<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only
(as permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Coinmach Laundry Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
<PAGE>
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3)Filing Party:
(4) Date Filed:
<PAGE>
[logo]
COINMACH LAUNDRY CORPORATION
55 Lumber Road
Roslyn, New York 11576
Dear Stockholder:
On behalf of the Board of Directors of Coinmach Laundry Corporation, I
cordially invite you to attend the Annual Meeting of Stockholders which will
be held at The Park Hotel, 2200 Rexford Road, Charlotte, North Carolina on
Wednesday, July 28, 1999 at 11:00 A.M. Eastern Standard Time.
I look forward to greeting you personally. The accompanying Proxy Statement
describes the matters to be acted on at the meeting, and I urge you to read it
carefully.
At the meeting, you will be asked to vote on the matters described in the
accompanying Notice and Annual Meeting and Proxy Statement, which include the
election of two directors, the amendment of the Third Amended and Restated
1996 Employee Stock Option Plan and the appointment of Ernst & Young LLP as
the Company's independent auditors.
It is important that your shares be represented at the meeting regardless of
the number of shares you may hold or whether or not you plan to attend in
person. In order for your vote to be counted, you must attend the meeting in
person or sign, date and return the enclosed proxy card in the envelope
provided. If you do attend the meeting and desire to vote in person, you may
do so even though you have previously sent a proxy. Whether or not you plan to
attend in person, I urge you to sign and return the enclosed proxy card
promptly.
Sincerely,
/s/ Stephen R. Kerrigan
Stephen R. Kerrigan
Chairman of the Board
and Chief Executive Officer
Roslyn, New York
June 25, 1999
<PAGE>
COINMACH LAUNDRY CORPORATION
55 Lumber Road
[logo] Roslyn, New York 11576
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held July 28, 1999
----------------
TO THE STOCKHOLDERS OF COINMACH LAUNDRY CORPORATION:
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Stockholders (the
"Annual Meeting") of Coinmach Laundry Corporation (the "Company") will be held
on Wednesday, July 28, 1999, at 11:00 A.M. Eastern Standard Time, at The Park
Hotel, 2200 Rexford Road, Charlotte, North Carolina for the following
purposes:
(1) To elect two Class III directors of the Company to serve for the term
expiring at the 2002 annual meeting of stockholders of the Company;
(2) To approve an amendment to the Third Amended and Restated 1996
Employee Stock Option Plan;
(3) To confirm the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year commencing April 1, 1999; and
(4) To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
NOTICE IS FURTHER GIVEN that the Company's Board of Directors has fixed June
10, 1999 as the record date for the determination of the stockholders entitled
to notice of, and to vote at, the Annual Meeting or any adjournments or
postponements thereof. A list of such stockholders will be available at the
time and place of the meeting and, during the ten days prior to the Annual
Meeting, at the Company's offices, located at 521 E. Morehead, Suite 590,
Charlotte, North Carolina.
If you would like to attend the Annual Meeting and your shares are held by a
broker, bank or other nominee, you must bring to the Annual Meeting a recent
brokerage or bank statement or a letter from the nominee confirming your
beneficial ownership of your shares. You must also bring a form of personal
identification. In order to vote your shares at the Annual Meeting, you must
obtain from the broker, bank or nominee a proxy issued in your name. Whether
or not you plan to attend the Annual Meeting, WE URGE YOU TO SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ACCOMPANYING POSTAGE-PAID RETURN
ENVELOPE.
The annual report of the Company on Form 10-K for the fiscal year ended
March 31, 1999 is being mailed to all stockholders of record and accompanies
the Proxy Statement to which this notice is attached.
By Order of the Board of Directors
Robert M. Doyle
Secretary
Roslyn, New York
June 25, 1999
<PAGE>
COINMACH LAUNDRY CORPORATION
55 Lumber Road
Roslyn, New York 11576
----------------
ANNUAL MEETING OF STOCKHOLDERS
July 28, 1999
----------------
PROXY STATEMENT
----------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (sometimes hereinafter referred to as the
"Board" or the "Board of Directors") and management of Coinmach Laundry
Corporation, a Delaware corporation, (the "Company") to be voted at the annual
meeting of stockholders (the "Annual Meeting"), to be held on July 28, 1999 at
11:00 A.M. Eastern Standard Time, at The Park Hotel, 2200 Rexford Road,
Charlotte, North Carolina and at any postponement or adjournment thereof, for
the purposes set forth in the accompanying Notice of Annual Meeting of
Stockholders.
This Proxy Statement and the enclosed form of proxy were first mailed to
stockholders on or about June 28, 1999.
All expenses incident to the solicitation of proxies, including the costs of
preparing, assembling and mailing the proxy solicitation materials, will be
paid by the Company. The Company has retained Corporate Investor
Communications, Inc. to assist in distributing proxies for a fee of
approximately $850, plus reimbursement of reasonable out-of-pocket expenses.
Solicitation by mail, telephone, telecopier or personally may be effected by
directors, officers and regular employees of the Company, for which they will
receive no additional compensation. Brokerage houses, banks and other
nominees, fiduciaries and custodians nominally holding shares of Common Stock
as of the Record Date (each as hereinafter defined) will be requested to
forward proxy solicitation materials to the beneficial owners of such shares,
and will be reimbursed by the Company for their reasonable out-of-pocket
expenses.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Record Date and Share Ownership
The Board of Directors has fixed the close of business on June 10, 1999 as
the record date (the "Record Date") for the determination of the stockholders
entitled to receive notice of, and to vote at, the Annual Meeting or any
adjournment or postponement thereof. The Company has two classes of common
stock outstanding: (i) Class A common stock, par value $.01 per share (the
"Common Stock"); and (ii) Class B non-voting common stock, par value $0.01 per
share (the "Non-Voting Common Stock"). Holders of record of Common Stock at
the close of business on the Record Date will be entitled to vote at the
Annual Meeting. On the Record Date, there were 12,927,459 shares of Common
Stock issued and outstanding and 240,324 shares of Non-Voting Common Stock
issued and outstanding.
Voting and Quorum
Each share of Common Stock, the only securities of the Company entitled to
vote at the Annual Meeting, will be entitled to one vote at the Annual
Meeting. Holders of Common Stock are not entitled to cumulate their votes on
any matter to be considered at the Annual Meeting. The presence at the Annual
Meeting, in person or by proxy, of the holders of a majority of the total
number of shares of Common Stock outstanding on the Record Date constitutes a
quorum for the transaction of business at the Annual Meeting. Where a quorum
is present, the
<PAGE>
vote of the holders of a majority of shares of Common Stock present in person
or represented by proxy and entitled to vote will decide any question voted
upon, and the two nominees for director receiving the highest number of votes
(i.e., a plurality) will be elected as directors. Except as described below,
if any votes are withheld, such withheld votes will be excluded entirely from
the vote and will have no effect.
Abstentions and broker non-votes (as hereinafter defined) are counted for
the purpose of determining whether a quorum is present at the Annual Meeting.
For the purpose of determining whether a proposal (except for the election of
directors) has received a majority vote, abstentions will be included in the
vote totals with the result that an abstention will have the same effect as a
negative vote. In instances where brokers are prohibited from exercising
discretionary authority for beneficial owners who have not returned a proxy
("broker non-votes"), those shares of Common Stock will not be included in the
vote totals and will have no effect on the vote.
Proxies and Revocation of Proxies
Proxies in the enclosed form are solicited by the Board of Directors in
order to provide each stockholder an opportunity to vote on all matters
scheduled to be voted upon at the Annual Meeting, whether or not the
stockholder attends in person. All proxies received pursuant to this
solicitation will be voted except as to matters where authority to vote is
specifically withheld or the holder has elected to abstain and, where a choice
is specified as to the proposal, they will be voted in accordance with such
specification. In the absence of such specific directions, properly executed
proxies will be voted "FOR" (i) the election of the nominees listed below
under "ELECTION OF DIRECTORS" as Class III directors of the Company, (ii) the
approval of an amendment to the Third Amended and Restated 1996 Employee Stock
Option Plan (the "Option Plan"), and (iii) the confirmation of the appointment
of Ernst & Young LLP as the Company's independent auditors for the current
fiscal year. Any stockholder submitting a proxy has the power to revoke the
proxy prior to its exercise. A proxy may be revoked (a) by delivering to the
Secretary of the Company at or prior to the Annual Meeting an instrument of
revocation or a duly executed proxy bearing a date or time later than the date
or time of the proxy being revoked or (b) at the Annual Meeting if the
stockholder is present and elects to vote in person. Mere attendance at the
Annual Meeting will not serve to revoke a proxy.
SECURITY OWNERSHIP OF THE COMPANY
Voting Arrangements
The Company and each of Golder, Thoma, Cressey, Rauner Fund IV, L.P.
("GTCR"), the holder of 3,008,402 shares of Common Stock (or approximately
23.3% of the outstanding Common Stock entitled to vote at the Annual Meeting),
MCS Capital, Inc., a corporation controlled by Mr. Kerrigan ("MCS"), the
holder of 329,369 shares of Common Stock (or approximately 2.5% of the
outstanding Common Stock entitled to vote at the Annual Meeting), Mitchell
Blatt, the holder of 298,845 shares of Common Stock (or approximately 2.3% of
the outstanding Common Stock entitled to vote at the Annual Meeting),
President and Fellows of Harvard College ("Harvard"), the holder of 70,273
shares of Common Stock (or approximately 0.5% of the outstanding Common Stock
entitled to vote at the Annual Meeting), and Robert M. Doyle, Michael E.
