers or assurances of such cure reasonably satisfactory to
such Sellers shall not have been given by or on behalf of Buyer or Parent, as
the case may be, within such 20 business day period.
-22-
<PAGE>
(d) By Sellers owning a majority of the Shares, if any condition precedent
to Sellers, obligation to effect the Closing as set forth herein is not
satisfied and shall have become incapable of being satisfied, and is not waived,
if waivable, by Sellers on or prior to the Termination Date.
(e) By Buyer, if there has been a material breach by the Sellers or Solon
of any of the representations, warranties, covenants, obligations or agreements
set forth in this Agreement or in any writing delivered pursuant hereto by any
Seller or Solon, which breach has not been cured within 20 business days
following receipt by the non-terminating party of notice of such breach from
Buyer or assurance of such cure reasonably satisfactory to Buyer shall not have
been given by or on behalf of the non-terminating party within such 20 business
day period.
(f) By Buyer, if any condition precedent to Buyer's obligation to effect
the Closing as set forth herein is not satisfied and shall have become incapable
of being satisfied, and is not waived, if waivable, by Buyer on or prior to the
Termination Date.
Section 11.2 Effect of Termination. If this Agreement is validly terminated
---------------------
by either Solon, Sellers or Buyer pursuant to Section 11.1 hereof, this
Agreement will forthwith become null and void and there will be no liability or
obligation on the part of Solon, Sellers, Buyer or Parent (or any of their
respective officers, directors, partners, employees, agents or other
representatives or affiliates), except that (i) the provisions of this Section
11.2 and Sections 7.8(b), 12.3 and 12.8 will continue to apply following any
such termination and (ii) nothing contained herein shall relieve any party
hereto from liability for any willful breach of its representations, warranties,
covenants or agreements contained in this Agreement.
ARTICLE XII
MISCELLANEOUS
-------------
Section 12.1 Notices. Any notice, request, instruction, document or other
-------
communication to be given under this Agreement must be in writing and shall be
deemed to have been duly given only if delivered personally or sent by
registered or certified mail, postage prepaid, at the addresses shown below, or
to such other address or person as any party may designate by written notice to
the others or sent via facsimile to the facsimile number shown below or to such
other facsimile number as any party may designate by written notice to the
others.
-23-
<PAGE>
To Solon: Solon Automated Services, Inc.
330 Market Street
Philadelphia, Pennsylvania 19106
Attention: John E. Denson
Facsimile No.: (215) 629-0655
To the Representative: Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: Robert R. Grusky
Facsimile No.: 212-902-3000
with copies to: Milbank Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, New York 10005
Attention: Michael Goroff, Esq.
Facsimile No.: (212) 530-5219
To Buyer: Ford Coin Laundries, Inc.
4240 Bronze Way
Dallas, Texas 75231
Attention: Mr. Richard Enthoven
Facsimile No.: -(214) 339-5555
To Parent: Kwik Wash Laundries, Inc.
4240 Bronze Way
Dallas, Texas 75231
Attention: Mr. Richard Enthoven
Facsimile No.: (214) 339-5555
With copies to: Weil, Gotshal & Manges
100 Crescent Court, Suite 1300
Dallas, Texas 7S201
Attention: Lawrence D. Stuart, Jr., Esq.
Facsimile No.: (214) 746-7777
All such notices, requests, instructions, documents and other communications
will (i) if delivered personally to the address as provided in this Section, be
deemed given upon delivery, (ii) if delivered by facsimile transmission to the
facsimile number as provided in this Section, be deemed given upon receipt, and
(iii) if delivered by mail in the manner described above to the address as
provided in this Section, be deemed given upon receipt (in each case regardless
of whether such notice is received by any other person to whom a copy of such
communication is to be delivered pursuant to this Section).
Section 12.2 Extensions and Waivers. (a) Buyer may, by written instrument,
----------------------
extend the time for the performance of any of the obligations or other acts of
Solon or any of the Sellers, and (i) waive any inaccuracies of any of the
Sellers or Solon in
-24-
<PAGE>
the representations and warranties contained herein or in any document delivered
pursuant to this Agreement, (ii) waive compliance with any of the covenants of
Solon or any of the Sellers contained in this Agreement, (iii) waive performance
by Solon or any of the Sellers of any of the obligations set out in this
Agreement and (iv) waive any term or condition in this Agreement that it is
entitled to the benefits thereof.
(b) Solon or Sellers owning a majority of the Shares may, by written
instrument, extend the time for the performance of any of the obligations or
other acts of Buyer, and (i) waive any inaccuracies of Buyer in the
representations and warranties contained herein or in any document delivered
pursuant to this Agreement, (ii) waive compliance with any of Buyer's covenants
contained in this Agreement, (iii) waive performance by Buyer of any of the
obligations set out in this Agreement and (iv) waive any term or condition in
this Agreement that it is entitled to the benefits thereof.
Section 12.3 Costs and Expenses. Whether or not the Transaction is
------------------
consummated, Parent, Buyer, Solon and the Sellers shall each bear their own
respective costs and expenses in connection with the negotiation and
consummation of the Transaction, except that ordinary and reasonable transaction
costs (including reasonable legal fees of Milbank, Tweed, Hadley & McCloy,
counsel for Solon and the Sellers, and accounting fees of Solon, all at normal
rates without premiums) of the Sellers shall be paid for by Solon. Solon will
not bear any investment banking fees in connection with this Transaction.
Section 12.4 Indemnification by the Sellers.
------------------------------
(a) From and after the Closing, each Seller, severally and not jointly,
hereby agrees to indemnify, defend and hold Buyer, Parent, and their Affiliates
(as defined below) harmless from, against and in respect of any and all losses
resulting from or arising out of or in connection with any breach of any
representation or warranty of such Seller set forth in Article V of this
Agreement.
(b) As used herein, the term "Affiliate" means, with respect to any person
or entity, any other person or entity that directly or indirectly, through one
or more intermediaries, is controlled by, or is under common control with, such
person or entity, whether such control is through stock ownership, contract or
otherwise.
(c) From and after the Closing, Goldman, Sachs hereby agrees to indemnify,
defend and hold Buyer, Parent and Solon, their Affiliates, officers, directors,
shareholders and agents harmless from, against and in respect of any and all
claims and losses (including costs and expenses, including reasonable attorney's
fees) resulting from or arising out of or in
-25-
<PAGE>
connection with any action brought by or on behalf of C. Richard and Betsy
Bergner arising out of the purchase by Goldman, Sachs on November 10, 1994 of
706,534 shares of Common Stock from C. Richard and Betsy Bergner pursuant to the
Stock Purchase Agreement between such parties dated as of November 8, 1994.
(d) Buyer, Parent or Solon will give Goldman, Sachs notice with respect to
any claim or loss for which Buyer, Parent or Solon is seeking indemnification
under subsection (c) above ("Bergner Notice"). Upon receipt of the Bergner
Notice, Goldman, Sachs shall assume the defense of such matter through counsel
of its choice reasonably acceptable to the Buyer, Parent or Solon, as the case
may be. Buyer, Parent or Solon, as the case may be, will have the right, at its
own expense, to employ counsel to represent it. If Goldman, Sachs fails or
refuses to undertake the defense within thirty (30) days after receiving the
Bergner Notice, Buyer, Parent or Solon, as the case may be, will have the right
to assume the defense of such matter on behalf of and for the account of
Goldman, Sachs, provided, however, that Buyer, Parent or Solon, as the case may
be, will not settle any claim without the prior written consent of Goldman,
Sachs, which consent may not be unreasonably withheld or delayed.
Section 12.5 Agreements of Parties. This Agreement, the Confidentiality
---------------------
Agreements and the documents referred to herein set forth all the covenants,
promises, agreements, conditions and understandings among the parties hereto,
and there are no other covenants, promises, agreements, conditions or
understandings, whether oral or written, among the parties hereto relating to
the subject matter hereof.
Section 12.6 Equity to Enforce Performance. Each of Solon and the Sellers
-----------------------------
acknowledges that Buyer, and each of Parent and Buyer acknowledges that each of
Solon and the Sellers, would be irreparably damaged and would not have an
adequate remedy at law for money damages in the event that any of the covenants
of Solon or any of the Sellers on the one hand, and Parent and Buyer on the
other, contained in this Agreement were not performed in all material respects
in accordance with its terms or otherwise were materially breached. Therefore,
each of Solon and the Sellers on the one hand, and each of the Buyer and Parent
on the other, agrees that Solon and the Sellers, or Buyer and Parent, as the
case may be, shall be entitled to an injunction or injunctions, without the
posting of a bond, to prevent breaches of such performance and to specific
enforcement of such covenants in addition to any other remedy to which it may be
entitled, at law or in equity.
Section 12.7 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware (without giving
effect to the conflicts of laws principles thereof)
-26-
<PAGE>
Section 12.8 Attorneys' Fees. In the event attorneys' fees or other costs
---------------
are incurred to secure performance of any of the obligations herein provided
for, or to establish damages for the breach thereof, or to obtain any other
appropriate relief, whether by way of prosecution or defense, the prevailing
party shall be entitled to recover reasonable attorneys, fees and costs incurred
therein.
Section 12.9 Further Assurances. Each party hereto agrees to execute any
------------------
and all documents, and to perform such other acts, to the extent permitted by
law, whether before or, after Closing, that may be reasonably necessary or
expedient to further the purposes of this Agreement or to further assure the
benefits intended to be conferred hereby.
Section 12.10 Successors and Assigns. All covenants and agreements
----------------------
contained in this Agreement by or on behalf of the parties hereto will bind or
inure to the benefit of the respective personal representatives, successors and
assigns of such parties.
Section 12.11 Counterparts. This Agreement may be executed in one or more
------------
counterparts for the convenience of the parties hereto, all of which together
shall constitute one and the same instrument.
Section 12.12 Sellers Representative. The Sellers hereby designate
----------------------
Goldman, Sachs as representative (the "Representative") to act on behalf of the
Sellers as contemplated or provided herein. The Buyer shall be entitled to rely
upon instructions from the Representative with respect to the payment of the
Purchase Price as provided for in Section 1.2 hereof.
Section 12.13 Headings. The headings used in this Agreement have been
--------
inserted for convenience of reference only and do not define or limit the
provisions hereof.
Section 12.14 Invalid Provisions. If any provision of this Agreement is
------------------
held to be illegal, invalid or unenforceable under any present or future Law,
and if the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (a) such provision will be
fully severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (d) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
-27-
<PAGE>
Section 12.15 Amendment. This Agreement may be amended, supplemented or
---------
modified only by a written instrument duly executed by or on behalf of Buyer,
Parent, Solon and Sellers owning a majority of the Shares.
Section 12.16 Public Announcements. At all times at or before the Closing,
--------------------
neither Sellers, Solon, Buyer or Parent will issue or make any reports,
statements or releases to the public with respect to this Agreement or the
Transaction contemplated hereby without the consent of the others, which consent
shall not be unreasonably withheld. If either of the parties is unable to obtain
the approval of its public report, statement or release from the other parties
and such report, statement or release is, in the opinion of legal counsel to
such party, required by law in order to discharge such party's disclosure
obligations, then such party may make or issue the legally required report,
statement or release and promptly furnish the other parties with a copy thereof.
Solon, the Sellers, Buyer and Parent will also obtain the other parties, prior
approval of any press release to be issued immediately following the Closing
announcing the consummation of the Transaction contemplated by this Agreement.
Section 12.17 Non-Survival of Representations Warranties, Covenants and
---------------------------------------------------------
Agreements. The representations, warranties, covenants and agreements contained
- ----------
in this Agreement or in any instrument delivered pursuant to this Agreement
shall not survive the Closing, except for the representations and warranties
contained in Article III and Article V hereof, and the agreements contained in
----------- ---------
Article XII and Section 1.3, which shall survive the Closing. In no event shall
- -----------
any of the Sellers in their respective capacity as such have any liability or
obligation whatsoever for or in respect of any breach by Solon of any of its
representations, warranties, covenants or obligations contained in this
Agreement or in any instrument delivered by or on behalf of Solon pursuant to
this Agreement.
Section 12.18 Guarantee. Parent hereby unconditionally guarantees the due
---------
performance by Buyer of all Buyer's obligations under or in connection with this
Agreement, waiving notice and all circumstances that might constitute a defense
or discharge of a guarantor.
Section 12.19 Directors' and Officers' Indemnification and Insurance. (a)
------------------------------------------------------
From and after the Closing Date, Solon shall (Solon is referred to in this
Section as the "Indemnifying Party"), indemnify, defend and hold harmless each
person who is now, or has been at any time prior to the date hereof or who
becomes prior to the Closing Date, a director, officer, employee or agent of the
Company (the "Indemnified Parties") against (i) other than amounts resulting
from or arising out of a loss or claim as described in Section 12.4(c) hereof,
all losses, claims, damages, costs and expenses (including attorneys' fees),
-28-
<PAGE>
liabilities, judgments and settlement amounts that are paid or incurred in
connection with any claim, action, suit, proceeding or investigation (whether
civil, criminal, administrative or investigative and whether asserted or claimed
prior to, at or after the Closing Date) that is based in whole or in part on, or
arises in whole or in part out of, the fact that such Indemnified Party is or
was a director, officer, employee or agent of the Company and relates to or
arises out of any action or omission occurring at or prior to the Closing Date
("Indemnified Liabilities"), and (ii) all Indemnified Liabilities based in whole
or in part on, or arising in whole or in part out of, or pertaining to this
Agreement or the Transaction contemplated hereby, in each case to the full
extent a corporation is permitted under applicable law to indemnify its own
directors, officers, employees or agents, as the case may be; provided that this
--------
Indemnifying Party shall not be liable for any settlement of any claim effected
without its written consent, which consent shall not be unreasonably withheld.
Without limiting the foregoing, in the event that any such claim, action, suit,
proceeding or investigation is brought against any Indemnified Party (whether
arising prior to or after the Closing Date), (w) the Indemnifying Party will pay
expenses in advance of the final disposition of any such claim, action suit,
proceeding or investigation to each Indemnified Party to the full extent
permitted by applicable law provided that the person to whom expenses are
advanced provides an undertaking to repay such advance if it is ultimately
determined that such person is not entitled to indemnification; (x) the
Indemnified Parties shall retain counsel reasonably satisfactory to the
Indemnifying Party; (y) the Indemnifying Party shall pay all reasonable fees and
expenses of such counsel for the Indemnified Parties (subject to the final
sentence of this paragraph) promptly as statements therefor are received; and
(z) the Indemnifying Party shall use all commercially reasonable efforts to
assist in the vigorous defense of any such matter. Any Indemnified Party wishing
to claim indemnification under this Section, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify the Indemnifying Party,
but the failure so to notify the Indemnifying Party shall not relieve it from
any liability which it may have under this paragraph except to the extent such
failure irreparably prejudices such party. The Indemnified Parties as a group
may retain only one law firm to represent them with respect to each such matter
unless there is, under applicable standards of professional conduct, a conflict
on any significant issue between the positions of any two or more Indemnified
Parties.
(b) Solon shall, until the sixth anniversary of the Closing Date, maintain
in effect, to the extent available, the policies of directors' and officers'
liability insurance
-29-
<PAGE>
maintained by the Company as of the date hereof (or policies of at least the
same coverage and amounts containing terms that are no less advantageous to the
insured parties) with respect to claims arising from facts or events that
occurred on or prior to the Closing Date; provided that in no event shall Solon
--------
be obligated to expend in order to maintain or procure insurance coverage
pursuant to this paragraph any amount per annum in excess of 200% of the
aggregate premiums paid by the Company in 1994 (on an annualized basis) for
such purpose.
(c) The provisions of this Section 12.19 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and each party entitled
to insurance coverage under paragraph (b) above, respectively, and his or her
heirs and legal representatives, and shall be in addition to any other rights an
Indemnified Party may have under the certificate or articles of incorporation or
bylaws of the Company, Buyer or Parent, under the DGCL or otherwise.
(d) in the event Solon or any of its respective successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then, and in each such case, proper provision shall be made so that the
successors and assigns of Solon shall assume the obligations set forth in
paragraphs (a) and (b) of this Section.
(e) Parent and Buyer (in their capacity as direct and indirect shareholders
of Solon) agree to cause Solon to comply with its obligations under this Section
12.19.
Section 12.20 Signing Stockholders. Buyer, Parent, Solon and the Sellers
--------------------
shall permit any holder of Common Stock or Class A Common Stock that is not a
party to this Agreement as of the date hereof to become a party to this
Agreement by executing a counterpart to this Agreement and delivering the same
to Solon, Buyer, Parent and the Representative (on behalf of the Sellers) at any
time prior to two (2) business days prior to the Closing Date. Upon the
execution and delivery of such a counterpart to this Agreement by such a holder,
this Agreement shall automatically be deemed to be amended to add such holder as
a Seller, such holder shall be deemed a Seller for all purposes hereunder and
the shares of Common Stock and Class A Common Stock held by such holder shall be
deemed to be Shares for all purposes of this Agreement.
-30-
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of
the date first above written.
FORD COIN LAUNDRIES, INC.
By: /s/ Richard Enthoven
--------------------
Name: Richard Enthoven
-------------------
Title: President
------------------
KWIK WASH LAUNDRIES, INC.
By: /s/ Richard Enthoven
--------------------
Name: Richard Enthoven
-------------------
Title: President
------------------
SOLON AUTOMATED SERVICES, INC.
By:
--------------------
Name:
-------------------
Title:
------------------
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of
the date first above written.
FORD COIN LAUNDRIES, INC.
By:
--------------------
Name:
-------------------
Title:
------------------
KWIK WASH LAUNDRIES, INC.
By:
--------------------
Name:
-------------------
Title:
------------------
SOLON AUTOMATED SERVICES, INC.
By: /s/ John E. Denson
----------------
Name: John E. Denson
-----------------
Title: Senior Vice President - Finance
--------------------------------
<PAGE>
NO. OF
SELLERS CLASS SHARES
------- ----- ------
BROAD STREET INVESTMENT FUND I, L.P. Common Stock 8,109,228
By: Goldman, Sachs & Co., General
Partner
By: /s/
--------------------
Name:
-------------------
Title:
------------------
GOLDMAN, SACHS & CO. Common Stock 1,428,962
By: /s/
--------------------
Name:
-------------------
Title:
------------------
- -----------------------------
JOHN E. and BARBARA F. DENSON Common Stock 158,970
- -----------------------------
MICHAEL and SUSAN GALLAGHER Common Stock 52,990
<PAGE>
NO. OF
SELLERS CLASS SHARES
------- ----- ------
BROAD STREET INVESTMENT FUND I, L.P. Common Stock 8,109,228
By: Goldman, Sachs & Co., General
Partner
By:
--------------------
Name:
--------------------
Title:
--------------------
GOLDMAN, SACHS & CO. Common Stock 1,428,962
By:
--------------------
Name:
--------------------
Title:
--------------------
/s/ John E. Denson
- -----------------------------
JOHN E. and BARBARA F. DENSON Common Stock 158,970
- -----------------------------
MICHAEL and SUSAN GALLAGHER Common Stock 52,990
<PAGE>
NO. OF
SELLERS CLASS SHARES
------- ----- ------
BROAD STREET INVESTMENT FUND I, L.P. Common Stock 8,109,228
By: Goldman, Sachs & Co., General
Partner
By:
--------------------
Name:
--------------------
Title:
--------------------
GOLDMAN, SACHS & CO. Common Stock 1,428,962
By:
--------------------
Name:
--------------------
Title:
--------------------
- -----------------------------
JOHN E. and BARBARA F. DENSON Common Stock 158,970
/s/ Michael Gallagher
- -----------------------------
MICHAEL and SUSAN GALLAGHER Common Stock 52,990
<PAGE>
NO. OF
SELLERS CLASS SHARES
------- ----- ------
/s/ Michael E. Stanky
- -----------------------------
MICHAEL E. STANKY Common Stock 141,306
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT A
Solon Automated Services 03/01/95
DATE OF GRANT. . . 10/12/87 11/21/88 04/25/90 02/14/91 05/6/91
NAME ISSUE PRICE. . . . $1.00 $1.06 $0.98 $1.10 $1.10
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NUMBER OF TOTAL
SHARES DOLLARS
Richard L. Bagby 30,998 $33,297.56 $15,000 2,000 3,750
Douglas A. Barski 32,167 35,983.74 2,000 500 22,500
Hugo A. Brandts 6,063 6,861.26 2,000 500
John E. Denson 62,091 90,351.02 35,000 8,750
Michael B. Gallagher 89,016 97,199.52 30,000 7,500 25,000
James P. McDonnell 56,566 66,560.52 5,000 1,250 8,750
Frank Nocella 25,320 28,440.40 5,000 1,250 8,750
R. Daniel Osborne II 22,380 24,443.60 10,000 2,500
David R. Siegel 31,572 33,837.84 10,000 5,750
Susan R. Songy 38,515 42,258.30 15,000 3,750 2,000
Michael E. Stanky 103,350 112,067.00 15,000 1,500 12,500
R. Gary 10,000 10,600.00 50,000
J. Cahill 32,880 39,829.20 10,000 2,000
D. Woodyard 2,000 1,960.00 2,000
N. Latva 2,000 1,960.00 2,000
T. Wink 2,000 1,960.00 2,000
R. Page 2,573 1,960.00 2,000
S. Gallagher 1,930 2,659.06 1,500
C. Hudnell 1,000 1,994.60 1,000
D. Cahill 1,000 980.00 1,000
G. Edelhauser 1,000 980.00 1,000
W. Hammonds 1,000 980.00 1,000
P. Welch 1,000 980.00 1,000
R. Wood 1,000 980.00 1,000
L. Musmecci 1,000 980.00 1,000
R. LaPlace 1,000 980.00 1,000
J. Gonzales 1,000 980.00 1,000
H. Langston 1,000 980.00 1,000
R. Nino 1,000 980.00 1,000
W. Ellis 1,000 980.00 1,000
R. Wood 1,000 980.00 1,000
W. Sims 1,000 980.00 1,000
J. Alkins 1,000 980.00 1,000
L. Owens 1,000 980.00 1,000
P. Garrett 1,000 980.00 1,000
R. Pendleton 1,000 980.00 1,000
R. Sheckman 1,000 980.00 1,000
C. Rodriguez 1,000 980.00 1,000
A. Eng-Herritt 1,000 980.00 1,000
L. Miller 1,000 980.00 1,000
C. Metz 1,000 980.00 1,000
L. DelValle 14,867 15,747.74 10,000
K. Banker 22,730 23,950.60 15,000 1,500
H. Colton 1,000 980.00 1,000 1,000
J. Valenti 1,000 980.00 1,000 1,000
A. Stetina 1,000 980.00 1,000 1,000
J. Cassidy 1,000 1,100.00 1,000
J. Kornicki 1,000 1,100.00 1,000
M. Rodriguez 1,000 1,100.00 1,000
H. Carter 1,000 1,100.00 1,000
G. Lewis 1,000 1,100.00 1,000
C. Roberts 1,000 1,100.00 1,000
R.F. Moberly 1,000 1,100.00 1,000
R. Weir 1,000 1,100.00 1,000
J. Dahlgren 20,587 23,196.14 15,000 1,000
J. Hudson 1,000 1,100.00 1,000
M. Gee 1,000 1,100.00 1,000
G.C. Toole 1,000 1,100.00 1,000
G. Boone 1,000 1,100.00 1,000
J. Shipp 1,000 1,100.00 1,000
P. Smith 1,000 1,100.00 1,000
P. Craig 1,000 1,100.00 1,000
E. LeMoine 1,000 1,100.00 1,000
G. Palmer 1,000 1,100.00 1,000
C. Williams 1,000 1,100.00 1,000
Total Shares 673,605 184,000 13,500 110,500 98,000 4,500
Avg. Price 1.10
Total Dollars $740,458.10 $184,000.00 $14,310.00 $108,290.00 $107,800.00 $4,950.00
<CAPTION>
02/26/92 12/17/92 02/25/93 03/03/94
NAME $1.17 $1.22 $1.22 $1.23
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richard L. Bagby 10,248
Douglas A. Barski 7,167
Hugo A. Brandts 3,583
John E. Denson 38,341
Michael B. Gallaghe 26,516
James P. McDonnell 41,566
Frank Nocella 10,320
R. Daniel Osborne I 1,500 6,880 1,500
David R. Siegel 10,822
Susan R. Songy 1,000 15,265
Michael E. Stanky 40,850
R. Gary
J. Cahill 1,000 860 2,000 27,000
D. Woodyard
N. Latva
T. Wink
R. Page
S. Gallagher 573
C. Hudnell 430
D. Cahill
G. Edelhauser
W. Hammonds
P. Welch
R. Wood
L. Musmecci
R. LaPlace
J. Gonzales
H. Langston
R. Nino
W. Ellis
R. Wood
W. Sims
J. Alkins
L. Owens
P. Garrett
R. Pendleton
R. Sheckman
C. Rodriguez
A. Eng-Herritt
L. Miller
C. Metz
L. DelValle
K. Banker 2,867 1,000 1,000
H. Colton 4,730 1,500
J. Valenti
A. Stetina
J. Cassidy
J. Kornicki
M. Rodriguez
H. Carter
G. Lewis
C. Roberts
R.F. Moberly
R. Weir
J. Dahlgren 4,587
J. Hudson
M. Gee
G.C. Toole
G. Boone
J. Shipp
P. Smith
P. Craig
E. LeMoine
G. Palmer
C. Williams
Total Shares 3,500 225,805 4,500 29,500
Avg. Price
Total Dollars $4,095.00 $275,238.10 $5,490.00 $36,285.00
</TABLE>
<PAGE>
EXHIBIT 2F
----------
STOCKHOLDERS AGREEMENT
----------------------
THIS AGREEMENT is made as of July 26, 1995, among SAS Acquisitions Inc., a
Delaware corporation (the "Company"), and each of the other Persons executing a
signature page hereto whether signing as of or after the date hereof (each a
"Stockholder" and, collectively, the "Stockholders"). Capitalized terms used
herein are defined in paragraph 9 hereof.
The Company and the Stockholders desire to enter into this Agreement for
the purposes, among others, of (i) establishing the composition of the Company's
Board of Directors (the "Board"), (ii) assuring continuity in the management and
ownership of the Company and (iii) providing for the orderly sale of the
Company.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties to this Agreement hereby agree as follows:
1. Board of Directors.
------------------
(a) From and after the date hereof and until the provisions of this
paragraph 1 cease to be effective, each Stockholder shall vote all of its
Stockholder Shares which are voting shares and any other voting securities of
the Company over which such Stockholder has voting control and shall take all
other necessary or desirable actions within its control (whether in its capacity
as a stockholder, director, member of a board committee or officer of the
Company or otherwise, and including, without limitation, attendance at meetings
in person or by proxy for purposes of obtaining a quorum and execution of
written consents in lieu of meetings), and the Company shall take all necessary
or desirable actions within its control (including, without limitation, calling
special board and stockholder meetings), so that:
(i) the authorized number of directors on the Board shall be
established at five directors;
(ii) the following individuals shall be elected to the Board:
(1) two individuals designated by GTCR, which individuals
initially shall be David A. Donnini and Bruce V. Rauner (the
"GTCR Directors");
<PAGE>
(2) one member of management, employee or officer of the Company
or its Subsidiaries designated by the holders of a majority of the
Common Stock of the Company held by the Executives, which individual
initially shall be Stephen R. Kerrigan (the "Management Director");
and
(3) two individuals designated by GTCR who are reasonably
acceptable to the Executives, which individuals initially shall be
James N. Chapman and Mitchell Blatt (the "Outside Directors");
provided that if after 60 days GTCR and the Executives are unable to
agree upon the designation of any Outside Director(s), GTCR may
designate such Outside Director(s);
(iii) the composition of the board of directors of each of the
Company's Subsidiaries (a "Sub Board") shall be the same as that of the
Board;
(iv) any committees of the Board or a Sub Board shall be created only
upon, and may be disbanded upon, the approval of three members of the Board
and the composition of each such committee (if any) shall be
proportionately equivalent to that of the Board;
(v) the removal from the Board or a Sub Board (with or without cause)
of any GTCR Director or Outside Director shall be at GTCR's written
request, but only upon such written request and under no other
circumstances; and the removal from the Board or a Sub Board (with or
without cause) of any Management Director shall be at the written request,
and only at the written request, of the holders of a majority of the
Stockholder Shares held by the Executives, provided that if any Management
Director ceases to be a member of management, employee or officer of the
Company or its Subsidiaries, he shall be removed as a director promptly
after his employment ceases; and
(vi) in the event that any GTCR Director, Management Director or
Outside Director ceases to serve as a member of the Board or a Sub Board
during his term of office, the resulting vacancy on the Board or the Sub
Board shall be filled in the manner provided in subparagraphs (ii)(1),
(ii)(2) or (ii)(3) above, as the case may be.
(b) The Company shall pay the reasonable out-of-pocket expenses incurred by
each director in connection with attending the meetings of the Board, any Sub
Board and any committee thereof.
- 2 -
<PAGE>
(c) The rights of GTCR under this paragraph 1 shall terminate at such time
as GTCR and its Permitted Transferees hold in the aggregate less than 50% of the
Stockholder Shares held by GTCR on the date hereof.
(d) The rights of the Executives under this paragraph 1 shall terminate at
such time as the Executives and their Permitted Transferees hold in the
aggregate less than 50% of the Stockholder Shares held by such Persons on the
date hereof.
(e) The provisions of this paragraph 1 shall terminate automatically and be
of no further force and effect upon a Qualified Public Offering.
(f) If any party fails to designate a representative to fill a directorship
pursuant to the terms of this paragraph 1, the election of an individual to such
directorship shall be accomplished in accordance with the Company's bylaws and
applicable law.
2. Representations and Warranties. Each Stockholder represents and warrants
------------------------------
that (i) such Stockholder is the record owner of the number of each class of
Stockholder Shares set forth on the signature page of such Stockholder attached
hereto, (ii) this Agreement has been duly authorized, executed and delivered by
such Stockholder and constitutes the valid and binding obligation of such
Stockholder, enforceable in accordance with its terms, and (iii) such
Stockholder has not granted and is not a party to any proxy, voting trust or
other agreement which is inconsistent with, conflicts with or violates any
provision of this Agreement. No holder of Stockholder Shares shall grant any
proxy or become party to any voting trust or other agreement which is
inconsistent with, conflicts with or violates any provision of this Agreement.
3. Pre-Emptive Rights.
------------------
(a) Except for issuances of equity securities of the Company or
options or other rights to acquire equity securities of the Company
(i) in connection with a registered primary public offering,
(ii) to employees or Outside Directors of the Company or its
Subsidiaries,
(iii) to any lender (other than GTCR or any of its Affiliates) in
connection with the incurrence of Indebtedness by the Company or any
of its Subsidiaries,
- 3 -
<PAGE>
(iv) as payment of all or a portion of the purchase price of
any business or assets thereof acquired by the Company or any of
its Subsidiaries, or
(v) upon the exercise of any option or other right described
in any of clauses (i) through (iv) above or any other option or
right to acquire equity securities issued by the Company,
if the Company authorizes the issuance or sale of any equity securities of the
Company or any securities containing options or rights to acquire any equity
securities of the Company (other than as a dividend on outstanding Common
Stock), the Company shall first offer to sell to each Stockholder, at the same
price and on the same terms, a portion of such securities, options or rights
(the "New Securities") equal to the quotient of (i) the number of Stockholder
--------------
Shares (other than Unvested Shares) held by such Stockholder divided by (ii) the
----------
total number of shares of Common Stock (other than Unvested Shares) on a Fully
Diluted Basis.
(b) In order to exercise its purchase rights pursuant to this paragraph 3,
a Stockholder must within ten business days after receipt of written notice from
the Company describing in reasonable detail the New Securities being offered the
purchase price thereof, the payment terms and such Stockholder's percentage
allotment, deliver a written notice to the Company describing its election. If
all of the New Securities offered to the Stockholders are not fully subscribed
by the Stockholders, the remaining New Securities shall be reoffered by the
Company to the Stockholders purchasing their full allotment upon the terms set
forth in this paragraph 3 until either all such New Securities have been
subscribed for or no Stockholder subscribes for additional New Securities,
except that such Stockholder must give written notice of its election to
purchase such reoffered New Securities within five (and not 10) business days
after receipt of notice of any such reoffer.
(c) If a Stockholder purchases all or any portion of any New Securities
offered pursuant to this paragraph 3 ("Purchased New Securities"), such
------------------------
Stockholder shall be required to concurrently purchase an equal proportion of
each other class of debt or equity securities of the Company or any of its
Subsidiaries which are issued contemporaneously with such Purchased New
Securities.
(d) During the 180 days after the expiration of the offering periods
described above, the Company shall be entitled to sell any New Securities which
the Stockholders have not elected to purchase, on terms and conditions no more
favorable to the
- 4 -
<PAGE>
purchasers thereof than those offered to the Stockholders. Any New Securities
offered or sold by the Company after such 180-day period must be reoffered to
the Stockholders pursuant to the terms of this paragraph 3.
(e) If the New Securities possess voting rights, a Stockholder may request,
and the Company shall issue to the requesting Stockholder, in place of the New
Securities such Stockholder would be entitled to purchase pursuant to this
paragraph 3, securities that are identical to the New Securities except that
such securities (i) will be non-voting and (ii) will be convertible into New
Securities at the request of the Stockholder on a share-for-share basis.
(f) The rights pursuant to this paragraph 3 shall terminate upon a
Qualified Public Offering.
(g) Notwithstanding any other provision of this Agreement to the contrary,
so long as (i) no Event of Default relating to the payment of any amounts due to
lenders has occurred and is continuing or (ii) the due date of any amounts
outstanding under the Loan Agreement have not been accelerated, the Company
shall not issue or sell any shares of common stock of the Company or any
security exchangeable or convertible into, or any option, warrant, or other
right to acquire such shares (each a "Common Stock Equivalent") at a price
-----------------------
less than fair market value on the date of such issuance or sale.
4. Sale of the Company.
-------------------
(a) If the Board and the holders of a majority of the shares of Common
Stock then outstanding approve a sale of all or substantially all of the
Company's assets determined on a consolidated basis or a sale of all or
substantially all of the Company's outstanding capital stock (whether by merger,
recapitalization, consolidation, reorganization, combination or otherwise) to
any other person or entity (collectively, a "Sale of the Company"), each holder
of Stockholder Shares shall vote for, consent to, and raise no objections
against, such Sale of the Company. If the Sale of Company is structured as (i) a
merger or consolidation, each holder of Stockholder Shares shall waive any
dissenters rights, appraisal rights or similar rights in connection with such
merger or consolidation or (ii) a sale of stock, each holder of Stockholder
Shares shall agree to sell all of its shares of Common Stock and rights to
acquire shares of common Stock Stockholder Shares on the terms and conditions
approved by the Board and the holders of a majority of the Common Stock then
outstanding. Each holder of Stockholder Shares shall take all
- 5 -
<PAGE>
necessary or desirable actions in connection with the consummation of the Sale
of the Company as requested by the Company.
(b) The obligations of the holders of Stockholder Shares with respect to
the Sale of the Company are subject to the satisfaction of the following
conditions: (i) upon the consummation of the Sale of the Company, each holder of
Stockholder Shares shall receive the same form of consideration and the amount
of consideration as set forth in paragraph 4 (c) below; (ii) if any holders of a
class of Common Stock are given an option as to the form and amount of
consideration to be received, each holder of such class of Common Stock shall be
given the same option; and (iii) each holder of then currently exercisable
rights to acquire shares of a class of Common Stock shall be given an
opportunity to either (A) exercise such rights prior to the consummation of the
Sale of the Company and participate in such sale as holders of such class of
Common Stock or (B) upon the consummation of the Sale of the Company, receive in
exchange for such rights consideration equal to the amount determined by
multiplying (1) the same amount of consideration per share of Common Stock
received by holders of such class of Common Stock in connection with the Sale of
the Company less the exercise price per share of Common Stock of such rights to
acquire such class of Common Stock by (2) the number of shares of such class of
Common Stock represented by such rights.
(c) In the event of a Sale of the Company, each Stockholder shall receive
in exchange for its Stockholder Shares the same portion of the aggregate
consideration from such Sale of the Company that such Stockholder would have
received if such aggregate consideration had been distributed by the Company in
complete liquidation pursuant to the rights and preferences set forth in the
Company's Certificate of Incorporation as in effect immediately prior to such
Sale of the Company. Each holder of Stockholder Shares shall take all necessary
or desirable actions in connection with the distribution of the aggregate
consideration from such Sale of the Company as requested by the Company.
5. Co-Sale Rights.
--------------
(a) Prior to the transfer or series of related transfers other than
pursuant to a Public Sale or Sale of the Company (a "Transfer") of any shares of
--------
Stockholder Stock owned directly or indirectly by GTCR that results in GTCR
owning directly or indirectly less than 60% of the then outstanding Common Stock
of the Company, and prior to any such Transfer thereafter, GTCR shall give
written notice (the "Sale Notice") to the Company and each of the other
-----------
Stockholders. The Sale Notice will disclose in reasonable detail the identity of
the prospective transferee(s),
- 6 -
<PAGE>
the number and class of shares to be transferred and the terms and conditions of
the proposed Transfer. GTCR shall not consummate any such Transfer until 60 days
after the Sale Notice has been given to the Company and each other Stockholder,
unless the parties to the Transfer have been fully determined pursuant to this
paragraph 5 prior to the expiration of such 60-day period (the date of the first
to occur of such events is referred to herein as the "Authorization Date").
------------------
(b) Any other Stockholder may elect to participate in the contemplated
Transfer by delivering written notice to GTCR within 30 days after delivery of
the Sale Notice to such Stockholder. If any Stockholder has elected to
participate in such Transfer, GTCR and the Stockholders so electing shall be
entitled to sell in the contemplated Transfer, on the same terms and at the
price calculated pursuant to subparagraph 5(c) below, a number of shares equal
to the product of (i) the quotient determined by dividing the number of shares
of Common Stock owned by such Stockholder by the aggregate number of shares of
Common Stock owned by all such electing Stockholders and GTCR and (ii) the
number of shares to be sold in the contemplated Transfer.
For example, if the Sale Notice contemplated a sale of 100 shares
-----------
by GTCR, and if GTCR was at such time the owner of 30% of the
Company's Common Stock (on a Fully Diluted Basis) and if a
Stockholder elected to participate and such Stockholder owned 20%
of the Company's Common Stock (on a Fully Diluted Basis), GTCR
would be entitled to sell 60 shares (30%/50% x 100 shares) and
such electing Stockholder would be entitled to sell 40 shares
(20%/50% x 100 shares).
GTCR will use its best efforts to obtain the agreement of the prospective
transferee(s) to the participation of the electing Stockholders in the
contemplated Transfer and will not transfer any Stockholder Stock to the
prospective transferee(s) if such transferee(s) refuses to allow the
participation of the electing Stockholders.
(c) The purchase price to be paid by any transferee for shares of Common
Stock transferred in accordance with this paragraph 5 shall be determined as
follows: (i) the price per share to be paid for Class A Common included in such
Transfer shall be equal to the amount per share of Class A Common which such
transferee has agreed to pay to GTCR and (ii) the price per share to be paid for
Class B Common included in such Transfer shall be the price per share described
in clause (i) minus the quotient of (A) the sum of the Unreturned Preferred
-----
Amount and the Unpaid Yield
- 7 -
<PAGE>
of the Class A Common at such time divided by (B) the number of shares of Class
----------
A Common then outstanding.
