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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
(RULE 14D-101)
SOLICITATION/RECOMMENDATION STATEMENT UNDER SECTION 14(d)(4) OF THE SECURITIES
EXCHANGE ACT OF 1934
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COINMACH LAUNDRY CORPORATION
(Name of Subject Company)
COINMACH LAUNDRY CORPORATION
(Name of Person(s) Filing Statement)
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Class A Common Stock, Par Value $.01 Per Share
Class B Non-Voting Common Stock, Par Value $.01 Per Share
(Title of Class of Securities)
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19259L101
(CUSIP Number of Class of Securities)
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Stephen R. Kerrigan
Coinmach Laundry Corporation
55 Lumber Road
Roslyn, New York 11576
Telephone: (516) 484-2300
(Name, address and telephone number of person authorized to receive notice and
communication on behalf of the person(s) filing statement).
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With a copy to:
Stephen M. Banker, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036-6522
Telephone: (212) 735-3000
Facsimile: (212) 735-2000
[_]Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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Item 1. Subject Company Information.
Name and Address
The name of the subject company to which this Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") relates is Coinmach Laundry
Corporation, a Delaware corporation ("Coinmach" or the "Company"). The address
of the principal executive offices of Coinmach is 55 Lumber Road, Roslyn,
New York 11576. The telephone number of the principal executive offices of
Coinmach is (516) 484-2300.
Securities
The titles of the classes of equity securities to which this statement
relates are the Class A Common Stock, par value $.01 per share (the "Class A
Common Stock"), and Class B Non-Voting Common Stock, par value $.01 per share,
(the "Class B Common Stock" and, together with the Class A Common Stock, the
"Shares" or the "Common Stock") of Coinmach. As of May 12, 2000 there were
12,927,459 shares of Class A Common Stock outstanding and 240,324 shares of
Class B Common Stock outstanding.
Item 2. Identity and Background of Filing Person.
Name and Address
The name and address of the Company, which is the person filing this
Statement, are set forth in Item 1 above.
Tender Offer
This Schedule 14D-9 relates to the tender offer by CLC Acquisition
Corporation, a Delaware corporation (the "Purchaser"), to purchase all of the
outstanding Shares at a price of $14.25 per Share, net to the selling
stockholders in cash (less any required withholding taxes), without interest
(the "Offer Price"), upon the terms and subject to the conditions set forth in
the Offer to Purchase dated May 26, 2000 (the "Offer to Purchase") and the
related Letter of Transmittal ( the "Letter of Transmittal" which, together
with the Offer to Purchase, as they may be amended or supplemented from time
to time constitute the "Offer"). The Purchaser is controlled by Golder, Thoma,
Cressey, Rauner Fund IV, L.P. ("GTCR Fund IV") which is the largest single
stockholder of the Company and which currently owns approximately 23% of the
outstanding Shares of the Company. The Offer is described in a Tender Offer
Statement on Schedule TO (which includes the information required to be
reported under Rule 13e-3), dated May 26, 2000 (the "Schedule TO"), which was
filed with the Securities and Exchange Commission (the "SEC") on May 26, 2000.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of May 12, 2000 (as such agreement may be amended and supplemented from
time to time, the "Merger Agreement"), between Coinmach and the Purchaser. The
Merger agreement provides, among other things, that as soon as practicable
after the satisfaction or waiver of the conditions set forth in the Merger
Agreement, in accordance with the relevant provisions of the Delaware General
Corporation Law, as amended (the "DGCL"), the Purchaser will be merged with
and into Coinmach (the "Merger"). Following consummation of the Merger,
Coinmach will continue as the surviving corporation (the "Surviving
Corporation"). At the effective time of the Merger (the "Effective Time"),
each Share then outstanding (other than Shares owned by the Purchaser) will be
converted, subject to dissenters rights, into the right to receive the Offer
Price. A copy of the Merger Agreement is filed as Exhibit 1 to this Schedule
14D-9 and is incorporated herein by reference.
As set forth in the Schedule TO, the principal executive offices of the
Purchaser are located at 6100 Sears Tower, Chicago, Illinois 60606.
Information contained in this Schedule 14D-9 or incorporated herein by
reference concerning the Purchaser or its respective officers, directors,
representatives of affiliates, or actions or events with respect to it, was
provided by the Purchaser and Coinmach takes no responsibility for such
information.
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Item 3. Past Contacts, Transactions, Negotiations and Agreements.
Except as described herein, or incorporated herein by reference, there are
no material contracts, agreements, arrangements or understandings or any
actual or potential conflicts of interest between the Company or its
affiliates and either (1) the Company, its executive officers, directors or
affiliates or (2) the Purchaser or any of its respective executive officers,
directors or affiliates.
1. Certain Arrangements between Coinmach and its Executive Officers,
Directors and Affiliates
Certain such agreements, arrangements and understandings and actual or
potential conflicts of interest are disclosed under the captions "Security
Ownership of the Company", "Election of Directors", "Compensation of
Directors", "Executive Compensation", "Employment Contracts", "Report of the
Compensation Committee on Executive Compensation" and "Certain Relationships
and Related Transactions" at pages 2 through 18 of Coinmach's Proxy Statement,
filed June 28, 1999, for its 1999 Annual Meeting of Stockholders (the "Proxy
Statement"), a copy of which is filed herewith as Exhibit 3 and is
incorporated herein by reference.
2. The Merger Agreement
General
The Purchaser was formed by Bruce V. Rauner, a director of the Company and a
principal of the indirect general partner of GTCR Fund IV. Mr. Rauner is the
sole stockholder and sole director of the Purchaser. GTCR Fund IV is the
Company's largest stockholder and is controlled by certain affiliates of the
Purchaser. Certain members of the Company's senior management consisting of:
Stephen R. Kerrigan, Chief Executive Officer; Mitchel Blatt, President and
Chief Operating Officer; Robert M. Doyle, Chief Financial Officer and
Secretary; Michael E. Stanky, Senior Vice President; and James N. Chapman,
Director (collectively, the "Management Group") will also have an interest in
the Purchaser. GTCR Fund IV currently beneficially owns approximately 23% of
the outstanding Common Stock. GTCR Fund VII, L.P. ("GTCR Fund VII"), of which
Mr. Rauner is an affiliate, has delivered to the Purchaser a binding
commitment letter to provide financing of up to $192 million in exchange for
equity interests in the Purchaser.
Merger Agreement
The following is a summary of the Merger Agreement, a copy of which is filed
as Exhibit 1 hereto and is incorporated herein by reference. The Merger
Agreement should be read in its entirety for a more complete description of
the matters discussed below.
The Offer. The Merger Agreement provides for the commencement of the Offer
as soon as practicable, and in any event not later than ten business days
following the date of the execution of the Merger Agreement. The obligation of
the Purchaser to accept for payment or pay for any Shares tendered pursuant to
the Offer is subject to the satisfaction or waiver (to the extent permitted by
the Merger Agreement) of the conditions described below in "Conditions of the
Offer" (the "Offer Conditions"). The Purchaser may waive any such condition in
whole or in part and make any other changes in the terms and conditions of the
Offer, subject to the terms of the Merger Agreement.
Under the terms of the Merger Agreement, the Purchaser shall have no
obligation to pay interest on the purchase price of tendered Shares, including
in the event the Purchaser exercises its right to extend the period of time
during which the Offer is open. The rights reserved by the Purchaser are in
addition to the Purchaser's rights to terminate the Offer pursuant to the
Offer Conditions described herein. The Merger Agreement provides that subject
to the terms and conditions of the Offer and the Merger Agreement and the
satisfaction or waiver (to the extent permitted) of all the Offer Conditions
as of the Expiration Date, the Purchaser will accept for payment and pay for
all Shares validly tendered and not withdrawn pursuant to the Offer as soon as
practicable after the expiration date of the Offer. If the Offer Conditions
are not satisfied or, to the extent permitted, waived by the Purchaser as of
the expiration date, the Purchaser may extend the Offer from time to time for
the shortest time
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periods permitted by law and to the extent Purchaser reasonably believes such
extensions are necessary until the consummation of the Offer, provided that
notwithstanding the satisfaction of the Offer Conditions, Purchaser shall have
the right to extend the Offer until August 10, 2000, notwithstanding the prior
satisfaction of the Offer Conditions.
Conditions of the Offer. Notwithstanding any other provision of the Offer,
Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-l(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (relating to
the Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for any Shares tendered pursuant
to the Offer, and may postpone the acceptance for payment or, subject to the
restriction referred to above, payment for any Shares tendered pursuant to the
Offer, and may amend or terminate the Offer (whether or not any Shares have
theretofore been purchased or paid for) to the extent permitted by this
Agreement if, (a) there shall not have been tendered and not properly
withdrawn prior to expiration of the Offer at least the number of Shares that
when combined with the Shares already owned by Purchaser shall constitute at
least 51% of the then outstanding Shares, or (b) at any time on or after the
date of the Merger Agreement and prior to the acceptance for payment of
Shares, any of the following conditions occurs or has occurred:
(i) there shall have been any (A) action, proceeding, application, claim
or suit, (B) order or preliminary or permanent injunction, or (C) statute,
rule, regulation, legislation, interpretation, judgment or order
instituted, pending, enacted, entered, enforced, promulgated, amended,
issued and continuing and applicable to Purchaser, the Company or any
subsidiary or affiliate of Purchaser or the Company or the Offer, by any
legislative body, court, government or governmental, administrative or
regulatory authority or agency which would reasonably be expected to have
the effect of, directly or indirectly: (1) making illegal, or otherwise
directly or indirectly restraining or prohibiting or making materially more
expensive the making of the Offer, the acceptance for payment of, or
payment for the Shares by Purchaser or the consummation of any of the
transactions contemplated by the Merger Agreement; (2) prohibiting or
affecting the ownership or operation by the Company or any of its
subsidiaries or Purchaser or any of its affiliates of all or any material
portion of the business or assets of the Company or any of its
subsidiaries, taken as a whole, or any of its affiliates or compelling
Purchaser or any of its affiliates to dispose of or hold separate all or
any material portion of the business or assets of the Company or any of
their respective subsidiaries or Purchaser, or any of its affiliates, as a
result of the transactions contemplated by the Offer, the Merger or the
Merger Agreement; (3) imposing or confirming limitations on the ability of
Purchaser or any of its affiliates effectively to acquire or hold or to
exercise full rights of ownership of Shares, including without limitation
the right to vote any Shares acquired or owned by Purchaser or any of its
affiliates on all matters properly presented to the stockholders, including
without limitation the adoption and approval of the Merger Agreement and
the Merger or the right to vote any shares of capital stock of any
subsidiary directly or indirectly owned by the Company; (4) requiring
divestiture by Purchaser of any Shares; or (5) otherwise resulting in any
change or effect that would be materially adverse to the assets,
liabilities, business, prospects, operations or condition (financial or
otherwise) of the Company and its subsidiaries, taken as a whole or the
ability of the Company to perform its obligations under the Merger
Agreement and to consummate the transactions contemplated thereby
("Material Adverse Effect");
(ii) there shall have occurred and be continuing (A) any general
suspension of trading in, or limitation on prices for, securities on any
national securities exchange or in the over-the-counter market, including
the NASDAQ National Market System, in the United States, (B) a material
adverse change in or material disruption of conditions in the market for
syndicated bank credit facilities or the financial, banking or capital
markets generally, including without limitation, a decline of at least 10%
in either the Dow Jones Average of Industrial Stocks or the Standard &
Poor's 500 index from the date hereof, (C) a commencement and continuation
of a war or armed hostilities or other national or international calamity
directly or indirectly involving the United States, or (D) in the case of
any of the foregoing existing at the time of commencement of the Offer, a
material acceleration or worsening thereof;
(iii) (A) it shall have been publicly disclosed or Purchaser shall have
otherwise learned that beneficial ownership (determined for the purposes of
this paragraph as set forth in Rule 13d-3 promulgated
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under the Exchange Act) of more than 5% of the outstanding Shares has been
acquired by any corporation (including the Company or any of its
subsidiaries or affiliates), partnership, person or other entity or group
(as defined in Section 13(d)(3) of the Exchange Act), other than Purchaser
or its affiliates, or the Management Group or any of their respective
affiliates (but only with respect to the Shares that they beneficially own
on the date hereof), or (B) (1) the Company's Board of Directors (the
"Board of Directors," the "Coinmach Board" or the "Board") or any committee
thereof shall have withdrawn or modified in a manner adverse to Purchaser
(including by amendment of the Schedule 14D-9) the approval or
recommendation of the Offer, the Merger or the Merger Agreement, or
approved or recommended any proposal or offer from any person relating to
any acquisition or purchase of assets of, or any equity interest (other
than the exercise of outstanding options) in, the Company or any of its
subsidiaries, or any tender offer (including a self tender offer) or
exchange offer, merger, reorganization, consolidation, business
combination, recapitalization, restructuring, spin-off, liquidation,
dissolution or similar transaction involving, directly or indirectly, the
Company or any of its subsidiaries ("Takeover Proposal") or any other
acquisition of Shares other than the Offer or the Merger or shall have
resolved to do any of the foregoing, (2) any corporation, partnership,
person or other entity or group shall have entered into a definitive
agreement or an agreement in principle with the Company with respect to an
acquisition transaction pursuant to a Takeover Proposal, or (3) the
Company's Board of Directors or any committee thereof shall have resolved
to do any of the foregoing;
(iv) any of the representations and warranties of the Company set forth
in the Merger Agreement shall not be true and correct, except (A) those
representations and warranties that address matters only as of a particular
date are true and correct as of such date, and (B) where the failure of
such representations and warranties to be true and correct (without giving
effect to any limitation as to "materiality" or "material adverse effect"
set forth therein), does not have, and is not likely to have, individually
or in the aggregate, a Material Adverse Effect on the Company;
(v) the Company shall have failed to perform in any material respect any
obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under the
Merger Agreement;
(vi) the Merger Agreement shall have been terminated in accordance with
its terms or the Offer shall have been terminated with the consent of the
Company;
(vii) any waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") applicable to the purchase of
Shares pursuant to the Offer shall not have expired or been terminated, or
any material approval, permit, authorization or consent of any domestic or
foreign governmental, administrative or regulatory agency (federal, state,
local, provincial or otherwise) shall not have been obtained on terms
satisfactory to the Purchaser in its reasonable discretion; or
(viii) there shall have occurred any change, condition, event or
development that has a Material Adverse Effect on the Company.
The foregoing conditions are for the sole benefit of Purchaser and may be
asserted by Purchaser regardless of the circumstances giving rise to any such
conditions and may be waived by Purchaser in whole or in part at any time and
from time to time in their reasonable discretion, in each case, subject to the
terms of the Merger Agreement. The failure by Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of such
right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
Composition of the Board of Directors After the Offer. The Merger Agreement
provides that, promptly upon the consummation of the Offer and payment for
Shares of the Company equal to a majority of all Shares, Purchaser shall be
entitled to designate all of the individuals who shall serve as directors of
the Company, and the Company shall promptly take all actions necessary to
cause Purchaser's designees to be so elected, including, seeking the
resignations of Mr. Stephen G. Cerri and Dr. Arthur B. Laffer or, if
necessary, otherwise increasing or decreasing the size of the Board.
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The Merger. The Merger Agreement provides that, upon the terms and subject
to the satisfaction or waiver of the conditions thereof (and including those
described herein under "Conditions of the Offer") and in accordance with the
DGCL, at the Effective Time, Purchaser shall be merged with and into the
Company. Following the Merger, the separate corporate existence of Purchaser
shall cease and the Company shall continue as the Surviving Corporation. At
Purchaser's election, any affiliate or direct or indirect subsidiary of
Purchaser may be merged with and into the Company instead of Purchaser.
Certificate of Incorporation, By-laws, Directors and Officers After the
Merger. The Merger Agreement provides that the certificate of incorporation of
the Surviving Corporation shall be amended at the Effective Time to conform to
the certificate of incorporation of Purchaser, as in effect at the Effective
Time, except (a) the name of the Surviving Corporation will remain Coinmach
Laundry Corporation, (b) any provisions in the certificate of incorporation of
Purchaser naming the incorporator and/or the initial directors shall not
become part of the certificate of incorporation of the Surviving Corporation
and (c) as otherwise prohibited by Delaware law. At the Effective Time, the
By-Laws of Purchaser shall be the By-Laws of the Surviving Corporation until
thereafter amended in accordance with their terms and applicable law except
that the name of the Surviving Corporation shall remain Coinmach Laundry
Corporation. The Merger Agreement further provides that the directors of the
Purchaser immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation and shall hold office until their
respective successors are duly elected and qualified, or their earlier death,
resignation or removal. The officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation, in
each case until their respective successors are duly elected and qualified, or
their earlier death, resignation or removal.
Conversion of Shares. Pursuant to the Merger Agreement, at the Effective
Time, each Share issued and outstanding immediately prior to the Effective
Time (other than any Shares held by Purchaser or any wholly owned subsidiary
of Purchaser, in the treasury of the Company or by any wholly owned subsidiary
of the Company, which Shares, by virtue of the Merger, shall be canceled and
shall cease to exist with no payment being made with respect thereto, and
other than Shares held by a person who has not voted in favor of the Merger or
consented thereto in writing and who demands in writing an appraisal for such
Common Shares in accordance with Section 262 of the DGCL (the "Dissenting
Shares")) shall be converted into the right to receive in cash the Offer Price
(the "Merger Price"), payable to the holder thereof, and without interest,
upon surrender of the certificate formerly representing such Share.
Conversion of Options. The Merger Agreement provides that, immediately prior
to the Effective Time, each outstanding option to purchase Shares, whether or
not then exercisable or vested, shall become fully exercisable and vested and
shall be canceled by the Company. Each holder thereof shall be entitled to
receive immediately following the Effective Time from the Company in
consideration for such cancellation an amount in cash equal to the product of
(a) the excess of the Merger Price over the exercise price per Share thereof
and (b) the number of Shares subject to such stock option (net of taxes
required by law to be withheld with respect thereto).
Dissenting Shares. The Merger Agreement provides that Dissenting Shares
shall not be converted into the right to receive the Merger Price, but shall
be entitled to receive the consideration as shall be determined pursuant to
Section 262 of the DGCL, unless and until such holder fails to perfect or
withdraws or otherwise loses his right to appraisal and payment under the
DGCL. If, after the Effective Time, any such holder fails to perfect or
withdraws or loses his right to appraisal, such Dissenting Shares shall
thereupon be treated as if they had been converted as of the Effective Time
into the right to receive the Merger Price, if any, to which such holder is
entitled, without interest or dividends thereon. The Company shall give
Purchaser prompt notice of any demands received by the Company for appraisal
of Shares, withdrawals of such demands and any other instruments served
pursuant to the DGCL and received by the Company and, prior to the Effective
Time, Purchaser shall have the right to direct all negotiations and
proceedings with respect to such demands. Prior to the Effective Time, the
Company shall not, except with the prior written consent of Purchaser, make
any payment with respect to, or settle or offer to settle, any such demands.
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Stockholders Meeting. The Merger Agreement provides that if required, the
Company, acting through its Board of Directors, shall, in accordance with
applicable law, (a) duly call, give notice to, convene and hold a special
meeting of the stockholders (the "Special Meeting") as soon as practicable
following the consummation of the Offer for the purpose of considering and
taking action under the Merger Agreement; (b) prepare and file with, and use
its reasonable best efforts to have cleared by, the SEC a preliminary proxy
statement relating to the Merger and the Merger Agreement and use its
reasonable efforts (i) to obtain and furnish the information required to be
included by the SEC in the Proxy Statement (as hereinafter defined) and, after
consultation with Purchaser, to respond promptly to any comments made by the
SEC with respect to the preliminary proxy statement and cause a definitive
proxy statement (the "Proxy Statement") to be mailed to the stockholders and
(ii) to obtain the necessary approvals of the Merger and the Merger Agreement
by the stockholders; and (c) subject to the fiduciary obligations of the Board
of Directors under applicable law as determined in good faith by a majority of
the Board of Directors based on the advice of independent outside legal
counsel, (i) include in the Proxy Statement the recommendation of the Board of
Directors that the stockholders vote in favor of the approval of the Merger
and the adoption of the Merger Agreement and a written fairness opinion of the
Company's financial advisor that the consideration to be received by the
stockholders pursuant to the Offer and the Merger is fair from a financial
point of view to such stockholders and (ii) use its reasonable best efforts to
obtain the necessary adoption of the Merger Agreement. Pursuant to the Merger
Agreement, Purchaser also agrees that it will vote, or cause to be voted, all
of the Shares then owned by it or any of its other subsidiaries in favor of
the approval of the Merger and the adoption of the Merger Agreement.
The Merger Agreement provides that, notwithstanding the foregoing, in the
event Purchaser shall acquire at least 90% of the outstanding Shares of each
class pursuant to the Offer, the parties thereto agree to take all necessary
and appropriate action to cause the Merger to become effective as soon as
practicable after the consummation of the Offer, without a meeting of the
stockholders, in accordance with Section 253 of the DGCL.
Conduct of Business Pending the Merger. The Company has agreed that, during
the period from the date of the Merger Agreement to the termination of the
Offer, except pursuant to the terms of the Merger Agreement or unless
Purchaser shall otherwise agree in writing, the Company will, and will cause
each of its subsidiaries to conduct its operations only in, and the Company
and its subsidiaries shall not take any action other than in, the ordinary
course of business consistent with past practice and in compliance with
applicable laws. The Company has also agreed that the Company and each of its
subsidiaries shall use commercially reasonable efforts to preserve intact
their business organization, to keep available the services of their present
officers and key employees, and to preserve their present relationships with
customers, suppliers, creditors, business partners and other persons with
which they have significant business relations.
Without limiting the generality of the foregoing and except as otherwise
expressly contemplated by the Merger Agreement, the Company has agreed that
the Company and its subsidiaries shall refrain from taking various actions
without the Purchaser's prior written consent until the termination of the
Offer. These prohibitions cover, among other things, limitations on making
changes to their organizational documents, selling their capital stock,
declaring or paying any dividend or other distribution, making changes in
their capital stock, increasing the compensation payable to directors,
officers and employees (except in the ordinary course of business consistent
with past practices), increasing or granting any severance or termination pay
(except to the extent required under existing plans, policies or agreements),
engaging in any material corporate transaction, including acquisitions,
incurring debt outside the ordinary course of business under existing lines of
credit, entering into, renewing or amending contracts and making capital
expenditures beyond specified limits, selling, leasing, licensing or disposing
of any material assets (outside the ordinary course of business), changing
accounting or tax policies, settling any material litigation or any litigation
which relates to the transactions contemplated by the Merger Agreement,
changing the key management structure of the Company or any of its
subsidiaries, transferring or granting any rights to intellectual property,
taking any action reasonably likely to expose the Company to any claim that
the Company has violated applicable laws, rules or regulations, adopting a
plan of complete or partial dissolution or liquidation, merger, restructuring,
recapitalization or other reorganization of the Company or any of its active
subsidiaries, paying or discharging any claims, liabilities or
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obligations outside the ordinary course of business consistent with past
practices, entering into any collective bargaining agreement and taking any
actions that would make any of the representations and warranties of the
Company contained in the Merger Agreement untrue and incorrect in any material
respect or result in any of the Offer Conditions not being satisfied.
Access to Information. Pursuant to the Merger Agreement, from the date
thereof until the termination or consummation of the Offer, the Company is
required to, and must cause its subsidiaries, and each of their respective
officers, directors, employees, counsel, advisors, representatives and
financing sources (collectively, the "Company Representatives") to, provide
Purchaser and its officers, employees, counsel, advisors and representatives
and financing sources (collectively, the "Purchaser Representatives")
reasonable access (subject to existing confidentiality and similar non-
disclosure obligations and the preservation of the attorney-client work
product privileges), consistent with applicable law, during normal business
hours and upon reasonable notice, to the offices and other facilities and to
the books and records of the Company and its subsidiaries, and to permit
Purchaser and Purchaser Representatives to make inspections of such as any of
them may reasonably require, and to cause the Company Representatives and the
Company's subsidiaries to furnish Purchaser or Purchaser Representative to the
extent available with such other information with respect to the business and
operations of the Company and its subsidiaries as Purchaser may from time to
time reasonably request.
