<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 26, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ___________.
Commission File Number 1-11907
COINMACH LAUNDRY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 11-3258015
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
55 LUMBER ROAD, ROSLYN, NEW YORK 11576
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (516) 484-2300
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT
WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO __.
---
AS OF THE CLOSE OF BUSINESS ON NOVEMBER 6, 1997, COINMACH LAUNDRY CORPORATION
HAD OUTSTANDING 10,004,278 SHARES OF CLASS A COMMON STOCK, PAR VALUE $.01 PER
SHARE (THE "COMMON STOCK"), AND 480,648 SHARES OF NON-VOTING CLASS B COMMON
STOCK, PAR VALUE $.01 PER SHARE (THE "NON-VOTING COMMON STOCK").
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
---------------------------------------------
INDEX
-----
PART I.
Financial Information Page No.
- --------------------- --------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-
September 26, 1997 (Unaudited) and March 28, 1997 3
Condensed Consolidated Statements of Operations (Unaudited) -
Three and Six Months Ended September 26, 1997 and September 27, 1996 4
Condensed Consolidated Statements of Cash Flows (Unaudited) -
Three and Six Months Ended September 26, 1997 and September 27, 1996 5
Notes to Condensed Consolidated Financial Statements 6-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11-15
PART II.
Other Information 16
- -----------------
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signature Page 17
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<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
---------------------------------------------
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
------- --------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(In thousands of dollars)
September March
26, 1997 28, 1997/1/
----------- -----------
(Unaudited)
ASSETS:
Cash and cash equivalents $ 16,815 $ 14,729
Receivables, net 8,633 6,894
Inventories 12,456 7,959
Prepaid expenses 3,728 3,170
Advance rental payments 47,540 38,472
Property and equipment, less accumulated
depreciation of $56,565 and $42,017 130,348 112,116
Contract rights, less accumulated
amortization of $29,358 and $19,815 217,371 180,557
Goodwill, less accumulated amortization of
$8,956 and $5,574 109,027 95,771
Other assets 14,441 13,253
-------- --------
Total assets $560,359 $472,921
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable $ 9,972 $ 8,941
Accrued commissions 13,065 10,573
Accrued interest 10,871 9,712
Other accrued expenses 12,795 8,996
Deferred income taxes 78,803 65,650
11 3/4% Senior Notes 196,655 196,655
Credit facility 203,250 130,000
9 7/8% promissory note 15,000 15,000
Other long-term debt 3,619 3,831
Stockholders' equity:
Common stock and capital in excess of par value 53,810 53,265
Notes receivable from management (439) (439)
Accumulated deficit (37,042) (29,263)
-------- --------
Total stockholders' equity 16,329 23,563
-------- --------
Total liabilities and stockholders' equity $560,359 $472,921
======== ========
The accompanying notes are an integral part of these financial statements.
___________
1. The March 28, 1997 Balance Sheet has been derived from the audited financial
statements as of that date.
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<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
---------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(UNAUDITED)
-----------
(In thousands of dollars, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------ ------------------------------
September 26, September 27, September 26, September 27,
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES $ 77,702 $ 46,506 $149,797 $ 94,446
COSTS AND EXPENSES:
Laundry operating expenses 52,074 31,016 100,310 63,596
General and administrative expenses 1,428 1,082 2,917 2,123
Depreciation and amortization 18,105 10,382 34,580 20,192
Stock-based compensation charge 400 1,460 545 1,460
-------- -------- -------- --------
72,007 43,940 138,352 87,371
-------- -------- -------- --------
OPERATING INCOME 5,695 2,566 11,445 7,075
INTEREST EXPENSE, NET 11,066 6,001 21,129 12,142
-------- -------- -------- --------
LOSS BEFORE INCOME TAXES (5,371) (3,435) (9,684) (5,067)
-------- -------- -------- --------
PROVISION (BENEFIT) FOR
INCOME TAXES:
Currently payable 100 100 150 105
Deferred (1,205) (1,300) (2,055) (1,750)
-------- -------- -------- --------
(1,105) (1,200) (1,905) (1,600)
-------- -------- -------- --------
NET LOSS ($4,266) ($2,235) ($7,779) ($3,467)
======== ======== ======== ========
NET LOSS PER SHARE ($.41) ($.23) ($.74) ($.43)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
---------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(UNAUDITED)
-----------
(In thousands of dollars)
<TABLE>
<CAPTION>
Six Months Ended
----------------
September 26, 1997 September 27, 1996
------------------- -------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ($7,779) ($3,467)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 34,580 20,192
Deferred income taxes (2,055) (1,750)
Stock-based compensation charge 545 1,460
Amortization of debt discount and debt issuance costs 351 261
Increase or decrease in operating assets and liabilities,
net of business acquired:
Increase in other assets (1,182) (1,216)
Decrease (increase) in receivables, net 88 (63)
Increase in inventories and prepaid expenses (2,204) (1,177)
Decrease in accounts payable (1,493) (537)
Increase in accrued interest 1,159 996
Increase in accrued expenses, net 376 688
-------- --------
Net cash provided by operating activities 22,386 15,387
-------- --------
INVESTING ACTIVITIES:
Additions to property and equipment (18,940) (12,555)
Advance rental payments to location owners (6,660) (4,872)
Additions to net assets related to acquisitions of
businesses (66,300) (17,623)
-------- --------
Net cash used for investing activities (91,900) (35,050)
-------- --------
FINANCING ACTIVITIES:
Debt transactions:
Net repayments of bank and other borrowings (262) (136)
Deferred debt issuance costs (900) (90)
Proceeds from credit facility, net of repayments 73,250 --
Principal payments on capitalized lease obligations (488) (229)
Equity transactions:
Proceeds from issuance of common stock -- 52,017
Redemption of preferred stock -- (19,207)
Dividend paid-preferred stock -- (21)
-------- --------
Net cash provided by financing activities 71,600 32,334
-------- --------
Net increase in cash and cash equivalents 2,086 12,671
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 14,729 19,858
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 16,815 $ 32,529
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 19,628 $ 11,131
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
---------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. DESCRIPTION OF BUSINESS
Coinmach Laundry Corporation ("Coinmach Laundry"), a Delaware corporation,
through its wholly-owned subsidiaries (collectively, the "Company"), is the
leading supplier of out-sourced coin-operated laundry equipment services for
multi-family housing properties in the United States. The Company's business
involves leasing laundry rooms from building owners and property management
companies, installing and servicing the laundry equipment and collecting
revenues generated from laundry machines. On September 26, 1997, the Company
owned and operated approximately 417,000 coin-operated washers and dryers in
approximately 42,000 locations on routes throughout the United States and in 151
retail laundromats located throughout Texas.
2. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
the Company have been prepared in conformity with generally accepted accounting
principles ("GAAP") for interim financial reporting and pursuant to the rules
and regulations of the Securities and Exchange Commission. Accordingly, such
financial statements do not include all of the information and footnotes
required by GAAP for complete financial statements. GAAP requires the Company's
management to make estimates and assumptions that affect the amounts reported
therein. Actual results could vary from such estimates. The interim results
presented herein are not necessarily indicative of the results to be expected
for the entire year.
In the opinion of management of the Company, these unaudited condensed
consolidated financial statements contain all adjustments of a normal recurring
nature necessary for a fair presentation of the financial statements for the
interim periods presented.
These unaudited condensed consolidated financial statements should be read
in conjunction with the audited consolidated financial statements included in
Coinmach Laundry's Annual Report on Form 10-K for the year ended March 28, 1997.
3. LOSS PER SHARE
Loss per share for each of the three and six month periods ended September
26, 1997, was calculated based upon the weighted average aggregate number of
shares of Common Stock and Non-Voting Common Stock outstanding, which was
10,484,926 during such period. Loss per share for the three and six month
periods ended September 27, 1996 was calculated based upon the weighted average
aggregate number of shares of Common Stock and Non-Voting Common Stock
outstanding, which was 9,742,573 and 7,980,134, respectively during such
periods.
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128 "Earnings Per Share" ("FAS
128"). This standard changes the method of calculating earnings per share and
will be effective for periods ending after December 15, 1997. Application of
FAS 128 to periods ending prior to December 15, 1997 is prohibited; however,
when adopted, all prior period earnings per share data presented will be
required to be restated to conform with the new standard. The Company has
determined that the impact of FAS No. 128 will not have a material effect on the
calculation of earnings per share.
4. LONG-TERM DEBT
On September 26, 1997, the outstanding long-term debt of Coinmach Laundry
and Coinmach Corporation ("Coinmach"), a wholly-owned subsidiary of Coinmach
Laundry, consisted of (a) approximately $196.7 million of 11 3\4% Senior
Notes due 2005 (the "Senior Notes"), issued by Coinmach, (b) $187.3 million of
term loans, (c) $16.0 million of revolving loans and (d) a $15.0 million
9 7/8% promissory note due 2004 issued by Coinmach
-6-
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
---------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. LONG-TERM DEBT (continued)
Laundry (the "Kwik Wash Note"). The outstanding term loans and revolving loans
were made pursuant to a senior financing arrangement obtained by the Company in
January 1997, which consists of a $190 million term loan facility and a $70
million revolving credit facility (as amended, the "Credit Facility").
On October 8, 1997, Coinmach completed the private placement (the "Bond
Offering") of $100 million aggregate principal amount of its 11 3/4% Series
C Notes due 2005 (the "Series C Notes") on substantially identical terms as its
outstanding Senior Notes. The gross proceeds from the Bond Offering were
$109.875 million, of which $100.0 million represented the payment of principal
and $9.875 million represented the payment of a premium for the Series C Notes.
Coinmach used approximately $105.4 million of the net proceeds from the Bond
Offering to repay indebtedness outstanding under the Credit Facility. After
giving effect to such repayment of indebtedness, the aggregate outstanding
indebtedness under the Credit Facility is $97.9 million, as of November 10,
1997. See Note 7-"Subsequent Events."
Indebtedness under the Credit Facility is secured by all of the Company's
real and personal property. Coinmach Laundry has guaranteed the indebtedness
under the Credit Facility and pledged to Bankers Trust Company, as Collateral
Agent, its interests in all of the issued and outstanding shares of capital
stock of Coinmach. In addition to certain terms and provisions, events of
default, and customary restrictive covenants and agreements, the Credit Facility
and the indenture governing the Senior Notes contain certain covenants
including, but not limited to, a maximum leverage ratio, a minimum consolidated
interest coverage ratio, and limitations on indebtedness, capital expenditures,
advances, investments and loans, mergers and acquisitions, dividends, stock
issuances and transactions with affiliates. Also, the Senior Notes and the
Credit Facility limit Coinmach's ability to pay dividends.
5. STOCKHOLDERS' EQUITY
a. INITIAL PUBLIC OFFERING
On July 23, 1996, Coinmach Laundry completed its initial public offering
(the "Offering") of 4,120,000 shares of Common Stock at a price of $14.00 per
share. Coinmach Laundry's registration statement for 4,000,000 shares of Common
Stock was filed with the Securities and Exchange Commission (the "Commission")
on May 13, 1996 and subsequently declared effective by the Commission on July
17, 1996. On July 18, 1996, Coinmach Laundry filed with the Commission an
additional registration statement on Form S-1 with respect to the registration
of an additional 120,000 shares of Common Stock, which registration statement
was effective upon filing.
In connection with the Offering, the underwriters were granted a 30-day
option to purchase up to an aggregate of 618,000 additional shares of Common
Stock to cover over-allotments (the "Over-Allotment Option"), which Over-
Allotment Option was exercised on August 16, 1996 with respect to the purchase
of an additional 63,642 shares of Common Stock.
Proceeds from the Offering were approximately $54.5 million (after giving
effect to the exercise of the Over-Allotment Option), after underwriting
discounts and commissions and before expenses. After giving effect to the
redemption of the Preferred Stock (as described below), proceeds from the
Offering were approximately $35.3 million, before expenses.
Prior to the Offering, Coinmach Laundry issued, in privately negotiated
transactions, 79,029 shares of its Class B common stock to certain members of
management. Coinmach Laundry recorded a stock based compensation charge in an
amount of approximately $887,000, attributable to the issuance of such stock.
In addition, in July 1996 approximately $103,000 of receivables relating to
loans to management in connection with
-7-
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COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
---------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
5. STOCKHOLDERS' EQUITY (continued)
prior purchases of Coinmach Laundry's common stock were forgiven and was
accounted for as a stock-based compensation charge.
b. RECLASSIFICATION AND STOCK SPLIT
In connection with the Offering, Coinmach Laundry approved a
reclassification (the "Reclassification") of all of its capital stock, pursuant
to which all seven classes of the previously issued and outstanding capital
stock of Coinmach Laundry prior to the Offering were converted into a class of
preferred stock, a class of voting common stock and a class of non-voting common
stock. As part of the Reclassification, holders of Coinmach Laundry's Class A
common stock, Class E common stock and Class F common stock immediately prior to
the Offering (collectively, the "Preference Shares") also received a
distribution consisting of shares of Common Stock and shares of Series A
preferred stock, par value $.01 per share (the "Preferred Stock") representing
an amount equal to the sum of: (a) preferred dividends on such Preference Shares
in an amount equal to the accrued yield (at a rate of 8% per annum, compounded
quarterly) on the original investment in such Preference Shares through July 23,
1996; and (b) an amount equal to the original investment in such Preference
Shares. Holders of Preference Shares who were members of the Company's
management received an aggregate of 28,425 shares of Common Stock, and holders
of the Preference Shares who were not members of the Company's management
received an aggregate of 1,000 shares of Preferred Stock. In connection with
the Reclassification, Coinmach Laundry also approved an approximate 23-to-1
stock split (the "Stock Split") payable to shareholders of record of Coinmach
Laundry on July 12, 1996.
c. REDEMPTION OF PREFERRED STOCK
Immediately following the Offering, approximately $19.2 million of the
proceeds of the Offering were used by the Company to retire all of the issued
and outstanding shares of Preferred Stock.
d. STOCK OPTIONS
Prior to the Offering, the Company adopted the 1996 Employee Stock Option
Plan (as amended and restated, the "Stock Option Plan") which provides that the
Company may grant options for the purchase of up to 1,109,147 shares of Common
Stock to key employees of the Company over a period of up to ten years. The
Company may grant incentive stock options or options which do not qualify as
incentive stock options at an exercise price per share not less than 100% of the
fair market value of the Common Stock on the date of grant. All options granted
under the Stock Option Plan vest over four years in five equal installments (20%
vest immediately on the date of grant and the remainder vest over a four year
period) and expire ten years from the date of grant.
The Company has granted 246,250 options to various employees of the Company
pursuant to the Stock Option Plan, through September 26, 1997.
On July 23, 1996, in connection with the Offering, Coinmach Laundry granted
certain non-qualified options (the "Options") to certain members of management
(collectively, the "Option Holders") to purchase up to 735,618 shares of Common
Stock at 85% of the initial offering price of the Common Stock. On September
17, 1996, for the purpose of preserving the Option Holders' percentage interest
of Common Stock represented by the Options (which percentage interest was
decreased as a result of the exercise of the Over-Allotment Option), Coinmach
Laundry granted to the Option Holders additional non-qualified stock options to
purchase up to 3,819 shares of Common Stock (the "Additional Options"). The
Options and Additional Options vest in equal annual installments
-8-
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COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
---------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
5. STOCKHOLDERS' EQUITY (continued)
(20% vest immediately on the date of grant and the remainder over a four year
period) commencing on July 23, 1996, the effective date of the Offering. With
respect to Options and Additional Options granted to employees of the Company,
the Company will record the difference between the exercise price and the
initial offering price of Common Stock as a stock-based compensation charge over
the applicable four year vesting period.
On September 17, 1996, Coinmach Laundry granted to certain directors, each
of whom was appointed by the Board of Directors of Coinmach Laundry on such date
to serve as independent directors, options entitling each such director to
purchase up to 60,000 shares of Common Stock (the "Independent Director
Options"). The Independent Director Options vest in equal annual installments
(25% vest immediately on the date of grant and the remainder vest over a three
year period), commencing on September 17, 1996, and entitle each such director
to purchase shares of Common Stock at the initial public offering price of the
Common Stock. The Company will record the difference between the exercise price
of the Independent Director Options and the fair market value of the Common
Stock on September 17, 1996 as a stock-based compensation charge over the
applicable three year vesting period.
On September 5, 1997, Coinmach Laundry granted certain non-qualified
options (the "1997 Options") to certain members of management to purchase up to
200,000 shares of Common Stock at an exercise price of $11.90 per share of
Common Stock. The 1997 Options vest in equal annual installments (20% vest
immediately on the date of grant and the remainder vest over a four year period)
commencing on September 5, 1997. The Company will record the difference between
the exercise price of the 1997 Options and the fair market value of Common Stock
on September 5, 1997 as a stock-based compensation charge over the applicable
four year vesting period.
For the six months ended September 26, 1997 and September 27, 1996, the
Company recorded a stock-based compensation charge of approximately $545,000 and
$470,000 respectively, relating to the Options, the Additional Options, the
Independent Director Options and the 1997 Options. See Note 7-"Subsequent
Events" for a discussion of Coinmach Laundry's proposed offering of 2,500,000
shares of Common Stock.
6. ACQUISITIONS
On January 8, 1997, Coinmach acquired (the "Kwik Wash Acquisition") 100% of
the outstanding voting securities of the partners of Kwik Wash Laundries, L.P.
("Kwik Wash") for $125 million in cash and the Kwik Wash Note. The Kwik Wash
Acquisition enabled the Company to provide coin-operated laundry equipment
services to multi-family housing properties in Texas, Louisiana, Arkansas and
Oklahoma and to operate 150 retail laundromats throughout Texas.
On April 23, 1997, Coinmach completed the acquisition and merger (the
"Reliable Acquisition") of Reliable Holding Corp. ("Reliable") and its
subsidiaries, Reliable Laundry Service Inc., Girard-Hopkins Acquisition Corp.,
Maquilados Automaticas S.A. de C.V., and Automatica S.A. de C.V. with and into
Coinmach for $44 million in cash. The Reliable Acquisition provided the Company
with a strong foothold in the California market and an entry into the northern
Mexican market.
On July 17, 1997, Coinmach acquired 100% of the outstanding voting
securities of National Coin Laundry Holding, Inc., an Ohio Corporation ("NCLH")
and National Laundry Equipment Company, an Ohio corporation ("NLEC") which is
the parent of National Coin Laundry, Inc., an Ohio corporation ("NCL") and
substantially all of the assets of Whitmer Vend-O-Mat Laundry Services, Inc., an
Indiana corporation ("Whitmer"). Coinmach acquired (the "National Coin
Acquisition") NCLH, NLEC, NCL and Whitmer for an aggregate purchase price of
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COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
---------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
6. ACQUISITION (continued)
approximately $19.0 million in cash. The National Coin Acquisition enabled the
Company to further expand its operations by providing coin-operated laundry
equipment services to multi-family housing properties in the states of Ohio,
Indiana, Kentucky, Michigan, West Virginia, Pennsylvania, Georgia, Tennessee,
Illinois and Florida, as well as by distributing exclusive lines of commercial
coin and non-coin laundry machines and parts, and by selling service contracts.
Subsequent to the National Coin Acquisition, NCLH, NLEC and NCL were merged with
and into Coinmach.
The Kwik Wash Acquisition, the Reliable Acquisition and the National Coin
Acquisition have been accounted for as purchases. The Company has made
preliminary allocations to fair value of the assets and liabilities assumed in
such transactions as of their respective acquisition dates.
7. SUBSEQUENT EVENTS
On October 8, 1997, Coinmach consummated the Bond Offering. The issue
price was 109.875%, representing a 9.94% yield to maturity. The gross proceeds
from the Bond Offering were $109.875 million, of which $100.0 million
represented the payment of principal and $9.875 million represented the payment
of a premium for the Series C Notes. Coinmach used approximately $105.4 million
of the net proceeds from the Bond Offering to repay indebtedness outstanding
under the Credit Facility. After giving effect to such repayment of
indebtedness, the aggregate outstanding indebtedness under the Credit Facility
is $97.9 million as of November 10, 1997.
On October 14, 1997, Coinmach Laundry filed a registration statement with
the Securities and Exchange Commission relating to a proposed offering of
4,312,500 shares of Common Stock. Of the total number of shares of Common Stock
that are contemplated to be registered for sale, 2,500,000 shares are
contemplated to be offered by Coinmach Laundry, 1,250,000 shares are
contemplated to be offered by certain selling stockholders and 562,500 shares
represent shares subject to an over-allotment option to be granted to the
underwriters by the selling stockholders, which include certain members of
management. There can be no assurance that Coinmach Laundry will consummate the
offering of such shares of Common Stock.
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COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
---------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Except for the historical information contained herein, certain matters
discussed in this document are forward-looking statements that involve certain
risks and uncertainties, including the risks and uncertainties discussed below,
as well as other risks set forth in the Company's Annual Report on Form 10-K for
the year ended March 28, 1997.
GENERAL
The Company is principally engaged in the business of supplying out-sourced
coin-operated laundry equipment services to multi-family housing properties. On
September 26, 1997, the Company owned and operated approximately 417,000 coin-
operated washers and dryers in approximately 42,000 multi-family housing
properties on routes throughout the United States and 151 retail laundromats
located throughout Texas. Coinmach Laundry, through Super Laundry Equipment
Corp. ("Super Laundry"), a wholly-owned subsidiary of Coinmach, is also a
construction and laundromat equipment distribution company.
The Company provides out-sourced coin-operated laundry equipment services
to locations by leasing laundry rooms from building owners and property
management companies, typically on a long-term, renewable basis. In return for
the exclusive right to provide these services, most of the Company's contracts
provide for commission payments to the location owners. Commission expense
(also referred to as rent expense), the Company's single largest expense item,
is included in laundry operating expenses and represents payments to location
owners. Commissions may be fixed amounts or percentages of revenues and are
generally paid monthly. Also included in laundry operating expenses are the
cost of servicing and collecting in the route business, including, payroll,
parts, vehicles and other related items, the cost of sales associated with Super
Laundry and certain expenses related to the operation of retail laundromats.
In addition to commission payments, many of the Company's leases require
the Company to make advance rental payments to the location owners. These
advance payments are capitalized and amortized over the life of the applicable
lease.
Other revenue sources for the Company include (i) leasing laundry equipment
and other household appliances and electronic items to corporate relocation
entities, individuals, property owners and managers of multi-family housing
properties; (ii) operating, maintaining and servicing retail laundromats; and
(iii) constructing complete turnkey retail laundromats, retrofitting existing
retail laundromats, distributing exclusive lines of commercial coin and non-coin
machines and parts, and selling service contracts.
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the attached
unaudited condensed consolidated financial statements and notes thereto and with
the Company's audited consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K as of and for the year
ended March 28, 1997.
THREE AND SIX MONTH PERIODS ENDED SEPTEMBER 26, 1997 COMPARED TO THREE AND SIX
MONTH PERIODS ENDED SEPTEMBER 27, 1996
Revenues increased by approximately 67% and 59% for the three and six month
periods ended September 26, 1997, respectively, as compared to the prior year's
corresponding periods. The improvement in revenues for the three and six month
periods resulted primarily from the acquisition of the route and laundromat
business of Kwik Wash Laundries, L.P. in January 1997 (the "Kwik Wash
Acquisition"), the acquisition of the route business of Reliable Holding Corp.
in April 1997 (the "Reliable Acquisition"), the acquisition (the "National Coin
Acquisition")
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COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
---------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
RESULTS OF OPERATIONS (continued)
of the route business of National Coin Laundry Holding, Inc. ("NCLH"), National
Coin Laundry, Inc. ("NCL"), National Laundry Equipment Company, Inc. ("NLEC")
and Whitmer Vend-O-Mat Laundry Services, Inc. ("Whitmer"), and increased route
revenues resulting from internal expansion. During such six-month period, the
Company's installed base increased by approximately 9,400 machines from internal
growth (excluding the machines added from the Reliable Acquisition and the
National Coin Acquisition) as compared to an increase of approximately 4,200
machines during the prior year's corresponding period.
Laundry operating expenses increased by approximately 68% and 58% for the
three and six month periods ended September 26, 1997, respectively, as compared
to the prior year's corresponding periods. The increase was due primarily to an
increase in laundry operating expenses related to the Kwik Wash Acquisition, the
Reliable Acquisition and the National Coin Acquisition.
General and administrative expenses increased by approximately $0.3 million
and $0.8 million, for the three and six month periods ended September 26, 1997,
respectively, as compared to the prior year's corresponding periods. The
increase for the periods was primarily due to various expenses associated with
(i) costs relating to the Company's acquisition strategy, including legal and
financial due diligence investigations of potential targets and related costs,
(ii) the development and implementation of procedures for the management of
investor relations, and (iii) systems development and refinement relating to the
integration of prior acquisitions.
Depreciation and amortization increased by approximately 74% and 71% for
the three and six month periods ended September 26, 1997, respectively, as
compared to the prior year's corresponding periods, due primarily to the
contract rights and goodwill associated with the Kwik Wash Acquisition, the
Reliable Acquisition and the National Coin Acquisition, as well as an increase
in capital expenditures for the installed base of machines. As a result of the
Company's acquisition activity since early 1995, the Company incurred
approximately $18.9 million in non-cash depreciation and amortization charges
for the six months ended September 26, 1997 as compared to $11.7 million for the
prior year's corresponding period.
In July 1996, Coinmach Laundry issued in privately negotiated transactions,
79,029 shares of its Class B common stock to certain members of management.
Coinmach Laundry recorded a stock-based compensation charge of approximately
$887,000 attributable to the issuance of such stock. In addition, in July 1996
approximately $103,000 of receivables relating to loans to management in
connection with prior purchases of Common Stock were forgiven and have been
recorded as a stock-based compensation charge.
During July and September 1996, Coinmach Laundry granted nonqualified
options (the "Options") to purchase Common Stock, to certain members of
management and certain other individuals, which enable such persons to purchase
shares of Common Stock at a 15% discount to the initial offering price of Common
Stock. With respect to the Options granted to its employees, the Company will
record such discount as a stock-based compensation charge over the applicable
four year vesting period. The Company also granted options to two of its
disinterested directors (the "Independent Director Options"), which enable such
persons to purchase an aggregate of 120,000 shares of Common Stock at the
initial offering price of Common Stock. The Company will record the difference
between the exercise price of the Independent Director Options and the fair
market value of the Common Stock on the date of grant as a stock-based
compensation charge over the applicable three year vesting period.
In September 1997, Coinmach Laundry granted non-qualified options (the
"1997 Options") to purchase an aggregate of 200,000 shares of Common Stock to
certain members of management at an exercise price of $11.90
-12-
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
---------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
RESULTS OF OPERATIONS (continued)
per share of Common Stock. The Company will record the difference between the
exercise price of the 1997 Options and the fair market value of the Common Stock
on the date of grant as a stock-based compensation charge over the applicable
four year vesting period. For the six months ended September 26, 1997 and
September 27, 1996, the Company recorded a stock-based compensation charge of
approximately $545,000 and $470,000 respectively, relating to the Options, the
Independent Director Options and the 1997 Options.
Operating income margins were approximately 7% and 8% for the three and six
month periods ended September 26, 1997, respectively, as compared to
approximately 6% and 7%, for the three and six month periods ended September 27,
1996, respectively.
Interest expense, net increased by approximately 84% and 74%, for the three
and six month periods ended September 26, 1997, respectively, as compared to the
prior year's corresponding periods, due primarily to increased interest payable
under the Company's senior financing arrangement obtained in January 1997 (as
amended, the "Credit Facility") resulting from increased borrowings to fund
acquisitions.
EBITDA (earnings before deductions for interest, income taxes, depreciation
and amortization), before deduction for stock-based compensation charges, was
approximately $46.6 million for the six months ended September 26, 1997, as
compared to approximately $28.7 million for the corresponding period in 1996,
representing an improvement of approximately 62%. EBITDA margins improved to
approximately 31.1% for the six months ended September 26, 1997, compared to
approximately 30.4% for the prior year's corresponding period. EBITDA is used
by management and certain investors as an indicator of a company's historical
ability to service debt. Management believes that an increase in EBITDA is an
indicator of the Company's improved ability to service existing debt, to sustain
potential future increases in debt and to satisfy capital requirements.
However, EBITDA is not intended to represent cash flows for the period, nor has
it been presented as an alternative to either (i) operating income (as
determined by generally accepted accounting principles ("GAAP")) as an indicator
of operating performance or (ii) cash flows from operating, investing and
financing activities (as determined by GAAP) as a measure of liquidity. Given
that EBITDA is not a measurement determined in accordance with GAAP and is thus
susceptible to varying calculations, EBITDA as presented may not be comparable
to other similarly titled measures of other companies.
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 and contract
rights amortization).
-13-
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
---------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to have substantial indebtedness and debt service
requirements. On September 26, 1997, the Company had outstanding long-term debt
of approximately $402.5 million and stockholders' equity of approximately $16.1
million. On September 26, 1997, $16.0 million of revolving debt was outstanding
under the Credit Facility.
The Company's level of indebtedness will have several important effects on
its future operations, including, but not limited to, the following: (a) a
significant portion of the Company's cash flows from operations will be required
to pay interest on its indebtedness and will not be available for other
purposes; (b) the financial covenants contained in certain of the 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; (c) the Company's ability to obtain additional financing in
the future for working capital, capital expenditures, acquisitions or general
corporate purposes may be impaired; and (d) the Company's ability to adapt to
changes in the coin-operated laundry equipment services industry and to economic
conditions in general will be limited.
The Company anticipates that it will continue to utilize cash flows from
operations to finance its capital expenditures and working capital needs,
including interest payments on its outstanding indebtedness. Capital
expenditures for the six months ended September 26, 1997 were approximately
$91.9 million. Of such amount, the Company spent approximately $66.3 million in
acquisition and related transaction costs, including the Reliable Acquisition
and the National Coin Acquisition, and approximately $8.0 million related to the
net increase in the installed base of machines. The balance was used to
maintain the existing machine base and for general corporate purposes. The full
impact on revenues and EBITDA generated from capital expended on acquisitions
and the net increase in the installed base are not expected to be reflected in
the Company's financial results until subsequent reporting periods, depending on
the timing of the capital expended.
The Company's working capital requirements are, and are expected to
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 certain of the financing agreements governing the Company's
indebtedness, Coinmach is required to make monthly cash interest payments under
the Credit Facility and semi-annual cash interest payments on the Senior Notes.
The Company's depreciation and amortization expenses (aggregating
approximately $34.6 million for the six months ended September 26, 1997) have
the effect of reducing net income but not operating cash flow. In accordance
with GAAP, a significant portion of the purchase prices 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 can have a
favorable effect on operating cash flow by reducing taxes, such treatment also
reduces net income.
Effective June 2, 1997, Coinmach entered into an amendment to the Credit
Facility with Bankers Trust Company, First Union National Bank of North
Carolina, Lehman Commercial Paper, Inc. and certain other lending institutions
named therein, to increase the principal amount of the Tranche B term loan by
$60 million. The Credit Facility, as amended and prior to giving effect to
payment of principal installments, consists of a $70 million revolving credit
facility and a $190 million term loan facility, which is comprised of a Tranche
A term loan in the amount of $30 million and Tranche B term loan in the amount
of $160 million. The Credit Facility also provides for up to $10 million of
letter of credit financing and short term borrowings under a swing line facility
of up to $5 million.
-14-
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
---------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
LIQUIDITY AND CAPITAL RESOURCES (continued)
In connection with Coinmach's January 1997 acquisition of KWL, Inc. ("KWL")
and Kwik-Wash Laundries, Inc. ("Kwik Wash"), the sole partners of Kwik Wash
Laundries, L.P., Coinmach Laundry issued a $15 million promissory note (the
"Kwik Wash Note") in partial payment of the purchase price for the outstanding
voting securities of KWL and Kwik Wash.
On July 17, 1997, Coinmach consummated the National Coin Acquisition,
pursuant to which it acquired 100% of the outstanding voting securities of NCLH
and NLEC and substantially all of the assets of Whitmer for an aggregate
purchase price of approximately $19.0 million in cash. NCLH is the parent of
NCL. The National Coin Acquisition enabled the Company to further expand its
operations by providing coin-operated laundry equipment services to multi-family
housing properties in the states of Ohio, Indiana, Kentucky, Michigan, West
Virginia, Pennsylvania, Georgia, Tennessee, Illinois and Florida, as well as by
distributing exclusive lines of commercial coin and non-coin laundry machines
and parts, and by selling service contracts. Subsequent to the National Coin
Acquisition, NCLH, NLEC and NCL were merged with and into Coinmach. The Credit
Facility was used to finance the National Coin Acquisition.
On October 8, 1997, Coinmach completed the private placement (the "Bond
Offering") of $100 million aggregate principal amount of its 11 3\4% Series
C Notes due 2005 ("Series C Notes"), on substantially identical terms as its
outstanding Senior Notes. The issue price was 109.875%, representing a 9.94%
yield to maturity. The gross proceeds from the Bond offering were $109.875
million of which $100.0 million represented the payment of principal and $9.875
million represented the payment of a premium for the Series C Notes. Coinmach
used approximately $105.4 million of the net proceeds from the Bond Offering to
repay indebtedness outstanding under the Credit Facility. After giving effect
to such repayment of indebtedness, the aggregate outstanding indebtedness under
the Credit Facility is $97.9 million as of November 10, 1997.
Management believes that the Company's future operating activities will
generate sufficient cash flow to repay borrowings under the Senior Notes, the
Series C Notes, the Credit Facility and the Kwik Wash Note or to permit any
necessary refinancings thereof. An inability of the Company, however, to comply
with covenants or other conditions contained in the indentures governing the
Senior Notes or the Series C Notes, respectively, or in the credit agreement
evidencing the Credit Facility (as amended, the "Credit Agreement") could result
in an acceleration of all amounts due under such indentures, the Credit
Agreement and the Kwik Wash Note. 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 Credit
Agreement, or the indentures governing the Senior Notes or the Series C Notes,
respectively.
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.
-15-
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
---------------------------------------------
PART II. OTHER INFORMATION
-----------------
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company has been, and expects to continue to be,
subject to legal proceedings and claims 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, management believes that any such
liability, individually or in the aggregate, will not have a material adverse
effect on the financial condition and results of operations of the Company.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
10.74 Stock Purchase Agreement dated, July 17, 1997, by and among
"Sellers" as set forth on Exhibit A attached thereto, National
Coin Laundry Holding, Inc., National Coin Laundry, Inc., National
Laundry Equipment Company and Coinmach Corporation.
10.75 Asset Purchase Agreement, dated July 17, 1997, by and among
Whitmer Vend-O-Mat Laundry Services, Inc., Stephen P. Close,
Kimberly A. Close, Ruth D. Close, Kimberly A. Close, Ruth D. Close
and Stephen P. Close as trustees of the Alvin D. Close Trust, SPC
Management, Inc. and Coinmach Corporation.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
None
-16-
<PAGE>
COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES
---------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COINMACH LAUNDRY CORPORATION
Date: November 10, 1997 /s/ ROBERT M. DOYLE
-------------------------------
Robert M. Doyle
Senior Vice President and Chief Financial Officer
(On behalf of registrant and as Principal
Financial Officer)
-17-
<PAGE>
EXHIBIT 10.74
STOCK PURCHASE AGREEMENT
by and among
"Sellers"
--------
as set forth on Exhibit A
National Coin Laundry Holding, Inc., National Coin Laundry, Inc.,
and National Laundry Equipment Company
--------------------------------------
collectively, the "Companies",
---------
and
Coinmach Corporation
--------------------
as "Buyer"
-----
Dated: July 17, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1
DEFINITIONS
1.1 Defined Terms................................... 1
1.2 Other Defined Terms............................. 7
ARTICLE 2
PURCHASE AND SALE OF SHARES................................ 8
2.1 Transfer of Common Stock........................ 8
2.2 Consideration for Common Stock.................. 8
2.3 Purchase Price Adjustments...................... 9
(a) NCL Spare Parts.............................. 9
(b) Indebtedness Adjustment...................... 9
(c) Net Current Asset Adjustment for NCL
Purchase Price................................... 9
(d) Net Current Asset Adjustment for NLEC
Purchase Price................................... 12
2.4 Payment Terms for Consideration for Good Accounts
Receivable, Good New Inventory and Spare Parts of
NLEC............................................. 15
ARTICLE 3
CLOSING.................................................... 17
3.1 Closing.......................................... 17
3.2 Documents to be Delivered........................ 17
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND SELLERS 18
4.1 Organization of the Companies.................... 18
4.2 Organization; Good Standing; Authorization of the
Sellers.......................................... 18
4.3 Capitalization................................... 18
4.4 Ownership of Common Stock........................ 19
4.5 Authorization of the Companies................... 19
4.6 Subsidiaries..................................... 19
4.7 Absence of Certain Changes or Events............. 20
4.8 Title to Assets, Etc............................. 22
4.9 Condition of Tangible Assets..................... 24
4.10 Contracts and Commitments........................ 24
4.11 Location Contracts............................... 25
4.12 No Conflict or Violation......................... 26
4.13 Consents and Approvals........................... 26
4.14 Financial Statements............................. 27
4.15 Litigation....................................... 27
4.16 Labor Matters.................................... 27
4.17 Liabilities...................................... 28
4.18 Compliance with Law.............................. 28
4.19 No Brokers....................................... 29
4.20 No Other Agreements to Sell the Assets or the
Companies........................................ 29
- i -
<PAGE>
4.21 Proprietary Rights............................... 29
4.22 Employee and Related Agreements; ERISA........... 30
4.23 Transactions with Certain Persons................ 34
4.24 Tax Matters...................................... 34
4.25 Severance Arrangements........................... 37
4.26 Insurance........................................ 37
4.27 Accounts Receivable.............................. 38
4.28 Inventories...................................... 38
4.29 Payments......................................... 38
4.30 Customers and Suppliers.......................... 39
4.31 Compliance With Legislation Regulating Environ-
mental Quality................................... 39
4.32 Misstatements or Omissions....................... 40
4.33 Key Personnel.................................... 41
4.34 Solvency......................................... 41
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER.................... 41
5.1 Organization; Good Standing; Authorization....... 41
5.2 Consents and Approvals........................... 41
5.3 No Brokers....................................... 42
5.4 No Conflict or Violation......................... 42
ARTICLE 6
CONDITIONS TO SELLERS' OBLIGATIONS........ ................ 42
6.1 Representations, Warranties and Covenants........ 42
6.2 Consents......................................... 43
6.3 No Governmental Proceeding or Litigation......... 43
6.4 Employment Agreements............................ 43
6.5 Certificates..................................... 43
6.6 Corporate Documents.............................. 43
6.7 HSR Act.......................................... 43
6.8 Asset Purchase Agreement......................... 43
ARTICLE 7
CONDITIONS TO BUYER'S OBLIGATIONS.......................... 43
7.1 Representations, Warranties and Covenants........ 43
7.2 Consents......................................... 44
7.3 No Governmental Proceeding or Litigation......... 44
7.4 Compliance with Legal Requirements............... 44
7.5 Opinion of Counsel............................... 44
7.6 Certificates..................................... 44
7.7 Material Changes................................. 45
7.8 Corporate Documents.............................. 45
7.9 HSR Act.......................................... 45
7.10 Disclosure Schedule.............................. 45
7.11 Asset & Liability Statements..................... 45
7.12 Employment Agreements............................ 46
7.13 Due Diligence.................................... 46
7.14 Escrow Agreement................................. 46
7.15 Asset Purchase Agreement......................... 46
7.16 Motor Vehicles................................... 46
7.17 Resignations of Officers and Directors........... 46
- ii -
<PAGE>
ARTICLE 8
ACTIONS BY SELLERS, THE COMPANIES
AND BUYER AFTER THE CLOSING............................... 46
8.1 Books and Records................................ 46
8.2 Further Assurances............................... 47
8.3 Cooperation on Litigation........................ 47
8.4 Cooperation on Tax Matters....................... 47
8.5 Payment of Taxes................................. 47
ARTICLE 9
INDEMNIFICATION............................................ 47
9.1 Survival of Representations...................... 47
9.2 Indemnification.................................. 48
9.3 Indemnification Procedures....................... 50
9.4 Control of Defense: Exceptions, etc............. 50
9.5 No Right of Contribution......................... 51
9.6 Characterization; Taxes.......................... 51
9.7 Escrow........................................... 52
ARTICLE 10
SECURITIES LAWS............................................ 52
10.1 Acquisition for Investment....................... 52
10.2 Legend........................................... 52
ARTICLE 11
ACTIONS BY SELLERS, THE COMPANIES AND
BUYER PRIOR TO THE CLOSING................................. 53
11.1 Maintenance of Business.......................... 53
11.2 Obstruction of Purpose........................... 53
11.3 Certain Prohibited Transactions.................. 53
11.4 Investigation by Buyer........................... 54
11.5 Consents and Efforts............................. 55
11.6 Notification of Certain Matters.................. 55
11.7 No Mergers, Consolidations, Sale of the Shares,
Etc.............................................. 55
ARTICLE 12
MISCELLANEOUS.............................................. 56
12.1 Assignment....................................... 56
12.2 Notices; Transfer of Funds....................... 56
12.3 Choice of Law; Venue; Service of Process......... 58
12.4 Entire Agreement; Amendments and Waivers......... 58
12.5 Counterparts..................................... 58
12.6 Invalidity....................................... 58
12.7 Headings......................................... 59
12.8 Expenses......................................... 59
12.9 Publicity........................................ 59
12.10 Remedies........................................ 59
12.11 Confidential Information........................ 59
- iii -
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
This Stock Purchase Agreement, dated July 17, 1997, is entered into by
and among Coinmach Corporation, a Delaware corporation ("Buyer"), the Sellers
-----
listed on Exhibit A attached hereto (each a "Seller" and, collectively, "Seller"
--------- ------ -------
or "Sellers") and each of the Companies (as hereinafter defined).