6. Initial Public Offering. In the event that the Board and the holders of
-----------------------
a majority of the shares of Common Stock then outstanding approve an Initial
Public Offering, the holders of Common Stock shall take all necessary or
desirable actions in connection with the consummation of the Initial Public
Offering. In the event that such Initial Public Offering is an underwritten
offering and the managing underwriters advise the Company in writing that in
their opinion the Common Stock structure would adversely affect the
marketability of the offering, each holder of Stockholder Shares shall consent
to and vote for a recapitalization, reorganization and/or exchange of the Common
Stock into securities that the managing underwriters, the Board and holders of a
majority of the shares of Common Stock then outstanding find acceptable and
shall take all necessary or desirable actions in connection with the
consummation of the recapitalization, reorganization and/or exchange; provided
that the resulting securities reflect and are consistent with the rights and
preferences among the outstanding classes of securities set forth in the
Company's Certificate of Incorporation as in effect immediately prior to such
recapitalization, reorganization or exchange, and such recapitalization,
reorganization or exchange is otherwise fair and reasonable to the Company and
the holders of each class of the Company's equity securities in light of such
relative rights and preferences.
7. Legend. Each certificate evidencing Stockholder Shares and each
------
certificate issued in exchange for or upon the transfer of any Stockholder
Shares (if such shares remain Stockholder Shares after such transfer) shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"The securities represented, by this certificate are subject to a
Stockholders Agreement dated as of July 26, 1995, among the issuer of such
securities (the "Company") and certain of the Company's stockholders, as
amended and modified from time to time. A copy of such Stockholders
Agreement shall be furnished without charge by the Company to the holder
hereof upon written request."
The Company shall imprint such legend on certificates evidencing
Stockholder Shares outstanding as of the date hereof. The legend set forth above
shall be removed from the certificates evidencing any shares which cease to be
Stockholder Shares.
- 8 -
<PAGE>
8. Transfer. Prior to transferring any Stockholder Shares (other than in a
--------
Public Sale or a Sale of the Company) to any Person, the transferring holders of
Stockholder Shares shall cause the prospective transferee to execute and deliver
to the Company, for the benefit of the Company and the other Stockholders, a
counterpart of this Agreement pursuant to which such transferee agrees to be
bound as a "Stockholder" by the provisions of this Agreement.
9. Definitions.
-----------
"Affiliate" of a Person means any other Person, entity or investment fund
---------
controlling, controlled by or under common control with such Person and any
partner of such Person which is a partnership.
"Authorization Date" has the meaning specified in paragraph 5(a).
------------------
"Board" has the meaning set forth in the preamble.
-----
"Class A Common" means the Company's Class A Common Stock, par value $.Ol
--------------
per share.
"Class B Common" means the Company's Class B Common Stock, Par value $.Ol
--------------
per share.
"Common Stock" means the Class A Common and the Class B Common.
------------
"Company" has the meaning set forth in the preamble.
-------
"Event of Default" means an "Event of Default" as defined in the Loan
----------------
Agreement, dated as of the date hereof, among the Company and Finova Capital
Corporation (the "Loan Agreement"), or any payment by Speed Queen Company
--------------
pursuant to its guaranty in connection with the Loan Agreement, and any similar
term or event in any replacement for, refinancing of, or modification or
amendment to, such agreements, or any similar term in any other loan or credit
facility entered into by the Company.
"Executive" means any Stockholder designated as an "Executive" on the
---------
signature page of such Stockholder attached hereto.
"Executive Stock Agreement" means any agreement (including any Executive
-------------------------
Stock Agreement, dated as of the date
- 9 -
<PAGE>
hereof) between the Company and an Executive pursuant to which such Executive
acquires Common Stock.
"Fully Diluted Basis" means, without duplication, (i) all shares of Common
-------------------
Stock outstanding at the time of determination plus (ii) all shares of Common
Stock issuable upon conversion of any convertible securities or the exercise of
any option, warrant or similar right, whether or not such conversion, right or
option, warrant or similar right is then exercisable.
"GTCR" means Golder, Thoma, Cressey, Rauner Fund IV, L.P., a Delaware
----
limited partnership.
"GTCR Directors" has the meaning set forth in paragraph l(a).
--------------
"Indebtedness" means all indebtedness for borrowed money, all indebtedness
------------
under revolving credit arrangements, all capitalized lease obligations and all
guarantees of any of the foregoing.
"Initial Public Offering" means the sale in an underwritten public offering
-----------------------
registered under the Securities Act (other than on Form S-8 or a similar form)
of shares of the Company's Common Stock.
"Investor" means any Stockholder designated as an "Investor" on the
--------
signature page of such Stockholder attached hereto.
"Management Director" has the meaning set forth in paragraph l(a).
-------------------
"Outside Director" has the meaning set forth in paragraph 1(a).
----------------
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Public Sale" means any sale of Stockholder Shares to the public pursuant
-----------
to an offering registered under the Securities Act or to the public through a
broker, dealer or market maker pursuant to the provisions of Rule 144 adopted
under the Securities Act.
- 10 -
<PAGE>
"Qualified Public Offering" means the sale in an underwritten public
-------------------------
offering registered under the Securities Act (other than on Form S-8 or a
similar form) of shares of the Company's Common Stock having an aggregate
offering value of at least $25 million.
"Sale Notice" has the meaning set forth in paragraph 5(a).
-----------
"Sale of the Company" has the meaning set forth in paragraph 4.
-------------------
"Securities Act" means the Securities Act of 1933, as amended from time to
--------------
time.
"Stockholder Shares" means (i) any Common Stock purchased or otherwise
------------------
acquired by any Stockholder, (ii) any capital stock or other equity securities
issued or issuable directly or indirectly with respect to the Common Stock
referred to in clause (i) above by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization, and (iii) any other shares of any class or series of
capital stock of the Company held by a Stockholder; provided that Stockholder
Shares shall not include nonvoting stock described in (i), (ii) or (iii) for
purposes of paragraph 1 hereof. As to any particular shares constituting
Stockholder Shares, such shares shall cease to be Stockholder Shares when they
have been (x) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them or (y) sold to the
public through a broker, dealer or market maker pursuant to Rule 144 (or any
similar provision then in force) under the Securities Act.
"Stockholders" has the meaning set forth in the preamble.
------------
"Sub Board" has the meaning set forth in paragraph 1(a).
---------
"Subsidiary" means, with respect to any Person, any corporation, limited
----------
liability company, partnership, association or other business entity of which
(i) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the limited liability company, partnership or other similar ownership
interest thereof is at the
- 11 -
<PAGE>
time owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control the managing director or general partner of such limited
liability company, partnership, association or other business entity.
"Transfer" has the meaning set forth in paragraph 5(a).
--------
"Unpaid Yield" means the "Unpaid Yield" as defined in the Company's
------------
Certificate of Incorporation.
"Unreturned Preferred Amount" means the "Unreturned Preferred Amount" as
---------------------------
defined in the Company's Certificate of Incorporation.
"Unvested Shares" has the meaning set forth in Section 4(a) of the
---------------
Executive Stock Agreements.
10. Transfers in Violation of Agreement. Any Transfer or attempted Transfer
-----------------------------------
of any Stockholder Shares in violation of any provision of this Agreement shall
be void, and the Company shall not record such Transfer on its books or treat
any purported transferee(s) of such Stockholder Shares as the owner of such
shares for any purpose.
11. Amendment and Waiver. Except as otherwise provided herein, no
--------------------
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or the Stockholders unless such modification,
amendment or waiver is approved in writing by the Company or the holders of a
majority of the Stockholder Shares, respectively; provided, however, that no
such modification, amendment or waiver shall materially and adversely affect the
rights hereunder of any Stockholder vis-a-vis other similarly-situated
Stockholders without the approval in writing of such Stockholder. The failure of
any party to enforce any of the provisions of this Agreement shall in no way be
construed as a waiver of such provisions and shall not affect the right of such
party thereafter to enforce each and every provision of this Agreement in
accordance with its terms.
12. Severability. Whenever possible, each provision of this Agreement shall
------------
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of
- 12 -
<PAGE>
this Agreement is held to be invalid, illegal or unenforceable in any respect
under any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect the validity, legality or
enforceability of any other provision of this Agreement in such jurisdiction or
affect the validity, legality or enforceability of any provision in any other
jurisdiction, but this Agreement shall be reformed, construed and enforced in
such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
13. Entire Agreement. Except as otherwise expressly set forth herein, this
----------------
Agreement embodies the complete agreement and understanding among the parties
hereto with respect to the subject matter hereof and supersedes and preempts any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
14. Successors and Assigns. Except as otherwise provided herein, this
----------------------
Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Stockholders and any subsequent
holders of Stockholder Shares and the respective successors and assigns of each
of them, so long as they hold Stockholder Shares.
15. Counterparts. This Agreement may be executed in multiple counterparts,
------------
each of which shall be an original and all of which taken together shall
constitute one and the same agreement.
16. Remedies. The Company and the Stockholders shall be entitled to enforce
--------
their rights under this Agreement specifically, to recover damages by reason of
any breach of any provision of this Agreement and to exercise all other rights
existing in their favor. The parties hereto agree and acknowledge that money
damages would not be an adequate remedy for any breach of the provisions of this
Agreement and that the Company or any Stockholder may in its sole discretion
apply to any court of law or equity of competent jurisdiction for specific
performance and/or injunctive relief (without posting a bond or other security)
in order to enforce or prevent any violation of the provisions of this
Agreement.
17. Notices. Any notice provided for in this Agreement shall be in writing,
-------
and shall be either personally delivered, or mailed first class mail (postage
prepaid) or sent by reputable overnight courier service (charges prepaid) to the
Company at the addresses set forth below and to any other recipient at the
address indicated on the signature page of such Stockholder attached hereto
- 13 -
<PAGE>
and to any subsequent holder of Stockholder Shares subject to this Agreement at
such address as indicated by the Company's records, or at such address or to the
attention of such other person as the recipient party has specified by prior
written notice to the sending party. Notices shall be deemed to have been given
hereunder when delivered personally, three days after deposit in the U.S. mail
and one day after deposit with a reputable overnight courier service. Notices
shall be sent to the following addresses:
If to the Company, to:
SAS Acquisitions Inc.
c/o Coinmach Industries Co., L.P.
55 Lumber Road
Roslyn, NY 11576
Attention: President
with a copy, which will not constitute notice of the Company, to:
Anderson Kill Olick & Oshinsky, P.C.
1251 Avenue of the Americas
New York, NY 10020
Attention: Ronald S. Brody, Esq.
18. Governing Law. All issues and questions concerning the construction,
-------------
validity, interpretation and enforceability of this Agreement and the exhibits
and schedules hereto shall be governed by, and construed in accordance with, the
laws of the State of New York, without giving effect to any choice of law or
conflict of law rules or provisions (whether of the State of Delaware or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.
19. Descriptive Headings. The descriptive headings of this Agreement are
--------------------
inserted for convenience only and do not constitute a part of this Agreement.
* * * *
- 14 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
SAS ACQUISITIONS INC.
By:_____________________
Its:____________________
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV, L.P.
By: GTCR IV, L.P.
Its: General Partner
By: GOLDER, THOMA, CRESSEY, RAUNER, INC.
Its: General Partner
By:__________________________
Its:_________________________
Number and Class of
Stockholder Shares: 721,153 shares of Class A Common
Designation: None
Notices should be sent to:
Golder, Thoma, Cressey Rauner, Fund IV, L.P.
6100 Sears Tower
Chicago, IL 60606
Attention: David A. Donnini
with a copy, which will not constitute notice to GTCR, to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Kevin R. Evanich
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
__________________________
Mitchell Blatt
Number and Class of
Stockholder Shares: 398 shares of Class A Common
4,000 shares of Class B Common
Designation: Investor with respect to Class A Common
Executive with respect to Class B Common
Notices should be sent to:
Mitchell Blatt
31 Wilmington Drive
Dix Hills, NY 11747
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
------------------------
Robert M. Doyle
Number and Class of
Stockholder Shares: 2,000 shares of Class B Common
Designation: Executive
Notices should be sent to:
Robert M. Doyle
53 Sheryl Crescent
Smithtown, NY 11787
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
------------------------
Michael Stanky
Number and Class of
Stockholder Shares: 425 shares of Class A Common
1,500 shares of Class B Common
Designation: Investor regarding Class A Common
Executive regarding Class B Common
Notices should be sent to:
Michael Stanky
1125 Ashington Place
Desoto, TX 75115
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
HELLER FINANCIAL, INC.
By:
------------------------------
Its:
------------------------------
Number and Class of
Stockholder Shares: 3,806 shares of Class A Common
Designation: Investor
Notices should be sent to:
Heller Financial, Inc.
500 West Monroe Street
Chicago, IL 60661
Attn: Portfolio Manager
Portfolio Organization
Corporate Finance Group
with a copy, which will not constitute notice, to:
Heller Financial, Inc.
500 West Monroe Street
Chicago, IL 60661
Attn: Legal Department
Portfolio Organization
Corporate Finance Group
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
JACKSON NATIONAL LIFE INSURANCE
COMPANY
By:
------------------------
Its:
------------------------
Number and Class of
Stockholder Shares: 3,425 shares of Class A Common
Designation: Investor
Notices should be sent to:
Jackson National Life Insurance Company c/o PPM America, Inc.
225 West Wacker Drive, Suite 1200
Chicago, IL 60606
Attn: Private Placements
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
JACKSON NATIONAL LIFE INSURANCE
COMPANY OF MICHIGAN
By:
----------------------
Its:
----------------------
Number and Class of
Stockholder Shares: 381 shares of Class A Common
Designation: Investor
Notices should be sent to:
Jackson National Life Insurance Company of Michigan c/o PPM America, Inc.
225 West Wacker Drive, Suite 1200
Chicago, IL 60606
Attn: Private Placements
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
----------------------
James N. Chapman
Number and Class of
Stockholder Shares: 300 shares of Class A Common
Designation: Investor
Notices should be sent to:
James N. Chapman
14 Alpine Road
Greenwich, CT 06830
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
----------------------
Michael E. Marrus
Number and Class of
Stockholder Shares: 228 shares of Class A Common
Designation: Investor
Notices should be sent to:
Michael E. Marrus
755 Park Avenue
New York, NY 10021
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
MCS CAPITAL, INC.
By:
---------------------
Its:
---------------------
Number and Class of
Stockholder Shares: 1,479 shares of Class A Common
4,000 shares of Class B Common
Designation: Investor regarding Class A Common
Executive regarding Class B Common
Notices should be sent to:
MCS Capital, Inc.
c/o Coinmach Industries Co., L.P.
55 Lumber Road
Roslyn, NY 11576
Attn: Stephen R. Kerrigan
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
PRESIDENT AND FELLOWS OF
HARVARD COLLEGE
By: Harvard Management
Company, Inc.
By:
------------------------
Its:
------------------------
By:
------------------------
Its:
------------------------
Number and Class of
Stockholder Shares: 2,405 shares of Class A Common
Designation: Investor
Notices should be sent to:
President and Fellows of Harvard College
c/o Harvard Management Company, Inc.
c/o Timothy Peterson
600 Atlantic Avenue
Boston, MA 02210
<PAGE>
Exhibit 2G
----------
MANAGEMENT AND CONSULTING SERVICES AGREEMENT
--------------------------------------------
MANAGEMENT AND CONSULTING SERVICES AGREEMENT ("Agreement"), dated as of
---------
July 26, 1995, by and between GTCR IV, L.P., a Delaware limited partnership
("GTCR"), and SAS Acquisitions Inc., a Delaware corporation (the "Company").
---- -------
WHEREAS, Golder, Thoma, Cressey, Rauner Fund IV, L.P., a Delaware limited
partnership (the "Fund"), of which GTCR is the general partner, will purchase
----
(the "Investment") pursuant to that certain Equity Purchase Agreement (the
----------
"Purchase Agreement") of even date herewith between the Company and GTCR 72,153
------------------
shares of the Company's Class A Common Stock, par value $0.01 per share;
WHEREAS, the Company desires to receive financial and management consulting
services from GTCR, and obtain the benefit of the experience of GTCR in business
and financial management generally and its knowledge of the Company and the
Company's financial affairs in particular;
WHEREAS, in connection with the Investment, GTCR is willing to provide
financial and management consulting services to the Company and the compensation
arrangements set forth in this Agreement are designed to compensate GTCR for
such services; and
WHEREAS, the Company seeks to compensate GTCR for financial and managerial
services performed in connection with the Company's acquisitions in the
coin-operated laundry industry such as the arrangement of financing for the
transactions, the negotiation of the related acquisition agreements, and the
management consultation in regards to the structure of the transactions (the
"Acquisitions").
------------
NOW, THEREFORE, in consideration of the foregoing premises and the
respective agreements hereinafter set forth and the mutual benefits to be
derived herefrom, GTCR and the Company hereby agree as follows:
1. Engagement. The Company hereby engages GTCR as a financial and
----------
management consultant, and GTCR hereby agrees to provide financial and
management consulting services to the Company, all on the terms and subject to
the conditions set forth below.
2. Services of GTCR. GTCR hereby agrees during the term of this engagement
----------------
to consult with the Company's board of directors (the "Board") and management of
-----
the Company and its subsidiaries in such manner and on such business and
financial matters as may be reasonably requested from time to time by the Board,
including but not limited to:
<PAGE>
(i) corporate strategy;
(ii) budgeting of future corporate investments;
(iii) acquisition and divestiture strategies; and
(iv) debt and equity financings.
3. Personnel. GTCR shall provide and devote to the performance of this
---------
Agreement such partners, employees and agents of GTCR as GTCR shall deem
appropriate for the furnishing of the services required thereby.
4. Management Fee. From and after the Closing (as defined in the Purchase
--------------
Agreement), the Company shall pay to GTCR an annual management fee in the amount
of $100,000 per year (as such amount may be increased from time to time by GTCR
with the approval of the Board) payable annually in full on the first
anniversary of the Closing and on each subsequent anniversary thereof.
5. Closing and Advisory Fees. Upon Consummation of the Closing, the Company
-------------------------
shall pay to GTCR a closing fee in the amount of $200,000 and a financial
advisory fee of $130,000, each payable on the day on which the Closing is
consummated.
6. Expenses. In addition to the fees described in Sections 4 and 5 above,
--------
the Company shall promptly reimburse GTCR for such reasonable travel expenses
and other out-of-pocket fees and expenses as may be incurred by GTCR, its
directors, officers and employees in connection with the Acquisitions and in
connection with the rendering of services hereunder.
7. Term. This Agreement will continue from the date hereof until the Fund
----
ceases to own at least 33% of the Common Stock (as defined in the Purchase
Agreement). No termination of this Agreement, whether pursuant to this paragraph
or otherwise, shall affect the Company's obligations with respect to the fees,
costs and expenses incurred by GTCR in rendering services hereunder and not
reimbursed by the Company as of the effective date of such termination.
8. Liability. Neither GTCR nor any of its affiliates, partners, employees
---------
or agents shall be liable to the Company or its subsidiaries or affiliates for
any loss, liability, damage or expense arising out of or in connection with the
performance of services contemplated by this Agreement, unless such loss,
liability, damage or expense is a result of the gross negligence or willful
misconduct of GTCR.
2
<PAGE>
9. Indemnification. The Company agrees to indemnify and hold harmless GTCR,
---------------
its partners, affiliates, officers, agents and employees against and from any
and all loss, liability, suits, claims, costs, damages and expenses (including
attorneys' fees) arising from their performance hereunder, except as a result of
their gross negligence or willful misconduct.
10. GTCR Independent Contractor Status. GTCR and the Company agree that
----------------------------------
GTCR shall perform services hereunder as an independent contractor, retaining
control over and responsibility for its own operations and personnel. Neither
GTCR nor its partners, employees or agents shall be considered employees or
agents of the Company as a result of this Agreement nor shall any of them have
authority to contract in the name of or bind the Company, except as expressly
agreed to in writing by the Company.
11. Notices. Any notice, report or payment required or permitted to be
-------
given or made under this Agreement by one party to the other shall be deemed to
have been duly given or made if personally delivered (including by courier) or,
if mailed, when mailed by registered or certified mail, postage prepaid, to the
other party at the following addresses (or at such other address as shall be
given in writing by one party to the other):
If to GTCR:
GTCR, IV, L.P.
6100 Sears Tower
Chicago, IL 60606
Attention: Bruce V. Rauner David A. Donnini
with a copy (which copy will not constitute notice to GTCR) to:
--------------------------------------------------------------
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Kevin R. Evanich, Esq.
If to the Company:
SAS Acquisitions Inc.
c/o Coinmach Industries Co., L.P.
55 Lumber Road
Roslyn, NY 11576
Attention: President
3
<PAGE>
with a copy (which copy will not constitute notice to the Company) to:
---------------------------------------------------------------------
Anderson, Kill, Olick & Oshinsky, P.C.
1251 Avenue of The Americas
New York, New York 10020
Attention: Ronald S. Brody, Esq.
12. Entire Agreement; Modification. This Agreement (a) contains the
---------------- ------------
complete and entire understanding and agreement of GTCR and the Company with
respect to the subject matter hereof; and (b) supersedes all prior and
contemporaneous understandings, conditions and agreements, oral or written,
express or implied, respecting the engagement of GTCR in connection with the
subject matter hereof.
13. Waiver of Breach. The waiver by either party of a breach of any
----------------
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach of that provision or any other provision
hereof.
14. Assignment. Neither GTCR nor the Company may assign its rights or
----------
obligations under this Agreement without the express written consent of the
other.
15. Successors. This Agreement and all the obligations and benefits
----------
hereunder shall inure to the successors and permitted assigns of the parties.
16. Counterparts. This Agreement may be executed and delivered by each
------------
party hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original and both of which taken together shall
constitute one and the same agreement.
17. Choice of Law. This Agreement shall be governed by and construed in
-------------
accordance with the domestic laws of the State of Illinois, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of Illinois or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Illinois.
4
<PAGE>
IN WITNESS WHEREOF, GTCR and the Company have caused this Agreement to be
duly executed and delivered on the date and year first above written.
GTCR IV, L.P.
By: Golder, Thoma, Cressey, Rauner, Inc.
Its: General Partner
By:
------------------------
Its: Principal
SAS ACQUISITIONS INC.
By:
------------------------
Its:
------------------------
<PAGE>
Exhibit 2H
----------
REGISTRATION AGREEMENT
----------------------
THIS AGREEMENT is made as of July 26, 1995, among SAS Acquisitions Inc., a
Delaware corporation (the "Company"), and each Person executing a signature page
-------
hereto whether signing as of or after the date hereof. Unless otherwise provided
in this Agreement, capitalized terms used herein shall have the meanings set
forth in paragraph 8 hereof.
The parties hereto agree as follows:
1. Demand Registrations.
--------------------
(a) Requests for Registration. At any time after the Company has completed
-------------------------
an Initial Public Offering, GTCR may request registration under the Securities
Act of all or any portion of the GTCR Registrable Securities on Form S-1 or any
similar long-form registration ("Long-Form Registrations"), and may request
-----------------------
registration under the Securities Act of all or any portion of the GTCR
Registrable Securities on Form S-2 or S-3 or any similar short-form registration
("Short-Form Registrations") if available. All registrations requested pursuant
------------------------
to this paragraph 1(a) are referred to herein as "Demand Registrations." Each
--------------------
request for a Demand Registration shall specify the approximate number of
Registrable Securities requested to be registered and the anticipated per share
price range for such offering. Within ten days after receipt of any such
request, the Company shall give written notice of such requested registration to
all other holders of Registrable Securities and shall include in such
registration all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within 15 days after the receipt
of the Company's notice.
(b) Long-Form Registrations. GTCR shall be entitled to request four
-----------------------
Long-Form Registrations in which the Company shall pay all Registration Expenses
("Company-paid Long-Form Registrations"). A registration shall not count as one
------------------------------------
of the permitted Long-Form Registrations until it has become effective, and no
Long-Form Registration shall count as one of the Company-paid Long-Form
Registrations unless GTCR is able to register and sell at least 75% of the GTCR
Registrable Securities requested to be included in such registration; provided
that in any event the Company shall pay all Registration Expenses in connection
with any registration initiated as a Company-paid Long-Form Registration whether
or not it has become effective and whether or not such registration is counted
as one of the Company-paid Long-Form Registrations.
<PAGE>
(c) Short-Form Registrations. In addition to the Long-Form Registrations
------------------------
provided pursuant to paragraph 1(b), GTCR shall be entitled to request an
unlimited number of Short-Form Registrations in which the Company shall pay all
Registration Expenses. Demand Registrations shall be Short-Form Registrations
whenever the Company is permitted to use any applicable short form. After the
Company has become subject to the reporting requirements of the Securities
Exchange Act, the Company shall use commercially reasonable efforts to make
Short-Form Registrations on Form S-3 available for the sale of Registrable
Securities.
(d) Priority on Demand Registrations. If a Demand Registration is an
--------------------------------
underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and, if
permitted hereunder, other securities requested to be included in such offering
exceeds the number of Registrable Securities and other securities, if any, which
can be sold therein without adversely affecting the Company or the marketability
of the offering, the Company shall include in such registration the number of
Registrable Securities and other securities requested to be included in such
registration, which in the opinion of such underwriters can be sold without
adversely affecting the Company or the marketability of the offering, pro rata
among the respective holders (including GTCR) thereof on the basis of the number
of shares requested to be included in such registration by each such holder.
(e) Restrictions on Demand Registrations. The Company shall not be
------------------------------------
obligated to effect any Registration within 180 days after the effective date of
a previous Demand Registration or a previous registration in which the holders
of Registrable Securities were given piggyback rights pursuant to paragraph 2
and in which there was no reduction in the number of Registrable Securities
requested to be included.
(f) Selection of Underwriters. GTCR shall have the right to select the
-------------------------
investment banker(s) and manager(s) to administer the offering, subject to the
Company's approval which shall not be unreasonably withheld.
2. Piggyback Registrations.
-----------------------
(a) Right to Piggyback. Whenever the Company proposes to register any of
------------------
its securities under the Securities Act and the registration form to be used may
be used for the registration of Registrable Securities (a "Piggyback
---------
Registration"), the Company shall give prompt written notice to all holders of
- ------------
Registrable Securities of its intention to effect such a registration and shall
include in such registration all Registrable Securities with
2
<PAGE>
respect to which the Company has received written requests for inclusion therein
within 20 days after the receipt of the Company's notice.
(b) Piggyback Expenses. The Registration Expenses of the holders of
------------------
Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) Priority on Primary Registrations. If a Piggyback Registration is an
---------------------------------
underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering without adversely affecting the marketability
of the offering, the Company shall include in such registration (i) first, the
securities the Company proposes to sell, and (ii) second, the Registrable
Securities and other securities of the Company requested to be included in such
registration, pro rata among the holders of such Registrable Securities and
other securities of the Company on the basis of the number of shares requested
to be included in such registration by each such holder.
(d) Priority on Secondary Registrations. If a Piggyback Registration is an
-----------------------------------
underwritten secondary registration on behalf of holders of the Company's
securities, and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering without
adversely affecting the Company or the marketability of the offering, the
Company shall include in such registration (i) the securities requested to be
included therein by the holders initially requesting such registration, (ii) the
Registrable Securities and (iii) any other securities of the Company requested
to be included in such registration, in each instance which in the opinion of
such underwriters can be sold without adversely affecting the Company or the
marketability of the offering, pro rata among the holders thereof (including
GTCR) on the basis of the number of shares requested to be included in such
registration by each such holder.
(e) Selection of Underwriters. If any Piggyback Registration is an
-------------------------
underwritten offering, the selection of investment banker(s) and manager(s) for
the offering must be approved by the holders of a majority of the Registrable
Securities included in such Piggyback Registration. Such approval shall not be
unreasonably withheld.
(f) Other Registrations. If the Company has previously filed. a
-------------------
registration statement with respect to Registrable Securities pursuant to
paragraph 1 or pursuant to this paragraph 2, and
3
<PAGE>
if such previous registration has not been withdrawn or abandoned, the Company
shall not file or cause to be effected any other registration of any of its
equity securities or securities convertible or exchangeable into or exercisable
for its equity securities under the Securities Act (except on Form S-8 or any
successor form), whether on its own behalf or at the request of any holder or
holders of such securities, until a period of at least 180 days has elapsed from
the effective date of such previous registration.
3. Holdback Agreements.
-------------------
(a) Each holder of Registrable Securities shall not effect any public sale
or distribution (including sales pursuant to Rule 144) of equity securities of
the Company, or any securities convertible into or exchangeable or exercisable
for such securities, during the seven days prior to and the 180-day period
beginning on the effective date of any underwritten Demand Registration or any
underwritten Piggyback Registration (except as part of such underwritten
registration), unless the underwriters managing the registered public offering
otherwise agree.
(b) The Company shall not effect any public sale or distribution of its
equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and during the
180-day period beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration (except as part of such
underwritten registration or pursuant to registrations on Form S-8 or any
successor form), unless the underwriters managing the registered public offering
otherwise agree.
4. Registration Procedures. Whenever the holders of Registrable Securities
-----------------------
have requested that any Registrable Securities be registered pursuant to this
Agreement, the Company shall use its best efforts to effect the registration and
the sale of such Registrable Securities in accordance with the intended method
of disposition thereof, and pursuant thereto the Company shall as expeditiously
as possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective;
(b) notify each holder of Registrable Securities of the effectiveness of
each registration statement filed hereunder and prepare and file with the
Securities and Exchange Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to
4
<PAGE>
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement;
(c) furnish to each seller of Registrable Securities such number of copies
of such registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each preliminary
prospectus) and such other documents as such seller may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
seller;
(d) use its best efforts to register or qualify such Registrable Securities
under such other securities or blue sky laws of such jurisdictions as any seller
reasonably requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided that the Company shall not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
(e) notify each seller of such Registrable Securities, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in such registration statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not misleading, and,
at the request of any such seller, the Company shall prepare a supplement or
amendment to such prospectus and/or registration statement so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each securities
exchange on which similar securities issued by the Company are then listed and,
if not so listed, to be listed on the NASD automated quotation system;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of the first registration statement
relating to Registrable Securities or securities of any class of the Company;
(h) enter into such customary agreements (including underwriting agreements
in customary form) and take all such other
5
<PAGE>
actions as the holders of a majority of the Registrable Securities being sold or
the underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities (including effecting a stock
split or a combination of shares);
(i) make available for inspection by any seller of Registrable Securities,
any underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors, employees and independent accountants to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(j) otherwise use commercially reasonable efforts to comply with all
applicable rules and regulations of the Securities and Exchange Commission, and
make available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning with
the first day of the Company's first full calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; and
(k) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any securities included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order.
5. Registration Expenses.
---------------------
(a) All expenses incident to the Company's performance of or compliance
with this Agreement, including without limitation all registration and filing
fees, fees and expenses of compliance with securities or blue sky laws, printing
expenses, messenger and delivery expenses, fees and disbursements of custodians,
and fees and disbursements of counsel for the Company and all independent
certified public accountants, underwriters (excluding discounts and commissions)
and other Persons retained by the Company (all such expenses being herein called
"Registration Expenses"), shall be borne by the Company, and the Company shall
---------------------
pay its internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting
6
<PAGE>
duties), the expense of any annual audit or quarterly review, the expense of any
liability insurance and the expenses and fees for listing the securities to be
registered on each securities exchange on which similar securities issued by the
Company are then listed or on the NASD automated quotation system.
(b) In connection with each Demand Registration and each Piggyback
Registration, the Company shall reimburse the holders of Registrable Securities
included in such registration for the reasonable fees and disbursements of one
counsel chosen by the holders of a majority of the Registrable Securities
included in such registration.
6. Indemnification.
---------------
(a) The Company agrees to indemnify, to the extent permitted by law, each
holder of Registrable Securities, its officers and directors and each Person who
controls such holder (within the meaning of the Securities Act) against all
losses, claims, damages, liabilities and expenses caused by any untrue or
alleged untrue statement of material fact contained in any registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such holder expressly for use
therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company shall indemnify
such underwriters, their officers and directors and each Person who controls
such underwriters (within the meaning of the Securities Act) to the same extent
as provided above with respect to the indemnification of the holders of
Registrable Securities.
(b) In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder shall furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, shall indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged
7
<PAGE>
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, but only to the extent that such untrue
statement or omission is contained in any information or affidavit so furnished
in writing by such holder; provided that the obligation to indemnify shall be
individual, not joint and several, for each holder and shall be limited to the
net amount of proceeds received by such holder from the sale of Registrable
Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder shall (i) give prompt
written notice to the indemnifying party of any claim with respect to which it
seeks indemnification (provided that the failure to give prompt notice shall not
impair any Person's right to indemnification hereunder to the extent such
failure has not prejudiced the indemnifying party) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement shall remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and shall survive the transfer of securities. The Company also
agrees to make such provisions, as are reasonably requested by any indemnified
party, for contribution to such party in the event the Company's indemnification
is unavailable for any reason.
7. Participation in Underwritten Registrations. No Person may participate
-------------------------------------------
in any registration hereunder which is underwritten unless such Person (i)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements, (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other
8
<PAGE>
documents required under the terms of such underwriting arrangements, and (iii)
completes and executes any other documents reasonably required.
8. Definitions.
-----------
"Common Stock" means any share of the Company's Class A Common Stock, par
------------
value $.01 per share, or Class B Common Stock par value $.01 per share.
"Executive" means any Stockholder designated as an "Executive" on the
---------
signature page of such Stockholder attached hereto.
"Executive Registrable Securities" means, irrespective of which Person
--------------------------------
actually holds such securities, (i) any shares of Common Stock acquired as of
the date hereof by the Executives (ii) any shares of Common Stock acquired
hereafter by the Executives or any executive employee of the Company or its
Subsidiaries who becomes a party to this Agreement, and (iii) any capital stock
of the Company issued or issuable with respect to the securities referred to in
clauses (i) or (ii) above by way of a stock dividend, stock split, conversion or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization. As to any particular Executive
Registrable Securities, such securities will cease to be Executive Registrable
Securities when they have been distributed to the public pursuant to an offering
registered under the Securities Act or sold to the public through a broker,
dealer or market maker in compliance with Rule 144 (or any similar rule then in
force) under the Securities Act. For purposes of this Agreement, a Person will
be deemed to be a holder of Executive Registrable Securities whenever such
Person has the right to acquire such Executive Registrable Securities (upon
conversion or exercise in connection with a transfer of securities or otherwise,
but disregarding any restrictions or limitations upon the exercise of such
right), whether or not such acquisition has actually been effected.
"GTCR" means Golder, Thoma, Cressey, Rauner Fund IV, L.P., a Delaware
----
limited partnership.
"GTCR Registrable Securities" means, irrespective of which Person actually
---------------------------
holds such securities, (i) any shares of Common Stock acquired as of or prior to
the date hereof by GTCR, (ii) any shares of Common Stock acquired hereafter by
GTCR, and (iii) any capital stock of the Company issued or issuable with respect
to the securities referred to in clauses (i) or (ii) above by way of a stock
dividend, stock split, conversion or in connection with a combination of shares,
recapitalization, merger,
9
<PAGE>
consolidation or other reorganization. As to any particular GTCR Registrable
Securities, such securities will cease to be GTCR Registrable Securities when
they have been distributed to the public pursuant to an offering registered
under the Securities Act or sold to the public through a broker, dealer or
market maker in compliance with Rule 144 (or any similar rule then in force)
under the Securities Act. For purposes of this Agreement, a Person will be
deeded to be a holder of GTCR Registrable Securities whenever such Person has
the right to acquire such GTCR Registrable Securities (upon conversion, or
exercise in connection with a transfer of securities or otherwise, but
disregarding any restrictions or limitations upon the exercise of such right),
whether or not such acquisition has actually been effected.
"Initial Public Offering" means the sale of an initial underwritten public
-----------------------
offering registered under the Securities Act (other than on Form S-8 or a
similar form) of shares of the Company's Common Stock or other equity
securities.
"Investor" means any Stockholder designated as an "Investor" on the
--------
signature page of such Stockholder attached hereto.
"Investor Registrable Securities" means, irrespective of which Person
-------------------------------
actually holds such securities, (i) any shares of Common Stock acquired as of
the date hereof by any Investor, (ii) any shares of Common Stock acquired
hereafter by any Investor, and (iii) any capital stock of the Company issued or
issuable with respect to the securities referred to in clauses (i) or (ii) above
by way of a stock dividend, stock split, conversion or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Investor Registrable Securities, such
securities will cease to be Investor Registrable Securities when they have been
distributed to the public pursuant to an offering registered under the
Securities Act or sold to the public through a broker, dealer or market maker in
compliance with Rule 144 (or any similar rule then in force) under the
Securities Act. For purposes of this Agreement, a Person will be deeded to be a
holder of Investor Registrable Securities whenever such Person has the right to
acquire such Investor Registrable Securities (upon conversion, or exercise in
connection with a transfer of securities or otherwise, but disregarding any
restrictions or limitations upon the exercise of such right), whether or not
such acquisition has actually been effected.
"Person" means an individual, a partnership, a joint venture, a
------
corporation, a trust, a limited liability company, an unincorporated
organization or a government or any department or agency thereof.
10
<PAGE>
"Registrable Securities" means, collectively, the Executive Registrable
----------------------
Securities, the GTCR Registrable Securities and the Investor Registrable
Securities.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
-----------------------
amended.
"Stockholders Agreement" means the Stockholders Agreement, dated as of the
----------------------
date hereof, among the Company and certain of its stockholders, as amended from
time to time.
"Subsidiary" means, with respect to any Person:
----------
(a) any corporation a majority of the total voting power of shares of stock
of which is entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more of
the other Subsidiaries of that Person or a combination thereof, or
(b) any partnership, association or other business entity a majority of the
partnership or other similar ownership interest of which is at the time owned or
controlled, directly or indirectly, by that Person or one or more Subsidiaries
of that Person or a combination thereof.
For purposes of this definition, a Person is deemed to have a majority ownership
interest in a partnership, association or other business entity if such Person
is allocated a majority of the gains or losses of such partnership, association
or other business entity or is or controls the managing director or general
partner of such partnership, association or other business entity.
9. Miscellaneous.
-------------
(a) No Inconsistent Agreements. The Company shall not hereafter enter into
--------------------------
any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the holders of Registrable Securities in this
Agreement.
(b) Adjustments Affecting Registrable Securities. The Company shall not
--------------------------------------------
take any action, or permit any change to occur, with respect to its securities
which would materially and adversely affect the ability of the holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken
11
<PAGE>
pursuant to this Agreement or which would materially and adversely affect the
marketability of such Registrable Securities in any such registration
(including, without limitation, effecting a stock split or a combination of
shares).
(c) Remedies. Any Person having rights under any provision of this
--------
Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(d) Amendments and Waivers. Except as otherwise provided herein, the
----------------------
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company and holders of a majority of the Registrable
Securities; provided, however, that no such amendment or waiver shall materially
and adversely affect the rights hereunder of any of the parties hereto without
the prior written approval of such party.
(e) Successors and Assigns. All covenants and agreements in this agreement
----------------------
by or on behalf of any of the parties hereto shall bind and inure to the benefit
of the respective successors and assigns of the parties hereto whether so
expressed or not. In addition, whether or not any express assignment has been
made, the provisions of this Agreement which are for the benefit of purchasers
or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities.
(f) Severability. Whenever possible, each provision of this Agreement shall
------------
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
(g) Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement.
12
<PAGE>
(h) Descriptive Headings. The descriptive headings of this Agreement are
--------------------
inserted for convenience only and do not constitute a part of this Agreement.
(I) GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING THE CONSTRUCTION,
-------------
VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT AND THE EXHIBITS AND
SCHEDULES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR
CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF DELAWARE OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF DELAWARE.
(j) Notices. All notices, demands or other communications to be given or
-------
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable overnight courier service (charges
prepaid) or mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to each holder of Registrable Securities at the
address indicated on the signature page of such holder attached hereto, and to
any other holder of Registrable Securities at such address as indicated by the
Company's records and to the Company at the address indicated below:
if to the Company, to:
SAS Acquisitions Inc.
c/o Coinmach Industries Co., L.P.
