Promissory Note - Coinmach Corp. and Stephen R. Kerrigan
PROMISSORY NOTE
$500,000 February 11, 1997
For value received, Stephen R. Kerrigan ("Maker") promises to pay to the
order of Coinmach Corporation, a Delaware corporation ("Holder"), at its offices
in Roslyn, New York, or such other place as is designated in writing by Holder,
the aggregate principal sum of $500,000. Maker will pay the aggregate principal
sum in five equal annual payments of $100,000, the first of which payments shall
be due on July 18, 1997, and, thereafter, payments shall be due on each July 18
of the four next succeeding years, or, if any such date is not a business day,
on the next succeeding business day (hereinafter, "Payment Dates"), and, on each
such Payment Date, Maker will pay interest accrued through such Payment Date at
the rate specified below.
Interest will accrue on the outstanding principal amount of this Note at a
rate equal to seven and one-half percent (7-1/2%) per annum, and shall be
payable at such time as each principal payment of this Note becomes due and
payable.
Outstanding principal and accrued and unpaid interest (collectively,
"Borrowings") on this Note shall be forgiven as follows: twenty percent (20%) of
Borrowings shall be forgiven on July 18, 1997, and thereafter twenty percent
(20%) of Borrowings shall be forgiven on each of the four next succeeding
Payment Dates, provided, however, that, if Maker ceases to be employed by Holder
or its affiliates at any time for any reason, no further amounts hereunder shall
be forgiven for the period commencing on the Payment Date immediately preceding
such termination through the date of termination, and all Borrowings shall be
paid by Maker within thirty (30) business days after the date of termination.
Notwithstanding anything to the contrary contained in this Note, in the event of
(i) a Change of Control (as defined herein) of Holder occurring while Maker is
employed by Holder, (ii) Maker's death occurring while Maker is employed by
Holder, (iii) Maker's Disability (as defined herein) occurring while Maker is
employed by Holder, (iv) the termination of Maker's employment by Holder without
Cause (as such term is defined in that certain Senior Management Agreement,
dated as of January 31, 1995, among Maker and those other parties signatory
thereto, and as amended by the Omnibus Agreement, dated November 30, 1995 (the
"Senior Management Agreement")), or (v) the termination of Maker's employment by
Maker for Good Reason (as defined in the Senior Management Agreement), all
Borrowings shall be forgiven in full as of the occurrence of any of such events
set forth in clauses (i)-(v) above. For purposes of this Note, "Change of
Control" shall mean (a) the sale of Holder's equity securities which results in
any person or group of related persons, not affiliated with the majority equity
holder of Holder on the date hereof, owning equity securities of Holder
possessing the power to elect (without reference to any special or
<PAGE>
default voting rights) a majority of the members of the board of directors of
Holder, or (b) the sale of all or substantially all of Holder's assets. For
purposes of this Note, "Disability" shall mean the failure of Maker to perform
his duties on account of illness or other physical or mental disability or
infirmity for a continuous period of 90 days in any twelve-month period, or at
such earlier time as Maker submits to Holder medical evidence reasonably
satisfactory to the board of directors of Holder that Maker has a physical or
mental disability or infirmity that will prevent him from returning to the
performance of his duties and responsibilities for a continuous period of 90
days or longer in any twelve-month period.