Efforts. The Merger Agreement provides that, subject to the terms and
conditions thereof, each of the parties thereto shall use its reasonable good
faith efforts to ensure that the conditions set forth in the Merger Agreement
are satisfied and to consummate and make effective the transactions
contemplated by the Offer, the Merger and the Merger Agreement as promptly as
practicable.
Public Announcements. So long as the Merger Agreement is in effect,
Purchaser and the Company agree to consult with each other before issuing any
press release or otherwise making any public statement with respect to the
transactions contemplated by the Merger Agreement and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by law or any listing agreement with any securities
exchange.
Indemnification. The Merger Agreement provides that the Company will, and
after the Effective Time, Purchaser will cause the Surviving Corporation to,
until the expiration of any applicable statutes of limitation, (a) indemnify
and hold harmless each present and former director, officer, and employee of
the Company (the "Company Indemnified Parties"), against any costs and
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages or liabilities (collectively, "Costs") (but only to the extent
such Costs are not otherwise covered by insurance and paid) incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to matters existing or occurring at or prior to the Effective Time, including,
in any event, in connection with the Offer, the Merger and the Merger
Agreement, whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent permitted under applicable law and (b) keep in
effect the provisions in its articles of incorporation and bylaws containing
the provisions with respect to exculpation of director and officer liability
and indemnification set forth in the articles of incorporation and bylaws of
the Company on the date of the Merger Agreement to the fullest extent
permitted under applicable law, which provisions shall not be amended,
repealed or otherwise modified in any manner adverse to the Company
Indemnified Parties, without the prior written consent of such persons, except
as required by applicable law.
The Merger Agreement also provides that the Company will, and after the
Effective Time, Purchaser will cause the Surviving Corporation to, use its
reasonable best efforts to cause to be maintained in effect for not less than
six years from the Effective Time the policies of the directors' and officers'
liability insurance maintained by the Company with respect to matters
occurring prior to the Effective Time and providing coverage and containing
terms and conditions which are no less advantageous than those currently in
place, provided, that the Surviving Corporation shall not be required to pay
an annual premium in excess of 150% of the last annual premium paid by the
Company prior to the date thereof (it being understood that if the Surviving
Corporation is unable to obtain the insurance required by the Merger
Agreement, it shall obtain as much comparable insurance as possible for an
annual premium equal to such maximum amount).
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The obligations of the Purchaser to cause the Surviving Corporation to take
the actions described above will terminate at any time the Purchaser and its
affiliates control less than a majority of the Shares and less than a majority
of the Company's Board of Directors.
No Solicitation of Transactions. The Merger Agreement provides that the
Company shall not, and shall not authorize or permit any of its or its
subsidiaries' directors, officers, employees, agents, advisors or
representatives, directly or indirectly, to (a) solicit, initiate or encourage
or take any other action to facilitate any Takeover Proposal or take any other
action which may be reasonably expected to lead to any Takeover Proposal other
than the transactions contemplated by the Merger Agreement, (b) negotiate,
explore or otherwise participate in discussions with any person (other than
Purchaser or its respective directors, members, officers, employees, agents
and representatives), and including any parties with which the Company has
previously engaged in discussions or negotiations with respect to any Takeover
Proposal or potential Takeover Proposal, or furnish to any person (other than
Purchaser or its respective directors, members, officers, employees, agents
and representatives) any information with respect to its business, properties
or assets or any of the foregoing, or otherwise cooperate in any way with, or
assist or participate in, facilitate or encourage, any effort or attempt by
any other person (other than Purchaser or its respective directors, members,
officers, employees, agents and representatives) to do or seek any of the
foregoing or (c) enter into any agreement, arrangement or understanding with
respect to, or endorse, any Takeover Proposal; provided, however, that the
foregoing shall not prohibit the Company from (i) prior to the consummation of
the Offer (A) furnishing information pursuant to a confidentiality agreement
(provided for informational purposes to Purchaser), on terms and conditions
customary for similar transactions, concerning the Company and its businesses,
properties or assets to a third party who has made an unsolicited bona fide
written Takeover Proposal, or (B) engaging in discussions or negotiations with
such a third party who has made an unsolicited bona fide written Takeover
Proposal which did not otherwise result from a breach of the relevant section
in the Merger Agreement or (ii) following receipt of an unsolicited bona fide
written Takeover Proposal but prior to consummation of the Offer, failing to
make or withdrawing or modifying its recommendation of the Merger Agreement,
but in each case referred to in the foregoing clauses (i) (B) or (ii) only to
the extent that the Company's Board of Directors shall have concluded in good
faith, on the basis of advice from outside legal counsel and the Company's
financial advisors, that (A) such Takeover Proposal is more favorable to the
stockholders than the transactions contemplated by the Offer and the Merger
Agreement (taking into account all legal, financial, regulatory and other
aspects of the proposal and the person making the proposal), (B) such Takeover
Proposal is not conditioned on obtaining financing (and with respect to which
Purchaser has received written evidence, in form and substance reasonably
acceptable to Purchaser, of such third party's ability to fully finance its
Takeover Proposal) and provides for consideration to the stockholders payable
in cash or shares of capital stock that for a period of at least two
consecutive years immediately preceding the effective time of the closing of
such Takeover Proposal was continuously registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended and listed
on a national securities exchange or quoted on the NASDAQ National Market (any
such capital stock, "Public Stock") or any combination of cash and Public
Stock, (C) such Takeover Proposal is for at least 100% of the Shares, and (D)
the Coinmach Board's fiduciary duties, as they would exist in the absence of
any limitation in this Agreement, would require the Coinmach Board to take
such action (any Takeover Proposal satisfying each of the immediately
preceding clauses (A), (B), (C) and (D), hereinafter referred to as a
"Superior Proposal"); provided, further, that the Coinmach Board shall not
take any of the foregoing actions referred to in clauses (i) and (ii) until
after prior written notice to Purchaser with respect to such action. After
taking any such action, the Coinmach Board shall promptly advise Purchaser
with respect to the status thereof as developments arise or as requested by
Purchaser. Nothing in the Merger Agreement shall prevent the Coinmach Board
from taking, and disclosing to the stockholders, a position contemplated by
Rules 14d-9 and 14e-2 promulgated under the Exchange Act with regard to any
tender offer. In addition, if the Company Board receives an unsolicited
Takeover Proposal or any inquiry with respect to or which could lead to any
Coinmach Proposal, then the Company shall immediately inform Purchaser orally
and in writing of the terms and conditions of such proposal and the identity
of the person making it and if any Takeover Proposal is in writing, the
Company shall immediately deliver a copy thereof to Purchaser.
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Special Meeting. The Merger Agreement provides that the Company shall take
no action to call a special meeting of the stockholders without the prior
consent of Purchaser unless compelled by legal process, except in accordance
with the Merger Agreement unless and until the Merger Agreement has been
terminated in accordance with its terms.
Disposition of Litigation. The Merger Agreement provides that the Company
will not settle any litigation currently pending, or commenced after the date
thereof, against the Company or any of its directors by any Stockholder
relating to the Offer or the Merger Agreement, without the prior written
consent of Purchaser. The Merger Agreement further provides that the Company
will not voluntarily cooperate with any third party which has sought or may
thereafter seek to restrain or prohibit or otherwise oppose the Offer or the
Merger and will cooperate with Purchaser to resist any such effort to restrain
or prohibit or otherwise oppose the Offer or the Merger, subject, in each
case, to the fiduciary duties of the Board of Directors.
State Takeover Laws. The Company shall, upon the request of Purchaser, take
all reasonable steps to assist in any challenge by Purchaser to the validity
or applicability to the transactions contemplated by the Merger Agreement,
including the Offer and the Merger, of any state or foreign takeover law.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto including, but
not limited to, representations and warranties by the Company concerning the
Company's capitalization, required filings and consents, the Board of
Directors' approval of the Merger Agreement and the transactions contemplated
thereby, SEC filings and financial statements, absence of certain changes or
events, business, compliance with applicable laws, no conflicts, opinion of
financial advisor, absence of litigation, tax matters, insurance matters, and
brokers. Some of the representations are qualified by a Material Adverse
Effect clause.
Conditions of the Merger. Under the Merger Agreement, the respective
obligations of Purchaser and the Company to consummate the Merger are subject
to the satisfaction, at or before the Effective Time, of each of the following
conditions: (a) if required by the DGCL, the stockholders shall have duly
adopted the Merger Agreement and approved the transactions contemplated by the
Merger Agreement pursuant to the requirements of the Company's Certificate of
Incorporation and applicable law (which the Company has represented shall be
solely the affirmative vote of a majority of the outstanding Shares), (b)
Purchaser shall have accepted for payment and paid for Shares pursuant to the
Offer in accordance with the terms thereof, and (c) the consummation of the
Merger shall not be restrained, enjoined or prohibited by any law, order,
judgment, decree, injunction or ruling of a court of competent jurisdiction or
any governmental entity and there shall not have been any statute, rule or
regulation enacted, promulgated or deemed applicable to the Merger by any
governmental entity which prevents the consummation of the Merger; provided
that the party invoking this condition shall have used its reasonable best
efforts to prevent the entry of such order, judgment, decree, injunction or
ruling and to appeal as promptly as practicable any such order, judgment,
decree, injunction or ruling.
Termination Events. The Merger Agreement can be terminated and the Offer and
the Merger contemplated thereby may be abandoned at any time notwithstanding
approval thereof by the stockholders:
(a) by mutual written consent of Purchaser and the Company;
(b) by Purchaser or the Company, if there shall be any statute, law, rule
or regulation that makes consummation of the Offer or the Merger illegal or
prohibited or if any court or other governmental entity of competent
jurisdiction or located or having jurisdiction within the United States or
any country or economic region in which either the Company or Purchaser,
directly or indirectly, has material assets or operations shall have
issued, enacted, entered, promulgated or enforced any final order,
judgment, decree, injunction, or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Offer or the Merger and
such order, judgment, decree, injunction or ruling shall have become
nonappealable;
(c) by Purchaser or the Company if (i) the Offer is terminated or
withdrawn pursuant to its terms without any Shares being purchased
thereunder or (ii) if Purchaser shall have failed to pay for Shares
pursuant to the Offer within 90 days following the date of the Merger
Agreement; provided, however, that
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<PAGE>
neither the Purchaser nor the Company, as the case may be, may terminate
the Merger Agreement as described in this paragraph, if Purchaser's
termination or withdrawal of the Offer or failure to pay for Shares
pursuant to the Offer has been caused by or results from the failure of
such terminating party to perform any of its covenants or agreements
contained in the Merger Agreement or a breach of such party's
representations and warranties contained in the Merger Agreement;
(d) by the Company if (i) the Offer shall not be commenced within ten
business days following the date of execution of the Merger Agreement,
provided, that the failure to so commence has not been caused by and does
not result from the failure of the Company to perform any of its
representations, warranties, covenants or agreements contained in the
Merger Agreement, (ii) Purchaser shall have breached any of its
representations, warranties, covenants or agreements contained in the
Merger Agreement which breach materially adversely affects Purchaser's
ability to consummate the Offer, and, with respect to any such breach that
is reasonably capable of being cured, which shall not have been cured prior
to the earlier of (A) 10 business days following notice of such breach and
(B) two business days prior to the Expiration Date, (iii) Purchaser shall
have terminated the Offer, or (iv) prior to the purchase of Shares pursuant
to the Offer, any person shall have made a bona fide Takeover Proposal that
is a Superior Proposal (after taking into account any revised proposal made
by Purchaser during the Three-Day Period (as defined below)); provided,
however, that (1) such Superior Proposal did not result from a breach of
the provisions described in "No Solicitation of Transactions," above, (2)
on the basis of advice from outside legal counsel and the Company's
financial advisors and acting in good faith, the Company Board or the
Special Committee shall have withdrawn its recommendation to the
stockholders that the Offer and the Merger is fair and advisable and in the
best interests of the Company, and (3) prior to such termination by the
Company, the Company Board shall, if requested by Purchaser in connection
with a revised proposal made by Purchaser, negotiate in good faith with
Purchaser in respect of such revised proposal for not less than three (3)
business days (the "Three Day Period"); and provided, further, that such
termination under this clause (d)(iv) shall not be effective until the
Company has reimbursed Purchaser for all of its fees and expenses as
described below;
(e) by Purchaser prior to the purchase of Shares pursuant to the Offer,
if (i) there shall have been a breach of any representation or warranty on
the part of the Company contained in the Merger Agreement which would
reasonably be expected to have a Material Adverse Effect on the Company or
which would materially adversely affect (or materially delay) the
commencement or consummation of the Offer, (ii) there shall have been a
breach of any covenant or agreement on the part of the Company contained in
the Merger Agreement which would reasonably be expected to have a Material
Adverse Effect on the Company or which would materially adversely affect
(or materially delay) the commencement or consummation of the Offer or the
Merger, which, in the case of clause (i) or (ii), if such breach is
reasonably capable of being cured, such breach shall not have been cured
prior to the earlier of (A) 10 business days following notice of such
breach and (B) two business days prior to the Expiration Date, (iii) the
Company shall effect, or enter into any agreement with respect to, a
transaction with any person pursuant to a Takeover Proposal (other than the
Purchaser) or the Company Board has resolved to do so, (iv) the Company
Board shall have withdrawn or modified in a manner adverse to Purchaser its
approval or recommendation of the Offer or the Merger or shall have
recommended another offer or transaction, or shall have resolved to effect
any of the foregoing or (v) the Minimum Condition (as defined in Annex I of
the Merger Agreement) shall not have been satisfied by the Expiration Date;
or
(f) by the Company, if the Company enters into a written agreement with
respect to a Superior Proposal in accordance with the terms of this
Agreement, including, without limitation, payment of all fees and expenses
as described below.
Termination Fees and Expenses. The Merger Agreement provides that (a) if the
Merger Agreement is terminated by the Company as described under paragraph
(d)(iv) under "Termination Events", or by the Purchaser as described under
paragraph (e)(i), (ii), (iii) or (iv) under "Termination Events"; or (b) the
transactions contemplated by the Merger Agreement are not consummated through
no fault of the Purchaser, and the Company within one (1) year of the
termination of the Merger Agreement enters into a transaction with
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<PAGE>
another person which is the result of a Takeover Proposal, then the Company
shall pay to Purchaser a cash fee of $8.0 million (the "Fee"). In addition to
any amounts described in the immediately preceding sentence, the Merger
Agreement provides that all Expenses (as hereinafter defined) incurred by the
parties to the Merger Agreement shall be borne solely and entirely by the
Company, and that the Company shall without exception, at the request of
Purchaser, whether or not the Offer has been withdrawn, terminated or
consummated, promptly (but not later than three business days after receipt of
written invoices from Purchaser evidencing such Expenses) reimburse Purchaser
for all such Expenses; provided that, if the Offer is not consummated, the
Company's obligation to reimburse Purchaser's Expenses is limited to
$1,500,000. For purposes of this subsection, "Expenses" means all out-of-
pocket fees and expenses actually incurred by Purchaser, whether before or
after the execution and delivery of the Merger Agreement, in connection with
the transactions contemplated by the Merger Agreement, including, without
limitation, reasonable fees and expenses payable to all banks, investors,
investment banking firms and other financial institutions, and their
respective agents and counsel, all fees and reasonable expenses of counsel,
accountants, experts and consultants to Purchaser and its investors, and,
further, including without limitation fees and reasonable expenses of, or
incurred in connection with, any litigation or other proceedings to collect
the Fee or any of the fees, costs and expenses described above.
3. The Rollover Agreement
Simultaneously with the execution of the Merger Agreement, Purchaser entered
into a Rollover Agreement with the Management Group. The Rollover Agreement
obligates Messrs. Kerrigan, Blatt, Doyle, Stanky and Chapman to exchange
265,369, 298,845, 59,467, 23,746 and 9,561 Shares, respectively, for equity
interests in the Purchaser having designations, powers, preferences and
relative and other special rights, qualifications, limitations and
restrictions no less favorable than those contained in the equity interests
issued to GTCR Fund VII and/or its affiliates in connection with the
transactions contemplated by the Merger Agreement. The Rollover Agreement
would terminate upon the termination of the Offer.
4. Stock Options
The Merger Agreement provides that, immediately following consummation of
the Merger, the holder of each outstanding option to purchase Shares, whether
or not then exercisable or vested, will be paid the excess of $14.25 over the
exercise price of such options, multiplied by the number of Shares subject to
such options (less any required withholding taxes). Pursuant to such
provision, the directors and executive officers of the Company will be
entitled to receive the following amounts:
<TABLE>
<CAPTION>
Name Title Amount
---- ----- --------
<C> <S> <C>
Stephen R. Kerrigan......... Chairman of the Board & Chief $908,380
Executive Officer, Director
Mitchell Blatt.............. President, Chief Operating Officer, $370,610
Director and Senior Vice President
Robert M. Doyle............. Chief Financial Officer, Senior Vice $477,682
President, Treasurer and Secretary
Michael E. Stanky........... Senior Vice President $292,644
John E. Denson.............. Senior Vice President, Corporate $104,447
Development
Bruce V. Rauner............. Director --
David A. Donnini............ Director --
James N. Chapman............ Director $237,294
Arthur B. Laffer............ Director $104,670
Stephen G. Cerri............ Director $104,670
</TABLE>
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<PAGE>
5. Indemnification
Article Five of Coinmach's Third Amended and Restated Bylaws requires that
Coinmach indemnify and hold harmless any director or officer of Coinmach, or
any person serving at the request of Coinmach as a director, officer or agent
of another corporation, partnership, joint venture, trust, or other
enterprise, including service with respect to an employee benefit plan, to the
full extent permitted by Delaware law. The indemnification and advancement of
expenses permitted by law shall, unless otherwise provided, when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent of Coinmach and inure to the benefit of the heirs, executors
and administrators of such person. A copy of such Article Five is filed as
Exhibit 4 hereto, and is incorporated herein by reference.
Article Eleven of Coinmach's Fourth Amended and Restated Certificate of
Incorporation eliminates directors' personal liability to Coinmach or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Such Article Eleven does not eliminate or limit the liability of a director
(a) for any breach of the director's duty of loyalty to Coinmach or its
stockholders, (b) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law, (c) under Section
174 of the DGCL or (d) for any transaction from which the director derived an
improper personal benefit. A copy of such Article Eleven is filed as Exhibit 5
hereto, and is incorporated herein by reference.
The Merger Agreement provides for continued rights to indemnification and
insurance, as described under "The Merger Agreement--Indemnification" above.
6. Voting Agreement
The Company and GTCR Fund IV, the holder of 3,008,402 shares of Common Stock
(or approximately 23% of the outstanding Common Stock), MCS Capital, Inc., a
corporation controlled by Steven Kerrigan ("MCS"), the holder of 329,369
shares of Common Stock (or approximately 2.5% of the outstanding Common
Stock), Mitchell Blatt, the holder of 298,845 shares of Common Stock (or
approximately 2.3% of the outstanding Common Stock), President and Fellows of
Harvard College ("Harvard"), the holder of 70,273 shares of Common Stock (or
approximately .05% of the outstanding Common Stock), and Robert M. Doyle,
Michael E. Stanky, Charles Prato, James N. Chapman, Michael Marrus, David
Tulkop, Russel Harrison, Sash A. Spencer and Mary Spencer, the holders of an
aggregate of 175,104 shares of Common Stock (or approximately 1.4% of the
outstanding Common Stock), 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 (a) two persons designated by GTCR Fund IV (currently Messrs. Rauner and
Donnini), (b) 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), (c) two persons jointly designated by GTCR Fund IV and Mr. Kerrigan
(currently Mr. Chapman and Dr. Laffer), and (d) one person designated by GTCR
Fund IV and approved by Mr. Kerrigan (currently Mr. Cerri). The Voting
Agreement provides that it shall terminate at such time as GTCR Fund IV holds
in the aggregate less than twenty percent of all issued and outstanding shares
of Class A Common Stock. GTCR Fund IV has informed the Company that it intends
to tender all of its Shares in the Offer (other than such Shares contributed
to GTCR-CLC, LLC in exchange for a 1% equity interest in GTCR-CLC, LLC).
Accordingly, upon consummation of the Offer, the Voting Agreement will
terminate in accordance with its terms.
7. Other
The Company paid Mr. Chapman, a director of the Company, $320,000, $120,000
and $180,000, during each of the fiscal years ended 1998, 1999 and 2000,
respectively, for general financial advisory and investment banking services.
12
<PAGE>
Item 4. The Solicitation or Recommendation.
Recommendation
At a meeting held on May 12, 2000, a special committee of the Board of
Directors of Coinmach (the "Special Committee") unanimously determined that
the Offer and the Merger are fair to, and in the best interests of, Coinmach
and its stockholders (other than stockholders of the Purchaser), recommended
that the Board of Directors of Coinmach approve the Merger Agreement and the
transactions contemplated by the Merger Agreement (including the Offer) and
recommended that Coinmach's stockholders tender their Shares pursuant to the
Offer and, if approval is required by applicable law, approve the Merger.
At a meeting held on May 12, 2000, the Coinmach Board received the Special
Committee's recommendation, and unanimously determined that the Offer and the
Merger are fair to, and in the best interests of, Coinmach and its
stockholders (other than stockholders of the Purchaser), approved the Merger
Agreement and the transactions contemplated thereby (including the Offer) and
recommended that Coinmach's stockholders tender their Shares pursuant to the
Offer and, if approval is required by applicable law, approve the Merger.
THE COINMACH BOARD RECOMMENDS THAT THE STOCKHOLDERS OF COINMACH TENDER THEIR
SHARES PURSUANT TO THE OFFER.
Background
In January 1995, certain members of Coinmach's management, together with
GTCR Fund IV, acquired Coinmach. Presently, GTCR Fund IV beneficially owns
approximately 23% of the outstanding Shares.
An integral component of the Company's business strategy since January 1995
has been growth through selective acquisitions designed to increase the
Company's installed machine base and achieve economies of scale, increase
operating efficiencies and improve financial performance. From November 1995
to March 1998, the Company pursued a strategy of rapid growth through
acquisitions, expanding its national presence in the outsourced laundry
equipment services industry. Against the background of limited opportunities
for significant acquisitions, in an effort to preserve and reduce its level of
indebtedness, the Company determined to slow its rate of growth through
acquisitions. During this period, the Coinmach Board became concerned that the
Company's strong operating performance within its core business was not
appropriately reflected in its share price. These concerns were discussed
internally with management and with the Company's investment bankers in early
1997, resulting in a determination to evaluate available strategies and/or
opportunities to maximize stockholder value, including possibly a sale of the
Company. Following an active solicitation process (the "Prior Auction
Process") conducted by a nationally recognized investment banking firm,
including meetings with potential acquirors and strategic partners, the
Company received only one acquisition proposal, which was at a price per Share
less than the trading price of the Common Stock at that time. The Coinmach
Board abandoned its efforts to sell the Company due to the lack of interest.
From 1998 through October 1999, the market price for Coinmach Stock
generally dropped, and on October 11, 1999, the closing price for the Coinmach
Stock was $8.87. On October 12, 1999 Coinmach received a letter from GRKC
Holding Company L.L.C. ("GRKC"), a company controlled by Messrs. Kerrigan and
Chapman, proposing to acquire not less than 80% and up to 90% of all the
outstanding Coinmach Stock for $13.00 per Share in cash (the "Original
Offer").