55 Lumber Road
Roslyn, NY 11576
Attention: President
with a copy, which will not constitute notice to the Company, to:
Anderson Kill Olick & Oshinsky, P.C.
1251 Avenue of the Americas
New York, NY 10020
Attention: Ronald S. Brody, Esq.
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
* * * * *
13
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
SAS ACQUISITIONS INC.
By:
------------------------
Its:
------------------------
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV, L.P.
By: GTCR IV, L.P.,
Its: General Partner
By: GOLDER, THOMA, CRESSEY, RAUNER, INC.
Its: General Partner
By:
-----------------------------------
Its:
-----------------------------------
Designation: None
Notices should be sent to:
Golder, Thoma, Cressey, Rauner Fund IV, L.P.
6100 Sears Tower
Chicago, IL 60606
Attention: David A. Donnini
with a copy, which shall not constitute notice, to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Kevin R. Evanich
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
-----------------------------------
Mitchell Blatt
Designation: Executive
Notices should be sent to:
Mitchell Blatt
31 Wilmington Drive
Dix Hills, NY 11747
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
-----------------------------------
Robert M. Doyle
Designation: Executive
Notices should be sent to:
Robert M. Doyle
53 Sheryl Crescent
Smithtown, NY 11787
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
-----------------------------------
Michael Stanky
Designation: Executive
Notices should be sent to:
Michael Stanky
1125 Ashington Place
Desoto, TX 75115
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
HELLER FINANCIAL, INC.
By:
-----------------------------------
Its:
-----------------------------------
Designation: Investor
Notices should be sent to:
Heller Financial, Inc.
500 West Monroe Street
Chicago, IL 60661
Attn: Portfolio Manager
Portfolio Organization
Corporate Finance Group
with a copy, which shall not constitute notice, to:
Heller Financial, Inc.
500 West Monroe Street
Chicago, IL 60661
Attn: Legal Department
Portfolio Organization
Corporate Finance Group
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
JACKSON NATIONAL LIFE INSURANCE COMPANY
By:
-----------------------------------
Its:
-----------------------------------
Designation: Investor
Notices should be sent to:
Jackson National Life Insurance Company
c/o PPM America, Inc.
225 West Wacker Drive, Suite 1200
Chicago, IL 60606
Attn: Private Placements
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
JACKSON NATIONAL LIFE INSURANCE
COMPANY OF MICHIGAN
By:
-----------------------------------
Its:
-----------------------------------
Designation: Investor
Notices should be sent to:
Jackson National Life Insurance Company of Michigan
c/o PPM America, Inc.
225 West Wacker Drive, Suite 1200
Chicago, IL 60606
Attn: Private Placements
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
-----------------------------------
James N. Chapman
Designation: Investor
Notices should be sent to:
James N. Chapman
14 Alpine Road
Greenwich, CT 06630
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
-----------------------------------
Michael E. Marrus
Designation: Investor
Notices should be sent to:
Michael E. Marrus
755 Park Avenue
New York, NY 10021
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
PRESIDENT AND FELLOWS OF
HARVARD COLLEGE
By: HARVARD MANAGEMENT
COMPANY, INC.
By:
-----------------------------------
Its:
-----------------------------------
By:
-----------------------------------
Its:
-----------------------------------
Designation: Investor
Notices should be sent to:
President and Fellows of Harvard College
c/o Harvard Management Company, Inc.
c/o Timothy Peterson
600 Atlantic Avenue
Boston, MA 02210
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
MCS CAPITAL, INC.
By:
-----------------------------------
Its:
-----------------------------------
Designation: Executive
Notices should be sent to:
MCS Capital, Inc.
c/o Coinmach Industries Co., L.P.
55 Lumber Road
Roslyn, NY 11576
<PAGE>
Exhibit 2M
-----------
EXECUTIVE STOCK AGREEMENT
-------------------------
THIS AGREEMENT is made as of July 26, 1995, between SAS Acquisitions Inc.,
a Delaware corporation (the "Company"), Golder, Thoma, Cressey, Rauner Fund IV,
L.P. ("GTCR"), and the purchasers listed on the signature pages hereto (each a
"Purchaser" and collectively the "Purchasers"). Except as otherwise indicated,
herein, capitalized terms used herein are defined in paragraph 8 hereof.
The execution and delivery of this Agreement by the Company and the
Purchasers is a condition to the purchase of 72,153 shares of the Company's
Class A Common Stock, par value $0.01 per share (the "Class A Common"), by GTCR
pursuant to an Equity Purchase Agreement dated as of the date hereof (the
"Equity Purchase Agreement"). Certain provisions of this Agreement are intended
for the benefit of, and will be enforceable by, GTCR.
The parties hereto agree as follows:
1. Authorization of the Class B Common. The Company shall authorize the
issuance to the Purchasers of 15,000 shares of Class B Common Stock, par value
$.Ol per share (the "Class B Common"), having the rights set forth in Exhibit A
attached hereto. The Class A Common and Class B Common are hereinafter
collectively referred to as the "Common Stock".
2. Acquisition of Stock.
(a) Purchase and Sale of Executive Stock. Upon execution of this Agreement,
each Purchaser will purchase, and the Company will sell, the number of shares of
Class B Common set forth on the signature page for such Purchaser for the
purchase price of $15.4028 per share. The sale to and purchase by each Purchaser
of Class B Common will constitute a separate sale and purchase. The Company will
deliver to each Purchaser a certificate or certificates representing such Common
Stock, and each Purchaser will deliver to the Company a check or wire transfer
of funds in the amount indicated on the signature page hereto of such Purchaser,
and, if applicable, a promissory note (each an "Executive Note") in the amount
indicated on the signature page hereto of such Purchaser. Such Purchaser's
obligations under the Executive Note will be secured by a pledge of all of the
shares of Executive Stock to the Company and, in connection therewith, such
Purchaser shall enter into a pledge agreement (each a "Pledge Agreement").
(b) Section 83(b) Election. Within 30 days after a Purchaser, purchases any
Executive Stock, such Purchaser will make
<PAGE>
an effective election with the Internal Revenue Service under Section 83(b) of
the Internal Revenue Code of 1986, as amended, and the regulations promulgated
thereunder.
(c) Purchasers' Representations and Warranties. In connection with the
issuance of the Executive Stock hereunder, each Purchaser represents and
warrants to the Company that, in each case, as of the Closing:
(i) The Class B Common to be acquired by such Purchaser pursuant, to
this Agreement will be acquired for such Purchaser's own account and not
with a view to, or intention of, distribution thereof in violation of the
Securities Act, or any applicable state securities laws, and such Class B
Common will not be disposed of in contravention of the Securities Act or
any applicable state securities laws.
(ii) Such Purchaser is sophisticated in financial matters and is able
to evaluate the risks and benefits of the investment in such Class B
Common.
(iii) Such Purchaser is able to bear the economic risk of his
investment in such Class B Common for an indefinite period of time, and
such Purchaser acknowledges that such Class B Common has not been
registered under the Securities Act and, therefore, cannot be sold unless
subsequently registered under the Securities Act or an exemption from such
registration is available.
(iv) Such Purchaser has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of such
Class B Common and has had full access to such other information concerning
the Company as he has requested.
(v) This Agreement, the Stockholders Agreement and the Registration
Agreement and such Purchaser's Executive Note and Pledge Agreement, if any,
constitute legal, valid and binding obligations of such Purchaser,
enforceable in accordance with their terms, and the execution, delivery and
performance of this Agreement, the Stockholders Agreement and the
Registration Agreement and such Purchaser's Executive Note and Pledge
Agreement, if any, by such Purchaser does not and will not conflict with,
violate or cause a breach of any agreement, contract or instrument to which
such Purchaser is a party or any law, rule, regulation, judgment, order or
decree to which such Purchaser is subject.
- 2 -
<PAGE>
3. Representations and Warranties of the Company. In connection with the
issuance of the Executive Stock hereunder, the Company represents to each
Purchaser that, in each case, as of the Closing:
(a) Organization and Corporate Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of Delaware. The
Company has all requisite corporate power and authority to carry out the
transactions contemplated by this Agreement, the Stockholders Agreement and the
Registration Agreement (collectively, the "Investment Agreements"). The copies
of the Company's Amended and Restated Certificate of Incorporation and Bylaws
which have been furnished to each Purchaser's counsel reflect all amendments
made thereto at any time prior to the date of this Agreement and are correct and
complete.
(b) Capital Stock and Related Matters.
(i) As of the Closing and immediately thereafter, the authorized capital
stock of the Company shall consist of 10,000 shares which will be designated as
Preferred Stock and 100,000 shares of Common Stock, of which 85,000 shares
shall be designated as Class A Common and 15,000 shares shall be designated
Class B Common. As of the Closing, the Company shall not have outstanding any
stock or securities convertible or exchangeable for any shares of its capital
stock or containing any profit participation features, nor shall it have
outstanding any rights or options to subscribe for or to purchase its capital
stock or any stock or securities convertible into or exchangeable for its
capital stock or any stock appreciation rights or phantom stock plans other than
pursuant to and as contemplated by this Agreement, the Equity Purchase
Agreement, the Investor Purchase Agreement and the Stockholders Agreement. As of
the Closing, the Company shall not be subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its
capital stock or any warrants, options or other rights to acquire its capital
stock, except pursuant to this Agreement, the Equity Purchase Agreement, the
Investor Purchase Agreement and the Stockholders Agreement. As of the Closing,
all of the outstanding shares of the Company's capital stock shall be validly
issued, fully paid and nonassessable.
(ii) There are no statutory or contractual stockholders preemptive rights
or rights of refusal with respect to the issuance of the Common Stock hereunder,
except as provided herein, in the Stockholders Agreement. The Company has not
violated any applicable federal or state securities laws in connection with the
offer, sale or issuance of any of its capital stock, and the offer,
- 3 -
<PAGE>
sale and issuance of the Common Stock pursuant to this Agreement do not and will
not require registration under the Securities Act.
4. Vesting of Executive Stock.
(a) Except as otherwise provided in paragraph 4 (b) below, 20% of the
Executive Stock will be deemed "Vested Shares" as of the date of Closing and the
remainder of the Executive Stock will become vested in accordance with the
following schedule, if as of each such date such Purchaser is an employee of the
Company or any of its Subsidiaries or Affiliates:
Cumulative
Anniversary of Percentage of Executive
the Date of Closing Stock Vested
------------------- ------------
lst 40
2nd 60
3rd 80
4th 100
Any shares of Executive Stock which do not become Vested Shares under the
foregoing provisions will remain "Unvested Shares."
(b) If such Purchaser ceases to be employed by the Company or any of its
Subsidiaries or Affiliates on any date other than any anniversary date, the
cumulative percentage of Executive Stock to become vested will be determined on
a pro-rata basis according to the number of days elapsed since the prior
anniversary date. Immediately prior to the closing of (i) any sale of the
Company's equity securities which results in any person, or group of related
persons, not affiliated with GTCR, owning equity securities of the Company
possessing the power to elect (without reference to any special or default
voting rights) a majority of the members of the Board, or (ii) a sale of all or
substantially all of the Company's assets, all Unvested Shares will become
Vested Shares.
5. Repurchase Option.
(a) In the event a Purchaser violates paragraph 10(a) of his respective
Executive Stock Agreement, dated as of January 31, 1995, among The Coinmach
Corporation, such Purchaser and GTCR, or paragraph 3 (a) of his respective
Employment Agreement, dated as of the date hereof, among Solon Automated
Services, Inc., such Purchaser and GTCR, in each case a "Noncompete Breach," or
in the event a Purchaser's employment by the Company, its Subsidiaries and
- 4 -
<PAGE>
its Affiliates terminates for any reason (a "Termination"), the Executive Call
Stock (whether held by such Purchaser or one or more of such Purchaser's
transferees, other than the Company or GTCR) will be subject to repurchase by
the Company first, Management second and GTCR third pursuant to the terms and
conditions set forth in this paragraph 5 (the "Repurchase Option").
(b) If the Repurchase Option becomes exercisable because of a Noncompete
Breach or Termination resulting from the termination of such Purchaser's
employment with the Company, its Subsidiaries or its Affiliates for Cause,
then, the purchase price for each share of Executive Call Stock will be the
lower of (a) such Purchaser's Original Cost for such share or (b) the fair
market value of such share. If a Purchaser's employment with the Company, its
Subsidiaries or its Affiliates terminates other than as described in the
preceding sentence, the purchase price for each (i) Unvested Share shall be such
Purchaser's Original Cost for such share, and (ii) Vested Share shall be the
fair market value of such share as of the date of the related Repurchase Notice
or Investor Notice (as hereinafter defined), as the case may be.
(c) The Company may, at the option of the Board, elect to purchase all or
any portion of the Executive Call Stock from time to time by delivering written
notice (the "Repurchase Notice") to Management, GTCR and the holder or holders
of such Executive Call Stock from time to time during the 270 days after the
Noncompete Breach or Termination, as the case may be. The Repurchase Notice will
set forth the number of shares of Executive Call Stock, including the number of
Unvested Shares and Vested Shares, to be acquired from such holder, the
aggregate consideration to be paid for such shares and the time and place for
the closing of the transaction.
(d) If for any reason the Company has not elected to purchase all of the
Executive Call Stock pursuant to the Repurchase Option, Management shall be
entitled to exercise the Repurchase Option for any or all of the shares of
Executive Call Stock, including the Unvested Shares and the Vested Shares, the
Company has not yet elected to purchase (the "Available Shares"), by giving
written notice to the Company and the holder(s) of the Available Shares to be
repurchased during the 30 days after the date of delivery to Management of the
Repurchase Notice (the "Management Notice") setting forth the number of
Available Shares each Manager is willing to purchase. If the Managers elect to
purchase an aggregate number of shares greater than the number of Available
Shares, the Available Shares shall be allocated among the Managers pro rata
based on the number of shares of Common Stock owned by each Manager. As soon as
practicable, and in any event, within 10 days after the expiration of the 30-day
period set forth above, the
- 5 -
<PAGE>
Company shall notify the holder(s) of the Available Shares and GTCR as to the
number of shares being purchased from such holder(s) by Management (the
"Supplemental Repurchase Notice"). At the time the Company delivers the
Supplemental Repurchase Notice to the holder(s) of the Available Shares, the
Company shall also deliver written notice to each Manager and GTCR setting forth
the number of shares such Manager is entitled to purchase, the aggregate
purchase price and the time and place of the closing of the transaction and, in
the notice to GTCR, a statement of the number, type and purchase price of
Available Shares available for purchase by GTCR.
(e) If for any reason Management has not elected to purchase any or all of
the Available Shares pursuant to paragraph 5(d) above, GTCR may elect to
purchase any or all of the Available Shares not purchased by Management by
giving written notice to the holder(s) of the Available Shares to be
repurchased within 30 days after the date of delivery to GTCR of the
Supplemental Repurchase Notice (the "Investor Repurchase Notice") setting forth
the number of Available Shares GTCR is willing to purchase.
(f) Each closing of the purchase of the Executive Call Stock pursuant to
the Repurchase Option shall take place on the date designated by the Company,
Management or GTCR in the related Repurchase Notice, Supplemental Repurchase
Notice, or Investor Repurchase Notice, as the case may be, but in any event not
later than 365 days after the date of the Noncompete Breach or Termination. At
such closing, such Purchaser shall deliver to the Company, Management and/or
GTCR certificates representing the Executive Stock to be repurchased by the
Company, Management and/or GTCR and the Company, Management and/or GTCR, as the
case may be, will pay for the Executive Call Stock to be purchased pursuant to
the Repurchase Option in the following manner:
(i) In the event that no Event of Default has occurred and is
continuing on the date of the Noncompete Breach or Termination, payment for
the Executive Call Stock to be purchased shall be made by delivery to such
Purchaser of a cashier's or certified check or wire transfer of funds in
the amount of one-half of the purchase price of the Executive Call Stock on
the date of the closing of the Repurchase Option. Payment for the remaining
one-half of the purchase price shall be made by delivery of a promissory
note, with an aggregate principal amount equal to one-half of the purchase
price of the Executive Stock to be repurchased, payable in one lump sum
payment on the second anniversary of the date of issuance and bearing
interest at the rate of 8% per annum.
(ii) In the event that an Event of Default has occurred and, is
continuing on the date of the Noncompete Breach or
- 6 -
<PAGE>
Termination, payment for the Executive Call Stock to be purchased shall be
made by delivery of a promissory note, with an aggregate principal amount
equal to the total purchase price of the Executive Call Stock to be
repurchased, payable in one lump sum payment on the fifth anniversary of
the date of issuance and bearing interest at the rate of 8% per annum.
Any such note issued by the Company pursuant to subparagraphs (i) and (ii) above
shall be junior and subordinated in right of payment to all indebtedness of the
Company (for borrowed money or otherwise). In addition, the Company may pay the
total purchase price for such shares by offsetting amounts outstanding under any
bona fide debts owed by such Purchaser to the Company. The Company, Management
and GTCR will be entitled to receive customary representations and warranties
from the sellers regarding such sale and to require that all sellers' signatures
be guaranteed.
(g) If within six months following the repurchase of Executive Call Stock
pursuant to paragraph 5(f) above, (i) a Sale of the Company or a Public Offering
of the Company's Common Stock registered under the Securities Act occurs and
(ii) the valuation of a share of Common Stock for such transaction (based upon
the purchase price or liquidation proceeds per share of Common Stock or the
Public Offering price per share of Common Stock, but reduced by any preferential
amounts available to any of the classes of Common Stock) exceeds the amounts per
share received by the holder(s) of Executive Call Stock upon the repurchase of
Vested Shares, then such holder(s) of Executive Call Stock shall be entitled to
receive from the Company the benefit of such higher valuation for the Vested
Shares of Executive Call Stock sold under the Repurchase Option. The excess of
(x) the amount which the holder(s) of Executive Call Stock would have received
in such Sale of the Company or Public Offering assuming the sale of their Vested
Shares of Executive Call Stock purchased by exercise of the Repurchase Option in
connection with such transaction, over (y) the purchase price of the Vested
Shares of Executive Call Stock paid to such Purchaser under the Repurchase
Option, shall be paid by certified check or cashier's check or wire transfer of
funds to each such holder upon consummation of any such transaction. For
purposes of this paragraph 5(g), "Sale" means the sale of all or substantially
all of the assets of the Company or a sale of the Company's equity securities
which results in any person, or group of related persons, owning equity
securities of the Company possessing the power to elect (without reference to
any special or default voting rights) a majority of the members of the Board,
including any such sale accomplished by merger or consolidation.
6. Restrictions on Transfer.
- 7 -
<PAGE>
(a) Transfer of Executive Stock. On or prior to the Restriction Lapse Date,
no Purchaser shall directly or indirectly transfer any interest in any shares of
Executive Stock (a "Transfer"), except pursuant to the provisions of paragraph
5 or 6(e) of this Agreement. After the Restriction Lapse date, no Purchaser
shall directly or indirectly Transfer any interest in any shares of Executive
Stock except (i) pursuant to the provisions of paragraph 5 or 6(e) of this
Agreement, (ii) in a Public Sale or (iii) pursuant to the provisions of
paragraphs 6(b), 6(c) and 6(d) of this Agreement. Prior to effecting any
Transfer of Executive Stock (other than to the Company, Management or GTCR), the
Purchaser shall obtain from each transferee their written agreement to be bound
by the provisions of paragraph 6 of this Agreement for the benefit of the
Company, Management and GTCR.
(b) Sale Notice. After the Restriction Lapse Date, prior to making any
Transfer, each Purchaser will give written notice (the "Sale Notice") to the
Company, each Manager and GTCR. The Sale Notice will disclose in reasonable
detail the number of shares to be transferred and the terms and conditions of
the proposed Transfer and, if known, the identity of the prospective
transferee(s). No Purchaser will consummate any such Transfer until 90 days
after the Sale Notice has been given to the Company, Management and GTCR, unless
the parties to the Transfer have been fully determined pursuant to this
paragraph 6(b) and paragraphs 6(c) and 6(d) prior to the expiration of such
90-day period. (The date of the first to occur of such events is referred to
herein as the "Authorization Date.")
(c) First Refusal Rights. The Company may elect to purchase all (but not
less than all) of the shares of Executive Stock to be transferred upon the same
terms and conditions as those set forth in the Sale Notice by delivering a
written notice of such election to the transferring Purchaser (the "Transferring
Purchaser"), each Manager and GTCR within 30 days after the Sale Notice has been
given to the Company. If the Company has not elected to purchase all of the
Executive Stock to be transferred, Management may elect to purchase all (but not
less than all) of the Executive Stock to be transferred upon the same terms and
conditions as those set forth in the Sale Notice by giving written notice of
such election to the Transferring Purchaser, the Company and GTCR within 60 days
after the Sale Notice has been given to Management. Management's rights
hereunder shall be allocated among the Managers pro rata based on the number of
shares of Common Stock owned by each Manager. If the Company and Management have
not elected to purchase all of the Executive Stock to be transferred, GTCR may
elect to purchase all (but not less than all) of the Executive Stock to be
transferred upon the same terms and conditions as those set forth in the Sale
Notice by giving written
- 8 -
<PAGE>
notice of such election to the Transferring Purchaser, the Company and each
Manager within 90 days after the Sale Notice has been given to GTCR. If, the
Company, Management or GTCR do not elect to purchase all of the shares of
Executive Stock specified in the Sale Notice, the Transferring Purchaser may
transfer the shares of Executive Stock specified in the Sale Notice at a price
and on terms no more favorable to the transferee(s) thereof than specified in
the Sale Notice during the 30-day period immediately following the Authorization
Date. Any shares of Executive Stock not transferred within such 30-day period
will be subject to the provisions of this paragraph 6(c) upon subsequent
transfer.
(d) Co-Sale Rights.
(i) GTCR may elect to participate in the contemplated Transfer by
delivering written notice to the Transferring Purchaser within 90 days
after delivery of the Sale Notice to GTCR. If GTCR has elected to
participate in such Transfer, the Transferring Purchaser and GTCR shall be
entitled to sell in the contemplated Transfer, on the same terms and at the
price calculated pursuant to subparagraph 6(d) (ii) below, a number of
shares equal to the product of (x) the quotient determined by dividing the
number of shares of Common Stock owned by such person by the aggregate
number of shares of Common Stock owned by Executive and GTCR and (y) the
number of shares to be sold in the contemplated Transfer.
For example, if the Sale Notice contemplated a sale of 100 shares by the
Transferring Purchaser, and if the Transferring Purchaser was at such time
the owner of 30% of the Company's Common Stock (on a fully-diluted basis)
and if GTCR elected to participate and GTCR owned 20% of the Company's
Common Stock (on a fully-diluted basis), the Transferring Purchaser would
be entitled to sell 60 shares (30%/50% x 100 shares) and GTCR would be
entitled to sell 40 shares (20%/50% x 100 shares).
The Transferring Purchaser will use his best efforts to obtain the
agreement of the prospective transferee(s) to the participation of GTCR in
the contemplated transfer and will not transfer any Executive Stock to the
prospective transferee(s) if such transferee(s) refuses to allow the
participation of GTCR.
(ii) The purchase price to be paid by any transferee for shares of
Class B Common and Class A Common transferred in accordance with this
paragraph 6(d) shall be determined as follows: (i) the price per share to
be paid for Class B Common included in such Transfer shall be equal to the
amount per
- 9 -
<PAGE>
share of Class B Common which such transferee has agreed to pay to the
Transferring Purchaser and (ii) the price per share to be paid for Class A
Common included in such Transfer shall be the price per share described in
clause (i) plus the quotient (the "Per Share Preference") of (A) the sum of
the Unreturned Preferred Amount and the Unpaid Yield of the Class A Common
at such time divided by (B) the number of shares of Class A Common then
outstanding.
(e) Permitted Transfers. The restrictions contained in this paragraph 6
shall not apply with respect to any Transfer of Executive Stock pursuant to
applicable laws of descent and distribution or among such Purchaser and such
Purchaser's Family Members; provided that such restrictions will continue to be
applicable to the Executive Stock after any such transfer and the transferees of
such Executive Stock have agreed in writing to be bound by the provisions of
this Agreement.
(f) Pledges. Notwithstanding the provisions of this paragraph 6, any
Purchaser may pledge any shares of Executive Stock to the Company to secure
payment of the Executive Note.
7. Additional Restrictions on Transfer of Executive Stock.
(a) Legend. The certificates representing the Executive Stock will bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY
ISSUED AS OF JULY 26, 1995, HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN
REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN AN
EXECUTIVE STOCK AGREEMENT BETWEEN THE COMPANY, CERTAIN
PURCHASERS, AND A CERTAIN INVESTOR, DATED AS OF JULY 26, 1995. A
COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT
THE ISSUER'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) Opinion of Counsel. No holder of Executive Stock may sell, transfer or
dispose of any Executive Stock (except
- 10 -
<PAGE>
pursuant to an effective registration statement under the Securities Act)
without first delivering to the Company an opinion of counsel (reasonably
acceptable in form and substance to the Company) that (i) neither registration
nor qualification under the Securities Act and applicable state securities laws
is required in connection with such transfer or (ii) all such applicable
registration and qualification requirements have been satisfied.
8. Definitions.
"Affiliate" of any particular person or entity means any other person or
entity controlling, controlled by or under common control with such particular
person or entity.
"Cause" means, with respect to any Purchaser (i) a material breach of any
agreement with the Company, its Subsidiaries, its Affiliates or its stockholders
by such Purchaser (after notice and reasonable opportunity to cure), (ii) a
breach of such Purchaser's duty of loyalty to the Company or any of its
Subsidiaries or Affiliates or any act of dishonesty, gross negligence, willful
misconduct or fraud with respect to the Company or any of its Subsidiaries or
Affiliates or any of their stockholders, customers or suppliers, (iii) the
commission by such Purchaser of a felony, a crime involving moral turpitude or
other act or omission tending to cause harm to the standing and reputation of,
or otherwise bring public disgrace or disrepute to, the Company or any of its
Subsidiaries or Affiliates, (iv) such Purchaser's continued failure or refusal
to perform any material duty to the Company or any of its Subsidiaries or
Affiliates which is normally attached to his position (after notice and
reasonable opportunity to cure) or (v) such Purchaser's gross negligence or
willful misconduct in performing those duties which are normally attached to his
position (after notice and reasonable opportunity to cure). For purposes of this
Agreement, "a Purchaser's duty of loyalty to the Company or any of its
Subsidiaries or Affiliates" shall include such Purchaser's fiduciary obligation
to place the interests of the Company and its Subsidiaries or Affiliates ahead
of his personal interests and thereby not knowingly profit personally at the
expense of the Company or any of its Subsidiaries or Affiliates, and shall also
include specifically the affirmative obligation to disclose promptly to the
Board any known conflicts of interest such Purchaser may have with respect to
the Company and its Subsidiaries or Affiliates, and the negative obligations not
to usurp corporate opportunities of the Company, any of its Subsidiaries or any
of its Affiliates, not to engage in any "conflict-of-interest" transactions with
the Company, its Subsidiaries, or its Affiliates (without the approval of the
board directors), and not to compete directly with the Company or its
Subsidiaries or Affiliates (without the approval of the Board).
- 11 -
<PAGE>
"Event of Default" means Event of Default as defined in the Loan Agreement,
dated as of the date hereof, among SAS Acquisitions Inc. and Finova Capital
Corporation (the "Loan Agreement"), or any payment by Speed Queen Company
pursuant to its guaranty in connection with the Loan Agreement, and any similar
term or event in any replacement for, refinancing of, or modification or
amendment to, such agreements, or any similar term in any other loan or credit
facility entered into by the Company.
"Executive Call Stock" means, with respect to any Purchaser, at any time
(i) all equity securities of the Company then held by such Purchaser or a Family
Member, (ii) all equity securities of the Company which at any time have been
held by such Purchaser (whether or not then held by such Purchaser), and (iii)
all equity securities of the Company issued or issuable directly or indirectly
with respect to any equity securities described in clause (i) or (ii) above in
connection with a combination of shares, dividend, recapitalization, merger,,
consolidation, reorganization or otherwise; provided that any equity securities
which had been Executive Call Stock and which have been transferred in
accordance with the terms of this Agreement will not be Executive Call Stock at
any subsequent time unless held at the time of determination by such Purchaser
or a Family Member.
"Executive Stock" means the shares of the Company's Class B Common Stock
purchased hereunder.
"Family Members" means such Purchaser's spouse and/or lineal descendants, a
trust for the sole benefit of such Purchaser and/or such Purchaser's spouse or
lineal descendants or upon a Purchaser's death, such Purchaser's estate.
"Investor Purchase Agreement" means the Investor Purchase Agreement, dated
as of the date hereof, among the Company, GTCR and certain investors party
thereto.
"Management" means Stephen R. Kerrigan, Mitchell Blatt, Robert M. Doyle and
Michael Stanky.
"Manager" means an individual member of Management.
"Original Cost" of each share of Class B Common Stock purchased hereunder
will be equal to $15.4028 (as proportionately adjusted for all subsequent stock
splits, stock dividends and other recapitalizations).
"Public Offering" means the sale in an underwritten public offering
registered under the Securities Act (other than on
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<PAGE>
Form S-8 or a similar or successor form) of shares of the Company's Common Stock
approved by the Board.
"Public Sale" means any sale pursuant to a registered Public Offering under
the Securities Act or any sale to the public pursuant to Rule 144 promulgated
under the Securities Act effected through a broker, dealer or market maker.
"Registration Agreement" means the Registration Agreement, dated as of the
date hereof, among the Company and certain of the Company's stockholders.
"Restriction Lapse Date" means the earlier of (i) the fifth anniversary of
the date of this Agreement and (ii) the date of the closing of any Public
Offering.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"Stockholders Agreement" means the Stockholders Agreement, dated as of the
date hereof, among the Company and certain of the Company's stockholders.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, association or other business entity if
such Person or Persons shall be allocated a majority of partnership, association
or other business entity gains or losses or shall be or control the managing
director or general partner of such partnership, association or other business
entity.
"Transfer" means to sell, transfer, assign, pledge or otherwise dispose of
(whether with or without consideration and whether voluntarily or involuntarily
or by operation of law).
- 13 -
<PAGE>
"Unreturned Preferred Amount" means the "Unreturned Preferred Amount" as
defined in the Company's Certificate of Incorporation.
"Unpaid Yield" means the "Unpaid Yield" as defined in the Company's
Certificate of Incorporation.
9. Notices. Any notice provided for in this Agreement must be in writing
and must be either personally delivered, mailed by first class mail (postage
prepaid and return receipt requested) or sent by reputable overnight courier
service (charges prepaid) to the Purchasers as the addresses set forth on the
signature page hereto of such Purchaser and to the Company or GTCR as follows:
If to the Company:
SAS Acquisitions Inc.
c/o Coinmach Industries Co., L.P.
55 Lumber Road
Roslyn, NY 11576
Attention: President
With a copy (which will constitute notice to the Company) to:
Anderson Kill Olick & Oshinsky, P.C.
1251 Avenue of the Americas
New York, New York 10020
Attention: Ronald S. Brody, Esq.
If to GTCR:
Golder, Thoma, Cressey, Rauner Fund IV, L.P.
6100 Sears Tower
Chicago, Illinois 60606
Attention: Bruce V. Rauner
David A. Donnini
with a copy (which will not constitute notice to GTCR) to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Kevin R. Evanich, Esq.
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed
- 14 -
<PAGE>
to have been given when so delivered or sent or, if mailed, five days after
deposit in the U.S. mail.
10. General Provisions.
(a) Transfers in Violation of Agreement. Any Transfer or attempted Transfer
of any Executive Stock in violation of any provision of this Agreement shall be
void, and the Company shall not record such Transfer on its books or treat any
purported transferee of such Executive Stock as the owner of such stock for any
purpose.
(b) Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(c) Complete Agreement. This Agreement, those documents expressly referred
to herein and other documents of even date herewith (i) embody the complete
agreement and understanding among the parties and (ii) supersede and preempt any
prior summaries of terms and conditions, understandings, agreements or
representations by or among the parties, written or oral, which may have related
to the subject matter hereof in any way.
(d) Counterparts. This Agreement may be executed in separate counterparts,
each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.
(e) Successors and Assigns. Except as otherwise provided herein, this
Agreement shall bind each Purchaser and the Company and their respective
successors and permitted assigns and inure to the benefit of and be enforceable
by each Purchaser, the Company, GTCR and their respective successors and
permitted assigns (including in each case subsequent holders of Executive
Stock); provided that no Purchaser may assign any of his rights under any other
provision of Part I of this Agreement except as part of a Transfer of Executive
Stock in accordance with paragraphs 5 or 6.
(f) Choice of Law. The corporate law of the State of Delaware will govern
all questions concerning the relative rights of the Company and its
stockholders. All other questions con-
- 15 -
<PAGE>
cerning the construction, validity and interpretation of this Agreement and the
exhibits hereto will be governed by and construed in accordance with the
internal laws of the State of Illinois, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of Illinois or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Illinois.
(g) Remedies. Each of the parties to this Agreement will be entitled to
enforce its rights under this Agreement specifically, to recover damages and
costs (including attorney's fees) caused by any breach of any provision of this
Agreement and to exercise all other rights existing in its favor. The parties
hereto agree and acknowledge that money damages may not be an adequate remedy
for any breach of the provisions of this Agreement and, except as otherwise
provided in paragraph 10(d), that any party may in its sole discretion apply
to any court of law or equity of competent jurisdiction (without posting any
bond or deposit) for specific performance and/or other injunctive relief in
order to enforce or prevent any violations of the provisions of this Agreement.
(h) Amendment and Waiver. Except as otherwise expressly provided herein,
the provisions of this Agreement may be amended or modified only by written
agreement of the Company, each Purchaser and GTCR. No other course of dealing
between the parties or third-party beneficiaries hereof or any delay in
exercising any rights hereunder shall operate as a waiver of any rights of any
such persons.
(i) Survival of Representations and Warranties. All representations and
warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by any Purchaser or on his behalf or by the Company or on its
behalf.
(j) Business Days. If any time period for giving notice or taking action
hereunder expires on a day which is a Saturday, Sunday or holiday in the state
in which the Company's chief executive office is located, the time period shall
be automatically extended to the business day immediately following such
Saturday, Sunday or holiday.
(k) Descriptive Headings; Interpretation. The descriptive headings of this
Agreement are inserted for convenience only
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<PAGE>
and do not constitute a part of this Agreement. The use of the word "including"
in this Agreement shall be by way of example rather than by limitation.
* * * * *
- 17 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
SAS ACQUISITIONS INC.
By
-----------------------------
Its
-----------------------------
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV, L.P.
By: GTCR IV, L.P.
Its: General Partner
By: Golder, Thoma, Cressey,
Rauner, Inc.
Its: General Partner
By:
-----------------------------
Its: Principal
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
-----------------------------
Mitchell Blatt
Number of Shares of Class
B Common: 4,000
Aggregate Purchase
Price: $61,611.20
Amount of cash or
check: $9,241.68
Amount of Note: $52,369.52
Address:
Mitchell Blatt
31 Wilmington Drive
Dix Hills, NY 11747
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
-----------------------------
Robert M. Doyle
Number of Shares of Class
B Common: 2,000
Aggregate Purchase
Price: $30,805.60
Amount of cash or
check: $4,620.80
Amount of Note: $26,184.80
Address:
Robert M. Doyle
53 Sheryl Crescent
Smithtown, NY 11787
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
-----------------------------
Michael Stanky
Number of Shares of Class
B Common: 1,500
Aggregate Purchase
Price: $23,104.20
Amount of cash or
check: $3,465.64
Amount of Note: $19,638.56
Address:
Michael Stanky
1125 Ashington Place
Desoto, TX 75115
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
MCS CAPITAL, INC.
By
-----------------------------
Its
-----------------------------
Number of Shares of Class
B Common: 4,000
Aggregate Purchase
Price: $61,611.20
Amount of cash or
check: $9,241.68
Amount of Note: $52,369.52
Address:
MCS Capital,. Inc.
c/o Coinmach Industries Co.,
L.P.
55 Lumber Road
Roslyn, NY 11576
<PAGE>
CONSENT
The undersigned spouse of Purchaser hereby acknowledges that I have
read the foregoing Executive Stock Purchase and that I understand its contents.
I am aware that the Agreement provides for the repurchase of my spouse's shares
of Common Stock under certain circumstances and imposes other restrictions on
the transfer of such Common Stock. I agree that my spouse's interest in the
Common Stock is subject to this Agreement and any interest I may have in such
Common Stock shall be irrevocably bound by this Agreement and further that my
community or marital property interest, if any, shall be similarly bound by this
Agreement.
- -----------------------
Spouse's Name:
- -----------------------
Witness
<PAGE>
EXHIBIT A
Certificate of incorporation
<PAGE>
Exhibit 2N
----------
INVESTOR PURCHASE AGREEMENT
THIS AGREEMENT is made as of July 26, 1995, between SAS Acquisitions Inc.,
a Delaware corporation (the "Company"), Golder, Thoma, Cressey, Rauner Fund IV,
L.P. ("GTCR"), and the purchasers listed on the signature pages hereto (each a
"Purchaser" and collectively the "Purchasers"). Except as otherwise indicated
herein, capitalized terms used herein are defined in Section 5 hereof.
The parties hereto agree as follows:
Section 1. Authorization and Closing
1A. Authorization of the Class A Common. The Company shall authorize the
issuance of 85,000 shares of its Class A Common Stock, par value $.Ol per share
(the "Class A Common") having the rights set forth in Exhibit A attached hereto.
1B. Purchase and Sale of Class A Common. At the Closing (as defined in
Section 1C below), the Company shall sell to each Purchaser and, subject to the
terms and conditions set forth herein, each Purchaser shall purchase from the
Company the number of shares of Class A Common indicated on the signature page
hereto of such Purchaser at a purchase price of $76.4605882 per share. The sale
to and purchase by each Purchaser of Class A Common will constitute a separate
sale and purchase.
1C. The Closing. The closing of the purchase and sale of the Class A Common
(the "Closing") shall take place at the offices of Kirkland & Ellis, 200 East
Randolph Drive, Chicago, Illinois 60601 at 10:00 a.m. on the date hereof or at
such other place or on such other date as may be mutually agreeable to the
Company and the Purchasers. At the Closing, the Company shall deliver to each
Purchaser a stock certificate or certificates evidencing the Class A Common to
be purchased by such Purchaser, registered in such Purchaser's name, upon
payment of the purchase price thereof by a cashier's or certified check, or by
wire transfer of immediately available funds to such account as designated by
the Company.
1D. Conditions of the Purchasers' Obligations at the Closing. The
obligation of each Purchaser to purchase and pay for the Class A Common to be
purchased by such Purchaser hereunder at the Closing is subject to the purchase
by Golder, Thoma, Cressey, Rauner Fund IV, L.P. ("GTCR") of 72,153 shares of
Class A Common pursuant to that certain Equity Purchase Agreement, dated as of
the date hereof, between the Company and GTCR.
<PAGE>
Section 2. Representations, Warranties and Covenants.
2A. Representations and Warranties of Purchaser. In connection with the
issuance of the Class A Common hereunder, each Purchaser represents and warrants
to the Company that, in each case, as of the Closing:
(i) The Investor Stock to be acquired by such Purchaser pursuant to
this Agreement will be acquired for such Purchaser's own account and not
with a view to, or intention of, distribution thereof in violation of the
Securities Act, or any applicable state securities laws, and such Investor
Stock will not be disposed of in contravention of the Securities Act or any
applicable state securities laws.
(ii) Such Purchaser is able to bear the economic risk of its
investment in such Investor Stock for an indefinite period of time, and
such Purchaser acknowledges that such Investor Stock has not been
registered under the Securities Act and, therefore, cannot be sold unless
subsequently registered under the Securities Act or an exemption from such
registration is available.