- -----------
RECITALS
--------
WHEREAS, Sellers own the number of shares of capital stock of each of
the Companies (as hereinafter defined) set forth opposite each such Seller's
name on Exhibit A hereto (collectively, the "Common Stock").
--------- ------------
WHEREAS, the Companies currently engage in, among other things,
supplying coin-operated laundry equipment services to multi-family dwellings
located primarily in the States of Ohio, Indiana, Kentucky, Michigan, West
Virginia, Pennsylvania, Georgia, Tennessee, Illinois and Florida (the foregoing,
together with all other businesses and operations of the Companies, shall
hereinafter be collectively referred to as the "Business").
--------
WHEREAS, Buyer desires to purchase from Sellers, and Sellers desire to
transfer to Buyer, all of the Common Stock, subject to the terms and conditions
of this Agreement.
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 agree as follows:
ARTICLE 1
DEFINITIONS
-----------
1.1 Defined Terms. As used herein, the terms below shall have the
-------------
following meanings:
"Adverse Effect" shall mean a materially adverse effect on any of the
--------------
Business, the Sale, the Common Stock, the Assets, liabilities, working capital,
earnings, condition (financial or otherwise), operating results, prospects, or
employee or customer relations, in each case, of any of the Companies, or the
ability of any of the Companies or any Seller to perform its respective
obligations under the Transaction Documents or the ability of any of the
Companies to conduct the Business as presently conducted or as proposed to be
conducted.
- 1 -
<PAGE>
"Affiliate" of any Person shall mean any other Person controlling,
---------
controlled by or under common control with such first Person.
"Agreement" shall mean this Stock Purchase Agreement, by and among
---------
Buyer, each of the Companies and Sellers, as such Agreement may be amended from
time to time.
"Balance Sheet" shall mean the consolidated balance sheet of the
-------------
Companies for the fiscal year ended as of December 31, 1996, together with the
notes thereon, delivered to Buyer on or before the Closing Date and attached
hereto as Exhibit B.
---------
"Balance Sheet Date" shall mean December 31, 1996.
------------------
"Business" shall have the meaning assigned to such term in the recitals
--------
hereof.
"Closing Date" shall mean July 17, 1997, or such other date as may be
------------
mutually agreed upon in writing by the Parties.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
----
time to time.
"Common Stock" shall have the meaning assigned to such term in the
------------
recitals hereof.
"Companies" shall mean each of NCLH, NCLI and NLEC and any of their
---------
respective predecessors.
"Contracts" shall mean the Location Contracts and any of the agreements,
---------
contracts, commitments or other documents described in Section 4.10(a)-(k)
hereof or set forth on the Disclosure Schedule.
-------------------
"Disclosure Schedule" means a schedule executed and delivered by Sellers
-------------------
to Buyer prior to the date hereof which sets forth exceptions to the
representations and warranties contained in Article 4 hereof and certain other
information called for by Article 4 hereof and other provisions of this
Agreement and which hereby is made a part of this Agreement and incorporated in
its entirety herein by reference.
"Encumbrances" shall mean 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
the interest of any vendor, vendee or lessor or lessee under any conditional
sale agreement, capital lease or other title retention agreement.
- 2 -
<PAGE>
"Environmental and Safety Requirements" means all applicable federal,
-------------------------------------
state, local and foreign statutes, regulations, ordinances, restrictions and
similar provisions having the force or effect of law, all judicial and
administrative orders and determinations, all contractual obligations and all
common law concerning public health and safety, worker or occupational health
and safety, and pollution or protection of the environment, including, without
limitation, all those relating to the presence, use, production, generation,
handling, transport, treatment, storage, disposal, distribution, labeling,
testing, processing, discharge, release, threatened release, control, or cleanup
of any hazardous or otherwise regulated materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation, and also including, but not limited to, the
Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.), Resource
-- ---
Conservation & Recovery Act (42 U.S.C. Section 6901 et seq.), Safe Drinking
-- ---
Water Act (21 U.S.C. Section 349, 42 U.S.C. Section 201, 300f), Toxic
Substances Control Act (15 U.S.C. Section 2601 et seq.), Clean Air Act (42
-- ---
U.S.C. Section 7401 et seq.), and Comprehensive Environmental Response,
-- ---
Compensation and Liability Act (42 U.S.C. Section 9601 et seq.).
-- ---
"Equity Interests" shall mean any capital stock or warrants, options or
----------------
other rights of any kind to acquire capital stock.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
-----
as amended.
"Facilities" shall mean the warehouses, office locations, self-storage
----------
locations and all other Real Estate, and related facilities (including any and
all facilities and locations covered by the Location Contracts) which are owned
or leased by the Companies or the Sellers or any of their Representatives on
behalf of the Companies.
"Financial Statements" shall mean the Balance Sheet and the consolidated
--------------------
statements of income and consolidated statements of stockholders' equity for the
Companies for the twelve month periods ended as of the Balance Sheet Date,
together with the notes thereon, delivered to Buyer on or before the Closing
Date and attached hereto as Exhibit C.
---------
"Fixtures and Equipment" shall mean all of the furniture, fixtures,
----------------------
furnishings, machinery (including the Machines) and equipment owned or leased by
the Companies or the Sellers or any of their Representatives on behalf of the
Companies and located in, at or upon the Facilities as of the
- 3 -
<PAGE>
Balance Sheet Date, plus all additions, replacements or deletions since the
Balance Sheet Date to the Closing Date.
"Good Accounts Receivable" shall mean NLEC's bona fide claims against
------------------------
debtors for services performed or other charges arising within 180 days prior to
the Closing Date, including all equipment lease receivables, and that all ser-
vices performed which gave rise to said accounts were performed in accordance
with the applicable contracts or customer requirements; and that said accounts
receivable are subject to no defenses, counterclaims or rights of setoff and are
fully collectible in the ordinary course of business and in all events within
180 days after such accounts receivable arose, consistent with past practices,
without cost to Buyer in collection efforts therefor.
"Good New Inventory" shall consist only of NLEC's Machines and Equipment
------------------
used in connection with the Business of quality and quantity commercially usable
and salable in the ordinary course of business and purchased by Seller no more
than 270 days prior to the Closing Date.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
-------
1976, as amended.
"Indebtedness" shall mean with respect to any Person, without
------------
duplication, (i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all capitalized lease obligations of such Person
except vehicle lease obligations as set forth on the Disclosure Schedule, (iv)
all obligations of such Person issued or assumed as the deferred purchase price
of property, all conditional sale obligations and all obligations under any
title retention agreement (but excluding trade accounts payable, vehicle
obligations, obligations for Machines acquired for the Middle Tennessee
University contract as set forth on the Disclosure Schedule, obligations for
Machines (domestic Whirlpool washers and dryers) acquired from Buyer as set
forth on the Disclosure Schedule, office equipment lease obligations as set
forth on the Disclosure Schedule, and other accrued expenses or liabilities
arising in the ordinary course of business and consistent with past practice
that are not overdue by 90 days or more or are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted), (v) all
obligations for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (vi) all obligations to the
State of Kentucky or any other state relating to Sellers' failure to file tax
returns with the appropriate state taxing authorities, (vii) guarantees and
other contingent obligations in respect of Indebtedness referred to in clauses
(i) through (vi) above and clause (ix)
- 4 -
<PAGE>
below, (viii) all obligations of any other Person of the type referred to in
clauses (i) through (vii) which are secured by any lien on any property or asset
of such Person, and (ix) all obligations under currency agreements and interest
swap agreements of such Person.
"Investment" shall mean, with respect to any Person, (a) any direct or
----------
indirect purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or other ownership or beneficial interest
(including, without limitation, partnership interests and joint venture
interests) of any other Person, and (b) any capital contribution by such Person
to any other Person.
"Leases" shall mean all of the leases (including the Location Contracts)
------
listed on the Disclosure Schedule and all other leases relating to the Business
-------------------
which are not required to be scheduled pursuant to this Agreement.
"Legal Requirements" means any applicable action, law, statute, treaty,
------------------
rule, regulation, order, ordinance, judgment, injunction, decree, award,
determination or direction of an arbitrator or government entity, including,
without limitation, any zoning, Environmental and Safety Requirements, motor
vehicle safety requirements or standards or any requirements arising thereunder
or related thereto.
"Location Contracts" shall mean those licenses, contracts or lease
------------------
agreements, however, designated, for the provision of laundry equipment services
to multi-family dwellings in the course of the Business, which contracts shall
be set forth on the Disclosure Schedule.
-------------------
"Machines" shall mean any and all of the coin-operated washing machines
--------
and dryers, soap machines, debit card equipment, vending machines and change
makers, and other machines used in connection with the Business, owned or leased
by any of the Companies.
"NCLH" shall mean National Coin Laundry Holding, Inc., an Ohio
----
corporation.
"NCLI" shall mean National Coin Laundry Inc., an Ohio corporation.
----
"NLEC" shall mean National Laundry Equipment Company, an Ohio
----
corporation.
"On-Location Machines" shall mean the Machines installed on location and
--------------------
subject to written or oral lease or agreement.
- 5 -
<PAGE>
"Parties" shall mean, collectively, the Buyer, each of the Companies and
-------
each of the Sellers.
"Permits" shall mean all of Sellers' and the Companies' licenses,
-------
permits and other governmental authorizations or consents required to conduct
the Business as presently conducted or as proposed to be conducted.
"Person" shall mean an individual, partnership, corporation,
------
association, joint stock company, limited liability company, trust, joint
venture, unincorporated organization, governmental entity or any other entity or
organization of any kind whatsoever.
"Real Estate" shall mean all real property, whether owned or leased, or
-----------
any interest therein, and all plants, buildings and other improvements located
on such owned or leased property, and all easements, licenses, rights of way,
Permits and all appurtenances to such owned or leased property, including,
without limitation, all appurtenant rights in and to public streets, whether or
not vacated.
"Representative" shall mean, with respect to any Person, any officer,
--------------
director, partner, principal, affiliate, attorney, agent, employee or other
representative of such Person.
"Securities Act" shall means the Securities Act of 1933, as amended.
--------------
"Subsidiaries" shall mean and include any Person in which any of the
------------
Companies either owns capital stock or is a partner or is in some other manner
affiliated through an Investment or participation in the voting interests or
Equity Interests of such Person.
"Tax" shall mean any federal, state, local, or foreign income, gross
---
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security or similar tax, unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including without limitation any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" shall mean any return, declaration, report, claim for
----------
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
- 6 -
<PAGE>
"Transaction Documents" shall mean this Agreement and all other
---------------------
agreements, instruments, certificates and other documents to be entered into or
delivered by any Person in connection with the transactions contemplated by any
of the foregoing.
"Transfer Taxes" shall mean any and all sales, use, transfer, real
--------------
property transfer, recording, gains, stock transfer and other similar taxes and
fees, including without limitation any interest, penalty or addition thereto,
whether disputed or not.
1.2 Other Defined Terms. The following terms shall have the meanings
-------------------
assigned to such terms in the corresponding Sections of this Agreement set forth
below:
<TABLE>
<CAPTION>
Term Section
- -------------------------------------------- -------
<S> <C>
AAA 2.3
Act 10.2
Actions 4.15
Arbitrator 2.3
Assets 4.8
Benefit Arrangement 4.22
Buyer's Indemnitees 9.2
Closing 3.1
Damages 9.2
Disagreement 2.3
Disputed Item 2.3
Employee Plan 4.22
Environmental Requirements 4.31
ERISA Affiliate 4.22
ERISA Liabilities 9.2
Escrow Agreement 2.2
Escrowed Funds 2.2
Indemnified Party 9.3
Indemnifying Party 9.3
Locations 4.11
Multiemployer Plans 4.22
NCL Purchase Price 2.2
NLEC Purchase Price 2.2
NLEC Restated Financial Statements 2.2
PBGC 4.22
Personnel 4.7
Purchase Price 2.2
Proprietary Rights 4.21
Review Period 2.3
Sale 2.1
Sellers' Indemnitees 9.2
Tax Liabilities 9.2
Title IV Plan 4.22
WARN Act 4.16
</TABLE>
- 7 -
<PAGE>
ARTICLE 2
PURCHASE AND SALE OF SHARES
---------------------------
2.1 Transfer of Common Stock. Upon the terms and subject to the
------------------------
conditions contained herein, Sellers will sell, convey, transfer, assign and
deliver to Buyer, and Buyer will acquire on the Closing Date, all of the Common
Stock (the "Sale").
----
2.2 Consideration for Common Stock.
------------------------------
(a) Upon the terms and subject to the conditions contained herein, as
consideration for the purchase of the Common Stock, Buyer shall pay a purchase
price (i) to the stockholders of NLEC for all of the issued and outstanding
capital stock of NLEC an amount in cash equal to (A) $1,294,000 plus (B) the
----
amount, if any, paid by Buyer for Seller's Good Accounts Receivable, Good New
Inventory, Used Inventory and Spare Parts in accordance with Section 2.4(c)
hereof (the "NLEC Purchase Price"); and (ii) to the stockholders of NCLH for all
-------------------
of the issued and outstanding capital stock of NCLH an amount in cash equal to
$11,250,000 (the "NCL Purchase Price," together with the NLEC Purchase Price,
------------------
the "Purchase Price"). The Purchase Price is subject to the purchase price
--------------
adjustments as hereinafter provided. Notwithstanding anything to the contrary
contained herein, on the Closing Date, not less than One Million One Hundred
Thousand Dollars ($1,100,000) of the NCL Purchase Price shall be placed in
escrow by the Sellers (the "Escrowed Funds") in respect of certain
--------------
indemnification obligations of Sellers provided for in Article 9 hereof and
pursuant to Article 11 of that certain Asset Purchase Agreement dated July 17,
1997 by and among the Buyer, Stephen P. Close, Kimberly A. Close, Ruth D. Close,
Kimberly A. Close, Ruth D. Close and Stephen P. Close as Trustees of the Alvin
D. Close Trust, SPC Management, Inc. and Whitmer Vend-O-Mat Laundry Services,
Inc. ("Asset Purchase Agreement"). The Escrowed Funds shall be disbursed
------------------------
pursuant to and in accordance with the provisions of an escrow agreement (the
"Escrow Agreement"), substantially in the form attached hereto as Exhibit D.
- ----------------- ---------
Except as expressly provided in the Escrow Agreement, the rights and
obligations of Sellers and Buyer under the Escrow Agreement shall in no way
affect their respective rights and obligations under this Agreement, including,
without limitation, their respective rights and obligations under Article 9
hereof.
(b) All payments to be made to Sellers pursuant to this Section 2.2
shall be made by wire transfer of immediately available funds to such account or
accounts as the Sellers may reasonably direct by written notice delivered
- 8 -
<PAGE>
to Buyer at least two (2) business days prior to the Closing Date or in such
other manner as the Parties may mutually agree to in writing.
2.3 Purchase Price Adjustments.
--------------------------
(a) NCL Spare Parts. On the Closing Date, Buyer shall purchase from
---------------
Seller all spare parts for Machines and Equipment used in connection with the
Business of NCL ("NCL Spare Parts") for an amount equal to Seller's cost for
---------------
such Spare Parts; provided, however, that such amount shall not exceed $50,000.
-------- -------
(b) Indebtedness Adjustment. On the Closing Date, the Purchase Price
-----------------------
shall be decreased, on a dollar-for-dollar basis, by the amount of the
Companies' Indebtedness outstanding on the Closing Date.
(c) Net Current Asset Adjustment for NCL Purchase Price.
---------------------------------------------------
(i) Definitions. For the purposes of this Section 2.3(b), the
following terms shall have the following respective meanings:
(A) "NCL Closing Date Asset & Liability Statement" shall mean the
--------------------------------------------
statement of Assets and Liabilities for NCLH and NCLI dated as of the Closing
Date.
(B) "NCL Closing Date Assets" shall mean, (1) as of the Closing Date,
-----------------------
the amount of prepaid taxes if benefitting NCL in the 12-month period after the
Closing Date, prepaid commissions and security deposits, (2) the current portion
of that certain American Coin Corporation/NCL joint venture note receivable,
which amount is payable within one year after the Closing Date and (3) those
assets under the captions "Cash and "Accounts Receivable" on the NCL Closing
---- -------------------
Date Asset & Liability Statement and determined in accordance with generally
accepted accounting principles, consistently applied.
(C) "NCL Closing Date Liabilities" shall mean, as of the Closing Date,
----------------------------
those liabilities included under the caption "Current Liabilities", including
without limitation commissions payable and NCL's accounts payable incurred in
the ordinary course of business consistent with past practices, except for
obligations representing the purchase price for the acquisition of those certain
(1) Machines installed at Middle Tennessee University in June 1997, which Buyer
has agreed to pay, and (2) Machines (domestic Whirlpool washers and dryers)
acquired from Buyer in June 1997, and except for that portion of Indebtedness
that is deemed a current liability under generally accepted
- 9 -
<PAGE>
accounting principles, on the NCL Closing Date Asset & Liability Statement and
determined in accordance with generally accepted accounting principles,
consistently applied.
(D) "NCL Closing Date Net Current Asset Amount" shall mean the NCL
-----------------------------------------
Closing Date Assets less the NCL Closing Date Liabilities. The NCL Closing Date
Net Current Asset Amount may be a positive or negative number.
(E) "NCL Balance Sheet" shall mean the consolidated balance sheets of
-----------------
NCLH and NCLI for the fiscal year ended as of December 31, 1996, together with
the notes thereto.
(F) "NCL Balance Sheet Assets" shall mean (1) as of the Balance Sheet
------------------------
Date, the amount of prepaid taxes if benefitting NCL in the 12-month period
after the Closing Date, prepaid commissions and security deposits; (2) the
current portion of that certain American Coin Corporation/NCL joint venture note
receivable, which amount is payable within one year after the Closing Date and
(3) the amount of assets included under the captions "Cash" and "Accounts
---- --------
Receivable" on the NCL Balance Sheet and determined in accordance with generally
- ----------
accepted accounting principles, consistently applied.
(G) "NCL Balance Sheet Liabilities" shall mean the amount of
-----------------------------
liabilities included under the caption "Current Liabilities", including without
limitation commissions payable and NCL's accounts payable incurred in the
ordinary course of business consistent with past practices, except for that
portion of Indebtedness that is deemed a current liability under generally
accepted accounting principles, on the NCL Balance Sheet and determined in
accordance with generally accepted accounting principles, consistently applied.
(H) "NCL Balance Sheet Net Current Asset Amount" shall mean the NCL
------------------------------------------
Balance Sheet Assets less the NCL Balance Sheet Liabilities. The NCL Balance
Sheet Net Current Asset Amount may be a positive or negative number.
(I) "NCL Deficiency" shall mean the amount, if any, by which the NCL
--------------
Closing Date Net Current Asset Amount is less than the NCL Balance Sheet Net
Current Asset Amount, as modified as a result of the resolution of any Disputed
Items (as hereinafter defined).
(J) "NCL Surplus" shall mean the amount, if any, by which the NCL
-----------
Closing Date Net Current Asset Amount is greater than the NCL Balance Sheet Net
Current
- 10 -
<PAGE>
Asset Amount, as modified as a result of the resolution of any Disputed Items
(as hereinafter defined).
(ii) Effect of NCL Deficiency. The NCL Purchase Price shall be
reduced on a dollar-for-dollar basis by the amount of the NCL Deficiency, if
any, in the manner contemplated by Section 2.3(b)(iv) and (v) hereof.
(iii) Effect of NCL Surplus. The NCL Purchase Price shall be
increased on a dollar-for-dollar basis by the amount of the NCL Surplus, if any,
in the manner contemplated by Section 2.3(b)(iv) and (vi) hereof.
(iv) Delivery of NCL Closing Date Asset & Liability Statement and
NCL Balance Sheet.
(A) No later than thirty (30) days after the Closing Date, Sellers
shall deliver to Buyer the preliminary NCL Closing Date Asset & Liability
Statement (the "NCL Preliminary Statement") setting forth each of the categories
-------------------------
of assets and liabilities described in the definitions of NCL Closing Date
Assets and NCL Closing Date Liabilities set forth in Section 2.3(b)(i) hereof.
On the Closing Date, Sellers shall deliver to Buyer the NCL Balance Sheet.
(B) Buyer shall have thirty (30) days from its receipt of the NCL
Preliminary Statement (the "Review Period") to notify Sellers of its objection
-------------
to any item on the NCL Preliminary Statement. Any such notice shall specify the
item or items in dispute (a "Disputed Item" or "Disputed Items"). Any Disputed
------------- --------------
Item shall be resolved in the manner set forth in Section 2.3(d) below.
(C) Upon the expiration of the Review Period, if Buyer (x) does not
deliver to Sellers its objections to the NCL Preliminary Statement, or (y)
acknowledges in writing that the NCL Preliminary Statement is accurate, the NCL
Preliminary Statement shall be final, binding and conclusive on the Parties, and
Sellers shall pay to Buyer the amount of any NCL Deficiency, or Buyer shall pay
to the Sellers the amount of any NCL Surplus, that is not a Disputed Item within
ten (10) days after the Review Period. All payments for any NCL Deficiency
shall be made by wire transfer of immediately available funds to the account or
accounts designated by Buyer. All payments for any NCL Surplus shall be made by
wire transfer of immediately available funds to the account or accounts
designated by Sellers.
(v) Payment of NCL Deficiency. If it is finally determined pursuant
to the provisions of this Section 2.3(b) that there is an NCL Deficiency, then
within ten (10)
- 11 -
<PAGE>
days after all Disputed Items with respect thereto have been resolved, Sellers
shall pay to Buyer the amount of the NCL Deficiency that has not already been
paid by Sellers pursuant to Section 2.3(b)(iv)(C) hereof. All payments of the
NCL Deficiency shall be made by wire transfer of immediately available funds to
the account or accounts designated by Buyer.
(vi) Payment of NCL Surplus. If it is finally determined pursuant to
the provisions of this Section 2.3(b) that there is an NCL Surplus, then within
ten (10) days after all Disputed Items with respect thereto have been resolved,
Buyer shall pay to Sellers the amount of the NCL Surplus that has not already
been paid by Buyer pursuant to Section 2.3(b)(iv)(C) hereof. All payments of
the NCL Surplus shall be made by wire transfer of immediately available funds to
the account or accounts designated by Sellers.
(d) Net Current Asset Adjustment for NLEC Purchase Price.
----------------------------------------------------
(i) Definitions. For the purposes of this Section 2.3(c), the
following terms shall have the following respective meanings:
(A) "NLEC Closing Date Asset & Liability Statement" shall mean the
---------------------------------------------
statement of Assets and Liabilities for NLEC dated as of the Closing Date.
(B) "NLEC Closing Date Assets" shall mean, (1) as of the Closing Date,
------------------------
the amount of prepaid taxes if benefitting NLEC in the 12-month period after the
Closing Date, prepaid commissions and security deposits and (2) those assets
under the caption "Cash" on the NLEC Closing Date Asset & Liability Statement
----
and determined in accordance with generally accepted accounting principles,
consistently applied, but shall not include those items for which consideration
is provided pursuant to Section 2.4.
(C) "NLEC Closing Date Liabilities" shall mean, as of the Closing
-----------------------------
Date, those liabilities included under the caption "Current Liabilities",
including without limitation commissions payable and NLEC's accounts payable
incurred in the ordinary course of business consistent with past practices,
except for that portion of Indebtedness that is deemed a current liability under
generally accepted accounting principles, on the NLEC Closing Date Asset &
Liability Statement and determined in accordance with generally accepted
accounting principles, consistently applied.
(D) "NLEC Closing Date Net Current Asset Amount" shall mean the NLEC
------------------------------------------
Closing Date Assets less the NLEC
- 12 -
<PAGE>
Closing Date Liabilities. The NLEC Closing Date Net Current Asset Amount may be
a positive or negative number.
(ii) "NLEC Deficiency" shall mean the amount, if any, by which the
---------------
NLEC Closing Date Net Current Asset Amount is less than zero as set forth on the
NLEC Closing Date Asset & Liability Statement, as modified as a result of the
resolution of any Disputed Items (as hereinafter defined).
(iii) "NLEC Surplus" shall mean the amount, if any, by which the NLEC
------------
Closing Date Net Current Asset Amount is greater than zero as set forth on the
NLEC Closing Date Asset & Liability Statement, as modified as a result of the
resolution of any Disputed Items (as hereinafter defined).
(iv) Effect of NLEC Deficiency. The NLEC Purchase Price shall be
reduced on a dollar-for-dollar basis by the amount of the NLEC Deficiency, if
any, in the manner contemplated by Section 2.3(c)(iv) and (v) hereof.
(v) Effect of NLEC Surplus. The NLEC Purchase Price shall be
increased on a dollar-for-dollar basis by the amount of the NLEC Surplus, if
any, in the manner contemplated by Section 2.3(c)(iv) and (vi) hereof.
(vi) Delivery of NLEC Closing Date Asset & Liability Statement.
(A) No later than thirty (30) days after the Closing Date, Sellers
shall deliver to Buyer the preliminary NLEC Closing Date Asset & Liability
Statement (the "NLEC Preliminary Statement") setting forth each of the
--------------------------
categories of assets and liabilities described in the definitions of NLEC
Closing Date Assets and NLEC Closing Date Liabilities set forth in Section
2.3(c)(i) hereof.
(B) Buyer shall have thirty (30) days from its receipt of the NLEC
Preliminary Statement (the "Review Period") to notify Sellers of its objection
-------------
to any item on the NLEC Preliminary Statement. Any such notice shall specify
the item or items in dispute (a "Disputed Item" or "Disputed Items"). Any
------------- --------------
Disputed Item shall be resolved in the manner set forth in Section 2.3(d) below.
(C) Upon the expiration of the Review Period, if Buyer (x) does not
deliver to Sellers its objections to the NLEC Preliminary Statement, or (y)
acknowledges in writing that the NLEC Preliminary Statement is accurate, the
NLEC Preliminary Statement shall be final, binding and conclusive on the
Parties, and Sellers shall pay to Buyer the amount of any NLEC Deficiency, or
Buyer shall
- 13 -
<PAGE>
pay to the Sellers the amount of any NLEC Surplus, that is not a Disputed Item
within ten (10) days after the Review Period. All payments for any NLEC
Deficiency shall be made by wire transfer of immediately available funds to the
account or accounts designated by Buyer. All payments for any NLEC Surplus
shall be made by wire transfer of immediately available funds to the account or
accounts designated by Sellers.
(vii) Payment of NLEC Deficiency. If it is finally determined
pursuant to the provisions of this Section 2.3(c) that there is an NLEC
Deficiency, then within ten (10) days after all Disputed Items with respect
thereto have been resolved, Sellers shall pay to Buyer the amount of the NLEC
Deficiency that has not already been paid by Sellers pursuant to Section
2.3(c)(iv)(C) hereof. All payments of the NLEC Deficiency shall be made by wire
transfer of immediately available funds to the account or accounts designated by
Buyer.
(viii) Payment of NLEC Surplus. If it is finally determined pursuant
to the provisions of this Section 2.3(c) that there is an NLEC Surplus, then
within ten (10) days after all Disputed Items with respect thereto have been
resolved, Buyer shall pay to Sellers the amount of the NLEC Surplus that has not
already been paid by Buyer pursuant to Section 2.3(c)(iv)(C) hereof. All
payments of the NLEC Surplus shall be made by wire transfer of immediately
available funds to the account or accounts designated by Sellers.
(e) Arbitration. If Buyer and Sellers shall be unable to agree on the
-----------
amount of any adjustments to the Purchase Price pursuant to this Section 2.3 (a
"Disagreement") or shall be unable resolve any Disputed Item within thirty (30)
------------
days after notice from Buyer to Sellers that a Disagreement or Disputed Item
exists, then a Representative of Sellers and a Representative of Buyer shall
endeavor in good faith to resolve such Disagreement or Disputed Item. In the
event that such Representatives are unable to resolve any such Disagreement or
Disputed Item within thirty (30) days, Buyer and Sellers shall, within ten (10)
business days thereafter, appoint an arbitrator ("Arbitrator") who is licensed
----------
by the American Arbitration Association ("AAA") to arbitrate such Disagreement
---
or Disputed Item. In the event Buyer and Sellers cannot agree on the selection
of the Arbitrator, Buyer shall select one arbitrator and Sellers shall select
one arbitrator who shall together select the Arbitrator who shall arbitrate the
matter. Buyer and Sellers shall, within twenty (20) days thereafter present
their positions with respect to the disputes to the Arbitrator, together with
such other materials as the Arbitrator deems appropriate. The
- 14 -
<PAGE>
Arbitrator shall, after the submission of the evidentiary materials, submit a
written decision on each dispute to Sellers and Buyer. Any determination by the
Arbitrator with respect to any dispute shall be final and binding on each party
to this Agreement. The Arbitrator shall comply, and the arbitration shall be
conducted in the State of Delaware in accordance with the commercial arbitration
rules of the AAA as in effect for commercial arbitrations conducted in the State
of Delaware by the AAA. Sellers and Buyer agree that the costs of the
Arbitrator shall be borne equally by Sellers and Buyer.
2.4 Payment Terms for Consideration for Good Accounts Receivable, Good
------------------------------------------------------------------
New Inventory and Spare Parts of NLEC.
- -------------------------------------
(a) Good Accounts Receivable of NLEC. On the Closing Date, NLEC shall
--------------------------------
deliver to Buyer a schedule, in form and substance reasonably acceptable to
Buyer, listing all accounts receivable which are contained on the NLEC Closing
Date Balance Sheet ("Accounts Receivable Schedule"). The Accounts Receivable
----------------------------
Schedule shall identify which of the accounts receivable are Good Accounts
Receivable. The portion of the Purchase Price attributable to Good Accounts
Receivable shall be paid as follows:
(i) Buyer shall pay to Sellers or Sellers' designee, within 10 days
after the Closing Date, an amount equal to 2/3 of the aggregate value of all
Good Accounts Receivable ("Good Accounts Receivable Payment") and shall assign
--------------------------------
to Sellers or Sellers' designee all the accounts receivable listed on the
Accounts Receivable Schedule which are not Good Accounts Receivable.
(ii) Within 5 business days subsequent to each 90-day period (each
period, a "Quarter" and the last day of each period, a "Reconciliation Date")
------- -------------------
occurring during the 12-month period after the Closing Date, Buyer shall provide
to Sellers a schedule evidencing the amount of the Good Accounts Receivable that
was actually collected by Buyer during such Quarter ("Collections"). If the
-----------
Collections for the Quarter ending on such Reconciliation Date (together with
the Collections, if any, received for any prior Quarter) exceed the amount of
the Good Accounts Receivable Payment, Buyer shall pay such excess amount to
Sellers or Sellers' designee within 5 days of the relevant Reconciliation Date;
provided, however, that Buyer shall credit against any such payment made by
- -------- -------
Buyer in any given Quarter any payments previously made to Sellers or Sellers'
designee for any prior Quarter. If, at the end of the final Quarter in the 12-
month period after the Closing Date (the "Final Quarter"), the aggregate amount
-------------
of the Collections is less than the Good Accounts Receivable Payment, Sellers
shall pay such deficient
- 15 -
<PAGE>
amount to Buyer within 5 days of the Reconciliation Date of such final Quarter.
Within 5 days after the Reconciliation Date of the Final Quarter, Buyer shall
assign to Sellers or Sellers' designee any Good Accounts Receivable not
collected as of such date.
(b) Inventory. On the Closing Date, NLEC shall deliver to Buyer a
---------
schedule, in form and substance reasonably acceptable to Buyer, of all Machines
and Equipment used in connection with the Business of NLEC identifying Good New
Inventory and all other Machines and Equipment which are not Good New Inventory
(which are either used or, if unused, are more than 270 days old) ("Used and Old
------------
Inventory"). The portion of the Purchase Price attributable to Good New
- ---------
Inventory shall be paid as follows:
(i) Within 10 days after the Closing Date, Buyer shall pay to Sellers
or Sellers' designee an amount equal to 2/3 of Sellers' cost for Good New
Inventory (including freight thereon).
(ii) Additionally, Buyer shall have the option, but not the
obligation, to purchase from Sellers within 30 days after the Closing Date any
Used and Old Inventory that Buyer determines to purchase in its sole discretion
at a price to be mutually agreed upon by the Parties, such amount to be paid
within 40 days after the Closing Date. Buyer shall assign to Sellers or
Sellers' designee any Used and Old Inventory that it does not so purchase.
(iii) On each Reconciliation Date, Buyer shall provide to Sellers a
schedule evidencing the amount of all Good New Inventory sold by Buyer to third
parties during such Quarter ("Inventory Sales"). If the Inventory Sales for the
---------------
Quarter ending on such Reconciliation Date (together with the Inventory Sales,
if any, for any prior Quarter) exceeds the amount Buyer paid to Sellers or
Sellers' designee for such Good New Inventory in accordance with subparagraph
(i) above, Buyer shall pay such excess amount to Sellers or Sellers' designee up
to an amount equal to that portion of Sellers' cost for such Good New Inventory
which was not paid to Sellers or Sellers' designee in accordance with
subparagraph (i) above within 5 days of the relevant Reconciliation Date;
provided, however, that Buyer shall credit against any such payment made by
- -------- -------
Buyer in any given Quarter any payments previously made to Sellers or Sellers'
designee for any prior Quarter. If, at the end of the Final Quarter, the
aggregate amount of the Inventory Sales is less than the amount Buyer paid to
Sellers or Sellers' designee in accordance with subparagraph (i) above, Sellers
shall pay such deficient amount to Buyer within 5 days of the Reconciliation
Date of such Final Quarter. Within 5 days after the Reconciliation Date of the
Final Quarter, Buyer shall assign to Sellers or
- 16 -
<PAGE>
Sellers' designee any Good New Inventory that Buyer did not sell to third
parties as of such date.
(c) NLEC Spare Parts. On the Closing Date, NLEC shall deliver to Buyer
----------------
a schedule, in form and substance reasonably acceptable to Buyer, of all spare
parts for Machines and Equipment used in connection with the Business of NLEC
("NLEC Spare Parts"). Buyer shall have the option, but not the obligation, to
- ------------------
purchase within 30 days after the Closing Date any NLEC Spare Parts at a price
to be mutually agreed upon by the Parties, such amount to be paid within 10 days
of any such purchase. Buyer shall assign to Sellers or Sellers' designee any
NLEC Spare Parts that it does not so purchase.
ARTICLE 3
CLOSING
-------
3.1 Closing. The closing of the transactions contemplated herein (the
-------
"Closing") shall be held at 11:00 a.m. Columbus, Ohio time on the Closing Date
-------
at the offices of Ricketts & Onda, 300 South Second Street, Columbus, Ohio,
unless the parties hereto otherwise agree.
3.2 Documents to be Delivered. To effect the transfer referred to in
-------------------------
Section 2.1 and the delivery of the consideration described in Sections 2.2,
2.3 and 2.4 hereof, Sellers and Buyer shall, on the Closing Date, deliver the
following:
(a) Sellers shall deliver to Buyer certificate(s) evidencing the shares
of Common Stock, free and clear of any Encumbrances of any nature whatsoever,
duly endorsed in blank for transfer or accompanied by stock powers duly executed
in blank.