Stanky, Charles Prato, James N. Chapman, Michael Marrus, David Tulkop, Russell
Harrison, Sash A. and Mary Spencer, the holders of an aggregate of 175,104
shares of Common Stock (or approximately 1.4% of the outstanding Common Stock
entitled to vote at the Annual Meeting), are parties to a Voting Agreement,
dated July 23, 1996 (the "Voting Agreement"), pursuant to which such
stockholders agreed to vote their shares of Common Stock so that the Board of
Directors will consist of (i) two persons designated by GTCR (currently
Messrs. Rauner and Donnini), (ii) two persons who are officers, employees or
members of management of the Company and are designated by the holders of a
majority of Common Stock held by executive officers of the Company (currently
Messrs. Kerrigan and Blatt), (iii) two persons jointly designated by GTCR and
Mr. Kerrigan (currently Mr. Chapman and Dr. Laffer), and (iv) one person
designated by GTCR and approved by Mr. Kerrigan (currently Mr. Cerri).
2
<PAGE>
Beneficial Ownership of Common Stock
The following table sets forth the beneficial ownership of Common Stock as
of June 10, 1999, by (i) each director of the Company; (ii) each executive
officer of the Company named in the Summary Compensation Table set forth under
the caption "EXECUTIVE COMPENSATION" below, (iii) each person known by the
Company to own more than 5% of the outstanding shares of Common Stock; and
(iv) all directors and executive officers as a group. As of June 10, 1999,
there were 12,927,459 shares of Common Stock outstanding. No director or
executive officer of the Company owns any shares of Non-Voting Common Stock.
The Company believes that, except as otherwise stated, the beneficial holders
listed below have sole voting and investment power regarding the shares of
Common Stock beneficially owned by them.
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class/1/
---------------- -------------------- ----------
<S> <C> <C>
Golder, Thoma, Cressey, Rauner, Fund IV,
L.P. ........................................ 3,008,402 23.3%
6100 Sears Tower
Chicago, IL 60606
Strong Capital Management, Inc................ 1,609,800/2/ 12.5%
100 Heritage Reserve
Menomonee Falls, WI 53051
Prudential Insurance Company of America....... 1,268,900/3/ 9.8%
751 Broad Street
Newark, NJ 07102-3777
Robert Fleming, Inc........................... 869,519/4/ 6.7%
320 Park Avenue, 11th Floor
New York, NY 10022
Capital Guardian Trust Company................ 737,800/5/ 5.7%
333 South Hope Street, 52nd Flr.
Los Angeles, CA 90071
The Goldman Sachs Group, L.P.................. 722,600/6/ 5.6%
85 Broad Street
New York, NY 10004
Officers and Directors
Stephen R. Kerrigan........................... 605,848/7/ 4.4%
Mitchell Blatt................................ 436,845/8/ 3.3%
Robert M. Doyle............................... 184,979/9/ 1.3%
Michael E. Stanky............................. 152,563/10/ 1.1%
John E. Denson................................ 24,548/11/ *
Bruce V. Rauner............................... 3,008,402/12/ 23.3%
David A. Donnini.............................. 3,008,402/13/ 23.3%
James N. Chapman.............................. 45,066/14/ *
Arthur B. Laffer.............................. 45,000/15/ *
Stephen G. Cerri.............................. 50,500/16/ *
All Officers and Directors as a group (10
persons)..................................... 4,553,751/17/ 33.2%
</TABLE>
3
<PAGE>
- --------
* Percentage of shares beneficially owned does not exceed 1% of Common Stock
outstanding.
/1/Share percentage ownership is rounded to nearest tenth of 1% and reflects
the effect of dilution as a result of outstanding options to the extent
such options are, or within 60 days from June 10, 1999 will become,
exercisable. Shares underlying any option which was exercisable on June 10,
1999 or becomes exercisable within the 60 day period thereafter are deemed
outstanding only for purposes of computing the share ownership and share
ownership percentage of the holder of such option.
/2/Based on a report on Schedule 13G filed by Strong Capital Management, Inc.
("Strong") with the Securities and Exchange Commission ("SEC") on February
11, 1999. Strong has sole voting power as to 1,134,450 shares and sole
investment power as to 1,609,800 shares.
/3/Based on a report on Schedule 13G/A filed by Prudential Insurance Company
of America ("Prudential") with the SEC on April 9, 1999. Prudential has
sole voting power as to 478,000 shares and shared voting power as to
790,900 shares. Prudential has sole investment power as to 478,000 shares
and shared investment power as to 790,900 shares.
/4/Based on a report on Schedule 13G filed by Robert Fleming Inc. with the
SEC on February 10, 1999.
/5/Based on a report on Schedule 13G filed by Capital Guardian Trust Company
("Capital") with the SEC on February 12, 1999. Capital has sole voting
power as to 726,900 shares and sole investment power as to 737,800 shares.
Capital has disclaimed beneficial ownership of all shares pursuant to Rule
13d-4 of the Securities Exchange Act of 1934, as amended.
/6/Based on a report on Schedule 13G filed by the Goldman Sachs Group, L.P.
("Goldman Sachs") with the SEC on February 12, 1999. Goldman Sachs has
shared voting power as to 430,100 shares. Goldman Sachs has shared
investment power as to 722,600 shares.
/7/Includes shares beneficially owned by MCS, a corporation controlled by Mr.
Kerrigan. Includes shares underlying options held by MCS to purchase an
aggregate of 246,479 shares of Common Stock at an exercise price of $11.90
per share, all of which options are currently exercisable. Does not include
shares underlying options held by MCS to purchase an aggregate of 61,619
shares of Common Stock at an exercise price of $11.90 per share, none of
which options are currently exercisable nor become exercisable within the
next 60 days. Includes shares underlying options held by Mr. Kerrigan to
purchase an aggregate of (i) 20,000 shares of common stock at an exercise
price of approximately $23.05 per share and (ii) 10,000 shares of Common
Stock at an exercise price of $13.00 per share, all of which options are
currently exercisable. Does not include shares underlying options held by
Mr. Kerrigan to purchase an aggregate of (i) 30,000 shares of Common Stock
at an exercise price of approximately $23.05 per share and (ii) 40,000
shares of Common Stock at an exercise price of $13.00 per share, none of
which options are currently exercisable nor become exercisable within the
next 60 days.
/8/Includes shares underlying options to purchase an aggregate of (i) 40,000
shares of Common Stock at an exercise price of $11.90 per share, (ii)
80,000 shares of Common Stock at an exercise price of $14.00 per share,
(iii) 12,000 shares of Common Stock at an exercise price of approximately
$23.05 per share and (iv) 6,000 shares of Common Stock at an exercise price
of $13.00 per share, all of which options are currently exercisable. Does
not include shares underlying options to purchase an aggregate of 60,000
shares of Common Stock at an exercise price of $11.90 per share, (ii)
20,000 shares of Common Stock at an exercise price of $14.00 per share,
(iii) 18,000 shares of Common Stock at an exercise price of approximately
$23.05 per share and (iv) 24,000 shares of Common Stock at an exercise
price of $13.00 per share, none of which options are currently exercisable
nor become exercisable within the next 60 days.
/9/Includes shares underlying options to purchase an aggregate of (i) 97,512
shares of Common Stock at an exercise price of $11.90 per share, (ii) 8,000
shares of Common Stock at an exercise price of approximately $23.05 per
share and (iii) 4,000 shares of Common Stock at an exercise price of $13.00
per share, all of which options are currently exercisable. Does not include
shares underlying options to purchase an aggregate of (i) 74,378 shares of
Common Stock at an exercise price of $11.90 per share, (ii) 12,000 shares
of Common Stock at an exercise price of approximately $23.05 per share and
(iii) 16,000 shares of Common Stock at an exercise price of $13.00 per
share, all of which options are not currently exercisable nor become
exercisable within the next 60 days.
/10/Includes shares underlying options to purchase an aggregate of (i) 82,817
shares of Common Stock at an exercise price of $11.90 per share, (ii)
40,000 shares of Common Stock at an exercise price of $14.00 per share,
(iii) 4,000 shares of Common Stock at an exercise price of approximately
$22.31 per share and (iv) 2,000 shares of Common Stock at an exercise price
of $13.00 per share, all of which options are currently exercisable. Does
not include shares underlying options to purchase an aggregate of (i)
20,704 shares of Common Stock at an exercise price of $11.90 per share,
(ii) 10,000 shares of Common Stock at an exercise price of $14.00 per
share, (iii) 6,000 shares of Common Stock at an exercise price of
approximately $22.31 per share and (iv) 8,000 shares of Common Stock at an
exercise price of $13.00 per share, none of which options are currently
exercisable nor become exercisable within the next 60 days.
/11/Represents shares underlying options to purchase an aggregate of (i)
23,005 shares of Common Stock at an exercise price of $11.90 per share,
(ii) 2,000 shares of Common Stock at an exercise price of approximately
$22.31 per share and (iii) 2,000 shares of Common Stock at an exercise
price of $13.00 per share, all of which options are currently exercisable.
Does not include shares underlying options to purchase an aggregate of (i)
5,751 shares of Common Stock at an exercise price of $11.90 per share, (ii)
3,000 shares of Common Stock at an exercise price of approximately $22.31
per share and (iii) 8,000 shares of Common Stock at an exercise price of
$13.00 per share, none of which options are currently exercisable nor
become exercisable within the next 60 days.
/12/All such shares are held by GTCR, of which GTCR IV, L.P. ("GTCR IV"), is
the general partner. Mr. Rauner is a principal of Golder, Thoma, Cressey,
Rauner, Inc., the general partner of GTCR IV. Mr. Rauner disclaims
beneficial ownership of such shares.
/13/All such shares are held by GTCR, of which GTCR IV is the general partner.
Mr. Donnini is a principal of Golder, Thoma, Cressey, Rauner, Inc., the
general partner of GTCR IV. Mr. Donnini disclaims beneficial ownership of
such shares.
/14/Includes shares underlying options to purchase an aggregate of (i) 23,005
shares of Common Stock at an exercise price of $11.90 per share, and (ii)
12,500 shares of Common Stock at an exercise price of approximately $22.31
per share, all of which options are currently exercisable. Does not include
shares underlying options to purchase an aggregate of (i) 5,751 shares of
Common Stock at an exercise price of $11.90 per share, and (ii) 18,744
shares of Common Stock at an exercise price of approximately $22.31 per
share, none of which options are currently exercisable nor become
exercisable within the next 60 days.
