Management Contribution Agreement - Coinmach Holdings LLC and James N. Chapman
COINMACH HOLDINGS, LLC
MANAGEMENT CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this "Agreement") is made as of March 5,
2003, by and between Coinmach Holdings, LLC, a Delaware limited liability
company (the "Company"), and James N. Chapman ("Management Stockholder"). Except
as otherwise indicated herein, capitalized terms used herein are defined in
Section 7 hereof.
WHEREAS, Coinmach Laundry Corporation, a Delaware corporation ("Coinmach
Laundry"), will be a wholly-owned subsidiary of the Company on the Closing Date;
WHEREAS, Coinmach Corporation, a Delaware corporation ("Coinmach
Corporation"), is a wholly-owned subsidiary of Coinmach Laundry;
WHEREAS, Appliance Warehouse of America, Inc., a Delaware corporation
("Appliance Warehouse"), was formed as a wholly-owned subsidiary of Coinmach
Corporation;
WHEREAS, Management Stockholder acquired shares of common stock, par value
$.01 per share, of Coinmach Laundry (the "Non-EPP Common Stock") in connection
with Coinmach Laundry's going-private transaction in July of 2000;
WHEREAS, Management Stockholder also acquired shares of Class B2 Preferred
Stock, par value $.01 per share, of Coinmach Laundry (the "CLC Preferred Stock")
in connection with Coinmach Laundry's going-private transaction in July of 2000;
WHEREAS, in connection with Coinmach Laundry's equity participation
program (the "CLC Equity Participation Program"), Management Stockholder also
acquired shares of common stock, par value $.01 per share, of Coinmach Laundry
(the "EPP Common Stock" and, together with the Non-EPP Common Stock, the "CLC
Common Stock") pursuant to the Coinmach Laundry Corporation Equity Participation
Program Restricted Common Stock Purchase Agreement, dated as of December 17,
2000, by and between Management Stockholder and Coinmach Laundry (the "CLC
Equity Purchase Agreement");
WHEREAS, Management Stockholder and Coinmach Laundry desire to terminate
the CLC Equity Purchase Agreement and enter into this Agreement, which shall
contain substantially similar terms as the CLC Equity Purchase Agreement;
WHEREAS, in connection with the CLC Equity Participation Program,
Management Stockholder agreed to assign all of the issued and outstanding shares
of EPP Common Stock owned by Management Stockholder to Coinmach Laundry pursuant
to the Management Stock Assignment, dated as of December 17, 2000 (the "CLC
Stock Assignment");
WHEREAS, Management Stockholder desires to replace such CLC Stock
Assignment with an undated instrument of transfer containing customary terms and
conditions of transfer in respect of the securities of the Company received in
exchange for the Contributed Stock (the "Instrument of Transfer");
<PAGE>
WHEREAS, in connection with the purchase of EPP Common Stock under the CLC
Equity Participation Program, Management Stockholder entered into the Management
Promissory Note, dated as of December 17, 2000 (the "CLC Promissory Note"), in
favor of Coinmach Laundry;
WHEREAS, Management Stockholder desires to amend and restate the CLC
Promissory Note as set forth in the Amended and Restated Promissory Note, dated
as of the Closing Date (the "Amended CLC Promissory Note"), with substantially
similar terms as the CLC Promissory Note;
WHEREAS, in connection with the CLC Equity Participation Program,
Management Stockholder entered into the Management Security Agreement, dated as
of December 17, 2000, by and among Management Stockholder, Coinmach Laundry and
the secretary of Coinmach Laundry (the "CLC Security Agreement");
WHEREAS, Management Stockholder desires to amend and restate the CLC
Security Agreement as set forth in the Amended and Restated Security Agreement,
dated as of the Closing Date (the "Amended CLC Security Agreement," and together
with the Instrument of Transfer and the Amended CLC Promissory Note, the
"Amended EPP Documents");
WHEREAS, on or prior to the date hereof, (i) Coinmach Corporation declared
and paid a dividend on its issued and outstanding shares of common stock, par
value $.01 per share, payable in shares of common stock, par value $.01 per
share, of Appliance Warehouse (the "AWA Common Stock"), and (ii) Coinmach
Laundry authorized the declaration of a dividend (the "AWA Common Stock
Dividend") on its issued and outstanding shares of CLC Common Stock in shares of
AWA Common Stock;
WHEREAS, the AWA Common Stock Dividend is payable on the Closing Date to
holders of record of CLC Common Stock as of the Closing Date;
WHEREAS, Management Stockholder desires to contribute to the Company, and
the Company desires to acquire from Management Stockholder, all of (i) the CLC
Common Stock, (ii) the AWA Common Stock (by Management Stockholder's assignment
of its right to receive the AWA Common Stock Dividend), and (iii) the CLC
Preferred Stock (the CLC Preferred Stock, the CLC Common Stock and the AWA
Common Stock being referred to collectively herein as the "Contributed Stock"),
owned (or with respect to which Management Stockholder has the right to
receive), directly or indirectly, by Management Stockholder and listed on
Schedule A attached hereto, in exchange for Common Units and Class C Preferred
Units of the Company in the amounts set forth on Schedule A attached hereto.
NOW THEREFORE, the parties hereto hereby agree as follows:
-2-
<PAGE>
Section 1. Contribution; Issuance and Vesting of Common Units and
Issuance of Class C Preferred Units; Consent to Dividend.