In the event Maker fails to pay any Borrowings due and owing hereunder,
such amount of Borrowings shall be offset, on a dollar for dollar basis, against
(i) any vested options granted to MCS Capital, Inc. pursuant to the terms and
conditions of the Option Agreement, dated July 23, 1996, by and between Coinmach
Laundry Corporation, a Delaware corporation ("CLC"), and MCS Capital, Inc. (the
"Option Agreement"), attached hereto as Exhibit A, the value of which options
shall be as set forth in Section 3 of the Option Agreement, (ii) if the amount
offset against the vested Options is not sufficient to satisfy the full amount
of the Borrowings due and owing hereunder, any shares of CLC's common stock, par
value $.01 per share (the "CLC Stock"), pledged by MCS Capital, Inc. to CLC
pursuant to those certain Stock Pledge Agreements, attached hereto as Exhibit B
and Exhibit C, the value of which CLC Stock shall be the fair market value of
the CLC stock (as determined by the average closing price per share of CLC Stock
during the three business day period immediately preceding the date Maker failed
to pay any Borrowings due and owing hereunder); or (iii) if the amount offset
against the vested Options and CLC Stock are not sufficient to satisfy the full
amount of the Borrowings due and owing hereunder, the personal assets of Maker.
In the event Maker fails to pay any amounts due hereunder when due, Maker
shall pay to Holder, in addition to such amounts due, all costs of collection,
including reasonable attorneys fees and disbursements.
Maker, or his successors and assigns, hereby waives diligence,
presentment, protest and demand and notice of protest, demand, dishonor and
nonpayment of this Note, and expressly agrees that this Note, or any payment
hereunder, may be extended from time to time and that Holder may accept security
for this Note or release security for this Note, all without in any way
affecting the liability of Maker hereunder.
This Note shall be governed by the internal laws, not the laws of
conflicts, of the State of New York.
/S/ STEPHEN R. KERRIGAN
------------------------
Stephen R. Kerrigan
<PAGE>
EXHIBIT A
MCS OPTION AGREEMENT
(Incorporated by reference from Exhibit 10.46
to Coinmach Laundry's Form 10-Q for the
quarterly period ended June 28, 1996,
file number 1-11907)
<PAGE>
EXHIBIT B
STOCK PLEDGE AGREEMENT, DATED JANUARY 31, 1995
(Incorporated by reference from Exhibit 10.5
to Coinmach's Registration Statement on Form S-1,
file number 333-00620)
<PAGE>
EXHIBIT C
STOCK PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT is made as of July 26, 1995, between MCS Capital,
Inc. ("Pledgor"), and SAS Acquisitions Inc., a Delaware corporation (the
"Company").
The Company and Pledgor are parties to an Executive Stock Agreement, dated
July 26, 1995, pursuant to which Pledgor purchased 4000 shares of the Company's
Class B Common Stock, $0.01 par value (the "Pledged Shares"), for an aggregate
purchase price of $61,611.20. The Company has allowed Pledgor to purchase a
portion of the Pledged Shares by delivery to the Company of a promissory note
(the "Note") in the aggregate principal amount of $52,369.52. This Pledge
Agreement provides the terms and conditions upon which the Note is secured by a
pledge to the Company of the Pledged Shares.
NOW, THEREFORE, in consideration of the premises contained herein and
other good and valuable consideration the receipt and sufficiency of which
hereby acknowledged, and in order to induce the Company to accept the Note as
partial payment for the Pledged Shares, Pledgor and the Company hereby agree as
follows:
1. Pledge. Pledger hereby pledges to the Company, and grants to the
Company a security interest in, the Pledged Shares as security for the prompt
and complete payment when due of the unpaid principal of and interest on the
Note.
2. Delivery of Pledged Shares. Upon the execution of this Pledge
Agreement, Pledgor shall deliver to the Company the certificate(s) representing
the Pledged Shares, together with duly executed forms of assignment sufficient
to transfer title thereto to the Company.
3. Voting Rights; Cash Dividends. Notwithstanding anything to the contrary
contained herein, during the term of this Pledge Agreement until such time as
there exists a default in the payment of principal or interest on the Note,
Pledgor shall be entitled to all voting rights with respect to the Pledged
Shares.