(iii) Such Purchaser has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of such
Investor Stock and has had full access to such other information concerning
the Company as it has requested.
(iv) This Agreement, the Stockholders Agreement and the Registration
Agreement (collectively, the "Investment Agreements") constitute legal,
valid and binding obligations of such Purchaser, enforceable in accordance
with their terms, and the execution, delivery and performance of the
Investment Agreements by such Purchaser do not and will not conflict with,
violate or cause a breach of any agreement, contract or instrument to which
such Purchaser is a party or any law, rule, regulation, judgment, order or
decree to which such Purchaser is subject.
2B. Representations and Warranties of the Company. In connection with the
issuance of the Class A Common hereunder, the Company represents to each
Purchaser that, in each case, as of the Closing:
(i) Organization and Corporate Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware and is qualified to do business in every jurisdiction in which the
failure to so
- 2 -
<PAGE>
qualify might reasonably be expected to have a material adverse effect on
the financial condition, operating results, assets, operations or business
prospects of the Company and its Subsidiaries taken as a whole. The Company
has all requisite corporate power and authority and all material licenses,
permits and authorizations necessary to own and operate its properties, to
carry on its businesses as now conducted and presently proposed to be
conducted and to carry out the transactions contemplated by this Agreement.
The copies of the Company's Certificate of Incorporation and bylaws which
have been furnished to each Purchaser reflect all amendments made thereto
at any time prior to the date of this Agreement and are correct and
complete.
(ii) Capital Stock and Related Matters.
(a) As of the Closing and immediately thereafter, the authorized
capital stock of the Company shall consist of 100,000 shares of Common
Stock (the "Common Stock") (divided into 85,000 shares of Class A
Common, (all of which will be issued and outstanding), and 15,000
shares of Class B Common Stock (of which ll,500 shares will be issued
and outstanding), and 10,000 shares of Preferred Stock (none of which
will be issued and outstanding). As of the Closing, neither the
Company nor any Subsidiary shall have outstanding any stock or
securities convertible or exchangeable for any shares of its Common
Stock or containing any profit participation features, nor shall it
have outstanding any rights or options to subscribe for or to purchase
its Common Stock or any stock appreciation rights or phantom stock
plans other than pursuant to and as contemplated by this Agreement and
the Other Equity Agreements. As of the Closing, neither the Company
nor any Subsidiary shall be subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of
its Common Stock or any warrants, options or other rights to acquire
its Common Stock, except pursuant to this Agreement and the Other
Equity Agreements. As of the Closing, all of the outstanding shares of
the Company's Common Stock shall be validly issued, fully paid and
nonassessable.
(b) There are no statutory or contractual stockholders preemptive
rights or rights of refusal with respect to the issuance of the Class
A Common hereunder, except as expressly provided herein. Based in part
on the investment representations of the Purchasers in Section 2A,
the Company has not violated any applicable federal or state
securities laws in connection with the
- 3 -
<PAGE>
offer, sale or issuance of any of its Common Stock, and the offer,
sale and issuance of the Class A Common hereunder and pursuant to
Section 1B hereof do not and will not require registration under the
Securities Act or any applicable state securities laws. There are no
agreements among the Company's stockholders with respect to the voting
or transfer of the Company's Common Stock or with respect to any other
aspect of the Company's affairs, except for this Agreement and the
Other Equity Agreements.
(iii) Subsidiaries; Investments. Other than 1,000 shares of Class A
Common Stock, par value $.O1 per share, of Ford, the Option Shares (as
defined in the letter agreement, dated as of April 4, 1995, among the
Company and each of the Ford Holders (as defined therein)), the capital
stock of Solon purchased pursuant to the Solon Purchase Agreement and the
capital stock of the Subsidiaries as set forth in Section 4.3 of the Solon
Purchase Agreement, the Company does not own or hold any shares of stock or
any other security or interest in any other Person or any rights to acquire
any such security or interest, and the Company has never had any
Subsidiary.
(iv) Authorization; No Breach. The execution, delivery and performance
by the Company of the Transaction Documents (as defined in the Equity
Purchase Agreement) and the filing of the amendment of the Certificate of
Incorporation each has been duly authorized by the Company and each
constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms. The execution and delivery by the Company of the
Transaction Documents, the offering, sale and issuance of the Class A
Common hereunder and pursuant to Section 1B, the amendment of the
Certificate of Incorporation and the fulfillment of and compliance with the
respective terms hereof and thereof by the Company, do not and shall not
(a) conflict with or result in a breach of the terms, conditions or
provisions of, (b) constitute a default under, (c) result in the creation
of any lien, security interest, charge or encumbrance upon the Company's
Common Stock or assets pursuant to, (d) give any third party the right to
modify, terminate or accelerate any obligation under, (e) result in a
violation of, or (f) require any authorization, consent, approval,
exemption or other action by or notice to any court or administrative or
governmental body pursuant to, the Certificate of Incorporation or bylaws
of the Company, or any law, statute, rule or regulation to which the
Company is subject, or any agreement, instrument, order, judgment or decree
to which the Company is a party or by which it is bound.
- 4 -
<PAGE>
(v) Purchase Agreement Representations. Except as set forth on
"Schedule 2A(v) - Representations and Warranties" attached hereto, the
representations and warranties made by Solon Automated Services, Inc.
("Solon") in Article IV of the Stock Purchase Agreement (the "Solon
Purchase Agreement"), dated as of March 17, 1995, among Ford Coin
Laundries, Inc. ("Ford"), Solon and the Sellers (as defined therein), and
by the Sellers in Article V of the Solon Purchase Agreement are, to the
best of the Company's knowledge, true and correct in all material respects
on the date of the Closing as though then made, except for any change that
results from events occurring after the Closing Date (as defined therein)
and prior to the Closing in the ordinary course of business of Solon, and
the representations and warranties of Ford in Section 2 of the Stock
Purchase Agreement, dated as of April 4, 1995, between the Company and
Ford, are, to the best of the Company's knowledge, true and correct in all
material respects on the date of the Closing as though then made, except
for any change that results from events occurring after the Closing Date
(as defined therein) and prior to the Closing in the ordinary course of
business of Ford.
(vi) Disclosure. Neither this Agreement nor any of the schedules,
attachments, written statements, documents, certificates or other items
prepared or supplied to the Purchaser by or on behalf of the Company with
respect to the transactions contemplated hereby contain any untrue
statement of a material fact or omit a material fact necessary to make each
statement contained herein or therein not misleading. There is no fact
which the Company has not disclosed to each Purchaser in writing and of
which any of its officers, directors or executive employees is aware and
which has had or might reasonably be anticipated to have a material adverse
effect upon the existing or expected financial condition, operating
results, assets, customer or supplier relations, employee relations or
business prospects of the Company and its Subsidiaries taken as a whole.
(vii) Closing Date. The representations and warranties of the Company
contained in this Section 2B and elsewhere in this Agreement and all
information contained in any exhibit, schedule or attachment hereto or in
any writing delivered by, or on behalf of, the Company to any Purchaser
shall be true and correct in all material respects on the date of the
Closing as though then made, except as affected by the transactions
expressly contemplated by this Agreement.
2C. Current Public Information. At all times after the Company has filed a
registration statement with the Securities and
- 5 -
<PAGE>
Exchange Commission pursuant to the requirements of either the Securities Act or
the Securities Exchange Act, the Company shall file all reports required to be
filed by it under the Securities Act and the Securities Exchange Act and the
rules and regulations adopted by the Securities and Exchange Commission
thereunder and shall take such further action as any Purchaser holding Class A
Common purchased hereunder may reasonably request, all to the extent required to
enable such holders to sell Class A Common pursuant to (i) Rule 144 adopted by
the Securities and Exchange Commission under the Securities Act (as such rule
may be amended from time to time) or any similar rule or regulation hereafter
adopted by the Securities and Exchange Commission or (ii) a registration
statement on Form S-2 or S-3 or any similar registration form hereafter adopted
by the Securities and Exchange Commission. Upon request, the Company shall
deliver to any Purchaser holding Class A Common purchased hereunder a written
statement as to whether it has complied with such requirements.
Section 3. Restrictions on Transfer.
3A. Transfer of Investor Stock.
(i) Subject to the restrictions set forth in the remainder of this
Section 3, Investor Stock is transferable only pursuant to (a) a Public
Offering registered under the Securities Act, (b) Rule 144 or Rule 144A of
the Securities and Exchange Commission (or any similar rule or rules then
in force) if such rule or rules are available or (c) subject to the
conditions specified in Section 3A(ii) below, any other legally available
means of transfer.
(ii) In connection with the transfer of any Investor Stock (other than
a transfer described in Section 3A(i)(a) or (b) above), the holder thereof
shall deliver written notice to the Company describing in reasonable detail
the transfer or proposed transfer, together with an opinion of counsel
which (to the Company's reasonable satisfaction) is knowledgeable in
securities law matters to the effect that such transfer of Investor Stock
may be effected without registration of such Investor Stock under the
Securities Act. In addition, if the holder of the Investor Stock delivers
to the Company an opinion of counsel that no subsequent transfer of such
Investor Stock shall require registration under the Securities Act, the
Company shall promptly upon such contemplated transfer deliver new
certificates for such Investor Stock which do not bear the Securities Act
legend set forth in Section 4A hereof. If the Company is not required to
deliver new certificates for such Investor Stock not bearing such legend,
the holder thereof shall not transfer the same until
- 6 -
<PAGE>
the prospective transferee has confirmed to the Company in writing its
agreement to be bound by the conditions contained in this Section and
Section 4A hereof.
(iii) Upon the request of any Purchaser, the Company shall promptly
supply to such Purchaser or its prospective transferees all information
regarding the Company required to be delivered in connection with a
transfer pursuant to Rule 144A of the Securities and Exchange Commission.
(iv) Any transfer or attempted transfer of any Investor Stock in
violation of any provision of this Agreement shall be void, and the Company
shall not record such transfer on its books or treat any purported
transferee of such Investor Stock as the owner of such Investor Stock for
any purpose.
3B. Sale Notice. Prior to making any Transfer of Investor Stock, the
Purchaser intending to make such Transfer (the "Transferring Purchaser") will
give written notice (the "Sale Notice") to the Company and GTCR. The Sale Notice
will disclose in reasonable detail the number of shares to be transferred and
the terms and conditions of the proposed Transfer and, if known, the identity of
the prospective transferee(s). The Transferring Purchaser will not consummate
any such Transfer until 60 days after the Sale Notice has been given to the
Company and to GTCR, unless the parties to the Transfer have been fully
determined pursuant to this Section 3B and Section 3C prior to the expiration of
such 60-day period. (The date of the first to occur of such events is referred
to herein as the "Authorization Date.")
3C. First Refusal Rights. The Company may elect to purchase all (but not
less than all) of the shares of Investor Stock to be transferred upon the same
terms and conditions as those set forth in the Sale Notice by delivering a
written notice of such election to the Transferring Purchaser and GTCR within 30
days after the Sale Notice has been given to the Company. If the Company has not
elected to purchase all of the Investor Stock to be transferred, GTCR may elect
to purchase all (but not less than all) of the Investor Stock to be transferred
upon the same terms and conditions as those set forth in the Sale Notice by
giving written notice of such election to the Transferring Purchaser within 60
days after the Sale Notice has been given to GTCR. If neither the Company nor
GTCR elect to purchase all of the shares of Investor Stock specified in the
Sale Notice, the Transferring Purchaser may transfer the shares of Investor
Stock specified in the Sale Notice at a price and on terms no more favorable to
the transferee(s) thereof than specified in the Sale Notice during the 30-day
period immediately following the Authorization Date. Any shares of Investor
Stock not transferred within such 30-day period will be
- 7 -
<PAGE>
subject to the provisions of this Section 3C upon subsequent transfer.
3D. Co-Sale Rights.
(i) GTCR may elect to participate in the contemplated Transfer by
delivering written notice to the Transferring Purchaser within 90 days
after delivery of the Sale Notice to GTCR. If GTCR has elected to
participate in such Transfer, the Transferring Purchaser and GTCR shall be
entitled to sell in the contemplated Transfer, on the same terms and at the
price calculated pursuant to subparagraph 3D(ii) below, a number of shares
equal to the product of (x) the quotient determined by dividing the number
of shares of Common Stock owned by such person by the aggregate number of
shares of Common Stock owned by the Transferring Purchaser and GTCR and (y)
the number of shares to be sold in the contemplated Transfer.
For example, if the Sale Notice contemplated a sale of 100 shares by the
Transferring Purchaser, and if the Transferring Purchaser was at such time
the owner of 30% of the Company's Common Stock (on a fully-diluted basis)
and if GTCR elected to participate and GTCR owned 20% of the Company's
Common Stock (on a fully-diluted basis), the Transferring Purchaser would
be entitled to sell 60 shares (30%/50% x 100 shares) and GTCR would be
entitled to sell 40 shares (20%/50% x 100 shares).
The Transferring Purchaser will use its best efforts to obtain the
agreement of the prospective transferee(s) to the participation of GTCR in
the contemplated transfer and will not transfer any Investor Stock to the
prospective transferee(s) if such transferee(s) refuses to allow the
participation of GTCR.
(ii) The purchase price to be paid by any transferee for shares of
Class A Common transferred in accordance with this paragraph 3D shall be
equal to the amount per share of Class A Common which such transferee has
agreed to pay to such Purchaser.
Section 4. Additional Restrictions on Transfer of Investor Stock.
4A. Legend. Each Purchaser hereby represents that it is acquiring the
Investor Stock purchased hereunder or acquired pursuant hereto for its own
account with the present intention of holding such securities for purposes of
investment, and that it has
- 8 -
<PAGE>
no intention of selling such securities in a public distribution in violation of
the federal securities laws or any applicable state securities laws; provided
that nothing contained herein shall prevent any Purchaser and subsequent holders
of Investor Stock from transferring such securities in compliance with the
provisions of Section 4 hereof. Each certificate for Investor Stock shall be
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY
ISSUED AS OF JULY 26, 1995, HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AND CERTAIN
OTHER AGREEMENTS SET FORTH IN AN INVESTOR PURCHASE AGREEMENT
BETWEEN THE COMPANY AND CERTAIN INVESTORS, DATED AS OF JULY 26,
1995. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER
HEREOF AT THE ISSUER'S PRINCIPAL PLACE OF BUSINESS WITHOUT
CHARGE."
4B. Opinion of Counsel. No holder of Investor Stock may sell, transfer or
dispose of any Investor Stock (except pursuant to an effective registration
statement under the Securities Act) without first delivering to the Company an
opinion of counsel (reasonably acceptable in form and substance to the Company)
that (i) neither registration nor qualification under the Securities Act and
applicable state securities laws is required in connection with such transfer or
(ii) all such applicable registration and qualification requirements have been
satisfied.
Section 5. Definitions.
"Equity Agreements" means the Equity Purchase Agreement, the Executive
Stock Agreement, the Stockholders Agreement, the Registration Agreement and the
Services Agreement.
"Equity Purchase Agreement" means the Equity Purchase Agreement dated as of
the date hereof between the Company and GTCR.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar federal law then in force.
- 9 -
<PAGE>
"Executive Stock Agreement" means the Executive Stock Agreement dated as of
the date hereof between the Company and the other parties thereto.
"Investor Stock" means (i) the Class A Common issued hereunder and (ii) any
common stock issued or issuable with respect to the Class A Common referred to
in clause (i) above by way of stock dividends or stock splits or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular shares of Investor Stock, such shares shall
cease to be Investor Stock when they have been (a) effectively registered under
the Securities Act and disposed of in accordance with the registration statement
covering them or (b) distributed to the public through a broker, dealer or
market maker pursuant to Rule 144 under the Securities Act (or any similar rule
then in force). Whenever any particular securities cease to be Investor Stock,
the holder thereof shall be entitled to receive from the Company, without
expense, new securities of like tenor not bearing a Securities Act legend of the
character set forth in Section 4A.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization
and a governmental entity or any department, agency or political subdivision
thereof.
"Public Offering" means the sale in an underwritten public offering
registered under the Securities Act (other than on Form S-8 or a similar or
successor form) of shares of the Company's Common Stock approved by the Board.
"Public Sale" means any sale pursuant to a registered Public Offering under
the Securities Act or any sale to the public pursuant to Rule 144 promulgated
under the Securities Act effected through a broker, dealer or market maker.
"Registration Agreement" means the Registration Agreement dated as of the
date hereof among the Company and certain of the Company's stockholders.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"Securities and Exchange Commission" includes any governmental body or
agency succeeding to the functions thereof.
"Services Agreement" means the Management and Consulting Services Agreement
dated as of the date hereof between the Company and GTCR IV, L.P.
- 10 -
<PAGE>
"Stockholders Agreement" means the Stockholders Agreement dated as of the
date hereof among the Company and certain of the Company's stockholders.
"Subsidiary" means, with respect to any Person, any corporation,
partnership association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, association or other business entity if
such Person or Persons shall be allocated a majority of partnership, association
or other business entity gains or losses or shall be or control the managing
director or general partner of such partnership, association or other business
entity.
"Transfer" means to sell, transfer, assign, pledge or otherwise dispose of
(whether with or without consideration and whether voluntarily or involuntarily
or by operation of law) other than pursuant to a Public Sale or Sale of the
Company.
Section 6. Miscellaneous
6A. Notices. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested) or sent by reputable overnight
courier service (charges prepaid) to the Purchasers at the addresses set forth
on the signature page hereto of such Purchaser and to the Company or GTCR as
follows:
If to the Company:
SAS Acquisitions Inc.
c/o Coinmach Industries Co., L.P.
55 Lumber Road
Roslyn, NY 11576
Attention: President
- 11 -
<PAGE>
With a copy (which will not constitute notice to the Company) to:
Anderson Kill Olick & Oshinsky, P.C.
1251 Avenue of the Americas
New York, New York 10020
Attention: Ronald S. Brody, Esq.
If to GTCR:
Golder, Thoma, Cressey, Rauner Fund IV, L.P.
6100 Sears Tower
Chicago, Illinois 60606
Attention: Bruce V. Rauner
David A. Donnini
with a copy (which will not constitute notice to GTCR) to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Kevin R. Evanich, Esq.
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or sent or, if mailed, five days after deposit in the U.S. mail.
6B. Transfers in Violation of Agreement. Any Transfer or attempted Transfer
of any Investor Stock in violation of any provision of this Agreement shall be
void, and the Company shall not record such Transfer on its books or treat any
purported transferee of such Investor Stock as the owner of such stock for any
purpose.
6C. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
- 12 -
<PAGE>
6D. Complete Agreement. This Agreement, those documents expressly referred
to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior summaries of terms and conditions, understandings, agreements or
representations by or among the parties, written or oral, which may have related
to the subject matter hereof in any way.
6E. Counterparts. This Agreement may be executed in separate counterparts,
each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.
6F. Successors and Assigns. Except as otherwise provided herein, this
Agreement shall bind each Purchaser and the Company and their respective
successors and permitted assigns and inure to the benefit of and be enforceable
by each Purchaser, the Company, GTCR and their respective successors and
permitted assigns (including in each case subsequent holders of each Purchaser's
Stock); provided that no Purchaser may assign any of its or his rights under any
provision of this Agreement except as part of a Transfer of Investor Stock in
accordance with Section 3.
6G. Choice of Law. The corporate law of the State of Delaware will govern
all questions concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement and the exhibits hereto will be governed by and
construed in accordance with the internal laws of the State of Illinois, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Illinois or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Illinois.
6H. Remedies. Each holder of Investor Stock shall have all rights and
remedies set forth in this Agreement and the Company's Certificate of
Incorporation and all rights and remedies which such holders have been granted
at any time under any other agreement or contract and all of the rights which
such holders have under any law. Any Person having any rights under any
provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
6I. Amendment and Waiver. Except as otherwise expressly provided herein,
the provisions of this Agreement may be amended or modified only by written
agreement of the Company, each Purchaser and GTCR. No other course of dealing
between the parties or third-
- 13 -
<PAGE>
party beneficiaries hereof or any delay in exercising any rights hereunder shall
operate as a waiver of any rights of any such Person.
6J. Survival of Representations and Warranties. All representations and
warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by any Purchaser or on its behalf or by the Company or on its
behalf.
6K. Business Days. If any time period for giving notice or taking action
hereunder expires on a day which is a Saturday, Sunday or holiday in the state
in which the Company's chief executive office is located, the time period shall
be automatically extended to the business day immediately following such
Saturday, Sunday or holiday.
6L. Descriptive Headings; Interpretation. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement. The use of the word "including" in this Agreement shall be by way of
example rather than by limitation.
6M. Expenses. The Company agrees to pay the reasonable fees and expenses of
each Purchasers' outside counsel arising in connection with the negotiation and
execution of this Agreement and the consummation of the transactions
contemplated hereby.
* * * * *
- 14 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
SAS ACQUISITIONS INC.
By
-----------------------
Its
-----------------------
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV, L.P.
By: GTCR IV, L.P.
Its: General Partner
By: Golder, Thoma, Cressey,
Rauner, Inc.
Its: General Partner
By:
-----------------------
Its: Principal
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
-----------------------
James N. Chapman
Number of Shares of Class A
Common: 300
Aggregate Purchase
Price: $22,941.18
Address:
James N. Chapman
14 Alpine Road
Greenwich, CT 06830
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
-----------------------
Michael E. Marrus
Number of Shares of Class A
Common: 228
Aggregate Purchase
Price: $17,435.30
Address:
Michael E. Marrus
755 Park Avenue
New York, NY 10021
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
-----------------------
Mitchell Blatt
Number of Shares of Class A
Common: 398
Aggregate Purchase
Price: $30,435.29
Address:
Mitchell Blatt
31 Wilmington Drive
Dix Hills, NY 11747
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first written above.
HELLER FINANCIAL, INC.
By
-----------------------
Its
-----------------------
Number of Shares of Class A
Common: 3,806
Aggregate Purchase
Price: $291,047.06
Address:
Heller Financial, Inc.
500 West Monroe Street
Chicago, IL 60661
Attn: Portfolio Manager
Portfolio Organization
Corporate Finance Group
A copy of all correspondence,
which shall not constitute
notice, should be sent to:
Heller Financial, Inc.
500 West Monroe Street
Chicago, IL 60661
Attn: Legal Department
Portfolio Organization
Corporate Finance Group
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
JACKSON NATIONAL LIFE
INSURANCE COMPANY
By:
-----------------------
Its:
-----------------------
Number of Shares of Class A
Common: 3,425
Aggregate Purchase
Price: $261,911.77
Address:
Jackson National Life Insurance
Company
c/o PPM America, Inc.
225 West Wacker Drive
Suite 1200
Chicago, IL 60606
Attn: Private Placements
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
JACKSON NATIONAL
LIFE INSURANCE COMPANY
OF MICHIGAN
By
-----------------------
Its
-----------------------
Number of Shares of Class A
Common: 381
Aggregate Purchase
Price: $29,135.29
Address:
Jackson National Life Insurance
Company of Michigan
c/o PPM America, Inc.
225 West Wacker Drive
Suite 1200
Chicago, IL 60606
Attn: Private Placements
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
PRESIDENT AND FELLOWS OF
HARVARD COLLEGE
By Harvard Management
Company, Inc.
By
-----------------------
Its
-----------------------
By
-----------------------
Its
-----------------------
Number of Shares of Class A
Common: 2,405
Aggregate Purchase
Price: $183,1911.76
Address:
President and Fellows of
Harvard College
c/o Harvard Management Company,
Inc.
c/o Timothy Peterson
600 Atlantic Avenue
Boston, MA 02210
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first written above.
MCS CAPITAL, INC.
By
-----------------------
Its
-----------------------
Number of Shares of Class A
Common: 1,479
Aggregate Purchase
Price: $113,100.00
Address:
MCS Capital, Inc.
c/o Coinmach Industries Co.,
L.P.
55 Lumber Road
Roslyn, NY 11576
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
-----------------------
Michael Stanky
Number of Shares of Class A
Common: 425
Aggregate Purchase
Price: $32,500.00
Address:
Michael Stanky
1125 Ashington Place
Desoto, TX 75115
<PAGE>
Schedule 2M-Executives
----------------------
Mitchell Blatt
Robert M. Doyle
Michael Stanky
MCS Capital, Inc.
<PAGE>
Schedule 2N-Investors
---------------------
Mitchell Blatt
Michael Stanky
James N. Chapman
Michael E. Marrus
Heller Financial, Inc.
Jackson National Life Insurance Company
Jackson National Life Insurance Company of Michigan
President and Fellows of Harvard College
MCS Capital, Inc.
<PAGE>
Schedule 5E-Representations and Warranties
------------------------------------------
None
<PAGE>
Exhibit 10.22
INVESTOR PURCHASE AGREEMENT
THIS AGREEMENT is made as of July 26, 1995, between SAS Acquisitions Inc.,
a Delaware corporation (the "Company"), Golder, Thoma, Cressey, Rauner Fund IV,
L.P. ("GTCR"), and the purchasers listed on the signature pages hereto (each a
"Purchaser" and collectively the "Purchasers") . Except as otherwise indicated
herein, capitalized terms used herein are defined in Section 5 hereof.
The parties hereto agree as follows:
Section 1. Authorization and Closing
1A. Authorization of the Class A Common. The Company shall authorize the
issuance of 85,000 shares of its Class A Common Stock, par value $.O1 per share
(the "Class A Common") having the rights set forth in Exhibit A attached hereto.
1B. Purchase and Sale of Class A Common. At the Closing (as defined in
Section 1C below), the Company shall sell to each Purchaser and, subject to the
terms and conditions set forth herein, each Purchaser shall purchase from the
Company the number of shares of Class A Common indicated on the signature page
hereto of such Purchaser at a purchase price of $76.4605882 per share. The sale
to and purchase by each Purchaser of Class A Common will constitute a separate
sale and purchase.
1C. The Closing. The closing of the purchase and sale of the Class A
Common (the "Closing") shall take place at the offices of Kirkland & Ellis, 200
East Randolph Drive, Chicago, Illinois 60601 at 10:00 a.m. on the date hereof or
at such other place or on such other date as may be mutually agreeable to the
Company and the Purchasers. At the Closing, the Company shall deliver to each
Purchaser a stock certificate or certificates evidencing the Class A Common to
be purchased by such Purchaser, registered in such Purchaser's name, upon
payment of the purchase price thereof by a cashier's or certified check, or by
wire transfer of immediately available funds to such account as designated by
the Company.
1D. Conditions of the Purchasers' Obligations at the Closing. The
obligation of each Purchaser to purchase and pay for the Class A Common to be
purchased by such Purchaser hereunder at the Closing is subject to the purchase
by Golder, Thoma, Cressey, Rauner Fund IV, L.P. ("GTCR") of 72,153 shares of
Class A Common pursuant to that certain Equity Purchase Agreement, dated as of
the date hereof, between the Company and GTCR.
<PAGE>
Section 2. Representations, Warranties and Covenants.
2A. Representations and Warranties of Purchaser. In connection with the
issuance of the Class A Common hereunder, each Purchaser represents and warrants
to the Company that, in each case, as of the Closing:
(i) The Investor Stock to be acquired by such Purchaser. pursuant to
this Agreement will be acquired for such Purchaser's own account and not
with a view to, or intention of, distribution thereof in violation of the
Securities Act, or any applicable state securities laws, and such Investor
Stock will not be disposed of in contravention of the Securities Act or any
applicable state securities laws.
(ii) Such Purchaser is able to bear the economic risk of its
investment in such Investor Stock for an indefinite period of time, and
such Purchaser acknowledges that such Investor Stock has not been
registered under the Securities Act and, therefore, cannot be sold unless
subsequently registered under the Securities Act or an exemption from such
registration is available.
(iii) Such Purchaser has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of such
Investor Stock and has had full access to such other information concerning
the Company as it has requested.
(iv) This Agreement, the Stockholders Agreement and the Registration
Agreement (collectively, the "Investment Agreements") constitute legal,
valid and binding obligations of such Purchaser, enforceable in accordance
with their terms, and the execution, delivery and performance of the
Investment Agreements by such Purchaser do not and will not conflict with,
violate or cause a breach of any agreement, contract or instrument to which
such Purchaser is a party or any law, rule, regulation, judgment, order or
decree to which such Purchaser is subject.
2B. Representations and Warranties of the Company. In connection with the
issuance of the Class A Common hereunder, the Company represents to each
Purchaser that, in each case, as of the Closing:
(i) Organization and Corporate Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware and is qualified to do business in every jurisdiction in which the
failure to so
- 2 -
<PAGE>
qualify might reasonably be expected to have a material adverse effect on
the financial condition, operating results, assets, operations or business
prospects of the Company and its Subsidiaries taken as a whole. The Company
has all requisite corporate power and authority and all material licenses,
permits and authorizations necessary to own and operate its properties, to
carry on its businesses as now conducted and presently proposed to be
conducted and to carry out the transactions contemplated by this Agreement.
The copies of the Company's Certificate of Incorporation and bylaws which
have been furnished to each Purchaser reflect all amendments made thereto
at any time prior to the date of this Agreement and are correct and
complete.
(ii) Capital Stock and Related Matters.
(a) As of the Closing and immediately thereafter, the authorized
capital stock of the Company shall consist of 100,000 shares of Common
Stock (the "Common Stock") (divided into 85,000 shares of Class A
Common, (all of which will be issued and outstanding), and 15,000
shares of Class B Common Stock (of which 11,500 shares will be issued
and outstanding), and 10,000 shares of Preferred Stock (none of which
will be issued and outstanding). As of the Closing, neither the
Company nor any Subsidiary shall have outstanding any stock or
securities convertible or exchangeable for any shares of its Common
Stock or containing any profit participation features, nor shall it
have outstanding any rights or options to subscribe for or to purchase
its Common Stock or any stock appreciation rights or phantom stock
plans other than pursuant to and as contemplated by this Agreement and
the Other Equity Agreements. As of the Closing, neither the Company
nor any Subsidiary shall be subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of
its Common Stock or any warrants, options or other rights to acquire
its Common Stock, except pursuant to this Agreement and the Other
Equity Agreements. As of the Closing, all of the outstanding shares of
the Company's Common Stock shall be validly issued, fully paid and
nonassessable.
(b) There are no statutory or contractual stockholders preemptive
rights or rights of refusal with respect to the issuance of the Class
A Common hereunder, except as expressly provided herein. Based in part
on the investment representations of the Purchasers in Section 2A, the
Company has not violated any applicable federal or state securities
laws in connection with the
- 3 -
<PAGE>
offer, sale or issuance of any of its Common Stock, and the offer,
sale and issuance of the Class A Common hereunder and pursuant to
Section 1B hereof do not and will not require registration under the
Securities Act or any applicable state securities laws. There are no
agreements among the Company's stockholders with respect to the voting
or transfer of the Company's Common Stock or with respect to any other
aspect of the Company's affairs, except for this Agreement and the
Other Equity Agreements.
(iii) Subsidiaries; Investments. Other than 1,000 shares of Class A
Common Stock, par value $.01 per share, of Ford, the Option Shares (as
defined in the letter agreement, dated as of April 4, 1995, among the
Company and each of the Ford Holders (as defined therein)), the capital
stock of Solon purchased pursuant to the Solon Purchase Agreement and the
capital stock of the Subsidiaries as set forth in Section 4.3 of the Solon
Purchase Agreement, the Company does not own or hold any shares of stock or
any other security or interest in any other Person or any rights to acquire
any such security or interest, and the Company has never had any
Subsidiary.
(iv) Authorization; No Breach. The execution, delivery and performance
by the Company of the Transaction Documents (as defined in the Equity
Purchase Agreement) and the filing of the amendment of the Certificate of
Incorporation each has been duly authorized by the Company and each
constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms. The execution and delivery by the Company of the
Transaction Documents, the offering, sale and issuance of the Class A
Common hereunder and pursuant to Section 1B, the amendment of the
Certificate of Incorporation and the fulfillment of and compliance with the
respective terms hereof and thereof by the Company, do not and shall not
(a) conflict with or result in a breach of the terms, conditions or
provisions of, (b) constitute a default under, (c) result in the creation
of any lien, security interest, charge or encumbrance upon the Company's
Common Stock or assets pursuant to, (d) give any third party the right to
modify, terminate or accelerate any obligation under, (e) result in a
violation of, or (f) require any authorization, consent, approval,
exemption or other action by or notice to any court or administrative or
governmental body pursuant to, the Certificate of Incorporation or bylaws
of the Company, or any law, statute, rule or regulation to which the
Company is subject, or any agreement, instrument, order, judgment or decree
to which the Company is a party or by which it is bound.
- 4 -
<PAGE>
(v) Purchase Agreement Representations. Except as set forth on
"Schedule 2A(v) - Representations and Warranties" attached hereto, the
representations and warranties made by Solon Automated Services, Inc.
("Solon") in Article IV of the Stock Purchase Agreement (the "Solon
Purchase Agreement"), dated as of March 17, 1995, among Ford Coin
Laundries, Inc. ("Ford"), Solon and the Sellers (as defined therein), and
by the Sellers in Article V of the Solon Purchase Agreement are, to the
best of the Company's knowledge, true and correct in all material respects
on the date of the Closing as though then made, except for any change that
results from events occurring after the Closing Date (as defined therein)
and prior to the Closing in the ordinary course of business of Solon, and
the representations and warranties of Ford in Section 2 of the Stock
Purchase Agreement, dated as of April 4, 1995, between the Company and
Ford, are, to the best of the Company's knowledge, true and correct in all
material respects on the date of the Closing as though then made, except
for any change that results from events occurring after the Closing Date
(as defined therein) and prior to the Closing in the ordinary course of
business of Ford.
(vi) Disclosure. Neither this Agreement nor any of the schedules,
attachments, written statements, documents, certificates or other items
prepared or supplied to the Purchaser by or on behalf of the Company with
respect to the transactions contemplated hereby contain any untrue
statement of a material fact or omit a material fact necessary to make each
statement contained herein or therein not misleading. There is no fact
which the Company has not disclosed to each Purchaser in writing and of
which any of its officers, directors or executive employees is aware and
which has had or might reasonably be anticipated to have a material adverse
effect upon the existing or expected financial condition, operating
results, assets, customer or supplier relations, employee relations or
business prospects of the Company and its Subsidiaries taken as a whole.
(vii) Closing Date. The representations and warranties of the Company
contained in this Section 2B and elsewhere in this Agreement and all
information contained in any exhibit, schedule or attachment hereto or in
any writing delivered by, or on behalf of, the Company to any Purchaser
shall be true and correct in all material respects on the date of the
Closing as though then made, except as affected by the transactions
expressly contemplated by this Agreement.
2C. Current Public Information. At all times after the Company has filed a
registration statement with the Securities and
- 5 -
<PAGE>
Exchange Commission pursuant to the requirements of either the Securities Act or
the Securities Exchange Act, the Company shall file all reports required to be
filed by it under the Securities Act and the Securities Exchange Act and the
rules and regulations adopted by the Securities and Exchange Commission
thereunder and shall take such further action as any Purchaser holding Class A
Common purchased hereunder may reasonably request, all to the extent required to
enable such holders to sell Class A Common pursuant to (i) Rule 144 adopted by
the Securities and Exchange Commission under the Securities Act (as such rule
may be amended from time to time) or any similar rule or regulation hereafter
adopted by the Securities and Exchange Commission or (ii) a registration
statement on Form S-2 or S-3 or any similar registration form hereafter adopted
by the Securities and Exchange Commission. Upon request, the Company shall
deliver to any Purchaser holding Class A Common purchased hereunder a written
statement as to whether it has complied with such requirements.
Section 3. Restrictions on Transfer.
3A. Transfer of Investor Stock.
(i) Subject to the restrictions set forth in the remainder of this
Section 3, Investor Stock is transferable only pursuant to (a) a Public
Offering registered under the Securities Act, (b) Rule 144 or Rule 144A of
the Securities and Exchange Commission (or any similar rule or rules then
in force) if such rule or rules are available or (c) subject to the
conditions specified in Section 3A(ii) below, any other legally available
means of transfer.
(ii) In connection with the transfer of any Investor Stock (other than
a transfer described in Section 3A(i) (a) or (b) above), the holder thereof
shall deliver written notice to the Company describing in reasonable detail
the transfer or proposed transfer, together with an opinion of counsel
which (to the Company's reasonable satisfaction) is knowledgeable in
securities law matters to the effect that such transfer of Investor Stock
may be effected without registration of such Investor Stock under the
Securities Act. In addition, if the holder of the Investor Stock delivers
to the Company an opinion of counsel that no subsequent transfer of such
Investor Stock shall require registration under the Securities Act, the
Company shall promptly upon such contemplated transfer deliver new
certificates for such Investor Stock which do not bear the Securities Act
legend set forth in Section 4A hereof. If the Company is not required to
deliver new certificates for such Investor Stock not bearing such legend,
the holder thereof shall not transfer the same until
- 6 -
<PAGE>
the prospective transferee has confirmed to the Company in writing its
agreement to be bound by the conditions contained in this Section and
Section 4A hereof.
(iii) Upon the request of any Purchaser, the Company shall promptly
supply to such Purchaser or its prospective transferees all information
regarding the Company required to be delivered in connection with a
transfer pursuant to Rule 144A of the Securities and Exchange Commission.
(iv) Any transfer or attempted transfer of any Investor Stock in
violation of any provision of this Agreement shall be void, and the Company
shall not record such transfer on its books or treat any purported
transferee of such Investor Stock as the owner of such Investor Stock for
any purpose.
3B. Sale Notice. Prior to making any Transfer of Investor Stock, the
Purchaser intending to make such Transfer (the "Transferring Purchaser") will
give written notice (the "Sale Notice") to the Company and GTCR. The Sale Notice
will disclose in reasonable detail the number of shares to be transferred and
the terms and conditions of the proposed Transfer and, if known, the identity of
the prospective transferee(s). The Transferring Purchaser will not consummate
any such Transfer until 60 days after the Sale Notice has been given to the
Company and to GTCR, unless the parties to the Transfer have been fully
determined pursuant to this Section 3B and Section 3C prior to the expiration of
such 60-day period. (The date of the first to occur of such events is referred
to herein as the "Authorization Date.")
3C. First Refusal Rights. The Company may elect to purchase all (but not
less than all) of the shares of Investor Stock to be transferred upon the same
terms and conditions as those set forth in the Sale Notice by delivering a
written notice of such election to the Transferring Purchaser and GTCR within 30
days after the Sale Notice has been given to the Company. If the Company has not
elected to purchase all of the Investor Stock to be transferred, GTCR may elect
to purchase all (but not less than all) of the Investor Stock to be transferred
upon the same terms and conditions as those set forth in the Sale Notice by
giving written notice of such election to the Transferring Purchaser within 60
days after the Sale Notice has been given to GTCR. If neither the Company nor
GTCR elect to purchase all of the shares of Investor Stock specified in the Sale
Notice, the Transferring Purchaser may transfer the shares of Investor Stock
specified in the Sale Notice at a price and on terms no more favorable to the
transferee(s) thereof than specified in the Sale Notice during the 30-day period
immediately following the Authorization Date. Any shares of Investor Stock not
transferred within such 30-day period will be
- 7 -
<PAGE>
subject to the provisions of this Section 3C upon subsequent transfer.
3D. Co-Sale Rights.
(i) GTCR may elect to participate in the contemplated Transfer by
delivering written notice to the Transferring Purchaser within 90 days
after delivery of the Sale Notice to GTCR. If GTCR has elected to
participate in such Transfer, the Transferring Purchaser and GTCR shall be
entitled to sell in the contemplated Transfer, on the same terms and at the
price calculated pursuant to subparagraph 3D(ii) below, a number of shares
equal to the product of (x) the quotient determined by dividing the number
of shares of Common Stock owned by such person by the aggregate number of
shares of Common Stock owned by the Transferring Purchaser and GTCR and (y)
the number of shares to be sold in the contemplated Transfer.