1.1 Authorization of Common Units and Preferred Units. The Company hereby
authorizes the issuance to Management Stockholder of 756,436 Common Units and
109.79 Class C Preferred Units.
1.2 Contribution of Contributed Stock and Issuance of Common Units and
Class C Preferred Units. At the Closing (as defined in Section 1.5 below),
subject to the terms and conditions set forth herein, Management Stockholder
shall contribute the CLC Common Stock and the CLC Preferred Stock and assign all
of its right, title and interest in and to the AWA Common Stock Dividend, to the
Company (the "Management Stock Contribution"), and the Company shall issue to
Management Stockholder the number of Common Units and Class C Preferred Units
listed on Schedule A attached hereto in exchange therefor. The Company and
Management Stockholder agree that (i) the fair value of the Common Units
received in exchange for the contributed CLC Common Stock and the AWA Common
Stock is equal to the fair value of the CLC Common Stock and the AWA Common
Stock contributed by Management Stockholder for the Common Units as set forth on
Schedule A, (ii) the fair value of the Class C Preferred Units received in
exchange for the contributed CLC Preferred Stock is equal to the fair value of
the CLC Preferred Stock contributed by Management Stockholder for the Class C
Preferred Units as set forth on Schedule A, (iii) the consideration given by
Management Stockholder is a tax free contribution of property to a partnership
pursuant to Code Section 721, and (iv) each party shall prepare or cause to be
prepared their tax returns in accordance with clauses (i) through (iii) above.
The parties hereto hereby acknowledge and agree that upon delivery of the
Dividend Payment Notice to Coinmach Laundry pursuant to Section 2.5 hereof, the
Company shall be entitled to receive all of the AWA Common Stock to which
Management Stockholder is entitled pursuant to the AWA Common Stock Dividend
without any further action required to be taken by any party hereto or otherwise
(except as otherwise provided in this Section 1.2).
1.3 Vesting of Common Units. The Management Stock Contribution shall
include both the Vested Shares and Unvested Shares of EPP Common Stock held by
Management Stockholder under the CLC Equity Purchase Agreement. Management
Stockholder shall receive from the Company at the Closing a number of Common
Units representing the number of Vested Shares of EPP Common Stock held by
Management Stockholder under the CLC Equity Purchase Agreement on the date of
the Closing (together with the other Common Units, the "Vested Common Units")
and a number of Common Units representing the number of Unvested Shares of EPP
Common Stock held by Management Stockholder under the CLC Equity Purchase
Agreement on the date of the Closing (the "Unvested Common Units"). 634,442 of
the Common Units held by Management Stockholder set forth on Schedule A shall be
subject to the following vesting schedule (expressed as a percentage of 634,442
Common Units):
-3-
<PAGE>
INSTALLMENT VESTING DATE APPLICABLE TO INSTALLMENT
---------- --------------------------------------
20% December 17, 2000
20% December 17, 2001
20% December 17, 2002
20% December 17, 2003
20% December 17, 2004
1.4 No Voting Rights. Except as otherwise provided for in the LLC
Agreement, Management Stockholder shall have no voting rights with respect to
the Unvested Common Units.
1.5 Closing. The closing of the Management Stock Contribution and the
issuance of the Common Units and Class C Preferred Units (the "Closing") shall
take place at the offices of Mayer, Brown, Rowe & Maw, 1675 Broadway, New York,
NY 10019 at 10:00 a.m. on the Closing Date, or at such other place designated by
the Company.
1.6 Consent to Dividend. Management Stockholder hereby consents and agrees
to the declaration and payment of the AWA Common Stock Dividend by Coinmach
Laundry prior to the payment of any dividend or other distribution on such
Management Stockholder's CLC Preferred Stock to which such Management
Stockholder may be entitled and expressly agrees, solely in his capacity as a
holder of CLC Preferred Stock, that such Management Stockholder shall not be
entitled to be paid any dividends on its CLC Preferred Stock, including the AWA
Common Stock Dividend, as a condition to the payment of such AWA Common Stock
Dividend.
Section 2. Conditions to Closing. The Company's obligation to issue the
Common Units and Class C Preferred Units to Management Stockholder in connection
with the Management Stock Contribution is subject to the satisfaction as of the
Closing of the following conditions:
2.1 Limited Liability Company Agreement. Management Stockholder shall have
entered into the LLC Agreement on the Closing Date and shall have executed and
delivered a counterpart signature page thereto. The LLC Agreement shall be in
full force and effect as of the Closing, and the parties to the LLC Agreement
shall not be in breach of any of the terms thereof.
2.2 Registration Agreement. Management Stockholder shall have entered into
the Company's registration agreement (the "LLC Registration Agreement") on the
Closing Date and shall have executed and delivered to the Company a counterpart
signature page thereto. The LLC Registration Agreement shall be in full force
and effect as of the Closing, and the parties to the LLC Registration Agreement
shall not be in breach of any of the terms thereof.
2.3 Securityholders Agreement. Management Stockholder shall have entered
into the Company's securityholders agreement (the "LLC Securityholders
Agreement") on the Closing Date and shall have executed and delivered to the
Company a counterpart signature page thereto. The LLC Securityholders Agreement
shall be in full force and effect as of the Closing, and the parties to the LLC
Securityholders Agreement shall not be in breach of any of the terms thereof.
-4-
<PAGE>
2.4 Amended EPP Documents. Management Stockholder shall have entered into
each of the Amended EPP Documents on the Closing Date and shall have executed
and delivered to the Company a counterpart signature page thereto.
2.5 Delivery of Dividend Payment Notice. Management Stockholder shall have
delivered to Coinmach Laundry written notice substantially in the form attached
hereto as Exhibit A (the "Dividend Payment Notice"), directing and authorizing
Coinmach Laundry to pay to the Company on the Closing Date all of the AWA Common
Stock to which Management Stockholder is entitled pursuant to the AWA Common
Stock Dividend. The Dividend Payment Notice is hereby deemed to evidence the
assignment by Management Stockholder of its right to receive the AWA Common
Stock Dividend pursuant to Section 1.2 hereof.