4
<PAGE>
/15/Represents shares underlying options to purchase an aggregate of 45,000
shares of Common Stock at an exercise price of $14.00 per share, all of
which options are currently exercisable. Does not include shares underlying
options to purchase an aggregate of 15,000 shares of Common Stock at an
exercise price of $14.00 per share, none of which options are currently
exercisable nor become exercisable within the next 60 days.
/16/Represents shares underlying options to purchase an aggregate of 45,000
shares of Common Stock at an exercise price of $14.00 per share, all of
which options are currently exercisable. Does not include shares underlying
options to purchase an aggregate of 15,000 shares of Common Stock at an
exercise price of $14.00 per share and, none of which options are currently
exercisable nor become exercisable within the next 60 days.
/17/In calculating the shares beneficially owned by executive officers and
directors as a group, 3,008,402 shares of Common Stock owned by GTCR and
included in the beneficial ownership amounts of each of Messrs. Rauner and
Donnini are included only once. In calculating the percentage of shares
beneficially owned by executive officers and directors as a group, the
shares of Common Stock underlying all options which are currently
exercisable or become exercisable within the next 60 days are deemed
outstanding.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership and changes in ownership with
the SEC and the Nasdaq National Market. Officers, directors and ten percent
stockholders are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file.
Except as disclosed below, the Company believes, based solely on its review
of copies of such Section 16(a) forms received by it and based on written
representations from certain persons, that no other reports were required to
be filed by such person, that, during the Company's most recently completed
fiscal year, all filing requirements applicable to its officers, directors,
and ten percent stockholders were complied with. A beneficial ownership report
on Form 5 was not timely filed under Section 16(a) on behalf of Mr. Chapman
with respect to the grant of certain options, which report was subsequently
filed.
ELECTION OF DIRECTORS
The Board is divided into three classes of directors. Each class of
directors is elected to serve for a term of three years, so that the terms of
office of approximately one-third of the directors will expire each year. At
the Annual Meeting, two directors are to be elected in Class III to hold
office until the 2002 annual meeting of stockholders or until their successors
are elected and qualified. The persons designated as nominees for election as
directors in Class III are Mitchell Blatt and Bruce V. Rauner. Each of such
nominees is currently a director of the Company.
Should any one or more of these nominees become unable to serve for any
reason, or will not serve, the Board may, unless the Board by resolution
provides for a lesser number of directors, designate substitute nominees, in
which event the persons named in the enclosed proxy will vote proxies that
would otherwise be voted for all named nominees for the election of such
substitute nominee or nominees.
Certain information with respect to each of the nominees and directors
relating to principal occupations and directorships, and the approximate
number of shares of Common Stock beneficially owned by them, directly or
indirectly, has been furnished to the Company by such nominees and directors.
The Board of Directors unanimously recommends that the stockholders vote
"FOR" the proposal to elect the nominees as Class III directors of the
Company.
5
<PAGE>
<TABLE>
<CAPTION>
Name, Principal Occupation for the Past Director
Five Years, Directorships Age Since
--------------------------------------- --------- --------
<S> <C> <C>
CLASS III DIRECTOR NOMINEES FOR
TERM EXPIRING IN 2002
Mitchell Blatt. Mr. Blatt has been President and Chief Operating 47 1995
Officer of the Company since April 1996 and of Coinmach
Corporation, a wholly-owned subsidiary of the Company ("Coinmach"),
since November 1995. Mr. Blatt was the President and Chief
Operating Officer of The Coinmach Corporation ("TCC") from January
1995 to November 1995./1/ Mr. Blatt has been a director of the
Company and Coinmach since November 1995. Mr. Blatt joined TCC's
predecessor, Coinmach Industries Co., L.P. , as Vice President-
General Manager in 1982 and was Vice President and Chief Operating
Officer from 1988 to 1994.
Bruce V. Rauner. Mr. Rauner has been a director of the Company 43 1995
since April 1995. Mr. Rauner was a director of Coinmach from
November 1995 to November 1996 and a director of TCC from January
1995 to November 1995. Mr. Rauner has been a Principal and General
Partner with GTCR since 1984, where he is responsible for
originating and making new investments, monitoring portfolio
companies and recruiting and training associates. Mr. Rauner serves
as a director of Metamor Worldwide, Inc., Esquire Communications
Ltd., Lason Systems, Inc., Polymer Group, Inc., Province Healthcare
Company and AnswerThink Consulting Group, Inc.
INCUMBENT CLASS I DIRECTORS
WHOSE TERMS EXPIRE IN 2000
Stephen R. Kerrigan. Mr. Kerrigan has been Chief Executive Officer 45 1995
of the Company since April 1996 and of Coinmach since November
1995. Mr. Kerrigan was President and Treasurer of Solon Automated
Services, Inc. ("Solon") and the Company from April 1995 until
April 1996, and Chief Executive Officer of TCC from January 1995
until November 1995. Mr. Kerrigan has been a director and Chairman
of the Board of the Company since April 1995 and of Coinmach since
November 1995. Mr. Kerrigan was a director of TCC from January 1995
to November 1995 and a director of Solon from April 1995 to
November 1995. Mr. Kerrigan served as Vice President and Chief
Financial Officer of TCC's predecessor, Coinmach Industries Co.,
L.P., from 1987 to 1994.
David A. Donnini. Mr. Donnini has been a director of the Company 34 1995
since April 1995. Mr. Donnini was a director of Coinmach from
November 1995 to November 1996 and a director of TCC from January
1995 to November 1995. Mr. Donnini has been a Principal of GTCR
since 1993. From 1991 to 1993, Mr. Donnini was an Associate with
GTCR. Mr. Donnini also serves as a director of Polymer Group, Inc.
</TABLE>
- --------
/1/On.November 30, 1995, TCC merged with and into Solon (the "Merger") and
entered into a series of refinancing transactions, whereupon the surviving
corporation changed its name to "Coinmach Corporation." Coinmach Corporation
is the principal operating subsidiary of the Company.
6
<PAGE>
<TABLE>
<CAPTION>
Name, Principal Occupation for the Past Director
Five Years, Directorships Age Since
--------------------------------------- --------- --------
<S> <C> <C>
INCUMBENT CLASS III DIRECTORS
WHOSE TERMS EXPIRE IN 2001
Dr. Arthur B. Laffer. Dr. Laffer has been a director of the Company 58 1996
since September 1996. Dr. Laffer is a director of Mastec, Inc.,
Nicholas Applegate Mutual Funds, Nicholas Applegate Growth Equity
Funds, Oxigene, Inc., Neff Corporation and United States Filter
Corporation. Dr. Laffer has been Chairman and Chief Executive
Officer of Laffer Associates, an economic consulting firm, since
1979, Chief Executive Officer of Calport Asset Management, Inc., a
money management firm, since 1992 and Chief Executive Officer of
Laffer Advisors, Inc., a subsidiary of Laffer Associates, and a
registered broker-dealer and investment advisor since 1985.
Stephen G. Cerri. Mr. Cerri has been a director of the Company 63 1996
since September 1996. Mr. Cerri was Chairman and Chief Executive
Officer of Alinabal Holdings Corporation, manufacturer of electro-
mechanical and mechanical products, from November 1987 until
February 1999. He also serves as a director for three privately
held companies and has his own general business consulting firm, C4
Associates, Inc.
James N. Chapman. Mr. Chapman has been a director of the Company 37 1995
since April 1995. Mr. Chapman is presently a Vice President--
Investment Banking with The Renco Group, Inc., a private holding
company. Mr. Chapman was a Principal of Fieldstone Private Capital
Group, L.P. a financial services company, from its inception in
1990 to May 1996. Mr. Chapman was a director of Coinmach from
November 1995 to November 1996 and a director of TCC from January
1995 to November 1995.
</TABLE>
Meetings and Committees of the Board of Directors
Committees of the Board
The Board has three standing committees: (i) an Audit Committee, (ii) a
Compensation Committee, and (iii) a Plan Administration and Compensation
Committee. The Board does not have a nominating committee or a committee
performing the functions of a nominating committee.
Audit Committee. The Audit Committee is charged with recommending the
appointment of the Company's independent auditors, consulting with the
independent auditors and reviewing the results of internal audits, independent
audits, and the audit report with the independent auditors engaged by the
Company. Further, the Audit Committee is empowered to make independent
investigations and inquiries into all financial reporting or other financial
matters of the Company, as it deems necessary. The members of the Audit
Committee are Dr. Laffer and Messrs. Cerri and Chapman.
Compensation Committee. The Compensation Committee reviews and recommends to
the Board the compensation of executive officers and the adoption of any
compensation plans in which executive officers are eligible to participate.
The members of the Compensation Committee are Dr. Laffer and Messrs. Donnini
and Cerri.
Plan Administration and Compensation Committee. The Plan Administration and
Compensation Committee administers the Option Plan and reviews and recommends
to the Board the awards or grants to be made thereunder. The committee will
also administer the 1998 Employee Stock Purchase Plan. The members of the Plan
Administration and Compensation Committee are Messrs. Donnini and Rauner.
7
<PAGE>
Compensation of Directors
Management directors receive no cash remuneration for their service as
directors, other than reimbursement of reasonable travel and related expenses
for attendance at Board meetings. Beginning in the current fiscal year,
certain independent directors will receive an annual retainer of $12,500 and a
per meeting fee of $1,000. Each of Messrs. Cerri and Laffer, upon becoming
directors of the Company, were granted options to purchase 60,000 shares of
Common Stock at exercise prices equal to the fair market value of Common Stock
on the date of grant, which options vest in four equal annual installments
commencing on the date of grant. The Company paid Mr. Chapman, a director of
the Company, certain fees during the past fiscal year for general financial
advisory and investment banking services. See "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS--Management and Consulting Services."
Attendance at Board of Directors and Committee Meetings
During the fiscal year ended March 31, 1999, the Board of Directors of the
Company held three regularly scheduled meetings and three special meetings.