On October 13, 1999, the Coinmach Board held a special meeting at which it
appointed Dr. Laffer and Mr. Cerri to serve as the sole members of the Special
Committee. Dr. Laffer and Mr. Cerri are directors of Coinmach, neither of whom
is a member of Coinmach management or affiliated with GRKC. The Special
Committee was empowered to (a) retain a financial advisor (subject to certain
financial limitations) to evaluate the fairness of the Original Offer to the
Company's stockholders, and if appropriate render a fairness opinion with
respect thereto, and (b) engage legal counsel to advise the Special Committee
with respect to the Original Offer and assist the Special Committee in making
its recommendations to the Coinmach Board and stockholders with respect to
such offer. The Special Committee and its legal counsel, Skadden, Arps, Slate,
Meagher & Flom LLP ("Skadden") subsequently questioned the breadth of the
Special Committee's authority. The Special Committee believed that
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<PAGE>
the financial limitation placed on its ability to retain a financial advisor
would limit its choice of financial advisors, and that the authority
previously granted would not permit it to solicit other interest in acquiring
Coinmach. As a result of further discussions, on November 24, 1999 the
Coinmach Board lifted the financial limitation and on December 2, 1999 the
Coinmach Board granted to the Special Committee the authority to take any
actions such committee reasonably deemed necessary or appropriate in order to
facilitate its review and consideration of the Original Offer.
On October 20, 1999, GTCR Golder Rauner, L.L.C., an affiliate of GTCR Fund
VII, delivered to Coinmach its commitment letter to provide equity financing
of $155 million to fund the Original Offer. On the same date, GRKC publicly
announced its proposal to acquire Coinmach.
On November 15, 1999, GRKC delivered to the Special Committee a draft of the
Merger Agreement. The draft Merger Agreement provided for a cash tender offer
at $13.00 per Share for 80% to 90% of the outstanding Coinmach Stock, cash-out
of all vested stock options, recapitalization accounting, a termination fee of
$20 million which would apply in certain circumstances, and other matters.
On November 24, 1999, GRKC delivered a letter to the Special Committee
advising the Special Committee that, unless GRKC and the Special Committee
were able to reach an agreement with respect to the Original Offer by December
13, 1999, it intended to withdraw the Original Offer and consider other
options to deliver value to the stockholders.
On November 24, 1999, the Coinmach Board received a letter from a potential
bidder for Coinmach, indicating its interest in better understanding the
current status of the Company's business with an eye to potentially making a
formal offer to purchase the Company at a price in excess of $13.00 per Share.
On November 24, 1999, Lazard Freres & Co. LLC ("Lazard") was retained as
investment banker to assist the Special Committee in its review of the
Original Offer. On December 7, 1999, representatives of Lazard and Skadden met
with Mr. Chapman, with representatives of Jefferies & Co. (financial advisor
to GRKC) and Mayer, Brown & Platt, counsel to GRKC ("Mayer Brown"). At that
meeting, Mr. Chapman and Jefferies & Co. presented their view of the value of
Coinmach and reported on the details of the Prior Auction Process. The Special
Committee met on December 8, 1999 to discuss the results of the December 7,
1999 meeting and Lazard's progress in evaluating the Original Offer. The
Special Committee also discussed the alternatives of (a) conducting a
widespread solicitation of interest in acquiring Coinmach, (b) approaching
only a few select potential acquirors, (c) attempting to negotiate a pre-
emptive price from GRKC and (d) remaining independent. No decisions were made
at that time, pending completion of Lazard's work.
At a meeting on December 30, 1999, Lazard presented to the Special Committee
an update of its evaluation of the Original Offer. After again discussing the
options available to it, the Special Committee requested Lazard to contact a
limited group of potential buyers who had expressed an interest in Coinmach in
the past or had a potential strategic rationale for acquiring Coinmach, to
determine whether these entities would pursue an acquisition of Coinmach.
At a meeting of the Special Committee on January 13, 2000, Lazard reported
on its contacts with five potential bidders for Coinmach. One of the potential
bidders indicated that it would review any information prepared for bidders as
part of an auction process, but was uncertain as to its interest in submitting
a definitive proposal. The potential bidder which had submitted a letter on
November 24, 1999 indicated that its interest level would not be high without
the participation of Mr. Kerrigan and, in any event, would only be interested
at or marginally above a price of $13 per Share. Because of these and other
uncertainties the Special Committee did not pursue discussions with this
party.
Lazard then presented its preliminary financial analysis of Coinmach and the
Original Offer. Among other things, Lazard noted that the value of the
Coinmach Stock not purchased by GRKC pursuant to the Original Offer (10-20% of
the outstanding Coinmach Stock) would likely be less than $13 per Share.
Accordingly, the aggregate value to be received by stockholders, pursuant to
the Original Offer, when blended with the value of Shares not purchased in the
Original Offer, would result in a value to stockholders of less than $13.00.
Lazard
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<PAGE>
also noted that GRKC had an advantage over other potential bidders, since
Coinmach's credit facilities and public notes could remain outstanding
following its acquisition of Coinmach. Any other bidder for Coinmach would
potentially have to refinance the existing debt of Coinmach due to the "change
of control" provisions of those debt instruments, potentially making any such
offer more costly. The Special Committee determined that it was not interested
in selling Coinmach for $13 per Share, and resolved to try to negotiate a
higher price with GRKC and to simultaneously negotiate the terms of the Merger
Agreement.
On January 20, 2000, Skadden sent a letter to Mayer Brown responding to the
draft Merger Agreement and detailing the general terms upon which the Special
Committee would be willing to approve a transaction, which terms included,
among others: increased price; structuring the transaction as a cash election
merger instead of a tender offer (which would eliminate the coercive aspects
of a tender offer for fewer than all Shares); acceleration of all options and
a reasonable termination fee. Mayer Brown responded to Skadden's letter on
January 26, 2000, indicating on behalf of GRKC that it was committed to a
price of $13 per Share, and was unwilling to restructure the transaction as a
cash election merger, but indicating GRKC's willingness to consider extending
the Original Offer to the holders of 100% of the Coinmach Stock and to reduce
the termination fee.
On January 27, 2000, the Special Committee met and determined to demand a
higher price and to terminate all other discussions until the price issue had
been resolved. Between January 27, 2000 and February 3, 2000, Mayer Brown and
Skadden communicated telephonically on several occasions in an effort to reach
an agreement on price, but GRKC and the Special Committee were unable to reach
an agreement on price. On February 3, 2000, GRKC announced that, due to an
inability to reach an agreement, it had withdrawn its Original Offer to
acquire Coinmach.
During the weeks of April 24, 2000 and May 1, 2000, the Special Committee
and Lazard had several conversations with GTCR Fund VII as to the price at
which an acquisition of Coinmach might be accomplished. During the
discussions, GTCR Fund VII indicated that one of its affiliates would be
willing to offer $14.25 per Share in cash to acquire 100% of the outstanding
Coinmach Stock. The Special Committee responded that it would evaluate the
proposal and instruct its advisers to commence negotiations on the terms of a
definitive Merger Agreement.
On May 4, 2000, the Special Committee received a revised draft Merger
Agreement from Mayer Brown. From May 5 through May 12, 2000, Skadden and Mayer
Brown negotiated the terms of the Merger Agreement.
During the evening of May 12, 2000, the Special Committee met to consider
the proposed terms and conditions of the Merger Agreement. At such meeting
Lazard presented its valuation analysis and provided to the Special Committee
its opinion to the effect that, as of the date of the Merger Agreement, the
consideration to be received by the Coinmach stockholders (other than the
Purchaser and the stockholders of the Purchaser) in the Offer and the Merger
was fair, from a financial point of view, to such stockholders. The Special
Committee, acting unanimously, determined that the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger, are
fair to, and in the best interests of, Coinmach's stockholders (other than
stockholders of the Purchaser), and recommended that the Board of Directors of
Coinmach approve the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger.
Following the Special Committee meeting, on May 12, 2000, the Coinmach
Board, acting unanimously, determined that the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger, are
fair to, and in the best interests of, Coinmach's stockholders (other than
stockholders of the Purchaser), and approved the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger.
The Merger Agreement was executed immediately following the meeting, and on
May 15, 2000, Coinmach issued a press release announcing the execution of the
Merger Agreement. On May 26, 2000, the Purchaser commenced the Offer.
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Reasons For the Recommendation
The Special Committee. In approving the Merger Agreement, the Offer, the
Merger and the other transactions contemplated by the Merger Agreement and
recommending that the Company's stockholders tender their Shares pursuant to
the Offer, the Special Committee considered a variety of factors, including
but not limited to the following:
(i) the opinion of Lazard that, based upon and subject to the assumptions
and qualifications stated in its opinion, the $14.25 per Share to be paid
to the stockholders of Coinmach in the Offer and the Merger (other than the
Purchaser and the stockholders of the Purchaser) is fair to such
stockholders from a financial point of view, and the report and analysis
presented to the Special Committee in connection with the Lazard opinion; a
copy of the opinion of Lazard, which sets forth the assumptions made, the
matters considered and the limitations of the review undertaken by Lazard,
is attached hereto as Exhibit 6. Stockholders are urged to read the opinion
of Lazard in its entirety;
(ii) The presentation of Lazard that included various valuation analyses
of Coinmach, described below under "Opinion of Investment Banker";
(iii) the Merger Agreement and the transactions contemplated thereby were
the product of arm's-length negotiations between the Purchaser and its
advisors and the Special Committee (none of whose members were employed by
the Company or affiliated with the Purchaser) and its advisors, and the
judgment of the Special Committee that, based upon the negotiations that
had transpired (including the increased offer from $13 to $14.25 per Share)
a price higher than $14.25 per Share could not likely be obtained;
(iv) Coinmach's business, financial condition, results of operations,
prospects, current business strategy, competitive position in its industry
and general economic and stock market conditions;
(v) the historical market prices and recent trading activity of the
Coinmach Stock, including the fact that the Offer Price represents a
premium of approximately 78% over the $8.00 closing price of the Shares on
Nasdaq on May 12, 2000, the last full trading day prior to the announcement
that Coinmach entered into the Merger Agreement with the Purchaser;
(vi) the likelihood that the Company's market price performance in the
foreseeable future would not substantially exceed its recent performance,
considering the fact that the Company's growth opportunities are currently
limited and the stock price for comparable companies had also declined;
(vii) the fact that since the public announcement by GRKC of the Original
Offer on October 20, 1999, no other party had presented Coinmach with an
acquisition proposal;
(viii) the fact that certain potential bidders were contacted on behalf
of the Special Committee (including entities that were in discussion with
Coinmach as part of the Prior Auction Process) and that no such entity was
willing to present Coinmach with an acquisition proposal;
(ix) communications from various stockholders of the Company expressing
their views in favor of, and against the Original Offer;
(x) the fact that the Offer provides Coinmach's stockholders with
liquidity to dispose of their Shares which may not be available in the
public market due to the low level of trading volume of the Shares;
(xi) the terms of the Merger Agreement, including
. the ability of the Coinmach Board to provide access to information
concerning the Company to any third parties who make a Superior
Proposal, and to engage in discussions and negotiate with any such
third party;
. the ability of the Coinmach Board, in exercising its fiduciary
duties, to withdraw or modify its recommendation to the stockholders
and terminate the Merger Agreement in order to permit the Company to
enter into a business combination transaction with a third party
which makes a Superior Proposal;
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<PAGE>
. the fact that the Company would be required to pay the Purchaser
certain termination fees and expenses in order to accept a Superior
Proposal and that, while such fees and expense reimbursement would
increase the cost to a third party interested in acquiring the
Company, they would not preclude a third party from making a
Superior Proposal or from acquiring the Company; and
. there are no unusual requirements or conditions to the Offer and the
Merger.
(xii) the Offer and the Merger are not conditioned upon the availability
of financing, and the Purchaser has the financial resources to consummate
the Offer and the Merger expeditiously;
(xiii) the fact that the consideration to be paid in the Offer and the
Merger is all cash;
(xiv) the transaction has been structured to include a first-step cash
tender offer for all of the outstanding Shares, thereby enabling
stockholders who tender their Shares to promptly receive $14.25 per Share
in cash, and the fact that any public stockholders who do not tender their
Shares will receive the same cash price per Share in the subsequent Merger;
(xv) the conflicts of interest of certain directors and members of
management of both the Company and the Purchaser; and
(xvi) the fact that stockholders who do not tender their Shares pursuant
to the Offer will have the right to dissent from the Merger and to demand
appraisal of the fair value of their Shares under the DGCL, whether or not
a stockholder vote is required.
The Coinmach Board. All of the directors of the Company other than the
members of the Special Committee have an interest in the Offer and the Merger.
Accordingly, the Board of Directors based its determination that the terms of
the Offer are fair to Coinmach's stockholders primarily upon the conclusions
of the Special Committee described above, the other factors described above
under the caption "The Special Committee" and the factors set forth below:
(i) the Special Committee consisted of independent directors appointed by
the Coinmach Board to represent solely the interests of the stockholders;
(ii) the Special Committee retained and was advised by its own
independent legal counsel and investment banker who negotiated on behalf of
the Special Committee;
(iii) the Special Committee's investment banker, Lazard, assisted it in
evaluating the proposed transaction and provided other financial advice;
(iv) the Special Committee, with the assistance of its advisors,
evaluated and negotiated the terms of the Offer and the Merger; and
(v) the $14.25 per Share cash purchase price and the other terms and
conditions of the Merger Agreement resulted from arm's-length bargaining
between the Special Committee and the Purchaser and their respective
advisors.
The members of the Coinmach Board, including the members of the Special
Committee, evaluated the Offer and the Merger in light of their knowledge of
the business, financial condition and prospects of the Company, and based upon
the advice of financial and legal advisors.
The Coinmach Board, including the members of the Special Committee, believes
that the Offer and Merger are procedurally fair because, among other things:
(a) the Special Committee consisted of independent directors appointed to
represent the interests of stockholders (other than the Purchaser and its
stockholders); (b) the Special Committee retained and was advised by its own
independent legal counsel; (c) the Special Committee retained and was advised
by Lazard, as its independent investment banker; (d) the fact that the $14.25
per Share price
17
<PAGE>
resulted from arm's-length bargaining between the Special Committee and the
Purchaser and their respective advisors; and (e) the fact that the Special
Committee is a mechanism well established under Delaware law to ensure
fairness in transactions of this type.
The Coinmach Board and the Special Committee recognized that the Merger is
not structured to require the approval of a majority of the stockholders of
the Company other than the Purchaser and its stockholders.
The Coinmach Board and the Special Committee also recognized that, while
consummation of the Offer and the Merger will result in all stockholders
(other than the Purchaser and its stockholders) being entitled to receive
$14.25 in cash for each of their Shares, it will eliminate the opportunity for
current stockholders (other than the Purchaser and its stockholders) to
participate in the benefit of increases, if any, in the value of the Company's
business following the Merger. Nevertheless, the Coinmach Board and the
Special Committee concluded that this fact did not justify foregoing the
receipt of the immediate cash premium presented by the $14.25 per Share price.
Neither the Coinmach Board nor the Special Committee considered the
liquidation of the Company's assets and neither considered liquidation to be a
viable course of action. Therefore, no appraisal of liquidation values was
sought for purposes of evaluating the Offer and the Merger.
The foregoing discussion of information and factors considered and given
weight by the Special Committee and the Coinmach Board is not intended to be
exhaustive, but is believed to include all of the material factors considered
by the Special Committee and the Coinmach Board. In view of the variety of
factors considered in connection with its evaluation of the Offer and the
Merger, the Special Committee and the Coinmach Board did not find it
practicable to, and did not, quantify or otherwise assign relative weights to
the specific factors considered in reaching the determinations and
recommendations. In addition, individual members of the Special Committee and
the Coinmach Board may have given different weights to different factors.
Opinion of Investment Banker
On May 12, 2000, Lazard delivered its oral opinion to the Special Committee
to the effect that, as of that date, and subject to certain considerations
described by Lazard, the Merger consideration to be received by the
stockholders of the Company (other than the Purchaser or the stockholders of
the Purchaser) pursuant to the Merger Agreement was fair, from a financial
point of view, to such stockholders. Lazard confirmed its oral opinion by
delivery of its written opinion dated May 12, 2000. The opinion of Lazard does
not constitute a recommendation as to whether stockholders should tender their
Shares or how stockholders should vote with respect to the Merger.
The full text of the written opinion of Lazard dated May 12, 2000, which
identifies assumptions made, matters considered and limitations on the review
undertaken in connection with the opinion, is attached hereto as Annex A and
is incorporated into this document by reference. You are encouraged to, and
should, read Lazard's opinion in its entirety.
In connection with its opinion, Lazard:
. reviewed the financial terms and conditions of the Merger Agreement;
. analyzed certain historical business and financial information relating
to the Company;
. reviewed various financial forecasts and other data provided to Lazard
by the Company relating to its business;
. held discussions with members of the senior management of the Company
with respect to the business and prospects of the Company and its
strategic objectives;
. reviewed public information with respect to certain other companies in
lines of business they believe to be generally comparable to the
business of the Company;
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<PAGE>
. reviewed the financial terms of certain business combinations involving
companies in lines of business they believe to be generally comparable
to that of the Company, and in other industries generally;
. reviewed the historical stock prices and trading volumes of the
Company's Common Stock; and
. reviewed such other information and conducted such other financial
studies, analyses and investigations, as Lazard deemed appropriate.
In conducting its analysis and in arriving at its opinion, Lazard relied
upon the accuracy and completeness of the foregoing information, and did not
assume any responsibility for any independent verification of such information
or any independent valuation or appraisal of any of the assets or liabilities
of the Company, or concerning the solvency or fair value of the Company. With
respect to financial forecasts, Lazard assumed that they had been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of management of the Company as to the future financial performance
of the Company. Lazard assumed no responsibility for and expressed no view as
to such forecasts or the assumptions on which they were based.
Lazard's opinion was necessarily based on economic, monetary, market and
other conditions as in effect on, and the information made available to Lazard
as of, the date of its opinion.
In rendering its opinion, Lazard assumed, with the consent of the Special
Committee, that the Purchaser's acquisition of the Company would be
consummated on the terms described in the Merger Agreement, without any waiver
of any material terms or conditions by the Company and that obtaining the
necessary regulatory approvals for the Purchaser's acquisition of the Company
will not have an adverse effect on the Company.
The following is a summary of the material financial analyses used by Lazard
in connection with providing its oral opinion to the Special Committee on May
12, 2000. Lazard utilized substantially the same financial analyses in
connection with providing its written opinion attached hereto as Annex A.
The following summaries of financial analyses include information presented
in tabular format. Stockholders should read these tables together with the
text of each summary.
Historical Stock Trading Analysis. Lazard reviewed the historical trading
prices and volumes for the Company's Common Stock. Lazard compared the trading
price and volume data for the Company's Common Stock for the period from
October 20, 1998 through October 20, 1999, for the period from January 1, 1999
through October 20, 1999, for the period from June 30, 1999 through October
20, 1999 and for the period from February 3, 2000 through May 10, 2000. Lazard
reviewed the trading performance of the Company's Common Stock for the period
from October 20, 1998 through May 10, 2000 and for the period from the
Company's initial public offering through May 10, 2000. Lazard also compared
the trading performance of the Company's Common Stock for the period from
October 20, 1998 through May 10, 2000 and for the period from the Company's
initial public offering through May 10, 2000 to the trading performance of
Mac-Gray Corporation and the S&P 400 for the comparable periods, respectively.
Selected Companies Analysis. Lazard reviewed and compared certain financial
information for the Company to corresponding financial information, ratios and
public market multiples for the following four publicly traded corporations
(the "Selected Companies"):
. Mac-Gray Corporation;
. ABM Industries Incorporated;
. Encompass Services Corporation; and
. Integrated Electrical Services, Inc.
The Selected Companies were chosen because they are publicly traded
companies with operations or businesses that for purposes of analysis may be
considered similar to the Company's operations or businesses.
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<PAGE>
Lazard also calculated and compared various financial multiples and ratios
based on information it obtained from SEC filings, publicly available research
reports and the Institutional Brokers Estimate System ("IBES"). The multiples
and ratios for the Company were calculated using $14.25 per Share and
projections provided by the Company, which were then calendarized. The
multiples for each of the Selected Companies were based on the most recent SEC
filings, publicly available research reports, IBES and closing prices on May
10, 2000. Lazard's analyses of the Selected Companies compared the following
to the data for the Company:
. enterprise value (i.e., market value of common equity plus debt for the
Company and Mac-Gray Corporation and market value of common equity plus
debt less cash for ABM Industries Incorporated, Encompass Services
Corporation and Integrated Electrical Services, Inc.) as a multiple of
latest twelve month ("LTM"), estimated 2000 and estimated 2001 sales;
. enterprise value as a multiple of LTM, estimated 2000 and estimated 2001
earnings before interest, taxes, depreciation and amortization
("EBITDA");
. enterprise value as a multiple of LTM, estimated 2000 and estimated 2001
earnings before interest and taxes ("EBIT"); and
. estimated five-year earnings per Share growth rate based on IBES
estimates.
The results of these analyses are summarized as follows:
<TABLE>
<CAPTION>
Selected Companies
---------------------------
Company Range Median Mean
------- ----------- ------ ------
<S> <C> <C> <C> <C>
Enterprise Value as a Multiple of:
2001E Sales................................ 1.54x NA 0.19x 0.19x
2000E Sales................................ 1.60x 0.22x-0.82x 0.31x 0.45x
LTM Sales.................................. 1.66x 0.36x-0.84x 0.42x 0.51x
2001E EBITDA............................... 4.8x NA 2.2x 2.2x
2000E EBITDA............................... 5.0x 2.6x-4.0x 3.5x 3.3x
LTM EBITDA................................. 5.2x 4.1x-6.6x 4.6x 5.0x
2001E EBIT................................. 16.2x NA 2.7x 2.7x
2000E EBIT................................. 17.5x 3.2x-9.1x 4.3x 5.5x
LTM EBIT................................... 19.7x 5.1x-10.8x 7.3x 7.7x
IBES Est. 5 Year Growth Rate................ 20.0% 10.0%-17.5% 15.0% 14.4%
</TABLE>
NA: Not Applicable
Based on these analyses and assuming approximately 13.2 million Shares
outstanding and debt of approximately $685 million, Lazard determined that the
implied equity value per Share of the Company ranged from approximately $6 per
Share to $11 per Share.
Analysis of Selected Coinmach Acquisitions. Lazard calculated the implied
equity value per Share of the Company's Common Stock based on the LTM EBITDA
multiples
for selected acquisitions that the Company made between 1995 and 1998 and the
acquisition of the Company by GTCR Fund IV in 1995. Assuming approximately
13.2 million Shares outstanding and debt of approximately $685 million, Lazard
determined that the implied equity value per Share of the Company ranged from
approximately $13 per Share to $20 per Share and that, based on the mean and
median range of the LTM EBITDA multiples, the implied equity value per Share
of the Company ranged from approximately $14 per Share to $16 per Share.
Analysis of Selected Coinmach Acquisitions Adjusted for Cost Savings. Lazard
calculated the implied equity value per Share of the Company's Common Stock
based on adjusted LTM EBITDA multiples for selected acquisitions that the
Company made between 1995 and 1998 and the acquisition of the Company by GTCR
Fund
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<PAGE>
IV in 1995. The LTM EBITDA multiples were adjusted to reflect cost savings
related to the respective acquisition. The adjusted LTM EBITDA multiples were
provided to Lazard by Jefferies & Co., which in turn had been provided with
the underlying adjusted LTM EBITDA data by the Company. Assuming approximately
13.2 million Shares outstanding and debt of approximately $685 million, Lazard
determined that the implied equity value per Share of the Company ranged from
approximately $7 per Share to $17 per Share and that, based on the mean and
median range of the adjusted LTM EBITDA multiples, the implied equity value
per Share of the Company ranged from approximately $11 per Share to $12 per
Share.
Comparable Leveraged Buyout Premia. Lazard analyzed certain information
relating to leveraged buyout transactions greater than $100 million with all
cash offers (that were not subsequently withdrawn) since January 1, 1994 (the
"Buyouts"). Lazard used information provided by Securities Data Corp. and
Factset. For the Buyouts, Lazard compared:
. the final premium (based on the purchase price) to the price one day
prior to announcement of the respective offer;
. the final premium (based on the purchase price) to the price one week
prior to the announcement of the respective offer;
. the final premium (based on the purchase price) to the price four weeks
prior to the announcement of the respective offer; and
. the final purchase price as a percent of the prior 52-week high market
price of the respective stock.