Section 3. Restrictions on Transfer.
3.1 Transfer of Restricted Securities. Management Stockholder shall not,
directly or indirectly, transfer, sell, assign, pledge, offer or otherwise
dispose of any interest in any Restricted Securities (a "Transfer") except
pursuant to (i) Section 3.3 or Section 3.4 hereof, (ii) Section 3(a)
(participation rights), Section 3(c) (permitted transfers) and Section 5 (sale
of the company) of the LLC Securityholders Agreement, or (iii) a Public Sale
(clauses (i) through (iii) collectively referred to herein as "Exempt
Transfers"). Prior to effecting any Transfer of Restricted Securities (other
than (y) to the Company, to any Other Senior Managers or to the Investors or (z)
in connection with a Public Sale or Sale of the Company), Management Stockholder
shall obtain from each transferee their written agreement to be bound by the
provisions of Section 3 of this Agreement for the benefit of the Company, the
Other Senior Managers and the Investors.
3.2 Sale Notice. Prior to making any Transfer (other than an Exempt
Transfer), Management Stockholder will give written notice (the "Sale Notice")
to the Company, the Other Senior Managers and the Investors. The Sale Notice
will disclose in reasonable detail the number of Units to be transferred and the
terms and conditions of the proposed Transfer and, if known, the identity of the
prospective transferee(s). Management Stockholder will not consummate any such
Transfer until 90 days after the Sale Notice has been given to the Company, the
Other Senior Managers and the Investors, unless the parties to the Transfer have
been fully determined pursuant to this Section 3.2 and Section 3.3 prior to the
expiration of such 90-day period. (The date of the first to occur of such events
is referred to herein as the "Authorization Date").
3.3 First Refusal Rights. The Company may elect to purchase all (but not
less than all) of the Restricted Securities to be Transferred upon the same
terms and conditions as those set forth in the Sale Notice by delivering a
written notice of such election to Management Stockholder, each Other Senior
Manager and each Investor within 30 days after the Sale Notice has been given to
the Company. If the Company has not elected to purchase all of the Restricted
Securities to be Transferred, the Other Senior Managers may elect to purchase
all (but not less than all) of the Restricted Securities to be Transferred upon
the same terms and conditions as those set forth in the Sale Notice by giving
written notice of such election to Management Stockholder, the Company and the
Investors within 60 days after the Sale Notice has been given to the Other
Senior Managers. The Other Senior Managers' rights hereunder shall be allocated
-5-
<PAGE>
among the Other Senior Managers pro rata based on the number of Common Units
owned by each Other Senior Manager on a Fully Diluted Basis. If the Company and
the Other Senior Managers have not elected to purchase all of the Restricted
Securities to be Transferred, the Investors may elect to purchase all (but not
less than all) of the Restricted Securities to be Transferred upon the same
terms and conditions as those set forth in the Sale Notice by giving written
notice of such election to Management Stockholder, the Company and each Other
Senior Manager within 90 days after the Sale Notice has been given to the
Investors. If the Company, the Other Senior Managers or the Investors do not
elect to purchase all of the Restricted Securities specified in the Sale Notice,
Management Stockholder may Transfer the Restricted Securities specified in the
Sale Notice at a price and on terms no more favorable to the transferee(s)
thereof than specified in the Sale Notice during the 30-day period immediately
following the Authorization Date. Any Restricted Securities not Transferred
within such 30-day period will be subject to the provisions of this Section 3.3
upon subsequent Transfer.
3.4 Permitted Transfers. The restrictions contained in this Section 3
shall not apply with respect to any Transfer of Restricted Securities pursuant
to applicable laws of descent and distribution or among such Management
Stockholder and such Management Stockholder's Family Members; provided that such
restrictions will continue to be applicable to the Restricted Securities after
any such Transfer and the transferees of such Restricted Securities have agreed
in writing to be bound by the provisions of this Agreement.
3.5 Legend. The certificates representing the Restricted Securities will
bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER AND CERTAIN OTHER AGREEMENTS SET FORTH IN A
MANAGEMENT CONTRIBUTION AGREEMENT BETWEEN COINMACH HOLDINGS, LLC
("COINMACH") AND JAMES N. CHAPMAN, DATED AS OF MARCH 5, 2003. COINMACH MAY
REQUEST A WRITTEN OPINION OF COUNSEL (FROM COUNSEL ACCEPTABLE TO COINMACH)
SATISFACTORY TO COINMACH, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED
IN CONNECTION WITH SUCH SALE, PLEDGE OR HYPOTHECATION, OR OTHER TRANSFER.
A COPY OF SUCH AGREEMENT MAY BE OBTAINED AT COINMACH'S PRINCIPAL PLACE OF
BUSINESS WITHOUT CHARGE."
3.6 Payments. Notwithstanding any other provision to the contrary
contained in this Agreement, payments (including, but not limited to, in the
form of securities) to be made to Management Stockholder pursuant to this
Agreement shall be made only to the extent permitted by the financing
arrangements of the Company and its Subsidiaries in effect at the time such
payments are required to be made; provided, however, such payments shall be made
at such time that they are permitted to be made by such financing arrangements.
-6-
<PAGE>
3.7 Opinion. In connection with the Transfer of any Restricted Securities
(other than an Exempt Transfer or in connection with a Sale of the Company), the
holder thereof shall deliver written notice to the Company describing in
reasonable detail the Transfer or proposed Transfer, which, if requested by the
Company, shall be accompanied by an opinion of counsel which (to the Company's
reasonable satisfaction) is knowledgeable in securities law matters to the
effect that such Transfer of Restricted Securities may be effected without
registration of such Restricted Securities under the Securities Act. In
addition, if the holder of the Restricted Securities delivers to the Company an
opinion of counsel that no subsequent Transfer of such Restricted Securities
shall require registration under the Securities Act, the Company shall promptly
upon such contemplated Transfer deliver new certificates for such Restricted
Securities which do not bear the Securities Act legend set forth in Section 3.5
(but which may bear any applicable contractual restrictions on Transfer).