The Compensation Committee met or took action by unanimous written consent
twice during the past fiscal year. The Plan Administration and Compensation
Committee met or took action by unanimous written consent twice during the
past fiscal year. The Audit Committee met once during the past fiscal year.
Each director of the Company attended at least 75% of the Board and committee
meetings that such director was required to attend.
8
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth certain information regarding the executive
officers of the Company:
<TABLE>
<CAPTION>
Name Age Title
---- --- -----
<C> <C> <S>
Chairman of the Board and Chief Executive
Stephen R. Kerrigan..... 45 Officer, Director
Mitchell Blatt.......... 47 President, Chief Operating Officer, Director
Chief Financial Officer, Senior Vice President,
Robert M. Doyle......... 42 Treasurer, Secretary
John E. Denson.......... 61 Senior Vice President--Corporate Development
Michael E. Stanky....... 47 Senior Vice President
</TABLE>
For additional information regarding Messrs. Kerrigan and Blatt see
"ELECTION OF DIRECTORS" above.
Mr. Doyle has been Chief Financial Officer, Senior Vice President, Treasurer
and Secretary of the Company since April 1996 and of Coinmach since November
1995. Mr. Doyle has been a director of Coinmach since November 1995. Mr. Doyle
served as Vice President, Treasurer and Secretary of TCC from January 1995 to
November 1995. Mr. Doyle joined TCC's predecessor in 1987 as Controller. In
1988, Mr. Doyle became Director of Accounting, and was promoted in 1989 to
Vice President and Controller.
Mr. Denson has been Senior Vice President of the Company since April 1996
and of Coinmach since November 1995. Mr. Denson was Senior Vice President,
Finance of Solon from June 1987 until November 1995. Mr. Denson has served as
an officer of Solon under various titles since 1973, and served as a director
and Co-Chief Executive Officer of Solon from November 1994 to April 1995.
Mr. Stanky has been Senior Vice President of the Company since April 1996
and of Coinmach since November 1995. Mr. Stanky was a Senior Vice President of
Solon from July 1995 to November 1995. Mr. Stanky served Solon in various
capacities since 1976, and in 1985 was promoted to Area Vice President
responsible for Solon's South-Central Region. Mr. Stanky served as a Co-Chief
Executive Officer of Solon from November 1994 to April 1995.
9
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth all compensation awarded to, earned by or
paid to the Chief Executive Officer and the next four most highly compensated
executive officers of the Company (collectively, the "Named Executive
Officers") for all services rendered in all capacities for the fiscal years
ended March 28, 1997, March 31, 1998 and March 31, 1999. In March 1998, the
Company changed its fiscal year end from the 52 or 53 week period ending on
the last Friday of March to the twelve consecutive months ending March 31.
<TABLE>
<CAPTION>
Annual Long-term
Compensation Compensation
---------------------------- ------------
Common
Stock
Other Annual Underlying All other
Name and Principal Fiscal Salary Bonus Compensation Options Compensation
Position Year ($) ($) ($) (#) ($)
- ------------------ ------ ------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Stephen R.
Kerrigan 1999 350,000 400,000 121,740/1/ 50,000 2,121/10/
Chief
Executive 1998 350,000 400,000 83,870/2/ -- 1,929/10/
Officer 1997 330,841 400,000 97,161/3/ 308,098/4/ 1,875/10/
Mitchell
Blatt 1999 300,773 150,000 65,575/5/ 30,000 1,957/10/
President,
Chief 1998 268,530 280,000 62,680/6/ 100,000 2,073/10/
Operating
Officer 1997 238,942 112,000 59,693/7/ 100,000 1,875/10/
Robert M.
Doyle 1999 175,000 87,500 -- 20,000 1,190/10/
Chief
Financial 1998 169,438 175,000 -- 100,000 2,030/10/
Officer 1997 149,997 62,500 -- 71,890 1,875/10/
John E.
Denson 1999 125,500 25,000 44,068/8/ 5,000 1,359/10/
Senior Vice 1998 125,000 30,000 68,768/9/ -- 1,586/10/
President 1997 125,859 25,000 -- 28,756 1,149/10/
Michael E.
Stanky 1999 175,000 87,500 -- 10,000 1,928/10/
Senior Vice 1998 164,793 175,000 -- 153,521 2,145/10/
President 1997 150,500 37,500 -- -- 1,188/10/
</TABLE>
- --------
/1/ Includes $98,118 in forgiven indebtedness; $3,750 in interest, calculated
at a rate of 7.5% per annum on a loan made by the Company to Mr. Kerrigan;
$4,265 in automobile allowance; $14,500 in club membership; and $1,107 in
life insurance premiums paid by the Company on behalf of Mr. Kerrigan.
/2/ Includes $45,393 in forgiven indebtedness; $3,750 in interest, calculated
at a rate of 7.5% per annum on a loan made by the Company to Mr. Kerrigan;
$26,593 for reimbursement of certain out-of-pocket relocation expenses;
$3,643 in automobile allowances; $3,335 in club membership fees; and $1,156
in life insurance premiums paid by the Company on behalf of Mr. Kerrigan.
/3/ Includes $45,109 in forgiven indebtedness; $3,750 in interest, calculated
at a rate of 7.5% per annum on a loan made by the Company to Mr. Kerrigan;
$40,385 for reimbursement of certain out-of-pocket relocation expenses;
$4,554 in automobile allowances; $2,424 in club membership fees; and $939 in
life insurance premiums paid by the Company on behalf of Mr. Kerrigan.
/4/ Options are held by MCS, a corporation controlled by Mr. Kerrigan.
/5/ Includes $48,118 in forgiven indebtedness; $3,312 in automobile
allowances; $13,300 in club membership fees; and $845 in life insurance
premiums paid by the Company on behalf of Mr. Blatt.
/6/ Includes $45,393 in forgiven indebtedness; $3,687 in automobile
allowances; $12,700 in club membership fees; and $900 in life insurance
premiums paid by the Company on behalf of Mr. Blatt.
/7/ Includes $45,109 in forgiven indebtedness; $4,231 in automobile
allowances; $9,600 in club membership fees; and $733 in life insurance
premiums paid by the Company on behalf of Mr. Blatt.
/8/ Includes $20,000 in forgiven indebtedness; $1,900 in interest, calculated
at a rate of 9.5% per annum on a loan made by the Company to Mr. Denson;
$19,577 for reimbursement of certain out-of-pocket relocation expenses;
$1,525 in automobile allowances; and $1,066 in life insurance premiums paid
by the Company on behalf of Mr. Denson.
/9/ Includes $1,520 in imputed interest, calculated at a rate of 9.5% per
annum, on an interest free loan made by the Company to Mr. Denson; $48,691
for reimbursement of certain out-of-pocket relocation expenses; $796 in
automobile allowances; $984 in life insurance premiums
10
<PAGE>
paid by the Company on behalf of Mr. Denson; and $16,757 in net proceeds from
the exercise of options and sale of 2,457 underlying shares of Common Stock
in the Secondary Offering in December 1997 (equal to the difference between
the applicable exercise price of such options and the sale price of the
underlying shares of Common Stock, net of commissions).
/10/ Represents matching contributions made by the Company to the Profit
Sharing Plan.
Employment Contracts
Employment Agreements of Stephen R. Kerrigan, Mitchell Blatt and Robert M.
Doyle. On January 31, 1995, TCC and each of Stephen R. Kerrigan, Mitchell
Blatt and Robert M. Doyle (each, a "Senior Manager"), entered into Senior
Management Agreements (collectively, the "Senior Management Agreements"). In
connection with the Merger, the obligations of TCC under the Senior Management
Agreements were assumed by Coinmach and certain amendments to such agreements
were effected pursuant to the Omnibus Agreement, dated as of November 30, 1995
(the "Omnibus Agreement"). The Senior Management Agreements (after giving
effect to base salary increases thereunder) provided for annual base salaries
of $350,000, $300,000 and $175,000 for each of Messrs. Kerrigan, Blatt and
Doyle, respectively, which amounts are reviewed annually by the Board. During
the fiscal year ended March 31, 1999, the Compensation Committee approved of
annual base salaries for each of Messrs. Blatt and Doyle of $300,000 and
$175,000, respectively. The Board, in its sole discretion, may grant each
Senior Manager an annual bonus. Each Senior Management Agreement is terminable
at the will of the Senior Managers or at the discretion of the Board. Senior
Managers are entitled to severance pay upon termination of their employment.
If employment is terminated by the Company without Cause (as defined in the
Senior Management Agreements) and no event of default has occurred under any
bank credit facility to which the Company is a party, Senior Managers are
entitled to receive severance pay in an amount equal to 1.5 times their
respective annual base salaries then in effect, payable in 18 equal monthly
installments. If employment is terminated by the Company and an event of
default has occurred and is continuing under any bank credit facility to which
the Company is a party, Senior Managers are entitled to receive severance pay
in an amount equal to their respective annual base salaries then in effect,
payable in 12 equal monthly installments. Under limited circumstances, Senior
Managers are entitled to receive half of the severance pay to which they are
otherwise entitled if employment with the Company is terminated by them.
Employment Agreement of John E. Denson. The Company entered into an
employment agreement with Mr. Denson, dated as of September 5, 1996, for a
term of one year which is automatically renewable each year for successive
one-year terms. Such agreement provided for an annual base salary of $110,000,
commencing January 1, 1997, which amount is to be reviewed each December by
the Board. During the fiscal year ended March 31, 1999, the Compensation
Committee approved an annual base salary for Mr. Denson of $125,000. The Board
may, in its discretion, grant Mr. Denson a performance-based annual bonus. The
agreement is terminable at the will of Mr. Denson or at the discretion of the
Board. Under the terms of such employment agreement, Mr. Denson is entitled to
receive severance pay upon termination of employment by the Company without
Cause (as defined in such agreement) in an amount equal to the greater of
$110,000 or his annual base salary then in effect.
Employment Agreement of Michael E. Stanky. On July 1, 1995, the Company
entered into an employment agreement with Mr. Stanky which provided for an
annual base salary of $150,000. The terms and conditions of Mr. Stanky's
employment agreement are substantially similar to those contained in the
Senior Management Agreements. During the fiscal year ended March 31, 1999, the
Compensation Committee approved an annual base salary for Mr. Stanky of
$175,000.