The results of these analyses for the Buyouts are summarized as follows:
<TABLE>
<CAPTION>
Buyouts
---------------------
Low Median High
----- ------ -----
<S> <C> <C> <C>
Final Premium (Discount) to One Day Prior Price.......... (5.2%) 31.7% 129.2%
Final Premium (Discount) to One Week Prior Price......... (8.1%) 37.9% 142.4%
Final Premium (Discount) to Four Weeks Prior Price....... (18.6%) 38.3% 140.4%
Final Price as Percent of Prior 52-Week High Price....... 41.9% 101.3% 177.4%
</TABLE>
Based on the mean and median figures derived from such data and using the
closing price of the Company's Common Stock on May 10, 2000, Lazard determined
that the implied equity value per Share of the Company ranged from
approximately $7 per Share to $24 per Share.
Discounted Cash Flow Analysis. Lazard calculated the net present value of
unlevered free cash flows based on projections provided by the Company for the
years 2001 through 2005 using discount rates ranging from 10.5% to 12.5% and
calculated terminal values based on multiples ranging from 4.5x to 5.5x
estimated EBITDA in 2005. These terminal values were then discounted to
present value using discount rates ranging from 10.5% to 12.5% and added to
the net present value of the unlevered free cash flows to determine a range of
enterprise values and a range of implied equity values per Share. Assuming
approximately 13.2 million Shares outstanding and debt of approximately $685
million, Lazard determined that the implied equity value per Share of the
Company ranged from approximately $9 per Share to $23 per Share.
Leveraged Buyout Analysis. Using projections provided by the Company, Lazard
analyzed the equity internal rate of return from the Purchaser's perspective,
assuming an internal rate of return from 20% to 30%, the Company's current
level of debt capitalization and that the Purchaser exits its position in year
five at 4.5x to 5.5x EBITDA. Lazard determined that the implied equity value
per Share of the Company ranged from approximately $12 per Share to $16 per
Share.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without
considering the analyses as a whole, could create an incomplete view of the
processes underlying Lazard's
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<PAGE>
opinion. In arriving at its fairness determination, Lazard considered the
results of all such analyses. No company or transaction used in the above
analyses as a comparison is directly comparable to the Company or the
contemplated transaction.
The analyses were prepared for the benefit of the Special Committee and the
opinion of Lazard was rendered in connection with its consideration of the
Offer and the Merger. The opinion was not intended to and does not constitute
a recommendation as to whether you should tender your Shares or how you should
vote with respect to the Merger.
As described above, Lazard's opinion to the Special Committee was one of
many factors taken into consideration by the Special Committee in making its
determination to approve the Merger Agreement. The foregoing summary does not
purport to be a complete description of the analyses performed by Lazard.
Lazard, as part of its investment banking business, is continually engaged
in the valuation of businesses and their securities in connection with mergers
and acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. Lazard has in the past
provided underwriting services to the Company for which Lazard received
customary fees.
As of the date of its opinion, Lazard was acting as investment banker to
affiliates of the Purchaser for which Lazard may receive fees which would be
customary.
From time to time Laffer Associates, including Dr. Arthur B. Laffer, a
member of the Special Committee, have performed economic consulting services
for the asset management business of Lazard, for which Laffer Associates has
been paid customary fees and expenses.
One of the factors the Special Committee deemed significant in selecting
Lazard as its investment banker was the fact that it is a nationally
recognized investment banking firm with substantial experience in transactions
similar to the Offer and Merger.
Lazard provides a full range of financial, advisory and brokerage services
and in the course of its normal trading activities may from time to time
effect transactions and hold positions in the securities or options on
securities of the Company for its own account and for the account of
customers.
Intent To Tender
To Coinmach's knowledge after reasonable inquiry, all of Coinmach's
executive officers, directors and affiliates currently intend to tender all
Shares held of record or beneficially owned by them pursuant to the Offer
except for Messrs. Kerrigan, Doyle, Blatt, Stanky and Chapman who will
transfer certain of their Shares to the Purchaser pursuant to the Rollover
Agreement. The foregoing does not include any Shares over which, or with
respect to which, any such executive officer, director or affiliate acts in a
fiduciary or representative capacity or is subject to the instructions of a
third party with respect to such tender.
Item 5. Person/Assets, Retained, Employed, Compensated or Used.
Lazard was retained by the Special Committee pursuant to the terms of a
letter agreement (the "Letter Agreement"), to act as sole investment banker to
the Special Committee. Pursuant to the Letter Agreement, Lazard agreed to
render a fairness opinion ( the "Opinion") to the Special Committee and to the
Board of Directors. The Opinion is attached hereto as Exhibit 6.
Pursuant to the Letter Agreement, the Company agreed to pay Lazard (a) a
cash fee of $975,000, payable upon execution of a definitive agreement with
respect to a "Transaction" (as such term is defined below), which fee shall be
credited against any fee paid pursuant to clause (b); and (b) a cash fee,
payable upon consummation of a Transaction, equal to .365% of the aggregate
consideration in connection with the Transaction which
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<PAGE>
includes, among other things, the principal amount of any indebtedness of the
Company outstanding immediately prior to the Effective Time. The Company has
also agreed to reimburse Lazard for all reasonable out-of-pocket expenses
(including reasonable fees of outside counsel and other professional advisors)
and to indemnify Lazard and certain related parties against certain
liabilities, including liabilities under any applicable federal or state law,
relating to or arising out of Lazard's engagement.
The term "Transaction" in the Letter Agreement means: (a) the possible
purchase by a group consisting of GTCR Golder Rauner, LLC or its affiliates
and certain members of senior management of the Company (together, the "Buyer
Group") of the equity interests in the Company not owned by the Buyer Group
or, if relevant, another buyer or (b) any other transaction involving an
acquisition of a substantial portion of the equity or assets of the Company,
including a recapitalization of the Company by means of a distribution of cash
or securities to stockholders of the Company or a repurchase or redemption of
outstanding securities of the Company; provided that a Transaction will not
include any dividend, distribution or share repurchase if less than 15% of the
Company's assets are distributed or utilized in connection therewith or less
than 15% of the Company's outstanding Shares are repurchased in connection
therewith.
Except as described above, neither the Company nor any other person acting
on its behalf currently intends to employ, retain or compensate any other
person to make solicitations or recommendations to the stockholders on its
behalf concerning the Offer or the Merger.
Item 6. Interest in Securities of the Subject Company.
During the past 60 days, neither the Company nor any subsidiary of the
Company nor, to the best of the Company's knowledge, any executive officer,
director or affiliate of the Company has effected a transaction in the Shares
except as follows: On March 31, 2000, the Company purchased in an open market
transaction 6,500 Shares at $9.75 per Share on behalf of participants in the
Company's 1998 Employee Stock Purchase Plan. The Company then sold 5,732.370
Shares at $8.50 per share to certain of its employees pursuant to the 1998
Employee Stock Purchase Plan.
Item 7. Purposes of the Transaction and Plans or Proposals.
Except as set forth in this Schedule 14D-9, Coinmach is not engaged in any
negotiations in response to the Offer which relates to or would result in (i)
an extraordinary transaction, such as a merger, reorganization or liquidation,
involving Coinmach or any subsidiary of Coinmach; (ii) a purchase, sale or
transfer of a material amount of assets of Coinmach or any subsidiary of
Coinmach; (iii) a tender offer or other acquisition by Coinmach, any of its
subsidiaries or any other person; or (iv) any material change in the present
indebtedness, capitalization or dividend rate or policy of Coinmach. Except as
set forth in this Schedule 14D-9, there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer that relate to or would result in one or more of the matters described
above.
Item 8. Additional Information.
Certain Legal Matters
On November 18, 1999, a class action lawsuit was filed in the Court of
Chancery of the State of Delaware naming the Company, GTCR Fund IV, GTCR
Golder, Rauner, LLC and certain officers and directors of the Company as
defendants, and alleging that the Original Offer was inadequate and that any
agreement between GRKC and the Company to consummate an offer at $13 per Share
would constitute a breach of the fiduciary duties owed by the defendants to
the minority stockholders.
Short Form Merger
Under Section 253 of the DGCL, if the Purchaser acquires, pursuant to the
Offer or otherwise, at least 90% of the outstanding Shares, the Purchaser will
be able to effect the Merger after consummation of the Offer
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<PAGE>
without a meeting of Coinmach's stockholders. However, if the Purchaser does
not acquire at least 90% of the outstanding Shares pursuant to the Offer or
otherwise, a meeting of Coinmach's stockholders will be required under the
DGCL to effect the Merger. Upon successful completion of the Offer, the
Purchaser would have a sufficient number of Shares to approve the Merger
without the vote of any other Coinmach stockholder.
Appraisal Rights
No appraisal rights are available to holders of Shares in connection with
the Offer. However, if the Merger is consummated, holders of Shares who have
not voted in favor of the Merger or consented thereto in writing may have
certain rights under Section 262 of the DGCL to dissent and demand appraisal
of, and payment in cash for the fair value of, their Shares. Such rights, if
the statutory procedures are complied with, could lead to a judicial
determination of the fair value (excluding any element of value arising from
accomplishment or expectation of the Merger) required to be paid in cash to
such dissenting holders for their Shares. Any such judicial determination of
the fair value of Shares could be based upon any valuation method or
combination of methods the Delaware Court deems appropriate. The value so
determined could be more or less than the Merger Price.
If any holder of Shares who demands appraisal under Section 262 of the DGCL
fails to perfect, or effectively withdraws or loses his or her right to
appraisal, as provided in the DGCL, each of the Shares of such holder will be
converted into the Merger Price in accordance with the Merger Agreement. A
stockholder may withdraw his or her demand for appraisal by delivery to
Purchaser of a written withdrawal of his or her demand for appraisal and
acceptance of the Merger. Failure to follow the steps required by Section 262
of the DGCL for perfecting appraisal rights may result in the loss of such
rights.
Stockholders who wish to exercise appraisal rights in connection with the
Merger do not need to take any action at this time. If the Offer is
consummated, the Company will distribute to the remaining stockholders
additional information on the procedures to be followed to perfect their
appraisal rights.
Item 9. Exhibits.
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1. Agreement and Plan of Merger, dated as of May 12, 2000, between CLC
Acquisition Corporation and Coinmach Laundry Corporation.+
2. Letter to stockholders from Stephen R. Kerrigan, dated May 26, 2000.
*+
3. Pages 2-18 of the Proxy Statement dated June 28, 1999, relating to the
Company's 1999 Annual Meeting of Stockholders (incorporated by
reference to the Proxy Statement of Coinmach Laundry Corporation,
filed on June 28, 1999).
4. Article Five of the Company's Third Amended and Restated Bylaws
(incorporated by reference to Exhibit 3.3 to the Annual Report of
Coinmach Laundry Corporation on Form 10-K for the fiscal year ended
March 31, 1999).
5. Article Eleven of the Company's Fourth Amended and Restated
Certificate of Incorporation (incorporated by reference to Exhibit 3.1
to the Annual Report of Coinmach Laundry Corporation on Form 10-K for
the fiscal year ended March 31, 1999).
6. Opinion of Lazard Freres & Co. LLC dated May 12, 2000.*
7. Press release issued by the Company on May 15, 2000.+
</TABLE>
- --------
* Included in the copy of the Schedule 14D-9 mailed to Coinmach's
stockholders.
+Filed herewith.
24
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
/s/ Robert M. Doyle
By: _________________________________
Name: Robert M. Doyle
Title:Chief Financial Officer
and Secretary
Dated: May 26, 2000
25
<PAGE>
Exhibit 1
AGREEMENT AND PLAN OF MERGER
BETWEEN
CLC ACQUISITION CORPORATION
AND
COINMACH LAUNDRY CORPORATION
DATED AS OF
MAY 12, 2000
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
ARTICLE I
THE OFFER
<S> <C>
SECTION 1.01 The Offer...................................................................2
SECTION 1.02 Company Actions.............................................................3
SECTION 1.03 Directors...................................................................5
SECTION 1.04 Termination of Voting Agreement.............................................5
SECTION 1.05 Company Board Approval Under Section 203 of the GCL.........................5
ARTICLE II
THE MERGER
SECTION 2.01 The Merger..................................................................5
SECTION 2.02 Effective Time; Closing.....................................................6
SECTION 2.03 Effects of the Merger.......................................................6
SECTION 2.04 Certificate of Incorporation and By-Laws of the Surviving Corporation.......6
SECTION 2.05 Directors...................................................................6
SECTION 2.06 Officers....................................................................6
SECTION 2.07 Conversion of Common Shares.................................................7
SECTION 2.08 Conversion of Purchaser Common Stock........................................7
SECTION 2.09 Company Options.............................................................7
SECTION 2.10 Stockholders Meeting........................................................7
SECTION 2.11 Merger Without Meeting of Stockholders......................................8
ARTICLE III
DISSENTING SHARES; PAYMENT FOR COMMON SHARES
SECTION 3.01 Dissenting Shares...........................................................8
SECTION 3.02 Payment for Common Shares...................................................9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SECTION 4.01 Organization and Qualification; Subsidiaries...............................11
SECTION 4.02 Certificate of Incorporation and By-Laws...................................11
SECTION 4.03 Capitalization.............................................................12
SECTION 4.04 Authority Relative to this Agreement.......................................12
SECTION 4.05 No Conflict; Required Filings and Consents.................................13
SECTION 4.06 SEC Reports and Financial Statements.......................................14
SECTION 4.07 Information................................................................15
SECTION 4.08 Litigation.................................................................15
SECTION 4.09 Compliance with Applicable Laws............................................15
SECTION 4.10 Taxes......................................................................16
SECTION 4.11 Material Adverse Change....................................................16
SECTION 4.12 Opinion of Financial Advisor...............................................16
SECTION 4.13 Brokers....................................................................17
SECTION 4.14 Insurance..................................................................17
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
SECTION 5.01 Organization and Qualification.............................................17
SECTION 5.02 Authority Relative to this Agreement.......................................18
SECTION 5.03 No Conflict; Required Filings and Consents.................................18
SECTION 5.04 Information................................................................18
SECTION 5.05 Financing..................................................................19
SECTION 5.06 Brokers....................................................................19
ARTICLE VI
COVENANTS
SECTION 6.01 Conduct of Business of the Company.........................................19
SECTION 6.02 Access to Information......................................................22
SECTION 6.03 Efforts....................................................................23
SECTION 6.04 Consents...................................................................24
SECTION 6.05 Maintenance of Insurance...................................................24
SECTION 6.06 Public Announcements.......................................................24
SECTION 6.07 Continuance of Existing Indemnification Rights.............................25
SECTION 6.08 No Solicitation............................................................26
SECTION 6.09 Notification of Certain Matters............................................28
SECTION 6.10 Special Meeting............................................................28
SECTION 6.11 Disposition of Litigation..................................................28
SECTION 6.12 State Takeover Laws........................................................29
SECTION 6.13 Certain Agreements with Management.........................................29
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
ARTICLE VIII
TERMINATION; AMENDMENTS; WAIVER
<S> <C>
SECTION 8.01 Termination................................................................30
SECTION 8.02 Effect of Termination......................................................31
SECTION 8.03 Fees and Expenses..........................................................32
SECTION 8.04 Assumption of Certain Obligations by the Company...........................32
SECTION 8.05 Amendment..................................................................32
SECTION 8.06 Extension; Waiver..........................................................32
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Non-Survival of Representations and Warranties.............................33
SECTION 9.02 Limitation on Warranties...................................................33
SECTION 9.03 Company Disclosure Statement...............................................33
SECTION 9.04 Entire Agreement; Assignment...............................................34
SECTION 9.05 Binding Agreement..........................................................34
SECTION 9.06 Severability...............................................................34
SECTION 9.07 Notices....................................................................34
SECTION 9.08 Governing Law; Jurisdiction................................................36
SECTION 9.09 Waiver of Jury Trial.......................................................36
SECTION 9.10 Descriptive Headings.......................................................37
SECTION 9.11 Construction...............................................................37
SECTION 9.12 Counterparts...............................................................37
SECTION 9.13 Parties in Interest........................................................37
SECTION 9.14 Certain Definitions........................................................37
SECTION 9.15 Specific Performance.......................................................38
SECTION 9.16 Company Actions............................................................38
</TABLE>
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of May 12, 2000,
---------
between CLC Acquisition Corporation, a Delaware corporation (the "Purchaser"),
---------
and Coinmach Laundry Corporation, a Delaware corporation (the "Company").
-------
WHEREAS, each of the Board of Directors of Purchaser (the "Purchaser
---------
Board") and the Board of Directors of the Company (the "Company Board") have
-------------
approved the acquisition of the Company by Purchaser on the terms and subject to
the conditions set forth in this Agreement;
WHEREAS, in furtherance of such acquisition, Purchaser proposes to make a
tender offer (as it may be amended from time to time as permitted under this
Agreement, the "Offer") to purchase up to 100% of all of the shares of issued
-----
and outstanding Class A common stock, par value $.01 per share (the "Class A
-------
Common Stock") and up to 100% of all the shares of issued and outstanding Class
- ------------
B common stock, par value $.01 per share (the "Class B Common Stock," and,
--------------------
together with the Class A Common Stock, the "Common Shares"), on the date
-------------
hereof, at a price per share of $14.25 (the "Share Offer Price"), net to the
-----------------
selling stockholders in cash without interest thereon, less any requested
withholding taxes, upon the terms and subject to the conditions set forth in
this Agreement;
WHEREAS, pursuant to the Merger (as defined), Purchaser shall pay and cash
out all vested and unvested options outstanding on the date hereof issued and
exercisable at a price per option net to the selling stockholder in cash equal
to the difference between the Share Offer Price and the exercise price of such
options (the "Option Offer Price");
------------------
WHEREAS, the Company Board has approved the Offer upon the terms and
subject to the conditions set forth in this Agreement and resolved and agreed to
recommend that stockholders of the Company accept the Offer;
WHEREAS, the Purchaser Board and the Company Board have, subject to the
conditions contained herein, approved the merger of the Purchaser with and into
the Company (the "Merger"), as set forth below, in accordance with the General
------
Corporation Law of the State of Delaware (the "GCL") and upon the terms and
---
subject to the conditions set forth in this Agreement, whereby all issued and
outstanding Common Shares not owned directly or indirectly by the Company or the
Principal Holders (as defined) will be converted into the right to receive the
Share Offer Price in cash;
WHEREAS, concurrently with the execution and delivery of this Agreement,
Purchaser and certain executive officers of the Company (the "Principal
---------
Holders"), have entered into a Rollover Agreement, dated as of the date hereof,
in the form of Exhibit A hereto (the "Rollover Agreement"); and
---------- ------------------
WHEREAS, Purchaser and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Offer and the
Merger.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
Purchaser and the Company agree as follows:
ARTICLE I
THE OFFER
SECTION 1.01 The Offer.
---------
(a) So long as this Agreement shall not have been terminated in accordance
with Section 8.01 and none of the events set forth in Annex I hereto (as
------------ -------
hereinafter provided) shall have occurred, Purchaser shall commence the Offer
(within the meaning of Rule 14d-2(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) as promptly as practicable after the date hereof,
------------
but in any event not later than the tenth business day following the date
hereof. The obligation of the Purchaser to accept for payment and pay for
Common Shares tendered pursuant to the Offer shall be subject to the Minimum
Condition and to the satisfaction or waiver (to the extent permitted by this
Agreement) of the other conditions set forth in Annex I hereto (the "Offer
------- -----
Conditions"). The Share Offer Price shall, subject to applicable withholding of
- ----------
taxes, be net to the seller in cash, upon the terms and subject to the
conditions of the Offer. Subject to the terms of the Offer and this Agreement
and the satisfaction or waiver (to the extent permitted by this Agreement) of
all the conditions of the Offer set forth in Annex I hereto as of the Initial
-------
Expiration Date or any expiration date permitted by the Agreement, Purchaser
will accept for payment and pay for all Common Shares validly tendered and not
withdrawn pursuant to the Offer as soon as practicable after such expiration
date of the Offer. The initial expiration date for the Offer shall be the
twenty-fifth business day from and after the date the Offer is commenced,
including the date of commencement as the first business day in accordance with
Rule 14d-2 under the Exchange Act (the "Initial Expiration Date"). Subject to
-----------------------
Section 8.01, if the conditions set forth in Annex I hereto are not satisfied
- ------------ -------
or, to the extent permitted by this Agreement, waived by the Purchaser, as of
the Initial Expiration Date (or any subsequently scheduled expiration date),
Purchaser may extend the Offer from time to time for the shortest time periods
permitted by law and to the extent Purchaser reasonably believes such extensions
are necessary until the consummation of the Offer (it being understood that,
notwithstanding the satisfaction of the Offer Conditions, the Purchaser shall
have the right, but not the obligation, to extend the Offer until the Outside
Offer Date).
(b) As promptly as reasonably practicable, on the commencement date of the
Offer, the Purchaser shall file with the Securities and Exchange Commission (the
"SEC") a combined Tender Offer Statement and a Schedule 13e-3 Transaction
---
Statement on Schedule TO, including all exhibits thereto (together with any
supplements or amendments thereto, the "Schedule TO"), with respect to the
-----------
Offer, the Merger and the other transactions contemplated thereby. The Schedule
TO shall contain (as an exhibit thereto) the Purchaser's Offer to Purchase (the
"Offer to Purchase") and the forms of the related letter of transmittal and any
-----------------
related documents (the Schedule TO, the Offer to Purchase and any supplements or
amendments thereto, collectively,
-2-
<PAGE>
the "Offer Documents"). The Company and its counsel shall be given an
---------------
opportunity to review and comment upon the Offer Documents prior to the filing
thereof with the SEC, and Purchaser shall consider such comments in good faith.
Purchaser agrees to provide to the Company and its counsel any comments which
Purchaser or its counsel may receive from the Staff of the SEC with respect to
the Offer Documents promptly after receipt thereof.
(c) Purchaser shall use its reasonable good faith efforts to ensure that
the Offer Documents (i) will comply in all material respects with the provisions
of applicable federal securities laws, and (ii) on the date filed with the SEC
and on the date first published, sent or given to the Company's stockholders,
shall not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading, except that no representation is made by Purchaser with
respect to information supplied by the Company for inclusion in the Offer
Documents. Purchaser agrees to correct promptly, and the Company agrees to
notify Purchaser promptly as to, any information provided by it for use in the
Offer Documents, if and to the extent that such information shall have become
false or misleading in any material respect, and the Purchaser further agrees to
take all steps reasonably necessary to cause the Offer Documents as so corrected
to be filed with the SEC and to be disseminated to stockholders of the Company,
in each case as and to the extent required by applicable federal securities
laws.
SECTION 1.02 Company Actions.
---------------
(a) Concurrently with commencement of the Offer, the Company shall file
with the SEC and mail to the stockholders of the Company a
Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the
Offer (together with any amendments or supplements thereto, the "Schedule 14D-
------------
9").
(b) The Company hereby represents and warrants that (i) a special committee
of two independent directors of the Company Board (the "Special Committee") has
-----------------
recommended that the Company Board approve the Offer and the Merger, and approve
and authorize this Agreement, the Rollover Agreement and the other transactions
contemplated hereby, and (ii) the Company Board, at a meeting duly called and
held, has, based on the recommendation of the Special Committee described in the
preceding clause (i), duly adopted resolutions: (A) approving the Offer and the
Merger and approving and adopting this Agreement and the Rollover Agreement, (B)
determining that the Merger is advisable and that the terms of the Offer and the
Merger are fair to, and in the best interests of, the Company and the Company's
stockholders, and (C) recommending that the Company's stockholders accept the
Offer and, if approval is required by applicable law, approve the Merger and
approve and adopt this Agreement. The Company hereby consents to the inclusion
in the Offer Documents of the recommendation of the Company Board and the
recommendation of the Special Committee described in the first sentence of this
Section 1.02(b). The Company shall provide for inclusion in the Offer Documents
any information reasonably requested by Purchaser, and to the extent requested
by Purchaser, the Company shall cooperate in the preparation of the Offer
Documents. The Company further represents and warrants that the Special
Committee has been duly authorized
-3-
<PAGE>
and constituted, and at a meeting thereof duly called, determined that this
Agreement, the Merger and the Offer are fair to and in the best interests of the
stockholders of the Company (other than the Purchaser and its stockholders).