(b) Sellers and Buyer shall each deliver all documents required to be
delivered pursuant to this Agreement.
(c) Buyer shall deliver the Purchase Price as provided in Sections 2.2,
2.3 and 2.4.
(d) All instruments and documents executed and delivered to Buyer
pursuant hereto shall be in form and substance, and shall be executed in a
manner, reasonably satisfactory to Buyer. All instruments and documents
executed and delivered to Sellers pursuant hereto shall be in form and
substance, and shall be executed in a manner, reasonably satisfactory to
Sellers.
- 17 -
<PAGE>
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND SELLERS
-----------------------------------------------------------
Each of the Companies and the Sellers, jointly and severally, hereby
represent and warrant to Buyer as follows:
4.1 Organization of the Companies. Each of the Companies are
-----------------------------
corporations duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation, has full corporate power and
authority to conduct the Business as presently being conducted and as proposed
to be conducted and to own and lease its properties and Assets. Except as set
forth on the Disclosure Schedule, each of the Companies is duly qualified to do
-------------------
business as a foreign corporation and is in good standing in each jurisdiction
in which such qualification is necessary or required under applicable law as a
result of the conduct of the Business or the ownership of its Assets or
properties. Each jurisdiction in which each of the Companies is qualified to do
business as a foreign corporation is listed on the Disclosure Schedule.
-------------------
4.2 Organization; Good Standing; Authorization of the Sellers. Each
---------------------------------------------------------
Seller, if other than an individual, is duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of incorporation.
Each Seller has the requisite power and authority to enter into the Transaction
Documents and to perform its obligations thereunder. This Agreement and each of
the other Transaction Documents has been duly authorized, executed and delivered
by each Seller and is a valid and binding agreement of each Seller enforceable
against each Seller in accordance with its terms.
4.3 Capitalization. Set forth on the Disclosure Schedule is (i) the
-------------- -------------------
authorized capital stock of each of the Companies, the number of shares of each
class of capital stock issued and outstanding and the number of shares of Common
Stock reserved for issuance in connection with employee benefit, stock option
and dividend reinvestment plans, in each case, as of the Closing Date, and (ii)
all options, warrants, rights to subscribe to, scrip calls, contracts,
undertakings, arrangements and commitments to issue which may result in the
issuance of Equity Interests of any of the Companies, in each case, setting
forth the identity of the holder thereof, the exercise or similar price and the
date of expiration or termination thereof. The Common Stock constitutes all of
the Equity Interests of the Company, and all of the Common Stock has been duly
authorized and validly issued and is fully paid and non-assessable and is not
subject to any preemptive rights. The Common Stock was issued pursuant to, and
within the limitations contained
- 18 -
<PAGE>
in, appropriate and effective Permits of each governmental authority from which
any Permit was required by law. There are no subscriptions, options, warrants,
calls, commitments or other rights of any kind outstanding for the purchase of,
nor any securities convertible or exchangeable for, any shares of Common Stock,
securities or Equity Interests of the Companies. Except as set forth on the
Disclosure Schedule, one of the Companies nor any Subsidiary is subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any of its capital stock or other securities or Equity Interests. Except
as set forth on Disclosure Schedule, there are no contracts, agreements or
-------------------
understandings between any of the Companies and any Person granting such Person
the right to require any of the Companies to file a registration statement under
the Securities Act with respect to any securities of any of the Companies owned
or to be owned by such Person or to require any of the Companies to include such
securities in any other registration statement filed by any of the Companies
under the Securities Act.
4.4 Ownership of Common Stock. The numbers of shares of Common Stock
-------------------------
set forth opposite each Seller's name on the Disclosure Schedule are owned of
-------------------
record and beneficially by each Seller, free and clear of all Encumbrances.
Upon transfer of the shares of Common Stock to Buyer hereunder at the Closing in
accordance with Section 2.1 hereof, Buyer will receive good and valid title to
such shares of Common Stock, free and clear of all Encumbrances.
4.5 Authorization of the Companies. Each of the Companies has all
------------------------------
necessary corporate power and authority to enter into the Transaction Documents
and has taken all corporate action necessary to consummate the transactions
contemplated thereby and to perform its obligations thereunder. Each of the
Transaction Documents has been duly executed and delivered by each of the
Companies and each Transaction Document is a legal, valid and binding obligation
of each of the Companies enforceable against each of the Companies in accordance
with its respective terms.
4.6 Subsidiaries. The Disclosure Schedule sets forth a complete and
------------ -------------------
accurate list of all of Subsidiaries of the Companies, all of which are owned
beneficially and of record, directly or indirectly, by the Companies. All
references in this Agreement to the Companies, unless the context indicates
otherwise, shall be deemed to mean the Companies and their respective
Subsidiaries. The Disclosure Schedule also contains the jurisdiction of
-------------------
incorporation of each of the Subsidiaries, each jurisdiction in which such
Subsidiary is qualified to do business and the number of shares of capital stock
of such Subsidiary authorized, issued and outstanding. The outstanding shares of
capital stock of
- 19 -
<PAGE>
the Subsidiaries have been duly authorized and validly issued, are fully paid
and non-assessable, and were issued pursuant to, and within the limitations
contained in, appropriate and effective Permits of each governmental authority
from whom any permit or consent was required by law, and all outstanding shares
of capital stock of the Subsidiaries are owned by the Companies free and clear
of any Encumbrances. There are no subscriptions, options, warrants, calls,
commitments or other rights of any kind outstanding for the purchase of, nor any
securities convertible or exchangeable for, any securities or other Equity
Interests of any of the Subsidiaries.
4.7 Absence of Certain Changes or Events. Other than as set forth on
------------------------------------
the Disclosure Schedule, since the Balance Sheet Date, there has not been any:
-------------------
(a) change in any of the Companies' condition (financial or otherwise)
that could reasonably be expected to have an Adverse Effect;
(b) (i) except for normal periodic increases in the ordinary course of
business consistent with past practices, increase in the compensation payable or
to become payable by any of the Companies to any of their respective officers,
employees or agents (collectively, "Personnel"), (ii) any bonus, incentive
---------
compensation, service award or other like benefit granted, made or accrued,
contingently or otherwise, for or to the credit of any of the Personnel, (iii)
any employee welfare, pension, retirement, profit-sharing or similar payment or
arrangement made or agreed to by any of the Companies for any Personnel except
pursuant to the existing plans and arrangements described in the Disclosure
----------
Schedule or (iv) any new employment or consulting agreement to which any of the
- --------
Companies is a party;
(c) addition to or modification of the employee benefit plans,
arrangements or practices described in the Disclosure Schedule affecting
-------------------
Personnel other than (i) contributions made for fiscal years 1996 and 1997 in
accordance with the normal practices of the Companies or (ii) the extension of
coverage to other Personnel who became eligible after the Balance Sheet Date as
set forth in the Disclosure Schedule;
-------------------
(d) sale, assignment or transfer of any of the Assets, other than in the
ordinary course of business and consistent with past practices;
(e) cancellation of any Indebtedness or waiver of any rights of
substantial value to any of the Companies, whether or not in the ordinary course
of business;
- 20 -
<PAGE>
(f) amendment, cancellation or termination of any Contract, license or
other instrument of substantial value to the Assets, sales, Business, prospects,
earnings or condition (financial or otherwise) of any of the Companies;
(g) capital expenditure or execution of any lease or incurring of
liability therefor by any of the Companies not in the ordinary course of
business and consistent with past practices, or involving payments in excess of
$50,000 in the aggregate;
(h) failure to repay any obligation of any of the Companies;
(i) failure to operate the Business in the ordinary course and
consistent with past practices and to preserve the Business intact, to keep
available to Buyer the services of the Personnel, or to preserve for Buyer the
goodwill of the Companies' suppliers, customers or others having business
relations with it;
(j) change in accounting methods or practices by any of the Companies
affecting its Assets, earnings, reserves, working capital, prospects,
liabilities or Business;
(k) revaluation by any of the Companies of any of their respective
Assets or properties, including without limitation, writing off notes or
accounts receivable;
(l) damage, destruction or loss (whether or not covered by insurance)
adversely affecting the Facilities, properties, Assets, Business, condition
(financial or otherwise) or prospects of any of the Companies;
(m) mortgage, pledge or other Encumbrance of any Assets or properties of
any of the Companies;
(n) declaration, setting aside or payment of dividends or distributions
in respect of any Equity Interests of any of the Companies or any redemption,
purchase or other acquisition of any Equity Interests of any of the Companies;
(o) issuance by any of the Companies of, or commitment of any of the
Companies to issue, any securities or other Equity Interests or obligations or
securities convertible into or exchangeable for the Companies' securities or
Equity Interests;
(p) Indebtedness incurred by any of the Companies except as approved by
Buyer prior to incurrence thereof;
(q) liabilities incurred not in the ordinary course of business and
consistent with past practices that in the
- 21 -
<PAGE>
aggregate exceeds $50,000, or any increase or change in any assumptions
underlying or methods of calculating any bad debt, contingency or other
reserves;
(r) payment, discharge or satisfaction of any liabilities other than
the payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities reflected or reserved against in
the Balance Sheet or incurred in the ordinary course of business and consistent
with past practice since the Balance Sheet Date;
(s) activity which has resulted or may, with the passage of time or the
giving of notice or otherwise, result in the acceleration or delay of the
collection of its accounts or notes receivable or any delay in the payment of
its accounts payable, in each case as compared with its custom and practice in
the conduct of the Business immediately prior to the Balance Sheet Date;
(t) loan or advance of any of the Companies' funds or other property to,
or guarantee for the benefit of, or any Investment of any of its funds or other
property in, any other Person;
(u) receipt of any notice or other indication by any of the Companies
(i) from any of its suppliers to the effect that such supplier may stop, or
decrease the rate of, supplying products or services to any of the Companies;
(ii) from any of its customers to the effect that such customer may stop, or
decrease the rate of, buying services from any of the Companies; or (iii) with
respect to any of its significant suppliers or customers to the effect that any
of such suppliers or customers have or are reasonably likely to experience an
event or condition which may have a material adverse effect on such suppliers or
customers;
(v) other event or condition of any character which, in any one case or
in the aggregate, has resulted in an Adverse Effect or any event or condition
known to any of the Companies or any of the Sellers which could, in any one case
or in the aggregate, reasonably be expected to result in an Adverse Effect; or
(w) agreement by any of the Companies or by any of the Sellers or by any
of their respective Representatives to do any of the foregoing, as applicable.
4.8 Title to Assets, Etc.
--------------------
(a) Consistent with the Disclosure Schedule, each of the Companies has
-------------------
good and marketable fee simple title to, or valid leasehold interest in, all the
assets (including the
- 22 -
<PAGE>
Machines and leases of personal property) reflected on the Balance Sheet or
acquired in the ordinary course of business since the Balance Sheet Date
(collectively, the "Assets").
------
(b) None of the Assets are subject to any Encumbrances except: (i)
Encumbrances disclosed in the Financial Statements, (ii) Encumbrances for taxes
not yet due and payable or being contested in good faith which are set forth on
the Disclosure Schedule, or (iii) Encumbrances that are set forth on the
-------------------
Disclosure Schedule and could not be reasonably expected to have an Adverse
- -------------------
Effect.
(c) The Assets constitute all of the assets and rights which are
necessary or desirable for the conduct of the Business. Each of the Companies
has performed all the obligations required to be performed by it with respect to
all Assets leased by it through the date hereof.
(d) Each of the Companies enjoys peaceful and undisturbed possession of
all Facilities (except for the Location Contracts) owned or leased by it, and
such Facilities are not subject to any Encumbrances, encroachments, building or
use restrictions, exceptions, reservations or limitations which in any respect
interfere with or impair the present and continued use thereof in the usual and
normal conduct of the Business; each of the Companies enjoys peaceful and
undisturbed possession of all locations set forth in the Location Contracts
owned or leased by it, and such locations are not subject to any Encumbrances,
encroachments, building or use restrictions, exceptions, reservations or
limitations which, to the best of Sellers' knowledge, interfere with or impair
the present and continued use thereof in the usual and normal conduct of the
Business.
(e) Except as set forth on the Disclosure Schedule, there are no pending
-------------------
or, to any of the Companies' or Sellers' best knowledge, threatened condemnation
proceedings relating to any of the Facilities.
(f) The real property improvements (including leasehold improvements),
equipment and other tangible assets owned or used by any of the Companies at the
Facilities are insured generally in accordance with industry standards for the
coin-operated laundry equipment services industry and are structurally sound
with no known defects. Except as set forth on the Disclosure Schedule, none of
-------------------
the real property improvements, equipment and other assets are subject to any
commitment or other arrangement for their sale or use by any affiliate of any of
the Companies or third parties.
(g) None of the Companies has depreciated any of the Assets in any
manner inconsistent with applicable Internal Revenue Service guidelines, if any.
- 23 -
<PAGE>
4.9 Condition of Tangible Assets. Subject to ordinary wear and tear,
----------------------------
the Facilities and Fixtures and Equipment are in good operating condition and
repair, are sufficient for the operation of the Business as presently conducted
and as proposed to be conducted.
4.10 Contracts and Commitments. Except as set forth on the Disclosure
------------------------- ----------
Schedule, none of the Companies is a party to any written or oral:
- --------
(a) commitment, contract, note, loan, evidence of Indebtedness, purchase
order or letter of credit involving any obligation or liability on the part of
any of the Companies of more than $50,000 and not cancelable (without liability)
within 60 days;
(b) lease of real property other than the Location Contracts (the
Disclosure Schedule indicates, with respect to each lease listed on the
- -------------------
Disclosure Schedule, the location, term, annual rent, renewal options and number
- -------------------
of square feet leased);
(c) lease of personal property involving any annual expense in excess of
$10,000, and not cancelable (without liability) within 60 days (the Disclosure
----------
Schedule indicates, with respect to each lease listed on the Disclosure
- -------- ----------
Schedule, a general description of the leased items, term, annual rent and
- --------
renewal options);
(d) contracts or agreements (including confidentiality or other similar
arrangements) containing covenants limiting the freedom of any of the Companies
or Sellers to engage in any line of business or compete with any Person, or any
arrangements or agreements with competitors;
(e) employee collective bargaining agreement, employment agreement
(other than employment agreements terminable by Seller without premium or
penalty on notice of 30 days or less under which the only monetary obligation of
Seller is to make current wage or salary payments and provide current fringe
benefits), consulting, advisory or service agreement, deferred compensation
agreement, confidentiality agreement or covenant not to compete;
(f) contract or agreement with any officer, director or employee (other
than employment agreements disclosed in response to clause (e) or excluded from
the scope of clause (e)), agent, or attorney-in-fact of Seller;
(g) compensation arrangements, bonus or benefit plans, programs or other
arrangements, including without limitation, all arrangements, policies, plans
and programs relating to retirement, disability, insurance, (including any
- 24 -
<PAGE>
self-insured arrangements), severance pay, supplemental unemployment benefit,
vacation, leave of absence, equity participation, stock purchase, stock option,
stock appreciation right or any other incentive arrangement;
(h) contract pursuant to which it has advanced or loaned funds or made
any Investments, or agreed to advance or loan funds to any other Person or to do
any of the foregoing;
(i) contract or indenture relating to the mortgaging, pledging, or
otherwise placing an Encumbrance on any Assets (other than any Encumbrance which
will be extinguished prior to the Closing Date);
(j) assignment, license, indemnification or other contract with respect
to any intangible property (including any Proprietary Right);
(k) contracts and commitments not otherwise described above or listed in
the Disclosure Schedule (including without limitation undertakings or
-------------------
commitments to any governmental or regulatory authority) relating to the
Business or otherwise affecting the Business and not in the ordinary course of
business and consistent with past practices;
Each of the Companies has performed all material obligations required to
be performed by it under each Contract and is not (and, to the best knowledge of
each of the Companies, no other party is) in breach or violation of, or default
under any of the Contracts or other instruments, obligations, evidences of
Indebtedness or commitments described in (a)-(k) above, which breach, violation
or default, if known, could reasonably be expected to result in an Adverse
Effect. No event has occurred which, with the passage of time or the giving of
notice (or both), would result in a default, breach or event of noncompliance
under any obligation of any of the Companies or Sellers pursuant to any
Contract, which breach, violation or default, if known, could reasonably be
expected to result in an Adverse Effect. None of the Companies has a present
expectation or intention of not fully performing any obligation pursuant to any
Contract. Each Contract described on the Disclosure Schedule is valid, binding
-------------------
and enforceable in accordance with its terms.
4.11 Location Contracts. The Disclosure Schedule provides an accurate
------------------ -------------------
listing of the Location Contracts as of the Closing Date, and includes the terms
of each Location Contract including its termination date and remaining months of
its term; the commission rate; the number of On-Location Machines at each
Location; and whether the Location Contract is oral or written and for the
twenty (20) largest customers,
- 25 -
<PAGE>
whether each Location Contract for such customers contains a "change of control"
or similar provision or requires consent in connection with the transactions
contemplated hereby. Except as explicitly set forth on the Disclosure Schedule,
-------------------
each Location Contract grants Sellers the exclusive right to install and operate
all Machines at the location(s) (the "Locations") set forth in the Location
---------
Contact. As of the date of this Agreement, none of the Sellers or the Companies
is in default under any terms of any of the Location Contracts, and has not
received any notice, written or oral, requesting or threatening the removal of
any On-Location Machine from a Location (other than with respect to the
termination dates set forth in the Disclosure Schedule), or any other
-------------------
anticipatory breach of any Location Contract, or of any foreclosure against any
Location set forth in any of the Location Contracts. In determining the
termination date, the Sellers have not taken into account any option to or
likelihood of renewal of any Location Contract. Except as set forth on the
Disclosure Schedule, neither the Sellers nor any of the Companies have received
- -------------------
any written notice questioning the validity or enforceability of any Location
Contract.
4.12 No Conflict or Violation. Neither the execution and delivery of
------------------------
the Transaction Documents nor the consummation of the transactions contemplated
thereby will result in (a) a violation of or a conflict with any provision of
any organizational document of any of the Sellers or the Companies, as
applicable, (b) a breach or violation of, or a default under, any term or
provision of any Contract, agreement, instrument, mortgage, Indebtedness, lease,
indenture, Encumbrance, commitment, license, franchise, Permit, authorization or
concession to which any Seller or any of the Companies is a party or by which
any of the Assets are bound, which breach, violation or default could reasonably
be expected to result in an Adverse Effect, (c) a violation by Sellers or any of
the Companies of any statute, rule, regulation, ordinance, code, order,
judgment, writ, injunction, decree or award, or (d) an imposition of any
Encumbrance on the Business, any of the Companies or on any of the Assets.
4.13 Consents and Approvals. Except as set forth on the Disclosure
---------------------- ----------
Schedule and other than the expiration of the applicable waiting period under
- --------
the HSR Act, no Permit, consent, approval or authorization of, or declaration,
filing or registration with, any governmental or regulatory authority, or any
other Person is required to be made or obtained by any of the Companies or
Sellers in connection with the execution, delivery and performance of the
Transaction Documents or the consummation of the transactions contemplated
thereby.
- 26 -
<PAGE>
4.14 Financial Statements. The Sellers have heretofore delivered to
--------------------
Buyer the Financial Statements. Except as otherwise set forth therein, the
Financial Statements are complete, are in accordance with the books and records
of each of the Companies, present fairly the Assets, liabilities, financial
condition and results of operations and cash flows indicated thereby in
accordance with generally accepted accounting principles consistently applied,
and contain and reflect all necessary adjustments for a fair representation of
the Financial Statements as of the dates and for the periods covered thereby.
4.15 Litigation. Except as set forth on the Disclosure Schedule, there
---------- -------------------
is no action, order, writ, injunction, judgment or decree outstanding or claim,
suit, litigation, proceeding, labor dispute, arbitral action or investigation
(collectively, "Actions") pending or to each of the Seller's and each of the
-------
Companies' best knowledge, threatened or anticipated against, relating to or
affecting (i) any of the Sellers or the Companies, (ii) any benefit plan for
Personnel or any fiduciary or administrator thereof or (iii) the transactions
contemplated by the Transaction Documents, which have had or could reasonably be
expected to have an Adverse Effect. None of the Sellers or the Companies are in
default with respect to any judgment, order, writ, injunction or decree of any
court or governmental agency, and there are no unsatisfied judgments against any
of the Sellers or the Companies.
4.16 Labor Matters. (a) Except as set forth on the Disclosure Schedule:
------------- -------------------
(i) none of the Companies is a party to any labor agreement with
respect to its employees with any labor organization, group or association;
(ii) to the best knowledge of the Companies after due inquiry, none of
the Companies has experienced any attempt by organized labor or its
representatives to make any of the Companies conform to demands of organized
labor relating to its employees or to enter into a binding agreement with
organized labor that would cover the employees of any of the Companies;
(iii) each of the Companies is in substantial compliance with all
applicable laws respecting employment practices, terms and conditions of
employment and wages and hours;
(iv) to the best knowledge of the Companies' after due inquiry, none
of the Companies has engaged in any unfair labor practice and there is no unfair
labor practice charge or complaint against any of the Companies pending or
- 27 -
<PAGE>
threatened before the National Labor Relations Board or any other governmental
agency arising out of any of the Companies' activities, and none of the Sellers
or the Companies has knowledge of any facts or information which would give rise
thereto;
(v) there is no labor strike or labor disturbance pending or, to the
best of each of the Sellers' and the Companies' knowledge, threatened against
any of the Companies, nor is any grievance currently being asserted; and
(vi) none of the Companies has experienced a work stoppage or other
labor difficulty.
(b) Since the enactment of the Worker Adjustment and Retraining
Notification Act (the "WARN Act"), Seller has not effectuated (i) a "plant
--------
closing" (as defined in the WARN Act) affecting any site of employment of one or
more Facilities or operating units within any site of employment or Facility of
the Business; or (ii) a "mass layoff" (as defined in the WARN Act) affecting any
site of employment or one or more Facilities or operating units within any site
of employment or Facility of the Business. Seller has not been affected by any
transaction or engaged in layoffs or employment terminations with respect to the
Business sufficient in number to trigger application of any similar state or
local law. No employees of the Business have suffered an "employment loss" (as
defined in the WARN Act) within six months prior to the date hereof.
4.17 Liabilities. None of the Companies has any liabilities or
-----------
obligations (absolute, accrued, contingent or otherwise) except (i) liabilities
which are reflected and adequately reserved against on the Balance Sheet, (ii)
liabilities incurred in the ordinary course of business and consistent with past
practice since the Balance Sheet Date, (iii) Tax liabilities as set forth on the
Disclosure Schedule, (iv) liabilities arising in connection with the Whitmer
- -------------------
Vend-O-Mat Laundry Services, Inc. Employee Stock Ownership Plan and set forth on
the Disclosure Schedule, and (v) liabilities arising under Contracts, letters of
-------------------
credit, licenses, Permits, purchase agreements and other agreements, business
arrangements and commitments described in the Disclosure Schedule or which are
-------------------
of the type described in Section 4.10 but which, because of the dollar amount or
other qualifications, are not required to be listed in the Disclosure Schedule.
-------------------
4.18 Compliance with Law. Except as set forth on the Disclosure
------------------- ----------
Schedule, each of the Companies and the conduct of the Business are in
- --------
substantial compliance with all applicable laws, statutes, rules, ordinances and
regulations, including Environmental Requirements, whether federal, state
- 28 -
<PAGE>
or local and each of the Companies has received all approvals of governmental
authorities (including certificates of occupancy, Permits and licenses) required
in connection with the Business. None of the Companies has received any written
notice to the effect that, or otherwise been advised that, it is not in
compliance with any of such statutes, rules, regulations, orders, ordinances or
other laws, and none of the Companies has reason to anticipate that any
presently existing circumstances are likely to result in violations of any such
laws, statutes, rules, ordinances and regulations. The items described on the
Disclosure Schedule constitute all of the filings, notices, licenses, consents,
- -------------------
authorizations, accreditations, waivers, approvals and the like of, to or with
any governmental entity that are required for the consummation of the Sale or
any other transaction contemplated by the Transaction Documents.
4.19 No Brokers. Neither the Companies, any Seller, nor any
----------
Representative of any of the Companies or any Seller has entered into or will
enter into any contract, agreement, arrangement or understanding with any Person
which could reasonably be expected to result in the obligation of Buyer or any
of the Companies to pay any finder's fee, brokerage commission or similar
payment in connection with any of the transactions contemplated by the
Transaction Documents.
4.20 No Other Agreements to Sell the Assets or the Companies. Except as
-------------------------------------------------------
set forth in the Disclosure Schedule, neither any of the Sellers nor any of the
-------------------
Companies have any legal obligation, absolute or contingent, to any other Person
to sell the Assets, to sell any shares of Common Stock or to effect any merger,
consolidation or other reorganization of any of the Companies or to enter into
any agreement with respect thereto.
4.21 Proprietary Rights. Each of the Companies has all right, title and
------------------
interest in, or a valid and binding license to use, all Proprietary Rights used
in the conduct of the Business. None of the Companies is in default of (or with
the giving of notice or lapse of time or both, would be in default) or in breach
of any license to use such Proprietary Rights, such Proprietary Rights are not
being infringed by any third party, and none of the Companies is infringing any
Proprietary Right of any third party, except for such defaults and infringements
which, individually or in the aggregate, do not have and could not be reasonably
be expected to have an Adverse Effect. For purposes of this Agreement,
"Proprietary Rights" 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
- 29 -
<PAGE>
rights and all pending applications for and registrations of any of the
foregoing.
4.22 Employee and Related Agreements; ERISA.
--------------------------------------
(a) General Definitions. For the purposes of Sections 4.22 and 10.2,
-------------------
the following definitions shall apply:
(i) "Employee Plan" shall mean each "employee benefit plan", as
-------------
defined in Section 3(3) of ERISA, that is maintained, administered or
contributed to by any of the Companies or any of their Affiliates or to which
any of the Companies or any of their Affiliates is or has been obligated to
contribute.
(ii) "ERISA Affiliate" shall mean any other Person which, together
---------------
with any of the Companies, would be treated as a single employer under Section
414 of the Code.
(iii) "Multiemployer Plans" shall mean any Employee Plan that meets
-------------------
the definition of a "multiemployer plan" in Section 3(37) of ERISA.
(iv) "Title IV Plan" shall mean any Employee Plan that is subject
-------------
to Title IV of ERISA.
(v) "PBGC" shall mean the Pension Benefit Guaranty Corporation.
----
(vi) "Benefit Arrangement" shall mean any compensation arrangements,
-------------------
bonus or benefit plans, programs or other arrangements maintained by any of the
Companies, including without limitation, all arrangements, policies, plans and
programs relating to retirement, disability, insurance, (including any self-
insured arrangements), severance pay, supplemental unemployment benefits,
vacation, leave of absence, equity participation, stock purchase, stock option,
stock appreciation right or any other incentive arrangements.
(b) Disclosure. The Disclosure Schedule sets forth all Employee Plans
---------- -------------------
and identifies each Employee Plan which is (i) a Multiemployer Plan, (ii) a
Title IV Plan, (iii) maintained in connection with any trust described in
Section 501(c)(9) of the Code or (iv) another type of Employee Plan.
(c) Delivery of Documents and Information. Seller has heretofore
-------------------------------------
delivered to Buyer correct and complete copies of the following items:
(i) the plan document for each Employee Plan covering employees of any
of the Companies and related trust
- 30 -
<PAGE>
agreement (and all amendments thereto), all written interpretations and
communications with respect to each such Employee Plan, and if applicable,
written descriptions of any oral communications or oral representations
concerning such Employee Plan;
(ii) the most recent annual report (Form 5500 including, if
applicable, Schedule B thereto) prepared in connection with each Employee Plan
covering employees of any of the Companies;
(iii) the last actuarial valuation report prepared in connection with
any Title IV Plan covering employees of any of the Companies;
(iv) the most recent determination letter from the Internal Revenue
Service relating to each Employee Plan covering employees of any of the
Companies which is intended to be qualified under Section 401(a) of the Code.
(d) Except as specifically set forth in the Disclosure Schedule, with
-------------------
respect to each Employee Plan:
(i) no "prohibited transaction", as defined in Section 406 of ERISA or
----------------------
Section 4975 of the Code, has occurred, including, but not limited to, any loan
to an employee stock ownership plan which does not or at any time has not
complied with Section 408(b)(3) of ERISA or Section 4975(d)(3) of the Code, and
no tax or penalty has been imposed or can reasonably be expected to be imposed
under Section 502(i) of ERISA or Sections 4975(a) or (b) of the Code.
(ii) no "accumulated funding deficiency," as defined in Section 412 of
------------------------------
the Code, has been incurred with respect to any Employee Plan which is subject
to Section 412 of the Code, whether or not waived.
(iii) no "reportable event", within the meaning of Section 4043 of
----------------
ERISA, for which notice has not been waived under applicable regulations, has
occurred or is continuing.
(iv) no event described in Sections 4062 or 4063 of ERISA has
occurred.
(v) no condition exists or has existed which could constitute grounds
for termination by the PBGC of any Employee Plan which is a Title IV Plan and no
filing has been made by any of the Companies or any of their ERISA Affiliates
with the PBGC to terminate any such Employee Plan.
- 31 -
<PAGE>
(vi) each Employee Plan that is intended to be qualified under Section
401(a) of the Code has received a determination letter from the Internal Revenue
Service stating that such Employee Plan is a qualified plan and that each trust
created under any such Employee Plan is exempt from taxation under Section
501(a) of the Code. Further, each such Plan and related trust has been operated
in accordance with all applicable laws as of the effective date thereof,
notwithstanding the actual terms of the Employee Plan documents.
(vii) each Employee Plan has been maintained in compliance in all
material respects with its terms and with the requirements prescribed by any and
all laws, including but not limited to ERISA and the Code, that are applicable
to such plans. Except as set forth on the Disclosure Schedule, Sellers have
-------------------
timely made all payments and contributions due from them through the Closing
Date with respect to each Employee Plan and no contributions are owed by the
Sellers with respect to any Employee Plan for the plan year ending December 31,
1996.
(viii) no tax or penalty under any provision of the Code or ERISA has
been imposed or can reasonably be expected to be imposed as a result of actions
or inactions which occurred prior to the Closing Date.
(ix) no post-retirement medical or life insurance benefit obligations
exist with respect to employees or former employees of any of the Companies.
(x) there has not been a failure to timely pay any premium required
to be paid to the PBGC on account of any Title IV Plan.
(xi) none of the Companies has ever contributed nor been obligated
to contribute to any Multiemployer Plan.
(xii) there are no pending actions, claims or lawsuits which either
have been asserted or instituted or can reasonably be expected to be asserted or
instituted against any of the Employee Plans, the assets of any of the trusts
under such Employee Plans, the plan sponsor, the plan administrator, trustee or
any other fiduciary of such Employee Plans with respect to any aspect of such
Employee Plans (except for routine benefit claims or routine expenses).
(xiii) there are no pending or ongoing audits, or inquiries or
investigations by any governmental agency.
(xiv) all returns, reports and notices for any Employee Plan which are
required under the Code, ERISA or any
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<PAGE>
other applicable law and the regulations thereunder have been timely provided to
governmental agencies, employees, participants or beneficiaries.
(xv) none of the Companies or any of their ERISA Affiliates is
required to provide security to any Employee Plan under Section 401(a)(29) of
the Code.
(e) Except as set forth in the Disclosure Schedule with respect to each
-------------------
Employee Plan:
(i) none of the Companies or any of their ERISA Affiliates has engaged
in, or is a successor or parent corporation to any Person that has engaged in, a
transaction described in Section 4069 of ERISA.
(ii) none of the Companies or any of their ERISA Affiliates has
incurred or reasonably expects to incur any liability under Title IV of ERISA
(including, but not limited to liability arising in connection with any
termination of any Employee Plan covered or previously covered by Title IV of
ERISA).
(iii) none of the Companies or any of their ERISA Affiliates has
incurred or reasonably expects to incur any complete or partial withdrawal
liability with respect to any Multiemployer Plan and no condition exists with
respect to any Multiemployer Plan which presents a risk of complete or partial
withdrawal liability under Title IV of ERISA.
(iv) none of the Companies or any of their ERISA Affiliates has
incurred any unsatisfied contribution obligations under Section 412 of the Code
nor has liability for unpaid contributions with respect to any Employee Plan.
(v) none of the Companies has failed to comply with any of the health
care continuation coverage requirements or related notice requirements under
Section 601, et. seq. of ERISA and Section 4980B of the Code.
(f) There is no contract, Employee Plan or Benefit Arrangement covering
any current or former employee of any of the Companies that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to the terms of Section 280G of the Code.
(g) Except as specifically set forth in the Disclosure Schedule, no
-------------------
payment, award, bonus, severance payment or other amount under any contract,
Employee Plan or Benefit Arrangement will be triggered as a result of the events
contemplated by the Transaction Documents.
- 33 -
<PAGE>
(h) No Employee Plan or Benefit Arrangement has any restrictions against
termination or modification, either by its terms or due to any written or oral
communications by any Representative of any of the Companies.
(i) NCLH's, NCLI's and NLEC's Balance Sheet properly and adequately
reflects any and all liabilities and obligations of NCLH, NCLI and NLEC relating
to any period ending on or prior to the Closing Date in respect of the employees
of NCLH, NCLI and NLEC for (a) unpaid compensation, salaries, wages, disability
payments and other payroll items (including, without limitation, bonus,
incentive or deferred compensation, vacation or other paid leave), (b) unpaid
contribution, costs and expenses to or in respect of any Employee Plan, and (c)
severance or other termination benefits relating to, resulting from or arising
in respect of any termination of employment occurring on or prior to the Closing
Date.
(j) For all plan years, the National Coin Laundry Inc. Profit Sharing
and Pension Plan (the "NCLI Plan") has complied in operation with (i) the actual
deferral percentage requirements under Code Section 401(k), (ii) the actual
contribution percentage requirements under Code Section 401(m), (iii) the
limitations on elective deferrals under Code Section 401(a)(30) and (iv) the
limitations on contributions under Code Section 415.
4.23 Transactions with Certain Persons. Except as set forth on the
---------------------------------
Disclosure Schedule, neither any Representative of Sellers or any of the
- -------------------
Companies nor any member of any such Person's immediate family is presently a
party to any transaction with any of the Companies, including, without
limitation, any contract, agreement or other arrangement (i) providing for the
furnishing of services by, (ii) providing for the rental of real or personal
property from, (iii) otherwise requiring payments to (other than for services as
officers, directors or employees of any of the Companies), or (iv) providing any
advances or loans to, in each case, any Person in which any such Person has any
interest (beneficial or otherwise) or Investment as a shareholder, officer,
director, trustee or partner.
4.24 Tax Matters. Except as set forth in the attached Disclosure
----------- ----------
Schedule:
- --------
(a) each of the Companies has timely filed all Tax Returns which are
required to be filed and each such Tax Return is correct and complete in all
respects, each of the Companies has paid all Taxes due and owing by it (whether
or not shown on any Tax Return) and has withheld and paid over, on a timely
basis, all Taxes which it is obligated to withhold from amounts paid or owing to
any employee,
- 34 -
<PAGE>
independent contractor, shareholder, creditor or other third party;
(b) there are no Encumbrances of any kind on any of the Assets that
arose in connection with any failure (or alleged failure) to pay any Tax;
(c) no Tax audits are pending or being conducted, or to the best
knowledge of each of the Sellers and the Companies, threatened, with respect to
any of the Companies;
(d) no information related to Tax matters has been requested by any
Taxing authority, and none of the Companies has received notice indicating an
intent to open an audit or other review from any Taxing authority and neither
the Sellers, the Companies nor any Representative thereof (including any
Representative responsible for Tax matters) expects or has reason to expect any
authority to assess any additional Taxes for any period for which Tax Returns
have been filed;
(e) none of the Sellers or the Companies has knowledge of any asserted
claim (whether in writing or otherwise) by any Taxing authority concerning any
of the Companies' respective liabilities for Taxes;
(f) no claim has ever been made by any jurisdiction in which any of the
Companies does not file Tax Returns to the effect that such Company is or may be
subject to any Tax imposed by that jurisdiction, and none of the Companies has
received any nexus questionnaire from any jurisdiction in which it does not file
Tax Returns;
(g) none of the Companies has waived any statute of limitations in
respect of Taxes or agreed to an extension of time with respect to any Tax
assessment or deficiency;
(h) none of the Companies is a party to any agreement that could
obligate it to make any payments that would not be deductible pursuant to
Section 280G of the Code and none of the Companies has filed a consent pursuant
to Section 341(f) of the Code;
(i) each of the Companies has delivered to Buyer correct and complete
copies of all federal, state and local income Tax Returns, examination reports,
and statements of deficiencies assessed against or agreed to by each of the
Companies since 1991;
(j) none of the Companies is a party to or bound by (nor will any
Company become a party to or become bound by) any Tax indemnity, sharing or
allocation agreement, or has any liability for the Taxes of any Person (other
than any of
- 35 -
<PAGE>
the Companies) under Section 1.1502-6 of the Treasury Regulations (or any
similar provision of state, local or foreign law), as a transferee or successor,
by contract, or otherwise;
(k) the unpaid Taxes of the Companies (i) do not exceed the reserve for
Tax liabilities set forth on the Balance Sheet (other than in any notes
thereto), and (ii) do not exceed such reserve adjusted to take account of the
passage of time and the occurrence of transactions and events through the
Closing Date in accordance with each of the Companies' respective past custom
and practice in computing its Taxes and filing Tax Returns;
(l) each of the Companies' respective tax basis in its Assets at Closing
and each Subsidiary's tax basis at Closing is as set forth on the Disclosure
----------
Schedule;
- --------
(m) none of the Companies has ever been a member of an affiliated group
of corporations which has filed a consolidated federal income Tax Return under
Code Sections 1501 and 1502 and Treasury Regulation Section 1.1502;
(n) all elections with respect to Taxes affecting each Company as of the
date hereof are set forth on the Disclosure Schedule;
-------------------
(o) none of the Assets of any of the Companies is "tax exempt use
property" within the meaning of Section 168(h) of the Code;
(p) no Company has agreed to, or is required to, make any adjustment
under Section 481(a) of the Code by reason of a change in accounting method or
otherwise except as set forth on the Disclosure Schedule;
-------------------
(q) none of the Sellers is a person other than a United States Person
within the meaning of the Code and the transaction contemplated herein is not
subject to the withholding provisions of Section 3406 of Subchapter A of Chapter
3 of the Code;
(r) each Company has disclosed within the meaning of Section
6662(d)(2)(B)(ii) of the Code on its Tax Returns all positions taken therein
that could give rise to a substantial understatement of Tax within the meaning
of Section 6662 of the Code (or any corresponding provision of state, local or
foreign Tax law);
(s) none of the Assets of any Company is property that such Company is
required to treat as being owned by any other Person pursuant to the "safe
harbor lease" provisions of former Section 168(f)(8) of the Code;
- 36 -
<PAGE>
(t) none of the Assets of any Company directly or indirectly secures any
debt, the interest on which is tax-exempt under Section 103(a) of the Code;
(u) no Company has made a deemed dividend election under Treasury
Regulation Section 1.1502-32(f)(2) or a consent dividend election under Section
565 of the Code;
(v) no Company has participated in an international boycott within the
meaning of Section 999 of the Code;
(w) no Company has been a United States real property holding
corporation (as defined in Section 897(c)(2) of the Code) during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code;
(x) no Company has had a permanent establishment in any foreign country,
as defined in any applicable tax treaty or convention between the United States
and such foreign country; and
(y) the Disclosure Schedule sets forth the following information with
-------------------
respect to each of the Companies (or, in the case of clause (B) below, with
respect to NCLI) as of the most recent practicable date: (A) the basis of each
of the Companies in its assets; (B) the basis of NCLH in NCLI's stock (or the
amount of any excess loss account (as defined in Treasury Regulation Section
1.1502-19); (C) the amount of any net operating loss, net capital loss, unused
investment or other credit, unused foreign tax, or excess charitable
contribution allocable to each of the Companies; and (D) the amount of any
deferred gain or loss allocable to each of the Companies arising out of any
deferred intercompany transaction (as defined in Treasury Regulation Section
1.1502-13).