Change in Control Arrangements--Stock Options. In the event of a "change of
control" of the Company, all outstanding stock options granted to MCS, a
corporation controlled by Mr. Kerrigan, and Messrs. Doyle and Blatt will
become exercisable in full. Pursuant to the applicable stock option
agreements, a "change in control" shall occur when (i) the Company at any time
ceases to own directly 100% of the capital stock of Coinmach, (ii) any
"person" or "group" (as such terms are used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended), excluding Golder, Thoma,
Cressey, Rauner Inc. or any entity controlled thereby ("GTCR"), is or becomes
the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the
Exchange Act), directly or indirectly, of a greater percentage of Common Stock
than is owned by GTCR at such time, (iii) the Board
11
<PAGE>
ceases to consist of a majority of the directors of the Company on January 8,
1997 and such other directors (collectively, the "Continuing Directors") whose
nomination for election to the Board is recommended by the then Continuing
Directors, or (iv) the Company or Coinmach (or any successor of the Company or
Coinmach by merger or other business combination) at any time sells all or
substantially all of its assets.
401(k) Savings Plan
The Company offers a 401(k) savings plan (the "401(k) Plan") to all current
eligible employees of the Company who have completed one year of service.
Pursuant to the 401(k) Plan, eligible employees may defer from 2% up to 15% of
their salaries up to a maximum level imposed by applicable federal law
($10,000 in 1999). The percentage of compensation contributed to the plan is
deducted from each eligible employee's salary and considered tax-deferred
savings under applicable federal income tax law. Pursuant to the 401(k) Plan,
the Company contributes increasing matching contribution amounts, based upon
the number of years of service completed by eligible participants, up to a
maximum contribution of 1.5% of an eligible employee's salary (subject to the
Internal Revenue Code limitation on compensation taken into account for such
purpose). Matching contribution percentages range from 5% for one to two years
of service up to 25% for five or more years of service, of the amount
contributed to the 401(k) Plan by the respective eligible employee. Eligible
employees become vested with respect to matching contributions made by the
Company pursuant to a vesting schedule based upon an eligible employee's years
of service. After two years of service, an eligible employee is 20% vested in
all matching contributions made to the 401(k) Plan. Such employee becomes
vested in equal increments thereafter through the sixth year of service, at
which time such employee becomes 100% vested. Eligible participants are always
100% vested in their own contributions, including investment earnings on such
amounts.
The Company made the following matching contributions during its fiscal year
ended March 31, 1999 to the Named Executive Officers appearing in the Summary
Compensation Table above: Mr. Kerrigan $2,121; Mr. Blatt $1,957; Mr. Doyle
$1,190; Mr. Denson $1,359; and Mr. Stanky $1,928.
12
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth certain information concerning grants of
stock options approved by the Plan Administration and Compensation Committee
and made during the fiscal year ended March 31, 1999 to each of the Named
Executive Officers.
<TABLE>
<CAPTION>
Market
Price
Percentage Per Potential Realizable
of Total Share Value at Assumed Annual
Options Exercise on Rates of Share Price
Granted to Price Date Appreciation for Option
Number of Employees Per of Term ($)/2/
Options in Fiscal Share Grant Expiration ------------------------
Name Granted Year/1/ ($) ($) Date 0% 5% 10%
- ---- --------- ---------- -------- ------ ---------- ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stephen R. Kerrigan..... 50,000/3/ 20.1% 23.05 23.13 7/14/08 3,960 731,119 1,846,725
Chief Executive Officer
Mitchell Blatt.......... 30,000/4/ 12.1% 23.05 23.13 7/14/08 2,376 438,672 1,108,035
President, Chief
Operating Officer
Robert M. Doyle......... 20,000/5/ 8.1% 23.05 23.13 7/14/08 1,584 292,448 738,690
Chief Financial Officer
Michael E. Stanky....... 10,000/6/ 4.0% 22.31 25.94 5/4/08 36,286 199,409 449,671
Senior Vice President
John E. Denson.......... 5,000/7/ 2.0% 22.31 25.94 5/4/08 18,143 99,704 224,836
Senior Vice President
</TABLE>
- --------
/1/A total of 248,500 options were granted to employees of the Company during
the fiscal year ended March 31, 1999.
/2/These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent upon the future
market performance of Common Stock and the date on which the options are
exercised. The values represented in this table may not necessarily be
achieved.
/3/10,000 shares underlying the options are immediately exercisable, and the
remaining shares become exercisable in four equal annual installments
commencing on July 14, 1999.
/4/6,000 shares underlying the options are immediately exercisable, and the
remaining shares become exercisable in four equal annual installments
commencing on July 14, 1999.
/5/4,000 shares underlying the options are immediately exercisable, and the
remaining shares become exercisable in four equal annual installments
commencing on July 14, 1999.
/6/2,000 shares underlying the options are immediately exercisable, and the
remaining shares become exercisable in four equal annual installments
commencing on May 4, 1999.
/7/1,000 shares underlying the options are immediately exercisable, and the
remaining shares become exercisable in four equal annual installments
commencing on May 4, 1999.
13
<PAGE>
Fiscal Year-End Options and Option Values
The following table presents certain information relating to the number and
value of unexercised stock options beneficially owned by each Named Executive
Officer as of March 31, 1999. None of the Named Executive Officers who owned
options to purchase Common Stock during the fiscal year ended March 31, 1999
exercised any of such options during such period.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money Options
Options at Fiscal Year End at Fiscal Year End
(#) ($) /1/
----------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ------------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Stephen R. Kerrigan 184,860/2/ 123,238/2/ 0 0
Chief Executive Officer 10,000/3/ 40,000/3/ 0 0
Mitchell Blatt 6,000/3/ 24,000/3/ 0 0
President, Chief
Operating Officer 40,000/4/ 60,000/4/ 0 0
60,000/5/ 40,000/5/ 0 0
Robert M. Doyle 43,134/2/ 28,756/2/ 0 0
Chief Financial Officer 4,000/3/ 16,000/3/ 0 0
40,000/4/ 60,000/4/ 0 0
John E. Denson 14,797/2/ 11,502/5/ 0 0
Senior Vice President 1,000/6/ 4,000/6/ 0 0
Michael E. Stanky 62,113/2/ 41,408/2/ 0 0
Senior Vice President 30,000/5/ 20,000/5/ 0 0
2,000/6/ 8,000/6/ 0 0
</TABLE>
- --------
/1/The value of unexercised in-the-money options, whether or not exercisable,
equals the difference between the fair market value of such options at
fiscal year-end and the exercise price of such options. The closing price
per share of Common Stock as reported on the Nasdaq National Market on March
31, 1999 was $10.25. The exercise price per share of options granted on July
23, 1996 (the "July Options") and options granted on September 5, 1997 (the
"September Options") is $11.90. The exercise price per share of options
granted on August 8, 1996 is $14.00. Accordingly, as of March 31, 1999, all
of the unexercised options held by the Named Executive Officers were out-of-
the-money.
/2/These options were granted on July 23, 1996 and are exercisable at an
exercise price of $11.90 per share.
/3/These options were granted on July 14, 1998 and are exercisable at an
exercise price of approximately $23.05 per share.
/4/These options were granted on September 5, 1997 and are exercisable at an
exercise price of $11.90 per share.
/5/These options were granted on August 8, 1996 and are exercisable at an
exercise price of $14.00 per share.
/6/These options were granted on May 4, 1998 and are exercisable at an
exercise price of approximately $22.31 per share.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended March 31, 1999, the Compensation Committee was
comprised of Dr. Laffer and Messrs. Cerri and Donnini. None of Dr. Laffer or
Messrs. Cerri and Donnini have been an employee or officer of the Company or
any of its subsidiaries. Mr. Donnini is principal of Golder, Thoma, Cressey,
Rauner, Inc., the general partner of GTCR IV.
Report of the Compensation Committee on Executive Compensation
The Compensation Committee of the Board of Directors, none of the members of
which is employed by the Company, reviews, evaluates and approves the
structure and implementation of the Company's compensation system for
executive officers. The Compensation Committee also determines the form and
amount of compensation for the chief executive officer and other executive
officers. Dr. Laffer and Messrs. Cerri and Kerrigan served on the Compensation
Committee until November 1, 1996, at which time the Compensation Committee was
reconstituted at the direction of the Board of Directors and is presently
comprised of Dr. Laffer and Messrs. Cerri and Donnini. The Board also
maintains a Plan Administration and Compensation Committee consisting of
Messrs. Donnini and Rauner, each of whom qualify as an "outside director" for
purposes of
14
<PAGE>
Section 162(m) of the Internal Revenue Code of 1986, as amended, which is
authorized to take action with respect to stock option grants under the Option
Plan and the 1998 Employee Stock Purchase Plan.
The Executive Compensation Program
The executive compensation program is a performance and rewards compensation
system consisting of base salaries and incentives (annual and long-term) that
pay executives for the achievement of levels of performance designed to
increase the stockholder value of the Company. The system also enables the
Company to hire, retain and motivate high-quality executives who meet the
immediate business challenges and improve the performance of the Company and
is designed to pay base salaries and provide total compensation opportunities
which reward each executive for such executive's contributions to the
Company's successes.
While the Compensation Committee may rely upon quantitative measures or
other measurable objective criteria, such as earnings or other indicia of
financial performance, in reaching compensation determinations, the
Compensation Committee evaluates executive performance and reaches
compensation decisions based upon a subjective and careful analysis of each
executive's specific contributions to the Company as well as the
recommendations of the Company's chief executive officer.
The Company does not require its officers to own any amount of Common Stock,
nor does the Company maintain a stock retention policy for officers. However,
it is the Compensation Committee's belief that the substantial voluntary stock
ownership position of the Company's executive officers is an extremely strong
indication of the alignment of the Company's officers' interest with that of
the Company's stockholders.