(c) The Company hereby further represents and warrants that Lazard Freres
& Co., LLC (the "Financial Advisor") has delivered to the Company Board its
-----------------
written opinion that, as of the date hereof, the Share Offer Price to be
received by the holders of the Common Shares pursuant to each of the Offer and
the Merger (other than Purchaser or the stockholders of Purchaser) is fair to
such holders from a financial point of view. The Company hereby consents to the
inclusion in the Offer Documents of the recommendations of the Company Board
described in this Section 1.02(a).
---------------
(d) To the extent practicable, the Company shall cooperate with Purchaser
in mailing or otherwise disseminating the Schedule 14D-9 with the appropriate
Offer Documents to the Company's stockholders. Purchaser and its counsel shall
be given an opportunity to review and comment upon the Schedule 14D-9 prior to
the filing thereof with the SEC. The Company shall use its reasonable good
faith efforts to ensure that the Schedule 14D-9 will comply in all material
respects with the provisions of applicable federal securities laws. On the date
filed with the SEC and on the date first published, sent or given to the
Company's stockholders, the Schedule 14D-9 shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information supplied by
Purchaser for inclusion in the Schedule 14D-9. The Company agrees to correct
promptly, and Purchaser agrees to notify the Company promptly as to, any
information provided by it for use in the Schedule 14D-9, if and to the extent
such information shall have become false or misleading in any material respect,
and the Company further agrees to take all steps necessary to cause the Schedule
14D-9 as so corrected to be filed with the SEC and to be disseminated to all of
the holders of Common Shares, in each case as and to the extent required by
applicable federal securities laws. The Company agrees to provide Purchaser and
its counsel in writing any comments the Company or its counsel may receive from
the SEC or its staff with respect to the Schedule 14D-9 promptly after the
receipt of such comments. The Company agrees to use its reasonable best
efforts, after consultation with Purchaser, to respond promptly to all such
comments of and requests by the SEC.
(e) In connection with the Offer, the Company will, at its sole cost and
expense, if reasonably requested by Purchaser, promptly furnish Purchaser with
mailing labels, security position listings, any non-objecting beneficial owner
lists and any available listings or computer files containing the names and
addresses of the record holders of Common Shares, each as of a recent date, and
shall promptly furnish Purchaser with such additional information (including,
but not limited to, updated lists of stockholders, mailing labels, security
position listings and non-objecting beneficial owner lists) and any other
assistance as Purchaser or its agents or representatives may reasonably request
in connection with communicating the Offer and the Merger to the record and
beneficial holders of the Common Shares.
-4-
<PAGE>
SECTION 1.03 Directors. Subject to compliance with applicable laws,
---------
promptly upon Purchaser's payment for the Common Shares pursuant to the Offer
equal to a majority of all Common Shares, and from time to time thereafter
through the Effective Time, Purchaser shall be entitled to designate all of the
individuals who shall serve as directors on the Company Board, and the Company
shall promptly take all actions necessary to cause Purchaser's designees to be
so elected, including, seeking the resignations of Mr. Steven G. Cerri, Dr.
Arthur B. Laffer or any other present director or increasing the size of the
Company Board or both.
SECTION 1.04 Termination of Voting Agreement. Purchaser and the Company
-------------------------------
agree to the termination, and agree to use their reasonable good faith efforts
to cause the other parties thereto to terminate, as of the date Purchaser
acquires at least a majority of the outstanding Common Shares, that certain
Voting Agreement, dated July 23, 1996, among the Company and certain other
parties (the "Voting Agreement").
----------------
SECTION 1.05 Company Board Approval Under Section 203 of the GCL. On or
---------------------------------------------------
prior to the date hereof, the Company Board and the Special Committee shall have
approved each of this Agreement and the Rollover Agreement and taken all other
necessary actions under Section 203 of the GCL to cause the transactions
contemplated hereby and thereby, and any subsequent transactions of the Company
with Purchaser or any of its affiliates and associates (based only on
information supplied by Purchaser in writing to the Company or to its counsel in
connection with this Agreement or the transactions contemplated hereby), not to
be governed by such Section 203 of the GCL or subject thereto.
ARTICLE II
THE MERGER
SECTION 2.01 The Merger. Upon the terms and subject to the satisfaction
----------
or waiver of the conditions contained herein, and in accordance with the
applicable provisions of this Agreement and the GCL, at the Effective Time (as
defined in Section 2.02) the Purchaser shall be merged with and into the
------------
Company. Following the Merger, the separate corporate existence of the
Purchaser shall cease, and the Company shall continue as the surviving
corporation (the "Surviving Corporation"). At Purchaser's election, any
---------------------
affiliate or direct or indirect subsidiary of Purchaser may be merged with and
into the Company instead of Purchaser. In the event of such an election, the
parties agree to execute an appropriate amendment to this Agreement in order to
reflect such an election.
SECTION 2.02 Effective Time; Closing. As soon as practicable after the
-----------------------
satisfaction or waiver of the conditions set forth in Sections 7.01(a) and (b),
---------------- ---
but subject to Sections 2.11 and 7.01(c), the Company shall execute in the
-------------------------
manner required by the GCL and deliver to the Secretary of State of the State of
Delaware a duly executed and verified certificate of merger, and the parties
shall take such other and further actions as may be required by law to make the
Merger effective. The Merger shall become effective at such time as such
certificate of merger or a certificate of ownership and merger under Section 253
of the GCL is duly filed with the
-5-
<PAGE>
Secretary of State of the State of Delaware, or such later time as Purchaser and
the Company may agree and specify in such certificate (the "Effective Time").
The closing of the Merger (the "Closing") shall take place at the offices of
Mayer, Brown & Platt, 1675 Broadway, New York, New York at 10:00 a.m. New York
City time on a date as soon as practicable following the date on which the
conditions to the Closing (other than those that, by their terms, are to be
satisfied at the Closing) have been satisfied or waived, or at such other place,
time and date as the parties hereto may agree.
SECTION 2.03 Effects of the Merger. The Merger shall have the effects set
---------------------
forth in the GCL.
SECTION 2.04 Certificate of Incorporation and By-Laws of the Surviving
---------------------------------------------------------
Corporation.
- -----------
(a) The amended and restated certificate of incorporation of the Surviving
Corporation shall be amended at the Effective Time to conform to the certificate
of incorporation of Purchaser, as in effect at the Effective Time, except (1)
the name of the Surviving Corporation will remain Coinmach Laundry Corporation,
(2) any provisions in the certificate of incorporation of Purchaser naming the
incorporator and/or the initial directors shall not become part of the
certificate of incorporation of the Surviving Corporation and (3) as otherwise
prohibited by applicable Delaware law.
(b) Subject to the provisions of Section 6.01 of this Agreement, the by-
------------
laws of the Purchaser in effect at the Effective Time shall be the by-laws of
the Surviving Corporation, until thereafter amended in accordance with the terms
thereof, the terms of the Surviving Corporation's certificate of incorporation
and applicable Delaware law, except that the name of the Surviving Corporation
shall remain Coinmach Laundry Corporation.
SECTION 2.05 Directors. Subject to applicable law, the directors of the
---------
Purchaser immediately prior to the Effective Time shall be the initial directors
of the Surviving Corporation and shall hold office until their respective
successors are duly elected and qualified, or their earlier death, resignation
or removal, in accordance with applicable law and the Surviving Corporation's
certificate of incorporation and bylaws.
SECTION 2.06 Officers. The officers of the Company immediately prior to
--------
the Effective Time shall be the initial officers of the Surviving Corporation
and shall hold office until their respective successors are duly elected and
qualified, or their earlier death, resignation or removal.
SECTION 2.07 Conversion of Common Shares. At the Effective Time, by
---------------------------
virtue of the Merger and without any action on the part of the stockholders of
the Company, each Common Share issued and outstanding immediately prior to the
Effective Time (other than any Common Shares held by Purchaser or any wholly-
owned subsidiary of Purchaser or held in the treasury of the Company or by any
wholly-owned subsidiary of the Company, which Common Shares, by virtue of the
Merger and without any action on the part of the holder thereof, shall be
cancelled
-6-
<PAGE>
and retired and shall cease to exist with no payment being made with respect
thereto, and other than Dissenting Shares (as defined in Section 3.01)) shall be
------------
converted into the right to receive in cash the Share Offer Price (the "Merger
------
Price") payable to the holder thereof, and in the case of the Options, net of
- -----
taxes required by law to be withheld with respect thereto and without interest
thereon, upon surrender of the certificate formerly representing such Common
Share.
SECTION 2.08 Conversion of Purchaser Common Stock. At the Effective Time,
------------------------------------
each share of common stock, par value $0.01 per share, of the Purchaser issued
and outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and become one validly issued, fully paid and nonassessable share of common
stock, par value $0.01 per share, of the Surviving Corporation.
SECTION 2.09 Company Options. Purchaser and the Company shall take all
---------------
actions necessary so that, immediately prior to the Effective Time, (A) each
outstanding option to purchase Common Shares (collectively, the "Options"),
-------
including options granted under the Company's Third Amended and Restated Stock
Option Plan, as amended (the "Option Plan"), whether or not then exercisable or
-----------
vested, shall become fully exercisable and fully vested, (B) each Option which
is then outstanding shall be cancelled, and (C) in consideration of such
cancellation, and except to the extent that Purchaser and the holder of any such
Option otherwise agree, immediately following the Effective Time, the Company
shall pay to such holders of Options an amount in respect thereof equal to the
product of (1) the excess of the Merger Price over the applicable exercise price
thereof and (2) the number of Common Shares subject thereto (such payment to be
net of taxes required by law to be withheld with respect thereto). The
Surviving Corporation shall be entitled to deduct and withhold from the
consideration otherwise payable to any holder of Options pursuant to this
Agreement such amounts as may be required to be deducted and withheld with
respect to the making of such payment under the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder (the "Code"),
----
or under any provision of state, local or foreign tax law.
SECTION 2.10 Stockholders' Meeting.
---------------------
(a) If required by the Company's certificate of incorporation and/or
applicable law in order to consummate the Merger, the Company, acting through
and at the direction of the Company Board, shall, in accordance with applicable
law:
(i) duly call, give notice of, convene and hold a special meeting of
its stockholders (the "Special Meeting") as soon as practicable following
---------------
the acceptance for payment of and payment for Common Shares by the
Purchaser pursuant to the Offer for the purpose of considering and taking
action under this Agreement;
(ii) prepare and file with and use its reasonable best efforts to have
cleared by the SEC a preliminary proxy statement relating to the Merger and
this Agreement and use its reasonable best efforts (x) to obtain and
furnish the information required to be included by the SEC in the Proxy
Statement (as hereinafter defined) and, after consultation with Purchaser,
to respond promptly to any comments made by the SEC with respect to the
-7-
<PAGE>
preliminary proxy statement and cause a definitive proxy statement (the
"Proxy Statement") to be mailed to its stockholders and (y) to obtain the
----------------
necessary approvals of the Merger and this Agreement by its stockholders;
and
(iii)subject to the fiduciary obligations of the Company Board under
applicable law as determined in good faith by a majority of the Company
Board based on the advice of independent outside legal counsel, (A)
include in the Proxy Statement the recommendation of the Board that
stockholders of the Company vote in favor of the approval of the Merger and
the adoption of this Agreement and the written opinion of the Financial
Advisor that the consideration to be received by the stockholders of the
Company pursuant to the Offer and the Merger is fair from a financial point
of view to such stockholders and (B) use its reasonable best efforts to
obtain the necessary adoption of this Agreement.
(b) Purchaser agrees that it will vote, or cause to be voted, all of the
Common Shares then owned by it or any of its subsidiaries or affiliates in favor
of the approval of the Merger and the adoption of this Agreement.
SECTION 2.11 Merger Without Meeting of Stockholders. Notwithstanding
--------------------------------------
Section 2.10, in the event that Purchaser shall acquire at least 90% of the
- ------------
outstanding shares of each outstanding class of capital stock of the Company
pursuant to the transactions contemplated hereby, the parties hereto agree to
take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after the acceptance for payment of and payment
for Common Shares by the Purchaser pursuant to the Offer without a meeting of
stockholders of the Company, in accordance with Section 253 of the GCL.
ARTICLE III
DISSENTING SHARES; PAYMENT FOR COMMON SHARES
SECTION 3.01 Dissenting Shares. Notwithstanding anything in this
-----------------
Agreement to the contrary, Common Shares outstanding immediately prior to the
Effective Time and held by a holder of Common Shares who has not voted in favor
of the Merger or consented thereto in writing and who demands in writing an
appraisal for such Common Shares in accordance with Section 262 of the GCL, if
such Section 262 provides for appraisal rights for such Common Shares in the
Merger ("Dissenting Shares"), shall not be converted into the right to receive
-----------------
the Merger Price as provided in Section 2.07 but shall be entitled to receive
------------
the consideration as shall be determined pursuant to Section 262 of GCL, unless
and until such holder fails to perfect or withdraws or otherwise loses his right
to appraisal and payment under the GCL. If, after the Effective Time, any such
holder fails to perfect or withdraws or loses his right to appraisal, such
Dissenting Shares shall thereupon be treated as if they had been converted as of
the Effective Time into the right to receive the Merger Price, if any, to which
such holder is entitled, without interest or dividends thereon. The Company
shall give Purchaser prompt notice of any demands received by the Company for
appraisal of Common Shares, withdrawals of such demands and
-8-
<PAGE>
any other instruments served pursuant to the GCL and received by the Company
and, prior to the Effective Time, Purchaser shall have the right to direct all
negotiations and proceedings with respect to such demands. Prior to the
Effective Time, the Company shall not, except with the prior written consent of
Purchaser, make any payment with respect to, or settle or offer to settle, any
such demands.
SECTION 3.02 Payment for Common Shares.
-------------------------
(a) From and after the Effective Time, a bank or trust company designated
by Purchaser shall act as paying agent (the "Paying Agent") in effecting the
------------
payment of the Merger Price in respect of certificates (the "Share
-----
Certificates") that, prior to the Effective Time, represented Common Shares
entitled to payment of the Merger Price pursuant to Section 2.07. At the
------------
Effective Time, Purchaser shall deposit, or cause to be deposited, in trust with
the Paying Agent the aggregate Merger Price to which holders of Common Shares
shall be entitled at the Effective Time pursuant to Section 2.07.
-------------
(b) Promptly after the Effective Time, the Paying Agent shall mail to each
record holder of Share Certificates that, immediately prior to the Effective
Time, represented Common Shares (other than Share Certificates representing
Dissenting Shares and Share Certificates representing Common Shares held by
Purchaser or any wholly-owned subsidiary of Purchaser, in the treasury of the
Company or by any wholly-owned subsidiary of the Company) (i) a form of letter
of transmittal which shall specify that delivery shall be effected, and risk of
loss and title to the Share Certificates shall pass, only upon proper delivery
of the Share Certificates to the Paying Agent and which shall be in such form
and have such other provisions as Purchaser may reasonably specify and (ii)
instructions for use in surrendering such Share Certificates and receiving the
aggregate Merger Price in respect thereof. Upon surrender of each such Share
Certificate together with such letter of transmittal duly completed and validly
executed in accordance with the instructions thereto, the Paying Agent shall pay
the holder of such Share Certificate the Merger Price multiplied by the number
of Common Shares formerly represented by such Share Certificate in consideration
therefor, and such Share Certificate shall forthwith be cancelled. Until so
surrendered, each such Share Certificate (other than Share Certificates
representing Dissenting Shares and Share Certificates representing Common Shares
held by Purchaser, any wholly-owned subsidiary of Purchaser, in the treasury of
the Company or by any wholly-owned subsidiary of the Company) shall represent
solely the right to receive the aggregate Merger Price relating thereto. No
interest or dividends shall be paid or accrued on the Merger Price. If the
Merger Price (or any portion thereof) is to be delivered to any person other
than the person in whose name the Share Certificate formerly representing Common
Shares surrendered therefor is registered, it shall be a condition to such right
to receive such Merger Price, that the Share Certificate so surrendered shall be
properly endorsed, with signature guaranteed, or otherwise be in proper form for
transfer and that the person surrendering such Share Certificates shall pay to
the Paying Agent any transfer or other taxes required by reason of the payment
of the Merger Price, to a person other than the registered holder of the Share
Certificate surrendered, or shall establish to the satisfaction of the Paying
Agent that such tax has been paid or is not applicable.
-9-
<PAGE>
(c) Promptly following the date that is six months after the Effective
Time, the Paying Agent shall deliver to the Surviving Corporation all cash,
Share Certificates and other documents in its possession relating to the
transactions described in this Agreement, and the Paying Agent's duties shall
terminate. Thereafter, each holder of a Share Certificate formerly representing
a Common Share shall thereafter look only to the Surviving Corporation (as a
general creditor thereof) for payment of its claim for the Merger Price (without
any interest or dividends thereon).
(d) No Liability. To the extent permitted by applicable law, none of
------------
Purchaser, the Company or the Paying Agent shall be liable to any person in
respect of any cash delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(e) Investment of Merger Price. The Paying Agent shall invest the Merger
--------------------------
Price as directed by the Surviving Corporation (within guidelines approved by
the Company prior to the Closing Date, which approval shall not be unreasonably
withheld). Any interest resulting from such investment shall be paid to the
Surviving Corporation.
(f) Transfer of Common Shares. After the Effective Time, there shall be no
-------------------------
registrations of transfers on the stock transfer books of the Surviving
Corporation of any Common Shares which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates formerly
representing Common Shares are presented to the Surviving Corporation or the
Paying Agent, they shall be surrendered and cancelled in consideration for the
payment of the aggregate Merger Price relating thereto, as provided in this
Article III.
- -----------
(g) No Further Ownership Rights in Common Shares Exchanged For Cash. All
---------------------------------------------------------------
cash paid upon the surrender for exchange of Certificates representing Common
Shares in accordance with the terms of this Article III shall be deemed to have
been issued (and paid) in full satisfaction of all rights pertaining to the
Common Shares exchanged for cash theretofore represented by such Certificates in
accordance with the GCL.
(h) Lost Certificates. If any Certificate shall have been lost, stolen or
-----------------
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond in such amount as
the Surviving Corporation may direct as indemnity against any claim that may be
made against it with respect to the Certificate, the Paying Agent shall deliver
in exchange for such lost, stolen or destroyed Certificate the applicable Merger
Price with respect thereto.
(i) Withholding of Tax. Purchaser or any of its affiliates shall be
------------------
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any former holder of Common Shares such amounts as
Purchaser (or any affiliate thereof) is required to deduct and withhold with
respect to the making of such payment under the Code, or any provision of state,
local or foreign tax law. To the extent that amounts are so withheld by
Purchaser and paid by Purchaser to the applicable taxing authority, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the former holder of Common Shares in respect of which such
deduction and withholding was made by Purchaser.
-10-
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Purchaser that, except as set forth
in the Company's Form 10-K for the year ended March 31, 1999 and the Company's
Form 10-Qs for each of the quarters ended June 30, 1999, September 30, 1999 and
December 31, 1999 (collectively, the "Recent SEC Reports") filed with the SEC
------------------
and except as set forth in the Company Disclosure Statement delivered to
Purchaser prior to the execution of this Agreement (the "Company Disclosure
------------------
Statement"):
- ---------
SECTION 4.01 Organization and Qualification; Subsidiaries. The Company is
--------------------------------------------
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Each of the Company's subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. The Company and each of the
subsidiaries has the requisite corporate power and authority to own, operate or
lease its properties and to carry on its business as it is now being conducted,
and is duly qualified or licensed to do business, and is in good standing, in
each jurisdiction in which the nature of its business or the properties owned,
operated or leased by it makes such qualification, licensing or good standing
necessary; except where the failure to have such power or authority, or the
failure to be so qualified, licensed or in good standing, would not reasonably
be expected to have a Material Adverse Effect on the Company. As used in this
Agreement, the term "Material Adverse Effect on the Company" means any change or
--------------------------------------
effect that would be materially adverse to the assets, liabilities, business,
prospects, operations or condition (financial or otherwise) of the Company and
its subsidiaries, taken as a whole, or the ability of the Company to perform its
obligations under this Agreement or to consummate the transactions contemplated
hereby.
SECTION 4.02 Certificate of Incorporation and By-Laws. The Company has
----------------------------------------
heretofore made available to Purchaser a complete and correct copy of the
certificate of incorporation and the by-laws, each as amended to the date
hereof, of the Company and its subsidiaries. Such articles of incorporation and
by-laws are in full force and effect, and no other organizational documents are
applicable to or binding upon the Company or any of its subsidiaries. Neither
the Company nor any of its subsidiaries is in violation of any of the provisions
of its certificate of incorporation or by-laws.
SECTION 4.03 Capitalization. The authorized capital stock of the Company
--------------
consists of 35,000,000 shares of Class A Common Stock, 10,000,000 shares of
Class B Common Stock and 20,000,000 shares of Preferred Stock, par value $0.01
per share (the "Preferred Stock"). As of the date of this Agreement, the
---------------
Company had 12,927,459 shares of Class A Common Stock outstanding and 240,324
shares of Class B Common Stock and no shares of Preferred Stock issued or
outstanding. The Company has no shares of capital stock reserved for issuance,
except that, as of the date of this Agreement, there were 2,181,971 shares of
Class A Common Stock reserved for issuance pursuant to the exercise of Options
(of which Options to purchase 1,821,068 shares of Class A Common Stock are
outstanding). All the outstanding shares of
-11-
<PAGE>
Class A Common Stock and Class B Common Stock are, and all shares of Class A
Common Stock which may be issued pursuant to the exercise of outstanding Options
will be, when issued in accordance with the respective terms thereof, duly
authorized, validly issued, fully paid and nonassessable and free of preemptive
(or similar) rights. As of the date hereof, there are no treasury shares, and
there are no stock appreciation rights. There are no bonds, debentures, notes or
other evidences of indebtedness having general voting rights (or convertible
into securities having such rights) ("Voting Debt") of the Company or any of its
-----------
subsidiaries issued and outstanding. Except as contemplated by (i) this
Agreement and (ii) the Company's obligations under the Options, there are no
outstanding contractual obligations of the Company or any of its subsidiaries to
repurchase, redeem, or otherwise acquire any Common Shares or the capital stock
of the Company or any of its subsidiaries or to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
such subsidiary or any other entity. Each of the outstanding shares of capital
stock of each of the Company's subsidiaries is duly authorized, validly issued,
fully paid and nonassessable, and except for security interests arising under
the Second Amended and Restated Credit Agreement, dated as of March 2, 1998, as
amended to date, among the Company, Bankers Trust Company, as Administrative
Agent, First Union National Bank, as Syndication Agent, and the banks named
therein (the "Credit Agreement"), all such shares of the Company's subsidiaries
----------------
are owned by the Company or by another wholly owned subsidiary of the Company
and owned in each case free and clear of any lien, claim, option, charge,
security interest, limitation, encumbrance and restriction of any kind (any of
the foregoing being a "Lien"). Except for the Voting Agreement, there are no
----
voting trusts or other agreements or understandings to which the Company or any
of its subsidiaries is a party with respect to the voting of the capital stock
of the Company or any of its subsidiaries. None of the Company or its
subsidiaries is required to redeem, repurchase or otherwise acquire shares of
capital stock of the Company, or any of its subsidiaries, respectively, as a
result of the transactions contemplated by this Agreement.