Section 4. Representations and Warranties of Management Stockholder. As a
material inducement to the Company to enter into this Agreement, Management
Stockholder represents and warrants to the Company that:
4.1 Authorization of Transactions. Management Stockholder has full power
and authority to enter into this Agreement and the other agreements contemplated
hereby to which Management Stockholder is a party, and to perform Management
Stockholder's obligations hereunder and thereunder.
4.2 Execution, Delivery; Valid and Binding Agreements. This Agreement has
been duly executed and delivered by Management Stockholder, and constitutes, and
the other agreements contemplated hereby to which Management Stockholder is a
party, when executed and delivered by Management Stockholder in accordance with
the terms thereof shall each constitute, a valid and binding obligation of
Management Stockholder, enforceable in accordance with its terms, subject to the
effect of bankruptcy, or other similar laws and to general principles of equity
(whether considered in proceedings at law or in equity).
4.3 No Breach. The execution and delivery by Management Stockholder of
this Agreement and the other agreements contemplated hereby to which Management
Stockholder is a party, and the fulfillment of and compliance with the
respective terms hereof and thereof by Management Stockholder, does not and
shall not (i) conflict with or result in a breach of the terms, conditions or
provisions of, (ii) constitute a default under (whether with or without the
giving of notice, the passage of time or both), (iii) result in the creation of
any lien upon Management Stockholder's assets or encumbrance upon Management
Stockholder's Contributed Stock pursuant to, (iv) give any third party the right
to modify, terminate or accelerate any obligation under, (v) result in a
violation of, or (vi) require any authorization, consent, approval, exemption or
other action by or notice or declaration to, or filing with, any third party or
any court or administrative or governmental body or agency pursuant to, any law,
statute, rule or regulation to which Management Stockholder is subject, or any
organizational document, agreement, instrument, order, judgment or decree to
which Management Stockholder is subject.
4.4 Title to Coinmach Laundry Stock. Management Stockholder is the record
and beneficial owner of the shares of Contributed Stock shown on Schedule A
attached hereto. On the Closing Date, Management Stockholder shall transfer to
the Company good and marketable
-7-
<PAGE>
title to such shares of Contributed Stock, free and clear of all liens or other
encumbrances of any kind. Except for the shares of stock shown on Schedule A
attached hereto, Management Stockholder owns no other shares of CLC Common
Stock, AWA Common Stock or CLC Preferred Stock and is not a party to any option,
warrant, right, contract, call, put or other agreement or commitment providing
for the acquisition or disposition of any capital stock of Coinmach Laundry
(other than this Agreement and the CLC Equity Purchase Agreement). Management
Stockholder is not a party to any voting trust, proxy or other agreement or
understanding with respect to the voting of any capital stock of Coinmach
Laundry, Appliance Warehouse or the Company.
4.5 Litigation. There are no actions, suits, proceedings, orders or
investigations pending or, to the best of Management Stockholder's knowledge,
threatened against or affecting Management Stockholder, at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, which
would adversely affect Management Stockholder's performance under this
Agreement, the other agreements contemplated hereby to which Management
Stockholder is a party or the consummation of the transactions contemplated
hereby or thereby.
4.6 Brokerage. There are no claims for brokerage, commissions, finders'
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement binding upon Management
Stockholder. Management Stockholder shall pay, and hold the Company harmless
against, any liability, loss or expense (including, without limitation,
reasonable attorneys' fees and out-of-pocket expenses) arising in connection
with any such claim.
4.7 Issued Entirely for Own Account. The Common Units and Class C
Preferred Units to be issued to Management Stockholder are for investment for
Management Stockholder's own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof, and Management
Stockholder has no present intention of selling, granting any participation in,
or otherwise distributing the same. By executing this Agreement, Management
Stockholder further represents that Management Stockholder does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any third person, with
respect to any of the Common Units or Class C Preferred Units.
4.8 Disclosure of Information. Management Stockholder acknowledges that he
or she is aware of the Company's business affairs and financial condition and
has received all the information Management Stockholder considers necessary or
appropriate for deciding whether to acquire the Common Units and Class C
Preferred Units. Management Stockholder further represents that he or she has
had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the Common Units or Class C Preferred
Units, and the business, properties, prospects and financial condition of the
Company.
4.9 Investment Experience. Management Stockholder acknowledges that it can
bear the economic risk of its investment, and has such knowledge and experience
in financial or business matters that Management Stockholder is capable of
evaluating the merits and risks of an investment in Common Units and Class C
Preferred Units hereunder.
-8-
<PAGE>
4.10 Restricted Securities. Management Stockholder acknowledges that the
Common Units and Class C Preferred Units have not been registered under the
Securities Act, are deemed to constitute "restricted securities" under Rule 701
and Rule 144 promulgated under the Securities Act and must be held indefinitely
unless they are subsequently registered under the Securities Act and qualified
under any applicable state securities laws or an exemption from such
registration and qualification is available. Management Stockholder further
acknowledges that the Company is under no obligation to register the Common
Units or Class C Preferred Units.