Base Salaries
In determining the base salaries of executive officers, the Compensation
Committee takes into consideration the level of responsibility and experience
of each executive officer and the knowledge and skill required. Each year, the
executive's performance is evaluated and any base salary adjustment is based
on an evaluation of the individual's performance and contribution. Each year,
the chief executive officer makes recommendations with respect to salary
adjustments for all executive officers, which recommendations are reviewed,
modified where appropriate and approved or rejected by the Compensation
Committee. During the fiscal year ended March 31, 1999, the Compensation
Committee approved annual base salaries for each of Messrs. Blatt, Doyle,
Stanky and Denson of $300,000, $175,000, $175,000 and $125,000, respectively.
Annual Incentives
The Compensation Committee grants bonuses to executive officers in
recognition of their efforts to position the Company to achieve future growth.
For example, since the beginning of the last fiscal year, the Company
successfully consummated the acquisition of a number of local, regional and
multi-regional route operators, which acquisitions contributed significantly
to the increase of the Company's installed-machine base and to the increase in
the Company's pro forma revenues. After reviewing individual performances, the
chief executive officer makes recommendations with respect to bonuses and
other incentive awards. These recommendations are reviewed and, to the extent
determined appropriate, approved by the Compensation Committee. Annual
incentive awards in respect of performance during the past fiscal year have
not yet been determined by the Compensation Committee.
Long-Term Incentives
Stock option grants under the Option Plan are made to provide performance-
based incentives that reward executives as stockholder value increases. This
long-term incentive opportunity is also intended to promote a sense of
ownership on the part of executives and key employees and to establish
alignment with stockholders. During the fiscal year ended March 31, 1999, the
Compensation Committee approved stock option grants to Messrs. Kerrigan, Blatt
and Doyle of 50,000, 30,000 and 20,000 options, respectively, at an exercise
price of approximately $23.05, which options vest in five equal annual
installments commencing on the date of grant.
15
<PAGE>
Compensation Arrangements
From time to time, the Company enters into employment contracts or other
compensation arrangements with executives. Currently, the Company has
employment agreements with Messrs. Kerrigan, Blatt, Doyle, Stanky and Denson
and certain other key employees. The terms of all such agreements are
summarized under the heading "EXECUTIVE COMPENSATION--Employment Contracts."
Compensation of the Chief Executive Officer
Total compensation (consisting of base salary, annual incentive and long-
term incentives) for Stephen R. Kerrigan, the chairman and chief executive
officer of the Company, is based on a variety of factors discussed below. A
significant factor taken into account by the Compensation Committee in
determining Mr. Kerrigan's compensation was Mr. Kerrigan's performance as
chief executive officer and his contribution to the Company and its
stockholders.
Mr. Kerrigan's compensation remained constant during the past fiscal year.
In May 1998, the Compensation Committee determined to award Mr. Kerrigan
annual incentive compensation in the form of a bonus of $400,000 based on Mr.
Kerrigan's effective leadership and significant strategic accomplishments and
on its assessment of Mr. Kerrigan's individual performance and contribution
during the fiscal year ended March 31, 1998. The Compensation Committee has
not yet determined the amount of any change in base salary, annual bonus or
long term incentive compensation to be paid to Mr. Kerrigan for his
performance and contributions during the current fiscal year.
Impact of Section 162(m) of the Code
The Committee notes that Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code") limits, in certain circumstances, the
deductibility of certain compensation, including stock-based compensation, in
excess of $1 million paid to top executives by public companies. None of the
compensation paid to the executive officers named in the Summary Compensation
Table exceeded the threshold for deductibility under Section 162(m). See
"EXECUTIVE COMPENSATION--Summary Compensation Table" above. The Compensation
Committee reviews the potential effect of Section 162(m) periodically and
evaluates its effect on compensation paid to the Company's executive officers.
The Compensation Committee
David A. Donnini
Dr. Arthur B. Laffer
Mr. Stephen G. Cerri
16
<PAGE>
Stock Performance Graph
The graph below compares the cumulative total stockholder return of the
Company from July 23, 1996 through March 31, 1999 (the last day that the
Nasdaq National Market was open during the Company's 1999 fiscal year) with
the cumulative total return of the NASDAQ Composite Index and the Russell 2000
Index for the same periods. The graph assumes the investment of $100 in shares
of Common Stock, the NASDAQ Composite Index and the Russell 2000 Index on July
23, 1996, the date of the initial public offering of the Company, and the
reinvestment of all distributions and dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN OF COINMACH LAUNDRY
CORPORATION, NASDAQ COMPOSITE INDEX AND RUSSELL 2000 INDEX
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
July Sept. Dec. Mar. June Sept. Dec. Mar. June Sept. Dec. Mar.
23, 30, 31, 27, 27, 26, 26, 31, 30, 30, 31, 31,
1996 1996 1996 1997 1997 1997 1997 1998 1998 1998 1998 1999
---- ----- ---- ---- ---- ----- ---- ---- ---- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Coinmach Laundry
Corporation............ $100 $144 $124 $121 $184 $176 $175 $151 $173 $ 71 $ 93 $ 73
NASDAQ Composite Index.. $100 $111 $116 $114 $130 $152 $141 $165 $171 $153 $198 $222
Russell 2000 Index...... $100 $107 $112 $108 $123 $141 $135 $149 $142 $113 $131 $123
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Management and Consulting Services
During the last fiscal year, the Company paid Mr. Chapman, a director of the
Company, $120,000 for general financial advisory and investment banking
services.
17
<PAGE>
Registration Rights Agreement
The Company and GTCR, MCS and Messrs. Blatt, Doyle, Stanky and Chapman are
parties to a registration rights agreement, dated July 26, 1995 (the "Company
Registration Agreement"), pursuant to which the Company granted such parties
certain rights with respect to the registration under the Securities Act, for
resale to the public, of their respective Registrable Securities (as defined
in the Company Registration Agreement). The Company Registration Agreement
provides that, among other things, GTCR has the right to "demand"
registrations under the Securities Act with respect to all or a portion of
GTCR's Registrable Securities. The Company Registration Agreement also
provides for customary provisions regarding the priority among holders of
securities with respect to the number of shares to be registered pursuant to
any demand or piggyback registration and indemnification by the Company of the
holders of Registrable Securities.
Certain Loans to Members of Management
As of June 10, 1999, Mr. Kerrigan (directly and indirectly through MCS, an
entity controlled by Mr. Kerrigan) and Mr. Blatt owed the Company $484,074 and
$334,078, respectively, plus interest accrued thereon. During the last fiscal
year, the largest aggregate amount owed to the Company by Mr. Kerrigan
(directly and indirectly through MCS) and Mr. Blatt equaled $581,074 and
$381,074, respectively, plus interest accrued thereon. The indebtedness of
each of MCS and Mr. Blatt is evidenced by (i) two promissory notes dated
January 31, 1995 in the original principal amount of $140,000; (ii) two
promissory notes dated July 26, 1995 in the original amount of $52,370; and
(iii) two promissory notes dated May 3, 1996 in the original amount of
$21,797. Each such note accrues interest at a rate of 8% per annum and was
delivered to the Company in connection with the purchase of Company securities
by MCS and Mr. Blatt. The promissory notes dated January 31, 1995 are payable
in four equal annual installments commencing on January 31, 1996. The
promissory notes dated July 26, 1995 and May 3, 1996 are payable in eight
equal annual installments commencing on July 26, 1996 and May 3, 1996,
respectively. During the last fiscal year, the Company forgave the repayment
of approximately (i) $45,393 by each of MCS and Mr. Blatt, which amounts
represent the aggregate amount of the third installment of principal and
interest owed by MCS and Mr. Blatt under the notes dated January 31, 1995 and
July 26, 1995, and (ii) $2,725 by each of MCS and Mr. Blatt, which amounts
represent the aggregate amount of the second installment of principal and
interest owed by MCS and Mr. Blatt under the notes dated May 3, 1996. On May
5, 1999, the Company agreed to extend a loan of $250,000 to Mr. Blatt, which
loan is evidenced by a promissory note providing, among other things, that
such loan (i) be repaid in a single payment on the third anniversary of such
loan and (ii) accrue interest at a rate of 8% per annum. Such loan is also
secured by a pledge of all the Common Stock held by Mr. Blatt.
In connection with the Company's establishment of a corporate development
office in Charlotte, North Carolina and the relocation of Messrs. Kerrigan and
Denson to such office in September 1996 and March 1997, respectively, Coinmach
extended loans to each of Messrs. Kerrigan and Denson in the principal amounts
of $500,000 and $80,000, respectively. The loan to Mr. Denson (the "Denson
Loan") is an interest free demand loan. The loan to Mr. Kerrigan (the
"Kerrigan Loan") provided for the repayment of principal and interest in five
equal annual installments commencing in July 1997 (each payment date, a
"Payment Date") and accrual of interest at a rate of 7.5% per annum. During
the fiscal year ended March 31, 1998, the Board determined to extend the
Kerrigan loan an additional five years providing for repayment of outstanding
principal and interest in equal annual installments ending July 2006. The
Kerrigan Loan provides that payments of principal and interest will be
forgiven on each Payment Date provided that Mr. Kerrigan is employed by
Coinmach on such Payment Date. If Mr. Kerrigan ceases to be employed by
Coinmach for a reason other than (i) a change in control of Coinmach, (ii) the
death or disability of Mr. Kerrigan while employed by Coinmach, or (iii) cause
(as defined in the Kerrigan Loan) (each, a "Termination Event"), then all
outstanding amounts due under the Kerrigan Loan will be forgiven as of the
date of the Termination Event. If Mr. Kerrigan's employment is terminated upon
the occurrence of any event that is not a Termination Event, then all
outstanding amounts due under the Kerrigan Loan will become due and payable
within 30 business days following the termination of Mr. Kerrigan's
employment.