For example, if the Sale Notice contemplated a sale of 100 shares by the
Transferring Purchaser, and if the Transferring Purchaser was at such time
the owner of 30% of the Company's Common Stock (on a fully-diluted basis)
and if GTCR elected to participate and GTCR owned 20% of the Company's
Common Stock (on a fully-diluted basis), the Transferring Purchaser would
be entitled to sell 60 shares (30%/50% x 100 shares) and GTCR would be
entitled to sell 40 shares (20%/50% x 100 shares).
The Transferring Purchaser will use its best efforts to obtain the
agreement of the prospective transferee(s) to the participation of GTCR in
the contemplated transfer and will not transfer any Investor Stock to the
prospective transferee(s) if such transferee(s) refuses to allow the
participation of GTCR.
(ii) The purchase price to be paid by any transferee for shares of
Class A Common transferred in accordance with this paragraph 3D shall be
equal to the amount per share of Class A Common which such transferee has
agreed to pay to such Purchaser.
Section 4. Additional Restrictions on Transfer of Investor Stock.
4A. Legend. Each Purchaser hereby represents that it is acquiring the
Investor Stock purchased hereunder or acquired pursuant hereto for its own
account with the present intention of holding such securities for purposes of
investment, and that it has
- 8 -
<PAGE>
no intention of selling such securities in a public distribution in violation of
the federal securities laws or any applicable state securities laws; provided
that nothing contained herein shall prevent any Purchaser and subsequent holders
of Investor Stock from transferring such securities in compliance with the
provisions of Section 4 hereof. Each certificate for Investor Stock shall be
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
WERE ORIGINALLY ISSUED AS OF JULY 26, 1995, HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD
OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN
EXEMPTION FROM REGISTRATION THEREUNDER. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER AND CERTAIN OTHER AGREEMENTS SET FORTH IN
AN INVESTOR PURCHASE AGREEMENT BETWEEN THE COMPANY
AND CERTAIN INVESTORS, DATED AS OF JULY 26, 1995.
A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE
HOLDER HEREOF AT THE ISSUER'S PRINCIPAL PLACE OF
BUSINESS WITHOUT CHARGE."
4B. Opinion of Counsel. No holder of Investor Stock may sell, transfer or
dispose of any Investor Stock (except pursuant to an effective registration
statement under the Securities Act) without first delivering to the Company an
opinion of counsel (reasonably acceptable in form and substance to the Company)
that (i) neither registration nor qualification under the Securities Act and
applicable state securities laws is required in connection with such transfer or
(ii) all such applicable registration and qualification requirements have been
satisfied.
Section B. Definitions.
"Equity Agreements" means the Equity Purchase Agreement, the Executive
Stock Agreement, the Stockholders Agreement, the Registration Agreement and the
Services Agreement.
"Equity Purchase Agreement" means the Equity Purchase Agreement dated as of
the date hereof between the Company and GTCR.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar federal law then in force.
- 9 -
<PAGE>
"Executive Stock Agreement" means the Executive Stock Agreement dated as of
the date hereof between the Company and the other parties thereto.
"Investor Stock" means (i) the Class A Common issued hereunder and (ii) any
common stock issued or issuable with respect to the Class A Common referred to
in clause (i) above by way of stock dividends or stock splits or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular shares of Investor Stock, such shares shall
cease to be Investor Stock when they have been (a) effectively registered under
the Securities Act and disposed of in accordance with the registration statement
covering them or (b) distributed to the public through a broker, dealer or
market maker pursuant to Rule 144 under the Securities Act (or any similar rule
then in force). Whenever any particular securities cease to be Investor Stock,
the holder thereof shall be entitled to receive from the Company, without
expense, new securities of like tenor not bearing a Securities Act legend of the
character set forth in Section 4A.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization
and a governmental entity or any department, agency or political subdivision
thereof.
"Public Offering" means the sale in an underwritten public offering
registered under the Securities Act (other than on Form S-8 or a similar or
successor form) of shares of the Company's Common Stock approved by the Board.
"Public Sale" means any sale pursuant to a registered Public Offering under
the Securities Act or any sale to the public pursuant to Rule 144 promulgated
under the Securities Act effected through a broker, dealer or market maker.
"Registration Agreement" means the Registration Agreement dated as of the
date hereof among the Company and certain of the Company's stockholders.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"Securities and Exchange Commission" includes any governmental body or
agency succeeding to the functions thereof.
"Services Agreement" means the Management and Consulting Services Agreement
dated as of the date hereof between the Company and GTCR IV, L.P.
- 10 -
<PAGE>
"Stockholders Agreement" means the Stockholders Agreement dated as of the
date hereof among the Company and certain of the Company's stockholders.
"Subsidiary" means, with respect to any Person, any corporation,
partnership association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, association or other business entity if
such Person or Persons shall be allocated a majority of partnership, association
or other business entity gains or losses or shall be or control the managing
director or general partner of such partnership, association or other business
entity.
"Transfer" means to sell, transfer, assign, pledge or otherwise dispose of
(whether with or without consideration and whether voluntarily or involuntarily
or by operation of law) other than pursuant to a Public Sale or Sale of the
Company.
Section 6. Miscellaneous
6A. Notices. Any notice provided for in this Agreement must be in writing
and must be either personally delivered, mailed by first class mail (postage
prepaid and return receipt requested) or sent by reputable overnight courier
service (charges prepaid) to the Purchasers at the addresses set forth on the
signature page hereto of such Purchaser and to the Company or GTCR as follows:
If to the Company:
SAS Acquisitions Inc.
c/o Coinmach Industries Co., L.P.
55 Lumber Road
Roslyn, NY 11576
Attention: President
- 11 -
<PAGE>
With a copy (which will not constitute notice to the Company) to:
Anderson Kill Olick & Oshinsky, P.C.
1251 Avenue of the Americas
New York, New York 10020
Attention: Ronald S. Brody, Esq.
If to GTCR:
Golder, Thoma, Cressey, Rauner Fund IV, L.P.
6100 Sears Tower
Chicago, Illinois 60606
Attention: Bruce V. Rauner
David A. Donnini
with a copy (which will not constitute notice to GTCR) to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Kevin R. Evanich, Esq.
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or sent or, if mailed, five days after deposit in the U.S. mail.
6B. Transfers in Violation of Agreement. Any Transfer or attempted Transfer
of any Investor Stock in violation of any provision of this Agreement shall be
void, and the Company shall not record such Transfer on its books or treat any
purported transferee of such Investor Stock as the owner of such stock for any
purpose.
6C. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
- 12 -
<PAGE>
6D. Complete Agreement. This Agreement, those documents expressly referred
to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior summaries of terms and conditions, understandings, agreements or
representations by or among the parties, written or oral, which may have related
to the subject matter hereof in any way.
6E. Counterparts. This Agreement may be executed in separate counterparts,
each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.
6F. Successors and Assigns. Except as otherwise provided herein, this
Agreement shall bind each Purchaser and the Company and their respective
successors and permitted assigns and inure to the benefit of and be enforceable
by each Purchaser, the Company, GTCR and their respective successors and
permitted assigns (including in each case subsequent holders of each Purchaser's
Stock); provided that no Purchaser may assign any of its or his rights under any
provision of this Agreement except as part of a Transfer of Investor Stock in
accordance with Section 3.
6G. Choice of Law. The corporate law of the State of Delaware will govern
all questions concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement and the exhibits hereto will be governed by and
construed in accordance with the internal laws of the State of Illinois, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Illinois or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Illinois.
6H. Remedies. Each holder of Investor Stock shall have all rights and
remedies set forth in this Agreement and the Company's Certificate of
Incorporation and all rights and remedies which such holders have been granted
at any time under any other agreement or contract and all of the rights which
such holders have under any law. Any Person having any rights under any
provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
6I. Amendment and Waiver. Except as otherwise expressly provided herein,
the provisions of this Agreement may be amended or modified only by written
agreement of the Company, each Purchaser and GTCR. No other course of dealing
between the parties or third-
- 13 -
<PAGE>
party beneficiaries hereof or any delay in exercising any rights hereunder shall
operate as a waiver of any rights of any such Person.
6J. Survival of Representations and Warranties. All representations and
warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by any Purchaser or on its behalf or by the Company or on
its behalf.
6K. Business Days. If any time period for giving notice or taking action
hereunder expires on a day which is a Saturday, Sunday or holiday in the state
in which the Company's chief executive office is located, the time period shall
be automatically extended to the business day immediately following such
Saturday, Sunday or holiday.
6L. Descriptive Headings; Interpretation. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement. The use of the word "including" in this Agreement shall be by way of
example rather than by limitation.
6M. Expenses. The Company agrees to pay the reasonable fees and expenses of
each Purchasers' outside counsel arising in connection with the negotiation and
execution of this Agreement and the consummation of the transactions
contemplated hereby.
* * * * *
- 14 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
SAS ACQUISITIONS INC.
By /s/ Stephen R. Kerrigan
-------------------------------------
Its President
-------------------------------------
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV, L.P.
By: GTCR IV, L.P.
Its: General Partner
By: Golder, Thoma, Cressey,
Rauner, Inc.
Its: General Partner
By:
-------------------------------------
Its: Principal
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
SAS ACQUISITIONS INC.
By
-------------------------------------
Its
-------------------------------------
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV, L.P.
By: GTCR IV, L.P.
Its: General Partner
By: Golder, Thoma, Cressey,
Rauner, Inc.
Its: General Partner
By: /s/
-------------------------------------
Its: Principal
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
/s/ James N. Chapman
-----------------------------------------
James N. Chapman
Number of Shares of Class A
Common: 300
Aggregate Purchase
Price: $22,941.18
Address:
James N. Chapman
14 Alpine Road
Greenwich, CT 06830
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
/s/ Michael E. Marrus
-----------------------------------------
Michael E. Marrus
Number of Shares of Class A
Common: 228
Aggregate Purchase
Price: $17,435.30
Address:
Michael E. Marrus
755 Park Avenue
New York, NY 10021
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
/s/ Mitchell Blatt
-----------------------------------------
Mitchell Blatt
Number of Shares of Class A
Common: 398
Aggregate Purchase
Price: $30,435.29
Address:
Mitchell Blatt
31 Wilmington Drive
Dix Hills, NY 11747
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
HELLER FINANCIAL,
By /s/ Ellen J. Cook
--------------------------------------
Its Asst. Vice President
--------------------------------------
Number of Shares of Class A
Common: 3,806
Aggregate Purchase
Price: $291,047.06
Address:
Heller Financial, Inc.
500 West Monroe Street
Chicago, IL 60661
Attn: Portfolio Manager
Portfolio Organization
Corporate Finance Group
A copy of all correspondence,
which shall not constitute
notice, should be sent to:
Heller Financial, Inc.
500 West Monroe Street
Chicago, IL 60661
Attn: Legal Department
Portfolio Organization
Corporate Finance Group
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
JACKSON NATIONAL
LIFE INSURANCE COMPANY
By: /s/
-------------------------------------
Its: Vice President
-------------------------------------
Number of Shares of Class A
Common: 3,425
Aggregate Purchase
Price: $261,911.77
Address:
Jackson National Life Insurance
Company
c/o PPM America, Inc.
225 West Wacker Drive
Suite 1200
Chicago, IL 60606
Attn: Private Placements
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
JACKSON NATIONAL
LIFE INSURANCE COMPANY
OF MICHIGAN
By /s/
-------------------------------------
Its Vice President
-------------------------------------
Number of Shares of Class A
Common: 381
Aggregate Purchase
Price: $29,135.29
Address:
Jackson National Life Insurance
Company of Michigan
c/o PPM America, Inc.
225 West Wacker Drive
Suite 1200
Chicago, IL 60606
Attn: Private Placements
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
PRESIDENT AND FELLOWS OF
HARVARD COLLEGE
By Harvard Management
Company, Inc.
By /s/ Timothy S. Peterson
-------------------------------------
Its Timothy S. Peterson
-------------------------------------
Authorized Signatory
Number of Shares of Class A
Common: 2,405
Aggregate Purchase
Price: $183,911.76
Address:
President and Fellows of
Harvard College
c/o Harvard Management Company,
Inc.
c/o Timothy Peterson
600 Atlantic Avenue
Boston, MA 02210
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
MCS CAPITAL, INC.
By /s/ Stephen R. Kerrigan
-------------------------------------
Its Pres
-------------------------------------
Number of Shares of Class A
Common: 1,479
Aggregate Purchase
Price: $113,100.00
Address:
MCS Capital, Inc.
c/o Coinmach Industries Co.,
L.P.
55 Lumber Road
Roslyn, NY 11576
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
/s/ Michael Stanky
-----------------------------------------
Michael Stanky
Number of Shares of Class A
Common: 425
Aggregate Purchase
Price: $32,500.00
Address:
Michael Stanky
1125 Ashington Place
Desoto, TX 75115
<PAGE>
Exhibit A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SAS ACQUISITIONS INC.
ARTICLE FIRST
-------------
The name of the Corporation is SAS Acquisitions Inc.
ARTICLE SECOND
--------------
The address of the Corporation's registered office in the State of Delaware
is 15 East North Street in the City of Dover, County of Kent 19901. The name of
its registered agent at such address is United Corporate Services, Inc.
ARTICLE THIRD
-------------
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
ARTICLE FOURTH
--------------
A. AUTHORIZED SHARES
-----------------
The total number of shares of capital stock which the Corporation has
authority to issue is 110,000 shares, consisting of:
(1) 85, 000 shares of Class A Common Stock, par value $0.01 per share
(the "Class A Common");
--------------
(2) 15, 000 shares of Class B Common Stock, par value $0.01 per share
(the "Class B Common"); and
--------------
(3) 10,000 shares of Preferred Stock, par value $0.01 per share (the
"Preferred Stock").
---------------
The Class A Common and Class B Common and any other common stock issued
hereafter are hereafter collectively referred to as the "Common Stock." The
------------
shares of Common Stock shall have
<PAGE>
the rights, preferences and limitations separately set forth below. Capitalized
terms used but not otherwise defined in this Article Fourth are defined in Part
D of this Article Fourth.
B. PREFERRED STOCK
---------------
Shares of Preferred Stock may be issued from time to time in one or more
series. The Board of Directors of the Corporation is hereby authorized to
determine and alter all rights, preferences and privileges and qualifications,
limitations and restrictions thereof (including, without limitation, voting
rights and the limitation and exclusion thereof) granted to or imposed upon any
wholly unissued series of Preferred Stock and the number of shares constituting
any such series and the designation thereof, and to increase or decrease (but
not below the number of shares of such series then outstanding) the number of
shares of any series subsequent to the issue of shares of that series then
outstanding. In case the number of shares of any series is so decreased, the
shares constituting such reduction shall resume the status which such shares had
prior to the adoption of the resolution originally fixing the number of shares
of such series.
C. COMMON STOCK
------------
Except as otherwise provided in this Part C or as otherwise required by
applicable law, all shares of Class A Common and Class B Common shall be
identical in all respects and shall entitle the holders thereof to the same
rights and privileges, subject to the same qualifications, limitations and
restrictions.
1. Voting Rights. Except as otherwise provided in this Part C or as
-------------
otherwise required by applicable law, holders of Class A Common and Class B
Common shall be entitled to one vote per share on all matters to be voted on by
the stockholders of the Corporation.
2. Distributions. Subject to the distribution rights set forth in
-------------
paragraphs 3(i) and 3(ii) below, at the time of each Distribution, such
Distribution shall be made to the holders of Class A Common and Class B Common
outstanding as of the time of such Distribution in the following priority:
(i) The holders of Class A Common, as a separate class, shall be entitled
to receive all or a portion of such Distribution (ratably among such holders
based upon the number of shares of Class A Common held by each such holder as of
the time of such
- 2 -
<PAGE>
Distribution) equal to the aggregate Unpaid Yield on the outstanding shares of
Class A Common as of the time of such Distribution, and no Distribution or any
portion thereof shall be made under paragraph 2 (ii) or 2 (iii) below until the
entire amount of the Unpaid Yield on the outstanding shares of Class A Common as
of the time of such Distribution has been paid in full. The Distributions made
pursuant to this paragraph 2(i) to holders of Class A Common shall constitute
payments of Yield on Class A Common.
(ii) After the required amount (if any) of the Distribution has been made
pursuant to paragraphs 2(i) above, the holders of Class A Common, as a separate
class, shall be entitled to receive all or a portion of such Distribution
(ratably among such holders based upon the number of shares of Class A Common
held by each such holder as of the time of such Distribution) so that the
aggregate amount of all Distributions made pursuant to this paragraph 2(ii) is
equal to the Unreturned Preferred Amount for the Class A Common, and no
Distribution or any portion thereof shall be made under paragraph 2(iii) below
until the entire amount of the Unreturned Preferred Amount for the Class A
Common has been paid in full pursuant to this paragraph 2(ii). The Distributions
made pursuant to this paragraph 2(ii) to holders of Class A Common shall
constitute payments of the Unreturned Preferred Amount for the Class A Common.
(iii) After the required amounts (if any) of a Distribution have been made
pursuant to paragraphs 2(i) and 2(ii) above, the holders of Class A Common and
Class B Common, as a group, shall be entitled to receive the remaining portion
of such Distribution (ratably among such holders based upon the number of shares
of Common Stock held by each such holder as of the time of such Distribution).
3. Liquidation Preferences.
-----------------------
(i) Class A Common Liquidation Preference.
-------------------------------------
Upon any liquidation, dissolution or winding up of the Corporation, the
holders of Class A Common shall be entitled to be paid, before any Distribution
or payment is made upon any other Common Stock, an amount in cash equal to the
aggregate Unreturned Preferred Amount and the aggregate Unpaid Yield for the
Class A Common (ratably among such holders based upon the number of shares of
Class A Common held by each such holder as of the time of such Distribution) and
will then share ratably with the other shares of Common Stock in any remaining
Corporation assets (after the Distribution described in paragraph 3(ii) below).
If upon any such liquidation, dissolution or winding up of the Corporation, the
- 3 -
<PAGE>
Corporation's assets to be distributed among the holders of the Class A Common
are insufficient to permit payment to such holders of the aggregate amount which
they are entitled to be paid pursuant to this paragraph 3(i), then the entire
assets to be distributed shall be distributed ratably among such holders based
upon the aggregate Unreturned Preferred Amount and the aggregate Unpaid Yield
for the Class A Common held by each such holder. The Corporation shall mail
written notice of such liquidation, dissolution or winding up, not less than 60
days prior to the payment date stated therein, to each record holder of Class A
Common. Neither the consolidation or merger of the Corporation into or with any
other entity or entities, nor the sale or transfer by the Corporation of all or
any part of its assets, nor the reduction of the capital stock of the
Corporation, shall be deemed to be a liquidation, dissolution or winding up of
the Corporation within the meaning of this paragraph 3(i).
(ii) Class B Common Liquidation Preference.
-------------------------------------
Upon any liquidation, dissolution or winding up of the Corporation, after
the required amounts have been paid pursuant to paragraph 3(i) above, the
holders of Class B Common shall be entitled to be paid, before any Distribution
or payment is made upon any other Common Stock, an amount in cash equal to the
aggregate Unreturned Preferred Amount of the Class B Common (ratably among such
holders based upon the number of shares of Class B Common held by each such
holder as of the time of such Distribution) and will then share ratably with the
other shares of Common Stock in any remaining Corporation assets. If upon any
such liquidation, dissolution or winding up of the Corporation, the
Corporation's assets to be distributed among the holders of the Class B Common
are insufficient to permit payment to such holders of the aggregate amount which
they are entitled to be paid pursuant to this paragraph 3(ii), then the entire
assets to be distributed shall be distributed ratably among such holders based
upon the aggregate Unreturned Preferred Amount of the Class B Common held by
each such holder. The Corporation shall mail written notice of such liquidation,
dissolution or winding up, not less than 60 days prior to the payment date
stated therein, to each record holder of Class B Common. Neither the
consolidation or merger of the Corporation into or with any other entity or
entities, nor the sale or transfer by the Corporation of all or any part of its
assets, nor the reduction of the capital stock of the Corporation shall be
deemed to be a liquidation, dissolution or winding up of the Corporation within
the meaning of this paragraph 3(ii).
- 4 -
<PAGE>
4. Stock Splits and Stock Dividends. The Corporation shall not in any
--------------------------------
manner subdivide (by stock split, stock dividend or otherwise) or combine (by
reverse stock split or otherwise) the outstanding Common Stock of one class
unless the outstanding Common Stock of all the other classes shall be
proportionately subdivided or combined. All such subdivisions shall be payable
only in Class A Common to the holders of Class A Common and in Class B Common
only to the holders of Class B Common.
5. Events of Noncompliance.
-----------------------
5A. Definition. An "Event of Noncompliance" shall be deemed to have
---------- ----------------------
occurred if:
(i) the Corporation fails to pay on or prior to the eighth anniversary of
the initial issuance of the Class A Common the full amount of the Unreturned
Preferred Amount plus all Unpaid Yield with respect to the Class A Common,
whether or not such payment is legally permissible or is prohibited by any
agreement to which the Corporation is subject;
(ii) the Corporation breaches or otherwise fails to perform or observe in
any material respect any covenant or agreement set forth herein or in the Equity
Purchase Agreement (the "Purchase Agreement") or the Services Agreement (as
------------------
defined in the Purchase Agreement), and such breach or failure to perform is not
cured within 30 days after the occurrence thereof;
(iii) any representation or warranty contained in the Purchase Agreement or
required to be furnished to any holder of Class A Common pursuant to the
Purchase Agreement, or any information contained in writing required to be
furnished by the Corporation or any Subsidiary to any holder of Class A Common,
is false or misleading such that it would result in a material adverse effect
upon the business, operations, properties, assets or condition (financial or
otherwise) of the Corporation and its Subsidiaries taken as a whole on the date
made or furnished;
(iv) the Corporation or any Subsidiary makes an assignment for the benefit
of creditors or admits in writing its inability to pay its debts generally as
they become due; or an order, judgment or decree is entered adjudicating the
Corporation or any Subsidiary bankrupt or insolvent; or any order for relief
with respect to the Corporation or any Subsidiary is entered under the United
States Federal Bankruptcy Code; or the Corporation or any Subsidiary petitions
or applies to any tribunal for the appointment of a custodian, trustee, receiver
or liquidator of the Corporation or any Subsidiary or of any substantial part of
the
- 5 -
<PAGE>
assets of the Corporation or any Subsidiary, or commences any proceeding (other
than a proceeding for the voluntary liquidation and dissolution of a Subsidiary)
relating to the Corporation or any Subsidiary under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction; or any such petition or application is
filed, or any such proceeding is commenced, against the Corporation or any
Subsidiary and either (a) the Corporation or any such Subsidiary by any act
indicates its approval thereof, consent thereto or acquiescence therein or (b)
such petition, application or proceeding is not dismissed within 60 days;
(v) a judgment which exceeds any insurance available for the payment
thereof by more than $600,000 is rendered against the Corporation or any
Subsidiary and, within 60 days after entry thereof, such judgment is not
discharged or execution thereof stayed pending appeal, or within 60 days after
the expiration' of any such stay, such judgment is not discharged; or
(vi) the Corporation or any Subsidiary defaults in the performance of any
obligation or agreement if the effect of such default is to cause an amount
exceeding $600,000 to become due prior to its stated maturity.
5B. Consequences of Certain Events of Noncompliance.
-----------------------------------------------
(i) If an Event of Noncompliance has occurred, the rate at which the Yield
on the Class A Common is calculated shall increase immediately by an increment
of 4 percentage point(s). Thereafter, until such time as no Event of
Noncompliance exists, the rate at which the Yield on the Class A Common is
calculated shall increase automatically at the end of each succeeding 90-day
period by an additional increment of 2 percentage point(s) (but in no event
shall such rate exceed 18%). Any increase of the dividend rate resulting from
the operation of this paragraph shall terminate as of the close of business on
the date on which no Event of Noncompliance exists, subject to subsequent
increases pursuant to this paragraph.
(ii) If any Event of Noncompliance has occurred, then the number of
directors constituting the Corporation's Board of Directors will, at the request
of the holders of a majority of the Class A Common then outstanding, be
increased by one member, and the holders of Class A Common will have the special
right, voting separately as a single class (with each share being entitled to
one vote) and to the exclusion of all other classes of the Corporation's stock,
to elect an individual to fill such newly created directorship, to fill any
vacancy of such directorship and to remove any individual elected to such
directorship. The newly
- 6 -
<PAGE>
created directorship will constitute a separate class of directors, and the
director elected by the holders of the Class A Common will be entitled to cast a
number of votes on each matter considered by the Board of Directors (including
for purposes of determining the existence of a quorum) equal to the sum of the
number of votes entitled to be cast by all of the other directors plus one. The
special right of the holders of Class A Common to elect such a member of the
Board of Directors may be exercised at the special meeting called pursuant to
this subparagraph (ii), at any annual or, other special meeting of stockholders
and, to the extent and in the manner permitted by applicable law, pursuant to a
written consent of the holders of a majority of the Class A Common in lieu of a
stockholders meeting. Such special right shall continue until such time as there
is no longer any Event of Noncompliance in existence, at which time such special
right shall terminate subject to revesting upon the occurrence and continuation
of any Event of Noncompliance which gives rise to such special right hereunder.
At any time when such special right has vested in the holders of Class A
Common, a proper officer of the Corporation shall, upon the written request of
the holder(s) of at least 10% of the Class A Common then outstanding, addressed
to the secretary of the Corporation, call a special meeting of the holders of
Class A Common for the purpose of electing a director pursuant to this
subparagraph. Such meeting shall be held at the earliest legally permissible
date at the principal office of the Corporation, or at such other place
designated by the holders of at least 10% of the Class A Common then
outstanding. If such meeting has not been called by a proper officer of the
Corporation within 10 days after personal service of such written request upon
the secretary of the Corporation or within 20 days after mailing the same to the
secretary of the Corporation at its principal office, then the holders of at
least 10% of the Class A Common then outstanding may designate in writing one of
their number to call such meeting at the expense of the Corporation, and such
meeting may be called by such Person so designated upon the notice required for
annual meetings of stockholders and shall be held at the Corporation's principal
office, or at such other place designated by the holders of at least 10% of the
Class A Common then outstanding. Any holder of Class A Common so designated
shall be given access to the stock record books of the Corporation for the
purpose of causing a meeting of stockholders to be called pursuant to this
paragraph.
At any meeting or at any adjournment thereof at which the holders of Class
A Common have the special right to elect a director pursuant to this
subparagraph, the presence, in person or by proxy, of the holders of a majority
of the Class A Common then outstanding shall be required to constitute a quorum
for the election or removal of any director by the holders of the Class A
- 7 -
<PAGE>
Common exercising such special right. The vote of a majority of such quorum
shall be required to elect or remove any such director.
Any director so elected by the holders of Class A Common shall continue to
serve as a director until the expiration of the lesser of (a) a period of six
months following the date on which there is no longer any Event of Noncompliance
in existence or (b) the remaining period of the full term for which such
director has been elected. After the expiration of such six-month period or when
the full term for which such director has been elected ceases (provided that the
special right to elect directors has terminated), as the case may be, the number
of directors constituting the Board of Directors of the Corporation shall
decrease to such number as constituted the whole Board of Directors of the
Corporation immediately prior to the occurrence of the Event or Events of
Noncompliance giving rise to the special right to elect directors.
(iii) If any Event of Noncompliance exists, each holder of Class A Common
shall also have any other rights which such holder is entitled to under any
contract or agreement at any time and any other rights which such holder may
have pursuant to applicable law.
6. Registration of Transfer. The Corporation shall keep at its principal
------------------------
office (or such other place as the Corporation reasonably designates) a register
for the registration of shares of Common Stock. Upon the surrender of any
certificate representing shares of any class of Common Stock at such place, the
Corporation shall, at the request of the registered holder of such certificate,
execute and deliver a new certificate or certificates in exchange therefor
representing in the aggregate the number of shares of such class represented by
the surrendered certificate, and the Corporation forthwith shall cancel such
surrendered certificate. Each such new certificate will be registered in such
name and will represent such number of shares of such class as is requested by
the holder of the surrendered certificate and will be substantially identical in
form to the surrendered certificate. The issuance of new certificates shall be
made without charge to the holders of the surrendered certificates for any
issuance tax in respect thereof or other cost incurred by the Corporation in
connection with such issuance.
7. Replacement. Upon receipt of evidence reasonably satisfactory to the
-----------
Corporation (an affidavit of the registered holder will be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing one or more shares of any class of Common Stock, and in the case of
any such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Corporation (provided that if the holder is a
- 8 -
<PAGE>
financial institution or other institutional investor its own agreement will be
satisfactory), or, in the case of any such mutilation upon surrender of such
certificate, the Corporation shall (at its expense) execute and deliver in lieu
of such certificate a new certificate of like kind representing the number of
shares of such class represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
8. Notices. All notices referred to herein shall be in writing, shall be
-------
delivered personally or by first class mail, postage prepaid, and shall be
deemed to have been given when so delivered or mailed to the Corporation at its
principal executive offices and to any stockholder at such holder's address as
it appears in the stock records of the Corporation (unless otherwise specified
in a written notice to the Corporation by such holder).
9. Amendment and Waiver. No amendment or waiver of any provision of this
--------------------
Part C shall be effective without the prior approval of the holders of a
majority of the then outstanding Common Stock.
D. DEFINITIONS
-----------
"Distribution" means each distribution made by the Corporation to holders
------------
of Common Stock, whether in cash, property, or securities of the Corporation and
whether by dividend, liquidation distributions or otherwise; provided that
neither of the following shall be a Distribution: (a) any redemption or
repurchase by the Corporation of any shares of Common Stock for any reason or
(b) any recapitalization or exchange of any shares of Common Stock, or any
subdivision (by stock split, stock dividend or otherwise) or any combination (by
reverse stock split or otherwise) of any outstanding shares of Common Stock.
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership, interest in a partnership, association or other business
- 9 -
<PAGE>
entity if such Person or Persons shall be allocated a majority of partnership,
association or other business entity gains or losses or shall be or control the
managing director or general partner of such partnership, association or other
business entity.
"Unpaid Yield" means an amount equal to the excess, if any, of (a) the
------------
aggregate Yield accrued on the outstanding shares of Class A Common over (b) the
aggregate amount of Distributions made by the Corporation pursuant to paragraph
2 (i) of Part C of this Article Fourth.
"Unreturned Preferred Amount" means, (A) with respect to the Class A
---------------------------
Common, an amount equal to the excess, if any, of (a) the product of (1) the
number of shares of Class A Common then outstanding and (2) $76.4705882 over (b)
the aggregate amount of Distributions made by the Corporation with respect to
such shares pursuant to paragraph 2(ii) or paragraph 3(i) of Part C of this
Article Fourth, and (B) with respect to the Class B Common, an amount equal to
the excess, if any, of (a) the product of (x) the number of shares of Class B
Common then outstanding and (y) $15.4028 over (b) the aggregate amount of
Distributions made by the Corporation with respect to such shares pursuant to
paragraph 3(ii) of Part C of this Article Fourth.
"Yield" means, with respect to the outstanding shares of Class A Common for
-----
any quarter, the amount accruing on such shares each day during such quarter at
the rate of 8% per annum of the sum of (a) the Unreturned Preferred Amount from
time to time during such quarter, plus (b) the Unpaid Yield thereon for all
prior quarters. In calculating the amount of any Distribution to be made during
a quarter, the portion of the Yield on the outstanding shares of Class A Common
for the portion of such quarter elapsing before such Distribution is made shall
be taken into account.
ARTICLE FIFTH
-------------
The Corporation is to have perpetual existence.
ARTICLE SIXTH
-------------
In furtherance and not in limitation of the powers conferred by statute,
the board of directors of the Corporation is expressly authorized to make, alter
or repeal the by-laws of the Corporation.
ARTICLE SEVENTH
---------------
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws of the Corporation may
- 10 -
<PAGE>
provide. The books of the Corporation may be kept outside the State of Delaware
at such place or places as may be designated from time to time by the board of
directors or in the by-laws of the Corporation. Election of directors need not
be by written ballot unless the by-laws of the corporation so provide.
ARTICLE EIGHTH
--------------
To the fullest extent permitted by the General Corporation Law of the State
of Delaware as the same exists or may hereafter be amended, a director of this
Corporation shall not be liable to the Corporation or its stockholders for
monetary damages for a breach of fiduciary duty as a director. Any repeal or
modification of this ARTICLE EIGHTH shall not adversely affect any right or
--------------
protection of a director of the Corporation existing at the time of such repeal
or modification.
ARTICLE NINTH
-------------
The Corporation expressly elects not to be governed by Section 203 of the
General Corporation Law of the State of Delaware.
ARTICLE TENTH
-------------
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this certificate of incorporation in the manner now or
hereafter prescribed herein and by the laws of the State of Delaware, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
- 11 -
<PAGE>
Schedule 2A(v) - Representations and Warranties
-----------------------------------------------
None
<PAGE>
Exhibit 10.23
EXECUTIVE STOCK AGREEMENT
-------------------------
THIS AGREEMENT is made as of July 26, 1995, between SAS Acquisitions Inc.,
a Delaware corporation (the "Company"), Golder, Thoma, Cressey, Rauner Fund IV,
L.P. ("GTCR"), and the purchasers listed on the signature pages hereto (each a
"Purchaser" and collectively the "Purchasers"). Except as otherwise indicated
herein, capitalized terms used herein are defined in paragraph 8 hereof.
The execution and delivery of this Agreement by the Company and the
Purchasers is a condition to the purchase of 72,153 shares of the Company's
Class A Common Stock, par value $0.01 per share (the "Class A Common"), by GTCR
pursuant to an Equity Purchase Agreement dated as of the date hereof (the
"Equity Purchase Agreement"). Certain provisions of this Agreement are intended
for the benefit of, and will be enforceable by, GTCR.
The parties hereto agree as follows:
1. Authorization of the Class B Common. The Company shall authorize the
issuance to the Purchasers of 15,000 shares of Class B Common Stock, par value
$.01 per share (the "Class B Common"), having the rights set forth in Exhibit A
attached hereto. The Class A Common and Class B Common are hereinafter
collectively referred to as the "Common Stock".
2. Acquisition of Stock.
(a) Purchase and Sale of Executive Stock. Upon execution of this Agreement,
each Purchaser will purchase, and the Company will sell, the number of shares of
Class B Common set forth on the signature page for such Purchaser for the
purchase price of $15.4028 per share. The sale to and purchase by each Purchaser
of Class B Common will constitute a separate sale and purchase. The Company will
deliver to each Purchaser a certificate or certificates representing such Common
Stock, and each Purchaser will deliver to the Company a check or wire transfer
of funds in the amount indicated on the signature page hereto of such Purchaser,
and, if applicable, a promissory note (each an "Executive Note") in the amount
indicated on the signature page hereto of such Purchaser. Such Purchaser's
obligations under the Executive Note will be secured by a pledge of all of the
shares of Executive Stock to the Company and, in connection therewith, such
Purchaser shall enter into a pledge agreement (each a "Pledge Agreement").
(b) Section 83(b) Election. Within 30 days after a Purchaser purchases any
Executive Stock, such Purchaser will make
<PAGE>
an effective election with the Internal Revenue Service under Section 83(b) of
the Internal Revenue Code of 1986, as amended, and the regulations promulgated
thereunder.
(c) Purchasers' Representations and Warranties. In connection with the
issuance of the Executive Stock hereunder, each Purchaser represents and
warrants to the Company that, in each case, as of the Closing:
(i) The Class B Common to be acquired by such Purchaser pursuant to
this Agreement will be acquired for such Purchaser's own account and not
with a view to, or intention of, distribution thereof in violation of the
Securities Act, or any applicable state securities laws, and such Class B
Common will not be disposed of in contravention of the Securities Act or
any applicable state securities laws.
(ii) Such Purchaser is sophisticated in financial matters and is able
to evaluate the risks and benefits of the investment in such Class B
Common.
(iii) Such Purchaser is able to bear the economic risk of his
investment in such Class B Common for an indefinite period of time, and
such Purchaser acknowledges that such Class B Common has not been
registered under the Securities Act and, therefore, cannot be sold unless
subsequently registered under the Securities Act or an exemption from such
registration is available.
(iv) Such Purchaser has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of such
Class B Common and has had full access to such other information concerning
the Company as he has requested.
(v) This Agreement, the Stockholders Agreement and the Registration
Agreement and such Purchaser's Executive Note and Pledge Agreement, if any,
constitute legal, valid and binding obligations of such Purchaser,
enforceable in accordance with their terms, and the execution, delivery and
performance of this Agreement, the Stockholders Agreement and the
Registration Agreement and such Purchaser's Executive Note and Pledge
Agreement, if any, by such Purchaser does not and will not conflict with,
violate or cause a breach of any agreement, contract or instrument to which
such Purchaser is a party or any law, rule, regulation, judgment, order or
decree to which such Purchaser is subject.
- 2 -
<PAGE>
3. Representations and Warranties of the Company. In connection with the
issuance of the Executive Stock hereunder, the Company represents to each
Purchaser that, in each case, as of the Closing:
(a) Organization and Corporate Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of Delaware. The
Company has all requisite corporate power and authority to carry out the
transactions contemplated by this Agreement, the Stockholders Agreement and the
Registration Agreement (collectively, the "Investment Agreements"). The copies
of the Company's Amended and Restated Certificate of Incorporation and Bylaws
which have been furnished to each Purchaser's counsel reflect all amendments
made thereto at any time prior to the date of this Agreement and are correct and
complete.
(b) Capital Stock and Related Matters.
(i) As of the Closing and immediately thereafter, the authorized capital
stock of the Company shall consist of 10,000 shares which will be designated as
Preferred Stock and 100,000 shares of Common Stock, of which 85,000 shares shall
be designated as Class A Common and 15,000 shares shall be designated Class B
Common. As of the Closing, the Company shall not have outstanding any stock or
securities convertible or exchangeable for any shares of its capital stock or
containing any profit participation features, nor shall it have outstanding any
rights or options to subscribe for or to purchase its capital stock or any stock
or securities convertible into or exchangeable for its capital stock or any
stock appreciation rights or phantom stock plans other than pursuant to and as
contemplated by this Agreement, the Equity Purchase Agreement, the Investor
Purchase Agreement and the Stockholders Agreement. As of the Closing, the
Company shall not be subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock or any
warrants, options or other rights to acquire its capital stock, except pursuant
to this Agreement, the Equity Purchase Agreement, the Investor Purchase
Agreement and the Stockholders Agreement. As of the Closing, all of the
outstanding shares of the Company's capital stock shall be validly issued, fully
paid and nonassessable.
(ii) There are no statutory or contractual stockholders preemptive rights
or rights of refusal with respect to the issuance of the Common Stock hereunder,
except as provided herein, in the Stockholders Agreement. The Company has not
violated any applicable federal or state securities laws in connection with the
offer, sale or issuance of any of its capital stock, and the offer,
- 3 -
<PAGE>
sale and issuance of the Common Stock pursuant to this Agreement do not and will
not require registration under the Securities Act.
4. Vesting of Executive Stock.
(a) Except as otherwise provided in paragraph 4(b) below, 20% of the
Executive Stock will be deemed "Vested Shares" as of the date of Closing and the
remainder of the Executive Stock will become vested in accordance with the
following schedule, if as of each such date such Purchaser is an employee of the
Company or any of its Subsidiaries or Affiliates:
<TABLE>
<CAPTION>
Cumulative
Anniversary of Percentage of Executive
the Date of Closing Stock Vested
------------------- ------------
<S> <C>
lst 40
2nd 60
3rd 80
4th 100
</TABLE>
Any shares of Executive Stock which do not become Vested Shares under the
foregoing provisions will remain "Unvested Shares."