4.11 Resales of Restricted Securities. Management Stockholder acknowledges
that he or she is familiar with the provisions of Rule 701 and Rule 144 under
the Securities Act, which Rules, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly from the issuer
thereof, in a non-public offering subject to the satisfaction of certain
conditions. Management Stockholder understands that if the Company becomes
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, Management Stockholder will not be able to resell the Common Units or Class
C Preferred Units under Rule 701 (i) until at least ninety (90) days after the
Company became subject to such reporting requirements (or any longer stand-off
period, as discussed below, may require) and (ii) unless such resale satisfies
those provisions of Rule 144 that are specified in Rule 701(g)(3). Even if the
Company is not subject to such reporting requirements, the Common Units and
Class C Preferred Units may be resold in certain limited circumstances subject
to satisfaction of all of the applicable provisions of Rule 144. Management
Stockholder further acknowledges that in the event all of the applicable
requirements of Rule 144 are not satisfied, registration under the Securities
Act, compliance with Regulation A, or some other registration exemption will be
required in order to resell the Common Units or Class C Preferred Units.
Management Stockholder understands that no assurances can be given that any such
registration will be made or any such exemption will be available in such event.
4.12 Legends. Management Stockholder acknowledges and understands that all
certificates representing Common Units or Class C Preferred Units shall have
endorsed thereon the legend described in Section 3.5 hereof and such other
appropriate legends reflecting any other restrictions pursuant to the LLC
Agreement, bylaws, this Agreement and/or applicable securities laws.
4.13 Stop-Transfer Instructions. Management Stockholder agrees that, if
required by the Company (or a representative of the underwriters) in connection
with the first underwritten registration of the offering of any securities of
the Company under the Securities Act, Management Stockholder will not sell or
otherwise Transfer or dispose of any Common Units, Class C Preferred Units or
other securities of the Company during such stand-off period (not to exceed
one-hundred eighty (180) days following the effective date of the registration
statement of the Company filed under the Securities Act) as may be requested by
the Company or representatives of the underwriters. Management Stockholder
further agrees that the Company may impose stop-transfer instructions with
respect to the Common Units or Class C Preferred Units and any other of
Management Stockholder's securities that are subject to the foregoing
restrictions until the end of such period.
-9-
<PAGE>
4.14 Invalid Transfers. Management Stockholder acknowledges and agrees
that the Company shall not be required (i) to transfer on its books any Common
Units or Class C Preferred Units that have been sold or otherwise Transferred in
violation of any of the representations, warranties, agreements or other
provisions contained in this Agreement or any other agreement between the
Company and Management Stockholder, or (ii) in any such event, to treat as owner
of such Common Units or Class C Preferred Units, or to accord the right to vote
or pay dividends to any purchaser or other transferee to whom such Common Units
or Class C Preferred Units shall have been so Transferred.
4.15 Closing Date. All of the representations and warranties of Management
Stockholder contained in this Section 4 and elsewhere in this Agreement, and all
information delivered by Management Stockholder in any schedule or attachment
hereto or in any writing delivered by Management Stockholder to the Company, are
true and correct on the date of this Agreement and will be true and correct on
the Closing Date, except to the extent that Management Stockholder shall have
advised the Company otherwise in writing prior to the Closing.
Section 5. Representations and Warranties of the Company. As a material
inducement to Management Stockholder to enter into this Agreement and make the
Management Stock Contribution, the Company hereby represents and warrants to
Management Stockholder that:
5.1 Organization and Power. The Company is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is qualified to do business in every jurisdiction in which
the failure to so qualify might reasonably be expected to have a material
adverse effect on the financial condition, operating results, assets, operations
or business prospects of the Company. The Company has all requisite power and
authority and all material licenses, permits and authorizations necessary to own
and operate its properties, to carry on its businesses as now conducted and
presently proposed to be conducted and to carry out the transactions
contemplated by this Agreement.
5.2 Authorization; No Breach. The execution, delivery and performance of
this Agreement and the Amended EPP Documents (collectively, the "Transaction
Documents") have been duly authorized by the Company. Each Transaction Document
constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms. The execution and delivery by the Company of the
Transaction Documents, the issuance of the Common Units and Class C Preferred
Units hereunder, and the fulfillment of and compliance with the respective terms
hereof and thereof by the Company do not and will not (i) conflict with or
result in a breach of the terms, conditions or provisions of, (ii) constitute a
default under, (iii) result in the creation of any lien, security interest,
charge or encumbrance upon the Company's Units or assets pursuant to, (iv) give
any third party the right to modify, terminate or accelerate any obligation
under, (v) result in a violation of, or (vi) require any authorization, consent,
approval, exemption or other action by or notice to any court or administrative
or governmental body pursuant to, the LLC Agreement, or any law, statute, rule
or regulation to which the Company is subject, or any agreement, instrument,
order, judgment or decree to which the Company is a party or by which it is
bound.
-10-
<PAGE>
5.3 Closing Date. The representations and warranties of the Company
contained in this Section 5 and elsewhere in this Agreement shall be true and
correct in all material respects on the Closing Date as though then made, except
as affected by the transactions expressly contemplated by this Agreement.
Section 6. Escrow of Restricted Securities; Certain Matters Regarding the
Escrow Agent.
6.1 For so long as Common Units or Class C Preferred Units held by
Management Stockholder are subject to the terms of the Amended CLC Security
Agreement, Management Stockholder irrevocably authorizes the Company to deposit
with the Escrow Agent any certificates evidencing such Common Units or Class C
Preferred Units to be held by the Escrow Agent hereunder. Management Stockholder
hereby irrevocably constitutes and appoints the Escrow Agent as Management
Stockholder's attorney-in-fact and agent for the term of the escrow arrangement
created hereunder to execute with respect to such Common Units or Class C
Preferred Units all documents necessary or appropriate to make such Common Units
or Class C Preferred Units negotiable and to complete any transaction herein
contemplated.