4.25 Severance Arrangements. Except as set forth on the Disclosure
---------------------- ----------
Schedule, none of the Companies or Sellers has entered into any severance or
- --------
similar arrangement in respect of any present or former Representatives that
could reasonably be expected to result in any obligation (absolute or
contingent) of Buyer or any of the Companies to make any payment to any present
or former Representatives following termination of employment.
4.26 Insurance. The Disclosure Schedule contains a complete and
--------- -------------------
accurate list of all policies or binders of fire, casualty, liability, title,
worker's compensation, dram shop, liquor liability, earthquake, and other forms
of insurance (showing as to each policy or binder the carrier, policy number,
coverage limits, expiration dates, annual premiums and a general description of
the type of coverage provided) maintained by the Companies on their Business,
Facilities,
- 37 -
<PAGE>
property, Assets or Personnel. All of such policies are sufficient for
compliance with all requirements of law and of all Contracts to which any of the
Companies is a party. None of the Companies is in default under any of such
policies or binders, and none of the Companies has failed to give any notice or
to present any claim under any such policy or binder in a due and timely fashion
nor have any facts or events occurred which necessitate the giving of notice or
filing of a claim with respect to any such policy. There are no outstanding
material unpaid claims under any such policies or binders. Such policies and
binders provide sufficient coverage for the risks insured against, are in full
force and effect on the date hereof and shall be kept in full force and effect
by each of the Companies through the Closing Date.
4.27 Accounts Receivable. The accounts receivable reflected in the
-------------------
Balance Sheet, and all accounts receivable arising since the Balance Sheet Date,
represent bona fide claims against debtors for services performed or other
charges arising on or before the date hereof, and all the services performed
which gave rise to said accounts were performed in accordance with the
applicable Contracts or customer requirements. Said accounts receivable are
subject to no defenses, counterclaims or rights of setoff and are fully
collectible in the ordinary course of business, consistent with past practices,
without cost to the Companies in collection efforts therefor except, in the case
of accounts receivable shown on the Balance Sheet, to the extent of the
appropriate reserves set forth on the Balance Sheet.
4.28 Inventories. The values at which inventories are shown on the
-----------
Balance Sheet have been determined in accordance with the normal valuation
policy of each of the Companies, consistently applied and in accordance with
generally accepted accounting principles. The inventories (and items of
inventory acquired or remanufactured subsequent to the Balance Sheet Date)
consist only of items of quality and quantity commercially usable and salable in
the ordinary course of business, and the present quantities of all inventories
are reasonable in the present circumstances of the Business.
4.29 Payments. None of the Companies or the Sellers has, directly or
--------
indirectly, paid or delivered any fee, commission or other sum of money or item
or property, however characterized, to any finder, agent, Representative,
landlord, owner or manager of any Facilities, government official or other
Person, in the United States or any other country, which any Seller or any of
the Companies knows, should know or have reason to believe to have been illegal
under any federal, state or local laws of the United States or any other country
having jurisdiction, and each of the
- 38 -
<PAGE>
Companies has at all times done business in an open and ethical manner.
4.30 Customers and Suppliers. The Disclosure Schedule contains a
----------------------- -------------------
complete and accurate list of (i) the fifteen (15) largest customers of each of
the Companies in terms of collected coin revenues during each of the Companies'
last fiscal year, showing the approximate total coin revenues from each such
customer during such fiscal year; (ii) the five (5) largest suppliers of each of
the Companies in terms of Machine purchases during the Company's last fiscal
year, showing the approximate total purchases by the Companies from each such
supplier during such fiscal year. Since the Balance Sheet Date, there has been
no adverse change in the business relationship of any of the Companies with any
customer or supplier.
4.31 Compliance With Legislation Regulating Environmental Quality.
------------------------------------------------------------
(a) None of the following exists at, on, under or around any of the
Facilities:
(i) toxic wastes or other toxic or hazardous substances or
materials;
(ii) asbestos-containing materials in any form or condition;
(iii) materials or equipment containing polychlorinated biphenyls;
or
(iv) wetlands.
(b) The Facilities have been maintained in compliance with all federal,
state, local and foreign environmental protection, occupational, health and
safety or similar laws, statutes, ordinances, restrictions, licenses and local
envi ronmental protection, occupational, health and safety or similar laws,
statutes, ordinances, restrictions, licenses and regulations, including those
relating to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous or
otherwise regulated materials, substances or wastes, chemical substances or
mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum
products or byproducts, asbestos, polychlorinated biphenyls, noise or radiation,
and also including, but not limited to, the Federal Water Pollution Control Act
(33 U.S.C. Section 1251 et seq.), Resource Conservation & Recovery Act (42
-- ---
U.S.C. Section 6901 et seq.), Safe Drinking Water Act (21 U.S.C. Section 349,
-- ---
42 U.S.C. Section 201, 300f), Toxic Substances
- 39 -
<PAGE>
Control Act (15 U.S.C. Section 2601 et seq.), Clean Air Act (42 U.S.C. Section
-- ---
7401 et seq.), Comprehensive Environmental Response, Compensation and Liability
-- ---
Act (42 U.S.C. Section 9601 et seq.) (collectively, "Environmental
-- --- -------------
Requirements").
- ------------
(c) The Companies and Sellers have not received any written notice,
report or other information regarding any liabilities or potential liabilities
they may have (whether accrued, absolute, contingent, unliquidated or
otherwise), including any investigatory, remedial or corrective obligations,
arising under any Environmental Requirements.
(d) The Companies have obtained and complied with, and is in compliance
with, all Permits, licenses and other authorizations that may be required
pursuant to any Environmental Requirements for the occupation of the Facilities
or the operation of the Business.
(e) No facts, events or conditions relating to the past or present
Facilities or operations of the Business will prevent, hinder or limit continued
compliance with Environmental Requirements, give rise to any investigatory,
remedial or corrective obligations pursuant to the Environmental Requirements,
or give rise to any other liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise) pursuant to Environmental Requirements, including
relating to on-site or off-site releases or threatened releases of hazardous or
otherwise regulated materials, substances or wastes, personal injury, property
damage or natural resources damage.
(f) Neither this Agreement nor the transactions contemplated by the
Transaction Documents impose any obligations for off-site investigation or
cleanup, or notification to or consent of any governmental entity or third party
pursuant to any Environmental Requirements.
(g) The Companies and Sellers have not expressly or by operation of law
assumed or undertaken any liability or corrective or remedial obligations of any
other Person relating to Environmental Requirements.
(h) No lien, whether recorded or unrecorded, in favor of any
governmental entity relating to any liability of the Business or any other
Person arising under the Environmental Requirements, has attached to any
property owned, leased or operated by the Companies.
4.32 Misstatements or Omissions. No representations or warranties by
--------------------------
any of Sellers or any of the Companies in the Transaction Documents, or in
connection with the transactions contemplated thereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to
- 40 -
<PAGE>
state any fact necessary to make the statements or facts contained therein not
materially misleading. Sellers and each of the Companies have disclosed herein
all material events, conditions and facts affecting the Business, the Sale, the
Common Stock, Assets, Facilities, liabilities, working capital, earnings,
technology, operating results, prospects and condition (financial or otherwise)
or employee, customer or supplier relations of any of the Companies, or the
ability of any of the Companies or any Seller to perform its respective
obligations under the Transaction Documents or the ability of any of the
Companies to conduct the Business as presently conducted or as proposed to be
conducted.
4.33 Key Personnel. The Disclosure Schedule sets forth the number and
------------- -------------------
job category of all current employees of each of the Companies with an annual
base salary for fiscal year ending 1996 of more than $25,000, including with
respect to such employees, their names, dates of employment, current
compensation (including sales commissions) and date and amount of last increase
in compensation.
4.34 Solvency. Each of the Companies (a) owns and will own the Assets,
--------
the fair saleable value of which, on a going concern basis, are (i) greater than
the total amount of liabilities (including contingent liabilities) of such
Company, and (ii) greater than the amount that will be required to pay the
probable liabilities of such Company's then existing debts as they become due;
(b) has capital that is not unreasonably small in relation to the Business (to
the extent such Business is that of such Company) as presently conducted; and
(c) does not intend to incur and does not believe that it will incur debts
beyond its ability to pay such debts as they become due.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby represents and warrants to Sellers as follows:
5.1 Organization; Good Standing; Authorization. Buyer is duly
------------------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to enter into the applicable
Transaction Documents and to perform its obligations thereunder. The applicable
Transaction Documents have been duly executed and delivered by Buyer and are
valid and binding obligations of Buyer enforceable against it in accordance
with their terms.
5.2 Consents and Approvals. Other than the expiration of any
----------------------
applicable waiting period under the HSR
- 41 -
<PAGE>
Act, no consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority, or any other Person
is required in connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby.
5.3 No Brokers. Neither Buyer nor any Representative of Buyer has
----------
entered into or will enter into any agreement, arrangement or understanding with
any Person which could reasonably be expected to result in the obligation of
Sellers to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
5.4 No Conflict or Violation. Neither the execution and delivery of
------------------------
the Transaction Documents nor the consummation of the transactions contemplated
thereby will result in (a) a violation of or a conflict with any provision of
the Certificate of Incorporation or Bylaws of Buyer, (b) a breach or violation
of, or a default under, any term or provision of any contract, agreement,
Indebtedness, lease, commitment, license, franchise, Permit, authorization or
concession to which Buyer is a party, which breach, violation or default could
reasonably be expected to result in a material adverse effect on the Sale, or
(c) a violation by Buyer of any statute, rule, regulation, ordinance, code,
order, judgment, writ, injunction, decree or award, which violation could
reasonably be expected to result in a material adverse effect on the Sale.
ARTICLE 6
CONDITIONS TO SELLERS' OBLIGATIONS
----------------------------------
The obligations of Sellers to transfer the Common Stock to Buyer on the
Closing Date are subject, in the sole and absolute discretion of Sellers, to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions:
6.1 Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of Buyer contained in this Agreement shall be true and correct, in
all material respects, at and as of the Closing Date as if such representations
and warranties were made at and as of the Closing Date, and Buyer shall have
performed and complied with, in all material respects, all agreements and
covenants required hereby to be performed or complied with by it prior to or at
the Closing Date. There shall be delivered to Sellers a certificate (signed by
the President, Chief Financial Officer or a Vice President of Buyer), to the
foregoing effect.
- 42 -
<PAGE>
6.2 Consents. All Permits, consents, approvals and waivers from
--------
governmental authorities and other parties necessary to permit Sellers to
transfer the Common Stock to Buyer as contemplated hereby shall have been
obtained, unless the failure to obtain any such consent, approval or waiver
would not result in a material adverse effect on Sellers.
6.3 No Governmental Proceeding or Litigation. No suit, action,
----------------------------------------
investigation, inquiry or other proceeding by any governmental authority or
other Person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated by the Transaction
Documents and which could reasonably be expected to damage Sellers in any
material respect if the transactions contemplated thereunder are consummated.
6.4 Employment Agreements. Each of Kimberly A. Close and Stephen P.
---------------------
Close and Buyer shall have entered into employment agreements substantially in
the forms attached as Exhibit E hereto.
---------
6.5 Certificates. Buyer will furnish Seller with (a) such certificates
------------
of its officers and others to evidence compliance with the conditions set forth
in this Article 6 as may be reasonably requested by Seller and (b) a certificate
of good standing of Buyer from the Secretary of State of the State of Delaware.
6.6 Corporate Documents. Sellers shall have received from Buyer
-------------------
resolutions adopted by the board of directors of Buyer approving the Transaction
Documents and the transactions contemplated thereby, certified by Buyer's
corporate secretary.
6.7 HSR Act. The applicable waiting period, if any, including any
-------
extension thereof, under the HSR Act shall have expired.
6.8 Asset Purchase Agreement. Buyer shall have entered into the Asset
------------------------
Purchase Agreement.
ARTICLE 7
CONDITIONS TO BUYER'S OBLIGATIONS
---------------------------------
The obligations of Buyer to purchase the Common Stock as provided hereby
are subject, in the sole and absolute discretion of Buyer, to the satisfaction,
on or prior to the Closing Date, of each of the following conditions:
7.1 Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of Sellers and the Companies contained in this Agreement shall be
true and correct, in all
- 43 -
<PAGE>
material respects, at and as of the Closing Date as if such representations and
warranties were made at and as of the Closing Date, and Sellers and the
Companies shall have performed and complied with, in all material respects, all
agreements and covenants required hereby to be performed or complied with by
them prior to or at the Closing Date. There shall be delivered to Buyer a
certificate (signed by each Seller and the President or a Vice President of each
of the Companies), to the foregoing effect.
7.2 Consents. All Permits, consents, approvals and waivers, including
--------
HSR approval, if applicable, from governmental authorities and other parties
necessary to permit Sellers to transfer the Common Stock to Buyer as
contemplated hereby shall have been obtained.
7.3 No Governmental Proceeding or Litigation. No suit, action,
----------------------------------------
investigation, inquiry or other proceeding by any governmental authority or
other Person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby, and which could
reasonably be expected to have an Adverse Effect.
7.4 Compliance with Legal Requirements. The consummation of the
----------------------------------
transactions contemplated by the Transaction Documents will not be prohibited by
any Legal Requirement or subject the Buyer, the Sale, the Business, the Common
Stock or the Assets to any penalty, liability or other onerous condition arising
out of any such Legal Requirement.
7.5 Opinion of Counsel. Sellers shall have delivered to Buyer an
------------------
opinion of counsel for Sellers and the Companies, substantially in the form set
forth on Exhibit F attached hereto, acceptable to Buyer and its counsel, dated
---------
the Closing Date.
7.6 Certificates. Sellers and each of the Companies shall furnish
------------
Buyer with such certificates of Sellers and the respective officers of the
Companies and others to evidence compliance with the conditions set forth in
this Article 7 as may be reasonably requested by Buyer, including without
limitation:
(a) a certificate of each of the Closes (without qualification as to
knowledge), and an officer's certificate of each of National Coin Laundry
Holding, Inc., National Coin Laundry, Inc. and National Laundry Equipment
Company, dated as of the Closing Date, each certifying that the conditions
specified in Sections 7.1, 7.2, 7.3 and 7.4 have been fully satisfied;
(b) certificates as to good standing (or other certificates relating to
the right to do business) of NCLH,
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<PAGE>
NCLI and NLEC from the Secretary of State of the States of Ohio, Indiana,
Kentucky, Michigan, West Virginia, Pennsylvania, Georgia, Tennessee, Illinois
and Florida and any other state or jurisdiction where NCLI or NLEC is required
to be qualified to do business; and
(c) certificate of incorporation (certified by the Secretary of State of
the State of Ohio) and by-laws of NCLH, NCLI and NLEC, certified to be true and
complete copies hereof by the Secretary of NCLH, NCLI and NLEC.
7.7 Material Changes. Since the Balance Sheet Date, there shall not
----------------
have been any change or any development or discovery of any material contingent
or other liability not in the Disclosure Schedule, which might result in an
-------------------
Adverse Effect.
7.8 Corporate Documents. Buyer shall have received from each of the
-------------------
Companies resolutions adopted by the respective boards of directors of the
Companies approving the Transaction Documents and the transactions contemplated
thereby as well as the assumption of the sponsorship of the NCLI Plan by Whitmer
Vend-O-Mat Laundry Services, Inc., certified by the corporate secretary of each
of the Companies. Buyer shall have also received the corporate minute books,
Certificates of Incorporation, bylaws and stock transfer books of each of the
Companies.
7.9 HSR Act. The applicable waiting period, if any, including any
-------
extension thereof, under the HSR Act shall have expired.
7.10 Disclosure Schedule. Each of the Companies and Sellers shall
-------------------
deliver to Buyer on or prior to the Closing Date a Disclosure Schedule (the
"Closing Disclosure Schedule") revised to reflect any changes in the information
- ----------------------------
on the Disclosure Schedule from the date hereof up to and including the Closing
Date, which Closing Disclosure Schedule shall be made a part of this Agreement
---------------------------
and incorporated in its entirety herein by reference.
7.11 Asset & Liability Statements. Sellers shall deliver to Buyer, as
----------------------------
soon as practicable, copies of the NLEC Closing Date Asset & Liability Statement
and the NCL Closing Date Asset & Liability Statement. The NLEC Closing Date
Asset & Liability Statement shall be reviewed by NLEC's accounting firm. The
NCL Closing Date Asset & Liability Statement need not be audited, but shall be
in accordance with generally accepted accounting principles, consistently
applied, subject to the lack of footnote disclosure and changes resulting from
normal year-end adjustments, none of which changes would if properly presented,
alone or in the
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<PAGE>
aggregate, reflect matters which have had or could be expected to have an
Adverse Effect.
7.12 Employment Agreements. Each of Kimberly A. Close and Stephen P.
---------------------
Close and Buyer shall have entered into employment agreements substantially in
the forms attached as Exhibit E hereto.
---------
7.13 Due Diligence. Buyer shall have obtained from Sellers, each of
-------------
the Companies and their respective Representatives, copies of any and all
corporate documents, standard forms of all Location Contracts, securities
agreements, purchase contracts, commercial loan agreements, litigation
documents, audit reports, studies, financial statements, governmental reports,
insurance policies, employment records, employee benefit plans, permits,
licenses, applications for Permits or licenses and all other information or
documents requested by Buyer and Buyer shall, upon the review thereof, deem that
such items and information fully meet Buyer's satisfaction.
7.14 Escrow Agreement. Sellers shall have entered into the Escrow
----------------
Agreement, dated the date hereof (the "Escrow Agreement"), among Buyer, Seller,
----------------
National Coin Laundry Holding, Inc., National Coin Laundry, Inc., National
Laundry Equipment Company, Kimberly A. Close, Stephen P. Close, Ruth D. Close,
Kimberly A. Close, Ruth D. Close and Stephen P. Close as Trustees of the Alvin
D. Close Trust and Key Trust Company, N.A., substantially in the form of Exhibit
-------
D attached hereto.
- -
7.15 Asset Purchase Agreement. Sellers shall have entered into the
------------------------
Asset Purchase Agreement.
7.16 Motor Vehicles. Sellers shall have assigned to the Closes, as
--------------
applicable, those motor vehicles used by them personally and not in connection
with the Business as listed on the Disclosure Schedule.
7.17 Resignations of Officers and Directors. The officer and directors
--------------------------------------
of NCLH, NCLI and NLEC shall have resigned and Sellers shall have provided to
Buyers proof of such resignations, in form and substance reasonably acceptable
to Buyer.
ARTICLE 8
ACTIONS BY SELLERS, THE COMPANIES
AND BUYER AFTER THE CLOSING
---------------------------
8.1 Books and Records. Sellers and Buyer agree that, so long as any
-----------------
books, records and files relating to the Business, properties, Assets or
operations of any of the
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<PAGE>
Companies, to the extent that they pertain to the Business prior to the Closing
Date, remain in existence and available, Buyer shall have the right to inspect
and to make copies of the same at any time during business hours for any proper
purpose.
8.2 Further Assurances. On and after the Closing Date, Sellers, the
------------------
Companies and Buyer will take all appropriate action and execute all documents,
instruments or conveyances of any kind which, in the sole discretion of Buyer,
may be necessary or advisable to carry out any of the provisions hereof,
including without limitation, putting Buyer in possession and operating control
of the Business.
8.3 Cooperation on Litigation. Sellers agree to furnish or cause to be
-------------------------
furnished promptly to Buyer, upon request, such information (including access to
books and records) and assistance as is necessary, in the sole discretion of
Buyer, for the preparation for or the prosecution or defense of any suit,
action, litigation or arbitration or other proceeding or investigation against
the Buyer or the Companies.
8.4 Cooperation on Tax Matters. Sellers agree to furnish or cause to
--------------------------
be promptly furnished, upon request, such information (including access to books
and records) and assistance relating to the Companies or the Business as is
necessary, in the sole discretion of Buyer, for preparation of and for the
filing of any return, for the preparation for any audit, and for the prosecution
or defense of any claim, suit or proceeding relating to any proposed adjustment.
Sellers agree to make all tax filings for fiscal year 1996 prior to September
15, 1997. Sellers also agree to provide to Buyer for Buyer's review and
approval all copies of Tax Returns to be filed by Sellers on behalf of the
Companies prior to filing such Tax Returns.
8.5 Payment of Taxes. Sellers shall, jointly and severally, pay and be
----------------
responsible for all Taxes imposed on Sellers or any of the Companies regardless
of when imposed for any period prior to and including the Closing Date,
including, without limitation, any Tax Liabilities, any Taxes arising from the
Sale and any Transfer Taxes. Any Taxes of any of the Companies in respect of
the period commencing after the Closing Date shall not be a liability of the
Sellers.
ARTICLE 9
INDEMNIFICATION
---------------
9.1 Survival of Representations. All statements contained in the
---------------------------
Disclosure Schedule or in any certificate or
- -------------------
- 47 -
<PAGE>
instrument of conveyance delivered by or on behalf of the Parties pursuant to
the Transaction Documents or in connection with the transactions contemplated
thereby shall be deemed to be representations and warranties by the Parties
hereunder. The representations and warranties contained in this Agreement or
any instruments delivered pursuant to this Agreement shall survive the Closing,
without regard to any investigation made by any of the parties hereto, until (i)
the expiration of the applicable statute of limitations with respect to the
representations and warranties set forth in Sections 4.22, 4.24 and 4.31, and
any ERISA Liabilities or Tax Liabilities, taking into account any extensions or
waivers thereof, (ii) the first anniversary of the Closing Date, with respect to
representations and warranties set forth in Sections 4.1, 4.2, 4.5, 4.7, 4.9,
4.12, 4.13, 4.14, 4.16, 4.17, 4.18, 4.19, 4.20, 4.21, 4.25, 4.26, 4.27, 4.28,
4.30, 4.33, 5.1, 5.2, 5.3 and 5.4, and (iii) the third anniversary of the
Closing Date, with respect to representations and warranties set forth in
Sections 4.8, 4.10, 4.11, 4.15, 4.23, 4.29, 4.32 and 4.34. The remaining
representations and warranties set forth in Sections 4.3, 4.4 and 4.6 shall
survive the Closing, without regard to any investigation made by any of the
parties hereto. Neither a Party's participation in the consummation of any
transaction pursuant to any Transaction Document nor any waiver of any condition
to such participation (including any condition that a representation or warranty
of any other Party be true and correct) will constitute a waiver by such
participating Party of the representations and warranties of any other Party or
otherwise affect the survival of any such representation or warranty. All
covenants and agreements of the Parties, including, without limitation, the
obligations of the Parties set forth in Articles 8, 9, 10, 11 and 12 shall
survive the Closing.
9.2 Indemnification.
---------------
(a) In addition to any other right or remedy available to Buyer at law
or in equity, Sellers shall, jointly and severally, indemnify Buyer and the
Companies and their respective affiliates, stockholders, officers, directors,
partners, employees, agents, Representatives and permitted successors and
assigns (collectively, the "Buyer's Indemnitees") against, and hold each Buyer
-------------------
Indemnitee harmless from, any damage, Tax, costs, claim, liability or expense,
including without limitation, interest, penalties and reasonable attorneys' fees
and disbursements and settlement costs and expenses (collectively, "Damages"),
-------
arising out of a misrepresentation or the breach of any warranty, covenant or
agreement of Sellers or the Companies with respect to the representations and
warranties made by Sellers or the Companies, including (i) any Damages arising
out of transactions entered into or events occurring prior to
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<PAGE>
the Closing; (ii) any Damages arising as a result of any past or present
violation of the Non-Competition Agreement dated March 31, 1988 (the "Non-
---
Competition Agreement") between NCLI and Macke Laundry Service Limited
- ---------------------
Partnership; and (iii) any Damages arising as a result of any audit of any of
the Companies' Tax Returns conducted by the Internal Revenue Service or any
other taxing authority or Sellers' failure to comply with Section 8.5.
Notwithstanding the foregoing, in all cases except for Damages arising from or
in connection with (x) ERISA Liabilities (as hereinafter defined), (y) Tax
Liabilities (as hereinafter defined), and (z) any violation of the Non-
Competition Agreement, Seller will not be required to indemnify Buyer's
Indemnitees in respect of any Damages except to the extent that the aggregate
amount of all Damages exceeds $75,000.
(b) Notwithstanding anything contrary in this Agreement and in addition
to any other right or remedy available to Buyer at law or in equity, Sellers
shall, jointly and severally, indemnify Buyer's Indemnitees against, and hold
each Buyer Indemnitee harmless from any Damages arising out of, resulting from
or relating to any Employee Plan, Multiemployer Plan, Title IV Plan, Benefit
Arrangement, or any transaction relating thereto, or any other benefit
arrangement maintained at any time by (or to which contributions have been made
by) the Sellers or the Companies or any entity that is (or at any time has been)
an Affiliate (collectively, the "ERISA Liabilities").
-----------------
(c) Notwithstanding anything contrary in this Agreement and in addition
to any other right or remedy available to Buyer at law or in equity, Sellers
shall, jointly and severally, indemnify Buyer's Indemnitees against, and hold
each Buyer Indemnitee harmless from any Damages arising out of, resulting from
or relating to any Tax liabilities of the Companies arising out of or relating
to any period on or prior to the Closing Date, including, but not limited to,
any Tax liabilities arising from the sale of capital stock of SPC Management,
Inc. to Stephen P. Close (collectively, the "Tax Liabilities").
---------------
(d) In addition to any other right or remedy available to Sellers at
law or in equity, Buyer shall indemnify and hold Sellers and its affiliates,
stockholders, officers, directors, partner, employees, agents, Representatives
and permitted successors and assigns (collectively, the "Sellers' Indemnitees")
--------------------
against, and hold each Sellers' Indemnitee harmless from any Damages arising out
of a misrepresentation or the breach of any warranty, covenant or agreement of
Buyer with respect to the representations and warranties made by Buyer.
- 49 -
<PAGE>
The term "Damages" as used in this Section 9.2 is not limited to matters
-------
asserted by third parties against Sellers, any of the Companies or Buyer, but
includes Damages incurred or sustained by Sellers, any of the Companies or Buyer
in the absence of third party claims.
(e) Upon the occurrence of any event that triggers indemnification
obligations under Sections 9.2(a), (b), or (c) hereof, the Parties agree that
any Damages incurred relating thereto shall be paid from the Escrowed Funds
according to the terms and conditions of the Escrow Agreement. In the event
there are no longer any Escrowed Funds or the Escrow Agreement has been
terminated, Sections 9.3 and 9.4 shall apply to the payment of any
indemnification obligations under Sections 9.2(a), (b) and (c).
9.3 Indemnification Procedures. Subject to Section 9.2(e), upon any
--------------------------
Party (the "Indemnified Party") becoming aware of a fact, condition or event
-----------------
which constitutes a misrepresentation or breach of any of the representations or
warranties of the other Party or the incurrence of any ERISA Liabilities or Tax
Liabilities, if a claim for Damages in respect thereof is to be made against the
other Party (the "Indemnifying Party") under this Article 9, the Indemnified
------------------
Party will with reasonable promptness notify the Indemnifying Party in writing
of such fact, condition or event. If such fact, condition or event is the
assertion of a claim by a third party, the Indemnifying Party will be entitled
to participate in or take charge of the defense against such claim, provided
that the Indemnifying Party and its counsel shall:
(i) proceed with diligence and in good faith with respect thereto,
(ii) enter into an agreement with the Indemnified Party (in form and
substance satisfactory to the Indemnified Party) pursuant to which the
Indemnifying Party agrees to be fully responsible (with no reservation of any
rights other than the right to be subrogated to the rights of the Indemnified
Party), for all Damages relating to such proceeding and unconditionally
guarantees the payment and performance of any liability or obligation which
may arise with respect to such proceeding or the facts giving rise to such
claim for indemnification, and
(iii) furnish the Indemnified Party with evidence that the
Indemnifying Party, in the Indemnified Party's sole judgment, is and will be
able to satisfy any such liability.
9.4 Control of Defense: Exceptions, etc. Subject to Section 9.2(e),
-------------------------------------
notwithstanding the provisions of Section
- 50 -
<PAGE>
9.3: (i) the Indemnified Party will be entitled to participate in the defense
of such claim and to employ counsel of its choice for such purpose at its own
expense (provided that the Indemnifying Party will bear the reasonable fees and
--------
expenses of such separate counsel incurred prior to the date upon which the
Indemnifying Party effectively assumes control of such defense), (ii) the
Indemnifying Party will not be entitled to assume control of the defense of such
claim, and will pay the reasonable fees and expenses of legal counsel retained
by the Indemnified Party, if:
(w) the Indemnified Party reasonably believes that an adverse
determination of such proceeding could be detrimental to or injure the
Indemnified Party's reputation or future business prospects,
(x) the Indemnified Party reasonably believes upon advice of legal
counsel that there exists or could arise a conflict of interest which, under
applicable principles of legal ethics, could prohibit a single legal counsel
from representing both the Indemnified Party and the Indemnifying Party in
such proceeding, or
(y) a court of competent jurisdiction rules that the Indemnifying
Party has failed or is failing to prosecute or defend vigorously such claim;
and
(z) the Indemnifying Party must obtain the prior written consent of
the Indemnified Party (which the Indemnified Party will not unreasonably
withhold or delay) prior to entering into any settlement of such claim or
proceeding or ceasing to defend such claim or proceeding.
9.5 No Right of Contribution. After the Closing, the Companies shall
------------------------
have no liability to indemnify either Buyer or Sellers on account of a
misrepresentation or the breach of any warranty or the nonfulfillment of any
covenant or agreement of Sellers or any of the Companies; and Sellers shall have
no right of contribution against any of the Companies. In addition to any other
remedy which may be available at law or in equity, Buyer or any of the Companies
shall be entitled to specific performance and injunctive relief, without posting
bond or other security.
9.6 Characterization; Taxes. The Parties intend that any amount paid
-----------------------
pursuant to the provisions of this Article 9 be treated as an adjustment of the
Purchase Price prior to entering into any settlement of such claim or proceeding
or ceasing to defend such claim or proceeding. If, notwithstanding such
intention, any Tax is imposed on any Indemnified Party with respect to any
payment pursuant to this Article 9 (including this Section 9.6), then the
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<PAGE>
Indemnifying Party will reimburse the Indemnified Party for the amount of such
Tax (and any Tax in respect of any payment pursuant to this Section 9.6).
9.7 Escrow. Sellers hereby acknowledge and agree that, on the Closing
------
Date, funds have been placed in escrow in an amount not less than One Million
One Hundred Thousand Dollars ($1,100,000) (the "Escrowed Funds") for a period of
--------------
three years from the Closing Date pursuant to the terms and conditions of the
Escrow Agreement; provided that, in accordance with the terms and conditions of
the Escrow Agreement, an amount equal to (A) the balance of the Escrowed Funds
minus (B) $550,000 may be paid to Sellers on or within 5 days after the first
- -----
anniversary of the Closing Date, leaving a balance of $550,000 in the Escrowed
Funds. Sellers hereby acknowledge and agree that Sellers are a party to such
Escrow Agreement and that such Escrowed Funds have been established in respect
of a portion of the indemnification obligations of Sellers set forth in Section
9.2 of this Agreement and the indemnification obligations set forth in Article
11 of the Asset Purchase Agreement. The Escrowed Funds are to be disbursed
pursuant to and in accordance with the provisions of the Escrow Agreement.
Except as expressly provided in the Escrow Agreement, the rights and obligations
of Seller and Buyer under the Escrow Agreement shall in no way affect their
respective rights and obligations under this Agreement, including, without
limitation, their respective rights and obligations under Article 9 hereof.
ARTICLE 10
SECURITIES LAWS
---------------
10.1 Acquisition for Investment. Buyer hereby acknowledges that the
--------------------------
Common Stock to be purchased pursuant to the terms of this Agreement shall be
acquired in good faith for investment for its own account and not with a view to
a distribution or resale of any of such Common Stock in violation of applicable
securities laws.
10.2 Legend. Each certificate representing Common Stock sold pursuant
------
to the provisions hereof, if deemed advisable by Buyer, shall bear the following
legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). SUCH SECURITIES MAY NOT BE
---
SOLD OR TRANSFERRED UNLESS REGISTERED PURSUANT TO THE ACT OR IN THE ABSENCE
OF AN AVAILABLE EXEMPTION UNDER THE ACT OR THE RULES AND REGULATIONS
PROMULGATED THEREUNDER."
- 52 -
<PAGE>
ARTICLE 11
ACTIONS BY SELLERS, THE COMPANIES AND
-------------------------------------
BUYER PRIOR TO THE CLOSING
--------------------------
Sellers, the Companies and Buyer, unless otherwise stated, covenant as
follows for the period from the date hereof through the Closing Date:
11.1 Maintenance of Business. Since the Balance Sheet Date, the
-----------------------
Companies have conducted the Business only in the ordinary course and consistent
with past practices. The Companies shall diligently carry on the Business in
the ordinary course consistent with past practices and shall use its best
efforts to preserve the goodwill of its employees, suppliers, customers and
others having significant business dealings with it. The Companies shall make
all normal and customary repairs, replacements and improvements to its Machines
and Facilities in the ordinary course of business, consistent with past
practices.
11.2 Obstruction of Purpose. The Companies shall not take any action
----------------------
which would cause or tend to cause the conditions of the obligations of the
Parties to effect the transactions 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 event which would
cause the representations and warranties made by each of the Companies herein
not to be true, correct and accurate as of the Closing Date.
11.3 Certain Prohibited Transactions. None of the Companies shall,
-------------------------------
without the prior written approval of Buyer:
(a) incur any Indebtedness or make any capital expenditures, in each
case, except for capital expenditures made in the ordinary course of business
and consistent with past practices;
(b) issue any of its shares of Common Stock or any other Equity
Interests or any other securities;
(c) pay or incur any obligation to pay any dividend on its Common Stock,
Equity Interests or other securities, or make or incur any obligation to make
any distribution or redemption with respect to any of its Common Stock, Equity
Interests or other securities;
(d) make any change to its Certificate of Incorporation or bylaws;
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<PAGE>
(e) mortgage, pledge or otherwise encumber any of its properties or
Assets or sell, transfer or otherwise dispose of any of its properties or
Assets or cancel, release or assign any Indebtedness owed to it or any claims
held by it;
(f) make any Investment or purchase any property or assets of any other
Person except in the ordinary course of business and consistent with past
practices;
(g) enter into or terminate any contract or agreement, or make any
material change in any of its Leases and Contracts, other than in the ordinary
course of business and consistent with past practices;
(h) increase compensation payable to senior management employees or
make any discretionary bonuses or promise to do any of the foregoing;
(i) enter into any transaction with any Person on terms other than those
which are on an arms-length basis;
(j) make any payments or engage in transactions with related or
affiliated parties;
(k) do any other act which would cause any representation or warranty
of Sellers or any of the Companies in this Agreement to be or become untrue;
(l) other than in the ordinary course of business, discharge or satisfy
any Encumbrance or Indebtedness, except those required to be discharged or
satisfied;
(m) other than in the ordinary course of business, institute, settle or
agree to settle any litigation (including without limitation that certain "Tom
Duckworth" litigation), action or proceeding before any court or governmental
body;
(n) authorize any compensation increases of any kind whatsoever for any
personnel 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 any of the Companies; or
(o) other than in the ordinary course of business, cancel or terminate
any policies of insurance with respect to the Business or any of the Companies'
insurable properties or Assets.
11.4 Investigation by Buyer. The obligations of Buyer shall be
----------------------
contingent upon Buyer's completion of a business, environmental, financial and
legal investigation of each of the Companies with the results being satisfactory
to
- 54 -
<PAGE>
Buyer. Sellers and each of the Companies shall allow Buyer through Buyer's
Representatives, to make such investigation of the Business, properties, books
and records of each of the Companies, and to conduct such examination of the
condition of each of the Companies, as Buyer deems necessary or advisable to
familiarize itself with such Business, properties, books, records, condition
and other matters, and to verify the representations and warranties of Sellers
and each of the Companies hereunder.
11.5 Consents and Efforts. Promptly after execution and delivery of
--------------------
this Agreement, Buyer, Sellers and each of the Companies shall make all
governmental filings required in connection with the transactions to be
consummated pursuant to the Transaction Documents. Each of the Companies will,
as promptly as practicable, commence to take all action required to obtain all
Permits, consents, approvals and agreements of, and to give all notices and make
all other filings with, any third parties, including governmental authorities,
necessary to authorize, approve or permit the Sale; provided, however, that
-------- -------
Buyer shall not be required to agree to any unfavorable or commercially
unreasonable modification of any existing contract or agreement by Sellers or
any of the Companies in order to obtain any such Permits, consents or approvals.
In addition, subject to the terms and conditions herein provided, each of the
Parties covenants and agrees to use its commercially reasonable efforts to take,
or cause to be taken, all action or do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by the Transaction
Documents and to cause the fulfillment of the Parties' obligations hereunder.