SECTION 4.04 Authority Relative to this Agreement. The Company has all
------------------------------------
necessary corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly and validly authorized and
approved by the Company Board and no other corporate proceedings on the part of
the Company are necessary to authorize or approve this Agreement or to
consummate the transactions contemplated hereby (other than, with respect to the
Merger, the approval and adoption of the Merger and this Agreement by holders of
the Common Shares to the extent required by the Company's certificate of
incorporation and by applicable law and the filing of appropriate merger
documents as required by the GCL). This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due and valid
authorization, execution and delivery of this Agreement by Purchaser,
constitutes a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except that such enforceability (i)
may be limited by bankruptcy, insolvency, moratorium or other similar laws
affecting or relating to the enforcement of creditors' rights generally and (ii)
is subject to general principles of equity. Pursuant to the GCL and the
Company's certificate of incorporation and bylaws, the Shares purchased in
satisfaction of the Minimum Condition are
-12-
<PAGE>
sufficient to provide the stockholder vote required to consummate the Merger in
accordance with the Company's certificate of incorporation and bylaws and
Section 251 of the GCL.
SECTION 4.05 No Conflict; Required Filings and Consents.
------------------------------------------
(a) None of the execution, delivery of and performance of this Agreement
by the Company, the consummation by the Company of the transactions contemplated
hereby or compliance by the Company with any of the provisions hereof will (i)
conflict with or result in a violation of any provision of the certificate of
incorporation or by-laws of the Company, as amended, or the applicable
organizational documents of any of its subsidiaries, (ii) conflict with or
violate any law, rule, regulation, order, judgment, writ or decree of any
governmental authority applicable to the Company or any of its subsidiaries, or
by which any of them or any of their respective properties or assets may be
bound or affected, or (iii) result in a violation or breach of or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under (any of the foregoing referred to in clause (ii) or this clause
----------- ------
(iii) being a "Violation"), any loan and credit agreement, note, bond, mortgage,
- ----- ---------
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or any of their
respective properties may be bound or affected, except, in the case of clauses
-------
(ii) and (iii), for any such Violations which would not reasonably be expected
- --------------
to have a Material Adverse Effect on the Company.
(b) None of the execution, delivery and performance of this Agreement by
the Company, the consummation by the Company of the transactions contemplated
hereby or compliance by the Company with any of the provisions hereof will
require any consent, waiver, approval, authorization or permit of, or
registration or filing with or notification to (any of the foregoing being a
"Consent"), any government or subdivision thereof, or any administrative,
- --------
governmental or regulatory authority, agency, court, commission, tribunal or
body, domestic, foreign or supranational (a "Governmental Entity"), except for
-------------------
(i) compliance with any applicable requirements of the Exchange Act, (ii) the
filing of a certificate of merger, or, if permitted, a certificate of ownership
and merger, pursuant to the GCL, (iii) applicable state takeover statutes, (iv)
compliance with the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976, as
amended (the "HSR Act") and any requirements of any foreign or supranational
-------
anti-trust laws (as hereinafter defined), and (iv) Consents, the failure of
which to obtain or make would not reasonably be expected to have a Material
Adverse Effect on the Company.
SECTION 4.06 SEC Reports and Financial Statements.
------------------------------------
(a) The Company has filed with the SEC all forms, reports, schedules,
registration statements and definitive proxy statements (the "SEC Reports")
-----------
required to be filed with the SEC since the date the Company became subject to
reporting requirements under the Exchange Act. As of their respective dates,
the SEC Reports complied in all material respects with the requirements of the
Exchange Act or the Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated thereunder applicable, as the case may be, to
such SEC Reports, and none of the SEC Reports (including, but not limited to,
any financial statements or
-13-
<PAGE>
schedules included or incorporated by reference therein) contained when filed
(except to the extent revised or superseded by a subsequent filing with the SEC)
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
(b) The consolidated balance sheets as of March 31, 1999 and 1998 and the
related consolidated statements of income, common stockholders' equity and cash
flows for each of the three years in the period ended March 31, 1999 (including
the related notes and schedules thereto) of the Company contained in the
Company's Form 10-K for the year ended March 31, 1999 included in the SEC
Reports present fairly, in all material respects, the consolidated financial
position and the consolidated results of operations and cash flows of the
Company and its consolidated subsidiaries as of the dates or for the periods
presented therein in conformity with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis during the periods involved
----
except as otherwise noted therein, including the related notes.
(c) The consolidated balance sheets and the related statements of income
and cash flows (including in each case the related notes thereto) of the Company
contained in the Forms 10-Q for the periods ended June 30, 1999, September 30,
1999 and December 31, 1999 included in the SEC Reports (collectively, the
"Quarterly Financial Statements") have been prepared in accordance with the
- -------------------------------
requirements for interim financial statements contained in Regulation S-X. The
Quarterly Financial Statements present fairly, in all material respects, the
consolidated financial position and consolidated results of operations and cash
flows of the Company and its consolidated subsidiaries as of the dates and for
the periods presented therein in conformity with GAAP applied on a consistent
basis during the periods involved, except as otherwise noted therein, including
the related notes, provided, that the Quarterly Financial Statements do not
reflect full year end adjustments, accruals, reserves and footnotes.
(d) There are no liabilities of the Company or any of its subsidiaries of
any kind whatsoever, whether or not accrued and whether or not contingent or
absolute, that are material to the Company and its subsidiaries, taken as a
whole, other than (i) liabilities disclosed or provided for in the consolidated
balance sheet of the Company and its subsidiaries at March 31, 1999, including
the notes thereto, (ii) liabilities disclosed in the Quarterly Financial
Statements, (iii) liabilities incurred in the ordinary course of business
consistent with past practice since December 31, 1999, and (iv) other
liabilities, none of which (without giving effect to the materiality qualifier
contained in this Section 2.06(d)) would reasonably be expected to have a
---------------
Material Adverse Effect on the Company.
(e) The Company has heretofore furnished or made available to Purchaser a
complete and correct copy of any amendments or modifications which have not yet
been filed with the SEC to agreements, documents or other instruments which
previously had been filed by the Company with the SEC pursuant to the Securities
Act and the rules and regulations promulgated thereunder or the Exchange Act and
the rules and regulations promulgated thereunder.
-14-
<PAGE>
SECTION 4.07 Information. None of the Schedule 14D-9, the Proxy Statement
-----------
(except for any information concerning Purchaser and supplied by Purchaser
specifically for inclusion therein) nor any of the information concerning the
Company supplied by the Company specifically for inclusion or incorporation by
reference in (i) the Offer Documents, or (ii) any other document to be filed
with the SEC or any other Governmental Entity in connection with the
transactions contemplated by this Agreement and any amendment or supplement to
any of the above (the "Other Filings") will, at the respective times filed with
-------------
the SEC or other Governmental Entity or first published and, in addition, in the
case of the Proxy Statement, at the date it or any amendment or supplement is
mailed to stockholders and at the time of the Special Meeting (as herein
defined), contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
SECTION 4.08 Litigation. The Company Disclosure Statement sets forth each
----------
instance in which any of the Company and its subsidiaries or any of their
respective properties (a) is subject to any judgment, order, decree,
stipulation, injunction, or charge or (b) is a party to or the subject of any
material charge, complaint, action, suit, proceeding, hearing, or investigation
of or in any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction, or to the Knowledge of the Company, is
threatened to be a party to or the subject of any such action, except, in each
case, where the judgment, order, decree, stipulation, injunction, charge,
complaint, action, suit, proceeding, hearing, or investigation (i) is disclosed
in the Company's public filings with the SEC or (ii) would not reasonably be
expected to have a Material Adverse Effect on the Company.
SECTION 4.09 Compliance with Applicable Laws. Neither the Company nor any
-------------------------------
of its subsidiaries is in conflict with or in default or violation of (i) any
laws, regulations, rules, orders, judgment or decree of any Governmental Entity
applicable to it, such subsidiaries or any of their respective properties or
(ii) any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or its or any of their respective properties are bound or affected,
except for any such conflicts, defaults or violations which would not reasonably
be expected to have a Material Adverse Effect on the Company. The Company and
its subsidiaries have all permits, licenses, authorizations, consents, approvals
and franchises from governmental agencies required to conduct their businesses
as now being conducted, except for such permits, licenses, authorizations,
consents, approvals, and franchises the absence of which would not reasonably be
expected to have a Material Adverse Effect on the Company. The business
operations of the Company and its subsidiaries are not being conducted in
violation of any law, ordinance or regulation of any Governmental Entity, except
for possible violations which would not reasonably be expected to have a
Material Adverse Effect on the Company.
SECTION 4.10 Taxes. The Company has timely filed (or caused to be timely
-----
filed) all Federal, state, local and foreign income and other tax returns
regarding the Company or its subsidiaries required by law to be filed prior to
the date of this Agreement, which tax returns are correct and complete in all
material respects. The Company and its subsidiaries have paid all
-15-
<PAGE>
Federal, state, local or foreign income and other taxes that are due and payable
(including any interest, penalties or additions to tax that are due with respect
thereto) other than taxes that are being contested in good faith and which have
been reserved for in accordance with GAAP. No tax return of the Company or its
subsidiaries is currently under audit by any taxing authority and no deficiency
in the payment of any taxes by the Company or any subsidiary of the Company has
been assessed, asserted or, to the Knowledge of the Company, threatened against
the Company or any subsidiary of the Company that remains unsettled as of the
date of this Agreement. There are currently no outstanding waivers of statutes
of limitations with any taxing authority by the Company or the subsidiaries. The
Company has not at any time filed a consolidated or combined tax return as a
member of an affiliated group (within the meaning of Section 1504 of the Code)
other than as a group of which the Company was the parent.
SECTION 4.11 Material Adverse Change. Since December 31, 1999, except as
-----------------------
contemplated by this Agreement, the Company and its subsidiaries, taken as a
whole, have conducted their businesses only in the ordinary course and in a
manner consistent with past practice and, since such date, there has not been:
(i) any change in the assets, liabilities, results of operation, financial
condition or business of the Company or any of its subsidiaries that would
reasonably be expected to have a Material Adverse Effect on the Company; (ii)
any condition, event or occurrence which would reasonably be expected to have a
Material Adverse Effect on the Company; or (iii) any other action which, if it
had been taken after the date hereof, would have required the consent of
Purchaser under Section 4.01.
------------
SECTION 4.12 Opinion of Financial Advisor. The Company has received the
----------------------------
written opinion of the Financial Advisor to the effect that, as of such date,
the Share Offer Price to be received by holders of Common Shares pursuant to the
Offer is fair to such holders (other than Purchaser or the stockholders of
Purchaser) from a financial point of view, a copy of which opinion is attached
hereto as Exhibit B. The Company has been authorized by the Financial Advisor
---------
to permit the inclusion of such fairness opinion in the Schedule 14D-9 and the
Proxy Statement, as necessary or desirable.
SECTION 4.13 Brokers. Except for the engagement of the Financial Advisor,
-------
none of the Company, any of its subsidiaries, or any of their respective
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finder's fees in connection
with the transactions contemplated by this Agreement. True and correct copies
of the Company's agreements with the Financial Advisor have been provided to
Purchaser prior to the date of this Agreement.
SECTION 4.14 Insurance. The Company and its subsidiaries maintain
---------
policies of fire and casualty, liability, workmen's compensation and other forms
of insurance in such amounts, with such deductibles and against such risks and
losses as are in the Company's judgment, reasonable for the assets and
properties of the Company and its subsidiaries and as are customary in the
Company's industry, and, as of the date of this Agreement, except as would not
have, individually or in the aggregate, a Material Adverse Effect on the
Company, all such policies are in full force and effect, all premiums due and
payable thereon have been paid, and no notice of cancellation or termination has
been received with respect to any such policy.
-16-
<PAGE>
SECTION 4.15 Certain Approvals; Take-Over Laws. The Company Board has
---------------------------------
taken appropriate action such that, assuming the accuracy of information
provided by Purchaser in writing to the Company or to its counsel in connection
with this Agreement and the transactions contemplated hereby, the provisions of
Section 203 of the GCL will not apply to any of the transactions contemplated by
this Agreement or the Rollover Agreement. No foreign or state takeover law is
applicable to the transactions contemplated by this Agreement, including the
Offer and the Merger.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
The Purchaser represents and warrants to the Company as follows:
SECTION 5.01 Organization and Qualification. Purchaser is a corporation
------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Purchaser has the requisite power and authority to own,
operate or lease its properties and to carry on its business as it is now being
conducted, and is duly qualified or licensed to do business, and is in good
standing, in each jurisdiction in which the nature of its business or the
properties owned, operated or leased by it makes such qualification, licensing
or good standing necessary, except where the failure to have such power or
authority, or the failure to be so qualified, licensed or in good standing,
would not reasonably be expected to have a Material Adverse Effect on Purchaser.
The term "Material Adverse Effect on Purchaser", as used in this Agreement,
------------------------------------
means any change in or effect on the assets, liabilities, business, prospects,
operations or condition (financial or otherwise) of Purchaser or any of its
subsidiaries that would reasonably be expected to prevent or materially delay
consummation of the Offer or the Merger.
SECTION 5.02 Authority Relative to this Agreement. Purchaser has all
------------------------------------
necessary corporate power and authority to execute and deliver this Agreement
and the Rollover Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Purchaser and the
Rollover Agreement and the consummation by it of the transactions contemplated
hereby have been duly and validly authorized and approved by the Purchaser Board
and no other proceedings on the part of Purchaser are necessary to authorize or
approve this Agreement or the Rollover Agreement or to consummate the
transactions contemplated hereby. This Agreement and the Rollover Agreement has
been duly executed and delivered by each Purchaser and, assuming the due and
valid authorization, execution and delivery by the Company and the other parties
thereto (other than Purchaser), constitutes a valid and binding obligation of
Purchaser enforceable against Purchaser in accordance with its terms, except
that such enforceability (i) may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to the enforcement of
creditors' rights generally and (ii) is subject to general principles of equity.
SECTION 5.03 No Conflict; Required Filings and Consents.
------------------------------------------
-17-
<PAGE>
(a) None of the execution and delivery by Purchaser of this Agreement and
the Rollover Agreement, the consummation by Purchaser of the transactions
contemplated hereby or compliance by Purchaser with any of the provisions
contained in this Agreement and the Rollover Agreement will (i) conflict with or
violate the organizational documents of Purchaser, (ii) conflict with or violate
any law, regulation or order applicable to Purchaser or by which any of its
properties or assets may be bound or affected , or (iii) result in a violation
pursuant to any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Purchaser
is a party or by which any of its properties may be bound or affected, except in
the case of the foregoing clause (ii) or (iii), for any such violations which
----------- ------
would not have a Material Adverse Effect on Purchaser.
(b) None of the execution and delivery by Purchaser of this Agreement or
the Rollover Agreement, the consummation by Purchaser of the transactions
contemplated hereby or compliance by Purchaser with any of the provisions hereof
will require any Consent of any Governmental Entity, except for (i) compliance
with any applicable requirements of the Exchange Act, (ii) the filing of a
certificate of merger, or, if permitted, a certificate of ownership and merger,
pursuant to the GCL, (iii) applicable state takeover and environmental statutes,
(iv) compliance with the HSR Act and any requirements of any foreign or
supranational anti-trust laws, and (v) Consents the failure of which to obtain
or make would not reasonably be expected to have a Material Adverse Effect on
Purchaser.
SECTION 5.04 Information. Neither the Offer Documents, the Schedule TO
-----------
(except, in each case, for any information concerning the Company and supplied
by the Company specifically for inclusion therein) nor any of the information
concerning Purchaser and supplied or to be supplied by Purchaser specifically
for inclusion in (i) the Schedule 14D-9 or (ii) the Proxy Statement, will, at
the respective times filed with the SEC or other Governmental Entity and, in
addition, in the case of the Proxy Statement, at the date it or any amendment or
supplement is mailed to stockholders and at the time of the Special Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
SECTION 5.05 Financing. Purchaser has received and obtained a commitment
---------
letter from GTCR Fund VII, L.P., a true and complete copy of which is attached
hereto as Exhibit C, providing for equity capital and sufficient funds to
---------
consummate the Offer, the Merger and the transactions contemplated hereby (the
"Commitment Letter").
- ------------------
SECTION 5.06 Brokers. Except for Jefferies & Company, Inc., which has
-------
been engaged by Purchaser pursuant to that certain engagement letter between
Purchaser and Jefferies & Company, Inc. (the "Jefferies Engagement Letter"), a
---------------------------
true and complete copy of which is attached hereto as Exhibit D, none of
---------
Purchaser or any of its subsidiaries, officers, directors or employees has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finder's fees in connection with the transactions contemplated by
this Agreement for or with respect to which the Company is or might be liable.
-18-
<PAGE>
ARTICLE VI
COVENANTS
SECTION 6.01 Conduct of Business of the Company. Except as expressly
----------------------------------
contemplated by this Agreement, or with the prior written consent of Purchaser,
or as specified in the Company Disclosure Statement, during the period from the
date of this Agreement to the termination of the Offer, the Company will, and
will cause each of its subsidiaries to, conduct its operations only in and the
Company and its subsidiaries shall not take any action other than in the
ordinary course of business consistent with past practice and in compliance with
applicable laws (including, but not limited to, Environmental Laws) and will use
commercially reasonable efforts, and will cause each of its subsidiaries to use
commercially reasonable efforts, to preserve intact the business organization of
the Company and each of its subsidiaries, to keep available the services of its
and their present officers and key employees, and to preserve the present
relationships of the Company and its subsidiaries with customers, suppliers,
creditors, business partners and other persons with which the Company or any of
its subsidiaries has significant business relations. Without limiting the
generality of the foregoing and except as otherwise expressly contemplated by
this Agreement or the Company Disclosure Statement, the Company will not, and
will not permit any of its subsidiaries to, prior to the termination of the
Offer, without the prior written consent of Purchaser (which will not be
unreasonably withheld or delayed):
(a) adopt any amendment to its charter or by-laws or comparable
organizational documents;
(b) except for issuances of capital stock of the Company's
subsidiaries to the Company or a wholly-owned subsidiary of the Company,
issue, reissue, sell, pledge, dispose of or encumber or authorize the
issuance, reissuance, sale, pledge, disposition or encumbrance of (i)
additional shares of capital stock of any class, or securities convertible
into capital stock of any class, or any rights, warrants or options or
other rights of any kind to acquire any convertible securities or capital
stock or any other ownership interest (including, but not limited to, stock
appreciation rights or phantom stock) of the Company or any of its
subsidiaries, other than the issuance of shares of Class A Common Stock
pursuant to the exercise of Options outstanding on the date hereof or (ii)
any other securities in respect of, in lieu of, or in substitution for,
Common Shares outstanding on the date hereof;
(c) declare, set aside or pay any dividend or other distribution
(whether in cash, securities or property or any combination thereof) in
respect of any class or series of its capital stock other than between any
of the Company and any of its wholly owned subsidiaries;
(d) split, combine, subdivide, reclassify or redeem, purchase or
otherwise acquire, or propose to redeem or purchase or otherwise acquire,
any shares of its capital stock, or any of its other securities;
-19-
<PAGE>
(e) except for (i) increases in salary, wages and benefits of
officers or employees of the Company or its subsidiaries in the ordinary
course of business and in accordance with past practice, (ii) increases in
salary, wages and benefits granted to officers and employees of the Company
or its subsidiaries in conjunction with new hires, promotions or other
changes in job status in the ordinary course of business for officers and
employees whose aggregate cash compensation is equal to or less than
$75,000 per annum or (iii) increases in salary, wages and benefits to
employees of the Company pursuant to collective bargaining agreements
entered into in the ordinary course of business consistent with past
practice, increase the compensation or fringe benefits payable or to become
payable to its directors, officers or key employees (whether from the
Company or any of its subsidiaries), or pay any benefit not required by any
existing plan or arrangement (including, without limitation, the granting
of stock options, stock appreciation rights, shares of restricted stock or
performance units) or grant any severance or termination pay to (except
pursuant to existing agreements, plans or policies), or enter into any
employment or severance agreement with, any director, officer or other key
employee of the Company or any of its subsidiaries or establish, adopt,
enter into, or amend any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
savings, welfare, deferred compensation, employment, termination, severance
or other employee benefit plan, agreement, trust, fund, policy or
arrangement for the benefit or welfare of any directors, officers or
current or former employees (any of the foregoing being an "Employee
--------
Benefit Arrangement"), except in each case to the extent as required by
-------------------
applicable law or regulation;
(f) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof or any material assets, (ii) except for borrowings under
existing lines of credit in the ordinary course of business, incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise as an accommodation become responsible
for, the obligations of any person, or make any loans, advances or capital
contributions to, or investments in, any other person, except for bonuses,
advances, capital contributions or investments between any wholly owned
subsidiary of the Company and the Company or another wholly owned
subsidiary of the Company, (iii) make or start any bid or proposal, or
enter into, renew or amend any contract or agreement that could result in a
loss or would involve aggregate consideration in excess of $250,000, (iv)
authorize any single capital expenditure which is in excess of $250,000 or
capital expenditures which are, in the aggregate, in excess of $500,000 for
the Company and its subsidiaries taken as a whole, (v) enter into any
transaction, contract or commitment with any affiliate of the Company,
except as contemplated by this Agreement, (vi) sell, lease, license to
others or dispose of any assets outside the ordinary course of business
consistent with past practice which individually or in the aggregate are
material to the Company or (vii) modify, amend or terminate its material
Company Agreements or waive, release, or assign any material rights or
claims;
-20-
<PAGE>
(g) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
practices or principles used by it;
(h) make or change any tax election, make or change any method of
accounting with respect to taxes, file any amended tax return or settle or
compromise any material tax liability;
(i) settle or compromise any pending or threatened suit, action or
claim which is material or which relates to the transactions contemplated
hereby;
(j) make any change in the key management structure of the Company or
any of its subsidiaries, including, without limitation, the hiring of
additional officers or the termination of existing officers;
(k) transfer or grant any rights under, or enter into any settlement
regarding, the breach or infringement of, any Company Intellectual Property
Rights, or modify any existing rights with respect thereto;
(l) take any action, including, but not limited to, introducing a new
product, reasonably likely to expose the Company to any claim that the
Company has violated applicable laws, rules or regulations or any rights of
any other person in any material respect;
(m) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its subsidiaries not constituting
an inactive subsidiary (other than any transaction specifically
contemplated by this Agreement);
(n) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of liabilities reflected or
reserved against in the financial statements of the Company or incurred in
the ordinary course of business and consistent with past practice;
(o) enter into any collective bargaining agreement or any successor
collective bargaining agreement to any collective bargaining agreement; or
(p) take, or offer or propose to take, or agree to take in writing or
otherwise, any of the actions described in Sections 6.01(a) through 6.01(o)
---------------- -------
or any action which would make any of the representations or warranties of
the Company contained in this Agreement untrue and incorrect as of the date
when made in any material respect if such action had then been taken, or
would result in any of the conditions set forth in Annex I not being
satisfied.
-21-
<PAGE>
SECTION 6.02 Access to Information. From the date hereof until the
---------------------
termination or the consummation of the Offer, the Company will, and will cause
its subsidiaries, and each of their respective officers, directors, employees,
counsel, advisors, representatives and financing sources (collectively, the
"Company Representatives"), to provide Purchaser and its officers, employees,
- ------------------------
counsel, advisors, representatives and financing sources (collectively, the
"Purchaser Representatives") reasonable access (subject, however, to existing
- --------------------------
confidentiality and similar non-disclosure obligations and the preservation of
attorney-client and work product privileges), during normal business hours and
upon reasonable notice, to its officers and employees and to its offices and
other facilities and to the books and records of the Company and its
subsidiaries, and will permit Purchaser to make inspections of such as Purchaser
may reasonably require, and will cause the Company Representatives and the
Company's subsidiaries to furnish Purchaser and the Purchaser Representatives to
the extent available with such other financial and operating data and other
information with respect to the business and operations of the Company and its
subsidiaries as Purchaser may from time to time reasonably request. Unless
otherwise required by law, Purchaser will, and will cause the Purchaser
Representatives to, hold any such information in confidence until such time as
such information otherwise becomes publicly available through no wrongful act of
Purchaser or the Purchaser Representatives. No investigation pursuant to this
Section 6.02 shall affect any representations or warranties of the parties
- ------------
herein or the conditions to the obligations of the parties hereto. In the event
of termination of this Agreement for any reason, Purchaser will, and will cause
the Purchaser Representatives to, return to the Company or destroy all copies of
written information furnished by the Company or any of the Company
Representatives to Purchaser or the Purchaser Representatives and destroy such
portion of all memoranda, notes and other writings prepared by Purchaser or the
Purchaser Representatives based upon or including the information furnished by
the Company or any of the Company Representatives to the Purchaser or the
Purchaser Representatives (and Purchaser will certify to the Company that such
destruction has occurred).