6.2 The Escrow Agent is a party to this Agreement only for the purpose of
the escrow instructions contained herein. The duties of the Escrow Agent
hereunder are limited to those expressly set forth herein, and may be altered,
amended, modified or revoked only by a writing signed by all of the parties
hereto. The Escrow Agent may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by the Escrow Agent
to be genuine and to have been signed or presented by the proper party or
parties. The Escrow Agent shall not be personally liable for any act the Escrow
Agent may do or omit to do hereunder as Escrow Agent while acting in good faith,
and any act done or omitted by the Escrow Agent pursuant to the advice of the
Escrow Agent's attorneys shall be conclusive evidence of such good faith.
6.3 The Escrow Agent shall not be liable in any respect on account of the
identity, authorities or rights of the parties executing or delivering or
purporting to execute or deliver this Agreement or any documents or papers
deposited or called for hereunder.
6.4 If the Escrow Agent reasonably requires other or further instruments
in connection with the instructions contained in this Agreement, the necessary
parties hereto shall join in furnishing such instruments.
6.5 The responsibilities of the Escrow Agent hereunder shall terminate if
the Escrow Agent ceases to be an officer or agent of the Company or any of its
Subsidiaries or if the Escrow Agent resigns by written notice to the Company.
Upon such termination, the Company shall appoint a successor Escrow Agent. If at
the time of such termination, the Escrow Agent has in its possession any
documents, securities or other property belonging to, and then deliverable to
Management Stockholder, it shall deliver all of the same to Management
Stockholder and shall be discharged of all further obligations under this
Agreement.
6.6 In the event of any dispute with respect to the delivery and/or
ownership or right of possession of the Common Units or Class C Preferred Units
held by the Escrow Agent hereunder, the Company and Management Stockholder
authorize and direct the Escrow Agent to retain in its possession without
liability to anyone all or any part of such Common Units or Class C Preferred
Units until settlement of such disputes by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but the Escrow Agent shall be under no duty to institute or
defend any such proceedings.
-11-
<PAGE>
6.7 The Escrow Agent shall be entitled to employ such legal counsel as it
deems reasonably necessary with respect to the obligations of the Escrow Agent
hereunder, and may rely upon the advice of such counsel.
6.8 The Escrow Agent shall not be liable for the outlawing of any rights
under the statute of limitations with respect to the escrow instructions
contained herein.
6.9 Notwithstanding any permitted Transfer of Restricted Securities, (i)
no Restricted Securities shall be released by the Escrow Agent under this
Section 6 until such time that all of Management Stockholder's obligations under
the Amended CLC Security Agreement are satisfied in full and (ii) no such
Transfer shall release Management Stockholder from, or modify or alter in any
manner any obligation of Management Stockholder under, the Amended CLC
Promissory Note.
Section 7. Definitions. For the purposes of this Agreement, the following
terms have the meanings set forth below:
"Affiliate" of a Person means any direct or indirect general or limited
partner or member of such Person, or any employee or owner thereof, or any other
person, entity or investment fund controlling, controlled by or under common
control with such Person, and will include, without limitation, its owners and
employees.
"Agreement" has the meaning set forth in the preamble hereto.
"Amended CLC Promissory Note" has the meaning set forth in the eleventh
recital paragraph hereto.
"Amended CLC Security Agreement" has the meaning set forth in the
thirteenth recital paragraph hereto.
"Amended EPP Documents" has the meaning set forth in the thirteenth
recital paragraph hereto.
"Appliance Warehouse" has the meaning set forth in the third recital
paragraph hereto.
"Authorization Date" has the meaning set forth in Section 3.2 hereto.
"AWA Common Stock" has the meaning set forth in the fourteenth recital
paragraph hereto.
"AWA Common Stock Dividend" has the meaning set forth in the fourteenth
recital paragraph hereto.
-12-
<PAGE>
"Board" means the board of directors of the Company.
"Class C Preferred Units" means Units having the rights and obligations of
Class C Preferred Units set forth in the LLC Agreement.
"CLC Common Stock" has the meaning set forth in the sixth recital
paragraph hereto.
"CLC Equity Participation Program" has the meaning set forth in the sixth
recital paragraph hereto.
"CLC Equity Purchase Agreement" has the meaning set forth in the sixth
recital paragraph hereto.
"CLC Preferred Stock" has the meaning set forth in the fifth recital
paragraph hereto.
"CLC Promissory Note" has the meaning set forth in the tenth recital
paragraph hereto.
"CLC Security Agreement" has the meaning set forth in the twelfth recital
paragraph hereto.
"CLC Stock Assignment" has the meaning set forth in the eighth recital
paragraph hereto.
"Closing" has the meaning set forth in Section 1.5 hereto.
"Closing Date" means March 6, 2003, or such other date as an officer of
the Company or any of its Subsidiaries shall determine.
"Code" means the United States Internal Revenue Code of 1986, as amended,
and any successor statute.
"Coinmach Corporation" has the meaning set forth in the second recital
hereto.
"Coinmach Laundry" has the meaning set forth in the first recital hereto.
"Coinmach Registration Agreement" means the Registration Agreement, by and
among CLC Acquisition Corporation, Management Stockholder and each of the other
parties thereto, dated as of July 5, 2000.
"Coinmach Stockholders Agreement" means the Stockholders Agreement, by and
among CLC Acquisition Corporation, Management Stockholder and each of the other
parties thereto, dated as of July 5, 2000.
"Common Units" means Units having the rights and obligations of Common
Units set forth in the LLC Agreement.
"Company" has the meaning set forth in the preamble hereto.
"Contributed Stock" has the meaning set forth in the last recital
paragraph hereto.
-13-
<PAGE>
"Dividend Payment Notice" has the meaning set forth in Section 2.5 hereto.
"EPP Common Stock" has the meaning set forth in the sixth recital
paragraph hereto.