18
<PAGE>
PROPOSAL TO AMEND THE THIRD AMENDED AND RESTATED
1996 EMPLOYEE STOCK OPTION PLAN
Background
The Company adopted the 1996 Stock Employee Option Plan (the "Stock Option
Plan") on July 2, 1996. The Stock Option Plan is intended to attract, retain,
and provide incentives to key employees of the Company and to compensate
certain officers and employees of the Company by offering them an opportunity
to acquire or increase their proprietary interest in the Company. As of the
Record Date, (i) the Company has granted 612,000 stock options under the Stock
Option Plan to employees of the Company, all of which remain outstanding, and
(ii) there were 497,147 shares of Common Stock available for grant under the
Stock Option Plan.
Purpose of Amendment
In order to continue to implement the Company's policy of providing equity
incentives and to provide greater flexibility in making awards under the Stock
Option Plan, the Board of Directors has approved an amendment to the Stock
Option Plan (the "Proposed Amendment"). The Proposed Amendment provides solely
for the granting of awards to the Company's non-employee directors. The
purpose of the Proposed Amendment is to promote the interests of the Company
and its stockholders by permitting the PAC Committee to retain qualified
directors through grants of proprietary interests in the Company.
Accordingly, the stockholders of the Company are being asked to approve the
Proposed Amendment to the Stock Option Plan to allow the PAC Committee to
grant options to the Company's non-employee directors. The approval of the
Proposed Amendment to the Stock Option Plan requires the affirmative vote of a
majority of the votes cast at the Annual Meeting by holders of Common Stock
entitled to vote, and if the Proposed Amendment does not receive such
approval, it will not take effect.
Pursuant to the Proposed Amendment to the Stock Option Plan, Article 3 of
the Stock Option Plan would be amended to permit the granting of options to
non-employee directors. Except as set forth in the foregoing sentence, all
other terms and conditions of the Stock Option Plan shall remain unchanged. A
summary description of the Stock Option Plan follows. This description is
qualified in its entirety by reference to the specific provisions of the Stock
Option Plan which has been filed with the Securities and Exchange Commission.
Shares Subject to the Stock Option Plan
Up to 1,090,183 shares of Common Stock were reserved for issuance under the
Stock Option Plan on the date of its inception. The Stock Option Plan
generally grants the Board of Directors the power and authority to amend the
Stock Option Plan at any time without requiring the Board of Directors to
obtain stockholder approval as a condition to the effectiveness of such
amendment. The Board of Directors amended the Stock Option Plan as follows:
(i) on July 26, 1996 to increase the number of shares of Common Stock reserved
under the Stock Option Plan from 1,090,183 to 1,103,419, to offset the
dilutive effect of the Company's registration of an additional 120,000 shares
of Common Stock in its initial public offering (the "Offering"); and (ii) on
September 17, 1996 to increase the number of shares of Common Stock subject to
the Stock Option Plan from 1,103,419 to 1,109,147, to offset the dilutive
effect of the Company's issuance of shares of Common Stock upon the exercise
of the underwriters' over-allotment option granted in connection with the
Offering, in each case, subject to adjustment in the event of certain
transactions involving the Company. As of the Record Date, there were 497,147
shares of Common Stock available for grant under the Stock Option Plan. If an
award granted under the Stock Option Plan expires or is terminated without
having been exercised in full, the shares of Common Stock subject to the award
but not delivered are available again for awards under the Stock Option Plan.
Who May Participate in the Stock Option Plan
Options under the Stock Option Plan may be granted to full-time, salaried
employees of the Company and its subsidiaries. Currently, no directors of the
Company are eligible to receive options under the Stock Option Plan unless
they are also full-time salaried employees of the Company or one of its
subsidiaries.
19
<PAGE>
The Stock Option Plan is administered by the Plan Administration and
Compensation Committee (the "PAC Committee"), comprised of disinterested
members of the Board of Directors. The PAC Committee has authority under the
Stock Option Plan to designate the persons to whom options will be granted,
and, subject to the various provisions of the Stock Option Plan, to fix the
number of shares to be subject to such options and the other terms and
conditions of such options. Under the Stock Option Plan, the PAC Committee may
grant incentive stock options ("Incentive Options") or options which do not
qualify as incentive stock options ("Non-Incentive Options") under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"). The PAC
Committee has full power to construe and interpret the Stock Option Plan and
to establish rules for its administration. The PAC Committee's determinations
are binding upon all persons.
Description of the Stock Option Plan
All options granted under the Stock Option Plan are subject to the following
terms:
--The option must be evidenced by a written agreement between the Company
and the option holder.
--The exercise price of the option must be an amount which is either (i)
greater than or equal to the closing price on the date of grant of such
option or (ii) equal to the average closing price of the Common Stock for
the thirty (30) consecutive trading days immediately preceding the date of
grant.
--Options granted under the Stock Option Plan shall become exercisable at
such time or times and into such amounts of Common Stock as may be
determined by the PAC Committee in its sole discretion, subject to the
terms and conditions of the Stock Option Plan.
--If an option holder's employment by the Company or a subsidiary
terminates prior to an option's stated expiration date on account of the
death of such holder, all options underlying such holder's option
agreement shall vest immediately on the date of death and shall expire on
the date that is 90 days after the death of such holder, unless provided
otherwise in such holder's option agreement. If an option holder's
employment by the Company or a subsidiary terminates prior to an option's
stated expiration date on account of the disability of such holder, all
options underlying such holder's option agreement shall vest immediately
on the date of disability and shall expire on the date that is one year
after the date of disability of such holder, unless provided otherwise in
such holder's option agreement. If an option holder elects to voluntarily
retire from the Company or a subsidiary, all unvested options shall
continue to vest for a period of three years following the retirement date
and the holder of such option shall have the right to exercise any vested
portion of such option during such three-year period, unless otherwise
provided in such holder's option agreement or in the Stock Option Plan. If
an option holder's employment by the Company or a subsidiary is terminated
without cause, the holder of such option shall have the right to exercise
any vested options for a period of 30 days following the date of such
termination, unless otherwise provided in such holder's option agreement.
--The exercise price payable upon the exercise of an option granted under
the Stock Option Plan must be paid in cash or check upon exercise, or if
the PAC Committee has so permitted, in the case of Non-Incentive Options,
by delivery of other shares of Common Stock or by retention by the Company
of the shares of Common Stock which would otherwise be transferred to the
option holder, in each case, having an aggregate fair market value equal
to the exercise price or by delivering a combination of cash and Common
Stock.
--An option holder cannot transfer an option granted under the Stock Option
Plan except by such option holder's will or the laws of intestacy.
--During an option holder's life, only the option holder can exercise such
holder's options.
Incentive Options granted under the Stock Option Plan will be subject to the
following terms, in addition to the terms described above which are applicable
to all options granted under the Stock Option Plan:
--The aggregate fair market value (determined at the time of grant) of the
shares of Common Stock subject to all Incentive Options granted to any one
person under the Stock Option Plan (or any other plan of the Company and
its subsidiaries) which are exercisable for the first time in any calendar
year cannot exceed $100,000.
20
<PAGE>
--Each Incentive Option granted under the Stock Option Plan will expire no
more than ten years after the date of its grant.
The Stock Option Plan provides that the total number of shares subject to
the Stock Option Plan and the exercise price per share may be proportionately
adjusted by the Board of Directors in the event of a stock dividend, stock
split, combination or exchange of shares, merger, consolidation or other
change in the capitalization of the Company. In the event of a reorganization,
reclassification, consolidation, merger or sale of substantially all of the
Company's assets, the Board of Directors may adjust the number, type, or price
of options to reflect the event.
Under the terms of the Stock Option Plan, the Board of Directors may amend
the Stock Option Plan at any time without the approval of the Company's
stockholders so long as any amendment does not affect outstanding options or
adversely affect the Stock Option Plan's qualification under the Code. The
Board of Directors must obtain the affirmative vote of a majority of all
issued and outstanding shares of Common Stock to amend the Stock Option Plan
in any manner which would cause any outstanding Incentive Options to no longer
qualify as Incentive Options or which would cause the Stock Option Plan not to
satisfy the Code's requirements relating to performance-based compensation. If
any option holder is deemed to be an "insider" for purposes of Section 16 of
the Exchange Act, the Board of Directors must obtain the affirmative vote of a
majority of all issued and outstanding shares of Common Stock in order to (i)
increase the total number of shares of Common Stock for which options may be
granted, (ii) increase the benefits accruing to participants under the Stock
Option Plan, or (iii) modify the eligibility requirements for participation in
the Stock Option Plan.
The Proposed Amendment is being submitted for stockholder approval in order
to, among other things, permit the Stock Option Plan to continue to meet
certain requirements of the Code with respect to the granting of Incentive
Options and the deductibility of stock-based compensation pursuant to Section
162(m) of the Code. In addition, stockholder approval is required in order to
comply with the conditions of Rule 16b-3 ("Rule 16b-3") under the Exchange
Act. Compliance with Rule 16b-3 permits, among other things, officers and
directors of the Company to surrender for credit, at current fair market
value, shares of previously purchased Common Stock in payment of the
applicable option exercise price and to receive cash upon surrender of options
granted under the Stock Option Plan without incurring "short-swing profit"
liability under the Exchange Act. The Board of Directors believes that
compliance with Rule 16b-3 substantially enhances the incentive compensation
benefits of the Incentive Options.
Options Granted under the Stock Option Plan
During the period from the inception of the Stock Option Plan through the
Record Date, (i) Mr. Kerrigan, Mr. Blatt, Mr. Doyle, Mr. Stanky and Mr. Denson
have been granted 100,000, 160,000, 40,000, 70,000 and 15,000 stock options,
respectively, (ii) all current executive officers, as a group, have been
granted 385,000 stock options, (iii) all current employee directors, as a
group, have been granted 100,000 options, and (iv) all employees, including
all current officers who are not executive officers, as a group, have been
granted 227,000 stock options. On May 5, 1999, the Board of Directors
approved, conditioned on shareholder approval of the Proposed Amendment to the
Stock Option Plan, grants of stock options to each of Messrs. Chapman, Cerri
and Laffer to purchase 66,244, 35,000 and 35,000 shares of Common Stock,
respectively, at exercise prices equal to the per share fair market value of
one share of Common Stock on the date of grant.
