-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LJt6Il8qi/MrU2OxeBIRYkNanEvaAZ7IfAxySemDbcW44bAMuwHeNjBw7issJUkq VGYub96n5OAehWG7OcR4rQ== 0000950130-97-002791.txt : 19970616 0000950130-97-002791.hdr.sgml : 19970616 ACCESSION NUMBER: 0000950130-97-002791 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 25 CONFORMED PERIOD OF REPORT: 19970328 FILED AS OF DATE: 19970613 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: COINMACH LAUNDRY CORP CENTRAL INDEX KEY: 0001013021 STANDARD INDUSTRIAL CLASSIFICATION: MISC INDUSTRIAL & COMMERCIAL MACHINERY & EQUIPMENT [3590] IRS NUMBER: 113258015 STATE OF INCORPORATION: NY FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11907 FILM NUMBER: 97623536 BUSINESS ADDRESS: STREET 1: 55 LUMBER ROAD STREET 2: C/O COINMACH CORP CITY: ROSLYN STATE: NY ZIP: 11576 BUSINESS PHONE: 2122781509 MAIL ADDRESS: STREET 1: 55 LUMBER ROAD CITY: ROSLYN STATE: NY ZIP: 11576 10-K 1 FORM 10-K - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 28, 1997 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to COMMISSION FILE NUMBER 1-11907 COINMACH LAUNDRY CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 11-3258015 (STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.) 55 LUMBER ROAD, ROSLYN, NEW YORK 11576 (ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE) OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (516) 484-2300 SECURITIES REGISTERED PURSUANT TO SECTION 12 (B) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT: CLASS A COMMON STOCK, $.01 PAR VALUE (TITLE OF CLASS) ---------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] As of May 26, 1997, the registrant had outstanding 10,004,278 shares of Class A common stock, par value $.01 per share (the "Common Stock"), and 480,648 shares of non-voting Class B common stock, par value $.01 per share (the "Non-Voting Common Stock"). At May 26, 1997, the aggregate market value of Common Stock held by non- affiliates was approximately $83,688,840, based upon the closing price per share of the Common Stock as reported on The Nasdaq National Market on the close of business on May 23, 1997. For purposes of this calculation, shares of Common Stock held by stockholders party to that certain Voting Agreement, dated July 23, 1996, were excluded. This calculation is provided only for purposes of this report and does not represent an admission by either the registrant or any such person as to the status of such person. DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive proxy statement for the annual meeting of stockholders to be held on July 9, 1997 are incorporated by reference into Part III of this Form 10-K. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS. Unless otherwise expressly indicated herein, the descriptions of the Company contained herein are as of March 28, 1997 and do not give effect to the acquisition of Reliable Holding Corp. (the "Reliable Acquisition"), completed on April 23, 1997 or the amendment to the Company's New Credit Facility (defined herein), completed on June 2, 1997. For a description of such acquisition and amendment to the New Credit Facility, see "Business-General Development of Business-Recent Developments" and "Business-General Development of Business-Credit Facility." GENERAL DEVELOPMENT OF BUSINESS Coinmach Laundry Corporation, a Delaware corporation ("Coinmach Laundry" or the "Registrant"), through its wholly-owned subsidiaries (collectively, the "Company"), is a leading national supplier of coin-operated laundry equipment services for multi-family housing properties. Prior to giving effect to the Reliable Acquisition, the Company owns and operates approximately 337,000 coin-operated washers and dryers (sometimes hereinafter referred to as "machines") in over 30,000 multi-family housing properties on routes located in 30 states and the District of Columbia and in 150 retail laundromats located throughout Texas. The Company's routes are located throughout the Northeast, Mid-Atlantic, Southeast, South-Central and Midwest regions of the United States. The Company, through its wholly-owned subsidiary, Super Laundry Equipment Corp. ("Super Laundry"), is also a construction and laundromat equipment distribution company. Coinmach Laundry's executive offices are located at 55 Lumber Road, Roslyn, New York 11576, and its telephone number is (516) 484-2300. The Company's mailing address is the same as that of its executive