SECTION 6.03 Efforts.
-------
(a) Subject to the terms and conditions hereof, each party hereto shall
use their reasonable good faith efforts to ensure that the conditions set forth
in Annex I are satisfied and to consummate and make effective the transactions
-------
contemplated by the Offer and this Agreement as promptly as practicable in
accordance with this Agreement.
(b) The Company agrees to provide, and will cause its subsidiaries and its
and their respective officers, employees, advisers and lenders to provide, all
reasonable cooperation in connection with the arrangement of any financing
contemplated by the Commitment Letter to be consummated contemporaneous with the
Closing in respect of the transactions contemplated by this Agreement, including
without limitation, participation in meetings, due diligence sessions, road
shows, the preparation of offering memoranda, private placement memoranda,
prospectuses and similar documents, and taking such other action as otherwise
reasonably requested by Purchaser. The Company will also provide commercially
reasonable assistance to the Purchaser in connection with the execution and
delivery of any other documentation, as may be requested by Purchaser, necessary
to give effect to the transactions contemplated by this Agreement.
-22-
<PAGE>
(c) The Company and the Purchaser will as promptly as practicable file
with the Federal Trade Commission and the Department of Justice the notification
and report forms required for the transactions contemplated hereby and any
supplemental information that may be reasonably requested in connection
therewith pursuant to the HSR Act, which notification and report forms and
supplemental information will comply in all material respects with the
requirements of the HSR Act. The Company shall pay all filing fees required
with respect to the notification, report and other requirements of the HSR Act.
(d) If at any time prior to the Effective Time any event or circumstance
relating to either the Company or Purchaser or any of their respective
subsidiaries, should be discovered by the Company or Purchaser, as the case may
be, and which should be set forth in an amendment to the Offer Documents, the
Schedule TO, or the Schedule 14D-9, the discovering parties will promptly inform
the other party of such event or circumstance. If at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, including the execution of additional documents,
assignments and other instruments, the proper officers and directors of each
party to this Agreement shall take all such necessary action.
(e) Each of the parties agrees to cooperate with each other in taking, or
causing to be taken, all actions necessary to delist the Common Shares from the
NASDAQ National Market System if the listing requirements would no longer be
satisfied after the Effective Time; provided, that such delisting shall not be
--------
effective until after the Effective Time.
(f) Purchaser agrees to use commercially reasonable efforts to promptly
satisfy any conditions in the Commitment Letter, and not to waive or amend, or
provide any waivers, in respect of the Commitment Letter in a manner which would
adversely affect the consummation of the Offer in accordance with this
Agreement, including its timing thereof.
SECTION 6.04 Consents.
--------
(a) Each of the parties will as promptly as practicable (i) make the
required filings with, and take all reasonable steps to obtain the required
authorizations, approvals, consents and other actions of, any Governmental
Entity, (ii) take all reasonable steps (not including the expenditure of money
or the payment or delivery of other consideration) to obtain the required
consents of other persons with respect to the transactions contemplated hereby
and the Rollover Agreement and (iii) use its commercially reasonable efforts to
obtain waivers of any breaches, defaults or violations that may be caused by the
consummation of the Offer and other transactions contemplated by the Offer, the
Rollover Agreement and this Agreement.
(b) Any party hereto shall promptly inform the others of any material
communication from the United States Federal Trade Commission, the Department of
Justice or any other domestic or foreign government or governmental or
multinational authority regarding any of the transactions contemplated by this
Agreement. If any party or any affiliate thereof receives a request for
additional information or documentary material from any such government or
authority with respect to the transactions contemplated by this Agreement, then
such party will endeavor in good faith to make, or cause to be made, as soon as
reasonably practicable and after
-23-
<PAGE>
consultation with the other party, an appropriate response in compliance with
such request. Purchaser will advise the Company promptly in respect of any
understandings, undertakings or agreements (oral or written) which Purchaser
proposes to make or enter into with the Federal Trade Commission, the Department
of Justice or any other domestic or foreign government or governmental or
multinational authority in connection with the transactions contemplated by this
Agreement.
SECTION 6.05 Maintenance of Insurance. Each of the Company and its
------------------------
subsidiaries will continue to carry its existing insurance, including, but not
limited to, directors and officers insurance, through the Effective Time, and
shall not allow any breach, default or cancellation (other than expiration and
replacement of policies in the ordinary course of business) of such insurance
policies or agreements to occur or exist that would reasonably be expected to
have a Material Adverse Effect on the Company.
SECTION 6.06 Public Announcements. So long as this Agreement is in
--------------------
effect, Purchaser and the Company agree to consult with each other before
issuing any press release or otherwise making any public statement with respect
to the transactions contemplated by this Agreement and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by law or any listing agreement with any securities
exchange.
SECTION 6.07 Continuance of Existing Indemnification Rights.
----------------------------------------------
(a) The Company will, and after the Effective Time, Purchaser agrees that
it will cause the Surviving Corporation to, until the expiration of any
applicable statutes of limitation, (i) indemnify and hold harmless each present
and former director, officer and employee of the Company (collectively, the
"Company Indemnified Parties") against any costs or expenses (including
- ----------------------------
reasonable attorneys' fees), judgments, fines, losses, claims, damages or
liabilities (collectively, "Costs") (but only to the extent such Costs are not
-----
otherwise covered by insurance and paid) incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative (collectively, "Claims"), arising out of or
------
pertaining to matters existing or occurring at or prior to the Effective Time,
including, in any event, in connection with the Offer, the Merger and this
Agreement, whether asserted or claimed prior to, at or after the Effective Time,
to the fullest extent permitted under applicable law, and (ii) keep in effect
the provisions in its articles of incorporation and bylaws containing the
provisions with respect to exculpation of director and officer liability and
indemnification set forth in the articles of incorporation and bylaws of the
Company on the date of this Agreement to the fullest extent permitted under
applicable law, which provisions shall not be amended, repealed or otherwise
modified in any manner adverse to the Company Indemnified Parties, without the
prior written consent of such persons, except as required by applicable law.
(b) The Company will, and after the Effective time, Purchaser agrees that
it will cause the Surviving Corporation to, use its reasonable best efforts to
cause to be maintained in effect for a period of not less than six years from
the Effective Time policies of directors' and officers' liability insurance
maintained by the Company with respect to matters occurring prior
-24-
<PAGE>
to the Effective Time and providing coverage and containing terms and conditions
which are no less advantageous than those currently in place, provided, that the
--------
Surviving Corporation shall not at any time be required to pay an annual premium
in excess of 150% of the last annual premium paid by the Company prior to the
date hereof (it being understood that if the Surviving Corporation is unable to
obtain the insurance required by this Section 6.07(b), it shall obtain as much
----------------
comparable insurance as possible for an annual premium equal to such maximum
amount).
(c) Any Company Indemnified Party wishing to claim indemnification under
this Section 6.07 after the Effective Time, upon learning of any such claim,
------------
action, suit, proceeding or investigation, shall promptly notify the Surviving
Corporation thereof, but the failure to so notify shall not relieve the
Surviving Corporation of any liability it may have to such Company Indemnified
Party if such failure does not significantly prejudice the Surviving
Corporation. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) the
Surviving Corporation shall have the right to assume the defense thereof and the
Surviving Corporation shall not be liable to such Company Indemnified Parties
for any legal expenses of other counsel or any other expenses subsequently
incurred by such Company Indemnified Parties in connection with the defense
thereof, except that if the Surviving Corporation elects not to assume such
defense, or counsel for the Company Indemnified Parties advises the Surviving
Corporation in writing that there are issues which raise conflicts of interest
between the Surviving Corporation and the Company Indemnified Parties, the
Company Indemnified Parties may retain counsel reasonably satisfactory to them,
and the Surviving Corporation shall pay all reasonable fees and expenses of such
counsel for the Company Indemnified Parties promptly as statements therefor are
received; provided, however, that (i) the Surviving Corporation shall be
-------- -------
obligated pursuant to this paragraph (c) to pay for only one counsel for all
Company Indemnified Parties, (ii) the Company Indemnified Parties will cooperate
in the defense of any such matter and (iii) the Surviving Corporation shall not
be liable for any settlement effected without its prior written consent, which
will not be unreasonably withheld; and provided, further, that the Surviving
-------- -------
Corporation shall not have any obligation hereunder to any Company Indemnified
Party if and when a court of competent jurisdiction shall ultimately determine
that the indemnification of such Company Indemnified Party in the manner
contemplated hereby is prohibited by applicable law.
(d) Notwithstanding anything to the contrary in this Section 6.07, at any
------------
time that Purchaser and its affiliates (i) cease to control at least a majority
of the issued and outstanding Common Shares entitled to be voted at a meeting of
stockholders of the Company for the election of directors, and (ii) less than a
majority of the Company Board consists of persons designated by Purchaser or its
affiliates, the obligations of Purchaser under this Section 6.07 shall
------------
terminate.
(e) This Section 6.07 is intended to be for the benefit of, and shall be
------------
enforceable by, each of the Company Indemnified Parties and their respective
heirs and successors. The indemnification provided for herein shall not be
deemed exclusive of any other rights to which a Company Indemnified Party is
entitled, whether pursuant to law, contract or otherwise. The Company shall pay
all expenses, including reasonable attorneys' fees, that are incurred by any
-25-
<PAGE>
Company Indemnified Party which is the prevailing party in any action or
proceeding to enforce the indemnity and other obligations provided for in this
Section 6.07.
- ------------
(f) In the event that the Surviving Corporation or any of its controlling
persons or successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers or conveys all or substantially
all of its properties and assets to any person, then, and in each such case, to
the extent necessary to effectuate the purpose of this Section 6.07, proper
------------
provision shall be made so that the successors and assigns of the Surviving
Corporation or such controlling persons shall succeed to the obligations set
forth in this Section 6.07 and none of the actions described in clauses (i) or
------------
(ii) shall be taken until such provision is made.
SECTION 6.08 No Solicitation. The Company agrees that it shall not (and
---------------
shall not authorize any of its subsidiaries or any of the officers and directors
of it or its subsidiaries or its and its subsidiaries' directors, officers,
employees, affiliates, agents, advisors and representatives to), directly or
indirectly, (a) solicit, initiate or encourage, or take any other action to
facilitate (including by way of furnishing information) any Takeover Proposal
(as defined herein) or take any other action which may be reasonably expected to
lead to any Takeover Proposal, other than the transactions contemplated by this
Agreement and the Rollover Agreement, or any other transaction the consummation
of which would reasonably be expected to impede, interfere with, prevent or
delay the Offer or the Merger or which would reasonably be expected to adversely
affect the benefits to Purchaser of the transactions contemplated hereby, (b)
negotiate, explore or otherwise participate in discussions with any person
(other than Purchaser or its directors, members, officers, employees, agents and
representatives, as applicable), and including any parties with which the
Company has previously engaged in discussions or negotiations with respect to
any Takeover Proposal or potential Takeover Proposal, or furnish to any person
(other than Purchaser or its directors, members, officers, employees, agents and
representatives, as applicable) any information with respect to its business,
properties or assets or any of the foregoing, or otherwise cooperate in any way
with, or assist or participate in, facilitate or encourage, any effort or
attempt by any other person (other than Purchaser or its directors, members,
officers, employees, agents and representatives, as applicable) to do or seek
any of the foregoing or (c) enter into any agreement, arrangement or
understanding with respect to, or endorse, any Takeover Proposal; provided,
--------
however, that the foregoing shall not prohibit the Company from (i) prior to the
- -------
consummation of the Offer (A) furnishing information pursuant to a
confidentiality agreement (provided for informational purposes to Purchaser), on
terms and conditions customary for similar transactions, concerning the Company
and its businesses, properties or assets to a third party who has made an
unsolicited bona fide written Takeover Proposal, or (B) engaging in discussions
or negotiations with such a third party who has made an unsolicited bona fide
written Takeover Proposal which did not otherwise result from a breach of this
Section 6.08 or (ii) following receipt of an unsolicited bona fide written
- ------------
Takeover Proposal, but prior to consummation of the Offer, failing to make or
withdrawing or modifying its recommendation referred to in Section 1.02(a), but,
---------------
in each case referred to in the foregoing clauses (i)(B) or (ii), only to the
----------------------
extent that the Company Board shall have concluded in good faith, on the basis
of advice from outside legal counsel and the Company's financial advisors, that
(A) such Takeover Proposal is more favorable to the stockholders of the Company
than the
-26-
<PAGE>
transactions contemplated by the Offer and this Agreement (taking into
account all legal, financial, regulatory and other aspects of the proposal and
the person making the proposal), (B) such Takeover Proposal is not conditioned
on obtaining financing (and with respect to which Purchaser has received written
evidence, in form and substance reasonably acceptable to Purchaser, of such
third party's ability to fully finance its Takeover Proposal) and provides for
consideration to stockholders of the Company payable in cash or shares of
capital stock that for a period of at least two consecutive years immediately
preceding the effective time of the closing of such Takeover Proposal was
continuously registered pursuant to an effective registration statement under
the Act and listed on a national securities exchange or quoted on the Nasdaq
National Market (any such capital stock, "Public Stock") or any combination of
------------
cash and Public Stock, (C) such Takeover Proposal is for 100% of the Common
Shares, and (D) the Company Board's fiduciary duties, as they would exist in the
absence of any limitation in this Agreement, would require the Company Board to
take such action (any Takeover Proposal satisfying each of the immediately
preceding clauses (A), (B), (C) and (D), hereinafter referred to as a "Superior
--------
Proposal"); provided, further, that the Company Board shall not take any of the
- -------- -------- -------
foregoing actions referred to in clauses (i) and (ii) until after prior written
----------- ----
notice to Purchaser with respect to such action. After taking any such action,
the Company Board shall promptly advise Purchaser with respect to the status
thereof as developments arise or as requested by Purchaser. Nothing herein
shall prevent the Company Board from taking, and disclosing to the Company's
stockholders, a position contemplated by Rules 14D-9 and 14e-2 promulgated under
the Exchange Act with regard to any tender offer. In addition, if the Company
Board receives an unsolicited Takeover Proposal or any inquiry with respect to
or which could lead to any Takeover Proposal, then the Company shall immediately
inform Purchaser orally and in writing of the terms and conditions of such
Takeover Proposal and the identity of the person making it and if any Takeover
Proposal is in writing, the Company shall immediately deliver a copy thereof to
Purchaser. The Company agrees that it will use reasonable best efforts to
promptly inform its directors, officers, key employees, agents and
representatives of the obligations undertaken in this Section 6.08. As used in
------------
this Agreement, "Takeover Proposal" means any proposal or offer from any person
-----------------
relating to any acquisition or purchase of assets of, or any equity interest
(other than the exercise of outstanding options) in, the Company or any of its
subsidiaries, or any tender offer (including a self tender offer) or exchange
offer, merger, reorganization, consolidation, business combination,
recapitalization, restructuring, spin-off, liquidation, dissolution or similar
transaction involving, directly or indirectly, the Company or any of its
subsidiaries.
SECTION 6.09 Notification of Certain Matters. Purchaser and the Company
-------------------------------
shall promptly notify each other of (a) the occurrence or non-occurrence of any
fact or event which would be reasonably likely (i) to cause any representation
or warranty contained in this Agreement to be untrue or inaccurate at any time
from the date hereof to the Effective Time or (ii) to cause any covenant,
condition or agreement hereunder not to be complied with or satisfied, and (b)
any failure of the Company or Purchaser, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder, including, but not limited to the Company's obligation to inform
the Purchaser of receipt of an unsolicited Takeover Proposal or inquiry pursuant
to Section 6.08 hereof; provided, however, that no such notification shall
------------ -------- -------
affect the representations or warranties of any party or the
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<PAGE>
conditions to the obligations of any party hereunder, nor shall it limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
SECTION 6.10 Special Meeting. The Company shall take no action to call a
---------------
special meeting of stockholders of the Company without the prior consent of
Purchaser unless compelled by legal process, except in accordance with this
Agreement unless and until this Agreement has been terminated in accordance with
its terms.
SECTION 6.11 Disposition of Litigation.
-------------------------
(a) The Company agrees that it will not settle any litigation currently
pending, or commenced after the date hereof, against the Company or any of its
directors by any stockholder of the Company relating to the Offer or this
Agreement, without the prior written consent of Purchaser.
(b) The Company will not voluntarily cooperate with any third party which
has sought or may hereafter seek to restrain or prohibit or otherwise oppose the
Offer or the Merger and will cooperate with Purchaser to resist any such effort
to restrain or prohibit or otherwise oppose the Offer or the Merger, subject, in
each case, to the fiduciary duties of the Board of Directors of the Company.
SECTION 6.12 State Takeover Laws. The Company shall, upon the request of
-------------------
the Purchaser, take all reasonable steps to assist in any challenge by the
Purchaser to the validity or applicability to the transactions contemplated by
this Agreement, including the Offer, the Merger and the Rollover Agreement, of
any state or foreign takeover law.
SECTION 6.13 Certain Agreements with Management. Neither Purchaser nor
----------------------------------
any of its affiliates shall enter into any agreement, arrangement or
understanding that would have the effect of (i) prohibiting any officer of the
Company from participating in discussions with any third party at any time
during which the Company is permitted to engage (and is so engaging) in such
discussions with such third party pursuant to Section 6.08, or (ii) prohibiting
------------
or preventing any person, at any time after any termination of this Agreement in
accordance with its terms, from participating in (as a shareholder, employee, or
both) a Superior Proposal.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.01 Conditions. The respective obligations of Purchaser and the
----------
Company to consummate the Merger are subject to the satisfaction, at or before
the Effective Time, of each of the following conditions:
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<PAGE>
(a) Stockholder Approval. If required by the GCL, this Agreement
--------------------
and the transactions contemplated hereby shall have been approved and
adopted by the affirmative vote of a majority of the Common Shares
outstanding pursuant to the requirements of the Company's certificate of
incorporation and applicable law.
(b) Purchase of Common Shares. The Purchaser shall have accepted for
-------------------------
payment and paid for Common Shares pursuant to the Offer in accordance with
the terms hereof.
(c) Injunctions; Illegality. The consummation of the Merger shall
-----------------------
not be restrained, enjoined or prohibited by any law, legal requirement,
order, judgment, decree, injunction or ruling of a court of competent
jurisdiction or any Governmental Entity and there shall not have been any
statute, rule or regulation enacted, promulgated or deemed applicable to
the Merger by any Governmental Entity which prevents the consummation of
the Merger; provided that the party invoking this condition shall have used
--------
their reasonable best efforts to prevent the entry of such order, judgment,
decree, injunction or ruling and to appeal as promptly as practicable any
such order, judgment, decree, injunction or ruling.
ARTICLE VII
TERMINATION; AMENDMENTS; WAIVER
SECTION 8.01 Termination. This Agreement may be terminated and the Offer
-----------
and Merger contemplated hereby may be abandoned at any time, notwithstanding
approval thereof by the stockholders of the Company:
(a) by the mutual written consent of Purchaser and the Company;
(b) by Purchaser or the Company, if there shall be any statute, law,
rule or regulation that makes consummation of the Offer or the Merger
illegal or prohibited or if any court or other Governmental Entity of
competent jurisdiction or located or having jurisdiction within the United
States or any country or economic region in which either the Company or the
Purchaser, directly or indirectly, has material assets or operations shall
have issued, enacted, entered, promulgated or enforced any final order,
judgment, decree, injunction, or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Offer or the Merger and
such order, judgment, decree, injunction or ruling shall have become
nonappealable;
(c) by the Purchaser or the Company, if (i) the Offer is terminated
or withdrawn pursuant to its terms without any Common Shares being
purchased thereunder; or (ii) Purchaser shall have failed to pay for Common
Shares pursuant to the Offer within 90 days following the date hereof (the
"Outside Offer Date"); provided, however, that neither Purchaser nor the
------------------ -------- -------
Company, as the case may be, may terminate the Agreement pursuant to this
Section 8.01(c) if such termination or withdrawal of the Offer or failure
---------------
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<PAGE>
to pay for Common Shares pursuant to the Offer has been caused by or
results from the failure of such party seeking to terminate the Agreement
to perform any of its covenants or agreements contained in this Agreement
or a breach of such party's representations and warranties contained in
this Agreement;
(d) by the Company, if (i) the Offer shall not be commenced upon the
tenth business day immediately following the day specified in Section 1.01,
------------
provided, that the failure to so commence has not been caused by and does
--------
not result from the failure of the Company to perform any of its
representations, warranties, covenants or agreements contained in this
Agreement, (ii) Purchaser shall have breached any representation,
warranty, covenant or agreement contained in this Agreement, which breach
materially adversely affects Purchaser's ability to consummate the Offer,
and, with respect to any such breach that is reasonably capable of being
cured, which shall not have been cured prior to the earlier of (A) 10
business days following notice of such breach and (B) two business days
prior to the date on which the Offer expires, (iii) Purchaser shall have
terminated the Offer, or (iv) prior to the purchase of Common Shares
pursuant to the Offer, any person shall have made a bona fide Takeover
Proposal that is a Superior Proposal (after taking into account any revised
proposal made by Purchaser during the Three-Day Period (as defined in this
Section 8.01)); provided, however, that (1) such Superior Proposal did not
------------ -------- -------
result from a breach of Section 6.08 above, (2) on the basis of advice from
------------
outside legal counsel and the Company's financial advisors and acting in
good faith, the Company Board or the Special Committee shall have withdrawn
its recommendation to the stockholders that the Offer and the Merger is
fair and advisable and in the best interests of the Company, and (3) prior
to such termination by the Company, the Company Board shall, if requested
by Purchaser in connection with a revised proposal made by Purchaser,
negotiate in good faith with Purchaser in respect of such revised proposal
for not less than three (3) business days (the "Three Day Period"); and
----------------
provided, further, that such termination under this clause (d)(iv) shall
-------- ------- --------------
not be effective until the Company has reimbursed Purchaser for all of its
fees and expenses as required by Section 8.03(b) hereof; or
---------------
(e) By Purchaser prior to the purchase of Common Shares pursuant to
the Offer, if (i) there shall have been a breach of any representation or
warranty on the part of the Company contained in this Agreement which would
reasonably be expected to have a Material Adverse Effect on the Company or
which would materially adversely affect (or materially delay) the
commencement or consummation of the Offer, (ii) there shall have been a
breach of any covenant or agreement on the part of the Company contained in
this Agreement which would reasonably be expected to have a Material
Adverse Effect on the Company or which would materially adversely affect
(or materially delay) the commencement or consummation of the Offer or the
Merger, which, in the case of clause (i) or (ii), if such breach is
---------- ----
reasonably capable of being cured, such breach shall not have been cured
prior to the earlier of (A) 10 business days following notice of such
breach and (B) two business days prior to the date on which the Offer
expires, (iii) the Company shall effect, or enter into any agreement with
respect to, a transaction with any person pursuant to any Takeover Proposal
(other than Purchaser) or the Company Board
-30-
<PAGE>
has resolved to do so, (iv) the Company Board shall have withdrawn or
modified (including by amendment of the Schedule 14D-9) in a manner adverse
to Purchaser its approval or recommendation of the Offer or this Agreement
or shall have recommended another offer or transaction, or shall have
resolved to effect any of the foregoing or (v) the Minimum Condition (as
defined in Annex I hereto) shall not have been satisfied by the expiration
date of the Offer; or
(f) by the Company, if the Company enters into a written agreement
with respect to a Superior Proposal in accordance with the terms of this
Agreement, including, without limitation, payment of all fees and expenses
pursuant to Section 8.03 hereof.