Federal Income Tax Consequences
Incentive Options
Except as described below, neither the granting nor the exercise of an
Incentive Option under the Stock Option Plan will result in recognition of
income or loss to the grantee of the option for Federal income tax purposes.
If (i) the option holder retains ownership of Common Stock issued upon
exercise of an Incentive Option for at least two years from the grant of the
option and one year after the stock was transferred to the
21
<PAGE>
option holder pursuant to such exercise and at all times during the period
beginning on the date of the granting of the option and ending on the date
three months before the date of exercise, and (ii) the option holder was an
employee of the Company or a parent or subsidiary of the Company, or a
corporation or parent or subsidiary of such corporation issuing or assuming
such option in a transaction to which Section 424(a) of the Code applies, then
the option holder will be entitled to long-term capital gain treatment on any
gain from the subsequent sale of Common Stock. The basis of Common Stock will
be its exercise price. Any gain from the subsequent sale of stock issued upon
exercise of an Incentive Option or loss (measured by the difference between
the amount realized on disposition and the basis) will be long-term capital
loss. Generally, the Company will not be entitled to any deduction in
connection with the grant or exercise of Incentive Options under the Stock
Option Plan or the sale of Common Stock issued upon exercise of such options.
If an option holder does not satisfy the holding period for Common Stock
acquired upon exercise of an Incentive Option, any gain realized upon the
disposition of such Common Stock will be taxed as ordinary income for Federal
income tax purposes to the extent of the difference between the option
exercise price and the lesser of (i) the fair market value of Common Stock on
the date the option was exercised and (ii) the amount realized upon
disposition of Common Stock. Any amount realized by the option holder in
excess of such difference will be either long-term or short-term capital gain,
depending on the holding period for Common Stock. The Company will be entitled
to a deduction equal to the amount of ordinary income, if any, recognized by
the option holder.
If an option holder exercises an Incentive Option granted under the Stock
Option Plan by delivering Common Stock which was acquired upon the prior
exercise of an Incentive Option and which had not been held for the required
holding period, then the option holder would recognize ordinary income from
the disposition of such previously acquired Common Stock. The amount of
ordinary income would be determined in the same manner as in the case of any
premature disposition of stock received under an Incentive Option, as
described above, and the Company would be entitled to a deduction in the
amount of such ordinary income. If Common Stock delivered to pay the exercise
price upon exercise of an Incentive Option had not been acquired upon the
prior exercise of an Incentive Option, or if it has been acquired upon
exercise of an Incentive Option and held for the required period, then the
option holder would not recognize any income or gain from such delivery. In
such event, the basis and holding period of the shares of Common Stock
received will carry over to such shares to the extent the number of such
shares received equals the number of shares of Common Stock tendered, and any
excess shares of Common Stock received will have a zero basis and a new
holding period (which will be subject to the one-year and two-year holding
period rules described above).
Non-Incentive Options
Employees who have been granted Non-Incentive Options under the Stock Option
Plan will not recognize income for Federal income tax purposes at the time the
options are granted. Upon exercise of a Non-Incentive Option for cash, in
general, a holder will recognize ordinary income for Federal income tax
purposes to the extent of any excess of the fair market value of the Company's
Common Stock received upon exercise over the exercise price of such Common
Stock. Notwithstanding the foregoing, directors and officers of the Company
who are subject to Section 16-b of the Exchange Act are subject to special tax
rules relating to the receipt of shares upon the exercise of Non-Incentive
Options. The Company will be entitled to a deduction in the amount which the
holder recognized as ordinary income provided that certain conditions are met.
When an employee exercises a Non-Incentive Option by delivering Common
Stock, the employee will generally recognize ordinary income to the extent of
the fair market value of the shares received in excess of the number of shares
of Common Stock tendered on exercise (as well as ordinary income in connection
with the disposition of any Common Stock tendered as a result of prior
exercise of an Incentive Option for which the holding periods described above
were not met).
The basis and holding period of the number of shares of Common Stock
received will carry over to such shares to the extent the number of shares
received equals the number of shares of Common Stock tendered
22
<PAGE>
(assuming no shares failing to meet the one-year and two-year holding periods
described above for stock acquired on exercise of an Incentive Option are
tendered) and any excess shares of Common Stock received will have a new
holding period and a fair market value basis.
The Company will be entitled to a deduction equal to any ordinary income
recognized by the option holder.
The Board of Directors unanimously recommends that the stockholders vote
"FOR" approval of the Proposed Amendment to the Stock Option Plan.
CONFIRMATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Company has selected Ernst & Young LLP as independent auditors to audit
the books and accounts of the Company for the current fiscal year and
recommends that the stockholders confirm such selection. Ernst & Young LLP
served in that capacity with respect to the fiscal year ended March 31, 1999.
In the event of a negative vote, the Board of Directors will reconsider its
selection. A representative of Ernst & Young LLP is expected to be present at
the Annual Meeting to have the opportunity to make a statement and to respond
to questions from stockholders.
The Board of Directors unanimously recommends that the stockholders vote
"FOR" the confirmation of Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending March 31, 2000.
STOCKHOLDER PROPOSALS AND NOMINATIONS
Proposals of stockholders intending to be presented at the 2000 Annual
Meeting of Stockholders of the Company must be received by the Company for
inclusion in the Proxy Statement and form(s) of proxy relating to such Annual
Meeting no later than February 28, 2000. Stockholder proposals should be
directed to the attention of the Secretary of the Company at the address of
the Company set forth on the first page of this Proxy Statement. Timely
receipt of a stockholder's proposal will satisfy only one of several
conditions established by applicable federal securities laws for inclusion in
the Company's proxy materials.
DISCRETIONARY AUTHORITY
It is not intended to bring before the Annual Meeting any matters except (i)
the election of two Class III Directors, (ii) the amendment of the Third
Amended and Restated 1996 Employee Stock Option Plan and (iii) the
confirmation of the appointment of Ernst & Young LLP as independent auditors.
Management is not aware at this time of any other matters to be presented for
action. If, however, any other matters properly come before the Annual
Meeting, the persons named as proxies in the enclosed form of proxy intend to
vote in accordance with their judgment on the matters presented.
By Order of the Board of Directors
Robert M. Doyle
Secretary
June 25, 1999
23
<PAGE>
[LOGO]
--------
COINMACH
--------
KEEPING AMERICA CLEAN
ONE LAUNDRY ROOM AT A TIME
<PAGE>
COINMACH LAUNDRY CORPORATION
CLASS A COMMON STOCK
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 1999 ANNUAL MEETING OF STOCKHOLDERS - July 28, 1999
The undersigned hereby appoints Stephen R. Kerrigan and Robert M. Doyle, or
any one or more of them, each with full power of substitution, the proxy or
proxies for and in the name of the undersigned, to vote the shares of Class A
Common Stock, par value $.01 per share, of Coinmach Laundry Corporation, a
Delaware corporation (the "Corporation"), that the undersigned would be entitled
to vote if personally present at the 1999 Annual Meeting of Stockholders of the
Corporation to be held at The Park Hotel, 2200 Rexford Road, Charlotte, North
Carolina, on Wednesday, July 28, 1999 at 11:00 A.M., local time, and at any
adjournment thereof, upon the matters described in the Notice of Annual Meeting
of Stockholders and Proxy Statement (the "Proxy Statement"), mailed on or about
June 28, 1999, receipt of which is hereby acknowledged, subject to any direction
indicated on the reverse side of this card, and upon any other business that may
properly come before the meeting or any adjournment thereof, hereby revoking any
proxy heretofore executed by the undersigned to vote at said meeting.
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF COINMACH LAUNDRY
CORPORATION AND WILL BE VOTED IN ACCORDANCE WITH THE STOCKHOLDER'S
SPECIFICATIONS HEREON. IN THE ABSENCE OF ANY SUCH SPECIFICATION, THE PROXY WILL
BE VOTED "FOR" THE ELECTION OF DIRECTORS, "FOR" APPROVAL OF AN AMENDMENT TO THE
THIRD AMENDED AND RESTATED 1996 EMPLOYEE STOCK OPTION PLAN AND "FOR" THE
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE. COINMACH LAUNDRY CORPORATION
P.O. BOX 11415
NEW YORK, NY 10203-0415
<PAGE>
The Board of Directors of COINMACH LAUNDRY CORPORATION recommends a vote FOR
Proposals 1, 2 and 3.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. Election of Directors: FOR all nominees WITHHOLDING AUTHORITY to FOR all nominees except
listed below [_] vote for all nominees listed below as noted below [_]
[_]
Nominees: Mitchell Blatt and Bruce V. Rauner
INSTRUCTIONS: To withhold authority to vote for any nominee, mark the "FOR all nominees except as listed below" box and write the
name/s of that/those nominee/s in the space provided below.
Exception/s: In his discretion, either of the Proxies is
--------------- authorized to vote and otherwise represent the
shares upon such other business as may properly
come before the meeting or any adjournment(s)
or postponement(s) thereof.
2. Approval of an Amendment to theThird Amended and Restated 1996
Employee Stock Option Plan.
FOR [_] AGAINST [_] ABSTAIN [_] [_] Mark here if you plan to attend the meeting.
3. Ratification of appointment of Ernst & Young LLP as the Corporation's Change of Address and/or Comments Mark Here [_]
independent auditors for the year ending March 31, 2000.
FOR [_] AGAINST [_] ABSTAIN [_] NOTE: Please date and sign this proxy exactly
as your name appears hereon. In case of joint
owners, each joint owner should sign. When
signing in a fiduciary or representative
capacity, please give your full title. If the
proxy is submitted by a corporation or
partnership, it should be executed in the full
corporation or partnership name by a duly
authorized person.
Dated: , 1999
-----------------------
------------------------------------------------
Signature
Signature
Votes must be indicated in black or blue ink.
For each proposal, mark "X" in only one box.
(Please sign, date and return this proxy promptly in the enclosed postage prepaid envelope.)
</TABLE>