(b) If such Purchaser ceases to be employed by the Company or any of its
Subsidiaries or Affiliates on any date other than any anniversary date, the
cumulative percentage of Executive Stock to become vested will be determined on
a pro-rata basis according to the number of days elapsed since the prior
anniversary date. Immediately prior to the closing of (i) any sale of the
Company's equity securities which results in any person, or group of related
persons, not affiliated with GTCR, owning equity securities of the Company
possessing the power to elect (without reference to any special or default
voting rights) a majority of the members of the Board, or (ii) a sale of all or
substantially all of the Company's assets, all Unvested Shares will become
Vested Shares.
5. Repurchase Option.
(a) In the event a Purchaser violates paragraph 10(a) of his respective
Executive Stock Agreement, dated as of January 31, 1995, among The Coinmach
Corporation, such Purchaser and GTCR, or paragraph 3(a) of his respective
Employment Agreement, dated as of the date hereof, among Solon Automated
Services, Inc., such Purchaser and GTCR, in each case a "Noncompete Breach," or
in the event a Purchaser's employment by the Company, its Subsidiaries and
- 4 -
<PAGE>
its Affiliates terminates for any reason (a "Termination"), the Executive Call
Stock (whether held by such Purchaser or one or more of such Purchaser's
transferees, other than the Company or GTCR) will be subject to repurchase by
the Company first, Management second and GTCR third pursuant to the terms and
conditions set forth in this paragraph 5 (the "Repurchase Option").
(b) If the Repurchase Option becomes exercisable because of a Noncompete
Breach or Termination resulting from the termination of such Purchaser's
employment with the Company, its Subsidiaries or its Affiliates for Cause, then,
the purchase price for each share of Executive Call Stock will be the lower of
(a) such Purchaser's Original Cost for such share or (b) the fair market value
of such share. If a Purchaser's employment with the Company, its Subsidiaries or
its Affiliates terminates other than as described in the preceding sentence, the
purchase price for each (i) Unvested Share shall be such Purchaser's Original
Cost for such share, and (ii) Vested Share shall be the fair market value of
such share as of the date of the related Repurchase Notice or Investor Notice
(as hereinafter defined), as the case may be.
(c) The Company may, at the option of the Board, elect to purchase all or
any portion of the Executive Call Stock from time to time by delivering written
notice (the "Repurchase Notice") to Management, GTCR and the holder or holders
of such Executive Call Stock from time to time during the 270 days after the
Noncompete Breach or Termination, as the case may be. The Repurchase Notice will
set forth the number of shares of Executive Call Stock, including the number of
Unvested Shares and Vested Shares, to be acquired from such holder, the
aggregate consideration to be paid for such shares and the time and place for
the closing of the transaction.
(d) If for any reason the Company has not elected to purchase all of the
Executive Call Stock pursuant to the Repurchase Option, Management shall be
entitled to exercise the Repurchase option for any or all of the shares of
Executive Call Stock, including the Unvested Shares and the Vested Shares, the
Company has not yet elected to purchase (the "Available Shares"), by giving
written notice to the Company and the holder(s) of the Available Shares to be
repurchased during the 30 days after the date of delivery to Management of the
Repurchase Notice (the "Management Notice") setting forth the number of
Available Shares each Manager is willing to purchase. If the Managers elect to
purchase an aggregate number of shares greater than the number of Available
Shares, the Available Shares shall be allocated among the Managers pro rata
based on the number of shares of Common Stock owned by each Manager. As soon as
practicable, and in any event, within 10 days after the expiration of the 30-day
period set forth above, the
- 5 -
<PAGE>
Company shall notify the holder(s) of the Available Shares and GTCR as to the
number of shares being purchased from such holder(s) by Management (the
"Supplemental Repurchase Notice"). At the time the Company delivers the
Supplemental Repurchase Notice to the holder(s) of the Available Shares, the
Company shall also deliver written notice to each Manager and GTCR setting forth
the number of shares such Manager is entitled to purchase, the aggregate
purchase price and the time and place of the closing of the transaction and,. in
the notice to GTCR, a statement of the number, type and purchase price of
Available Shares available for purchase by GTCR.
(e) If for any reason Management has not elected to purchase any or all of
the Available Shares pursuant to paragraph 5(d) above, GTCR may elect to
purchase any or all of the Available Shares not purchased by Management by
giving written notice to the holder(s) of the Available Shares to be repurchased
within 30 days after the date of delivery to GTCR of the Supplemental Repurchase
Notice (the "Investor Repurchase Notice") setting forth the number of Available
Shares GTCR is willing to purchase.
(f) Each closing of the purchase of the Executive Call Stock pursuant to
the Repurchase Option shall take place on the date designated by the Company,
Management or GTCR in the related Repurchase Notice, Supplemental Repurchase
Notice, or Investor Repurchase Notice, as the case may be, but in any event not
later than 365 days after the date of the Noncompete Breach or Termination. At
such closing, such Purchaser shall deliver to the Company, Management and/or
GTCR certificates representing the Executive Stock to be repurchased by the
Company, Management and/or GTCR and the Company, Management and/or GTCR, as the
case may be, will pay for the Executive Call Stock to be purchased pursuant to
the Repurchase Option in the following manner:
(i) In the event that no Event of Default has occurred and is
continuing on the date of the Noncompete Breach or Termination, payment for
the Executive Call Stock to be purchased shall be made by delivery to such
Purchaser of a cashier's or certified check or wire transfer of funds in
the amount of one-half of the purchase price of the Executive Call Stock on
the date of the closing of the Repurchase Option. Payment for the remaining
one-half of the purchase price shall be made by delivery of a promissory
note, with an aggregate principal amount equal to one-half of the purchase
price of the Executive Stock to be repurchased, payable in one lump sum
payment on the second anniversary of the date of issuance and bearing
interest at the rate of 8% per annum.
(ii) In the event that an Event of Default has occurred and is
continuing on the date of the Noncompete Breach or
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<PAGE>
Termination, payment for the Executive Call Stock to be purchased shall
be made by delivery of a promissory note, with an aggregate principal
amount equal to the total purchase price of the Executive Call Stock to be
repurchased, payable in one lump sum payment on the fifth anniversary of
the date of issuance and bearing interest at the rate of 8% per annum.
Any such note issued by the Company pursuant to subparagraphs (i) and (ii) above
shall be junior and subordinated in right of payment to all indebtedness of the
Company (for borrowed money or otherwise). In addition, the Company may pay the
total purchase price for such shares by offsetting amounts outstanding under any
bona fide debts owed by such Purchaser to the Company. The Company, Management
and GTCR will be entitled to receive customary representations and warranties
from the sellers regarding such sale and to require that all sellers' signatures
be guaranteed.
(g) If within six months following the repurchase of Executive Call Stock
pursuant to paragraph 5(f) above, (i) a Sale of the Company or a Public Offering
of the Company's Common Stock registered under the Securities Act occurs and
(ii) the valuation of a share of Common Stock for such transaction (based upon
the purchase price or liquidation proceeds per share of Common Stock or the
Public Offering price per share of Common Stock, but reduced by any preferential
amounts available to any of the classes of Common Stock) exceeds the amounts per
share received by the holder(s) of Executive Call Stock upon the repurchase of
Vested Shares, then such holder(s) of Executive Call Stock shall be entitled to
receive from the Company the benefit of such higher valuation for the Vested
Shares of Executive Call Stock sold under the Repurchase Option. The excess of
(x) the amount which the holder(s) of Executive Call Stock would have received
in such Sale of the Company or Public Offering assuming the sale of their Vested
Shares of Executive Call Stock purchased by exercise of the Repurchase Option in
connection with such transaction, over (y) the purchase price of the Vested
Shares of Executive Call Stock paid to such Purchaser under the Repurchase
Option, shall be paid by certified check or cashier's check or wire transfer of
funds to each such holder upon consummation of any such transaction. For
purposes of this paragraph 5(g), "Sale" means the sale of all or substantially
all of the assets of the Company or a sale of the Company's equity securities
which results in any person, or group of related persons, owning equity
securities of the Company possessing the power to elect (without reference to
any special or default voting rights) a majority of the members of the Board,
including any such sale accomplished by merger or consolidation.
6. Restrictions on Transfer.
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<PAGE>
(a) Transfer of Executive Stock. On or prior to the Restriction Lapse Date,
no Purchaser shall directly or indirectly transfer any interest in any shares of
Executive Stock (a "Transfer"), except pursuant to the provisions of paragraph 5
or 6(e) of this Agreement. After the Restriction Lapse date, no Purchaser shall
directly or indirectly Transfer any interest in any shares of Executive Stock
except (i) pursuant to the provisions of paragraph 5 or 6 (e) of this Agreement,
(ii) in a Public Sale or (iii) pursuant to the provisions of paragraphs 6(b),
6(c) and 6(d) of this Agreement. Prior to effecting any Transfer of Executive
Stock (other than to the Company, Management or GTCR), the Purchaser shall
obtain from each transferee their written agreement to be bound by the
provisions of paragraph 6 of this Agreement for the benefit of the Company,
Management and GTCR.
(b) Sale Notice. After the Restriction Lapse Date, prior to making any
Transfer, each Purchaser will give written notice (the "Sale Notice") to the
Company, each Manager and GTCR. The Sale Notice will disclose in reasonable
detail the number of shares to be transferred and the terms and conditions of
the proposed Transfer and, if known, the identity of the prospective
transferee(s). No Purchaser will consummate any such Transfer until 90 days
after the Sale Notice has been given to the Company, Management and GTCR, unless
the parties to the Transfer have been fully determined pursuant to this
paragraph 6(b) and paragraphs 6(c) and 6(d) prior to the expiration of such
90-day period. (The date of the first to occur of such events is referred to
herein as the "Authorization Date.")
(c) First Refusal Rights. The Company may elect to purchase all (but not
less than all) of the shares of Executive Stock to be transferred upon the same
terms and conditions as those set forth in the Sale Notice by delivering a
written notice of such election to the transferring Purchaser (the "Transferring
Purchaser"), each Manager and GTCR within 30 days after the Sale Notice has been
given to the Company. If the Company has not elected to purchase all of the
Executive Stock to be transferred, Management may elect to purchase all (but not
less than all) of the Executive Stock to be transferred upon the same terms and
conditions as those set forth in the Sale Notice by giving written notice of
such election to the Transferring Purchaser, the Company and GTCR within 60 days
after the Sale Notice has been given to Management. Management's rights
hereunder shall be allocated among the Managers pro rata based on the number of
shares of Common Stock owned by each Manager. If the Company and Management have
not elected to purchase all of the Executive Stock to be transferred, GTCR may
elect to purchase all (but not less than all) of the Executive Stock to be
transferred upon the same terms and conditions as those set forth in the Sale
Notice by giving written
- 8 -
<PAGE>
notice of such election to the Transferring Purchaser, the Company and each
Manager within 90 days after the Sale Notice has been given to GTCR. If, the
Company, Management or GTCR do not elect to purchase all of the shares of
Executive Stock specified in the Sale Notice, the Transferring Purchaser may
transfer the shares of Executive Stock specified in the Sale Notice at a price
and on terms no more favorable to the transferee(s) thereof than specified in
the Sale Notice during the 30-day period immediately following the Authorization
Date. Any shares of Executive Stock not transferred within such 30-day period
will be subject to the provisions of this paragraph 6(c) upon subsequent
transfer.
(d) Co-Sale Rights.
(i) GTCR may elect to participate in the contemplated Transfer by
delivering written notice to the Transferring Purchaser within 90 days
after delivery of the Sale Notice to GTCR. If GTCR has elected to
participate in such Transfer, the Transferring Purchaser and GTCR shall be
entitled to sell in the contemplated Transfer, on the same terms and at the
price calculated pursuant to subparagraph 6(d) (ii) below, a number of
shares equal to the product of (x) the quotient determined by dividing the
number of shares of Common Stock owned by such person by the aggregate
number of shares of Common Stock owned by Executive and GTCR and (y) the
number of shares to be sold in the contemplated Transfer.
For example, if the Sale Notice contemplated a sale of 100 shares by the
Transferring Purchaser, and if the Transferring Purchaser was at such time
the owner of 30% of the Company's Common Stock (on a fully-diluted basis)
and if GTCR elected to participate and GTCR owned 20% of the Company's
Common Stock (on a fully-diluted basis), the Transferring Purchaser would
be entitled to sell 60 shares (30%/50% x 100 shares) and GTCR would be
entitled to sell 40 shares (20%/50% x 100 shares).
The Transferring Purchaser will use his best efforts to obtain the
agreement of the prospective transferee(s) to the participation of GTCR in
the contemplated transfer and will not transfer any Executive Stock to the
prospective transferee(s) if such transferee(s) refuses to allow the
participation of GTCR.
(ii) The purchase price to be paid by any transferee for shares of
Class B Common and Class A Common transferred in accordance with this
paragraph 6(d) shall be determined as follows: (i) the price per share to
be paid for Class B Common included in such Transfer shall be equal to the
amount per
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<PAGE>
share of Class B Common which such transferee has agreed to pay to the
Transferring Purchaser and (ii) the price per share to be paid for Class A
Common included in such Transfer shall be the price per share described in
clause (i) plus the quotient (the "Per Share Preference") of (A) the sum of
the Unreturned Preferred Amount and the Unpaid Yield of the Class A Common
at such time divided by (B) the number of shares of Class A Common then
outstanding.
(e) Permitted Transfers. The restrictions contained in this paragraph 6
shall not apply with respect to any Transfer of Executive Stock pursuant to
applicable laws of descent and distribution or among such Purchaser and such
Purchaser's Family Members; provided that such restrictions will continue to be
applicable to the Executive Stock after any such transfer and the transferees of
such Executive Stock have agreed in writing to be bound by the provisions of
this Agreement.
(f) Pledges. Notwithstanding the provisions of this paragraph 6, any
Purchaser may pledge any shares of Executive Stock to the Company to secure
payment of the Executive Note.
7. Additional Restrictions on Transfer of Executive Stock.
(a) Legend. The certificates representing the Executive Stock will bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
WERE ORIGINALLY ISSUED AS OF JULY 26, 1995, HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD
OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN
EXEMPTION FROM REGISTRATION THEREUNDER. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN
OTHER AGREEMENTS SET FORTH IN AN EXECUTIVE STOCK
AGREEMENT BETWEEN THE COMPANY, CERTAIN PURCHASERS,
AND A CERTAIN INVESTOR, DATED AS OF JULY 26, 1995.
A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE
HOLDER HEREOF AT THE ISSUER'S PRINCIPAL PLACE OF
BUSINESS WITHOUT CHARGE."
(b) Opinion of Counsel. No holder of Executive Stock may sell, transfer or
dispose of any Executive Stock (except
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<PAGE>
pursuant to an effective registration statement under the Securities Act)
without first delivering to the Company an opinion of counsel (reasonably
acceptable in form and substance to the Company) that (i) neither registration
nor qualification under the Securities Act and applicable state securities laws
is required in connection with such transfer or (ii) all such applicable
registration and qualification requirements have been satisfied.
B. Definitions.
"Affiliate" of any particular person or entity means any other person or
entity controlling, controlled by or under common control with such particular
person or entity.
"Cause" means, with respect to any Purchaser (i) a material breach of any
agreement with the Company, its Subsidiaries, its Affiliates or its stockholders
by such Purchaser (after notice and reasonable opportunity to cure), (ii) a
breach of such Purchaser's duty of loyalty to the Company or any of its
Subsidiaries or Affiliates or any act of dishonesty, gross negligence, willful
misconduct or fraud with respect to the Company or any of its Subsidiaries or
Affiliates or any of their stockholders, customers or suppliers, (iii) the
commission by such Purchaser of a felony, a crime involving moral turpitude or
other act or omission tending to cause harm to the standing and reputation of,
or otherwise bring public disgrace or disrepute to, the Company or any of its
Subsidiaries or Affiliates, (iv) such Purchaser's continued failure or refusal
to perform any material duty to the Company or any of its Subsidiaries or
Affiliates which is normally attached to his position (after notice and
reasonable opportunity to cure) or (v) such Purchaser's gross negligence or
willful misconduct in performing those duties which are normally attached to his
position (after notice and reasonable opportunity to cure). For purposes of this
Agreement, "a Purchaser's duty of loyalty to the Company or any of its
Subsidiaries or Affiliates" shall include such Purchaser's fiduciary obligation
to place the interests of the Company and its Subsidiaries or Affiliates ahead
of his personal interests and thereby not knowingly profit personally at the
expense of the Company or any of its Subsidiaries or Affiliates, and shall also
include specifically the affirmative obligation to disclose promptly to the
Board any known conflicts of interest such Purchaser may have with respect to
the Company and its Subsidiaries or Affiliates, and the negative obligations not
to usurp corporate opportunities of the Company, any of its Subsidiaries or any
of its Affiliates, not to engage in any "conflict-of-interest" transactions with
the Company, its Subsidiaries, or its Affiliates (without the approval of the
board directors), and not to compete directly with the Company or its
Subsidiaries or Affiliates (without the approval of the Board).
- 11 -
<PAGE>
"Event of Default" means Event of Default as defined in the Loan Agreement,
dated as of the date hereof, among SAS Acquisitions Inc. and Finova Capital
Corporation (the "Loan Agreement"), or any payment by Speed Queen Company
pursuant to its guaranty in connection with the Loan Agreement, and any similar
term or event in any replacement for, refinancing of, or modification or
amendment to, such agreements, or any similar term in any other loan or credit
facility entered into by the Company.
"Executive Call Stock" means, with respect to any Purchaser, at any time
(i) all equity securities of the Company then held by such Purchaser or a Family
Member, (ii) all equity securities of the Company which at any time have been
held by such Purchaser (whether or not then held by such Purchaser), and (iii)
all equity securities of the Company issued or issuable directly or indirectly
with respect to any equity securities described in clause (i) or (ii) above in
connection with a combination of shares, dividend, recapitalization, merger,
consolidation, reorganization or otherwise; provided that any equity securities
which had been Executive Call Stock and which have been transferred in
accordance with the terms of this Agreement will not be Executive Call Stock at
any subsequent time unless held at the time of determination by such Purchaser
or a Family Member.
"Executive Stock" means the shares of the Company's Class B Common Stock
purchased hereunder.
"Family Members" means such Purchaser's spouse and/or lineal descendants, a
trust for the sole benefit of such Purchaser and/or such Purchaser's spouse or
lineal descendants or upon a Purchaser's death, such Purchaser's estate.
"Investor Purchase Agreement" means the Investor Purchase Agreement, dated
as of the date hereof, among the Company, GTCR and certain investors party
thereto.
"Management" means Stephen R. Kerrigan, Mitchell Blatt, Robert M. Doyle and
Michael Stanky.
"Manager" means an individual member of Management.
"Original Cost" of each share of Class B Common Stock purchased hereunder
will be equal to $15.4028 (as proportionately adjusted for all subsequent stock
splits, stock dividends and other recapitalizations).
"Public Offering" means the sale in an underwritten public offering
registered under the Securities Act (other than on
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<PAGE>
Form S-8 or a similar or successor form) of shares of the Company's Common
Stock approved by the Board.
"Public Sale" means any sale pursuant to a registered Public Offering under
the Securities Act or any sale to the public pursuant to Rule 144 promulgated
under the Securities Act effected through a broker, dealer or market maker.
"Registration Agreement" means the Registration Agreement, dated as of the
date hereof, among the Company and certain of the Company's stockholders.
"Restriction Lapse Date" means the earlier of (i) the fifth anniversary of
the date of this Agreement and (ii) the date of the closing of any Public
Offering.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"Stockholders Agreement" means the Stockholders Agreement, dated as of the
date hereof, among the Company and certain of the Company's stockholders.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, association or other business entity if
such Person or Persons shall be allocated a majority of partnership, association
or other business entity gains or losses or shall be or control the managing
director or general partner of such partnership, association or other business
entity.
"Transfer" means to sell, transfer, assign, pledge or otherwise dispose of
(whether with or without consideration and whether voluntarily or involuntarily
or by operation of law).
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<PAGE>
"Unreturned Preferred Amount" means the "Unreturned Preferred Amount" as
defined in the Company's Certificate of Incorporation.
"Unpaid Yield" means the "Unpaid Yield" as defined in the Company's
Certificate of Incorporation.
9. Notices. Any notice provided for in this Agreement must be in writing
and must be either personally delivered, mailed by first class mail (postage
prepaid and return receipt requested) or sent by reputable overnight courier
service (charges prepaid) to the Purchasers at the addresses set forth on the
signature page hereto of such Purchaser and to the Company or GTCR as follows:
If to the Company:
SAS Acquisitions Inc.
c/o Coinmach Industries Co., L.P.
55 Lumber Road
Roslyn, NY 11576
Attention: President
With a copy (which will constitute notice to the Company) to:
Anderson Kill Olick & Oshinsky, P.C.
1251 Avenue of the Americas
New York, New York 10020
Attention: Ronald S. Brody, Esq.
If to GTCR:
Golder, Thoma, Cressey, Rauner Fund IV, L.P.
6100 Sears Tower
Chicago, Illinois 60606
Attention: Bruce V. Rauner
David A. Donnini
with a copy (which will not constitute notice to GTCR) to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Kevin R. Evanich, Esq.
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed
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<PAGE>
to have been given when so delivered or sent or, if mailed, five days after
deposit in the U.S. mail.
10. General Provisions.
(a) Transfers in Violation of Agreement. Any Transfer or attempted Transfer
of any Executive Stock in violation of any provision of this Agreement shall be
void, and the Company shall not record such Transfer on its books or treat any
purported transferee of such Executive Stock as the owner of such stock for any
purpose.
(b) Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(c) Complete Agreement. This Agreement, those documents expressly referred
to herein and other documents of even date herewith (i) embody the complete
agreement and understanding among the parties and (ii) supersede and preempt any
prior summaries of terms and conditions, understandings, agreements or
representations by or among the parties, written or oral, which may have related
to the subject matter hereof in any way.
(d) Counterparts. This Agreement may be executed in separate counterparts,
each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.
(e) Successors and Assigns. Except as otherwise provided herein, this
Agreement shall bind each Purchaser and the Company and their respective
successors and permitted assigns and inure to the benefit of and be enforceable
by each Purchaser, the Company, GTCR and their respective successors and
permitted assigns (including in each case subsequent holders of Executive
Stock); provided that no Purchaser may assign any of his rights under any other
provision of Part I of this Agreement except as part of a Transfer of Executive
Stock in accordance with paragraphs 5 or 6.
(f) Choice of Law. The corporate law of the State of Delaware will govern
all questions concerning the relative rights of the Company and its
stockholders. All other questions con-
- 15 -
<PAGE>
cerning the construction, validity and interpretation of this Agreement and the
exhibits hereto will be governed by and construed in accordance with the
internal laws of the State of Illinois, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of Illinois or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Illinois.
(g) Remedies. Each of the parties to this Agreement will be entitled to
enforce its rights under this Agreement specifically, to recover damages and
costs (including attorney's fees) caused by any breach of any provision of this
Agreement and to exercise all other rights existing in its favor. The parties
hereto agree and acknowledge that money damages may not be an adequate remedy
for any breach of the provisions of this Agreement and, except as otherwise
provided in paragraph 1O(d), that any party may in its sole discretion apply to
any court of law or equity of competent jurisdiction (without posting any bond
or deposit) for specific performance and/or other injunctive relief in order to
enforce or prevent any violations of the provisions of this Agreement.
(h) Amendment and Waiver. Except as otherwise expressly provided herein,
the provisions of this Agreement may be amended or modified only by written
agreement of the Company, each Purchaser and GTCR. No other course of dealing
between the parties or third-party beneficiaries hereof or any delay in
exercising any rights hereunder shall operate as a waiver of any rights of any
such persons.
(i) Survival of Representations and Warranties. All representations and
warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by any Purchaser or on his behalf or by the Company or on its
behalf.
(j) Business Days. If any time period for giving notice or taking action
hereunder expires on a day which is a Saturday, Sunday or holiday in the state
in which the Company's chief executive office is located, the time period shall
be automatically extended to the business day immediately following such
Saturday, Sunday or holiday.
(k) Descriptive Headings; Interpretation. The descriptive headings of this
Agreement are inserted for convenience only
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<PAGE>
and do not constitute a part of this Agreement. The use of the word "including"
in this Agreement shall be by way of example rather than by limitation.
* * * * *
- 17 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
SAS ACQUISITIONS INC.
By /s/ Stephen R. Kerrigan
--------------------------------------
Its Pres
--------------------------------------
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV, L.P.
By: GTCR IV, L.P.
Its: General Partner
By: Golder, Thoma, Cressey,
Rauner, Inc.
Its: General Partner
By:
-----------------------------------
Its: Principal
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
SAS ACQUISITIONS INC.
By
--------------------------------------
Its
--------------------------------------
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV, L.P.
By: GTCR IV, L.P.
Its: General Partner
By: Golder, Thoma, Cressey,
Rauner, Inc.
Its: General Partner
By: /s/
-----------------------------------
Its: Principal
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
/s/ Mitchell Blatt
-----------------------------------------
Mitchell Blatt
Number of Shares of Class
B Common: 4,000
Aggregate Purchase
Price: $61,611.20
Amount of cash or
check: $9,241.68
Amount of Note: $52,369.52
Address:
Mitchell Blatt
31 Wilmington Drive
Dix Hills, NY 11747
<PAGE>
CONSENT
-------
The undersigned spouse of Purchaser hereby acknowledges that I have read
the foregoing Executive Stock Purchase and that I understand its contents. I am
aware that the Agreement provides for the repurchase of my spouse's shares of
Common Stock under certain circumstances and imposes other restrictions on the
transfer of such Common Stock. I agree that my spouse's interest in the Common
Stock is subject to this Agreement and any interest I may have in such Common
Stock shall be irrevocably bound by this Agreement and further that my community
or marital property interest, if any, shall be similarly bound by this
Agreement.
/s/ Linda Blatt
- ------------------------------
Spouse's Name:
/s/ Kelly A. Newell
- ------------------------------
Witness
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
/s/ Robert M. Doyle
-----------------------------------------
Robert M. Doyle
Number of Shares of Class
B Common: 2,000
Aggregate Purchase
Price: $30,805.60
Amount of cash or
check: $4,620.80
Amount of Note: $26,184.80
Address:
Robert M. Doyle
53 Sheryl Crescent
Smithtown, NY 11787
<PAGE>
CONSENT
-------
The undersigned spouse of Purchaser hereby acknowledges that I have read
the foregoing Executive Stock Purchase and that I understand its contents. I am
aware that the Agreement provides for the repurchase of my spouse's shares of
Common Stock under certain circumstances and imposes other restrictions on the
transfer of such Common Stock. I agree that my spouse's interest in the Common
Stock is subject to this Agreement and any interest I may have in such Common
Stock shall be irrevocably bound by this Agreement and further that my community
or marital property interest, if any, shall be similarly bound by this
Agreement.
/s/ Christy O. Doyle
- ------------------------------
Spouse's Name:
/s/ Kelly A. Newell
- ------------------------------
Witness
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
/s/ Michael Stanky
-----------------------------------------
Michael Stanky
Number of Shares of Class
B Common: 1,500
Aggregate Purchase
Price: $23,104.20
Amount of cash or
check: $3,465.64
Amount of Note: $19,638.56
Address:
Michael Stanky
1125 Ashington Place
Desoto, TX 75115
<PAGE>
CONSENT
-------
The undersigned spouse of Purchaser hereby acknowledges that I have read
the foregoing Executive Stock Purchase and that I understand its contents. I am
aware that the Agreement provides for the repurchase of my spouse's shares of
Common Stock under certain circumstances and imposes other restrictions on the
transfer of such Common Stock. I agree that my spouse's interest in the Common
Stock is subject to this Agreement and any interest I may have in such Common
Stock shall be irrevocably bound by this Agreement and further that my community
or marital property interest, if any, shall be similarly bound by this
Agreement.
/s/ Mary Nell Stanky
- ------------------------------
Spouse's Name:
/s/ Lisa J. Crane
- ------------------------------
Witness
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
MCS CAPITAL, INC.
By /s/ Stephen R. Kerrigan
--------------------------------------
Its Pres.
--------------------------------------
Number of Shares of Class
B Common: 4,000
Aggregate Purchase
Price: $61,611.20
Amount of cash or
check: $9, 241. 68
Amount of Note: $52,369.52
Address:
MCS Capital, Inc.
c/o Coinmach Industries Co.,
L.P.
55 Lumber Road
Roslyn, NY 11576
<PAGE>
CONSENT
-------
The undersigned spouse of Purchaser hereby acknowledges that I have read
the foregoing Executive Stock Purchase and that I understand its contents. I am
aware that the Agreement provides for the repurchase of my spouse's shares of
Common Stock under certain circumstances and imposes other restrictions on the
transfer of such Common Stock. I agree that my spouse's interest in the Common
Stock is subject to this Agreement and any interest I may have in such Common
Stock shall be irrevocably bound by this Agreement and further that my community
or marital property interest, if any, shall be similarly bound by this
Agreement.
/s/ Maureen W. Kerrigan
- ------------------------------
Spouse's Name:
/s/ Kelly A. Newell
- ------------------------------
Witness
<PAGE>
Exhibit A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SAS ACQUISITIONS INC.
ARTICLE FIRST
-------------
The name of the Corporation is SAS Acquisitions Inc.
ARTICLE SECOND
--------------
The address of the Corporation's registered office in the State of Delaware
is 15 East North Street in the City of Dover, County of Kent 19901. The name of
its registered agent at such address is United Corporate Services, Inc.
ARTICLE THIRD
-------------
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
ARTICLE FOURTH
--------------
A. AUTHORIZED SHARES
-----------------
The total number of shares of capital stock which the Corporation has
authority to issue is 110,000 shares, consisting of:
(1) 85,000 shares of Class A Common Stock, par value $0.01 per share
(the "Class A Common");
--------------
(2) 15,000 shares of Class B Common Stock, par value $0.01 per share
(the "Class B Common"); and
--------------
(3) 10,000 shares of Preferred Stock, par value $0.01 per share (the
"Preferred Stock").
---------------
The Class A Common and Class B Common and any other common stock issued
hereafter are hereafter collectively referred to as the "Common Stock." The
------------
shares of Common Stock shall have
<PAGE>
the rights, preferences and limitations separately set forth below. Capitalized
terms used but not otherwise defined in this Article Fourth are defined in Part
D of this Article Fourth.
B. PREFERRED STOCK
---------------
Shares of Preferred Stock may be issued from time to time in one or more
series. The Board of Directors of the Corporation is hereby authorized to
determine and alter all rights, preferences and privileges and qualifications,
limitations and restrictions thereof (including, without limitation, voting
rights and the limitation and exclusion thereof) granted to or imposed upon any
wholly unissued series of Preferred Stock and the number of shares constituting
any such series and the designation thereof, and to increase or decrease (but
not below the number of shares of such series then outstanding) the number of
shares of any series subsequent to the issue of shares of that series then
outstanding. In case the number of shares of any series is so decreased, the
shares constituting such reduction shall resume the status which such shares had
prior to the adoption of the resolution originally fixing the number of shares
of such series.
C. COMMON STOCK
------------
Except as otherwise provided in this Part C or as otherwise required by
applicable law, all shares of Class A Common and Class B Common shall be
identical in all respects and shall entitle the holders thereof to the same
rights and privileges, subject to the same qualifications, limitations and
restrictions.
1. Voting Rights. Except as otherwise provided in this Part C or as
-------------
otherwise required by applicable law, holders of Class A Common and Class B
Common shall be entitled to one vote per share on all matters to be voted on by
the stockholders of the Corporation.
2. Distributions. Subject to the distribution rights set forth in
-------------
paragraphs 3(i) and 3(ii) below, at the time of each Distribution, such
Distribution shall be made to the holders of Class A Common and Class B Common
outstanding as of the time of such Distribution in the following priority:
(i) The holders of Class A Common, as a separate class, shall be entitled
to receive all or a portion of such Distribution (ratably among such holders
based upon the number of shares of Class A Common held by each such holder as of
the time of such
- 2 -
<PAGE>
Distribution) equal to the aggregate Unpaid Yield on the outstanding shares of
Class A Common as of the time of such Distribution, and no Distribution or any
portion thereof shall be made under paragraph 2(ii) or 2(iii) below until the
entire amount of the Unpaid Yield on the outstanding shares of Class A Common as
of the time of such Distribution has been paid in full. The Distributions made
pursuant to this paragraph 2(i) to holders of Class A Common shall constitute
payments of Yield on Class A Common.
(ii) After the required amount (if any) of the Distribution has been made
pursuant to paragraphs 2(i) above, the holders of Class A Common, as a separate
class, shall be entitled to receive all or a portion of such Distribution
(ratably among such holders based upon the number of shares of Class A Common
held by each such holder as of the time of such Distribution) so that the
aggregate amount of all Distributions made pursuant to this paragraph 2(ii) is
equal to the Unreturned Preferred Amount for the Class A Common, and no
Distribution or any portion thereof shall be made under paragraphs 2(iii) below
until the entire amount of the Unreturned Preferred Amount for the Class A
Common has been paid in full pursuant to this paragraph 2 (ii). The
Distributions made pursuant to this paragraph 2(ii) to holders of Class A Common
shall constitute payments of the Unreturned Preferred Amount for the Class A
Common.
(iii) After the required amounts (if any) of a Distribution have been made
pursuant to paragraphs 2(i) and 2(ii) above, the holders of Class A Common and
Class B Common, as a group, shall be entitled to receive the remaining portion
of such Distribution (ratably among such holders based upon the number of shares
of Common Stock held by each such holder as of the time of such Distribution).
3. Liquidation Preferences.
-----------------------
(i) Class A Common Liquidation Preference.
-------------------------------------
Upon any liquidation, dissolution or winding up of the Corporation, the
holders of Class A Common shall be entitled to be paid, before any Distribution
or payment is made upon any other Common Stock, an amount in cash equal to the
aggregate Unreturned Preferred Amount and the aggregate Unpaid Yield for the
Class A Common (ratably among such holders based upon the number of shares of
Class A Common held by each such holder as of the time of such Distribution) and
will then share ratably with the other shares of Common Stock in any remaining
Corporation assets (after the Distribution described in paragraph 3(ii) below).
If upon any such liquidation, dissolution or winding up of the Corporation, the
- 3 -
<PAGE>
Corporation's assets to be distributed among the holders of the Class A Common
are insufficient to permit payment to such holders of the aggregate amount which
they are entitled to be paid pursuant to this paragraph 3(i), then the entire
assets to be distributed shall be distributed ratably among such holders based
upon the aggregate Unreturned Preferred Amount and the aggregate Unpaid Yield
for the Class A Common held by each such holder. The Corporation shall mail
written notice of such liquidation, dissolution or winding up, not less than 60
days prior to the payment date stated therein, to each record holder of Class A
Common. Neither the consolidation or merger of the Corporation into or with any
other entity or entities, nor the sale or transfer by the Corporation of all or
any part of its assets, nor the reduction of the capital stock of the
Corporation, shall be deemed to be a liquidation, dissolution or winding up of
the Corporation within the meaning of this paragraph 3(i).
(ii) Class B Common Liquidation Preference.
-------------------------------------
Upon any liquidation, dissolution or winding up of the Corporation, after
the required amounts have been paid pursuant to paragraph 3(i) above, the
holders of Class B Common shall be entitled to be paid, before any Distribution
or payment is made upon any other Common Stock, an amount in cash equal to the
aggregate Unreturned Preferred Amount of the Class B Common (ratably among such
holders based upon the number of shares of Class B Common held by each such
holder as of the time of such Distribution) and will then share ratably with the
other shares of Common Stock in any remaining Corporation assets. If upon any
such liquidation, dissolution or winding up of the Corporation, the
Corporation's assets to be distributed among the holders of the Class B Common
are insufficient to permit payment to such holders of the aggregate amount which
they are entitled to be paid pursuant to this paragraph 3(ii), then the entire
assets to be distributed shall be distributed ratably among such holders based
upon the aggregate Unreturned Preferred Amount of the Class B Common held by
each such holder. The Corporation shall mail written notice of such liquidation,
dissolution or winding up, not less than 60 days prior to the payment date
stated therein, to each record holder of Class B Common. Neither the
consolidation or merger of the Corporation into or with any other entity or
entities, nor the sale or transfer by the Corporation of all or any part of its
assets, nor the reduction of the capital stock of the Corporation shall be
deemed to be a liquidation, dissolution or winding up of the Corporation within
the meaning of this paragraph 3(ii).
- 4 -
<PAGE>
4. Stock Splits and Stock Dividends. The Corporation shall not in any
--------------------------------
manner subdivide (by stock split, stock dividend or otherwise) or combine (by
reverse stock split or otherwise) the outstanding Common Stock of one class
unless the outstanding Common Stock of all the other classes shall be
proportionately subdivided or combined. All such subdivisions shall be payable
only in Class A Common to the holders of Class A Common and in Class B Common
only to the holders of Class B Common.
5. Events of Noncompliance.
-----------------------
5A. Definition. An "Event of Noncompliance" shall be deemed to have
---------- ----------------------
occurred if:
(i) the Corporation fails to pay on or prior to the eighth anniversary of
the initial issuance of the Class A Common the full amount of the Unreturned
Preferred Amount plus all Unpaid Yield with respect to the Class A Common,
whether or not such payment is legally permissible or is prohibited by any
agreement to which the Corporation is subject;
(ii) the Corporation breaches or otherwise fails to perform or observe in
any material respect any covenant or agreement set forth herein or in the Equity
Purchase Agreement (the "Purchase Agreement") or the Services Agreement (as
------------------
defined in the Purchase Agreement), and such breach or failure to perform is not
cured within 30 days after the occurrence thereof;
(iii) any representation or warranty contained in the Purchase Agreement or
required to be furnished to any holder of Class A Common pursuant to the
Purchase Agreement, or any information contained in writing required to be
furnished by the Corporation or any Subsidiary to any holder of Class A Common,
is false or misleading such that it would result in a material adverse effect
upon the business, operations, properties, assets or condition (financial or
otherwise) of the Corporation and its Subsidiaries taken as a whole on the date
made or furnished;
(iv) the Corporation or any Subsidiary makes an assignment for the benefit
of creditors or admits in writing its inability to pay its debts generally as
they become due; or an order, judgment or decree is entered adjudicating the
Corporation or any Subsidiary bankrupt or insolvent; or any order for relief
with respect to the Corporation or any Subsidiary is entered under the United
States Federal Bankruptcy Code; or the Corporation or any Subsidiary petitions
or applies to any tribunal for the appointment of a custodian, trustee, receiver
or liquidator of the Corporation or any Subsidiary or of any substantial part of
the
- 5 -
<PAGE>
assets of the Corporation or any Subsidiary, or commences any proceeding (other
than a proceeding for the voluntary liquidation and dissolution of a Subsidiary)
relating to the Corporation or any Subsidiary under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction; or any such petition or application is
filed, or any such proceeding is commenced, against the Corporation or any
Subsidiary and either (a) the Corporation or any such Subsidiary by any act
indicates its approval thereof, consent thereto or acquiescence therein or (b)
such petition, application or proceeding is not dismissed within 60 days;
(v) a judgment which exceeds any insurance available for the payment
thereof by more than $600,000 is rendered against the Corporation or any
Subsidiary and, within 60 days after entry thereof, such judgment is not
discharged or execution thereof stayed pending appeal, or within 60 days after
the expiration of any such stay, such judgment is not discharged; or
(vi) the Corporation or any Subsidiary defaults in the performance of any
obligation or agreement if the effect of such default is to cause an amount
exceeding $600,000 to become due prior to its stated maturity.
5B. Consequences of Certain Events of Noncompliance.