11.6 Notification of Certain Matters. Sellers shall give prompt notice
-------------------------------
to Buyer, and Buyer shall give prompt notice to Sellers, as applicable, of (i)
the occurrence or existence, or failure to occur or exist, of any fact,
information or event, which occurrence or existence or failure could cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate any time from the date hereof to the Closing Date and (ii) any
failure of Sellers, any of the Companies or Buyer, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied hereunder, and each Party shall use its best efforts to remedy same.
11.7 No Mergers, Consolidations, Sale of the Shares, Etc. Except as set
---------------------------------------------------
forth on the Disclosure Schedule, each of the Companies and Sellers will not,
directly or indirectly, solicit or participate in any inquiries or proposals or
enter into or continue any discussions, negotiations or agreements relating to
the sale or exchange of the Common Stock, the merger of any of the Companies, or
the direct or indirect
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<PAGE>
disposition of a significant amount of the Assets or Business to any Person
other than Buyer or provide any assistance or any information to or otherwise
cooperate with any other Person in connection with any such inquiry, proposal or
transaction. In the event that any of the Companies or any of Sellers receive
an unsolicited offer for such a transaction or obtain or become aware of
information that such an offer is likely to be made, the Companies or Sellers
will immediately provide Buyer with notice thereof, including the identity of
the prospective purchaser or soliciting party.
Upon any violation of this Section 11.7, Sellers shall pay Buyer's
reasonable expenses incurred in connection with the transactions contemplated
hereby.
11.8 NCLI Plan. Sellers shall cause Whitmer Vend-O-Mat Laundry
---------
Services, Inc. to (i) assume the sponsorship of the NCLI Plan on or prior to the
Closing Date, (ii) terminate the NCLI Plan as soon as administratively feasible
thereafter and (iii) obtain a determination letter from the Internal Revenue
Service regarding the qualified status of the NCLI Plan in connection with its
termination.
ARTICLE 12
MISCELLANEOUS
-------------
12.1 Assignment. Neither this Agreement nor any of the rights or
----------
obligations hereunder may be assigned by Sellers without the prior written
consent of Buyer. Subject to the foregoing, this Agreement shall be binding
upon and inure to the benefit of the Parties and their respective successors and
assigns, and no other Person shall have any right, benefit or obligation
hereunder.
12.2 Notices; Transfer of Funds. Unless otherwise provided herein, any
--------------------------
notice, request, instruction or other document to be given hereunder by any
Party to the others shall be in writing and delivered in person or by courier,
telegraphed, telexed or by facsimile transmission or mailed by certified mail,
postage prepaid, return receipt requested (such mailed notice to be effective on
the date such receipt is acknowledged or refused), as follows:
If to Sellers: National Coin Laundry, Inc.
990 West Third Avenue
Columbus, Ohio 43212
Attention: Mr. Kimberly A. Close
Mr. Stephen Close
Telephone: (614) 294-0222
Facsimile: (614) 294-2404
- 56 -
<PAGE>
With a copy to: Ricketts & Onda
300 South Second Street
Columbus, Ohio 43215
Attention: Robert Onda, Esq.
Telephone: (614) 229-4100
Facsimile: (614) 229-4111
If to the
Companies: Coinmach Corporation
521 East Morehead Place, Suite 590
Charlotte, North Carolina 28203
Attention: Stephen R. Kerrigan
Telephone: (800) 747-9379
Facsimile: (704) 375-8986
If to Buyer: Coinmach Corporation
521 East Morehead Place, Suite 590
Charlotte, North Carolina 28203
Attention: Stephen R. Kerrigan
Telephone: (800) 747-9379
Facsimile: (704) 375-8986
With copies to: Coinmach Corporation
55 Lumber Road
Roslyn, New York 11576
Attention: Mr. Robert M. Doyle
Telephone: (516) 484-2300
Facsimile: (516) 484-1812
Anderson Kill & Olick, P.C.
1251 Avenue of the Americas
New York, New York 10020-1182
Attention: Ronald S. Brody, Esq.
Telephone: (212) 278-1258
Facsimile: (212) 278-1733
or to such other place and with such other copies as either Party may designate
as to itself by written notice to the others.
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).
- 57 -
<PAGE>
Payments to be made to Buyer hereunder shall be made by wire transferred
funds to be delivered to Buyer in accordance with the instructions set forth in
Exhibit G or to such other account or place as Buyer may designate by written
- ---------
notice as provided herein. Payments to be made to Sellers hereunder shall be
made by wire transferred funds in accordance with the instructions set forth in
Exhibit G or such other account or place as Sellers may designate by written
- ---------
notice as provided herein.
12.3 Choice of Law; Venue; Service of Process. This Agreement shall be
----------------------------------------
construed, interpreted and the rights of the Parties determined in accordance
with the laws of the State of Delaware, without regard to principles of
conflicts of laws, except with respect to matters of law concerning the internal
corporate affairs of any corporate entity which is a party to or the subject of
this Agreement, and as to those matters the law of the jurisdiction under which
the respective entity derives its powers shall govern. Sellers irrevocably
agree that any legal action or proceeding arising out of or in connection with
the Transaction Documents, or the transactions contemplated thereby, shall be
brought in the United States District Court in the State of Delaware. Any and
all service of process and any other notice in any such action, suit or
proceeding shall be effective against any Party if given personally or by
registered or certified mail, return receipt requested, or by any other means of
mail that requires a signed receipt, postage prepaid, mailed to such Party as
herein provided.
12.4 Entire Agreement; Amendments and Waivers. This Agreement, together
----------------------------------------
with all exhibits and schedules hereto, constitutes the entire agreement among
the Parties pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the Parties. No supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the Party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed
or shall constitute a waiver of any other provision hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided.
12.5 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.6 Invalidity. In the event that any one or more of the provisions
----------
contained in this Agreement or in any other Transaction Document, shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect
- 58 -
<PAGE>
any other provision of this Agreement or any other such instrument.
12.7 Headings. The headings of the Articles and Sections herein are
--------
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
12.8 Expenses. Except as otherwise provided herein, Sellers and Buyer
--------
will each be liable for its own, and Sellers shall be liable for each of the
Companies' costs and expenses incurred in connection with the negotiation,
preparation, execution and performance of the Transaction Documents.
12.9 Publicity. Except as required by applicable law or legal process,
---------
neither Party shall issue any press release or make any public statement
regarding the transactions contemplated hereby, without the prior approval of
the other Party, and the Parties shall issue a mutually acceptable press release
as soon as practicable after the Closing Date.
12.10 Remedies. No failure to exercise, and no delay in exercising, any
--------
right, remedy, power or privilege under this Agreement by any Party will operate
as a waiver of such right, remedy, power or privilege, nor will any single or
partial exercise of any right, remedy, power or privilege under this Agreement
preclude any other or further exercise of such right, remedy, power or privilege
or the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges provided pursuant to this Agreement are
cumulative and not exhaustive of any other rights, remedies, powers and
privileges which may be provided by law.
12.11 Confidential Information. The Parties acknowledge that the
------------------------
transactions described herein are of a confidential nature and shall not be
disclosed except to their Representatives, or as required by applicable law or
legal process, until such time as the Parties make a public announcement
regarding the transaction as provided in Section 12.9. Neither Sellers nor
Buyer shall make any public disclosure of the specific terms of this Agreement,
except as required by applicable law or legal process. In connection with the
negotiation of the Transaction Documents and the preparation for the
consummation of the transactions contemplated thereby, each Party acknowledges
that it will have access to confidential information relating to the other
Party. Each Party shall treat such information as confidential, preserve the
confidentiality thereof and not duplicate or use such information, except to its
Representatives in connection with the transactions contemplated thereby.
- 59 -
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement, or
have caused this Agreement to be duly executed on their respective behalf by
their respective officers thereunto duly authorized, as of the day and year
first above written.
COINMACH CORPORATION
By: ______________________________
Name:
Title:
NATIONAL COIN LAUNDRY HOLDING, INC.
By: ______________________________
Name:
Title:
NATIONAL COIN LAUNDRY, INC.
By: ______________________________
Name:
Title:
NATIONAL LAUNDRY EQUIPMENT COMPANY
By: ______________________________
Name:
Title:
___________________________________
Kimberly A. Close
___________________________________
Stephen P. Close
___________________________________
Ruth D. Close
- 60 -
<PAGE>
ALVIN D. CLOSE TRUST
By: ______________________________
Stephen P. Close, trustee
By: ______________________________
Kimberly A. Close, trustee
By: ______________________________
Ruth D. Close, trustee
- 61 -
<PAGE>
EXHIBIT A
LIST OF SELLERS
Seller National Coin National Coin National Laundry
Laundry Holding, Laundry, Inc. Equipment Company
Inc.
Kimberly A. Class A: 46 shares 0 50 shares
Close Class B: 1,398
Stephen P. Class A: 46 shares 0 50 shares
Close Class B: 1,398
Ruth D. Close Class A: 4 shares 0 50 shares
Alvin D. Class A: 90 shares 0 0
Close Trust,
Kimberly A.
Close,
Stephen P.
Close and
Ruth D.
Close,
trustees
- 62 -
<PAGE>
EXHIBIT B
BALANCE SHEET
- 63 -
<PAGE>
EXHIBIT C
FINANCIAL STATEMENTS
- 64 -
<PAGE>
EXHIBIT D
ESCROW AGREEMENT
- 65 -
<PAGE>
EXHIBIT E
EMPLOYMENT AGREEMENTS
- 66 -
<PAGE>
EXHIBIT F
FORM OF OPINION OF SELLER'S COUNSEL
- 67 -
<PAGE>
EXHIBIT G
WIRE TRANSFER INSTRUCTIONS
- 68 -
<PAGE>
EXHIBIT 10.75
ASSET PURCHASE AGREEMENT
by and among
WHITMER VEND-O-MAT LAUNDRY SERVICES, INC.
as "Seller"
------
STEPHEN P. CLOSE, KIMBERLY A. CLOSE, RUTH D. CLOSE,
KIMBERLY A. CLOSE, RUTH D. CLOSE AND STEPHEN P. CLOSE
AS TRUSTEES OF THE ALVIN D. CLOSE TRUST AND SPC MANAGEMENT, INC.
and
COINMACH CORPORATION
as "Buyer"
-----
Dated: July 17, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1
DEFINITIONS............................................. 1
1.1 Defined Terms.................................. 1
1.2 Other Defined Terms............................ 8
ARTICLE 2
PURCHASE AND SALE OF ASSETS............................. 9
2.1 Transfer of Assets............................ 9
2.2 Purchase Price................................ 10
2.3 Purchase Price Adjustments.................... 11
2.4 Prorations.................................... 15
2.5 Closing Costs; Transfer Taxes................. 16
ARTICLE 3
CLOSING................................................. 17
3.1 Closing....................................... 17
3.2 Conveyances at Closing........................ 17
3.3 Assumption Documents.......................... 18
3.4 Other Deliveries at Closing................... 18
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER................ 19
4.1 Organization of Seller........................ 19
4.2 Authorization................................. 19
4.3 Subsidiaries.................................. 20
4.4 Absence of Certain Changes or Events.......... 20
4.5 Title to Assets, Etc.......................... 23
4.6 Condition of Tangible Assets.................. 24
4.7 Location Contracts............................ 24
4.8 Contracts and Commitments..................... 24
4.9 No Conflict or Violation...................... 26
4.10 Consents and Approvals....................... 26
4.11 Financial Statements......................... 27
4.12 Litigation................................... 27
4.13 Labor Matters................................ 27
4.14 Liabilities.................................. 28
4.15 Compliance with Law.......................... 28
4.16 No Brokers................................... 29
4.17 No Other Agreements to Sell the Purchased
Assets....................................... 29
4.18 Proprietary Rights........................... 29
4.19 Employee and Related Agreements; ERISA....... 29
4.20 Transactions with Certain Persons............ 31
4.21 Tax Matters.................................. 31
4.22 Severance Arrangements....................... 32
4.23 Insurance.................................... 32
4.24 Accounts Receivable.......................... 32
i
<PAGE>
4.25 Inventories.................................. 33
4.26 Payments..................................... 33
4.27 Customers and Suppliers...................... 33
4.28 Compliance With Legislation Regulating
Environmental Quality........................ 33
4.29 Real Estate.................................. 35
4.30 Material Misstatements Or Omissions.......... 38
4.31 Confidentiality Agreement.................... 39
4.32 Key Personnel................................ 39
4.33 Solvency..................................... 39
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER................. 39
5.1 Organization of Buyer......................... 39
5.2 Authorization................................. 39
5.3 No Brokers.................................... 39
5.4 No Conflict or Violation...................... 40
5.5 Consents and Approvals........................ 40
ARTICLE 6
COVENANTS OF SELLER AND BUYER........................... 40
6.1 Maintenance of Business Prior to Closing...... 40
6.3 Investigation by Buyer; Audits................ 41
6.4 Consents and Best Efforts..................... 41
6.5 Title Matters................................. 41
6.6 Certain Prohibited Transactions............... 42
6.7 Notification of Certain Matters............... 43
6.8 No Mergers, Consolidations, Sale of Stock, Etc. 43
6.9 Seller's Employees............................ 44
ARTICLE 7
CONDITIONS TO SELLER'S OBLIGATIONS...................... 45
7.1 Representations, Warranties and Covenants..... 45
7.2 Consents...................................... 46
7.3 No Governmental Proceedings or Litigation..... 46
7.4 Certificates.................................. 46
7.5 Corporate Documents........................... 46
7.6 HSR Act....................................... 46
7.7 Investigation by Buyer........................ 46
7.8 Employment Agreements......................... 46
7.9 Stock Purchase Agreement...................... 46
ARTICLE 8
CONDITIONS TO BUYER'S OBLIGATIONS....................... 46
8.1 Representations, Warranties and Covenants..... 47
8.2 Consents...................................... 47
8.3 No Governmental Proceedings or Litigation..... 47
8.4 Compliance with Legal Requirements............ 47
8.5 Opinion of Counsel............................ 47
8.6 Certificates.................................. 47
8.7 Material Changes.............................. 48
ii
<PAGE>
8.8 Corporate Documents........................... 48
8.9 HSR Act....................................... 48
8.10 Disclosure Schedule.......................... 48
8.11 Balance Sheet and Financial Statements....... 48
8.12 Investigation of Buyer; Audit................ 49
8.13 Due Diligence................................ 49
8.14 Employment Agreements........................ 49
8.15 Escrow Agreement............................. 49
8.16 Owned Real Property Items.................... 49
8.17 Stock Purchase Agreement..................... 49
ARTICLE 9
COVENANT NOT TO COMPETE AND CONFIDENTIALITY............. 49
9.1 Covenant Not to Compete...................... 49
9.2 Confidentiality and Non-Solicitation......... 50
9.3 Validity..................................... 50
9.4 Remedies..................................... 50
ARTICLE 10
RISK OF LOSS............................................ 51
ARTICLE 11
ACTIONS BY SELLER AND BUYER
AFTER THE CLOSING....................................... 51
11.1 Books and Records............................ 51
11.2 Survival of Representations, Etc............. 51
11.3 Indemnification.............................. 52
11.4 Indemnification Procedures................... 54
11.5 Control of Defense: Exceptions, etc......... 54
11.6 Other Remedies............................... 55
11.7 Characterization; Taxes...................... 55
11.8 Brokers and Finders.......................... 55
11.9 Further Assurances........................... 55
11.10 Bulk Sales.................................. 56
11.11 Cooperation on Litigation................... 56
11.12 Tax Matters................................. 56
11.13 Name Change................................. 56
11.14 Distributions and Dividends................. 56
11.15 Escrow...................................... 57
ARTICLE 12
MISCELLANEOUS........................................... 57
12.1 Termination.................................. 57
12.2 Assignment................................... 58
12.3 Notices; Transfer of Funds................... 58
12.4 Choice of Law; Venue; Service of Process..... 60
12.5 Entire Agreement; Amendments and Waivers..... 60
12.6 Multiple Counterparts........................ 60
12.7 Expenses..................................... 60
12.8 Invalidity................................... 60
12.9 Titles....................................... 61
iii
<PAGE>
12.10 Publicity................................... 61
12.11 Confidential Information.................... 61
12.12 Remedies.................................... 62
iv
<PAGE>
EXHIBITS
EXHIBIT A FINANCIAL STATEMENTS AND BALANCE SHEET.. A-1
EXHIBIT B ALLOCATION OF PURCHASE PRICE............ B-1
EXHIBIT C BILL OF SALE............................ C-1
EXHIBIT D ASSIGNMENT AND ASSUMPTION AGREEMENT..... D-1
EXHIBIT E FORM OF OPINION OF SELLER'S COUNSEL..... E-1
EXHIBIT F WIRE TRANSFER INSTRUCTIONS.............. F-1
EXHIBIT G EXCLUDED ASSETS......................... G-1
EXHIBIT H OWNED REAL ESTATE....................... H-1
EXHIBIT I PERMITTED EXCEPTIONS.................... I-1
EXHIBIT J CLOSING DOCUMENTS IN CONNECTION WITH
THE OWNED REAL ESTATE................... J-1
EXHIBIT K ESCROW AGREEMENT........................ K-1
EXHIBIT L OWNED REAL PROPERTY DESCRIPTION......... L-1
v
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated July 17, 1997, is by and among
Coinmach Corporation, a Delaware corporation ("Buyer"), Stephen P. Close, an
-----
individual residing at 3812 Riverside Drive, Columbus, Ohio 43221 ("Stephen P.
----------
Close"), Kimberly A. Close, an individual residing at 4300 Squirrel Bend,
- -----
Columbus, Ohio 43220 ("Kimberly A. Close), Ruth D. Close, an individual residing
-----------------
at 4544 Carriage Hill Lane, Columbus, Ohio 43220 ("Ruth D. Close"), Kimberly A.
-------------
Close, Ruth D. Close and Stephen P. Close as trustees of the Alvin D. Close
Trust (the "Close Trust", together with Stephen P. Close, Kimberly A. Close and
-----------
Ruth D. Close, the "Closes"), SPC Management, Inc., an Ohio corporation ("SPC"),
------ ---
and Whitmer Vend-O-Mat Laundry Services, Inc., an Indiana corporation
("Seller").
------
RECITALS
--------
A. Seller owns certain assets which it uses in the conduct of its
business of supplying coin-operated laundry equipment services to multi-family
dwellings located primarily in the States of Ohio, Indiana, Kentucky, West
Virginia, Pennsylvania, Tennessee and Illinois (the foregoing, together with all
other businesses and operations of Seller, shall hereinafter be collectively
referred to as the "Business").
--------
B. Buyer desires to purchase from Seller, and Seller desires to sell
to Buyer, such assets subject to the terms and conditions of this Agreement.
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 agree as follows:
ARTICLE 1
DEFINITIONS
-----------
1.1 Defined Terms. As used herein, the terms below shall have the
-------------
following meanings:
"Adverse Effect" shall mean a materially adverse effect on any of the
--------------
Sale, the Purchased Assets, liabilities, working capital, earnings, condition
(financial or otherwise), operating results, prospects, or employee, customer or
supplier relations, in each case, of the Business or the ability of Seller to
perform its obligations under the Transaction Documents.
- 1 -
<PAGE>
"Affiliate" of any Person shall mean any other Person controlling,
---------
controlled by or under common control with such first Person.
"Agreement" shall mean this Asset Purchase Agreement, between Buyer
---------
and Seller, as this Agreement may be amended from time to time.
"Balance Sheet" shall mean the balance sheet of Seller as of the
-------------
fiscal year ended as of the Balance Sheet Date, together with the notes thereon,
delivered to Buyer on or before the Closing Date and attached hereto as Exhibit
-------
A.
- -
"Balance Sheet Date" shall mean October 31, 1996.
------------------
"Books and Records" shall mean all records pertaining to the Purchased
-----------------
Assets, the Business and the customers or suppliers of Seller.
"Business" shall have the meaning set forth in Recital A hereof and
--------
shall include, without limitation, the Purchased Assets.
"Closing Date" shall mean July 17, 1997, or such other date as may be
------------
mutually agreed upon in writing by the Parties.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
----
time to time.
"Consent" shall mean a consent or waiver by a Consenting Party to an
-------
assignment or similar transfer or conveyance to Buyer of a Location Contract or
other agreement, in either case, in connection with the Transaction Documents or
any of the transactions contemplated thereby.
"Consenting Party" shall mean any Person whose consent or waiver is or
----------------
may be required under any of the Transaction Documents or in connection with any
of the transactions contemplated thereby, in any such case, in order to assign
or otherwise transfer or convey Seller's rights and obligations under a Contract
or other agreement, to Buyer.
"Contract" shall mean any of the agreements, contracts (including
--------
without limitation the Location Contracts), Leases or commitments described in
the Disclosure Schedule and any of Seller's agreements, contracts, leases or
-------------------
commitments not required to be described in the Disclosure Schedule solely
-------------------
because of the size or duration limitations on contracts required to be
scheduled by this Agreement.
- 2 -
<PAGE>
"Contract Rights" shall mean all of Seller's rights and obligations
---------------
under the Contracts.
"Disclosure Schedule" shall mean a schedule executed and delivered by
-------------------
Seller to Buyer on the date hereof and on or prior to the Closing Date which
sets forth the exceptions to the representations and warranties contained in
Article 4 hereof and certain other information called for by Article 4 hereof
and certain other provisions of this Agreement and which hereby is made a part
of this Agreement and incorporated in its entirety herein by reference.
"Encumbrances" shall mean any claim, mortgage, deed of trust,
------------
restrictive covenant, lien, pledge, option, charge, easement, security interest,
right-of-way, encumbrance or other right of third parties, whether or not filed,
recorded or otherwise perfected under applicable law, as well as the interest of
any vendor, vendee, lessor or lessee under any conditional sales agreement,
capital lease or other title retention agreement.
"Environmental and Safety Requirements" means all applicable federal,
-------------------------------------
state, local and foreign statutes, regulations, ordinances, restrictions and
similar provisions having the force or effect of law, all judicial and
administrative orders and determinations, all contractual obligations and all
common law concerning public health and safety, worker or occupational health
and safety, and pollution or protection of the environment, including, without
limitation, all those relating to the presence, use, production, generation,
handling, transport, treatment, storage, disposal, distribution, labeling,
testing, processing, discharge, release, threatened release, control, or cleanup
of any hazardous or otherwise regulated materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation, and also including, but not limited to, the
Federal Water Pollution Control Act (33 U.S.C. (S) 1251 et seq.), Resource
-- ---
Conservation & Recovery Act (42 U.S.C. (S) 6901 et seq.), Safe Drinking Water
-- ---
Act (21 U.S.C. (S) 349, 42 U.S.C. (S)(S) 201, 300f), Toxic Substances Control
Act (15 U.S.C. (S) 2601 et seq.), Clean Air Act (42 U.S.C. (S) 7401 et seq.),
-- --- -- ---
and Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. (S) 9601 et seq.).
-- ---
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended.
"Excluded Assets," shall mean the following items of Seller which are
---------------
not to be acquired by Buyer hereunder:
- 3 -
<PAGE>
(a) The employment agreement between Seller and Jeff Whitmer dated as
of April 27, 1993 ("Whitmer Employment Agreement");
----------------------------
(b) Permits, to the extent not lawfully transferable, as identified or
listed on Exhibit G; and
---------
(c) Any other items identified or listed on Exhibit G.
---------
"Facilities" shall mean the Locations, plants, offices, self storage
----------
facilities, re-manufacturing facilities, warehouses, administration buildings,
etc. and all real property and related facilities which are identified or listed
on the Disclosure Schedule.
-------------------
"Fee Improvements" shall mean all of Seller's improvements, fixtures
----------------
and equipment situated in or on the property leased under the Owned Real Estate.
"Financial Statements" shall mean the Balance Sheet and the statements
--------------------
of income and stockholders' equity of Seller for the twelve month period ended
as of the Balance Sheet Date, together with the notes thereon, delivered to
Buyer on or before the Closing Date and attached hereto as Exhibit A.
---------
"Fixtures and Equipment" shall mean all of the furniture, fixtures,
----------------------
furnishings, machinery (including Machines and Parts) and equipment owned or
leased by Seller or its Representatives on behalf of Seller and located in, at
or upon the Facilities as of the Balance Sheet Date plus all additions,
replacements or deletions since the Balance Sheet Date to the Closing Date in
the ordinary course of Seller's business.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
-------
of 1976, as amended.
"Indebtedness" shall mean with respect to any Person, without
------------
duplication, (i) all obligations of such Person, whether or not contingent, for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all capitalized lease
obligations of such Person except Motor Vehicle lease obligations as set forth
on the Disclosure Schedule, (iv) all obligations of such Person issued or
-------------------
assumed as the deferred purchase price of property, all conditional sale
obligations and all obligations under any title retention agreement (but
excluding trade accounts payable, vehicle obligations, office equipment lease
obligations as set forth on the Disclosure Schedule, and other accrued expenses
-------------------
or liabilities arising in the ordinary course of business and consistent with
past practice that are not overdue by 90 days or more or are being contested in
good faith by appropriate
- 4 -
<PAGE>
proceedings promptly instituted and diligently conducted), (v) all obligations
for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction, (vi) guarantees and other contingent
obligations in respect of Indebtedness referred to in clauses (i) through (v)
above and clause (viii) below, (vii) all obligations of any other Person of the
type referred to in clauses (i) through (vi) which are secured by any lien on
any property or asset of such Person, and (viii) all Obligations under currency
agreements and interest swap agreements of such Person.
"Leasehold Estates" shall mean all of Seller's rights and obligations
-----------------
as lessee under the Leases.
"Leasehold Improvements" shall mean all of Seller's leasehold
----------------------
improvements situated in or on the property leased under the Leases.
"Leases" shall mean all of the real and personal property leases
------
(including the Location Contracts) listed on the Disclosure Schedule and all
-------------------
other leases relating to the Business which are not required to be scheduled
pursuant to this Agreement.
"Legal Requirements" means any applicable action, law, statute,
------------------
treaty, rule, regulation, order, ordinance, judgment, injunction, decree, award,
determination or direction of an arbitrator or government entity, including,
without limitation, any zoning, Environmental and Safety Requirements, motor
vehicle safety requirements or standards or any requirements arising thereunder
or related thereto.
"Location" shall mean a laundry room or similar location at which one
--------
or more On-Location Machines are installed pursuant to a Location Contract (all
such locations collectively, the "Locations").
---------
"Location Contracts" shall mean all Contracts pursuant to which Seller
------------------
provides installation, maintenance or other services with respect to On-Location
Machines, which Contracts are listed on the Disclosure Schedule.
-------------------
"Machines" shall mean any and all of the coin-operated washing
--------
machines and dryers, commercial and domestic washers and dryers, soap machines,
debit card equipment, vending machines and change makers and video machines
(including the On-Location Machines), owned or leased by Seller.
"Mortgages" shall mean all deeds of trust, mortgages or other
---------
Encumbrances on Owned Real Estate.
- 5 -
<PAGE>
"Motor Vehicles" shall mean any and all trucks, trailers, vans and
--------------
automobiles owned or leased by Seller and used in the Business, which vehicles
shall be listed on the Disclosure Schedule.
-------------------
"Net Gross" shall mean, with respect to any Location, for the twelve
---------
(12) month period ending on the Balance Sheet Date, an amount equal to the gross
revenues or total coin collections for such Location minus the applicable
-----
commission or out of pocket rental expenses (which expenses shall exclude
decorating expenses and the actual per hour costs attributable to collection
employees of Seller), in each case reasonably allocable to such Location.
"On-Location Machines" shall mean approximately 8,600 coin-operated
--------------------
washing machines and dryers, installed at Locations, and subject to written or
oral Location Contracts, and 400 other types of coin- or non-coin operated
machines and dryers, as listed on the Disclosure Schedule.
-------------------
"Owned Real Estate" shall mean the real property owned in fee by
-----------------
Seller, located on Klondike Road, West Lafayette, Indiana, as more particularly
described on Exhibit H attached hereto and made a part hereof.
---------
"Parts" shall mean any and all spare parts or other Equipment owned by
-----
Seller and used in the Business.
"Parties" shall mean, collectively, Buyer, SPC, the Closes and Seller.
-------
"Permits" shall mean all of Seller's licenses, permits and other
-------
governmental authorizations or consents required to conduct the Business as
presently conducted or as proposed to be conducted.
"Person" shall mean an individual, partnership, corporation,
------
association, joint stock company, limited liability company, trust, joint
venture, unincorporated organization, governmental authority or any other entity
or organization of any kind whatsoever.
"Proprietary Rights" shall mean all of Seller's registrations of
------------------
trademarks and of other marks, trade names, service names or other trade rights
relative to the Business, including without limitation the trade name "Whitmer
Vend-O-Mat Laundry Services, Inc." and all pending applications for any such
registrations and all of Seller's patents and copyrights and all pending
applications therefor relative to the Business; all other trademarks and other
marks, trade names and other trade rights and all other trade secrets, designs,
plans, specifications and
- 6 -
<PAGE>
other proprietary rights, whether or not registered, relative to the Business.
"Purchased Assets" shall mean all of Seller's right, title and
----------------
interest in and to properties, assets and rights of any kind, whether tangible
or intangible, real or personal, owned by Seller or in which Seller has any
interest (except the Excluded Assets) and constituting, or used in connection
with, the Business, including without limitation, the following:
(i) all Motor Vehicles;
(ii) accounts receivable and refunds or deposits;
(iii) cash or cash equivalents;
(iv) all Contract Rights, including the Location Contracts;
(v) the Owned Real Estate;
(vi) all Leasehold Estates;
(vii) all Leasehold Improvements and Fee Improvements;
(viii) all Fixtures and Equipment;
(ix) all Books and Records;
(x) all Facilities;
(xi) all Proprietary Rights; and
(xii) to the extent transferable, all Permits.
"Real Estate" shall mean all real property, whether owned or leased,
-----------
or any interest therein, and all plants, buildings and other improvements
located on such owned or leased property, and all easements, licenses, rights of
way, Permits and all appurtenances to such owned or leased property, including,
without limitation, all appurtenant rights in and to public streets, whether or
not vacated.
"Representative" shall mean, with respect to any Person, any officer,
--------------
director, partner, principal, affiliate, principal, attorney, accountant,
financial advisor, consultant, agent, employee or other representative of such
Person.
"Subsidiaries" shall mean and include any Person in which Seller
------------
either owns capital stock or is a partner or is in
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<PAGE>
some other manner affiliated through an investment or participation in the
voting interests or equity interests of such Person.
"Tax" shall mean any federal, state, local, or foreign income, gross
---
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security or similar tax, unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, or Transfer Taxes, including without limitation any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Liabilities" shall mean any Damages arising out of, resulting
---------------
from or relating to any Taxes imposed on Seller or any Affiliate of Seller
regardless of when imposed for any period prior to and including the Closing
Date, including, without limitation, any Taxes arising from the Sale and any
Transfer Taxes.
"Tax Return" shall mean any return, declaration, report, claim for
----------
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Transaction Documents" shall mean this Agreement and all other
---------------------
agreements, instruments, exhibits, schedules, certificates and other documents
to be entered into or delivered by any Person in connection with the
transactions contemplated to be consummated pursuant to any of the foregoing.
"Transfer Taxes" shall mean any and all sales, use, transfer, real
--------------
property transfer, recording, gains, stock transfer and other similar taxes and
fees, including without limitation any interest, penalty or addition thereto,
whether disputed or not.
1.2 Other Defined Terms. The following terms shall have the meanings
-------------------
assigned to such terms in the sections set forth below:
Term Section
- ---- -------
AAA 2.3
Acquisition Proposal 6.8
Action 4.12
Arbitrator 2.3
Benefits 6.9
Benefit Arrangement 4.19
- 8 -
<PAGE>
Buyer's Indemnities 11.3(a)
Closing 3.1
Cobra Benefits 6.9
Coinmach Plan 6.9
Consent Lease 3.4
Damages 11.3(a)
Disputes 2.3
Employee Plan 4.19
ERISA Affiliate 4.19
ERISA Liabilities 11.3(b)
Escrow Agreement 8.15
Escrowed Funds 11.15
Indemnified Party 11.4
Indemnifying Party 11.4
Multiemployer Plan 4.19
Name 11.13
Personnel 4.4(b)
Sale 2.1
Service Agreement 3.4
Sublease 3.4
Purchase Price 2.2
Seller's Indemnities 11.3(d)
Seller's Plan 6.9
Title IV Plan 4.19
Transferred Employees 6.9
WARN Act 4.13
ARTICLE 2
PURCHASE AND SALE OF ASSETS
---------------------------
2.1 Transfer of Assets. On the Closing Date:
------------------
(a) Seller will sell, convey, transfer, assign, and deliver to Buyer,
and Buyer will acquire from Seller, the Purchased Assets (the "Sale").
----
(b) Buyer shall assume only the following obligations and liabilities
----
of Seller and no other obligations or liabilities whatsoever:
--------------------------------------------------
All obligations and liabilities accruing, arising out of, or relating
to events or occurrences happening after the Closing Date under Contracts or
commitments set forth on Schedule 2.1 of the Disclosure Schedule or under
-------------------
Contracts or commitments of Seller which are described in Sections 4.7 and 4.8
hereof but which, pursuant to the terms of such Sections, are not required to be
set forth on the Disclosure Schedule (excluding those obligations and
-------------------
liabilities herein expressly retained by Seller) and which have arisen or have
been incurred in the ordinary course of business (but in either case, not
including any
- 9 -
<PAGE>
obligation or liability for any breach thereof occurring on or prior to the
Closing Date).
(c) Except for the liabilities and obligations specifically assumed
under Section 2.1(b) hereunder, Buyer is not assuming any other liabilities of
Seller of any nature whatsoever, whether absolute, accrued, contingent or
otherwise, disclosed or undisclosed and whether or not relating to the Business,
including without limitation (i) any Tax Liabilities, (ii) any liability for
legal, accounting, appraisal, trustee, fiduciary or broker's fees incurred in
connection with the negotiation of the Transaction Documents or the consummation
of any of the transactions contemplated thereby, (iii) any liabilities related
to any litigation of Seller, (iv) any Indebtedness of Seller, (v) any leasehold
liabilities of Seller (other than with respect to liabilities arising under the
Contracts in the ordinary course of business as set forth in Section 2.1(b)
hereof after the Closing Date), (vi) any liability in respect of employees of
Seller not hired by Buyer, (vii) any ERISA Liabilities and (viii) any
liabilities of Seller arising under the Whitmer Employment Agreement, except
that Buyer shall reimburse Seller for 1/2 of the amount that Seller actually
pays to Whitmer in respect of the Whitmer Employment Agreement after the Closing
Date for obligations arising after the Closing Date.
2.2 Purchase Price. On the Closing Date, Buyer shall pay to Seller
--------------
for the sale, transfer, assignment, conveyance and delivery of the Purchased
Assets an amount (the "Purchase Price") equal to Five Million Dollars
--------------
($5,000,000), subject to certain purchase price adjustments as hereinafter
provided. The Purchase Price shall be paid on the Closing Date by wire transfer
of immediately available funds to Seller. The Purchase Price shall be allocated
among the Purchased Assets as set forth on Exhibit B attached hereto.
---------
Notwithstanding anything to the contrary contained herein, on the Closing Date,
not less than One Million One Hundred Thousand Dollars ($1,100,000) shall be
placed in escrow (the "Escrowed Funds") by Seller pursuant to that certain Stock
--------------
Purchase Agreement by and among the Buyer, the Closes, National Coin Laundry
Holding, Inc., National Coin Laundry, Inc. and National Laundry Equipment
Company (the "Stock Purchase Agreement") in respect of certain indemnification
------------------------
obligations of Seller provided for in Article 11 hereof and pursuant to Article
9 of the Stock Purchase Agreement. The Escrowed Funds shall be disbursed
pursuant to and in accordance with the provisions of an escrow agreement (the
"Escrow Agreement"), substantially in the form attached hereto as Exhibit K.
- -----------------
Except as expressly provided in the Escrow Agreement, the rights and
obligations of Sellers and Buyer under the Escrow Agreement shall in no way
affect their respective rights and
- 10 -
<PAGE>
obligations under this Agreement, including, without limitation, their
respective rights and obligations under Article 11 hereof.
2.3 Purchase Price Adjustments.
--------------------------
(a) Location Contracts Adjustment. Pursuant to the provisions of
-----------------------------
Section 3.4(b) hereof, with respect to any Consent Lease, in the event that
Seller is not able to (i) obtain the Consent of a Consenting Party, (ii) enter
into a Sublease with Buyer, or (iii) enter into a Service Agreement with Buyer,
the Purchase Price shall be decreased, on a dollar-for-dollar basis, with
respect to each such Consent Lease by an amount equal to the product of (A) the
applicable Net Gross for such Location multiplied by (B) a fraction, the
numerator of which shall equal the number of remaining days on the Consent Lease
from and after the Closing Date, and the denominator of which shall equal 360.
Seller hereby agrees to (1) use its best efforts to obtain such Consent, or (2)
enter into the Sublease or Service Agreement, as the case may be, in each case
within thirty (30) days of the Closing Date. If such Consent is not obtained or
such Sublease or Service Agreement has not been executed and delivered by Seller
within such thirty (30) day period, Seller shall pay the amount of the net
Purchase Price adjustment set forth in this Section 2.3(a) within fifteen (15)
days of the expiration of such thirty (30) day period. The purchase price
adjustment shall be paid by Seller to Buyer by wire transfer of immediately
available funds.
(b) Net Current Asset Adjustment.
----------------------------
(i) Definitions. For the purposes of this Section 2.3(b), the
following terms shall have the following respective meanings:
(A) "Closing Date Asset & Liability Statement" shall mean the
----------------------------------------
statement of Closing Date Assets and Liabilities of Seller.
(B) "Closing Date Assets" shall mean, as of the Closing Date, the
-------------------
amount of (1) prepaid taxes if due and owing within one year and (2) those
assets under the captions "Cash", "Accounts Receivable", "Inventory" and
---- ------------------- ---------
"Utility Deposits" on the Closing Date Asset & Liability Statement and
- -----------------
determined in accordance with generally accepted accounting principles,
consistently applied.
(C) "Closing Date Liabilities" shall mean, as of the Closing Date,
------------------------
those liabilities included under the captions "Accounts Payable", "Accounts
Payable/Other", "Deposits-OPL/CL Contracts", "Route Commissions Payable" and
"Sales Commissions Payable" on the Closing Date Asset & Liability
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<PAGE>
Statement and determined in accordance with generally accepted accounting
principles, consistently applied.