4. Distribution, etc. If, while the Pledge Agreement is in effect, Pledgor
becomes entitled to receive or receives any securities or other property in
addition to, in substitution of, or in exchange for any of the Pledged Shares
(whether as a distribution in connection with nay recapitalization,
reorganization or reclassification or otherwise), Pledgor shall accept such
securities or other property on behalf of and for the benefit of the Company as
additional security for Pledger's obligations under the Note and shall promptly
deliver such additional security to the Company together with duly executed
forms of assignment, and such additional security shall be deemed to be part of
the Pledged Shares hereunder.
<PAGE>
5. Default. If Pledgor defaults in the payment of the principal or
interest under the Note as it becomes due (whether upon demand, acceleration or
otherwise) or upon the bankruptcy or insolvency of Pledgor, the Company may
exercise any and all the rights, powers and remedies of any owner of the Pledged
Shares (including the right to vote the shares and receive distributions with
respect to such shares) and shall have and may exercise without demand any and
all the rights and remedies granted to a secured party upon default under the
Uniform Commercial Code or otherwise available to the Company under applicable
law. Without limiting the foregoing, the Company is authorized to sell, assign
and deliver at its discretion, from time to time, all or any part of the Pledged
Shares at any private sale or public auction, on not less than ten days written
notice to Pledgor, at such price or prices and upon such terms as the Company
may deem advisable. Pledgor shall have no right to redeem the Pledged Shares
after any such sale or assignment. At any such sale or auction, the Company may
bid for, and become the purchaser of, the whole or any part of the Pledged
Shares offered for sale. In case of any such sale, after deducting the costs,
reasonable attorneys' fees and other expenses of sale and delivery, the
remaining proceeds of such sale shall be applied to the principal of and accrued
interest on the Note; provided, however, that after payment in full of the
indebtedness evidenced by the Note, the balance of the proceeds of sale then
remaining shall be paid to Pledgor and Pledgor shall be entitled to the return
of any of the Pledged Shares remaining in the hands of the Company. Pledger
shall be liable for any deficiency if the remaining proceeds are insufficient to
pay the indebtedness under the Note in full, including the reasonable fees of
any attorneys employed by the Company to collect such deficiency.
6. Costs and Attorneys' Fees. All costs and expenses, including reasonable
attorneys' fees, incurred in exercising any right, power or remedy conferred by
this Pledge Agreement or in the enforcement thereof, shall become part of the
indebtedness secured hereunder and shall be paid by Pledger or repaid from the
proceeds of the sale of the Pledged Shares hereunder.
7. Payment of Indebtedness and Release of Pledged Shares. Upon payment in
full of the indebtedness evidenced by the Note, the Company shall surrender the
Pledged Shares to Pledger together with all forms of assignment.
8. Further Assurances. Pledgor agrees that at any time and from time to
time upon the written request of the Company, Pledger will execute and deliver
such further documents and do such further acts and things as the Company may
reasonably request in order to effect the purposes of this Pledge Agreement.
<PAGE>
9. Severability. Any provision of this Pledge Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10. No Waiver; Cumulative Remedies. The Company shall not by any act,
delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
the Company, and then only to the extent therein set forth. A waiver by the
Company of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Company would otherwise have
on any future occasion. No failure to exercise nor any delay in exercising on
the part of the Company, any right, power or privilege hereunder shall preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein provided are cumulative and may be
exercised singly or concurrently, and are not exclusive of any rights or
remedies provided by law.
11. Waivers, Amendments; Applicable Law. None of the terms or provisions
of this Pledge Agreement may be waived, altered, modified or amended except by
an instrument in writing, duly executed by the parties hereto. This Agreement
and all obligations of the Pledgor hereunder shall together with the rights and
remedies of the Company hereunder, inure the benefit of the Company and its
successors and assigns. This pledge Agreement shall be governed by, and be
construed and interpreted in accordance with, the laws of the State of New York.
* * * *
IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date
first above written.
MCS CAPITAL, INC.
By: /s/ Stephen R. Kerrigan
-----------------------
Its: President
SAS Acquisitions Inc.
By: /s/ Stephen R. Kerrigan
-----------------------
Its: President