------------
SECTION 8.02 Effect of Termination. In the event of the termination of
---------------------
this Agreement pursuant to Section 8.01, this Agreement shall forthwith become
------------
void and have no effect, without any liability on the part of any party or its
directors, officers or stockholders, other than the last two sentences of
Section 6.02, the provisions of Section 6.08, this Section 8.02, Section 8.03
- ------------ ------------ ------------ ------------
and Section 8.04, which shall survive any such termination. Nothing contained
------------
in this Section 8.02 shall relieve any party from liability for any breach of
------------
this Agreement.
SECTION 8.03 Fees and Expenses.
-----------------
(a) In addition to any amounts payable to the Purchaser pursuant to
Section 8.03(b) below, all Expenses (as hereinafter defined) incurred by the
- ---------------
parties hereto shall be borne solely and entirely by the Company, and the
Company shall without exception, at the request of Purchaser, whether or not the
Offer has been withdrawn, terminated or consummated, promptly (but not later
than three business days after receipt of written invoices from Purchaser
evidencing such Expenses) reimburse Purchaser for all such Expenses; provided
that, if the Offer is not consummated, the Company's obligation to reimburse
Purchaser's Expenses shall be limited to $1,500,000. As used in this Section
-------
8.03, the term "Expenses" means all out-of-pocket fees and expenses actually
- ---- --------
incurred by Purchaser, whether before or after the execution and delivery of
this Agreement, in connection with the transactions contemplated by this
Agreement and the Rollover Agreement, including, without limitation, reasonable
fees and expenses payable to all banks, investors, investment banking firms and
other financial institutions, and their respective agents and counsel, all fees
and reasonable expenses of counsel, accountants, experts and consultants to
Purchaser and its investors, and, further, including without limitation fees and
reasonable expenses of, or incurred in connection with, any litigation or other
proceedings to collect the Fee (as hereinafter defined) or any of the fees,
costs and expenses described in this sentence.
(b) In addition to any amounts payable to Purchaser pursuant to Section
-------
8.03(a) above, if (i) this Agreement is terminated by the Company pursuant to
- -------
Section 8.01(d)(iv) or by Purchaser pursuant to Section 8.01(e) (i), (ii), (iii)
- ------------------- --------------------------------
or (iv),or (ii) the transactions contemplated by this Agreement are not
----
consummated through no fault of Purchaser, and the Company, within one (1) year
of the termination of this Agreement, enters into a transaction with another
person which is the result of a Takeover Proposal (the "Alternate Transaction"),
---------------------
then the Company shall pay to Purchaser a fee (the "Fee") in an amount equal to
---
$8,000,000 in cash and in immediately
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<PAGE>
available funds, (A) in the case of clause (i) above, prior to any such
termination of this Agreement or (B) in the case of clause (ii) above, upon the
consummation of such Alternate Transaction.
SECTION 8.04 Assumption of Certain Obligations by the Company.
------------------------------------------------
Effective as of the consummation of the Offer, the Company hereby agrees to
assume each and every of Purchaser's indemnification obligations under the
Jefferies Engagement Letter.
SECTION 8.05 Amendment. This Agreement may be amended by the Company and
---------
Purchaser at any time before or after approval of the Merger by the stockholders
of the Company, if such approval is required by applicable law, but, after any
such approval, no amendment shall be made that requires the approval of the
Company's stockholders without obtaining such approval. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
SECTION 8.06 Extension; Waiver. At any time prior to the Effective Time,
-----------------
the parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of any other party hereto, (ii) waive any inaccuracies
in the representations and warranties contained herein by any other party or in
any document, certificate or writing delivered pursuant hereto by any other
party or (iii) waive compliance with any of the agreements of any other party or
with any conditions to its own obligations. Any agreement on the part of any
party to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Non-Survival of Representations and Warranties. The
----------------------------------------------
representations and warranties made in this Agreement shall not survive the
termination of this Agreement or beyond the consummation of the Offer. This
Section 9.01 shall not limit any covenant or agreement of the parties which by
- ------------
its terms contemplates performance after the Effective Time.
SECTION 9.02 Limitation on Warranties. The Company makes no
------------------------
representations or warranties with respect to any projections, forecasts or
forward-looking information provided to Purchaser. There is no assurance that
any projected or forecasted results will be achieved. The Company makes no
representations and warranties except for those matters covered by the
representations and warranties in Article IV. Purchaser acknowledges that
neither the Company, any subsidiary of the Company nor any other person has made
any representation or warranty, express or implied, as to the accuracy or
completeness of any information which is not included in this Agreement.
Without limitation of the foregoing, to the extent that any memoranda or
summaries prepared by the Company, any subsidiary of the Company or by any of
their respective advisors or representatives regarding the Company, such
subsidiaries, or their respective businesses are or have been provided to
Purchaser, Purchaser acknowledges and
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<PAGE>
agrees that no representation or warranty is made to Purchaser or any affiliate
thereof or any other person as to the completeness or accuracy of such memoranda
or summaries.
SECTION 9.03 Company Disclosure Statement. No representation or warranty
----------------------------
hereunder shall be deemed to be inaccurate if the actual situation is explicitly
disclosed in the specifically referenced section or cross-section of the Company
Disclosure Statement. Neither the specification of any dollar amount in any
representation, warranty or covenant contained in this Agreement nor the
inclusion of any specific item in the Company Disclosure Statement hereto is
intended to imply that such amount, or higher or lower amounts, or the item so
included or other items, are or are not material, and no party shall use the
fact of the setting forth of any such amount or the inclusion of any such item
in any dispute or controversy between the parties as to whether any obligation,
item or matter not described herein or included in the Company Disclosure
Statement is or is not material for purposes of this Agreement.
SECTION 9.04 Entire Agreement; Assignment.
----------------------------
(a) The Exhibits and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof. This Agreement, the
Rollover Agreement (including the documents and the instruments referred to
herein and therein), constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof and thereof.
(b) Neither this Agreement, the Rollover Agreement nor any of the rights,
interests or obligations hereunder or thereunder will be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party, except that Purchaser may assign all or any
of its rights to affiliates with the permission of the Company, which will not
be unreasonably withheld; provided, that no such assignment shall relieve the
--------
assigning party of its obligations hereunder.
SECTION 9.05 Binding Agreement. This Agreement and the Rollover Agreement
-----------------
shall be binding upon and inure to the benefit of the parties hereto and thereto
and their respective successors and permitted assigns, provided, that, except as
--------
provided in Section 9.04(b), no party may assign its rights and obligations
---------------
under this Agreement without the prior written consent of the other parties.
SECTION 9.06 Severability. Any term or provision of this Agreement that
------------
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity of enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other situation or in any other jurisdiction. If
the final judgment of a court of competent jurisdiction declares that any term
or provision hereof is invalid or unenforceable, the parties agree that the
court making the determination of invalidity or unenforceability shall have the
power to reduce the scope, duration, or area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement
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<PAGE>
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
SECTION 9.07 Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by overnight courier or facsimile to the
respective parties as follows:
If to the Purchaser:
CLC Acquisition Corporation
6100 Sears Tower
Chicago, Illinois 60606
Attention: Bruce V. Rauner
Facsimile: (312) 382-2200
with a copy to:
Mayer, Brown & Platt
1675 Broadway
New York, NY 10019
Attention: Ronald S. Brody, Esq.
Facsimile: (212) 849-5600
and
GTCR Golder Rauner, LLC
6100 Sears Tower
Chicago, IL 60606
Attention: David A. Donnini
Facsimile: (312) 382-2201
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Stephen L. Ritchie
Facsimile: (312) 861-2200
If to the Company:
Coinmach Laundry Corporation
55 Lumber Road
Roslyn, NY 11576
Attention: Robert M. Doyle
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<PAGE>
Facsimile: (516) 484-1812
with a copy to:
Stephen G. Cerri
7607 Nogales Road
Scottsdale, AZ 85258
Facsimile: (480) 607-7454
and
Skadden, Arps, Slate, Meagher & Flom
Four Times Square
New York, NY 10036
Attention: Stephen M. Banker, Esq.
Facsimile: (917) 777-2760
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 9.08 Governing Law; Jurisdiction.
---------------------------
(a) This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
(b) In addition, each of the parties hereto (i) consents to submit itself
to the personal jurisdiction of any federal court located in the State of New
York or any New York state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, (ii) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court and (iii) agrees that it will not
bring any action relating to this Agreement or any of the transactions
contemplated hereby in any court other than a federal or state court sitting in
the State of New York.
SECTION 9.09 Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES
--------------------
THAT ANY CONTROVERSY OR DISPUTE THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES AND THEREFORE EACH SUCH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (i) NO
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<PAGE>
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS
WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 9.09. ------------
SECTION 9.10 Descriptive Headings. The descriptive headings herein are
--------------------
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 9.11 Construction. The language used in this Agreement will be
------------
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction shall be applied against any party. Any
reference to any federal, state or local law shall be deemed also to refer to
all rules and regulations promulgated thereunder, unless the context requires
otherwise.
SECTION 9.12 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 9.13 Parties in Interest. This Agreement shall be binding upon
-------------------
and inure solely to the benefit of each party hereto, and, except with respect
to Section 6.07 and Section 8.03, nothing in this Agreement, express or implied,
------------ ------------
is intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
SECTION 9.14 Certain Definitions. As used in this Agreement:
-------------------
(a) the term "affiliate", as applied to any person, shall mean any
other person directly or indirectly controlling, controlled by, or under
common control with, that person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as applied to any person,
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of that person, whether
through the ownership of voting securities, by contract or otherwise;
(b) the term "Knowledge" means the actual knowledge, after reasonable
inquiry, of the executive officers of the Company, including, without
limitation, Mitchell Blatt and Robert M. Doyle;
(c) the term "person" shall include individuals, corporations,
partnerships, trusts, other entities and groups (which term shall include a
"group" as such term is defined in Section 13(d)(3) of the Exchange Act);
and
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<PAGE>
(d) the term "subsidiary" or "subsidiaries" means, with respect to
any person, any corporation, partnership, joint venture or other legal
entity of which such person (either alone or through or together with any
other subsidiary), owns, directly or indirectly, stock or other equity
interests the holders of which are generally entitled to more than 50% of
the vote for the election of the board of directors or other governing body
of such corporation or other legal entity.
SECTION 9.15 Specific Performance. The parties hereto agree that
--------------------
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
SECTION 9.16 Company Actions. Any amendment to, or waiver of, any of the
---------------
provisions of this Agreement, and any other provision hereof which requires the
consent or approval of the Company, shall be effective only if approved by an
independent committee of the Company Board.
* * * * * *
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its respective officer thereunto duly authorized, all
as of the day and year first above written.
COINMACH LAUNDRY CORPORATION
By: /s/ Mitchell Blatt
-----------------------
Name: Mitchell Blatt
Title: President
CLC ACQUISITION CORPORATION
By: /s/ Bruce V. Rauner
------------------------
Name: Bruce V. Rauner
Title: President
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<PAGE>
ANNEX I
-------
Offer Conditions
----------------
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-l(c) under the Exchange Act (relating
to Purchaser's obligation to pay for or return tendered Common Shares promptly
after termination or withdrawal of the Offer), pay for any Common Shares
tendered pursuant to the Offer, and may postpone the acceptance for payment or,
subject to the restriction referred to above, payment for any Common Shares
tendered pursuant to the Offer, and may amend or terminate the Offer (whether or
not any Common Shares have theretofore been purchased or paid for) to the extent
permitted by this Agreement if, (i) there shall not have been tendered and not
properly withdrawn prior to expiration of the Offer at least the number of
Common Shares that when combined with the Common Shares already owned by
Purchaser shall constitute 51% of the then outstanding Common Shares (the
"Minimum Condition"), or (ii) at any time on or after the date of this Agreement
- ------------------
and prior to the acceptance for payment of Common Shares, any of the following
conditions occurs or has occurred:
(a) there shall have been any (i) action, proceeding, application,
claim or suit, (ii) order or preliminary or permanent injunction, or (iii)
statute, rule, regulation, legislation, interpretation, judgment or order
instituted, pending, enacted, entered, enforced, promulgated, amended,
issued and continuing and applicable to Purchaser, the Company or any
subsidiary or affiliate of Purchaser or the Company or the Offer, by any
legislative body, court, government or governmental, administrative or
regulatory authority or agency which would reasonably be expected to have
the effect of, directly or indirectly: (1) making illegal, or otherwise
directly or indirectly restraining or prohibiting or making materially more
expensive the making of the Offer, the acceptance for payment of, or
payment for the Common Shares by Purchaser or the consummation of any of
the transactions contemplated by the Acquisition Agreement; (2) prohibiting
or affecting the ownership or operation by the Company or any of its
subsidiaries or Purchaser or any of its affiliates of all or any material
portion of the business or assets of the Company or any of its
subsidiaries, taken as a whole, or any of its affiliates or compelling
Purchaser or any of its affiliates to dispose of or hold separate all or
any material portion of the business or assets of the Company or any of
their respective subsidiaries or Purchaser, or any of its affiliates, as a
result of the transactions contemplated by the Offer, the Merger or the
Acquisition Agreement; (3) imposing or confirming limitations on the
ability of Purchaser or any of its affiliates effectively to acquire or
hold or to exercise full rights of ownership of Common Shares, including
without limitation the right to vote any Common Shares acquired or owned by
Purchaser or any of its affiliates on all matters properly presented to the
stockholders of the Company, including without limitation the adoption and
approval of the Acquisition Agreement and the Merger or the right to vote
any shares of capital stock of any subsidiary directly or indirectly owned
by the Company; (4) requiring divestiture by Purchaser of any Common
Shares; or (5) otherwise resulting in a Material Adverse Effect on the
Company;
1
<PAGE>
(b) there shall have occurred and be continuing (i) any general
suspension of trading in, or limitation on prices for, securities on any
national securities exchange or in the over-the-counter market, including
the Nasdaq National Market System, in the United States, (ii) a material
adverse change in or material disruption of conditions in the market for
syndicated bank credit facilities or the financial, banking or capital
markets generally, including without limitation, a decline of at least 10%
in either the Dow Jones Average of Industrial Stocks or the Standard &
Poor's 500 index from the date hereof, (iii) a commencement and
continuation of a war or armed hostilities or other national or
international calamity directly or indirectly involving the United States,
or (iv) in the case of any of the foregoing existing at the time of
commencement of the Offer, a material acceleration or worsening thereof;
(c) (i) it shall have been publicly disclosed or Purchaser shall
have otherwise learned that beneficial ownership (determined for the
purposes of this paragraph as set forth in Rule 13d-3 promulgated under the
Exchange Act) of more than 5% of the outstanding Common Shares has been
acquired by any corporation (including the Company or any of its
subsidiaries or affiliates), partnership, person or other entity or group
(as defined in Section 13(d)(3) of the Exchange Act), other than Purchaser
or its affiliates, or the Principal Holders or any of their respective
affiliates (but only with respect to the Common Shares that they
beneficially own on the date hereof), or (ii) (A) the Company Board or any
committee thereof shall have withdrawn or modified in a manner adverse to
Purchaser (including by amendment of the Schedule 14D-9) the approval or
recommendation of the Offer, the Merger or the Acquisition Agreement, or
approved or recommended any Takeover Proposal or any other acquisition of
Common Shares other than the Offer or the Merger or shall have resolved to
do any of the foregoing, (B) any corporation, partnership, person or other
entity or group shall have entered into a definitive agreement or an
agreement in principle with the Company with respect to an acquisition
transaction pursuant to a Takeover Proposal, or (C) the Company Board or
any committee thereof shall have resolved to do any of the foregoing;
(d) any of the representations and warranties of the Company set forth
in the Acquisition Agreement shall not be true and correct, except (i)
those representations and warranties that address matters only as of a
particular date are true and correct as of such date, and (ii) where the
failure of such representations and warranties to be true and correct
(without giving effect to any limitation as to "materiality" or "material
adverse effect" set forth therein), does not have, and is not likely to
have, individually or in the aggregate, a Material Adverse Effect on the
Company;
(e) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under the
Acquisition Agreement;
(f) the Acquisition Agreement shall have been terminated in
accordance with its terms or the Offer shall have been terminated with the
consent of the Company;
-2-
<PAGE>
(g) any waiting periods under the HSR Act applicable to the purchase
of Common Shares pursuant to the Offer shall not have expired or been
terminated, or any material approval, permit, authorization or consent of
any domestic or foreign governmental, administrative or regulatory agency
(federal, state, local, provincial or otherwise) shall not have been
obtained on terms satisfactory to the Purchaser in its reasonable
discretion; or
(h) there shall have occurred any change, condition, event or
development that has a Material Adverse Effect on the Company.
The foregoing conditions are for the sole benefit of Purchaser and may be
asserted by Purchaser regardless of the circumstances giving rise to any such
conditions and may be waived by Purchaser in whole or in part at any time and
from time to time in their reasonable discretion, in each case, subject to the
terms of the Acquisition Agreement. The failure by Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of such right
and each such right shall be deemed an ongoing right which may be asserted at
any time and from time to time.
The capitalized terms used in this Annex I shall have the meanings set
-------
forth in the Agreement to which it is annexed, except that the term "Acquisition
-----------
Agreement" shall be deemed to refer to the Agreement to which this Annex I is
- --------- -------
appended.
-3-
<PAGE>
COMPANY DISCLOSURE STATEMENT
This is the Company Disclosure Statement referred to in that certain
Agreement and Plan of Merger, dated May 12, 2000, between Coinmach Laundry
Corporation and CLC Acquisition Corporation (the "Agreement"). Section
references in this schedule correspond to the sections of the Agreement.
Capitalized terms used herein have the meanings given to such terms in the
Agreement.
Section
- -------
4.08 No disclosure.
-4-
<PAGE>
EXHIBIT 2
[LOGO FOR COINMACH]
May 26, 2000
Dear Stockholders:
We are pleased to inform you that, on May 12, 2000, Coinmach Laundry
Corporation ("Coinmach" or the "Company") entered into an Agreement and Plan
of Merger (the "Merger Agreement") with CLC Acquisition Corporation (the
"Purchaser"). Pursuant to the Merger Agreement, the Purchaser has today
commenced a tender offer (the "Offer") to purchase all of the outstanding
shares of Coinmach's Class A Common Stock and Class B Non-Voting Common Stock
(the "Shares"), at a price of $14.25 per Share net to the seller in cash (less
any required withholding taxes), without interest, subject to the terms and
conditions contained in the Offer to Purchase and the related Letter of
Transmittal that are included in Purchaser's offering materials. Under the
Merger Agreement, and subject to the terms thereof, following the Offer,
Purchaser will be merged with and into Coinmach (the "Merger") and all Shares
not purchased in the Offer (other than Shares held by Purchaser) will be
converted into the right to receive $14.25 per Share net to the Seller in
cash, (less any required withholding taxes) without interest thereon.
Your Board of Directors has unanimously (i) determined that the Offer and
the Merger are advisable, fair to, and in the best interests of, the Company's
stockholders (other than stockholders of the Purchaser) and (ii) approved the
Merger Agreement and the transactions contemplated thereby, including the
Offer and the Merger. The Coinmach Board of Directors recommends that
Coinmach's stockholders tender their Shares pursuant to the Offer.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors described in the attached Schedule 14D-9
that is being filed today with the Securities and Exchange Commission. Among
other things, the Board of Directors considered the unanimous recommendation
and approval of a Special Committee of the Board of Directors (the "Special
Committee") that the Offer and the Merger are fair to, and in the best
interests of, the Company and its stockholders (other than stockholders of the
Purchaser), and the opinion of Lazard Freres & Co. LLC, the Special
Committee's investment banker, to the effect that, as of the date thereof, and
based on and subject to the matters described in the opinion, the price per
share of $14.25 to be received by Coinmach's stockholders (other than the
Purchaser or the stockholders of the Purchaser), is fair to such holders from
a financial point of view.
In addition to the attached Schedule 14D-9 relating to the Offer, also
enclosed is the Offer to Purchase, dated May 26, 2000, of Purchaser, together
with related materials to be used for tendering your Shares. These documents
set forth the terms and conditions of the Offer and provide instructions as to
how to tender your Shares. We urge you to read the enclosed materials
carefully.
On behalf of the Board of Directors, management and employees of Coinmach, I
thank you for the support that you have given Coinmach.
Sincerely,
[LOGO FOR STEPHEN R. KERRIGAN]
Stephen R. Kerrigan
Chairman of the Board and
Chief Executive Officer
Coinmach Laundry Corporation
55 Lumber Road, Roslyn, New York 11576. 516-484-2300
<PAGE>
Exhibit 7
CONTACT:
- --------
Stephen M. Banker; (212) 735-2760
May 15, 2000
COINMACH LAUNDRY CORPORATION ACCEPTS
$14.25 PER SHARE ACQUISITION PROPOSAL
NEW YORK, NEW YORK, May 15, 2000 -- Coinmach Laundry Corporation announced today
that it has entered into a definitive agreement and plan of merger with CLC
Acquisition Corporation, an affiliate of GTCR Golder Rauner, LLC. Pursuant to
the definitive agreement, CLC will acquire all of Coinmach's outstanding common
stock for $14.25 per share in cash, representing a premium of approximately 78%
over Coinmach's last reported trading price. Coinmach's board of directors has
unanimously approved the transaction.
The definitive agreement contemplates that CLC will commence a tender offer to
purchase all of Coinmach's outstanding common stock within the next ten business
days. The transaction is subject to certain customary terms and conditions,
including the valid tender of at least a majority of Coinmach's outstanding
shares. Receipt of financing by CLC is not a condition to closing. Any shares
not purchased in the tender will be acquired for the same price in cash in a
second step merger, except for certain shares held by members of Coinmach's
senior management who are required to maintain an investment in Coinmach as a
condition to the offer. The transaction is expected to close in early July.
Affiliates of GTCR Golder Rauner, LLC, who own approximately 23% of Coinmach's
issued and outstanding common stock, intend to tender their shares in the
transaction. Jefferies & Company, Inc. is acting as dealer manager in
connection with the tender offer.
This release is for informational purposes only, is not an offer to buy or a
solicitation of an offer to sell any shares of Coinmach common stock, and is not
a solicitation of a proxy. The solicitation of offers to purchase shares of
Coinmach common stock will only be made pursuant to the offer to purchase and
related materials that CLC will be mailing to Coinmach's stockholders, and that
will be filed with the Securities and Exchange Commission ("SEC") as part of the
tender offer statement. Investors and security holders are strongly advised to
read both the tender offer statement and the solicitation/recommendation
statement regarding the tender offer referred to in this release when they
become available, because they will contain important information. Stockholders
may obtain a free copy of these statements (when available) and other documents
filed by CLC and Coinmach at the SEC's web site at http://www.sec.gov. The
tender offer statement and related materials may be obtained for free by
directing such requests to CLC. The solicitation/recommendation statement and
such other documents may be obtained for free by directing such requests to
Coinmach.
Certain statements in this release that are not historical in nature are
forward-looking statements. Although Coinmach believes that its expectations are
based upon reasonable assumptions, there
<PAGE>
can be no assurance that such expectations will be realized. In addition, such
forward looking statements are subject to known and unknown risks or
uncertainties that may cause actual results in the future to differ materially
from forecasted results. Among the key factors that could cause results to
differ materially are: (i) the inability of the parties to the definitive
agreement to complete the proposed acquisition; (ii) actions by customers,
shareholders, regulators and others following the announcement of the proposed
transaction; (iii) stock market and financing market conditions; (iv) business
and economic conditions in the United States market in which Coinmach operates;
and (v) other risks more fully described in Coinmach's filings with the SEC.
Coinmach does not undertake any obligation to update the information contained
herein, which speaks only as of the date of this release.
Coinmach Laundry Corporation [NASDAQ: WDRY], through its wholly-owned
subsidiaries, is the leading supplier of outsourced laundry equipment services
for multi-family properties in the United States.