(D) "Closing Date Net Current Asset Amount" shall mean the Closing
-------------------------------------
Date Assets less the Closing Date Liabilities. The Closing Date Net Current
Asset Amount may be a positive or negative number.
(E) "Deficiency" shall mean the amount, if any, by which the Closing
----------
Date Net Current Asset Amount is less than zero as set forth on the Closing Date
Asset & Liability Statement, as modified as a result of the resolution of any
Disputed Items (as hereinafter defined).
(F) "Surplus" shall mean the amount, if any, by which the Closing Date
-------
Net Current Asset Amount is greater than zero as set forth on the Closing Date
Asset & Liability Statement, as modified as a result of the resolution of any
Disputed Items (as hereinafter defined).
(ii) Effect of Deficiency. The Purchase Price shall be reduced on a
dollar-for-dollar basis by the amount of the Deficiency, if any, in the manner
contemplated by Section 2.3(b)(iv) and (v) hereof.
(iii) Effect of Surplus. The Purchase Price shall be increased on a
dollar-for-dollar basis by the amount of the Surplus, if any, in the manner
contemplated by Section 2.3(b)(iv) and (vi) hereof.
(iv) Delivery of Asset & Liability Statement.
(A) No later than thirty (30) days after the Closing Date, Seller
shall deliver to Buyer the preliminary Closing Date Asset & Liability Statement
(the "Preliminary Statement") setting forth each of the categories of assets and
---------------------
liabilities described in the definitions of Closing Date Assets and Closing Date
Liabilities set forth in Section 2.3(b)(i) hereof.
(B) Buyer shall have thirty (30) days from its receipt of the
Preliminary Statement (the "Review Period") to notify Seller regarding its
-------------
objection to any item on the Preliminary Statement. Any such notice shall
specify the item or items in dispute (a "Disputed Item" or "Disputed Items").
------------- --------------
Any Disputed Item shall be resolved in the manner set forth in Section 2.3(c)
below.
(C) Upon the expiration of the Review Period, if Buyer (x) does not
deliver to Seller its written notice of objection to the Preliminary Statement,
or (y)
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<PAGE>
acknowledges in writing that the Preliminary Statement is accurate, the
Preliminary Statement shall be final, binding and conclusive on the Parties and
Seller shall pay to Buyer the amount of any Deficiency, or Buyer shall pay to
Seller the amount of any Surplus (in each case, other than Disputed Items)
within ten (10) days after the Review Period. All payments for any Deficiency
shall be made by wire transfer of immediately available funds to the account or
accounts designated by Buyer. All payments for any Surplus shall be made by
wire transfer of immediately available funds to the account or accounts
designated by Seller.
(v) Payment of Deficiency. If it is finally determined pursuant to
the provisions of this Section 2.3(b) that there is a Deficiency, then within
ten (10) days after all Disputed Items with respect thereto have been resolved,
Seller shall pay to Buyer the amount of the Deficiency that has not been paid by
Seller pursuant to Section 2.3(b)(iv)(C) hereof. All payments of the Deficiency
shall be made by wire transfer of immediately available funds to the account or
accounts designated by Buyer.
(vi) Payment of Surplus. If it is finally determined pursuant to the
provisions of this Section 2.3(b) that there is a Surplus, then within ten (10)
days after all Disputed Items with respect thereto have been resolved, Buyer
shall pay to Seller the amount of the Surplus that has not already been paid by
Buyer pursuant to Section 2.3(b)(iv)(C) hereof. All payments of the Surplus
shall be made by wire transfer of immediately available funds to the account or
accounts designated by Seller.
(c) EBITDA Adjustment.
-----------------
(i) Definitions. For the purpose of this Section 2.3(c), the
following terms shall have the following respective meanings:
(A) "Annualized EBITDA Deficiency" shall mean an amount equal to the
----------------------------
product of 12 times a fraction, the numerator of which shall be an amount equal
to the EBITDA Deficiency, and the denominator of which shall be eight.
(B) "C&P EBITDA" shall mean, the EBITDA of Seller set forth
----------
on the Income Statement.
(C) "EBITDA" shall mean earnings before payment of interest,
------
Taxes, depreciation and amortization.
(D) "EBITDA Adjustment Amount" shall mean an amount equal to the
------------------------
product of 5.42 times the Annualized EBITDA Deficiency.
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<PAGE>
(E) "EBITDA Deficiency" shall mean the positive difference,
-----------------
if any, between the Seller EBITDA and the C&P EBITDA.
(F) "Income Statement" shall mean the income statement of Seller for
----------------
the eight month period ended June 30, 1997, as prepared by Ciuni & Panichi,
independent certified public accountants.
(G) "Seller EBITDA" shall mean $767,000, the EBITDA of
-------------
Seller for the eight month period ended June 30, 1997.
(ii) Effect of Annualized EBITDA Deficiency. The Purchase Price
shall be reduced by an amount equal to the product of 5.42 times the Annualized
EBITDA Deficiency, if any, in the manner contemplated by Section 2.3(c)(iii)
hereof.
(iii) Delivery of Income Statement. No later than thirty (30) days
after the Closing Date, Seller shall deliver to Buyer the Income Statement,
setting forth the C&P EBITDA.
(A) Buyer shall have ten (10) days from its receipt of the Income
Statement (the "EBITDA Review Period") to notify Seller regarding its objection
--------------------
to the amount of the C&P EBITDA (the "Disputed Amount"). Any Disputed Amount
---------------
shall be resolved in the manner set forth in Section 2.3(d) below.
(B) Upon the expiration of the EBITDA Review Period, if Buyer (x) does
not deliver to Seller its written notice of objection to the C&P EBITDA, or (y)
acknowledges in writing that the amount of the C&P EBITDA is accurate, the C&P
EBITDA shall be final, binding and conclusive on the Parties and, if an
Annualized EBITDA Deficiency exists, Seller shall pay to Buyer the EBITDA
Adjustment Amount within two (2) days after the Review Period. All payments for
any EBITDA Adjustment Amount shall be made by wire transfer of immediately
available funds to the account or accounts designated by Buyer.
(iv) Payment of EBITDA Adjustment Amount. If it is finally
determined pursuant to the provisions of this Section 2.3(c) that there is an
Annualized EBITDA Deficiency, then within two (2) days after all Disputed
Calculations with respect thereto have been resolved, Seller shall pay to Buyer
the EBITDA Adjustment Amount that has not been paid by Seller pursuant to
Section 2.3(c)(iv)(C) hereof. All payments of the EBITDA Adjustment Amount
shall be made by wire transfer of immediately available funds to the account or
accounts designated by Buyer.
(d) Arbitration. If Buyer and Seller shall be unable to agree on the
-----------
amount of any adjustments to the Purchase Price
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<PAGE>
pursuant to this Section 2.3 (a "Disagreement") or shall be unable resolve any
------------
Disputed Item within thirty (30) days after notice from Buyer to Seller that a
Disagreement or Disputed Item exists, or within ten (10) days after notice from
Buyer to Seller that a Disputed Amount exists, then a Representative of Seller
and a Representative of Buyer shall endeavor in good faith to resolve such
Disagreement, Disputed Item or Disputed Amount. In the event that such
Representatives are unable to resolve any such Disagreement, Disputed Item or
Disputed Amount within thirty (30) days, Buyer and Seller shall, within ten (10)
days thereafter, appoint an arbitrator ("Arbitrator") who is licensed by the
----------
American Arbitration Association ("AAA") to arbitrate such Disagreement,
---
Disputed Item or Disputed Amount. In the event Buyer and Seller cannot agree on
the selection of the Arbitrator, Buyer shall select one arbitrator and Seller
shall select one arbitrator who shall together select the Arbitrator who shall
arbitrate the matter. Buyer and Seller shall, within twenty (20) days
thereafter present their positions with respect to the disputes to the
Arbitrator, together with such other materials as the Arbitrator deems
appropriate. The Arbitrator shall, after the submission of the evidentiary
materials, submit a written decision on each dispute to Seller and Buyer. Any
determination by the Arbitrator with respect to any dispute shall be final and
binding on each party to this Agreement. The Arbitrator shall comply, and the
arbitration shall be conducted in the State of Delaware in accordance with the
commercial arbitration rules of the AAA as in effect for commercial arbitrations
conducted in the State of Delaware by the AAA. Seller and Buyer agree that the
costs of the Arbitrator shall be borne equally by Seller and Buyer.
2.4 Prorations.
----------
(a) Utilities; Taxes. On the Closing Date, or as promptly as
----------------
practicable following the Closing Date, but in no event later than sixty (60)
days thereafter, the real and personal property Taxes, water, sewer, gas, steam,
fuel, electricity and other utilities, common area maintenance reimbursements to
lessors, local business or other license fees or Taxes, merchants association
dues and other similar periodic charges shall be prorated between Buyer and
Seller retroactively effective as of the Closing Date. To the extent
practicable, utility meter readings for the Facilities shall be determined as of
the Closing Date. If the real property tax rate for the current tax year is not
established by the Closing Date, the prorations shall be made on the basis of
the rate in effect for the preceding tax year and shall be adjusted when the
exact amounts are determined. All such prorations shall be based upon the most
recent available assessed value of any Facility prior to the Closing Date. If
there are no water meters on the Owned Real Estate, then such proration shall be
based on the actual reading
- 15 -
<PAGE>
taken within ten (10) days of the Closing Date. All fuel charges, if any, shall
be based on a fuel company letter showing measurements no more than two (2) days
prior to the Closing Date and valued at current prices. If, on the Closing
Date, the Owned Real Estate or any part thereof shall be or shall have been
affected by an assessment or assessments which are or may become payable in
installments, then for purposes of this Agreement, all unpaid installments of
any such assessment, including those which are to become due and payable and to
be liens upon the Owned Real Estate shall be paid and discharged by Seller on
the Closing Date.
(b) Rents. Seller shall pay minimum or basic rent or other monthly
-----
charges under the Location Contracts or under any other Leases through the end
of the calendar month in which the Closing Date occurs. Payments of percentage
rent, if any, due under certain Location Contracts shall be adjusted to the
Closing Date as follows. Although Buyer shall pay any percentage rent due for
periods expiring after the Closing Date, Seller shall be responsible for that
portion due under Location Contracts based on revenues from the commencement of
the current Location Contract or applicable lease year thereunder to the Closing
Date, and Buyer shall be responsible for that portion due under the Location
Contracts based on revenues from and after the Closing Date. Within ninety (90)
days after the Closing Date, Seller will furnish Buyer with records (in form and
substance reasonably satisfactory to Buyer) which evidence the gross revenues of
Seller at each Location to the extent necessary to enable Buyer to comply with
the percentage rent provision of each Location Contract. Buyer shall provide to
Seller, within thirty (30) days before the annual settlement of percentage rent
under any Location Contract for the partial year in which Seller was operating
such Location, a statement showing the manner of computation of all percentage
rent due under each Location Contract for such year. Any reimbursement due
Buyer from Seller in respect of its pro rata share of percentage rent shall be
paid within fifteen (15) days after written demand therefor by the Buyer.
(c) Prepaid Commissions. In addition to the foregoing prorations in
-------------------
this Section 2.4, Buyer shall reimburse Seller within sixty (60) days after the
Closing Date for the amount of prepaid commissions relating to the period
subsequent to the Closing Date. The amount of the reimbursement shall be
determined by mutual agreement of Buyer and Seller based upon Seller's records
which evidence the amount of prepaid commissions determined as of the Closing
Date. Seller will provide such records to Buyer within thirty (30) days after
the Closing Date.
2.5 Closing Costs; Transfer Taxes. Seller shall be responsible for
-----------------------------
any Transfer Taxes and any other Taxes imposed by
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<PAGE>
reason of the transfer of Purchased Assets or the Sale provided hereunder and
any deficiency, interest or penalty asserted with respect thereto. Seller shall
also be responsible for the fees and costs of recording or filing all applicable
conveyancing instruments described in Section 3.2(a). Buyer shall be
responsible for accounting costs related to the Closing Date Asset & Liability
Statement.
ARTICLE 3
CLOSING
-------
3.1 Closing. The Closing of the transactions contemplated herein
-------
(the "Closing") shall be held at 11:00 a.m. Columbus, Ohio time on the Closing
-------
Date at the offices of Ricketts & Onda, 300 South Second Street, Columbus, Ohio,
unless the parties hereto otherwise agree.
3.2 Conveyances at Closing.
----------------------
(a) Instruments and Possession. To effect the transfer referred to in
--------------------------
Section 2.1 hereof and the delivery of the consideration described in Section
2.2 hereof, Seller will, on the Closing Date, execute and deliver to Buyer:
(i) a warranty deed in proper form for recording and in a form
mutually acceptable to Buyer and Seller, conveying the Owned Real Estate, and
all of the items set forth in Exhibit L attached hereto;
---------
(ii) one or more bills of sale substantially in the form attached
hereto as Exhibit C, conveying in the aggregate all of the Purchased Assets;
---------
(iii) subject to Section 3.4(b), an Assignment and Assumption
Agreement in the form attached hereto as Exhibit D with respect to the
---------
assignment of all Leases and Contract Rights;
(iv) assignments of all Proprietary Rights in recordable form to
the extent necessary to assign such rights;
(v) the subleases of the properties to be subleased to Buyer as
provided herein; and
(vi) such other instruments as shall be reasonably requested by Buyer
to vest in Buyer title in and to the Purchased Assets in accordance with the
provisions hereof.
(b) Form of Instruments. All of the foregoing instruments shall be in
-------------------
form and substance, and shall be executed and delivered in a manner, reasonably
satisfactory to Buyer.
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<PAGE>
(c) Consents to Assignment. Anything in this Agreement to the
----------------------
contrary notwithstanding and subject to the provisions concerning Location
Contracts set forth in Section 3.4(b), this Agreement shall not constitute an
agreement to assign any Contract, Contract Right, license or any claim or right
or any benefit arising thereunder or resulting therefrom if an attempted
assignment thereof, without the consent of a third party thereto, would
constitute a breach thereof or in any way affect the respective rights of Buyer
or Seller thereunder. If such consent is not obtained, or if an attempted
assignment thereof would be ineffective or would affect the rights thereunder so
that Buyer would not receive all such rights, Seller will use its best efforts
to provide to Buyer the benefits under any such claim, Contract or license
including without limitation, enforcement for the benefit of Buyer (at Seller's
expense) of any and all rights of Seller against a third party thereto arising
out of the breach or cancellation by such third party or otherwise; and any
transfer or assignment to Buyer of any property or property rights or any
Contract or agreement which shall require the consent or approval of any third
party shall be made subject to such consent or approval being obtained.
3.3 Assumption Documents. Upon the terms and subject to the
--------------------
conditions contained herein, on the Closing Date Buyer shall deliver to Seller
an Assignment and Assumption Agreement substantially in the form attached hereto
as Exhibit D with respect to the Leases and Contract Rights. Such instrument
---------
shall be in form and substance, and executed in a manner, reasonably
satisfactory to Seller, but shall not increase or decrease the liabilities and
obligations required to be assumed by Buyer hereunder.
3.4 Other Deliveries at Closing. In addition to the foregoing
---------------------------
matters, at the Closing:
(a) Certificates; Opinions. Buyer and Seller shall deliver the
----------------------
certificates, opinions of counsel and other matters described in Articles 7 and
8.
(b) Location Contracts. If Seller has not obtained any required
------------------
Consents for an assignment of a Location Contract (each, a "Consent Lease") by
-------------
the Closing Date, then in lieu of assigning such Consent Lease to Buyer, Seller
may, upon receipt of Buyer's prior written consent and to the extent subletting
is permitted under the terms of such Consent Lease and applicable law, sublet
the Location covered by such Consent Lease to Buyer on the same terms and
conditions (including rental and other payments) that are contained in the
existing Consent Lease, for the balance of the term thereof less one day (the
"Sublease"). Upon expiration of the term of the Consent Lease, Seller shall use
- ---------
its best efforts to cause the Consenting Party to enter into
- 18 -
<PAGE>
the Consent Lease with Buyer and, if the Consenting Party refuses to do so,
Seller shall use its best efforts to renew such Consent Lease and then enter
into a Sublease with Buyer. In the event Seller is unable to obtain the
required Consent or enter into a Sublease with Buyer, Seller will, effective on
the Closing Date, to the extent a service agreement is permitted under the terms
of the Consent Lease and applicable law, enter into a service agreement (the
"Service Agreement"), in form and substance reasonably acceptable to Buyer,
- ------------------
whereby Buyer is appointed Seller's exclusive agent to service the Machines and
collect the revenues generated therefrom at the Location subject to the Consent
Lease for the term of the Consent Lease. Upon expiration of the term of the
Consent Lease, Seller shall use its best efforts to have the Consenting Party
enter into the Consent Lease with Buyer, and, if the Consenting Party refuses to
do so, Seller shall use its best efforts to renew such Consent Lease and then
enter into a Sublease or Service Agreement with Buyer. If Buyer is unable to
enter to enter into a Sublease or Service Agreement with Seller for such Consent
Lease, the Purchase Price shall be adjusted as contemplated by Section 2.3(a)
hereof.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Except as set forth on the Disclosure Schedule, Seller the Closes and
-------------------
SPC hereby represent and warrant to Buyer as follows:
4.1 Organization of Seller. Seller is a corporation duly organized,
----------------------
validly existing and in good standing under the laws of its jurisdiction of
incorporation, has full corporate power and authority to conduct the Business as
it is presently being conducted and is proposed to be conducted and to own and
lease the Purchased Assets. Seller is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which such
qualification is necessary or required under the applicable law as a result of
the conduct of the Business or the ownership of the Purchased Assets. Each
jurisdiction in which Seller is qualified to do business as a foreign
corporation is listed on the Disclosure Schedule.
-------------------
4.2 Authorization. Seller has all necessary corporate power and
-------------
authority and has taken all corporate action necessary to enter into the
Transaction Documents, to consummate the transactions contemplated thereby and
to perform its obligations thereunder. This Agreement and each applicable
Transaction Document has been duly authorized, executed and delivered by Seller
and is a legal, valid and binding obligation of Seller enforceable against
Seller in accordance with its terms.
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<PAGE>
4.3 Subsidiaries. The Disclosure Schedule sets forth a complete and
------------ -------------------
accurate list of all Subsidiaries of Seller, all of which are owned beneficially
and of record, directly or indirectly, by Seller. All references in this
Agreement to Seller, unless the context indicates otherwise, shall be deemed to
mean Seller and its Subsidiaries. The Disclosure Schedule also contains the
-------------------
jurisdiction of incorporation of each of the Subsidiaries, each jurisdiction in
which such Subsidiary is qualified to do business and the number of shares of
capital stock of such Subsidiary authorized, issued and outstanding. Each of
the Subsidiaries is a corporation duly organized, validly existing and in good
standing under the jurisdiction of its incorporation, with full corporate power
to own its assets and properties and to conduct its business as now being
conducted and is duly qualified and in good standing to transact business in
each jurisdiction (as listed on the Disclosure Schedule) where, by virtue of its
-------------------
business carried on or properties or assets owned, it is required to be so
qualified.
4.4 Absence of Certain Changes or Events. Since the Balance Sheet
------------------------------------
Date, there has not been any:
(a) change in Seller's condition (financial or otherwise) that could
reasonably be expected to have an Adverse Effect;
(b) (i) except for normal periodic increases in the ordinary course of
business consistent with past practices, increase in the compensation payable or
to become payable by Seller to any of its officers, employees or agents
(collectively, "Personnel"), (ii) any bonus, incentive compensation, service
---------
award or other like benefit granted, made or accrued, contingently or otherwise,
for or to the credit of any of the Personnel, (iii) any employee welfare,
pension, retirement, profit-sharing or similar payment or arrangement made or
agreed to by Seller for any Personnel except pursuant to the existing plans and
arrangements described in the Disclosure Schedule or (iv) any new employment or
-------------------
consulting agreement to which Seller is a party;
(c) addition to or modification of the employee benefit plans,
arrangements or practices described in the Disclosure Schedule affecting
-------------------
Personnel other than (i) contributions made for fiscal years 1996 and 1997 in
accordance with the normal practices of Seller or (ii) the extension of coverage
to other Personnel who became eligible after the Balance Sheet Date as set forth
in the Disclosure Schedule;
-------------------
(d) sale, assignment or transfer of any of the Purchased Assets of
Seller, material singly or in the aggregate,
- 20 -
<PAGE>
other than in the ordinary course of business and consistent with past
practices;
(e) cancellation of any indebtedness or waiver of any rights of
substantial value to Seller, whether or not in the ordinary course of business;
(f) amendment, cancellation or termination of any Contract, license or
other instrument of substantial value to the Purchased Assets, the Business or
Seller, whether or not in the ordinary course of business;
(g) capital expenditure or the execution of any Lease or any incurring
of liability therefor by Seller, outside the ordinary course of business and not
consistent with past practices, or involving payments in excess of $50,000 in
the aggregate;
(h) failure to repay any obligation of Seller;
(i) failure to operate the Business in the ordinary course and
consistent with past practices, including, without limitation, any failure to
acquire Machines on a routine basis, and to preserve the Business intact, to
keep available to Buyer the services of the Personnel, or to preserve for Buyer
the goodwill of Seller's suppliers, customers and others having business
relations with it;
(j) change in accounting methods or practices by Seller affecting its
earnings, reserves, working capital, prospects, liabilities, Business or the
Purchased Assets;
(k) revaluation by Seller of any of the Purchased Assets or
properties, including without limitation, writing off notes or accounts
receivable;
(l) damage, destruction or loss (whether or not covered by insurance)
adversely affecting the Facilities, the Purchased Assets, the Business or the
condition (financial or otherwise) or prospects of Seller;
(m) mortgage, pledge or other Encumbrance of any of the Purchased
Assets;
(n) declaration, setting aside or payment of dividends or
distributions in respect of any equity securities of Seller or any redemption,
purchase or other acquisition of any of Seller's equity securities;
(o) issuance by Seller of, or commitment of Seller to issue, any
shares of stock, obligations or securities of Seller
- 21 -
<PAGE>
convertible into or exchangeable for shares of stock or other equity securities;
(p) Indebtedness incurred by Seller for borrowed money or any
commitment to borrow money entered into by Seller, or any loans made or agreed
to be made by Seller, except as approved by Buyer prior to the incurrence
thereof;
(q) liabilities incurred not in the ordinary course of business and
consistent with past practices, or any increase or change in any assumptions
underlying or methods of calculating any bad debt, contingency or other
reserves;
(r) payment, discharge or satisfaction of any liabilities other than
the payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities reflected or reserved against in
the Balance Sheet or incurred in the ordinary course of business and consistent
with past practice since the Balance Sheet Date;
(s) activity which has resulted or may, with the passage of time or
the giving of notice or otherwise, result in the acceleration or delay of the
collection of its accounts or notes receivable or any delay in the payment of
its accounts payable, in each case as compared with its custom and practice in
the conduct of the Business immediately prior to the Balance Sheet Date;
(t) loan or advance of any of Seller's funds or other property to, or
guarantee for the benefit of, or any investment of any of its funds or other
property in, any other Person;
(u) receipt of any notice or other indication by Seller (i) from any
of its suppliers to the effect that such supplier may stop, or decrease the
rate of, supplying products or services to Seller; (ii) from any of its
customers to the effect that such customer may stop, or decrease the rate of,
buying services from Seller; or (iii) with respect to any of its significant
suppliers or customers to the effect that any of such suppliers or customers
have or are reasonably likely to experience an event or condition which may have
a material adverse effect on such suppliers or customers;
(v) other event or condition of any character which, in any one case
or in the aggregate, has, or any event or condition known to Seller (other than
matters of general public knowledge relating to general economic conditions or
Seller's industry as a whole) which could, in any one case or in the aggregate,
reasonably be expected to result in an Adverse Effect; or
- 22 -
<PAGE>
(w) agreement by Seller or its Representatives to do any of the
foregoing, as applicable.
4.5 Title to Assets, Etc.
---------------------
(a) Seller has good and marketable fee simple title to, or valid
leasehold interests in, the Purchased Assets.
(b) None of the Purchased Assets are subject to any Encumbrances
except: (i) Encumbrances disclosed in the Financial Statements, (ii)
Encumbrances for taxes not yet due and payable or being contested in good faith,
in each case, which are set forth on the Disclosure Schedule, or (iii)
-------------------
Encumbrances that are set forth on the Disclosure Schedule and could not be
-------------------
reasonably expected to have an Adverse Effect.
(c) The Purchased Assets constitute all of the assets and rights that
are necessary or desirable for the conduct of the Business. Seller has
performed all the obligations required to be performed by it with respect to all
Purchased Assets leased by it through the date hereof.
(d) Seller enjoys peaceful and undisturbed possession of all
Facilities owned or leased by it, and such Facilities are not subject to any
Encumbrances, encroachments, building or use restrictions, exceptions,
reservations or limitations which in any respect interfere with or impair the
present and continued use thereof in the usual and normal conduct of the
Business.
(e) There are no pending or threatened condemnation proceedings
relating to any of the Facilities.
(f) The real property improvements (including leasehold improvements),
equipment and other tangible assets owned or used by Seller at the Facilities
are insured generally in accordance with industry standards for the coin-
operated laundry equipment services industry and are structurally sound with no
known defects. None of said improvements, equipment and other assets are
subject to any commitment or other arrangement for their sale or use by any
Representative of Seller or third parties.
(g) The Purchased Assets of Seller shown on the Balance Sheet and
acquired after the Balance Sheet Date are valued at or below actual cost less an
adequate and proper depreciation charge. All such Purchased Assets have a fair
market or realizable value at least equal to the value thereof as reflected in
the Balance Sheet. Seller has not depreciated any of the Purchased Assets on an
accelerated basis or in any other manner inconsistent with applicable Internal
Revenue Service guidelines, if any.
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<PAGE>
4.6 Condition of Tangible Assets. Subject to ordinary wear and tear,
----------------------------
the Facilities and Fixtures and Equipment are in good operating condition and
repair, are sufficient for the operation of the Business as presently conducted
and as proposed to be conducted and are in conformity with all Legal
Requirements.
4.7 Location Contracts. The Disclosure Schedule provides an accurate
------------------ -------------------
listing of the Location Contracts as of the Closing Date, and includes the terms
of each Location Contract including: (i) the number of On-Location Machines at
each Location, (ii) the date the Location Contract was entered into and the term
and expiration date of the Location Contract, (iii) the commission arrangement
with each account, (iv) whether the Location Contract contains an automatic
renewal provision, (v) whether the Location Contract contains any rights of
first refusal provision, (vi) with respect to only the largest twenty (20)
customers of Seller, whether the Location Contracts contain a "Change of
Control" provision, and (vii) whether a Consent is required. Except as set
forth on the Disclosure Schedule, each Location Contract (x) grants Seller the
-------------------
exclusive right to install, service, maintain and operate all On-Location
Machines at the Location(s) set forth in the applicable Location Contract and
(y) allows (whether explicitly by its terms or under applicable law) Seller to
enter into a sublease with respect to such Location Contract. Except as set
forth on the Disclosure Schedule, as of the date of this Agreement, Seller is
not and no other party is in breach or violation of or default under any terms
of any of the Location Contracts, and has not received any notice, written or
oral, requesting or threatening the removal of any On-Location Machine from a
Location, (other than with respect to the termination dates set forth in the
Disclosure Schedule) or any other anticipatory breach of any Location Contract,
- -------------------
or of any foreclosure against any Location set forth in any of the Location
Contracts. In determining the termination date, Seller has not taken into
account any option to renew or likelihood of renewal of any Location Contract.
Except as set forth on the Disclosure Schedule, Seller has not received any
-------------------
written notice questioning the validity or enforceability of any Location
Contract. Seller has delivered to Buyer a copy of each of Seller's standard
forms of Location Contracts.
4.8 Contracts and Commitments. Seller is not a party to any written
-------------------------
or oral:
(a) commitment, contract, note, loan, evidence of indebtedness,
purchase order or letter of credit involving any obligation or liability on the
part of Seller of more than $50,000 and not cancelable (without liability)
within 60 days;
- 24 -
<PAGE>
(b) lease of real property other than the Location Contracts (the
Disclosure Schedule indicates, with respect to each lease listed on the
- -------------------
Disclosure Schedule, the term, annual rent, location, renewal options and number
- -------------------
of square feet leased);
(c) lease of personal property involving any annual expense in excess
of $10,000 and not cancelable (without liability) within 60 days (the Disclosure
----------
Schedule indicates, with respect to each lease listed on the Disclosure
- -------- ----------
Schedule, a general description of the leased items, term, annual rent, location
and renewal options);
(d) contracts or agreements (including confidentiality or other
similar arrangements) containing covenants limiting the freedom of Seller to
engage in any line of business or compete with any Person, or any arrangements
or agreements with competitors;
(e) employee collective bargaining agreement, employment agreement
(other than employment agreements terminable by Seller without premium or
penalty on notice of 30 days or less under which the only monetary obligation of
Seller is to make current wage or salary payments and provide current fringe
benefits), consulting, advisory or service agreement, deferred compensation
agreement, confidentiality agreement or covenant not to compete or other
contracts with Representatives of Seller;
(f) contract or agreement with any officer, director or employee
(other than employment agreements disclosed in response to clause (e) or
excluded from the scope of clause (e) above), agent, or attorney-in-fact of
Seller;
(g) compensation arrangements, bonus or benefit plans, programs or
other arrangements, including without limitation, all arrangements, policies,
plans and programs relating to retirement, disability, insurance, (including any
self-insured arrangements), severance pay, supplemental unemployment benefit,
vacation, leave of absence, equity participation, stock purchase, stock option,
stock appreciation right or any other incentive arrangement;
(h) contract pursuant to which it has advanced or loaned funds or made
any investments, or agreed to advance or loan funds to any other Person or to do
any of the foregoing;
(i) contract or indenture relating to the mortgaging, pledging, or
otherwise placing an Encumbrance on any Purchased Assets (other than any
Encumbrance which will be extinguished prior to the Closing Date);
- 25 -
<PAGE>
(j) assignment, license, indemnification or other contract with
respect to any intangible property (including any Proprietary Right); or
(k) contracts and commitments not otherwise described above or listed
in the Disclosure Schedule (including, without limitation, undertakings or
-------------------
commitments to any governmental or regulatory authority) and relating to the
Business or otherwise affecting the Business and not in the ordinary course of
business and consistent with past practices.
Seller has performed all material obligations required to be performed
by it under each Contract and is not (and, to the best knowledge of Seller, no
other party is) in breach or violation of, or default under any of the Contracts
or other instruments, obligations, evidences of indebtedness or commitments
described in (a)-(k) above, which breach, violation or default, if known, could
reasonably be expected to result in an Adverse Effect. No event has occurred
which, with the passage of time or the giving of notice (or both), would result
in a default, breach or event of noncompliance under any obligation of any
Seller pursuant to any Contract, which breach, violation or default, if known,
could reasonably be expected to result in an Adverse Effect. Seller has no
present expectation or intention of not fully performing any obligation pursuant
to any Contract. Each Contract described on the Disclosure Schedule is valid,
-------------------
binding and enforceable in accordance with its terms.
4.9 No Conflict or Violation. Neither the execution and delivery of
------------------------
the Transaction Documents nor the consummation of the transactions contemplated
thereby will result in (a) a violation of or a conflict with any provision of
the Certificate of Incorporation or Bylaws of Seller, (b) a breach or violation
of, or a default under, any term or provision of any Contract, agreement,
indebtedness, indenture, Lease, Encumbrance, commitment, license, franchise,
Permit, authorization or concession to which Seller is a party or by which any
of the Purchased Assets are bound, which breach, violation or default could
reasonably be expected to result in an Adverse Effect, (c) a violation by Seller
of any Legal Requirement, or (d) an imposition of any Encumbrance on the
Business or on any of the Purchased Assets.
4.10 Consents and Approvals. Other than the expiration of the
----------------------
applicable waiting period under the HSR Act, no Permit, consent, approval,
waiver or authorization of, or declaration, filing or registration with, any
governmental or regulatory authority, or any other Person, is required to be
made or obtained by Seller in connection with the execution, delivery and
performance of the Transaction Documents or the consummation of the transactions
contemplated thereby.
- 26 -
<PAGE>
4.11 Financial Statements. Seller shall deliver to Buyer true and
--------------------
complete copies of the Financial Statements on or prior to the Closing Date.
Except as otherwise set forth therein, the Financial Statements are in
accordance with the Books and Records of Seller, present fairly the assets,
liabilities, financial condition and results of operations and cash flows
indicated thereby in accordance with generally accepted accounting principles
consistently applied, and contain and reflect all necessary adjustments for a
fair representation of the Financial Statements as of the dates and for the
periods covered thereby.
4.12 Litigation. There is no action, order, writ, injunction,
----------
judgment or decree outstanding or claim, suit, litigation, proceeding, labor
dispute, arbitral action or investigation (collectively, "Actions") pending or,
-------
to the best of Seller's knowledge, threatened or anticipated against, relating
to or affecting (i) Seller, the Business or the Purchased Assets, (ii) any
Employee Plan of Seller or any fiduciary or administrator thereof or (iii) any
of the transactions contemplated by the Transaction Documents, which have had or
could reasonably be expected to have an Adverse Effect. Seller is not in
default with respect to any judgment, order, writ, injunction or decree of any
court or governmental agency, and there are no unsatisfied judgments against
Seller or the Business. There is not a reasonable likelihood of an adverse
determination of any pending Actions which would, individually or in the
aggregate, result in an Adverse Effect.
4.13 Labor Matters.
-------------
(a) Seller is not a party to any labor agreement with respect to its
employees with any labor organization, group or association.
(b) To the best of Seller's knowledge after due inquiry, Seller has
not experienced any attempt by organized labor or its Representatives to make
Seller conform to demands of organized labor relating to its employees or to
enter into a binding agreement with organized labor that would cover the
employees of Seller.
(c) Seller is in substantial compliance with all applicable laws
respecting employment practices, terms and conditions of employment and wages
and hours.
(d) To the best of Seller's knowledge after due inquiry, Seller has
not engaged in any unfair labor practice and there is no unfair labor practice
charge or complaint against Seller pending or threatened before the National
Labor Relations Board or any other governmental agency arising out of Seller's
- 27 -
<PAGE>
activities, and Seller has no knowledge of any facts or information which would
give rise thereto.
(e) There is no labor strike or labor disturbance pending or, to the
best of Seller's knowledge, threatened against Seller nor is any grievance
currently being asserted.
(f) Seller has not experienced a work stoppage or other labor
difficulty.
(g) Since the enactment of the Worker Adjustment and Retraining
Notification Act (the "WARN Act"), Seller has not effectuated (i) a "plant
--------
closing" (as defined in the WARN Act) affecting any site of employment of one or
more Facilities or operating units within any site of employment or Facility of
the Business; or (ii) a "mass layoff" (as defined in the WARN Act) affecting any
site of employment or one or more Facilities or operating units within any site
of employment or Facility of the Business. Seller has not been affected by any
transaction or engaged in layoffs or employment terminations with respect to the
Business sufficient in number to trigger application of any similar state or
local law. No employees of the Business have suffered an "employment loss" (as
defined in the WARN Act) within six months prior to the date hereof.
4.14 Liabilities. There are no claims, obligations (absolute,
-----------
accrued, contingent or otherwise), penalties or Encumbrances against or any
other type of liabilities relating to the Purchased Assets or which may be
imposed upon Buyer at any time as result of the events contemplated by the
Transaction Documents, and there is no successor or transferee liability
relating to the Purchased Assets.
4.15 Compliance with Law. Seller and the conduct of the Business are
-------------------
in substantial compliance with all Legal Requirements, whether federal, state or
local, and Seller has received all approvals of governmental authorities
(including certificates of occupancy and Permits) required in connection with
the Business and the ownership of the Purchased Assets. Seller has not received
any notice to the effect that, or otherwise been advised that, it is not in
compliance with any of such Legal Requirements, and Seller has no reason to
anticipate that any presently existing circumstances are likely to result in
violations of any such Legal Requirements.
The items described on the Disclosure Schedule constitute all of the
-------------------
filings, notices, licenses, consents, authorizations, accreditations, waivers,
approvals and the like of, to or with any governmental entity that are required
for the consummation of the Sale or any other transaction contemplated by the
Transaction Documents.
- 28 -
<PAGE>
4.16 No Brokers. Neither Seller nor any Representative of Seller has
----------
entered into or will enter into any contract, agreement, arrangement or
understanding with any Person which could reasonably be expected to result in
the obligation of Buyer to pay any finder's fee, brokerage commission or similar
payment in connection with the transactions contemplated by the Transaction
Documents.
4.17 No Other Agreements to Sell the Purchased Assets. Neither
------------------------------------------------
Seller, any stockholders of Seller, nor their respective Representatives have
any legal obligation, absolute or contingent, to any other Person to sell the
Business, the Purchased Assets, any shares of capital stock of Seller, to effect
any merger, consolidation or other reorganization of Seller or to enter into any
agreement with respect thereto.
4.18 Proprietary Rights. All of Seller's Proprietary Rights are
------------------
listed on the Disclosure Schedule. The Proprietary Rights listed on the
-------------------
Disclosure Schedule are all those used in the Business. Seller has all right,
- -------------------
title and interest in, or a valid and binding license to use, all Proprietary
Rights used in the conduct of the Business. Seller is not in default (or with
the giving of notice or lapse of time or both, would be in default) or in breach
of any license to use such Proprietary Rights. No Person has a right to receive
a royalty or similar payment in respect of any Proprietary Rights pursuant to
any contractual arrangements entered into by Seller, and no Person otherwise has
a right to receive a royalty or similar payment in respect of any such
Proprietary Rights. Seller has no licenses granted by or to it or no other
agreements to which it is a party, relating in whole or in part to any of the
Proprietary Rights. Seller's use of the Proprietary Rights is not infringing
upon or otherwise violating the rights of any third party in or to such
Proprietary Rights, except for such infringements or violations that do not have
and could not reasonably be expected to have an Adverse Effect, and no
proceedings have been instituted or threatened against or notices received by
Seller that are presently outstanding alleging that Seller's use of its
Proprietary Rights infringes upon or otherwise violates any rights of a third
party in or to any such Proprietary Rights.
4.19 Employee and Related Agreements; ERISA.
--------------------------------------
(a) General Definitions. For the purposes of Sections 4.19 and
-------------------
Article 11, the following definitions shall apply:
(i) "Employee Plan" shall mean each "employee benefit plan", as
-------------
defined in Section 3(3) of ERISA, that is maintained, administered or
contributed to by Seller or any of its ERISA Affiliates or to which Seller or
any of its ERISA Affiliates is or has been obligated to contribute.