"LLC Securityholders Agreement" has the meaning set forth in Section 2.3
hereto.
"Escrow Agent" means Robert M. Doyle or such other executive officer or
agent of the Company or any of its Subsidiaries as determined by the Company
from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exempt Transfers" has the meaning set forth in Section 3.1 hereto.
"Family Members" means Management Stockholder's spouse and/or lineal
descendants, a trust for the sole benefit of Management Stockholder and/or
Management Stockholder's spouse or lineal descendants or upon Management
Stockholder's death, Management Stockholder's estate.
"Fully Diluted Basis" means, without duplication, (i) all Common Units
outstanding at the time of determination plus (ii) all Common Units issuable
upon conversion of any convertible securities or the exercise of any option,
warrant or similar right, whether or not such conversion, right or option,
warrant or similar right is then exercisable.
"GTCR" means GTCR-CLC, LLC or any Affiliate thereof.
"Instrument of Transfer" has the meaning set forth in the ninth recital
paragraph hereto.
"Investors" means, collectively, GTCR, Filbert Investment Pte Ltd, the
TCW/Crescent Purchasers, and each of their transferees.
"LLC Agreement" means the Limited Liability Company Agreement, by and
among the Company and its members, dated as of the Closing Date.
"LLC Registration Agreement" has the meaning set forth in Section 2.2
hereto.
"LLC Securityholders Agreement" has the meaning set forth in Section 2.3
hereto.
"Management Stockholder" has the meaning set forth in the preamble hereto.
"Management Stock Contribution" has the meaning set forth in Section 1.2
hereto.
"Non-EPP Common Stock" has the meaning set forth in the fourth recital
paragraph hereto.
"Other Senior Managers" means Stephen R. Kerrigan, Mitchell Blatt, Robert
M. Doyle and Michael E. Stanky.
-14-
<PAGE>
"Person" means an individual, a partnership, a limited liability company,
a corporation, an association, a joint share company, a trust, a joint venture,
an unincorporated organization and a governmental entity or any department,
agency or political subdivision thereof.
"Public Offering" means a sale in an underwritten public offering
registered under the Securities Act (other than on Form S-8 or a similar or
successor form) of Common Units (or other shares of equity interests into which
such Common Units may be exchanged or converted) approved by the Board.
"Public Sale" means (i) any sale pursuant to a Public Offering or (ii) any
sale to the public pursuant to Rule 144 promulgated under the Securities Act
effected through a broker, dealer or market maker (other than pursuant to Rule
144(k) prior to a Public Offering).
"Restricted Securities" means, at any time, (i) all Common Units and Class
C Preferred Units then held by Management Stockholder or a Family Member, and
(ii) all equity securities of the Company issued or issuable directly or
indirectly with respect to such Units in connection with a combination of Units,
dividend, recapitalization, merger, consolidation, reorganization or otherwise.
In addition, Restricted Securities shall continue to be Restricted Securities in
the hands of any holder (except to the extent such holder is the Company, any
Investor or a transferee in a Public Sale consummated in accordance with this
Agreement or the Securityholders Agreement), and except as otherwise provided
herein, each such holder of Restricted Securities shall succeed to all rights
and obligations attributable to Management Stockholder as a holder of Restricted
Securities hereunder.
"Sale Notice" has the meaning set forth in Section 3.2 hereto.
"Sale of the Company" means any transaction or series of transactions
pursuant to which any Person or group of related Persons in the aggregate
acquire(s) (i) equity securities of the Company possessing the voting power
(other than voting rights accruing only in the event of a default, breach or
event of noncompliance) to elect a majority of the Board (whether by merger,
consolidation, reorganization, combination or sale or Transfer of the Company's
equity or otherwise) or (ii) all or substantially all of the Company's assets
determined on a consolidated basis; provided that a Public Offering shall not
constitute a Sale of the Company.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"TCW/Crescent Purchasers" means, collectively, TCW/Crescent Mezzanine
Partners II, L.P., a Delaware limited partnership, TCW/Crescent Mezzanine Trust
II, a Delaware business trust, TCW Leverage Income Trust, L.P., a Delaware
limited partnership, and TCW Leveraged Income Trust II, L.P., a Delaware limited
partnership, any of their Affiliates or any holder of Units for whom Trust
Company of the West or any Affiliate of Trust Company of the West acts as an
Account Manager (each individually a "TCW/Crescent Purchaser").
"Transaction Documents" has the meaning set forth in Section 5.2 hereto.
"Transfer" has the meaning set forth in Section 3.1 hereto.
-15-
<PAGE>
"Units" has the meaning set forth in the LLC Agreement.
"Unvested Common Units" has the meaning set forth in Section 1.3 hereto.
"Unvested Shares" has the meaning set forth in the CLC Equity Purchase
Agreement.
"Vested Common Units" has the meaning set forth in Section 1.3 hereto.
"Vested Shares" has the meaning set forth in the CLC Equity Purchase
Agreement.
Section 8. Miscellaneous.
8.1 Survival of Representations and Warranties. All of the representations
and warranties set forth in this Agreement or in any writing delivered by the
Company or Management Stockholder in connection with this Agreement shall
survive the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby (regardless of any investigation, inquiry or
examination made by or on behalf of or any knowledge of any party or on its
behalf or the acceptance by any party of a certificate or opinion).
8.2 Termination of Existing Agreements. Management Stockholder and
Coinmach Laundry hereby agree and acknowledge that, effective as of the Closing
Date, the Coinmach Stockholders Agreement, the Coinmach Registration Agreement
and the CLC Equity Purchase Agreement are hereby terminated in their entirety
and shall be of no further force or effect.