-----------------------------------------------
(i) If an Event of Noncompliance has occurred, the rate at which the Yield
on the Class A Common is calculated shall increase immediately by an increment
of 4 percentage point(s). Thereafter, until such time as no Event of
Noncompliance exists, the rate at which the Yield on the Class A Common is
calculated shall increase automatically at the end of each succeeding 90-day
period by an additional increment of 2 percentage point(s) (but in no event
shall such rate exceed 18%). Any increase of the dividend rate resulting from
the operation of this paragraph shall terminate as of the close of business on
the date on which no Event of Noncompliance exists, subject to subsequent
increases pursuant to this paragraph.
(ii) If any Event of Noncompliance has occurred, then the number of
directors constituting the Corporation's Board of Directors will, at the request
of the holders of a majority of the Class A Common then outstanding, be
increased by one member, and the holders of Class A Common will have the special
right, voting separately as a single class (with each share being entitled to
one vote) and to the exclusion of all other classes of the Corporation's stock,
to elect an individual to fill such newly created directorship, to fill any
vacancy of such directorship and to remove any individual elected to such
directorship. The newly
- 6 -
<PAGE>
created directorship will constitute a separate class of directors, and the
director elected by the holders of the Class A Common will be entitled to cast a
number of votes on each matter considered by the Board of Directors (including
for purposes of determining the existence of a quorum) equal to the sum of the
number of votes entitled to be cast by all of the other directors plus one. The
special right of the holders of Class A Common to elect such a member of the
Board of Directors may be exercised at the special meeting called pursuant to
this subparagraph (ii), at any annual or other special meeting of stockholders
and, to the extent and in the manner permitted by applicable law, pursuant to a
written consent of the holders of a majority of the Class A Common in lieu of a
stockholders meeting. Such special right shall continue until such time as there
is no longer any Event of Noncompliance in existence, at which time such special
right shall terminate subject to revesting upon the occurrence and continuation
of any Event of Noncompliance which gives rise to such special right hereunder.
At any time when such special right has vested in the holders of Class A
Common, a proper officer of the Corporation shall, upon the written request of
the holder(s) of at least 10% of the Class A Common then outstanding, addressed
to the secretary of the Corporation, call a special meeting of the holders of
Class A Common for the purpose of electing a director pursuant to this
subparagraph. Such meeting shall be held at the earliest legally permissible
date at the principal office of the Corporation, or at such other place
designated by the holders of at least 10% of the Class A Common then
outstanding. If such meeting has not been called by a proper officer of the
Corporation within 10 days after personal service of such written request upon
the secretary of the Corporation or within 20 days after mailing the same to the
secretary of the Corporation at its principal office, then the holders of at
least 10% of the Class A Common then outstanding may designate in writing one of
their number to call such meeting at the expense of the Corporation, and such
meeting may be called by such Person so designated upon the notice required for
annual meetings of stockholders and shall be held at the Corporation's principal
office, or at such other place designated by the holders of at least 10% of the
Class A Common then outstanding. Any holder of Class A Common so designated
shall be given access to the stock record books of the Corporation for the
purpose of causing a meeting of stockholders to be called pursuant to this
paragraph.
At any meeting or at any adjournment thereof at which the holders of Class
A Common have the special right to elect a director pursuant to this
subparagraph, the presence, in person or by proxy, of the holders of a majority
of the Class A Common then outstanding shall be required to constitute a quorum
for the election or removal of any director by the holders of the Class A
- 7 -
<PAGE>
Common exercising such special right. The vote of a majority of such quorum
shall be required to elect or remove any such director.
Any director so elected by the holders of Class A Common shall continue to
serve as a director until the expiration of the lesser of (a) a period of six
months following the date on which there is no longer any Event of Noncompliance
in existence or (b) the remaining period of the full term for which such
director has been elected. After the expiration of such six-month period or when
the full term for which such director has been elected ceases (provided that the
special right to elect directors has terminated), as the case may be, the number
of directors constituting the Board of Directors of the Corporation shall
decrease to such number as constituted the whole Board of Directors of the
Corporation immediately prior to the occurrence of the Event or Events of
Noncompliance giving rise to the special right to elect directors.
(iii) If any Event of Noncompliance exists, each holder of Class A Common
shall also have any other rights which such holder is entitled to under any
contract or agreement at any time and any other rights which such holder may
have pursuant to applicable law.
6. Registration of Transfer. The Corporation shall keep at its principal
------------------------
office (or such other place as the Corporation reasonably designates) a register
for the registration of shares of Common Stock. Upon the surrender of any
certificate representing shares of any class of Common Stock at such place, the
Corporation shall, at the request of the registered holder of such certificate,
execute and deliver a new certificate or certificates in exchange therefor
representing in the aggregate the number of shares of such class represented by
the surrendered certificate, and the Corporation forthwith shall cancel such
surrendered certificate. Each such new certificate will be registered in such
name and will represent such number of shares of such class as is requested by
the holder of the surrendered certificate and will be substantially identical in
form to the surrendered certificate. The issuance of new certificates shall be
made without charge to the holders of the surrendered certificates for any
issuance tax in respect thereof or other cost incurred by the Corporation in
connection with such issuance.
7. Replacement. Upon receipt of evidence reasonably satisfactory to the
-----------
Corporation (an affidavit of the registered holder will be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing one or more shares of any class of Common Stock, and in the case of
any such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Corporation (provided that if the holder is a
- 8 -
<PAGE>
financial institution or other institutional investor its own agreement will be
satisfactory), or, in the case of any such mutilation upon surrender of such
certificate, the Corporation shall (at its expense) execute and deliver in lieu
of such certificate a new certificate of like kind representing the number of
shares of such class represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
8. Notices. All notices referred to herein shall be in writing, shall be
-------
delivered personally or by first class mail, postage prepaid, and shall be
deemed to have been given when so delivered or mailed to the Corporation at its
principal executive offices and to any stockholder at such holder's address as
it appears in the stock records of the Corporation (unless otherwise specified
in a written notice to the Corporation by such holder).
9. Amendment and Waiver. No amendment or waiver of any provision of this
--------------------
Part C shall be effective without the prior approval of the holders of a
majority of the then outstanding Common Stock.
D. DEFINITIONS
-----------
"Distribution" means each distribution made by the Corporation to holders
of Common Stock, whether in cash, property, or securities of the Corporation and
whether by dividend, liquidation distributions or otherwise; provided that
neither of the following shall be a Distribution: (a) any redemption or
repurchase by the Corporation of any shares of Common Stock for any reason or
(b) any recapitalization or exchange of any shares of Common Stock, or any
subdivision (by stock split, stock dividend or otherwise) or any combination (by
reverse stock split or otherwise) of any outstanding shares of Common Stock.
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, association or other business
- 9 -
<PAGE>
entity if such Person or Persons shall be allocated a majority of partnership,
association or other business entity gains or losses or shall be or control the
managing director or general partner of such partnership, association or other
business entity.
"Unpaid Yield" means an amount equal to the excess, if any, of (a) the
------------
aggregate Yield accrued on the outstanding shares of Class A Common over (b) the
aggregate amount of Distributions made by the Corporation pursuant to paragraph
2 (i) of Part C of this Article Fourth.
"Unreturned Preferred Amount" means, (A) with respect to the Class A
---------------------------
Common, an amount equal to the excess, if any, of (a) the product of (1) the
number of shares of Class A Common then outstanding and (2) $76.4705882 over (b)
the aggregate amount of Distributions made by the Corporation with respect to
such shares pursuant to paragraph 2(ii) or paragraph 3(i) of Part C of this
Article Fourth, and (B) with respect to the Class B Common, an amount equal to
the excess, if any, of (a) the product of (x) the number of shares of Class B
Common then outstanding and (y) $15.4028 over (b) the aggregate amount of
Distributions made by the Corporation with respect to such shares pursuant to
paragraph 3(ii) of Part C of this Article Fourth.
"Yield" means, with respect to the outstanding shares of Class A Common for
-----
any quarter, the amount accruing on such shares each day during such quarter at
the rate of 8% per annum of the sum of (a) the Unreturned Preferred Amount from
time to time during such quarter, plus (b) the Unpaid Yield thereon for all
prior quarters. In calculating the amount of any Distribution to be made during
a quarter, the portion of the Yield on the outstanding shares of Class A Common
for the portion of such quarter elapsing before such Distribution is made shall
be taken into account.
ARTICLE FIFTH
-------------
The Corporation is to have perpetual existence.
ARTICLE SIXTH
-------------
In furtherance and not in limitation of the powers conferred by statute,
the board of directors of the Corporation is expressly authorized to make, alter
or repeal the by-laws of the Corporation.
ARTICLE SEVENTH
---------------
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws of the Corporation may
- 10 -
<PAGE>
provide. The books of the Corporation may be kept outside the State of Delaware
at such place or places as may be designated from time to time by the board of
directors or in the by-laws of the Corporation. Election of directors need not
be by written ballot unless the by-laws of the corporation so provide.
ARTICLE EIGHTH
--------------
To the fullest extent permitted by the General corporation Law of the State
of Delaware as the same exists or may hereafter be amended, a director of this
Corporation shall not be liable to the Corporation or its stockholders for
monetary damages for a breach of fiduciary duty as a director. Any repeal or
modification of this ARTICLE EIGHTH shall not adversely affect any right or
--------------
protection of a director of the Corporation existing at the time of such repeal
or modification.
ARTICLE NINTH
-------------
The Corporation expressly elects not to be governed by Section 203 of the
General Corporation Law of the State of Delaware.
ARTICLE TENTH
-------------
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this certificate of incorporation in the manner now or
hereafter prescribed herein and by the laws of the State of Delaware, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
- 11 -
<PAGE>
Exhibit 10.24
STOCKHOLDERS AGREEMENT
----------------------
THIS AGREEMENT is made as of July 26, 1995, among SAS Acquisitions Inc., a
Delaware corporation (the "Company"), and each of the other Persons executing a
signature page hereto whether signing as of or after the date hereof (each a
"Stockholder" and, collectively, the "Stockholders"). Capitalized terms used
herein are defined in paragraph 9 hereof.
The Company and the Stockholders desire to enter into this Agreement for
the purposes, among others, of (i) establishing the composition of the Company's
Board of Directors (the "Board"), (ii) assuring continuity in the management and
ownership of the Company and (iii) providing for the orderly sale of the
Company.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties to this Agreement hereby agree as follows:
1. Board of Directors.
------------------
(a) From and after the date hereof and until the provisions of this
paragraph 1 cease to be effective, each Stockholder shall vote all of its
Stockholder Shares which are voting shares and any other voting securities of
the Company over which such Stockholder has voting control and shall take all
other necessary or desirable actions within its control (whether in its capacity
as a stockholder, director, member of a board committee or officer of the
Company or otherwise, and including, without limitation, attendance at meetings
in person or by proxy for purposes of obtaining a quorum and execution of
written consents in lieu of meetings), and the Company shall take all necessary
or desirable actions within its control (including, without limitation, calling
special board and stockholder meetings), so that:
(i) the authorized number of directors on the Board shall be
established at five directors;
(ii) the following individuals shall be elected to the Board:
(1) two individuals designated by GTCR, which individuals
initially shall be David A. Donnini and Bruce V. Rauner (the "GTCR
Directors");
<PAGE>
(2) one member of management, employee or officer of the Company
or its Subsidiaries designated by the holders of a majority of the
Common Stock of the Company held by the Executives, which individual
initially shall be Stephen R. Kerrigan (the "Management Director");
and
(3) two individuals designated by GTCR who are reasonably
acceptable to the Executives, which individuals initially shall be
James N. Chapman and Mitchell Blatt (the "Outside Directors");
provided that if after 60 days GTCR and the Executives are unable to
agree upon the designation of any Outside Director(s), GTCR may
designate such Outside Director(s);
(iii) the composition of the board of directors of each of the
Company's Subsidiaries (a "Sub Board") shall be the same as that of the
Board;
(iv) any committees of the Board or a Sub Board shall be created only
upon, and may be disbanded upon, the approval of three members of the Board
and the composition of each such committee (if any) shall be
proportionately equivalent to that of the Board;
(v) the removal from the Board or a Sub Board (with or without cause)
of any GTCR Director or Outside Director shall be at GTCR's written
request, but only upon such written request and under no other
circumstances; and the removal from the Board or a Sub Board (with or
without cause) of any Management Director shall be at the written request,
and only at the written request, of the holders of a majority of the
Stockholder Shares held by the Executives, provided that if any Management
Director ceases to be a member of management, employee or officer of the
Company or its Subsidiaries, he shall be removed as a director promptly
after his employment ceases; and
(vi) in the event that any GTCR Director, Management Director or
Outside Director ceases to serve as a member of the Board or a Sub Board
during his term of office, the resulting vacancy on the Board or the Sub
Board shall be filled in the manner provided in subparagraphs (ii) (1)
(ii)(2) or (ii)(3) above, as the case may be.
(b) The Company shall pay the reasonable out-of-pocket expenses incurred by
each director in connection with attending the meetings of the Board, any Sub
Board and any committee thereof.
-2-
<PAGE>
(c) The rights of GTCR under this paragraph 1 shall terminate at such time
as GTCR and its Permitted Transferees hold in the aggregate less than 50% of the
Stockholder Shares held by GTCR on the date hereof.
(d) The rights of the Executives under this paragraph 1 shall terminate at
such time as the Executives and their Permitted Transferees hold in the
aggregate less than 50% of the Stockholder Shares held by such Persons on the
date hereof.
(e) The provisions of this paragraph 1 shall terminate automatically and be
of no further force and effect upon a Qualified Public Offering.
(f) If any party fails to designate a representative to fill a directorship
pursuant to the terms of this paragraph 1, the election of an individual to such
directorship shall be accomplished in accordance with the Company's bylaws and
applicable law.
2. Representations and Warranties. Each Stockholder represents and warrants
------------------------------
that (i) such Stockholder is the record owner of the number of each class of
Stockholder Shares set forth on the signature page of such Stockholder attached
hereto, (ii) this Agreement has been duly authorized, executed and delivered by
such Stockholder and constitutes the valid and binding obligation of such
Stockholder, enforceable in accordance with its terms, and (iii) such
Stockholder has not granted and is not a party to any proxy, voting trust or
other agreement which is inconsistent with, conflicts with or violates any
provision of this Agreement. No holder of Stockholder Shares shall grant any
proxy or become party to any voting trust or other agreement which is
inconsistent with, conflicts with or violates any provision of this Agreement.
3. Pre-Emptive Rights.
------------------
(a) Except for issuances of equity securities of the Company or options or
other rights to acquire equity securities of the Company
(i) in connection with a registered primary public offering,
(ii) to employees or Outside Directors of the Company or its
Subsidiaries,
(iii) to any lender (other than GTCR or any of its Affiliates) in
connection with the incurrence of Indebtedness by the Company or any of its
Subsidiaries,
-3-
<PAGE>
(iv) as payment of all or a portion of the purchase price of any
business or assets thereof acquired by the Company or any of its
Subsidiaries, or
(v) upon the exercise of any option or other right described in any of
clauses (i) through (iv) above or any other option or right to acquire
equity securities issued by the Company,
if the Company authorizes the issuance or sale of any equity securities of the
Company or any securities containing options or rights to acquire any equity
securities of the Company (other than as a dividend on outstanding Common
Stock), the Company shall first offer to sell to each Stockholder, at the same
price and on the same terms, a portion of such securities, options or rights
(the "New Securities") equal to the quotient of (i) the number of Stockholder
--------------
Shares (other than Unvested Shares) held by such Stockholder divided by (ii) the
----------
total number of shares of Common Stock (other than Unvested Shares) on a Fully
Diluted Basis.
(b) In order to exercise its purchase rights pursuant to this paragraph 3,
a Stockholder must within ten business days after receipt of written notice from
the Company describing in reasonable detail the New Securities being offered,
the purchase price thereof, the payment terms and such Stockholder's percentage
allotment, deliver a written notice to the Company describing its election. If
all of the New Securities offered to the Stockholders are not fully subscribed
by the Stockholders, the remaining New Securities shall be reoffered by the
Company to the Stockholders purchasing their full allotment upon the terms set
forth in this paragraph 3 until either all such New Securities have been
subscribed for or no Stockholder subscribes for additional New Securities,
except that such Stockholder must give written notice of its election to
purchase such reoffered New Securities within five (and not 10) business days
after receipt of notice of any such reoffer.
(c) If a Stockholder purchases all or any portion of any New Securities
offered pursuant to this paragraph 3 ("Purchased New Securities"), such
------------------------
Stockholder shall be required to concurrently purchase an equal proportion of
each other class of debt or equity securities of the Company or any of its
Subsidiaries which are issued contemporaneously with such Purchased New
Securities.
(d) During the 180 days after the expiration of the offering periods
described above, the Company shall be entitled to sell any New Securities which
the Stockholders have not elected to purchase, on terms and conditions no more
favorable to the
-4-
<PAGE>
purchasers thereof than those offered to the Stockholders. Any New Securities
offered or sold by the Company after such 180-day period must be reoffered to
the Stockholders pursuant to the terms of this paragraph 3.
(e) If the New Securities possess voting rights, a Stockholder may request,
and the Company shall issue to the requesting Stockholder, in place of the New
Securities such Stockholder would be entitled to purchase pursuant to this
paragraph 3, securities that are identical to the New Securities except that
such securities (i) will be non-voting and (ii) will be convertible into New
Securities at the request of the Stockholder on a share-for-share basis.
(f) The rights pursuant to this paragraph 3 shall terminate upon a
Qualified Public Offering.
(g) Notwithstanding any other provision of this Agreement to the contrary,
so long as (i) no Event of Default relating to the payment of any amounts due to
lenders has occurred and is continuing or (ii) the due date of any amounts
outstanding under the Loan Agreement have not been accelerated, the Company
shall not issue or sell any shares of common stock of the Company or any
security exchangeable or convertible into, or any option, warrant, or other
right to acquire such shares (each a "Common Stock Equivalent") at a price less
-----------------------
than fair market value on the date of such issuance or sale.
4. Sale of the Company.
-------------------
(a) If the Board and the holders of a majority of the shares of Common
Stock then outstanding approve a sale of all or substantially all of the
Company's assets determined on a consolidated basis or a sale of all or
substantially all of the Company's outstanding capital stock (whether by merger,
recapitalization, consolidation, reorganization, combination or otherwise) to
any other person or entity (collectively, a "Sale of the Company"), each holder
of Stockholder Shares shall vote for, consent to, and raise no objections
against, such Sale of the Company. If the Sale of Company is structured as (i) a
merger or consolidation, each holder of Stockholder Shares shall waive any
dissenters rights, appraisal rights or similar rights in connection with such
merger or consolidation or (ii) a sale of stock, each holder of Stockholder
Shares shall agree to sell all of its shares of Common Stock and rights to
acquire shares of Common Stock Stockholder Shares on the terms and conditions
approved by the Board and the holders of a majority of the Common Stock then
outstanding. Each holder of Stockholder Shares shall take all
-5-
<PAGE>
necessary or desirable actions in connection with the consummation of the Sale
of the Company as requested by the Company.
(b) The obligations of the holders of Stockholder Shares with respect to
the Sale of the Company are subject to the satisfaction of the following
conditions: (i) upon the consummation of the Sale of the Company, each holder of
Stockholder Shares shall receive the same form of consideration and the amount
of consideration as set forth in paragraph 4 (c) below; (ii) if any holders of a
class of Common Stock are given an option as to the form and amount of
consideration to be received, each holder of such class of Common Stock shall be
given the same option; and (iii) each holder of then currently exercisable
rights to acquire shares of a class of Common Stock shall be given an
opportunity to either (A) exercise such rights prior to the consummation of the
Sale of the Company and participate in such sale as holders of such class of
Common Stock or (B) upon the consummation of the Sale of the Company, receive in
exchange for such rights consideration equal to the amount determined by
multiplying (1) the same amount of consideration per share of Common Stock
received by holders of such class of Common Stock in connection with the Sale of
the Company less the exercise price per share of Common Stock of such rights to
acquire such class of Common Stock by (2) the number of shares of such class of
Common Stock represented by such rights.
(c) In the event of a Sale of the Company, each Stockholder shall receive
in exchange for its Stockholder Shares the same portion of the aggregate
consideration from such Sale of the Company that such Stockholder would have
received if such aggregate consideration had been distributed by the Company in
complete liquidation pursuant to the rights and preferences set forth in the
Company's Certificate of Incorporation as in effect immediately prior to such
Sale of the Company. Each holder of Stockholder Shares shall take all necessary
or desirable actions in connection with the distribution of the aggregate
consideration from such Sale of the Company as requested by the Company.
5. Co-Sale Rights.
--------------
(a) Prior to the transfer or series of related transfers other than
pursuant to a Public Sale or Sale of the Company (a "Transfer") of any shares of
--------
Stockholder Stock owned directly or indirectly by GTCR that results in GTCR
owning directly or indirectly less than 60% of the then outstanding Common Stock
of the Company, and prior to any such Transfer thereafter, GTCR shall give
written notice (the "Sale Notice") to the Company and each of the other
-----------
Stockholders. The Sale Notice will disclose in reasonable detail the identity of
the prospective transferee(s),
-6-
<PAGE>
the number and class of shares to be transferred and the terms and conditions of
the proposed Transfer. GTCR shall not consummate any such Transfer until 60 days
after the Sale Notice has been given to the Company and each other Stockholder,
unless the parties to the Transfer have been fully determined pursuant to this
paragraph 5 prior to the expiration of such 60-day period (the date of the first
to occur of such events is referred to herein as the "Authorization Date").
------------------
(b) Any other Stockholder may elect to participate in the contemplated
Transfer by delivering written notice to GTCR within 30 days after delivery of
the Sale Notice to such Stockholder. If any Stockholder has elected to
participate in such Transfer, GTCR and the Stockholders so electing shall be
entitled to sell in the contemplated Transfer, on the same terms and at the
price calculated pursuant to subparagraph 5(c) below, a number of shares equal
to the product of (i) the quotient determined by dividing the number of shares
of Common Stock owned by such Stockholder by the aggregate number of shares of
Common Stock owned by all such electing Stockholders and GTCR and (ii) the
number of shares to be sold in the contemplated Transfer.
For example, if the Sale Notice contemplated a sale of 100 shares by GTCR,
-----------
and if GTCR was at such time the owner of 30% of the Company's Common Stock
(on a Fully Diluted Basis) and if a Stockholder elected to participate and
such Stockholder owned 20% of the Company's Common Stock (on a Fully
Diluted Basis), GTCR would be entitled to sell 60 shares (30%/50% x 100
shares) and such electing Stockholder would be entitled to sell 40 shares
(20%/50% x 100 shares).
GTCR will use its best efforts to obtain the agreement of the prospective
transferee(s) to the participation of the electing Stockholders in the
contemplated Transfer and will not transfer any Stockholder Stock to the
prospective transferee(s) if such transferee(s) refuses to allow the
participation of the electing Stockholders.
(c) The purchase price to be paid by any transferee for shares of Common
Stock transferred in accordance with this paragraph 5 shall be determined as
follows: (i) the price per share to be paid for Class A Common included in such
Transfer shall be equal to the amount per share of Class A Common which such
transferee has agreed to pay to GTCR and (ii) the price per share to be paid for
Class B Common included in such Transfer shall be the price per share described
in clause (i) minus the quotient of (A) the sum of the Unreturned Preferred
-----
Amount and the Unpaid Yield
-7-
<PAGE>
of the Class A Common at such time divided by (B) the number of shares of Class
----------
A Common then outstanding.
6. Initial Public Offering. In the event that the Board and the holders of
-----------------------
a majority of the shares of Common Stock then outstanding approve an Initial
Public Offering, the holders of Common Stock shall take all necessary or
desirable actions in connection with the consummation of the Initial Public
Offering. In the event that such Initial Public Offering is an underwritten
offering and the managing underwriters advise the Company in writing that in
their opinion the Common Stock structure would adversely affect the
marketability of the offering, each holder of Stockholder Shares shall consent
to and vote for a recapitalization, reorganization and/or exchange of the Common
Stock into securities that the managing underwriters, the Board and holders of a
majority of the shares of Common Stock then outstanding find acceptable and
shall take all necessary or desirable actions in connection with the
consummation of the recapitalization, reorganization and/or exchange; provided
that the resulting securities reflect and are consistent with the rights and
preferences among the outstanding classes of securities set forth in the
Company's Certificate of Incorporation as in effect immediately prior to such
recapitalization, reorganization or exchange, and such recapitalization,
reorganization or exchange is otherwise fair and reasonable to the Company and
the holders of each class of the Company's equity securities in light of such
relative rights and preferences.
7. Legend. Each certificate evidencing Stockholder Shares and each
------
certificate issued in exchange for or upon the transfer of any Stockholder
Shares (if such shares remain Stockholder Shares after such transfer) shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"The securities represented by this certificate are subject to a
Stockholders Agreement dated as of July 26, 1995, among the
issuer of such securities (the "Company") and certain of the
Company's stockholders, as amended and modified from time to
time. A copy of such Stockholders Agreement shall be furnished
without charge by the Company to the holder hereof upon written
request."
The Company shall imprint such legend on certificates evidencing
Stockholder Shares outstanding as of the date hereof. The legend set forth above
shall be removed from the certificates evidencing any shares which cease to be
Stockholder Shares.
-8-
<PAGE>
8. Transfer. Prior to transferring any Stockholder Shares (other than in a
--------
Public Sale or a Sale of the Company) to any Person, the transferring holders of
Stockholder Shares shall cause the prospective transferee to execute and deliver
to the Company, for the benefit of the Company and the other Stockholders, a
counterpart of this Agreement pursuant to which such transferee agrees to be
bound as a "Stockholder" by the provisions of this Agreement.
9. Definitions.
-----------
"Affiliate" of a Person means any other Person, entity or investment fund
controlling, controlled by or under common control with such Person and any
partner of such Person which is a partnership.
"Authorization Date" has the meaning specified in paragraph 5 (a) .
------------------
"Board" has the meaning set forth in the preamble.
-----
"Class A Common" means the Company's Class A Common Stock, par value $.Ol
--------------
per share.
"Class B Common" means the Company's Class B Common Stock, par value $.Ol
--------------
per share.
"Common Stock" means the Class A Common and the Class B Common.
------------
"Company" has the meaning set forth in the preamble.
-------
"Event of Default" means an "Event of Default" as defined in the Loan
----------------
Agreement, dated as of the date hereof, among the Company and Finova Capital
Corporation (the "Loan Agreement"), or any payment by Speed Queen Company
pursuant to its guaranty in connection with the Loan Agreement, and any similar
term or event in any replacement for, refinancing of, or modification or
amendment to, such agreements, or any similar term in any other loan or credit
facility entered into by the Company.
"Executive" means any Stockholder designated as an "Executive" on the
---------
signature page of such Stockholder attached hereto.
"Executive Stock Agreement" means any agreement (including any Executive
-------------------------
Stock Agreement, dated as of the date
-9-
<PAGE>
hereof) between the Company and an Executive pursuant to which such Executive
acquires Common Stock.
"Fully Diluted Basis" means, without duplication, (i) all shares of Common
-------------------
Stock outstanding at the time of determination plus (ii) all shares of Common
Stock issuable upon conversion of any convertible securities or the exercise of
any option, warrant or similar right, whether or not such conversion, right or
option, warrant or similar right is then exercisable.
"GTCR" means Golder, Thoma, Cressey, Rauner Fund IV, L.P., a Delaware
----
limited partnership.
"GTCR Directors" has the meaning set forth in paragraph l(a).
--------------
"Indebtedness" means all indebtedness for borrowed money, all indebtedness
------------
under revolving credit arrangements, all capitalized lease obligations and all
guarantees of any of the foregoing.
"Initial Public Offering" means the sale in an underwritten public offering
-----------------------
registered under the Securities Act (other than on Form S-8 or a similar form)
of shares of the Company's Common Stock.
"Investor" means any Stockholder designated as an "Investor" on the
--------
signature page of such Stockholder attached hereto.
"Management Director" has the meaning set forth in paragraph l(a).
-------------------
"Outside Director" has the meaning set forth in paragraph l(a).
----------------
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Public Sale" means any sale of Stockholder Shares to the public pursuant
-----------
to an offering registered under the Securities Act or to the public through a
broker, dealer or market maker pursuant to the provisions of Rule 144 adopted
under the Securities Act.
-10-
<PAGE>
"Qualified Public Offering" means the sale in an underwritten public
-------------------------
offering registered under the Securities Act (other than on Form S-8 or a
similar form) of shares of the Company's Common Stock having an aggregate
offering value of at least $25 million.
"Sale Notice" has the meaning set forth in paragraph 5(a).
-----------
"Sale of the Company" has the meaning set forth in paragraph 4.
-------------------
"Securities Act" means the Securities Act of 1933, as amended from time to
--------------
time.
"Stockholder Shares" means (i) any Common Stock purchased or otherwise
------------------
acquired by any Stockholder, (ii) any capital stock or other equity securities
issued or issuable directly or indirectly with respect to the Common Stock
referred to in clause (i) above by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization, and (iii) any other shares of any class or series of
capital stock of the Company held by a Stockholder; provided that Stockholder
Shares shall not include nonvoting stock described in (i), (ii) or (iii) for
purposes of paragraph I hereof. As to any particular shares constituting
Stockholder Shares, such shares shall cease to be Stockholder Shares when they
have been (x) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them or (y) sold to the
public through a broker, dealer or market maker pursuant to Rule 144 (or any
similar provision then in force) under the Securities Act.
"Stockholders" has the meaning set forth in the preamble.
------------
"Sub Board has the meaning set forth in paragraph 1(a).
---------
"Subsidiary" means, with respect to any Person, any corporation, limited
----------
liability company, partnership, association or other business entity of which
(i) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the limited liability company, partnership or other similar ownership
interest thereof is at the
-11-
<PAGE>
time owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control the managing director or general partner of such limited
liability company, partnership, association or other business entity.
"Transfer" has the meaning set forth in paragraph 5(a).
--------
"Unpaid Yield" means the "Unpaid Yield" as defined in the Company's
------------
Certificate of Incorporation.
"Unreturned Preferred Amount" means the "Unreturned Preferred Amount" as
---------------------------
defined in the Company's Certificate of Incorporation.
"Unvested Shares" has the meaning set forth in Section 4(a) of the
---------------
Executive Stock Agreements.
10. Transfers in Violation of Agreement. Any Transfer or attempted Transfer
-----------------------------------
of any Stockholder Shares in violation of any provision of this Agreement shall
be void, and the Company shall not record such Transfer on its books or treat
any purported transferee(s) of such Stockholder Shares as the owner of such
shares for any purpose.
11. Amendment and Waiver. Except as otherwise provided herein, no
--------------------
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or the Stockholders unless such modification,
amendment or waiver is approved in writing by the Company or the holders of a
majority of the Stockholder Shares, respectively; provided, however, that no
such modification, amendment or waiver shall materially and adversely affect the
rights hereunder of any Stockholder vis-a-vis other similarly-situated
Stockholders without the approval in writing of such Stockholder. The failure of
any party to enforce any of the provisions of this Agreement shall in no way be
construed as a waiver of such provisions and shall not affect the right of such
party thereafter to enforce each and every provision of this Agreement in
accordance with its terms.
12. Severability. Whenever possible, each provision of this Agreement shall
------------
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of
-12-
<PAGE>
this Agreement is held to be invalid, illegal or unenforceable in any respect
under any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect the validity, legality or
enforceability of any other provision of this Agreement in such jurisdiction or
affect the validity, legality or enforceability of any provision in any other
jurisdiction, but this Agreement shall be reformed, construed and enforced in
such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
13. Entire Agreement. Except as otherwise expressly set forth herein, this
----------------
Agreement embodies the complete agreement and understanding among the parties
hereto with respect to the subject matter hereof and supersedes and preempts any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
14. Successors and Assigns. Except as otherwise provided herein, this
----------------------
Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Stockholders and any subsequent
holders of Stockholder Shares and the respective successors and assigns of each
of them, so long as they hold Stockholder Shares.
15. Counterparts. This Agreement may be executed in multiple counterparts,
------------
each of which shall be an original and all of which taken together shall
constitute one and the same agreement.
16. Remedies. The Company and the Stockholders shall be entitled to enforce
--------
their rights under this Agreement specifically, to recover damages by reason of
any breach of any provision of this Agreement and to exercise all other rights
existing in their favor. The parties hereto agree and acknowledge that money
damages would not be an adequate remedy for any breach of the provisions of this
Agreement and that the Company or any Stockholder may in its sole discretion
apply to any court of law or equity of competent jurisdiction for specific
performance and/or injunctive relief (without posting a bond or other security)
in order to enforce or prevent any violation of the provisions of this
Agreement.
17. Notices. Any notice provided for in this Agreement shall be in writing
-------
and shall be either personally delivered, or mailed first class mail (postage
prepaid) or sent by reputable overnight courier service (charges prepaid) to the
Company at the addresses set forth below and to any other recipient at the
address indicated on the signature page of such Stockholder attached hereto
-13-
<PAGE>
and to any subsequent holder of Stockholder Shares subject to this Agreement at
such address as indicated by the Company's records, or at such address or to the
attention of such other person as the recipient party has specified by prior
written notice to the sending party. Notices shall be deemed to have been given
hereunder when delivered personally, three days after deposit in the U.S. mail
and one day after deposit with a reputable overnight courier service. Notices
shall be sent to the following addresses:
If to the Company, to:
SAS Acquisitions Inc.
c/o Coinmach Industries Co., L.P.
55 Lumber Road
Roslyn, NY 11576
Attention: President
with a copy, which will not constitute notice of the Company, to:
Anderson Kill Olick & Oshinsky, P.C.
1251 Avenue of the Americas
New York, NY 10020
Attention: Ronald S. Brody, Esq.
18. Governing Law. All issues and questions concerning the construction,
-------------
validity, interpretation and enforceability of this Agreement and the exhibits
and schedules hereto shall be governed by, and construed in accordance with, the
laws of the State of New York, without giving effect to any choice of law or
conflict of law, rules or provisions (whether of the State of Delaware or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.
19. Descriptive Headings. The descriptive headings of this Agreement are
--------------------
inserted for convenience only and do not constitute a part of this Agreement.
* * * *
-14-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
SAS ACQUISITIONS INC.
By: /S/ Stephen R. Kerrigan
-------------------------------------
Its: President
-------------------------------------
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV, L.P.
By: GTCR IV, L.P.
Its: General Partner
By: GOLDER, THOMA, CRESSEY,
RAUNER, INC.
Its: General Partner
By: /s/
-------------------------------------
Its: Principal
-------------------------------------
Number and Class of
Stockholder Shares: 72,153 Shares Class A Common
Designation: None
Notices should be sent to:
Golder, Thoma, Cressey, Rauner, Fund IV, L.P.
6100 Sears Tower
Chicago, IL 60606
Attention: David A. Donnini
with a copy, which will not constitute notice to GTCR, to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Kevin R. Evanich
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
/s/ Mitchell Blatt
-------------------------------------
Mitchell Blatt
Number and Class of
Stockholder Shares: 398 Shares Class A Common
4,000 Shares Class B Common
Designation: Investor with respect to Class A Common
Executive with respect to Class B Common
Notices should be sent to:
Mitchell Blatt
31 Wilmington Drive
Dix Hills, NY 11747
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
/s/ Robert M. Doyle
-------------------------------------
Robert M. Doyle
Number and Class of
Stockholder Shares: 2,000 Shares Class B Common
Designation: Executive
Notices should be sent to:
Robert M. Doyle
53 Sheryl Crescent
Smithtown, NY 11787
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
/s/ Michael Stanky
-------------------------------------
Michael Stanky
Number and Class of
Stockholder Shares: 425 Shares Class A Common
1,500 Shares Class B Common
Designation: Investor with respect to Class A Common
Executive with respect to Class B Common
Notices should be sent to:
Michael Stanky
1125 Ashington Place
Desoto, TX 75115
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
HELLER FINANCIAL, INC.
By: /s/ Ellen J. Cook
-------------------------------------
Its: Assistant Vice President
-------------------------------------
Number and Class of
Stockholder Shares: 3,806 Shares Class A Common
Designation: Investor
Notices should be sent to:
Heller Financial, Inc.
500 West Monroe Street
Chicago, IL 60661
Attn: Portfolio Manager
Portfolio Organization
Corporate Finance Group
with a copy, which will not constitute notice, to:
Heller Financial, Inc.
500 West Monroe Street
Chicago, IL 60661
Attn: Legal Department
Portfolio Organization
Corporate Finance Group
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
JACKSON NATIONAL LIFE INSURANCE
COMPANY
By: /s/
-------------------------------------
Its: Vice President
-------------------------------------
Number and Class of
Stockholder Shares: 3,425 Shares Class A Common
Designation: Investor
Notices should be sent to:
Jackson National Life Insurance Company
c/o PPM America, Inc.
225 West Wacker Drive, Suite 1200
Chicago, IL 60606
Attn: Private Placements
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
JACKSON NATIONAL LIFE INSURANCE
COMPANY OF MICHIGAN
By: /s/
-------------------------------------
Its: Vice President
-------------------------------------
Number and Class of
Stockholder Shares: 381 Shares Class A Common
Designation: Investor
Notices should be sent to:
Jackson National Life Insurance Company of Michigan
c/o PPM America, Inc.
225 West Wacker Drive, Suite 1200
Chicago, IL 60606
Attn: Private Placements
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
/s/ James N. Chapman
-------------------------------------
James N. Chapman
Number and Class of
Stockholder Shares: 300 Shares Class A Common
Designation: Investor
Notices should be sent to:
James N. Chapman
14 Alpine Road
Greenwich, CT 06830
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
/s/ Michael E. Marrus
-------------------------------------
Michael E. Marrus
Number and Class of
Stockholder Shares: 228 Shares Class A Common
Designation: Investor
Notices should be sent to:
Michael E. Marrus
755 Park Avenue
New York, NY 10021
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
PRESIDENT AND FELLOWS OF
HARVARD COLLEGE
By: Harvard Management
Company, Inc.
By: /s/ Timothy Peterson
-------------------------------------
Its:
-------------------------------------
By: /s/ Jack R. Meyer
-------------------------------------
Its:
-------------------------------------
Number and Class of
Stockholder Shares: 2,405 Shares Class A Common
Designation: Investor
Notices should be sent to:
President and Fellows of Harvard College
c/o Harvard Management Company, Inc.
c/o Timothy Peterson
600 Atlantic Avenue
Boston, MA 02210
<PAGE>
Exhibit 10.25
REGISTRATION AGREEMENT
----------------------
THIS AGREEMENT is made as of July 26, 1995, among SAS Acquisitions Inc., a
Delaware corporation (the "Company"), and each Person executing a signature page
-------
hereto whether signing as of or after the date hereof. Unless otherwise provided
in this Agreement, capitalized terms used herein shall have the meanings set
forth in paragraph 8 hereof.
The parties hereto agree as follows:
1. Demand Registrations.
--------------------
(a) Requests for Registration. At any time after the Company has completed
-------------------------
an Initial Public Offering, GTCR may request registration under the Securities
Act of all or any portion of the GTCR Registrable Securities on Form S-1 or any
similar long-form registration ("Long-Form Registrations"), and may request
-----------------------
registration under the Securities Act of all or any portion of the GTCR
Registrable Securities on Form S-2 or S-3 or any similar short-form registration
("Short-Form Registrations") if available. All registrations requested pursuant
------------------------
to this paragraph 1(a) are referred to herein as "Demand Registrations." Each
--------------------
request for a Demand Registration shall specify the approximate number of
Registrable Securities requested to be registered and the anticipated per share
price range for such offering. Within ten days after receipt of any such
request, the Company shall give written notice of such requested registration to
all other holders of Registrable Securities and shall include in such
registration all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within 15 days after the receipt
of the Company's notice.