- 29 -
<PAGE>
(ii) "ERISA Affiliate" shall mean any other Person which, together
---------------
with Seller, would be treated as a single employer under Section 414 of the
Code.
(iii) "Multiemployer Plans" shall mean any Employee Plan that meets
-------------------
the definition of a "multiemployer plan" in Section 3(37) of ERISA.
(iv) "Title IV Plan" shall mean any Employee Plan that is subject
-------------
to Title IV of ERISA.
(v) "Benefit Arrangement" shall mean any compensation arrangements,
-------------------
bonus or benefit plans, programs or other arrangements maintained by Seller,
including without limitation, all arrangements, policies, plans and programs
relating to retirement, disability, insurance, (including any self-insured
arrangements), severance pay, supplemental unemployment benefits, vacation,
leave of absence, equity participation, stock purchase, stock option, stock
appreciation right or any other incentive arrangements.
(b) No claims, obligations (absolute, accrued, contingent or
otherwise), penalties, Taxes, Encumbrances or any other type of liabilities
relating to any Employee Plan or Benefits Arrangement are attributable to the
Purchased Assets.
(c) No claims, obligations (absolute, accrued, contingent or
otherwise), penalties, Taxes, Encumbrances or any other type of liabilities
relating to any Employee Plan or Benefits Arrangement may be imposed upon Buyer
at any time as result of the events contemplated by the Transactions Documents,
including, but not limited to, any employment of Seller's employees by Buyer on
or after the Closing Date.
(d) Except as set forth in the Disclosure Schedule with respect to
-------------------
each Employee Plan:
(i) Neither Seller nor any of its ERISA Affiliates has engaged in, or
is a successor or parent corporation to any Person that has engaged in, a
transaction described in Section 4069 of ERISA.
(ii) Neither Seller nor any of its ERISA Affiliates has incurred or
reasonably expects to incur any liability under Title IV of ERISA (including,
but not limited to liability arising in connection with any termination of any
Employee Plan covered or previously covered by Title IV of ERISA).
(iii) Neither Seller nor any of its ERISA Affiliates has incurred or
reasonably expects to incur any
- 30 -
<PAGE>
complete or partial withdrawal liability with respect to any Multiemployer Plan
and no condition exists with respect to any Multiemployer Plan which presents a
risk of complete or partial withdrawal liability under Title IV of ERISA.
(iv) Neither Seller nor any of its ERISA Affiliates has incurred any
unsatisfied contribution obligations under Section 412 of the Code nor has
liability for unpaid contributions with respect to any Employee Plan.
(v) Seller has not failed to comply with any of the health care
continuation coverage requirements or related notice requirements under Section
601, et. seq. of ERISA and Section 4980B of the Code.
(e) There is no contract, Employee Plan or Benefit Arrangement
covering any current or former employee of Seller that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to the terms of Section 280G of the Code.
(f) Except as specifically set forth in the Disclosure Schedule, no
-------------------
payment, award, bonus, severance payment or other amount under any Contract,
Employee Plan or Benefit Arrangement will be triggered as a result of the events
contemplated by the Transaction Documents.
(g) No Employee Plan or Benefit Arrangement has any restrictions
against termination or modification, either by its terms or due to any written
or oral communications by any Representative of Seller.
4.20 Transactions with Certain Persons. Neither any Representative
---------------------------------
of Seller nor any member of any such Person's immediate family is presently a
party to any transaction with Seller relating to the Business or the Purchased
Assets, including without limitation, any Contract, agreement or other
arrangement (i) providing for the furnishing of services by, (ii) providing for
the rental of real or personal property from, (iii) otherwise requiring payments
to or (iv) providing any advances or loans to, in each case, any such Person in
which any such Person has any interest (beneficial or otherwise) or investment
as a shareholder, officer, director, trustee or partner.
4.21 Tax Matters.
-----------
(a) Seller and any predecessor of Seller, if any, have paid all Taxes
due and owing by it (whether or not shown on any Tax Return) with respect to
which successor, transferee or any other liability for any Taxes could apply to
or be payable by
- 31 -
<PAGE>
Buyer as a result of the transactions contemplated by the Transaction Documents.
Seller and any predecessor of Seller, if any, have withheld and paid over, on a
timely basis, all Taxes which it is obligated to withhold from amounts paid or
owing to any employee, independent contractor, shareholder, creditor or other
third party.
(b) There are no tax liens or Encumbrances of any kind on any of the
Purchased Assets that arose in connection with any failure (or alleged failure)
to pay any Tax.
4.22 Severance Arrangements. Except with respect to Jeff Whitmer as
----------------------
set forth on the Disclosure Schedule, Seller has not entered into any severance
or similar arrangement in respect of any present or former Personnel or
Representative that could reasonably be expected to result in any obligation
(absolute or contingent) of Buyer to make any payment to any present or former
Personnel or Representative of Seller following termination of employment.
4.23 Insurance. The Disclosure Schedule contains a complete and
--------- -------------------
accurate list of all policies or binders of fire, casualty, liability, title,
worker's compensation, dram shop, liquor liability, earthquake and other forms
of insurance (showing as to each policy or binder the carrier, policy number,
coverage limits, expiration dates, annual premiums and a general description of
the type of coverage provided) maintained by Seller on the Business, Facilities,
Purchased Assets and Personnel. All of such policies are sufficient for
compliance with all Legal Requirements and of all Contracts to which Seller is a
party. Seller is not in default under any of such policies or binders, and
Seller has not failed to give any notice or to present any claim under any such
policy or binder in a due and timely fashion nor have any facts or events
occurred that necessitate the giving of notice or filing of a claim with respect
to any such policy. There are no facts upon which an insurer might be justified
in reducing coverage or increasing premiums on existing policies or binders.
There are no outstanding material unpaid claims under any such policies or
binders. Such policies and binders provide sufficient coverage for the risks
insured against, are in full force and effect on the date hereof and shall be
kept in full force and effect by Seller through the Closing Date.
4.24 Accounts Receivable. The accounts receivable reflected in the
-------------------
Balance Sheet, and all accounts receivable arising since the Balance Sheet Date,
represent bona fide claims against debtors for services performed or other
charges arising on or before the date hereof, and all the services performed
which gave rise to said accounts were performed in accordance with the
applicable Contracts or customer requirements. Said
- 32 -
<PAGE>
accounts receivable are subject to no defenses, counterclaims or rights of
setoff and are fully collectible in the ordinary course of business, consistent
with past practices, without cost to Seller in collection efforts therefor
except, in the case of accounts receivable shown on the Balance Sheet, to the
extent of the appropriate reserves set forth on the Balance Sheet.
4.25 Inventories. The values at which inventories are shown on the
-----------
Balance Sheet have been determined in accordance with the normal valuation
policy of Seller, consistently applied and in accordance with generally accepted
accounting principles. The inventories (and items of inventory acquired or
remanufactured subsequent to the Balance Sheet Date) consist only of items of
quality and quantity commercially usable and salable in the ordinary course of
business, and the present quantities of all inventories are reasonable in the
present circumstances of the Business.
4.26 Payments. Seller has not, directly or indirectly, paid or
--------
delivered any fee, commission or other sum of money or item or property, however
characterized, to any finder, agent, Representative, landlord, owner or manager
of any Facilities, government official or other party or Person, in the United
States or any other country, which is in any manner related to the Business or
the Purchased Assets, which Seller knows or should know or has reason to believe
to have been illegal under any federal, state or local laws of the United States
or any other country having jurisdiction; and Seller has at all times done
business in an open and ethical manner.
4.27 Customers and Suppliers. The Disclosure Schedule contains a
----------------------- -------------------
complete and accurate list of (i) the fifteen (15) largest customers of Seller
in terms of collected coin revenues during Seller's last fiscal year, showing
the approximate total coin revenues to Seller by each such customer during such
fiscal year; (ii) the five (5) largest suppliers of Seller in terms of Machine
and Parts purchases during Seller's last fiscal year, showing the approximate
total purchases by Seller from each such supplier during such fiscal year.
Since the Balance Sheet Date, there has been no adverse change in the business
relationship of Seller with any customer or supplier.
4.28 Compliance With Legislation Regulating Environmental Quality.
------------------------------------------------------------
(a) None of the following exists at, on, under or around any of the
Facilities:
(i) toxic wastes or other toxic or hazardous substances or
materials;
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<PAGE>
(ii) asbestos-containing materials in any form or condition;
(iii) materials or equipment containing polychlorinated
biphenyls; or
(iv) wetlands.
(b) The Facilities have been maintained in compliance with all
applicable Environmental and Safety Requirements.
(c) Seller has not received any written notice, report or other
information regarding any liabilities or potential liabilities it may have
(whether accrued, absolute, contingent, unliquidated or otherwise), including
any investigatory, remedial or corrective obligations, arising under any
Environmental and Safety Requirements.
(d) Seller has obtained and complied with, and is in compliance with,
all Permits and other authorizations that may be required pursuant to any
Environmental and Safety Requirements for the occupation of the Facilities or
the operation of the Business.
(e) No facts, events or conditions relating to any of the Purchased
Assets or the past or present Facilities or operations of the Business will
prevent, hinder or limit continued compliance with Environmental and Safety
Requirements, give rise to any investigatory, remedial or corrective obligations
pursuant to the Environmental and Safety Requirements, or give rise to any other
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise)
pursuant to Environmental and Safety Requirements, including relating to on-site
or off-site releases or threatened releases of hazardous or otherwise regulated
materials, substances or wastes, personal injury, property damage or natural
resources damage.
(f) Neither this Agreement nor the transactions contemplated by the
Transaction Documents impose any obligations for off-site investigation or
cleanup, or notification to or consent of any governmental entity or third party
pursuant to any Environmental and Safety Requirements.
(g) Seller has not expressly or by operation of law assumed or
undertaken any liability or corrective or remedial obligations of any other
Person relating to Environmental and Safety Requirements.
(h) No Encumbrance relating to any liability of the Purchased Assets,
the Business or any other Person arising under
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<PAGE>
Environmental and Safety Requirements, has attached to the Business or any
property owned, leased or operated by Seller.
4.29 Real Estate.
-----------
(a) Owned Properties.
----------------
(i) Seller has good, indefeasible and marketable title to the Owned
Real Estate and all personal property and fixtures thereon, free and clear of
all liens and Encumbrances except the Permitted Exceptions (as such term is
defined on Exhibit I attached hereto and made a part hereof).
---------
(ii) There are no pending or threatened condemnation proceedings,
lawsuits, violations of applicable law or administrative actions relating to the
Owned Real Estate or other matters affecting adversely the current use, access
to, occupancy, or value of the Owned Real Estate.
(iii) Seller has complied with and the Owned Real Estate complies with
all Legal Requirements and Environmental and Safety Requirements.
(iv) All buildings, Fee Improvements and other property on the Owned
Real Estate, including all streets, curbs, curb cuts, sidewalks, sewers and
utilities (including any necessary gas, electricity, water, sanitary and storm
sewer service) have been supplied, completed and installed, and connected and
(where appropriate) dedicated to and accepted by the local governing body.
(v) No notice from any governmental authority, insurance company or
from any board of fire underwriters or real estate association (or other body
exercising similar functions) has been received requesting the performance of
any repairs, alterations or other work or affecting the operation of the Owned
Real Estate.
(vi) The Owned Real Estate has been issued all permanent certificates
of occupancy, all licenses, Permits, authorizations and approvals required by
all governmental authorities having jurisdiction over the Owned Real Estate for
the continued use of the Owned Real Estate as used at present, which are all in
full force and effect.
(vii) Any covenants or restrictions to which the Owned Real Estate is
subject have not been violated and will not be violated by any pending or
contemplated improvement to the Owned Real Estate or use of the Owned Real
Estate.
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<PAGE>
(viii) Seller will have paid, prior to the Closing Date, all taxes
and assessments, including assessments payable in installments, which are to
become due and payable and/or a lien on the Owned Real Estate, except for Taxes
for the current year which shall be prorated at Closing, and no portion of the
Owned Real Estate is affected by existing or impending special assessments,
whether or not a lien thereon, and Seller has no knowledge of any impending
increase in real estate or personal property Taxes affecting the Owned Real
Estate.
(ix) Seller is not a "foreign person" as such term is defined in
Section 1445(f)(3) of the Code.
(x) There are no leases, subleases, licenses, concessions or other
agreements, written or oral, granting to any Person the right of use or
occupancy of any portion of the Owned Real Estate and no Person other than
Seller is in possession of the Owned Real Estate.
(xi) There are no outstanding options or rights of first refusal to
purchase or lease the Owned Real Estate or any portion thereof or interest
therein.
(xii) No air or development rights with respect to the Owned Real Estate
have been transferred or sold, and no contract to sell such air or development
rights is outstanding, other than pursuant to the terms and conditions of this
Agreement.
(xiii) No employees, agents or contractors have been hired by or
otherwise employed by Seller for the maintenance or management of the Owned Real
Estate.
(xiv) No Contracts affect or impact the Owned Real Estate in any manner
whatsoever including, without limitation, Contracts relating the operation,
management, repair, operation or improvement of the Owned Real Estate.
(xv) All appliances and the water, sewer, heating, electrical,
plumbing, air conditioning and other mechanical and electrical systems are in
good working order and are adequate in quantity and quality for normal
operations and are free from leaks. The roofs are free from leaks and are in
sound structural condition. All other structural and non-structural portions of
the Fee Improvements on the Owned Real Estate, including walls and foundations,
are in sound structural condition and do not materially vary from their intended
grade.
(xvi) The Owned Real Estate is free and clear of all visible evidence of
termites, fungus, dry rot, beetles, other wood destroying insects, pests, faulty
grade levels, shower
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<PAGE>
leaks, cellulose debris or excessive moisture conditions, or other pest
infestation or damage.
(xvii) No part of the Owned Real Estate is located in a flood plain or
flood hazard or flood prone area as delineated by the federal or state
government.
(xviii) All work performed on or materials furnished with respect to the
Owned Real Estate prior to the Closing Date have been paid for by Seller prior
to the Closing Date.
(xix) No portion of the Owned Real Estate or the building or the Fee
Improvements thereon is designated by or registered with any governmental
authority as historic or landmark buildings or any other similar designation or
registration and Seller shall not attempt to obtain or effect any such
designation or registration.
(xx) Seller represents and warrants that it did not deal with any
broker or sales agent in connection with this Agreement or the sale of the Owned
Real Estate.
(b) Leased Properties. The Disclosure Schedule lists and describes
----------------- -------------------
briefly all Real Estate that is used or occupied, but not owned, by Seller and
the leases (other than Location Contracts), subleases and agreements by which
such Real Estate is used and occupied. Except as otherwise described on such
Disclosure Schedule, with respect to each such parcel of leased Real Property:
- -------------------
(i) the leases and subleases described on the Disclosure Schedule
-------------------
constitute all of the leases, subleases and agreements under which Seller holds
any interest (other than a fee interest) in any Real Estate;
(ii) each such lease, sublease or agreement is legal, valid, binding,
enforceable and in full force and effect, and will continue to be legal, valid,
binding, enforceable and in full force and effect on identical terms after the
Closing;
(iii) Seller or any other party to any such lease, sublease or agreement
is not in breach or default thereof, and no condition or circumstance exists or
is threatened which, with notice or the lapse of time, or both, would constitute
such a breach or default or permit termination, modification or acceleration
thereof or thereunder;
(iv) no party to any such lease, sublease or agreement has repudiated
any provision thereof;
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<PAGE>
(v) there are no disputes, oral agreements or forbearance programs in
effect as to any such lease, sublease or agreement;
(vi) no such lease, sublease or agreement has been modified in any
respect, except to the extent disclosed in the Disclosure Schedule;
-------------------
(vii) Seller has not assigned, transferred, conveyed, mortgaged, deeded
in trust or encumbered any interest in any leasehold or sub-leasehold;
(viii) all buildings, Leasehold Improvements and other property thereon
are supplied with utilities and other services necessary for the Business with
respect thereto (including any necessary gas, electricity, water, sanitary and
storm sewer service);
(ix) there are no pending or threatened condemnation proceedings, or
administrative actions relating thereto or other matters affecting adversely
Seller's current use, occupan cy, or value of such parcel;
(x) each such lease, sublease and agreement may be assigned pursuant
to the terms thereof without the consent of the landlord, sublandlord or lessor
thereunder; and
(xi) other than documents described on the Disclosure Schedule, there
-------------------
are no leases, subleases, licenses, concessions, or other agreements, written or
oral, granting to any Person the right of use or occupancy of any portion of
such parcel which Seller is entitled to occupy, and no Person is in possession
of any such portion of any such parcel.
4.30 Material Misstatements Or Omissions. No representations or
-----------------------------------
warranties by Seller in the Transaction Documents, or in connection with the
transactions contemplated thereby, contain or will contain any untrue statement
of a material fact, or omit or will omit to state any fact necessary to make the
statements or facts contained therein not materially misleading. Seller has
disclosed herein all material events, conditions and facts affecting the
Business, the Sale, the Purchased Assets, the Facilities, liabilities, working
capital earnings, technology, operating results, prospects and condition
(financial or otherwise) or employee, customer or supplier relations of Seller,
or the ability of Seller to perform its obligations under the Transaction
Documents or the ability of any of Seller to conduct the Business as presently
conducted or as proposed to be conducted.
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<PAGE>
4.31 Confidentiality Agreement. Neither Seller, any Representative
-------------------------
of Seller nor any holder of any equity interests of Seller has breached any of
the agreements contained in Section 12.11 hereof.
4.32 Key Personnel. The Disclosure Schedule sets forth the number and
------------- -------------------
job category of all current employees of Seller with an annual base salary for
fiscal year ending 1995 of more than $25,000, including with respect to such
employees, their names, dates of employment, current compensation (including
sales commissions) and date and amount of last increase in compensation.
4.33 Solvency. Seller (a) owns and will own the Purchased Assets, the
--------
fair saleable value of which, on a going concern basis, is (i) greater than the
total amount of liabilities (including contingent liabilities) of Seller, and
(ii) greater than the amount that will be required to pay the probable
liabilities of Seller's then existing debts as they become due; (b) has capital
that is not unreasonably small in relation to the Business as presently
conducted; and (c) does not intend to incur and does not believe that it will
incur debts beyond its ability to pay such debts as they become due.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby represents and warrants to Seller as follows:
5.1 Organization of Buyer. Buyer is duly organized, validly existing
---------------------
and in good standing under the laws of the State of Delaware.
5.2 Authorization. Buyer has all necessary corporate power and
-------------
authority and has taken all corporate action necessary to enter into the
Transaction Documents, to consummate the transactions contemplated thereby and
to perform its obligations thereunder. This Agreement and each applicable
Transaction Document has been duly authorized, executed and delivered by Buyer
and is a legal, valid and binding obligation of Buyer, enforceable against Buyer
in accordance with its terms.
5.3 No Brokers. Neither Buyer nor any Representative of Buyer has
----------
entered into or will enter into any agreement, arrangement or understanding with
any Person which could reasonably be expected to result in the obligation of
Seller to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated by the Transaction Documents.
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<PAGE>
5.4 No Conflict or Violation. Neither the execution and delivery of
------------------------
the Transaction Documents nor the consummation of the transactions contemplated
thereby will result in (a) a breach or violation of or a conflict with any
provision of the Certificate of Incorporation or Bylaws of Buyer, (b) a breach
of, or a default under, any term or provision of any contract, agreement,
indebtedness, lease, commitment, license, franchise, Permit, authorization or
concession to which Buyer is a party, which breach or default could reasonably
be expected to result in a material adverse effect on Buyer's ability to
consummate the transactions contemplated thereby or (c) a violation by Buyer of
any statute, rule, regulation, ordinance, code, order, judgment, writ,
injunction, decree or award, which violation would be likely to result in a
material adverse effect on Buyer's ability to consummate the transactions
contemplated thereby.
5.5 Consents and Approvals. Other than the expiration of the
----------------------
applicable waiting period under the HSR Act, no consent, approval, waiver or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority, or any other Person, is required to be made or obtained
by Buyer in connection with the execution, delivery and performance of the
Transaction Documents and the consummation of the transactions contemplated
thereby, unless the failure to obtain any such consent, approval, waiver or
authorization would not be likely to result in a material adverse effect on
Buyer's ability to consummate the transactions contemplated thereby.
ARTICLE 6
COVENANTS OF SELLER AND BUYER
Seller and Buyer each covenants with the other as follows:
6.1 Maintenance of Business Prior to Closing. Seller shall continue
----------------------------------------
to carry on the Business in the ordinary course and in accordance with past
practice and will not take any action inconsistent therewith, with any Legal
Requirements or with the Sale. Without limiting the generality of the
foregoing, Seller shall (a) maintain the Purchased Assets in their current state
of repair, excepting normal wear and tear; and (b) maintain insurance covering
Purchased Assets referred to in Section 4.23 hereof.
6.2 Obstruction of Purpose. Seller shall not take any action which
----------------------
would cause or tend to cause the conditions of the obligations of the Parties to
effect the transactions contemplated hereby not to be fulfilled; including,
without limitation, taking, causing to be taken, or permitting to be taken or
suffering to exist any action, condition or event which
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<PAGE>
would cause the representations and warranties made by each of the Seller, the
Closes and SPC herein not to be true, correct and accurate as of the Closing
Date.
6.3 Investigation by Buyer; Audits. Seller shall allow Buyer during
------------------------------
regular business hours to inspect the Purchased Assets, Books and Records and
Contracts. Prior to Closing, Seller will provide to Buyer a summary reflecting
(i) all of the Location Contracts (but such summary need not include the names
of customers), (ii) the number of On-Location Machines at each Location, (iii)
the date the Location Contract was entered into and the term and expiration date
of the Location Contract, (iv) the commission arrangement with each Location
Contract, customer or account, (v) whether the Location Contract contains an
automatic renewal provision, (vi) whether the Location Contract contains any
rights of first refusal provision, (vii) with respect to only the largest twenty
(20) customers of Seller, whether the Location Contracts contain a "Change of
Control" provision, and (viii) whether a Consent is required. On or prior to
the date hereof, Seller shall have delivered to Buyer a copy of Seller's
standard forms of Location Contracts. All such information shall be provided to
Buyer in such form as such information may presently exist or be readily
available. All information provided to Buyer pursuant to this Section shall be
subject to the provisions of Section 12.11.
6.4 Consents and Best Efforts. Prior to the execution and delivery
-------------------------
of this Agreement, Buyer and Seller shall have made all filings required under
the HSR Act. In addition, as soon as practicable and subject to the provisions
of Section 3.4, Buyer and Seller, as applicable, will commence all other
reasonable action required hereunder to obtain all applicable Permits, consents,
approvals and agreements of, and to give all notices and make all filings with,
any third parties as may be necessary to allow the Sale hereunder to be
consummated by the Closing Date. Buyer and Seller, as applicable, shall (a)
apply for or obtain (i) any and all consents to transfer Permits or (ii) any and
all new Permits for continued operation of the Business, and (b) make any
improvements or alterations of any type to the Purchased Assets required in
order to transfer or obtain any such Permits, in each at the expense of Buyer
and Seller, such expenses to be shared equally by Buyer and Seller. Seller
shall cooperate in good faith with Buyer's efforts as provided in Section 11.9.
6.5 Title Matters. Buyer may obtain, at Buyer's expense, such title
-------------
searches and owner's title insurance policies or commitments as Buyer may
request, issued by a title insurer selected by Buyer, with respect to any
Leasehold Estate or Owned Real Estate.
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<PAGE>
6.6 Certain Prohibited Transactions. Seller shall not prior to the
-------------------------------
Closing date without the prior written approval of Buyer:
(a) incur any indebtedness for borrowed money, assume, guarantee,
endorse or otherwise become responsible for obligations of any other Person, or
make any loans or advances to any Person, except trade payables incurred in the
ordinary course of business and consistent with past practice;
(b) issue any shares of its capital stock or any other securities or
any securities convertible into shares of its capital stock or any other
securities;
(c) make or incur any obligation to make any distribution of assets in
kind or redemption with respect to capital stock;
(d) make any change to its Certificate of Incorporation or bylaws
except as may be necessary to consummate the transactions contemplated by the
Transaction Documents;
(e) relative to the Business, mortgage, pledge or otherwise encumber
any the Purchased Assets or sell, transfer or otherwise dispose of any of the
Purchased Assets or cancel, release or assign any indebtedness owed to it or any
claims held by it;
(f) relative to the Business, make any investment in any Person;
(g) relative to the Business, enter into or terminate any material
contract or agreement, or make any material change in any of its Leases or
Contracts; or
(h) increase compensation payable to senior management employees or
make any discretionary bonuses or promise to do any of the foregoing;
(i) enter into any transaction with any Person on terms other than
those which are on an arms-length basis;
(j) make any payments or engage in transactions with related or
affiliated parties;
(k) other than in the ordinary course of business, discharge or
satisfy any Encumbrance or Indebtedness, except those required to be discharged
or satisfied;
(l) authorize any compensation increases of any kind whatsoever for
any Personnel except for normal increases in the
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<PAGE>
ordinary course of business that, in the aggregate, do not result in a material
increase in benefits or compensation expense to Seller; or
(m) other than in the ordinary course of business, cancel or terminate
any policies of insurance with respect to the Business or any of the Seller's
insurable properties or assets.
(n) do any other act or omit to do any act, which would cause any
representation or warranty of Seller in this Agreement to be or become untrue in
any material respect.
6.7 Notification of Certain Matters. Seller shall give prompt notice
-------------------------------
to Buyer, and Buyer shall give prompt notice to Seller, of (i) the occurrence,
or failure to occur, of any event which occurrence or failure would be likely to
cause any representation or warranty contained in this Agreement to be untrue or
inaccurate in any respect any time from the date hereof to the Closing Date and
(ii) any failure of Seller or Buyer, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder. Each party shall use its best efforts to remedy any failure on
its part to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder.
6.8 No Mergers, Consolidations, Sale of Stock, Etc. From the date
-----------------------------------------------
hereof until the Closing Date, Seller shall not, directly or indirectly, through
any Representative (i) solicit, initiate or encourage the submission of
inquiries, proposals or offers from any Person relating to any acquisition or
purchase of assets of, or any equity interest in Seller or any affiliate of
Seller, or any tender or exchange offer, merger, consolidation, business
combination, recapitalization, spin-off, liquidation, dissolution or similar
transaction involving, directly or indirectly, Seller or any affiliate of Seller
(each, an "Acquisition Proposal"), (ii) participate, directly or indirectly, in
--------------------
any discussions or negotiations regarding any Acquisition Proposal or for use in
connection with any Acquisition Proposal, or (iii) otherwise cooperate in any
way with, or assist or participate in, facilitate or encourage, any effort or
attempt by any other Person to discuss, make or enter into an agreement with
respect to an Acquisition Proposal. Furthermore, Seller shall immediately
notify Buyer of any of the foregoing in writing, which writing shall describe
any such occurrence in reasonable detail and shall identify the Persons
involved.
Seller acknowledges and agrees that, upon any violation of this
Section 6.8, if, within one year of the date hereof, Seller or any of its
Representatives enters into an agreement
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<PAGE>
with respect to an Acquisition Proposal with a party other than Buyer, Seller
shall promptly pay to Buyer, by wire transfer of immediately available funds, an
amount equal to the sum of (x) the reasonable expenses incurred by Buyer in
connection with the transactions contemplated hereby, and (y) the positive
difference, if any, between the aggregate consideration to be paid pursuant to
the applicable Acquisition Proposal and the Purchase Price.
6.9 Seller's Employees.
------------------
(a) Buyer has the option, but not the obligation, to hire on the
Closing Date any employees of Seller. Any such employees actually hired by
Buyer shall hereinafter be referred to as "Transferred Employees." Salaries,
---------------------
wages and all other regular current compensation of each Transferred Employee
which is attributable to services performed by each such Transferred Employee on
or prior to the Closing Date shall be paid by Seller directly to that employee.
All other cash compensation, including, but not limited to, incentive pay,
bonuses and other payments or obligations of any kind whatsoever in the nature
of compensation, arising after the Closing Date shall be paid by Buyer directly
to the Transferred Employee entitled thereto.
(b) Prior to the Closing Date, Seller shall cause the account balances
of Transferred Employees who are participants in Seller's 401(k) Plan (the
"Seller's Plan") to become fully vested as of the Closing Date. Seller shall
- --------------
provide each Transferred Employee with an election to receive a distribution of
his or her fully vested benefit as soon as practicable after the Closing Date.
Upon Seller providing Buyer with a current determination letter from the
Internal Revenue Service confirming the tax qualified status of Seller's Plan,
the Coinmach 401(k) Plan (the "Coinmach Plan") shall, as soon as reasonably
-------------
practicable thereafter, permit Transferred Employees to roll over (including by
means of a direct rollover within the meaning of Code Section 401(a)(31)) any
distribution that any such Transferred Employee may receive or be entitled to
receive from Seller's Plan which qualifies as an "eligible rollover
distribution" as defined in Section 402(f)(2)(A) of the Code.
(c) Seller shall pay or cause to be paid all claims for health care
benefits covered by any of its health care plans which relate to claims incurred
by Transferred Employees or their dependents on or before the Closing Date,
regardless of when such claims may be filed. Buyer shall pay or cause to be
paid all claims which relate to health care claims incurred by Transferred
Employees or their dependents after the Closing Date, but only to the extent
covered under the terms and conditions of Buyer's health care benefit plan which
covers such Transferred Employees. Notwithstanding anything contained in this
Section 6.9, Buyer
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<PAGE>
shall not be responsible for any claims incurred by Transferred Employees or
their dependents on or before the Closing Date, regardless of when such claims
may be filed.
(d) Seller shall retain all responsibilities for providing all
benefits required under Part 6 of Title I of ERISA ("COBRA Benefits") to
--------------
Transferred Employees, and their qualified beneficiaries in respect of
qualifying events occurring on or before the Closing Date; Buyer shall be
responsible for providing COBRA Benefits arising in respect of Transferred
Employees for qualifying events occurring after the Closing Date.
(e) Seller shall be responsible and liable for salary, bonus, fringe
benefits, welfare benefits, pension benefits, vacation, holiday or sick pay and
other benefits or claims including severance payments and COBRA benefits
(collectively "Benefits") with respect to employees of Seller that are not hired
--------
by Buyer. Seller shall be responsible and liable for, and Buyer shall have no
obligation for any Benefits accrued by Transferred Employees on or prior to the
Closing Date and any Benefits which are attributable to services performed by
Transferred Employees on or prior to the Closing Date.
(f) Buyer shall be responsible and liable for claims arising under any
state worker's compensation or similar law in respect of Transferred Employees
which are based upon any occurrence after the Closing Date; Seller shall be
responsible and liable for such claims which are based upon occurrences on or
before the Closing Date.
ARTICLE 7
CONDITIONS TO SELLER'S OBLIGATIONS
----------------------------------
The obligations of Seller to consummate the transactions provided for
hereby are subject, in the reasonable discretion of Seller, to the satisfaction,
on or prior to the Closing Date, of each of the following conditions:
7.1 Representations, Warranties and Covenants. All representations
-----------------------------------------
and warranties of Buyer contained in this Agreement shall be true and correct in
all material respects at and as of the Closing Date, except as and to the extent
that the facts and conditions upon which such representations and warranties are
based are expressly required or permitted to be changed by the terms hereof, and
Buyer shall have performed all agreements and covenants required hereby to be
performed by it prior to or at the Closing Date. There shall be delivered to
Seller a certificate signed by the President, Chief Financial Officer or a
Senior Vice President of Buyer to the foregoing effect.
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<PAGE>
7.2 Consents. Except as provided in Sections 3.2 and 3.4, all
--------
Permits, consents, approvals and waivers from governmental authorities and other
parties necessary to permit Seller to transfer the Purchased Assets to Buyer as
contemplated hereby shall have been obtained, unless (a) the failure to obtain
any such consent, approval or waiver would not result in an Adverse Effect, or
(b) Buyer indemnifies Seller with respect thereto.
7.3 No Governmental Proceedings or Litigation. No Action by any
-----------------------------------------
governmental authority shall have been instituted or threatened which questions
the validity or legality of the transactions contemplated by the Transaction
Documents hereby and which could reasonably be expected to damage Seller
materially if the transactions contemplated thereunder are consummated.
7.4 Certificates. Buyer will furnish Seller with (a) such
------------
certificates of its officers and others to evidence compliance with the
conditions set forth in this Article 7 as may be reasonably requested by Seller
and (b) a certificate of good standing of Buyer from the Secretary of State of
the State of Delaware.
7.5 Corporate Documents. Seller shall have received from Buyer a
-------------------
copy of resolutions adopted by the board of directors of Buyer approving the
Transaction Documents and the transactions contemplated thereby, certified by
Buyer's corporate secretary.
7.6 HSR Act. The applicable waiting period, including any extension
-------
thereof, under the HSR Act shall have expired.
7.7 Investigation by Buyer. Seller shall allow Buyer during regular
----------------------
business hours to inspect the Purchased Assets, Books and Records, Leases and
Contracts. All information provided to Buyer pursuant to this Section shall be
subject to the provisions of Section 12.11.
7.8 Employment Agreements. Each of Stephen P. Close and Kimberly A.
---------------------
Close shall have entered into employment agreements with Buyer, substantially in
the forms attached as Exhibit E to the Stock Purchase Agreement.
---------
7.9 Stock Purchase Agreement. Buyer shall have entered into the
------------------------
Stock Purchase Agreement.
ARTICLE 8
CONDITIONS TO BUYER'S OBLIGATIONS
---------------------------------
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<PAGE>
The obligations of Buyer to consummate the transactions provided for
hereby are subject, in the sole and absolute discretion of Buyer, to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions:
8.1 Representations, Warranties and Covenants. All representations
-----------------------------------------
and warranties of Seller contained in this Agreement shall be true and correct
in all material respects at and as of the Closing Date, except as and to the
extent that the facts and conditions upon which such representations and
warranties are based are expressly required or permitted to be changed by the
terms hereof, and Seller shall have performed all agreements and covenants
required hereby to be performed by it prior to or at the Closing Date. There
shall be delivered to Buyer a certificate signed by the President, Chief
Financial Officer or a Senior Vice President of Seller to the foregoing effect.
8.2 Consents. Except as provided in Sections 3.2 and 3.4, all
--------
consents, approvals and waivers from third parties and governmental authorities
and other parties necessary to permit Seller to transfer the Purchased Assets to
Buyer as contemplated hereby shall have been obtained, except where the failure
to obtain any such consent, approval or waiver would not have a materially
adverse effect upon Buyer.
8.3 No Governmental Proceedings or Litigation. No Action by any
-----------------------------------------
governmental authority shall have been instituted or threatened which questions
the validity or legality of the transactions contemplated by the Transaction
Documents and which could reasonably be expected to affect the right or ability
of Buyer to own, operate or possess the Purchased Assets after the Closing Date
or to damage Buyer if the transactions contemplated thereunder are consummated.
8.4 Compliance with Legal Requirements. The consummation of the
----------------------------------
transactions contemplated by the Transaction Documents will not be prohibited by
any Legal Requirement or subject the Buyer, the Sale, the Business or the
Purchased Assets to any penalty, liability or other onerous condition arising
out of any such Legal Requirement.
8.5 Opinion of Counsel. Seller shall have delivered to Buyer an
------------------
opinion of Ricketts & Onda, counsel to Seller, dated as of the Closing Date, in
the form attached hereto as Exhibit E.
---------
8.6 Certificates. Seller will furnish Buyer with such certificates
------------
of its officers and others to evidence compliance with the conditions set forth
in this Article 8 as may be reasonably requested by Buyer, including without
limitation:
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<PAGE>
(a) a certificate of each of the Closes (without qualification as to
knowledge), and an officer's certificate of each of SPC and Seller, dated as of
the Closing Date, each certifying that the conditions specified in Sections 8.1,
8.2, 8.3 and 8.4 have been fully satisfied;
(b) certificates as to good standing (or other certificates relating
to the right to do business) of Seller from the Secretary of State of the States
of Ohio, Indiana, Kentucky, West Virginia, Pennsylvania, Tennessee and Illinois
and any other state or jurisdiction where Seller is required to be qualified to
do business; and
(c) certificate of incorporation, certified by the Secretary of State
of the State of Ohio, and by-laws of Seller, certified to be true and complete
copies hereof by the Secretary of Seller.
8.7 Material Changes. Since the Balance Sheet Date, there shall not
----------------
have been any change or any development or discovery of any material contingent
or other liability not in the Disclosure Schedule, which might result in an
-------------------
Adverse Effect.
8.8 Corporate Documents. Buyer shall have received from Seller a
-------------------
copy of resolutions adopted by the board of directors of Seller approving the
Transaction Documents and the transactions contemplated thereby, certified by
Seller's corporate secretary.
8.9 HSR Act. The applicable waiting period, including any extension
-------
thereof, under the HSR Act shall have expired.
8.10 Disclosure Schedule. Seller shall deliver to Buyer on or prior
-------------------
to the Closing Date a Disclosure Schedule (the "Closing Disclosure Schedule")
---------------------------
revised to reflect any changes in the information on the Disclosure Schedule
from the date hereof up to and including the Closing Date, which Closing
-------
Disclosure Schedule shall be made a part of this Agreement and incorporated in
- -------------------
its entirety herein by reference.
8.11 Balance Sheet and Financial Statements. Seller shall deliver to
--------------------------------------
Buyer, as soon as practicable, copies of the Closing Date Asset & Liability
Statement of Seller. The Closing Date Asset & Liability Statement need not be
audited, but shall be in accordance with generally accepted accounting
principles, consistently applied, subject to changes resulting from normal year-
end adjustments, none of which changes would if properly presented, alone or in
the aggregate, reflect matters which have had or could be expected to have an
Adverse Effect.
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<PAGE>
8.12 Investigation of Buyer; Audit. Seller shall allow Buyer during
-----------------------------
regular business hours to inspect the Purchased Assets, Books and Records and
Contracts. Buyer or its Representatives shall have conducted an audit of
Seller's Books and Records, and in Buyer's sole discretion, Buyer shall be
satisfied on the basis of such audit that the representations and warranties of
Seller made pursuant to this Agreement are accurate and complete.
8.13 Due Diligence. Buyer shall have obtained from Seller and its
-------------
Representatives, copies of any and all corporate documents, securities
agreements, purchase contracts, sales contracts, commercial loan agreements,
litigation documents, audit reports, studies, financial statements, governmental
reports, insurance policies, employment records, employee benefit plans,
Permits, applications for Permits, Proprietary Rights information, and all other
information or documents requested by Buyer and Buyer shall, upon the review
thereof, deem that such items and information fully meet Buyer's satisfaction in
Buyer's sole and absolute discretion.