8.3 Remedies. Management Stockholder shall have all rights and remedies
set forth in this Agreement and all rights and remedies which Management
Stockholder has been granted at any time under any other agreement or contract
and all of the rights which Management Stockholder has under any law. Any Person
having any rights under any provision of this Agreement shall be entitled to
enforce such rights specifically (without posting a bond or other security), to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights granted by law.
8.4 Consent to Amendments. Except as otherwise expressly provided herein,
the provisions of this Agreement may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of
Management Stockholder. No other course of dealing between the Company and
Management Stockholder or any delay in exercising any rights hereunder shall
operate as a waiver of any rights of any such Person.
8.5 Successors and Assigns. Except as otherwise expressly provided herein,
all covenants and agreements contained in this Agreement by or on behalf of
either of the parties hereto shall bind and inure to the benefit of the
respective permitted successors, assigns, heirs, executors and administrators of
the parties hereto whether so expressed or not; provided, however, that
Management Stockholder may not assign its rights hereunder without the prior
written consent of the Company.
-16-
<PAGE>
8.6 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
8.7 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts taken together shall constitute one and the
same Agreement.
8.8 Descriptive Headings; Interpretation. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a Section of
this Agreement. The use of the word "including" in this Agreement shall be by
way of example rather than by limitation.
8.9 Further Assurances. Management Stockholder will execute and deliver
such further instruments of conveyance and transfer and take such additional
action as the Company may reasonably request to effect, consummate, confirm or
evidence the transfer to the Company of the Contributed Stock and any other
transactions contemplated hereby.
8.10 Governing Law. The Delaware Limited Liability Company Act shall
govern all issues concerning the relative rights of the Company and the holders
of its Common Units and Class C Preferred Units. All other questions concerning
the construction, validity and interpretation of this Agreement and the exhibits
and schedules hereto shall be governed by and construed in accordance with the
internal laws of the State of Delaware, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of Delaware or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.
8.11 Entire Agreement; Amendment. This Agreement between the Company and
Management Stockholder constitutes the full and entire understanding and
agreement between the parties with regard to the subject matter hereof and
thereof, and no party will be liable or bound to any other party in any manner
by any warranties, representations or covenants except as specifically set forth
herein. Except as expressly provided herein, neither this Agreement nor any term
hereof may be amended, waived, discharged or terminated other than by a written
instrument signed by the party against whom enforcement of any such amendment,
waiver, discharge or termination is sought.
8.12 Broker's Fees. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation of this section being untrue.
8.13 Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable
-17-
<PAGE>
express courier service (charges prepaid) or mailed to the recipient by
certified or registered mail, return receipt requested and postage prepaid. Such
notices, demands and other communications shall be sent to Management
Stockholder at the address set forth on the signature page hereto and to the
Company at the address indicated below:
Coinmach Holdings, LLC
c/o Coinmach Laundry Corporation
521 East Morehead Street
Suite 590
Charlotte, NC 28202
Attn: Stephen R. Kerrigan
with copies, which will not constitute notice to the Company,
to:
GTCR-CLC, LLC
c/o GTCR Golder Rauner, L.L.C.
Sears Tower
Chicago, IL 60606-6402
Attention: David A. Donnini
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Stephen L. Ritchie, P.C.
Mayer, Brown, Rowe & Maw
1675 Broadway
New York, NY 10019
Attention: Ronald S. Brody
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
* * * * *
-18-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Contribution
Agreement on the date first written above.
COINMACH HOLDINGS, LLC
By: /S/ ROBERT M. DOYLE
----------------------------
Name: Robert M. Doyle
Title: Chief Financial Officer
MANAGEMENT STOCKHOLDER:
/S/ JAMES N. CHAPMAN
-------------------------------
James N. Chapman
Address:
14 Alpine Road
Greenwich, CT 06830
For purposes of Section 8.2 only:
COINMACH LAUNDRY CORPORATION
By: /S/ ROBERT M. DOYLE
------------------------------
Name: Robert M. Doyle
Title: Chief Financial Officer
ESCROW AGENT:
/S/ ROBERT M. DOYLE
--------------------------
Name: Robert M. Doyle
Title: Secretary
<PAGE>
SCHEDULE A
MANAGEMENT STOCKHOLDER SCHEDULE OF CONTRIBUTED STOCK EXCHANGED FOR UNITS
CONTRIBUTED STOCK UNITS
----------------- -----
756,436 shares of CLC Common Stock 756,436 Common Units
45.255715 shares of AWA Common Stock
109.79 shares of CLC Preferred Stock 109.79 Class C Preferred Units
<PAGE>
EXHIBIT A
FORM OF DIVIDEND PAYMENT NOTICE
[ ], 2003
Coinmach Holdings, LLC
c/o Coinmach Laundry Corporation
521 East Morehead Street
Suite 590
Charlotte, NC 28202
Attn: Stephen R. Kerrigan
Re: Dividend Payment Notice authorizing Coinmach Laundry
Corporation to pay to Coinmach Holdings all of the
AWA Common Stock beneficially owned by Management
Stockholder pursuant to the AWA Common Stock Dividend
Ladies and Gentlemen:
Pursuant to Section 2.5 of that certain Contribution Agreement, dated as
of the date hereof (the "Contribution Agreement"), by and between the
undersigned (the "Management Stockholder"), and Coinmach Holdings, LLC, a
Delaware limited liability company ("Coinmach Holdings"), Management Stockholder
hereby directs and authorizes Coinmach Laundry Corporation, a Delaware
corporation, to pay to Coinmach Holdings all of the AWA Common Stock to which
Management Stockholder is entitled pursuant to the AWA Common Stock Dividend on
the Closing Date. All capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to such terms in the Contribution
Agreement.
Management Stockholder has caused this Dividend Payment Notice to be
executed and delivered as of the date first above written.
[Management Stockholder]
--------------------------