(b) Long-Form Registrations. GTCR shall be entitled to request four
-----------------------
Long-Form Registrations in which the Company shall pay all Registration Expenses
("Company-paid Long-Form Registrations"). A registration shall not count as
------------------------------------
one of the permitted Long-Form Registrations until it has become effective, and
no Long-Form Registration shall count as one of the Company-paid Long-Form
Registrations unless GTCR is able to register and sell at least 75% of the GTCR
Registrable Securities requested to be included in such registration; provided
that in any event the Company shall pay all Registration Expenses in connection
with any registration initiated as a Company-paid Long-Form Registration whether
or not it has become effective and whether or not such registration is counted
as one of the Company-paid Long-Form Registrations.
<PAGE>
(c) Short-Form Registrations. In addition to the Long-Form Registrations
------------------------
provided pursuant to paragraph 1(b), GTCR shall be entitled to request an
unlimited number of Short-Form Registrations in which the Company shall pay all
Registration Expenses. Demand Registrations shall be Short-Form Registrations
whenever the Company is permitted to use any applicable short form. After the
Company has become subject to the reporting requirements of the Securities
Exchange Act, the Company shall use commercially reasonable efforts to make
Short-Form Registrations on Form S-3 available for the sale of Registrable
Securities.
(d) Priority on Demand Registrations. If a Demand Registration is an
--------------------------------
underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and, if
permitted hereunder, other securities requested to be included in such offering
exceeds the number of Registrable Securities and other securities, if any, which
can be sold therein without adversely affecting the Company or the marketability
of the offering, the Company shall include in such registration the number of
Registrable Securities and other securities requested to be included in such
registration, which in the opinion of such underwriters can be sold without
adversely affecting the Company or the marketability of the offering, pro rata
among the respective holders (including GTCR) thereof on the basis of the number
of shares requested to be included in such registration by each such holder.
(e) Restrictions on Demand Registrations. The Company shall not be
------------------------------------
obligated to effect any Registration within 180 days after the effective date of
a previous Demand Registration or a previous registration in which the holders
of Registrable Securities were given piggyback rights pursuant to paragraph 2
and in which there was no reduction in the number of Registrable Securities
requested to be included.
(f) Selection of Underwriters. GTCR shall have the right to select the
-------------------------
investment banker(s) and manager(s) to administer the offering, subject to the
Company's approval which shall not be unreasonably withheld.
2. Piggyback Registrations.
-----------------------
(a) Right to Piggyback. Whenever the Company proposes to register any of
------------------
its securities under the Securities Act and the registration form to be used may
be used for the registration of Registrable Securities (a "Piggyback
---------
Registration"), the Company shall give prompt written notice to all holders of
- ------------
Registrable Securities of its intention to effect such a registration and shall
include in such registration all Registrable Securities with
-2-
<PAGE>
respect to which the Company has received written requests for inclusion therein
within 20 days after the receipt of the Company's notice.
(b) Piggyback Expenses. The Registration Expenses of the holders of
------------------
Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) Priority on Primary Registrations. If a Piggyback Registration is an
---------------------------------
underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering without adversely affecting the marketability
of the offering, the Company shall include in such registration (i) first, the
securities the Company proposes to sell, and (ii) second, the Registrable
Securities and other securities of the Company requested to be included in such
registration, pro rata among the holders of such Registrable Securities and
other securities of the Company on the basis of the number of shares requested
to be included in such registration by each such holder.
(d) Priority on Secondary Registrations. If a Piggyback Registration is an
-----------------------------------
underwritten secondary registration on behalf of holders of the Company's
securities, and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering without
adversely affecting the Company or the marketability of the offering, the
Company shall include in such registration (i) the securities requested to be
included therein by the holders initially requesting such registration, (ii) the
Registrable Securities and (iii) any other securities of the Company requested
to be included in such registration, in each instance which in the opinion of
such underwriters can be sold without adversely affecting the Company or the
marketability of the offering, pro rata among the holders thereof (including
GTCR) on the basis of the number of shares requested to be included in such
registration by each such holder.
(e) Selection of Underwriters. If any Piggyback Registration is an
-------------------------
underwritten offering, the selection of investment banker(s) and manager(s) for
the offering must be approved by the holders of a majority of the Registrable
Securities included in such Piggyback Registration. Such approval shall not be
unreasonably withheld.
(f) Other Registrations. If the Company has previously filed a registration
-------------------
statement with respect to Registrable Securities pursuant to paragraph 1 or
pursuant to this paragraph 2, and
-3-
<PAGE>
if such previous registration has not been withdrawn or abandoned, the Company
shall not file or cause to be effected any other registration of any of its
equity securities or securities convertible or exchangeable into or exercisable
for its equity securities under the Securities Act (except on Form S-8 or any
successor form), whether on its own behalf or at the request of any holder or
holders of such securities, until a period of at least 180 days has elapsed from
the effective date of such previous registration.
3. Holdback Agreements.
-------------------
(a) Each holder of Registrable Securities shall not effect any public sale
or distribution (including sales pursuant to Rule 144) of equity securities of
the Company, or any securities convertible into or exchangeable or exercisable
for such securities, during the seven days prior to and the 180-day period
beginning on the effective date of any underwritten Demand Registration or any
underwritten Piggyback Registration (except as part of such underwritten
registration), unless the underwriters managing the registered public offering
otherwise agree.
(b) The Company shall not effect any public sale or distribution of its
equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and during the
180-day period beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration (except as part of such
underwritten registration or pursuant to registrations on Form S-8 or any
successor form), unless the underwriters managing the registered public offering
otherwise agree.
4. Registration Procedures. Whenever the holders of Registrable Securities
-----------------------
have requested that any Registrable Securities be registered pursuant to this
Agreement, the Company shall use its best efforts to effect the registration and
the sale of such Registrable Securities in accordance with the intended method
of disposition thereof, and pursuant thereto the Company shall as expeditiously
as possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective;
(b) notify each holder of Registrable Securities of the effectiveness of
each registration statement filed hereunder and prepare and file with the
Securities and Exchange Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to
-4-
<PAGE>
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement;
(c) furnish to each seller of Registrable Securities such number of copies
of such registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each preliminary
prospectus) and such other documents as such seller may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
seller;
(d) use its best efforts to register or qualify such Registrable Securities
under such other securities or blue sky laws of such jurisdictions as any seller
reasonably requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided that the Company shall not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
(e) notify each seller of such Registrable Securities, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in such registration statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not misleading, and,
at the request of any such seller, the Company shall prepare a supplement or
amendment to such prospectus and/or registration statement so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each securities
exchange on which similar securities issued by the Company are then listed and,
if not so listed, to be listed on the NASD automated quotation system;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of the first registration statement
relating to Registrable Securities or securities of any class of the Company;
(h) enter into such customary agreements (including underwriting agreements
in customary form) and take all such other
-5-
<PAGE>
actions as the holders of a majority of the Registrable Securities being sold or
the underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities (including effecting a stock
split or a combination of shares);
(i) make available for inspection by any seller of Registrable Securities,
any underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors, employees and independent accountants to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(j) otherwise use commercially reasonable efforts to comply with all
applicable rules and regulations of the Securities and Exchange Commission, and
make available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning with
the first day of the Company's first full calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; and
(k) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any securities included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order.
5. Registration Expenses.
---------------------
(a) All expenses incident to the Company's performance of or compliance
with this Agreement, including without limitation all registration and filing
fees, fees and expenses of compliance with securities or blue sky laws, printing
expenses, messenger and delivery expenses, fees and disbursements of custodians,
and fees and disbursements of counsel for the Company and all independent
certified public accountants, underwriters (excluding discounts and commissions)
and other Persons retained by the Company (all such expenses being herein called
"Registration Expenses"), shall be borne by the Company, and the Company shall
pay its internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting
-6-
<PAGE>
duties), the expense of any annual audit or quarterly review, the expense of any
liability insurance and the expenses and fees for listing the securities to be
registered on each securities exchange on which similar securities issued by the
Company are then listed or on the NASD automated quotation system.
(b) In connection with each Demand Registration and each Piggyback
Registration, the Company shall reimburse the holders of Registrable Securities
included in such registration for the reasonable fees and disbursements of one
counsel chosen by the holders of a majority of the Registrable Securities
included in such registration.
6. Indemnification.
---------------
(a) The Company agrees to indemnify, to the extent permitted by law, each
holder of Registrable Securities, its officers and directors and each Person who
controls such holder (within the meaning of the Securities Act) against all
losses, claims, damages, liabilities and expenses caused by any untrue or
alleged untrue statement of material fact contained in any registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such holder expressly for use
therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company shall indemnify
such underwriters, their officers and directors and each Person who controls
such underwriters (within the meaning of the Securities Act) to the same extent
as provided above with respect to the indemnification of the holders of
Registrable Securities.
(b) In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder shall furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, shall indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged
-7-
<PAGE>
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, but only to the extent that such untrue
statement or omission is contained in any information or affidavit so furnished
in writing by such holder; provided that the obligation to indemnify shall be
individual, not joint and several, for each holder and shall be limited to the
net amount of proceeds received by such holder from the sale of Registrable
Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder shall (i) give prompt
written notice to the indemnifying party of any claim with respect to which it
seeks indemnification (provided that the failure to give prompt notice shall not
impair any Person's right to indemnification hereunder to the extent such
failure has not prejudiced the indemnifying party) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement shall remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and shall survive the transfer of securities. The Company also
agrees to make such provisions, as are reasonably requested by any indemnified
party, for contribution to such party in the event the Company's indemnification
is unavailable for any reason.
7. Participation in Underwritten Registrations. No Person may participate
-------------------------------------------
in any registration hereunder which is underwritten unless such Person (i)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements, (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other
-8-
<PAGE>
documents required under the terms of such underwriting arrangements, and (iii)
completes and executes any other documents reasonably required.
B. Definitions.
-----------
"Common Stock" means any share of the Company's Class A Common Stock, par
------------
value $.01 per share, or Class B Common Stock, par value $.01 per share.
"Executive" means any Stockholder designated as an "Executive" on the
---------
signature page of such Stockholder attached hereto.
"Executive Registrable Securities" means, irrespective of which Person
--------------------------------
actually holds such securities, (i) any shares of Common Stock acquired as of
the date hereof by the Executives (ii) any shares of Common Stock acquired
hereafter by the Executives or any executive employee of the Company or its
Subsidiaries who becomes a party to this Agreement, and (iii) any capital stock
of the Company issued or issuable with respect to the securities referred to in
clauses (i) or (ii) above by way of a stock dividend, stock split, conversion or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization. As to any particular Executive
Registrable Securities, such securities will cease to be Executive Registrable
Securities when they have been distributed to the public pursuant to an offering
registered under the Securities Act or sold to the public through a broker,
dealer or market maker in compliance with Rule 144 (or any similar rule then in
force) under the Securities Act. For purposes of this Agreement, a Person will
be deemed to be a holder of Executive Registrable Securities whenever such
Person has the right to acquire such Executive Registrable Securities (upon
conversion or exercise in connection with a transfer of securities or otherwise,
but disregarding any restrictions or limitations upon the exercise of such
right), whether or not such acquisition has actually been effected.
"GTCR" means Golder, Thoma, Cressey, Rauner Fund IV, L.P., a Delaware
----
limited partnership.
"GTCR Registrable Securities" means, irrespective of which Person actually
---------------------------
holds such securities, (i) any shares of Common Stock acquired as of or prior to
the date hereof by GTCR, (ii) any shares of Common Stock acquired hereafter by
GTCR, and (iii) any capital stock of the Company issued or issuable with respect
to the securities referred to in clauses (i) or (ii) above by way of a stock
dividend, stock split, conversion or in connection with a combination of shares,
recapitalization, merger,
-9-
<PAGE>
consolidation or other reorganization. As to any particular GTCR Registrable
Securities, such securities will cease to be GTCR Registrable Securities when
they have been distributed to the public pursuant to an offering registered
under the Securities Act or sold to the public through a broker, dealer or
market maker in compliance with Rule 144 (or any similar rule then in force)
under the Securities Act. For purposes of this Agreement, a Person will be
deeded to be a holder of GTCR Registrable Securities whenever such Person has
the right to acquire such GTCR Registrable Securities (upon conversion, or
exercise in connection with a transfer of securities or otherwise, but
disregarding any restrictions or limitations upon the exercise of such right),
whether or not such acquisition has actually been effected.
"Initial Public Offering" means the sale of an initial underwritten public
-----------------------
offering registered under the Securities Act (other than on Form S-8 or a
similar form) of shares of the Company's Common Stock or other equity
securities.
"Investor" means any Stockholder designated as an "Investor" on the
--------
signature page of such Stockholder attached hereto.
"Investor Registrable Securities" means, irrespective of which Person
-------------------------------
actually holds such securities, (i) any shares of Common Stock acquired as of
the date hereof by any Investor, (ii) any shares of Common Stock acquired
hereafter by any Investor, and (iii) any capital stock of the Company issued or
issuable with respect to the securities referred to in clauses (i) or (ii) above
by way of a stock dividend, stock split, conversion or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Investor Registrable Securities, such
securities will cease to be Investor Registrable Securities when they have been
distributed to the public pursuant to an offering registered under the
Securities Act or sold to the public through a broker, dealer or market maker in
compliance with Rule 144 (or any similar rule then in force) under the
Securities Act. For purposes of this Agreement, a Person will be deemed to be a
holder of Investor Registrable Securities whenever such Person has the right to
acquire such investor Registrable Securities (upon conversion, or exercise in
connection with a transfer of securities or otherwise, but disregarding any
restrictions or limitations upon the exercise of such right), whether or not
such acquisition has actually been effected.
"Person" means an individual, a partnership, a joint venture, a
------
corporation, a trust, a limited liability company, an unincorporated
organization or a government or any department or agency thereof.
-10-
<PAGE>
"Registrable Securities" means, collectively, the Executive Registrable
----------------------
Securities, the GTCR Registrable Securities and the Investor Registrable
Securities.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
-----------------------
amended.
"Stockholders Agreement" means the Stockholders Agreement, dated as of the
----------------------
date hereof, among the Company and certain of its stockholders, as amended from
time to time.
"Subsidiary" means, with respect to any Person:
----------
(a) any corporation a majority of the total voting power of shares of stock
of which is entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more of
the other Subsidiaries of that Person or a combination thereof, or
(b) any partnership, association or other business entity a majority of the
partnership or other similar ownership interest of which is at the time owned or
controlled, directly or indirectly, by that Person or one or more Subsidiaries
of that Person or a combination thereof.
For purposes of this definition, a Person is deemed to have a majority ownership
interest in a partnership, association or other business entity if such Person
is allocated a majority of the gains or losses of such partnership, association
or other business entity or is or controls the managing director or general
partner of such partnership, association or other business entity.
9. Miscellaneous.
-------------
(a) No Inconsistent Agreements. The Company shall not hereafter enter into
--------------------------
any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the holders of Registrable Securities in this
Agreement.
(b) Adjustments Affecting Registrable Securities. The Company shall not
--------------------------------------------
take any action, or permit any change to occur, with respect to its securities
which would materially and adversely affect the ability of the holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken
-11-
<PAGE>
pursuant to this Agreement or which would materially and adversely affect the
marketability of such Registrable Securities in any such registration
(including, without limitation, effecting a stock split or a combination of
shares).
(c) Remedies. Any Person having rights under any provision of this
--------
Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(d) Amendments and Waivers. Except as otherwise provided herein, the
----------------------
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company and holders of a majority of the Registrable
Securities; provided, however, that no such amendment or waiver shall materially
and adversely affect the rights hereunder of any of the parties hereto without
the prior written approval of such party.
(e) Successors and Assigns. All covenants and agreements in this Agreement
----------------------
by or on behalf of any of the parties hereto shall bind and inure to the benefit
of the respective successors and assigns of the parties hereto whether so
expressed or not. In addition, whether or not any express assignment has been
made, the provisions of this Agreement which are for the benefit of purchasers
or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities.
(f) Severability. Whenever possible, each provision of this Agreement shall
------------
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
(g) Counterparts. This Agreement may be executed simultaneously in two or
------------
more counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts taken together shall constitute one and the
same Agreement.
-12-
<PAGE>
(h) Descriptive Headings. The descriptive headings of this Agreement are
--------------------
inserted for convenience only and do not constitute a part of this Agreement.
(i) GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING THE CONSTRUCTION,
-------------
VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT AND THE EXHIBITS AND
SCHEDULES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR
CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF DELAWARE OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF DELAWARE.
(j) Notices. All notices, demands or other communications to be given or
-------
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable overnight courier service (charges
prepaid) or mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to each holder of Registrable Securities at the
address indicated on the signature page of such holder attached hereto, and to
any other holder of Registrable Securities at such address as indicated by the
Company's records and to the Company at the address indicated below:
If to the Company, to:
SAS Acquisitions Inc.
c/o Coinmach Industries Co., L.P.
55 Lumber Road
Roslyn, NY 11576
Attention: President
with a copy, which will not constitute notice to the Company, to:
Anderson Kill Olick & Oshinsky, P.C.
1251 Avenue of the Americas
New York, NY 10020
Attention: Ronald S. Brody, Esq.
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
* * * * *
-13-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
SAS ACQUISITIONS INC.
By: /s/ Stephen R. Kerrigan
-----------------------------------
Its: President
-----------------------------------
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV, L.P.
By: GTCR IV, L.P.,
Its: General Partner
By: GOLDER, THOMA, CRESSEY, RAUNER, INC.
Its: General Partner
By: /s/
------------------------------------
Its: Principal
------------------------------------
Designation: None
Notices should be sent to:
Golder, Thoma, Cressey, Rauner Fund IV, L.P.
6100 Sears Tower
Chicago, IL 60606
Attention: David A. Donnini
with a copy, which shall not constitute notice, to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Kevin R. Evanich
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
/s/ Mitchell Blatt
-----------------------------------
Mitchell Blatt
Designation: Executive
Notices should be sent to:
Mitchell Blatt
31 Wilmington Drive
Dix Hills, NY 11747
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
/s/ Robert M. Doyle
-----------------------------------
Robert M. Doyle
Designation: Executive
Notices should be sent to:
Robert M. Doyle
53 Sheryl Crescent
Smithtown, NY 11787
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
/s/ Michael Stanky
-----------------------------------
Michael Stanky
Designation: Executive
Notices should be sent to:
Michael Stanky
1125 Ashington Place
Desoto, TX 75115
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
HELLER FINANCIAL, INC.
By: /s/ Ellen J. Cook
-----------------------------------
Its: Assistant Vice President
-----------------------------------
Designation: Investor
Notices should be sent to:
Heller Financial, Inc.
500 West Monroe Street
Chicago, IL 60661
Attn: Portfolio Manager
Portfolio Organization
Corporate Finance Group
with a copy, which shall not constitute notice, to:
Heller Financial, Inc.
500 West Monroe Street
Chicago, IL 60661
Attn: Legal Department
Portfolio Organization
Corporate Finance Group
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
JACKSON NATIONAL LIFE INSURANCE COMPANY
By /s/
-----------------------------------
Its: Vice President
-----------------------------------
Designation: Investor
Notices should be sent to:
Jackson National Life Insurance Company
c/o PPM America, Inc.
225 West Wacker Drive, Suite 1200
Chicago, IL 60606
Attn: Private Placements
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
JACKSON NATIONAL LIFE INSURANCE
COMPANY OF MICHIGAN
By:
-----------------------------------
Its: Vice President
-----------------------------------
Designation: Investor
Notices should be sent to:
Jackson National Life Insurance Company of Michigan
c/o PPM America, Inc.
225 West Wacker Drive, Suite 1200
Chicago, IL 60606
Attn: Private Placements
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
/s/ James N. Chapman
-----------------------------------
James N. Chapman
Designation: Investor
Notices should be sent to:
James N. Chapman
14 Alpine Road
Greenwich, CT 06830
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
/s/ Michael E. Marrus
-----------------------------------
Michael E. Marrus
Designation: Investor
Notices should be sent to:
Michael E. Marrus
755 Park Avenue
New York, NY 10021
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
PRESIDENT AND FELLOWS OF
HARVARD COLLEGE
By: HARVARD MANAGEMENT
COMPANY, INC.
By: /s/ Timothy S. Peterson
-----------------------------------
Timothy S. Peterson
Its:
-----------------------------------
Authorized Signatory
By: /s/ Jack R. Meyer
-----------------------------------
Jack R. Meyer
Its:
-----------------------------------
Designation: Investor
Notices should be sent to:
President and Fellows of Harvard College
c/o Harvard Management Company, Inc.
c/o Timothy Peterson
600 Atlantic Avenue
Boston, MA 02210
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
MCS CAPITAL, INC.
By: /s/ Stephen R. Kerrigan
-----------------------------------
Its: President
-----------------------------------
Designation: Executive
Notices should be sent to:
MCS Capital, Inc.
c/o Coinmach Industries Co., L.P.
55 Lumber Road
Roslyn, NY 11576
<PAGE>
Exhibit 10.26
MANAGEMENT AND CONSULTING SERVICES AGREEMENT
--------------------------------------------
MANAGEMENT AND CONSULTING SERVICES AGREEMENT ("Agreement"), dated as of
---------
July 26, 1995, by and between GTCR IV, L.P., a Delaware limited partnership
("GTCR"), and SAS Acquisitions Inc., a Delaware corporation (the "Company").
---- -------
WHEREAS, Golder, Thoma, Cressey, Rauner Fund IV, L.P., a Delaware limited
partnership (the "Fund"), of which GTCR is the general partner, will purchase
----
(the "Investment") pursuant to that certain Equity Purchase Agreement (the
----------
"Purchase Agreement") of even date herewith between the Company and GTCR 72,153
------------------
shares of the Company's Class A Common Stock, par value $0.01 per share;
WHEREAS, the Company desires to receive financial and management consulting
services from GTCR, and obtain the benefit of the experience of GTCR in business
and financial management generally and its knowledge of the Company and the
Company's financial affairs in particular;
WHEREAS, in connection with the Investment, GTCR is willing to provide
financial and management consulting services to the Company and the compensation
arrangements set forth in this Agreement are designed to compensate GTCR for
such services; and
WHEREAS, the Company seeks to compensate GTCR for financial and managerial
services performed in connection with the Company's acquisitions in the
coin-operated laundry industry such as the arrangement of financing for the
transactions, the negotiation of the related acquisition agreements, and the
management consultation in regards to the structure of the transactions (the
"Acquisitions").
------------
NOW, THEREFORE, in consideration of the foregoing premises and the
respective agreements hereinafter set forth and the mutual benefits to be
derived herefrom, GTCR and the Company hereby agree as follows:
1. Engagement. The Company hereby engages GTCR as a financial and
----------
management consultant, and GTCR hereby agrees to provide financial and
management consulting services to the Company, all on the terms and subject to
the conditions set forth below.
2. Services of GTCR. GTCR hereby agrees during the term of this engagement
----------------
to consult with the Company's board of directors (the "Board") and management of
-----
the Company and its subsidiaries in such manner and on such business and
financial matters as may be reasonably requested from time to time by the Board,
including but not limited to:
<PAGE>
(i) corporate strategy;
(ii) budgeting of future corporate investments;
(iii) acquisition and divestiture strategies; and
(iv) debt and equity financings.
3. Personnel. GTCR shall provide and devote to the performance of this
---------
Agreement such partners, employees and agents of GTCR as GTCR shall deem
appropriate for the furnishing of the services required thereby.
4. Management Fee. From and after the Closing (as defined in the Purchase
--------------
Agreement), the Company shall pay to GTCR an annual management fee in the amount
of $100,000 per year (as such amount may be increased from time to time by GTCR
with the approval of the Board) payable annually in full on the first
anniversary of the Closing and on each subsequent anniversary thereof.
5. Closing and Advisory Fees. Upon consummation of the Closing, the Company
-------------------------
shall pay to GTCR a closing fee in the amount of $200,000 and a financial
advisory fee of $130,000, each payable on the day on which the Closing is
consummated.
6. Expenses. In addition to the fees described in Sections 4 and 5 above,
--------
the Company shall promptly reimburse GTCR for such reasonable travel expenses
and other out-of-pocket fees and expenses as may be incurred by GTCR, its
directors, officers and employees in connection with the Acquisitions and in
connection with the rendering of services hereunder.
7. Term. This Agreement will continue from the date hereof until the Fund
----
ceases to own at least 33% of the Common Stock (as defined in the Purchase
Agreement). No termination of this Agreement, whether pursuant to this paragraph
or otherwise, shall affect the Company's obligations with respect to the fees,
costs and expenses incurred by GTCR in rendering services hereunder and not
reimbursed by the Company as of the effective date of such termination.
8. Liability. Neither GTCR nor any of its affiliates, partners, employees
---------
or agents shall be liable to the Company or its subsidiaries or affiliates for
any loss, liability, damage or expense arising out of or in connection with the
performance of services contemplated by this Agreement, unless such loss,
liability, damage or expense is a result of the gross negligence or willful
misconduct of GTCR.
- 2 -
<PAGE>
9. Indemnification. The Company agrees to indemnify and hold harmless GTCR,
---------------
its partners, affiliates, officers, agents and employees against and from any
and all loss, liability, suits, claims, costs, damages and expenses (including
attorneys' fees) arising from their performance hereunder, except as a result of
their gross negligence or willful misconduct.
10. GTCR Independent Contractor Status. GTCR and the Company agree that
----------------------------------
GTCR shall perform services hereunder as an independent contractor, retaining
control over and responsibility for its own operations and personnel. Neither
GTCR nor its partners, employees or agents shall be considered employees or
agents of the Company as a result of this Agreement nor shall any of them have
authority to contract in the name of or bind the Company, except as expressly
agreed to in writing by the Company.
11. Notices. Any notice, report or payment required or permitted to be
-------
given or made under this Agreement by one party to the other shall be deemed to
have been duly given or made if personally delivered (including by courier) or,
if mailed, when mailed by registered or certified mail, postage prepaid, to the
other party at the following addresses (or at such other address as shall be
given in writing by one party to the other):
If to GTCR:
GTCR, IV, L.P.
6100 Sears Tower
Chicago, IL 60606
Attention: Bruce V. Rauner
David A. Donnini
with a copy (which copy will not constitute notice to GTCR) to:
--------------------------------------------------------------
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Kevin R. Evanich, Esq.
If to the Company:
SAS Acquisitions Inc.
c/o Coinmach Industries Co., L.P.
55 Lumber Road
Roslyn, NY 11576
Attention: President
- 3 -
<PAGE>
with a copy (which copy will not constitute notice to the Company) to:
---------------------------------------------------------------------
Anderson, Kill, Olick & Oshinsky, P.C.
1251 Avenue of The Americas
New York, New York 10020
Attention: Ronald S. Brody, Esq.
12. Entire Agreement; Modification. This Agreement (a) contains the
---------------- ------------
complete and entire understanding and agreement of GTCR and the Company with
respect to the subject matter hereof; and (b) supersedes all prior and
contemporaneous understandings, conditions and agreements, oral or written,
express or implied, respecting the engagement of GTCR in connection with the
subject matter hereof.
13. Waiver of Breach. The waiver by either party of a breach of any
----------------
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach of that provision or any other provision
hereof.
14. Assignment. Neither GTCR nor the Company may assign its rights or
----------
obligations under this Agreement without the express written consent of the
other.
15. Successors. This Agreement and all the obligations and benefits
----------
hereunder shall inure to the successors and permitted assigns of the parties.
16. Counterparts. This Agreement may be executed and delivered by each
------------
party hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original and both of which taken together shall
constitute one and the same agreement.
17. Choice of Law. This Agreement shall be governed by and construed in
-------------
accordance with the domestic laws of the State of Illinois, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of Illinois or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Illinois.
- 4 -
<PAGE>
IN WITNESS WHEREOF, GTCR and the Company have caused this Agreement to be
duly executed and delivered on the date and year first above written.
GTCR IV, L.P.
BY: Golder, Thoma, Cressey, Rauner,
Inc.
Its: General Partner
By: /s/
----------------------------------------
Its: Principal
SAS ACQUISITIONS INC.
By:
----------------------------------------
Its:
----------------------------------------
<PAGE>
IN WITNESS WHEREOF, GTCR and the Company have caused this Agreement to be
duly executed and delivered on the date and year first above written.
GTCR IV, L.P.
By: Golder, Thoma, Cressey, Rauner,
Inc.
Its: General Partner
By:
----------------------------------------
Its: Principal
SAS ACQUISITIONS INC.
By: /s/ Stephen R. Kerrigan
----------------------------------------
Its: President
----------------------------------------
<PAGE>
Exhibit 11.1
Pro Forma Computation of Loss Per Common Share
----------------------------------------------
<TABLE>
<CAPTION>
Six-month
transition period April 5, 1995 to
ended September 29,
March 29, 1996 1995
------------------- -----------------
<S> <C> <C>
Net loss applicable to common stock $(11,448,000) $(6,116,000)
============ ===========
Shares outstanding from the beginning of the period 6,233,326 6,233,326
Shares issued to management in May 1996 at prices below
the assumed initial public offering price reduced by shares
through the application of the treasury stock method 76,277 76,277
Options granted to management in May 1996 at 85 percent
of the assumed initial public offering price reduced by
shares through the application of the treasury stock method 104,148 104,148
Estimated number of shares which would have to be sold at
the assumed initial public offering price of $17.00 to fund
the following:
Shares issued to management for preferred stock 23,316 23,316
Cash used to repurchase remaining preferred stock 1,125,446 1,125,446
------------ -----------
Total weighted average number of shares 7,562,463 7,562,463
------------ -----------
Pro forma net loss per common share $(1.51) $(.81)
============ ===========
</TABLE>
<PAGE>
EXHIBIT 12.1
COINMACH LAUNDRY CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
TRANSITION APRIL 5, 1995
PERIOD ENDED TO
MARCH 29, 1996 SEPTEMBER 29, 1995
--------------- -------------------
<S> <C> <C>
Loss before income taxes
and extraordinary item $(2,523) $(6,116)
Fixed charges 12,410 12,198
------- -------
Earnings as adjusted $ 9,887 $ 6,082
======= =======
Fixed charges:
Interest expense $11,999 $11,818
Portion of operating lease rentals
representative of interest factor 411 380
------- -------
Fixed charges $12,410 $12,198
======= =======
Ratio of earnings to fixed charges (B) (B)
</TABLE>
- ----------------------------
(A) For the purpose of computing the ratio of earnings to fixed charges,
"earnings" include loss before income taxes and extraordinary items plus
fixed charges. "Fixed Charges" include interest expense, amortization
expense relating to issuance of indebtedness and such portion of operating
lease rentals estimated to represent the interest factor of such rentals.
(B) Earnings do not cover fixed charges during these periods by the following
amounts:
Six month transition period ended March 29, 1996 $2,523
April 5, 1995 to September 29, 1995 6,116
<PAGE>
THE COINMACH CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
TWO MONTHS ONE MONTH ------------------------------------------------
ENDED ENDED YEARS ENDED DECEMBER 31,
MARCH 31, JANUARY 31, ------------------------------------------------
1995 1995 1994 1993 1992 1991
----------- ------------- --------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Loss before income taxes and
extraordinary gain (1,153) ($175) ($5,675) ($12,281) ($13,031) ($13,630)
Fixed charges 804 413 4,226 10,709 9,775 10,212
------- ------ -------- --------- ---------- ---------
Earnings as adjusted $ 349 $ 238 ($1,449) ($1,572) ($3,256) ($3,418)
======= ====== ======== ========= ========== =========
Fixed charges:
Interest expense $ 774 $ 395 $ 4,012 $ 10,509 $ 9,573 $ 9,990
Portion of operating lease rentals
representative of interest factor 30 18 214 200 202 222
------- ------ -------- --------- ---------- ---------
Fixed charges $ 804 $ 413 $ 4,226 $ 10,709 $ 9,775 $ 10,212
======= ====== ======== ========= ========== =========
Ratio of earnings to fixed charges (B) (B) (B) (B) (B) (B)
</TABLE>
(A) For the purpose of computing the ratio of earnings to fixed charges,
"earnings" include loss before income taxes and extraordinary items plus
fixed charges. "Fixed Charges" include interest expense, amortization
expense relating to issuance of indebtedness and such portion of operating
lease rentals estimated to represent the interest factor of such rentals.
(B) Earnings do not cover fixed charges during these periods by the following
amounts:
<TABLE>
<S> <C>
Two months ended March 31, 1995 $ 1,153
One month ended January 31, 1995 175
Year ended December 31, 1994 5,675
Year ended December 31, 1993 2,281
Year ended December 31, 1992 13,031
Year ended December 31, 1991 13,630
</TABLE>
<PAGE>
COINMACH CORPORATION AND SUBSIDIARIES
(FORMERLY SOLON AUTOMATED SERVICES, INC.)
RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Predecessor
------------------------------------------------------------------------------
Fiscal Year Ended
--------------------------------------------------------
October 1, 1994 September 30, October 1, October 2, September 27,
to April 4, 1995 1994 1993 1992 1991
---------------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Income (loss) before income taxes and
extraordinary items $(1,729) $(4,156) $(3,563) $(2,554) $ 64
Fixed charges 9,197 18,631 18,043 16,423 16,457
------- ------- ------- ------- -------
Earnings as adjusted $ 7,468 $14,475 $14,480 $13,869 $16,521
======= ======= ======= ======= =======
Fixed charges:
Interest expense $ 8,928 $18,105 $17,453 $15,857 $15,888
Portion of operating lease rentals
representative of interest factor 269 526 590 566 569
------- ------- ------- ------- -------
Fixed charges $ 9,197 $18,631 $18,043 $16,423 $16,457
======= ======= ======= ======= =======
Ratio of earnings to fixed charges (B) (B) (B) (B) 1.00X
</TABLE>
(A) For the purpose of computing the ratio of earnings to fixed charges,
"earnings" include income (loss) before income taxes and extraordinary
items plus fixed charges. "Fixed Charges" include interest expense,
amortization expense relating to issuance of indebtedness and such portion
of operating lease rentals estimated to represent the interest factor of
such rentals.
(B) Earnings do not cover fixed charges during these periods by the following
amounts:
<TABLE>
<CAPTION>
<S> <C>
October 1, 1994 to April 4, 1995 1,729
Fiscal 1994 4,156
Fiscal 1993 3,563
Fiscal 1992 2,554
</TABLE>
<PAGE>
Exhibit 21.1
LIST OF SUBSIDIARIES OF REGISTRANT
----------------------------------
NAME OF SUBSIDIARY JURISDICTION OF INCORPORATION
- ------------------ -----------------------------
Coinmach Corporation Delaware
Super Laundry Equipment Corp. New York
(subsidiary of Coinmach Corporation)
Grand Wash & Dry Launderette, Inc. New York
(subsidiary of Coinmach Corporation)
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of our report
dated December 19, 1994 and to all references to our firm included in or made a
part of this Registration Statement.
Philadelphia, PA /s/ Arthur Andersen LLP
May 3, 1996
<PAGE>
Exhibit 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated May 3, 1996, with respect to the combined consolidated
financial statements of Coinmach Laundry Corporation, and March 20, 1996, with
respect to the combined consolidated financial statements of Coinmach
Corporation, in the Registration Statement (Form S-1 No. 333-___________) and
related Prospectus of Coinmach Laundry Corporation for the Registration of
3,500,000 shares of its common stock.
/s/ ERNST & YOUNG LLP
Melville, New York
==========================================
The foregoing consent is in the form that will be signed upon the completion of
the restatement of capital accounts described in Note 11 to the financial
statements
/s/ ERNST & YOUNG LLP
Melville, New York
May 8, 1996
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
The Board of Directors
Coinmach Laundry Corporation:
We consent to the inclusion of our reports dated April 28, 1995, with respect to
the consolidated balance sheets of CIC I Acquisition Corp. and subsidiaries as
of January 31, 1995 and December 31, 1994 and 1993, and the related statements
of operations and accumulated deficit and cash flows for the one-month period
ended January 31, 1995 and each of the years in the three-year period ended
December 31, 1994, which reports appear in the Form S-1 of Coinmach Laundry
Corporation. We also consent to the inclusion of our report dated July 7, 1995,
with respect to the consolidated balance sheet of The Coinmach Corporation and
subsidiaries as of March 31, 1995, and the related statements of operations and
accumulated deficit and cash flows for the two-month period then ended, which
report appears in the Form S-1 of Coinmach Laundry Corporation. In addition, we
consent to the reference to our firm under the heading "Experts" in the
prospectus.
/s/ KPMG Peat Marwick LLP
New York, New York
May 8, 1996
-1-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
S-1 REGISTRATION STATEMENT OF COINMACH LAUNDRY CORPORATION AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> MAR-29-1996 SEP-29-1995
<PERIOD-START> SEP-30-1995 APR-05-1995
<PERIOD-END> MAR-29-1996 SEP-29-1995
<CASH> 19,858 10,311
<SECURITIES> 0 0
<RECEIVABLES> 5,758<F1> 4,392<F1>
<ALLOWANCES> 0 0
<INVENTORY> 4,443 3,902
<CURRENT-ASSETS> 0 0
<PP&E> 102,208 91,026
<DEPRECIATION> 19,509 10,320
<TOTAL-ASSETS> 249,148<F2> 241,433<F2>
<CURRENT-LIABILITIES> 0 0
<BONDS> 201,655<F3> 170,554<F3>
0 0
0 0
<COMMON> 17,903 17,903
<OTHER-SE> (18,719) (7,271)
<TOTAL-LIABILITY-AND-EQUITY> 249,148 241,433
<SALES> 0<F4> 0<F4>
<TOTAL-REVENUES> 89,070 89,719
<CGS> 0<F5> 0<F5>
<TOTAL-COSTS> 60,536 62,905
<OTHER-EXPENSES> 20,056 22,974
<LOSS-PROVISION> 0<F6> 0<F6>
<INTEREST-EXPENSE> 11,999 11,818
<INCOME-PRETAX> (3,521) (7,978)
<INCOME-TAX> (998)<F7> (1,862)<F7>
<INCOME-CONTINUING> (2,523) (6,116)
<DISCONTINUED> 0 0
<EXTRAORDINARY> (8,925) 0
<CHANGES> 0 0
<NET-INCOME> (11,448)<F9> (6,116)<F9>
<EPS-PRIMARY> (1.51)<F8> (.81)<F8>
<EPS-DILUTED> 0 0
<FN>
<F1>Receivables are less allowances of $454 and $360, for the 6 months ended
March 29, 1996 and September 29, 1995, respectively.
<F2>Includes Advance Rental Payments of $20,320 and $19,772, Contract Rights of
$59,745 and $63,801, and Goodwill of $44,071 and $45,231, each net of
accumulated amortization, for the 6 months ended March 29, 1996 and the period
ended September 29, 1995, respectively.
<F3>Includes Debt outstanding under the long term credit facility of $42,880, for
the period ended September 29, 1995.
<F4>Total Revenues include Sales of laundromats and equipment of $8,625 and $8,602,
for the 6 months ended March 29, 1996 and the period ended September 29, 1995,
respectively.
<F5>Total Costs include Cost of Goods Sold of $6,011 and $6,139, for the 6 months
ended March 29, 1996 and the period ended September 29, 1995, respectively.
<F6>Total costs include a Provision for Bad Debt of $87 and $108, for the 6 months
ended March 29, 1996 and the period ended September 29, 1995, respectively.
<F7>The provision (benefit) for income taxes consists of $50 and $420 currently
payable and ($1,048) and ($2,282) deferred, for the 6 months ended March 29,
1996 and the period ended September 29, 1995, respectively.
<F8>The components are EPS before extraordinary item of ($.33) and ($.81), and EPS
of extraordinary item of ($1.18) and $0, for the 6 months ended March 29, 1996
and the period ended September 29, 1995, respectively.
<F9>In addition, EBITDA (earnings before interest, income taxes, depreciation and
amortization) of $26,690 and $22,156, was generated for the reported periods.
EBITDA is a meaningful measure of a company's ability to service debt.
</FN>
</TABLE>