8.14 Employment Agreements. Each of Stephen P. Close and Kimberly A.
---------------------
Close shall have entered into employment agreements with Buyer, substantially in
the forms attached as Exhibit E to the Stock Purchase Agreement.
---------
8.15 Escrow Agreement. Seller shall have entered into the Escrow
----------------
Agreement, dated the date hereof (the "Escrow Agreement"), among Buyer, Seller,
----------------
the Closes, National Coin Laundry Holding, Inc., National Coin Laundry, Inc.,
National Laundry Equipment Company and Key Trust Company, N.A., substantially in
the form of Exhibit K attached hereto.
---------
8.16 Owned Real Property Items. Seller shall have delivered to Buyer
-------------------------
each of the items specified on Exhibit J.
8.17 Stock Purchase Agreement. Seller shall have entered into the
------------------------
Stock Purchase Agreement.
ARTICLE 9
COVENANT NOT TO COMPETE AND CONFIDENTIALITY
-------------------------------------------
9.1 Covenant Not to Compete. For the purposes of this Section 9.1,
-----------------------
the term "Territory" shall mean the States of Ohio, Indiana, Kentucky, West
---------
Virginia, Pennsylvania and Illinois. Seller acknowledges and agrees that
Seller's reputation and goodwill are an integral part of the Business success
throughout the Territory. If Buyer is deprived of any of Seller's goodwill or
if Seller in any manner utilizes its reputation and goodwill in competition with
Buyer in the Territory, Buyer will be
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<PAGE>
deprived of the benefits it has bargained for pursuant to this Agreement. This
covenant is necessary to transfer the Business and goodwill of Seller to Buyer
effectively. Accordingly, as an inducement for Buyer to enter into this
Agreement, Seller agrees that for a period of five (5) years from and after the
Closing Date, Seller shall not, without Buyer's prior written consent, directly
or indirectly, own, manage, operate, join, control or participate in the
ownership, management, operation or control of, or be connected as a director,
officer, employee, partner, consultant or otherwise with, any Person in the
Territory, which, directly or indirectly, competes with the Business.
9.2 Confidentiality and Non-Solicitation. Seller agrees 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 Buyer. Seller agrees that
for a period of five (5) years from and after the Closing Date, it shall not and
shall not permit any of its Representatives, to, directly or indirectly, (i) in
any manner induce or attempt to induce any Personnel, customer, supplier,
licensee, landlord or other business relation of Buyer to leave or cease doing
business with Buyer or in any way interfere with the relationship between Buyer
and any Personnel, customer, supplier, licensee, landlord or other business
relation thereof or (ii) hire or solicit for employment any employee who is an
employee of the Business on or at any time within six (6) months prior to the
Closing Date. Seller agrees that such solicitation includes, without
limitation, offering any employment to any such employee commencing after the
non-solicitation period.
9.3 Validity. In the event the agreement in Sections 9.1 or 9.2
--------
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 only over the maximum 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.
9.4 Remedies. Seller acknowledges that a breach of the covenants
--------
contained in Sections 9.1 and 9.2 will cause irreparable damage to Buyer, the
exact amount of which will be difficult to ascertain, and that the remedies at
law for any such breach will be inadequate. Accordingly, Seller agrees that if
Seller breaches the covenant contained in Sections 9.1 and 9.2 in addition to
any other remedy which may be available at law or in equity, Buyer shall be
entitled to specific performance and injunctive relief, without posting bond or
other security.
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<PAGE>
ARTICLE 10
RISK OF LOSS
------------
Legal title, equitable title and risk of loss with respect to the
Purchased Assets shall not pass to the Buyer until the Purchased Assets are
transferred to Buyer on the Closing Date pursuant to the terms of this
Agreement.
ARTICLE 11
ACTIONS BY SELLER AND BUYER
---------------------------
AFTER THE CLOSING
-----------------
11.1 Books and Records. Each party agrees that it will cooperate
-----------------
with and make available to the other party, during normal business hours, all
Books and Records, information and employees (without substantial disruption of
employment) retained and remaining in existence after the Closing Date which are
necessary or useful in connection with any tax inquiry, audit, investigation or
dispute, any litigation or investigation or any other matter requiring any such
Books and Records, information or employees for any reasonable business purpose.
The party requesting any such Books and Records, information or employees shall
bear all out-of-pocket costs and expenses (including without limitation,
reasonable attorneys' fees and disbursements, but excluding reimbursement for
salaries and employee benefits) reasonably incurred in connection with providing
such Books and Records, information or employees.
11.2 Survival of Representations, Etc. All statements contained in
--------------------------------
the Disclosure Schedule or in any certificate or instrument of conveyance
-------------------
delivered by or on behalf of the Parties pursuant to the Transaction Documents
or in connection with the transactions contemplated thereby shall be deemed to
be representations and warranties by the Parties hereunder. The representations
and warranties contained in this Agreement or any instruments delivered pursuant
to this Agreement shall survive the Closing, without regard to any investigation
made by any of the Parties hereto, until (i) the expiration of the applicable
statute of limitations with respect to the representations and warranties set
forth in Sections 4.14, 4.19, 4.21, 4.26 and 4.28, and any ERISA Liabilities or
Tax Liabilities, taking into account any extensions or waivers thereof, (ii) the
first anniversary of the Closing Date, with respect to representations and
warranties set forth in Sections 4.6, 4.8, 4.11, 4.13, 4.15, 4.18, 4.22, 4.23,
4.24, 4.25, 4.27, 4.32, 5.1, 5.2, 5.3, 5.4 and 5.5 and (iii) the third
anniversary of the Closing Date, with respect to representations and warranties
set forth in Sections 4.7, 4.12, 4.20, 4.29, 4.30, 4.31 and 4.33. The
representations and warranties set forth in Sections 4.1, 4.2, 4.3, 4.4, 4.5,
4.9,
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<PAGE>
4.10, 4.16 and 4.17 shall survive the Closing, without regard to any
investigation made by any of the parties hereto. Neither a Party's
participation in the consummation of any transaction pursuant to any Transaction
Document nor any waiver of any condition to such participation (including any
condition that a representation or warranty of any other Party be true and
correct) will constitute a waiver by such participating Party of the
representations and warranties of any other Party or otherwise affect the
survival of any such representation or warranty. All covenants and agreements
of the Parties, including, without limitation, the obligations of the Parties
set forth in Articles 9, 10, 11 and 12 shall survive the Closing Date.
11.3 Indemnification.
---------------
(a) In addition to any other right or remedy available to Buyer at law
or in equity, Seller, the Closes and SPC shall, jointly and severally, indemnify
Buyer and its affiliates, stockholders, officers, directors, partners,
employees, agents, Representatives and permitted successors and assigns (collec
tively, the "Buyer's Indemnities") against, and hold each Buyer Indemnitee
-------------------
harmless from, any damage, Tax, costs, claim, liability or expense, including
without limitation, interest, penalties and reasonable attorneys' fees and
disbursements and settlement costs and expenses (collectively, "Damages"),
-------
arising out of or resulting from (i) a misrepresentation or the breach of any
warranty, covenant or agreement made by Seller, the Closes or SPC in the
Transaction Documents, (ii) any liability, obligation or commitment of any
nature (absolute, accrued, contingent or otherwise) of Seller, the Closes or SPC
or relating to (x) the Excluded Assets, or the (y) the Purchased Assets or the
operation of the Facilities, which liabilities, obligations or commitments
contemplated by this clause (y) arise out of transactions entered into or events
occurring prior to the Closing Date, (iii) any Damages arising as a result of
any audit of any of Seller's Tax Returns conducted by the Internal Revenue
Service or any other taxing authority or Seller's failure to comply with Section
11.12 hereof; and (iv) any Damages arising as a result of Seller's failure to
comply with Section 11.10 hereof. Notwithstanding the foregoing, in all cases
except for Damages arising from or in connection with the liabilities set forth
in Section 11.3(b) and (c) hereof, Seller, the Closes and SPC will not be
required to indemnify Buyer's Indemnities in respect of any Damages except to
the extent that the aggregate amount of all Damages exceeds $75,000.
(b) Notwithstanding anything to the contrary in this Agreement and in
addition to any other right or remedy available to Buyer at law or in equity,
Seller, the Closes and SPC shall, jointly and severally, indemnify Buyer's
Indemnities against, and
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<PAGE>
hold each Buyer Indemnitee harmless from any Damages arising out of, resulting
from or relating to any Employee Plan, Multiemployer Plans, Title IV Plan,
Benefit Arrangement, or any transaction relating thereto, or any other benefit
arrangement maintained at any time by (or to which contributions have been made
by) Seller, the Closes, SPC or any entity that is (or at any time has been) an
Affiliate or any liability arising from that certain Settlement Agreement, dated
April 25, 1997, between Seller and the Seller's Employee Stock Ownership Plan
acting through its Trustees (collectively, "ERISA Liabilities").
-----------------
(c) Notwithstanding anything to the contrary in this Agreement and in
addition to any other right or remedy available to Buyer at law or in equity,
Seller, the Closes and SPC shall indemnify Buyer's Indemnities against, and hold
each Buyer Indemnitee harmless from any Damages arising out of, resulting from
or relating to (i) any Tax Liabilities of Seller, (ii) failure of Seller to
comply with any wage and hours laws or law relating thereto, and (iii) the Owned
Real Estate and any and all real estate commissions, claims for such commissions
or similar fees, including attorneys' fees and expenses incurred in connection
therewith, in each case in the foregoing clauses (i), (ii) and (iii), arising
out of or relating to any period on or prior to the Closing Date.
(d) In addition to any other right or remedy available to Seller at
law or in equity, Buyer shall indemnify and hold Seller and its affiliates,
stockholders, officers, directors, partners, employees, agents, Representatives
and permitted successors and assigns (collectively, the "Seller's Indemnities")
--------------------
against, and hold each Seller's Indemnitee harmless from any Damages arising out
of a misrepresentation or the breach of any warranty, covenant or agreement of
Buyer with respect to the representations and warranties made by Buyer.
The term "Damages" as used in this Section 11.3 is not limited to
matters asserted by third parties against Seller or Buyer, but includes Damages
incurred or sustained by Seller or Buyer in the absence of third party claims.
(e) Upon the occurrence of any event that triggers indemnification
obligations under Sections 11.2(a), (b), or (c) hereof, the Parties agree that
any Damages incurred relating thereto shall be paid from the Escrowed Funds
according to the terms and conditions of the Escrow Agreement. In the event
there are no longer any Escrowed Funds or the Escrow Agreement has been
terminated, Sections 11.4 and 11.5 shall apply to the payment of any
indemnification obligations under Sections 11.3(a), (b) and (c).
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<PAGE>
11.4 Indemnification Procedures. Subject to Section 11.3(e), upon
--------------------------
any Party (the "Indemnified Party") becoming aware of a fact, condition or event
-----------------
which constitutes a misrepresentation or breach of any of the warranties,
covenants or agreements of the other Party or the incurrence of any ERISA
Liabilities or Tax Liabilities, if a claim for Damages in respect thereof is to
be made against the other Party (the "Indemnifying Party") under this Article
------------------
11, the Indemnified Party will with reasonable promptness notify the
Indemnifying Party in writing of such fact, condition or event. If such fact,
condition or event is the assertion of a claim by a third party, the
Indemnifying Party will be entitled to participate in or take charge of the
defense against such claim, provided that the Indemnifying Party and its counsel
shall:
(a) proceed with diligence and in good faith with respect thereto,
(b) enter into an agreement with the Indemnified Party (in form and
substance satisfactory to the Indemnified Party) pursuant to which the
Indemnifying Party agrees to be fully responsible (with no reservation of any
rights other than the right to be subrogated to the rights of the Indemnified
Party), for all Damages relating to such proceeding and unconditionally
guarantees the payment and performance of any liability or obligation which may
arise with respect to such proceeding or the facts giving rise to such claim for
indemnification, and
(c) furnish the Indemnified Party with evidence that the Indemnifying
Party, in the Indemnified Party's sole judgment, is and will be able to satisfy
any such liability.
11.5 Control of Defense: Exceptions, etc. Subject to Section
-------------------------------------
11.3(e), notwithstanding the provisions of paragraph 11.4: (i) the Indemnified
Party will be entitled to participate in the defense of such claim and to employ
counsel of its choice for such purpose at its own expense (provided that the
--------
Indemnifying Party will bear the reasonable fees and expenses of such separate
counsel incurred prior to the date upon which the Indemnifying Party effectively
assumes control of such defense), (ii) the Indemnifying Party will not be
entitled to assume control of the defense of such claim, and will pay the
reasonable fees and expenses of legal counsel retained by the Indemnified Party,
if:
(a) the Indemnified Party reasonably believes that an adverse
determination of such proceeding could be detrimental to or injure the
Indemnified Party's reputation or future business prospects,
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<PAGE>
(b) the Indemnified Party reasonably believes upon advice of legal
counsel that there exists or could arise a conflict of interest which, under
applicable principles of legal ethics, could prohibit a single legal counsel
from representing both the Indemnified Party and the Indemnifying Party in such
proceeding, or
(c) a court of competent jurisdiction rules that the Indemnifying
Party has failed or is failing to prosecute or defend vigorously such claim; and
(d) the Indemnifying Party must obtain the prior written consent of
the Indemnified Party (which the Indemnified Party will not unreasonably
withhold or delay) prior to entering into any settlement of such claim or
proceeding or ceasing to defend such claim or proceeding.
11.6 Other Remedies. In addition to any other remedy which may be
--------------
available at law or in equity, Buyer or Seller shall be entitled to specific
performance and injunctive relief, without posting bond or other security.
11.7 Characterization; Taxes. The Parties intend that any amount paid
-----------------------
pursuant to the provisions of this Article 11 be treated as an adjustment of the
Purchase Price prior to entering into any settlement of such claim or proceeding
or ceasing to defend such claim or proceeding. If, notwithstanding such
intention, any Tax is imposed on any Indemnified Party with respect to any
payment pursuant to this Article 11 (including this Section 11.7), then the
Indemnifying Party will reimburse the Indemnified Party for the amount of such
Tax (and any Tax in respect of any payment pursuant to this Section 11.7).
11.8 Brokers and Finders. Pursuant to the provisions of Section 11.3,
-------------------
each of Buyer and Seller shall indemnify, hold harmless and defend the other
party from the payment of any and all broker's and finder's expenses,
commissions, fees or other forms of compensation which may be due or payable
from or by the indemnifying party, or may have been earned by any third party
acting on behalf of the indemnifying party in connection with the negotiation
and execution hereof and the consummation of the transactions contemplated
hereby.
11.9 Further Assurances. On and after the Closing Date, each party
------------------
hereto will cooperate in good faith with the other and will take all appropriate
action and execute any documents, instruments or conveyances of any kind which
may be reasonably necessary or advisable to carry out any of the transactions
contemplated hereunder or under the Transaction Documents, including, without
limitation, putting Buyer in possession and operating control of the Business.
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<PAGE>
11.10 Bulk Sales. It may not be practicable to comply or attempt to
----------
comply with the procedures of the "Bulk Sales Act" or similar law of any or all
of the states in which the Purchased Assets are situated or of any other state
which may be asserted to be applicable to the transactions contemplated by the
Transaction Documents. Accordingly, to induce Buyer to waive any requirements
for compliance with any or all of such laws, Seller hereby agrees that the
indemnity provisions of Section 11.3 hereof shall apply to any Damages of Buyer
or any institution providing financing to Buyer arising out of or resulting from
the failure of Buyer or Seller to comply with any such laws or any similar law
or which may be asserted to be applicable.
11.11 Cooperation on Litigation. Seller agrees to furnish or cause
-------------------------
to be furnished promptly to Buyer, upon request, such information (including
access to Books and Records) and assistance as is necessary, in the sole
discretion of Buyer, for the preparation for or the prosecution or defense of
any suit, action, litigation or arbitration or other proceeding or investigation
against the Buyer or Seller.
11.12 Tax Matters. Seller shall pay and be responsible for all Tax
-----------
Liabilities. Seller agrees to furnish or cause to be promptly furnished, upon
request, such information (including access to Books and Records) and assistance
relating to Seller or the Business as is necessary, in the sole discretion of
Buyer, for preparation of and for the filing of any Tax Return, for the
preparation for any audit, and for the prosecution or defense of any claim, suit
or proceeding relating to any proposed adjustment.
11.13 Name Change. Within 10 days after the Closing Date, Seller
-----------
shall either (i) liquidate its assets and dissolve or, if, in its sole
discretion, it does not so liquidate and dissolve, (ii) change its corporate
name to a name which does not include (and which is not confusingly similar to
or include any derivative of) "Whitmer Vend-O-Mat Laundry Services, Inc." (the
"Name"), it being the intent of the parties hereto that from and after the
- -----
Closing, the Buyer will have the sole right as against the Seller, Seller's
Affiliates and all other persons or entities to conduct business under such Name
and that the Buyer will commence doing so, immediately after the Closing. On
and after the Closing Date, Seller agrees not to operate or conduct any business
under the Name.
11.14 Distributions and Dividends. Seller hereby agrees that all
---------------------------
distributions or dividends made to Seller's stockholders, including the holders
of Employee Stock Option Plan interests, shall be distributed to such
stockholders on a pro rata basis with such stockholders' equity interests in
Seller and
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<PAGE>
in accordance with all laws, rules and regulations governing distributions and
dividends to stockholders.
11.15 Escrow. Seller, each of the Closes and SPC hereby acknowledge
------
and agree that, on the Closing Date, funds have been placed in escrow by such
parties in an amount not less than One Million One Hundred Thousand Dollars
($1,100,000) (the "Escrowed Funds") for a period of three years from the Closing
--------------
Date pursuant to the terms and conditions of the Escrow Agreement, provided
that, in accordance with the terms and conditions of the Escrow Agreement, an
amount equal to (A) the balance of the Escrowed Funds minus (B) $550,000 may be
-----
paid to Seller on or within 5 days after the first anniversary of the Closing
Date, leaving a balance of $550,000 in the Escrowed Funds. Seller hereby
acknowledges and agrees that Seller is a party to such Escrow Agreement and that
such Escrowed Funds have been established in respect of a portion of the
indemnification obligations of Seller set forth in Section 11.3 of this
Agreement and the indemnification obligations set forth in Article 9 of the
Stock Purchase Agreement. The Escrowed Funds are to be disbursed pursuant to
and in accordance with the provisions of the Escrow Agreement. Except as
expressly provided in the Escrow Agreement, the rights and obligations of Seller
and Buyer under the Escrow Agreement shall in no way effect their respective
rights and obligations under this Agreement, including, without limitation,
their respective rights and obligations under Article 11 hereof.
ARTICLE 12
MISCELLANEOUS
-------------
12.1 Termination. If any condition precedent to Seller's obligations
-----------
hereunder is not satisfied and such condition is not waived by Seller at or
prior to the Closing Date, or if any condition precedent to Buyer's obligations
hereunder is not satisfied and such condition is not waived by Buyer at or prior
to the Closing Date, Seller or Buyer, as the case may be, may terminate this
Agreement at its option by notice to the other party. In the event of the
termination of this Agreement by either party as above provided, neither party
shall have any liability hereunder of any nature whatsoever (other than pursuant
to Section 12.11 below) to the other party, including any liability for damages,
unless either party is in default under any of its obligations hereunder, in
which event the party in default shall be liable to the other party for such
default. In the event that a condition precedent to its obligations is not
satisfied, nothing contained herein shall be deemed to require any party to
terminate this Agreement, rather than to waive such condition precedent and
proceed with the Closing. This Agreement shall terminate automatically if the
Closing Date has not occurred on or prior to July 31, 1997.
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<PAGE>
12.2 Assignment. Except with respect to any assignment by Buyer
----------
required by or in connection with any financing related to the transactions
contemplated hereby, this Agreement may not be assigned by any party hereto
without the prior written consent of the other parties. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, and no other Person
shall have any right, benefit or obligation hereunder.
12.3 Notices; Transfer of Funds. Unless otherwise provided herein,
--------------------------
any notice, request, instruction or other document to be given hereunder by
either party to the other shall be in writing and delivered personally or mailed
by certified mail, postage prepaid, return receipt requested or by a nationally
recognized overnight courier or by facsimile, as follows:
If to Seller, addressed to:
990 West Third Avenue
Columbus, Ohio 43212
Attention: Mr. Kimberly A. Close
Mr. Stephen P. Close
Telephone: (614) 294-0222
Facsimile: (614) 294-2404
With a copy to:
Ricketts & Onda
300 South Second Street
Columbus, Ohio 43215
Attention: Robert Onda, Esq.
Telephone: (614) 229-4100
Facsimile: (614) 229-4111
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<PAGE>
If to Buyer, addressed to:
Coinmach Corporation
521 East Morehead
Suite 590
Charlotte, North Carolina 28202
Attention: Mr. Stephen R. Kerrigan
Telephone: (704) 333-8702
Facsimile: (704) 375-8986
With copies to:
Coinmach Corporation
55 Lumber Road
Roslyn, New York 11576
Attention: Mr. Robert M. Doyle
Telephone: (516) 484-2300
Facsimile: (516) 484-1812
Anderson Kill & Olick, P.C.
1251 Avenue of the Americas
New York, New York 10020-1182
Attention: Ronald S. Brody, Esq.
Telephone: (212) 278-1258
Facsimile: (212) 278-1733
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
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, (iii) if delivered by mail in the manner described above to
the address as provided in this Section, be deemed given upon receipt, and (iv)
if delivered by nationally recognized overnight courier, be deemed given the
next day after delivery, (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).
Payments to be made to Seller hereunder shall be made by wire
transferred funds to be delivered to Seller in accordance with the instructions
set forth in Exhibit F or to such other account or place as Seller may designate
---------
by written notice as provided herein. Payments to be made to Buyer hereunder
shall be made by wire transferred funds to be delivered to Buyer in accordance
with the instructions set forth in Exhibit F or to such other account or place
---------
as Buyer may designate by written notice as provided herein.
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<PAGE>
12.4 Choice of Law; Venue; Service of Process. This Agreement shall
----------------------------------------
be construed, interpreted and the rights of the Parties determined in accordance
with the laws of the State of Delaware, without regard to principles of
conflicts of laws, except with respect to matters of law concerning the internal
corporate affairs of any corporate entity which is a party to or the subject of
this Agreement, and as to those matters the law of the jurisdiction under which
the respective entity derives its powers shall govern. Seller irrevocably
agrees that any legal action or proceeding arising out of or in connection with
the Transaction Documents, or the transactions contemplated thereby, shall be
brought in the United States District Court in the State of Delaware. Any and
all service of process and any other notice in any such action, suit or
proceeding shall be effective against any Party if given personally or by
registered or certified mail, return receipt requested, or by any other means of
mail that requires a signed receipt, postage prepaid, mailed to such Party as
herein provided.
12.5 Entire Agreement; Amendments and Waivers. This Agreement,
----------------------------------------
together with all exhibits and schedules hereto, constitutes the entire
agreement between the Parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties. No supplement, modification or waiver
of this Agreement shall be binding unless executed in writing by the Party or
Parties to be bound thereby. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
12.6 Multiple Counterparts. This Agreement may be executed in one or
---------------------
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.7 Expenses. Except as set forth below or as otherwise specified
--------
herein, each Party hereto shall pay its own legal, accounting, out-of-pocket and
other expenses incident to the negotiation, preparation, execution and
performance of the Transaction Documents and to any action taken by such Party
in preparation for carrying the Transaction Documents into effect.
12.8 Invalidity. In the event that any one or more of the provisions
----------
contained in this Agreement or in any other Transaction Document shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, then to
the maximum extent permitted by law, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement or any
other such instrument.
- 60 -
<PAGE>
12.9 Titles. The titles, captions or headings of the Articles and
------
Sections contained herein are inserted for convenience of reference only and are
not intended to be a part of or to affect the meaning or interpretation of this
Agreement.
12.10 Publicity. Unless required to do so by applicable law or legal
---------
process, neither Party shall issue any press release or similar publicity or
make any public statement regarding the Transaction Documents or the
transactions contemplated thereby without the prior written approval of the
other Party. The Parties hereto shall issue a mutually acceptable press release
as soon as practicable after the Closing Date. If either Party is required by
law or legal process to make any public statement regarding the Transaction
Documents or the transactions contemplated by the Transaction Documents, it must
first provide to the other Party the content of the proposed public statement,
the reasons that such disclosure is required by law or legal process, and the
time and place that the public statement will be made, in each case to the
extent permitted by law or legal process or to the extent reasonably
practicable. Notwithstanding the foregoing, it is acknowledged and agreed
between the Parties that Buyer is a reporting company under the Securities
Exchange Act of 1934 and, as such, is subject to the reporting requirements
thereunder. Accordingly, no agreement contained herein shall prevent Buyer from
complying with any such requirements in any manner Buyer deems appropriate.
12.11 Confidential Information. (a) The Parties acknowledge that the
------------------------
transactions contemplated by this Agreement are of a confidential nature and,
subject to the agreements contained in Section 12.10 hereof, each Party agrees
to keep this Agreement strictly confidential and each Party agrees that it will
not, without the prior written consent of the other Party, make any public
comment, statement, or communication or otherwise disclose or permit any
disclosure with respect to, or regarding the transactions contemplated hereby,
including but not limited to the existence of this Agreement, except to their
respective Representatives, or as required by applicable law or legal process,
until such time as the Parties make a public announcement regarding the
transaction as provided in Section 12.10. Neither Seller nor Buyer at any time
shall make any public disclosure of the specific terms, conditions or other
aspects of this Agreement, except as required by applicable law or legal
process.
(b) Each Party acknowledges that, in connection with the negotiation
of the Transaction Documents and the preparation for the consummation of the
transactions contemplated thereby, it will have access to confidential
information relating to the other Party. The Parties agree that they will treat
as confidential, will not duplicate (except to their respective
- 61 -
<PAGE>
Representatives in connection with the transactions contemplated by the
Transaction Documents) or use, and will maintain the confidentiality of (and
will use its best efforts to cause the Representatives of such Party to maintain
the confidentiality of), any written, oral, or other information obtained from
the other Party in connection with the Transaction Documents or the transactions
contemplated thereby, unless (a) such information is already known to such Party
or to others not bound by a duty of confidentiality or such information becomes
publicly available through no fault of such Party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the transactions
contemplated by the Transaction Documents, or (c) the furnishing or use of such
information is required by applicable law or legal process. In the event of the
termination of this Agreement for any reason whatsoever, each Party shall return
to the other all documents, work papers and other material (including all copies
thereof) obtained in connection with the transactions contemplated hereby and
will keep confidential (and will so instruct its Representatives and others who
have had access to confidential information) and will not use any such
information, unless such information is now, or is hereafter, disclosed through
no act or omission of such Party, in any manner making it available to the
general public.
(c) To the extent either Party is required by applicable law or legal
process to make any disclosure of the Transaction Documents, the transactions
contemplated by the Transaction Documents or any confidential information, it
must, to the extent reasonable practicable, first provide to the other Party in
writing the content of the proposed disclosure, the reasons that such disclosure
is required by law or legal process, and the time and place that the disclosure
will be made, in each case to the extent reasonably practicable and as permitted
by law or legal process.
12.12 Remedies. No failure to exercise, and no delay in exercising,
--------
any right, remedy, power or privilege under this Agreement by any Party will
operate as a waiver of such right, remedy, power or privilege, nor will any
single or partial exercise of any right, remedy, power or privilege under this
Agreement preclude any other or further exercise of such right, remedy, power or
privilege or the exercise of any other right, remedy, power or privilege. The
rights, remedies, powers and privileges provided pursuant to this Agreement are
cumulative and not exhaustive of any other rights, remedies, powers and
privileges which may be provided by law.
[SIGNATURE PAGE FOLLOWS]
- 62 -
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly
executed on their respective behalf, by their respective officers thereunto duly
authorized, all as of the day and year first above written.
WHITMER VEND-O-MAT LAUNDRY SERVICES, INC.
By: __________________________
Name:
Title:
______________________________
Stephen P. Close
______________________________
Kimberly A. Close
______________________________
Ruth D. Close
ALVIN D. CLOSE TRUST
By: __________________________
Kimberly A. Close, trustee
By: _________________________
Stephen P. Close, trustee
By: _________________________
Ruth D. Close, trustee
- 63 -
<PAGE>
SPC MANAGEMENT, INC.
By: __________________________
Name:
Title:
COINMACH CORPORATION
By: __________________________
Name:
Title:
- 64 -
<PAGE>
EXHIBIT A
FINANCIAL STATEMENTS AND BALANCE SHEET
--------------------------------------
A-1
<PAGE>
EXHIBIT B
ALLOCATION OF PURCHASE PRICE
----------------------------
Purchased Assets:
Motor Vehicles
Accounts receivable and refunds or deposits
Cash or cash equivalents
Contract Rights, including the Location
Contracts
Owned Real Estate
Leasehold Estates
Leasehold Improvements
Fee Improvements
Fixtures and Equipment
Facilities
Proprietary Rights
Sub-Total: _________
Covenant Not to Compete $500,000
_________
TOTAL:
=========
B-1
<PAGE>
EXHIBIT C
BILL OF SALE
------------
For good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, Whitmer Vend-O-Mat Laundry Services, Inc., an Indiana
corporation (the "Seller"), does hereby grant, bargain, transfer, sell, assign,
------
convey and deliver to Coinmach Corporation, a Delaware corporation ("Buyer"),
-----
all of Seller's right, title and interest in and to all of the Purchased Assets
as defined in that certain Asset Purchase Agreement, dated as of even date
herewith, by and among Seller, Buyer, Stephen P. Close, Kimberly A. Close, Ruth
D. Close, Kimberly A. Close, Ruth D. Close and Stephen P. Close as Trustees of
the Alvin D. Close Trust and SPC Management, Inc. (the "Asset Purchase
--------------
Agreement").
This Bill of Sale is being executed and delivered by Seller as of the
date set forth below pursuant to the terms of the Asset Purchase Agreement.
IN WITNESS WHEREOF, Seller has cause this Bill of Sale to be executed
in its name by a duly authorized officer as of this ____ day of _________, 1997.
WHITMER VEND-O-MAT LAUNDRY SERVICES, INC.
By __________________________
Its__________________________
C-1
<PAGE>
STATE OF _____________ )
) ss.
COUNTY OF ____________ )
On _________ __, 1997, before me, the undersigned, a Notary Public in
and for said County and State, personally appeared ____________, known to me to
be the ______________ of Whitmer Vend-O-Mat Laundry Services, Inc. that executed
the within instrument, and known to me to be the person who executed the within
instrument on behalf of such corporation therein named, and acknowledged to me
that, acting on behalf of such corporation, he executed the same.
WITNESS my hand and official seal.
______________________________
Notary Public in and for said
County and State
C-2
<PAGE>
EXHIBIT D
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (the "Agreement"), dated as
---------
of July ___, 1997, by and between Coinmach Corporation, a Delaware corporation
("Assignee"), and Whitmer Vend-O-Mat Laundry Services, Inc., an Indiana
--------
corporation (the "Assignor").
--------
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to such terms in the Asset Purchase Agreement, dated the date
hereof, among Assignor, Assignee, Stephen P. Close, Kimberly A. Close, Ruth D.
Close, Kimberly A. Close, Ruth D. Close and Stephen P. Close as Trustees of the
Alvin D. Close Trust and SPC Management, Inc. (the "Asset Purchase Agreement").
------------------------
RECITALS
Assignor and Assignee are parties to the Asset Purchase Agreement
pursuant to which Assignor has executed and delivered to Assignee a Bill of Sale
under which Assignor has transferred and conveyed and assigned its interest in
certain assets identified therein to Assignee (the "Purchased Assets").
----------------
In partial consideration for the transfer of the Purchased Assets,
Assignee agreed to assume various obligations of Assignor relating to the
Purchased Assets, as more fully set forth in the Asset Purchase Agreement (the
"Assumed Liabilities").
- --------------------
__________________________
AGREEMENT
In consideration of the mutual representations, warranties and
covenants set forth in this Agreement and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
D-1
<PAGE>
1. Assignment and Assumption. Assignor hereby sells, conveys,
-------------------------
transfers and assigns to Assignee all of Assignor's right, title and interest
in, to and under the Contract Rights, included within the Purchased Assets, and
the Leases. Assignee hereby does assume and agree to discharge the liabilities
and obligations of the Assumed Liabilities to the extent provided by and subject
to the terms and conditions of the Asset Purchase Agreement; provided, however,
that Assignee shall assume the Assumed Liabilities only to the extent they arise
after the Closing Date. Except as expressly assumed herein or in the Asset
Purchase Agreement, Assignee does not assume and shall not in any manner be
responsible for any liability (including any contingent liability), obligation
or Encumbrance of Assignor. This Assignment and Assumption Agreement is
executed pursuant to the Asset Purchase Agreement, the terms of which are
expressly incorporated herein by this reference and does not expand, diminish or
revise the terms of the Asset Purchase Agreement.
2. Binding upon Successors. This Agreement shall be binding upon the
-----------------------
heirs, executors, administrators, successors and assigns of the parties hereto.
3. Governing Law. This Agreement shall be construed according to the
-------------
laws of the State of New York (without regard to any conflicts of laws
provisions thereof) applicable to contracts made and performed in New York.
4. Counterpart Execution. 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.
D-2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized representatives as of the day and year
first above written.
COINMACH CORPORATION
By:_____________________________
Name:
Title:
WHITMER VEND-O-MAT LAUNDRY SERVICES, INC.
By:_____________________________
Name:
Title:
D-3
<PAGE>
EXHIBIT E
FORM OF OPINION OF SELLER'S COUNSEL
-----------------------------------
E-1
<PAGE>
EXHIBIT F
WIRE TRANSFER INSTRUCTIONS
--------------------------
F-1
<PAGE>
EXHIBIT G
EXCLUDED ASSETS
---------------
G-1
<PAGE>
EXHIBIT H
OWNED REAL ESTATE
-----------------
H-1
<PAGE>
EXHIBIT I
PERMITTED EXCEPTIONS
--------------------
I-1
<PAGE>
EXHIBIT J
CLOSING DOCUMENTS IN CONNECTION WITH THE OWNED REAL ESTATE
----------------------------------------------------------
(1) Evidence acceptable to Buyer and Stellard & Schuh, Inc. (the "Title
Company"), authorizing the consummation by Seller of the transactions
contemplated by this Agreement and the execution and delivery of documents on
behalf of Seller.
(2) All keys and combinations to all locks on Owned Real Estate and the Fee
Improvements.
(3) All plans, specifications, mechanical, electrical and plumbing layouts,
operating manuals, leasing information, purchase orders, computer disks and
tapes and other files and records in the possession of Seller and utilized in
connection with the operation and maintenance of the Owned Real Estate.
(4) Current tax bills and, if available, tax bills for each of the years of
Seller's ownership of the Owned Real Estate.
(5) An instrument assigning to Buyer any proceeding for the reduction of real
or personal property taxes assessed against any portion of the Owned Real
Estate for the fiscal year in which the Closing Date takes place. Any
refund for such year shall be prorated when received.
(6) Affidavits and certificates as to facts within the knowledge of Seller
relevant to the determination by Buyer and the Title Company as to the
condition of title or the due performance by Seller of its obligations
under this Agreement.
(7) An assignment of all warranties and guarantees relating to the Owned Real
Estate dated as of the Closing Date in a form reasonably acceptable to
Buyer together with originals of all instruments evidencing the rights
assigned.
(8) A certificate complying with the provisions of Section 1445(f)(3) of the
Code.
(9) A standard 1990 ALTA owner's form of title insurance with those
endorsements requested by Buyer insuring good and marketable title to the
Owned Real Estate free and clear from any Encumbrances.
J-1
<PAGE>
(10) Any and all documents, Books and Records, Contracts, and other information
in Seller's possession that relate to the Owned Real Estate.
J-2
<PAGE>
EXHIBIT K
ESCROW AGREEMENT
----------------
K-1
<PAGE>
EXHIBIT L
OWNED REAL PROPERTY DESCRIPTION
-------------------------------
L-1
<PAGE>
ASSET PURCHASE AGREEMENT
i
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> MAR-27-1998 MAR-27-1998
<PERIOD-START> JUN-28-1997 MAR-29-1998
<PERIOD-END> SEP-26-1997 SEP-26-1997
<CASH> 16,815 16,815
<SECURITIES> 0 0
<RECEIVABLES> 8,633 8,633
<ALLOWANCES> 0 0
<INVENTORY> 12,456 12,456
<CURRENT-ASSETS> 0 0
<PP&E> 186,913 186,913
<DEPRECIATION> 56,565 56,565
<TOTAL-ASSETS> 560,359 560,359<F1>
<CURRENT-LIABILITIES> 0 0
<BONDS> 414,905 414,905<F2>
0 0
0 0
<COMMON> 53,810 53,810
<OTHER-SE> (37,042) (37,042)
<TOTAL-LIABILITY-AND-EQUITY> 560,359 560,359<F3>
<SALES> 0 0
<TOTAL-REVENUES> 77,702 149,797
<CGS> 0 0
<TOTAL-COSTS> 52,074 100,310
<OTHER-EXPENSES> 19,935 38,042<F4>
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 11,066 21,129
<INCOME-PRETAX> (5,371) (9,684)
<INCOME-TAX> (1,105) (1,905)<F5>
<INCOME-CONTINUING> (4,266) (7,779)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,266) (7,779)<F6>
<EPS-PRIMARY> (.41) (.74)
<EPS-DILUTED> 0 0
<FN>
<F1>Includes Advance Rental Payments of $47,540, Contract Rights of $217,371,
and Goodwill of $109,027, each net of accumulated amortization, at
September 26, 1997.
<F2>Includes $196,655 of 11 3/4% senior notes and a promissary note of $15,000,
as well as debt outstanding under a credit facility of $203,250 at
September 26, 1997.
<F3>Includes Accrued Commissions of $13,065 and Accrued Interest of $10,871,
at September 26, 1997.
<F4>Other Expenses include stock based compensation charges of $545 for the
six months ended September 26, 1997.
<F5>The provision (benefit) for income taxes consists of $150 currently payable
and ($2,055) deferred, for the six months ended September 26, 1997.
<F6>In addition, EBITDA (earnings before interest, income taxes, depreciation
and amortization), before the deduction for the stock-based compensation
charge, of $46,570 was generated for the reported period. EBITDA is a
meaningful measure of a company's ability to service debt.
</FN>
</TABLE>