offices. In September 1996, Coinmach Laundry opened a corporate development office in Charlotte, North Carolina. INITIAL PUBLIC OFFERING On July 23, 1996, Coinmach Laundry completed its initial public offering (the "Offering") of 4,120,000 shares of its Common Stock at an initial public offering price of $14.00 per share. Coinmach Laundry's registration statement on Form S-1 (No. 333-03587) for 4,000,000 shares of Common Stock was filed with the Securities and Exchange Commission on May 13, 1996, and subsequently declared effective on July 17, 1996. On July 18, 1996, in connection with the Offering, Coinmach Laundry filed an additional registration statement on Form S-1 (No. 333-08331) with respect to the registration of an additional 120,000 shares of Common Stock, which registration statement became effective upon filing. In connection with the Offering, the underwriters were granted a 30- day option to purchase up to an aggregate of 618,000 additional shares of Common Stock to cover over-allotments (the "Over-Allotment Option"), which Over-Allotment Option was exercised on August 16, 1996, with respect to the purchase of an additional 63,642 shares of Common Stock. Proceeds from the Offering were approximately $54.5 million after giving effect to the exercise of the Over-Allotment Option, underwriting discounts and commissions and before expenses. After giving effect to the redemption of the Preferred Stock (as described below), net proceeds from the Offering aggregated approximately $35.3 million, before expenses. RECLASSIFICATION AND STOCK SPLIT In connection with the Offering, Coinmach Laundry approved a stock reclassification (the "Reclassification"), pursuant to which all seven classes of its authorized capital stock prior to the Offering were converted into Common Stock, Non-Voting Common Stock and Series A preferred stock, par value $.01 per share ("Preferred Stock"). As part of the Reclassification, holders of Coinmach Laundry's pre-Offering shares of Class A common stock, Class E common stock and Class F common stock (collectively, the "Preference 2 Shares") also received a distribution consisting of shares of Common Stock or shares of Preferred Stock representing an amount equal to the sum of: (a) preferred dividends on such Preference Shares in an amount equal to the accrued yield (at a rate of 8% per annum, compounded quarterly) on the original investment in such Preference Shares through July 23, 1996; and (b) an amount equal to the original investment in such Preference Shares. Holders of Preference Shares who were members of Coinmach Laundry's management received an aggregate of approximately 28,425 shares of Common Stock, and holders of the Preference Shares who were not members of Coinmach Laundry's management received an aggregate of 1,000 shares of Preferred Stock. In connection with the Reclassification, Coinmach Laundry also approved an approximate 23-to-1 stock split for stockholders of record on July 12, 1996. REDEMPTION OF PREFERRED STOCK Immediately following the Offering, Coinmach Laundry used approximately $19.2 million of the proceeds from the Offering to redeem all issued and outstanding shares of Preferred Stock. SIGNIFICANT ACQUISITIONS On April 1, 1996, the Company acquired substantially all of the assets of Allied Laundry Equipment Company, a regional route operator located in St. Louis, Missouri for $15.5 million in cash (the "Allied Acquisition"). The Allied Acquisition adds approximately 24,000 machines to the Company's base and provides the Company with a larger market presence in the Mid-West. On January 8, 1997, the Company acquired 100% of the outstanding voting securities of each of KWL, Inc., a Nevada corporation ("KWL"), and Kwik-Wash Laundries, Inc., a Nevada corporation ("Kwik Wash"), for $125 million in cash and a $15 million promissory note (the "Kwik Wash Note") issued by Coinmach Laundry (the "Kwik Wash Acquisition"). KWL and Kwik Wash are the sole partners of Kwik Wash Laundries, L.P. (the "Kwik Wash Partnership"), a Texas limited partnership. The Kwik Wash Acquisition increases the Company's presence in the South-Central region by adding approximately 74,000 machines to the Company's base and enables the Company to provide coin-operated laundry equipment services to multi-family housing properties in Texas, Louisiana, Arkansas and Oklahoma and to operate 150 retail laundromats throughout Texas. Upon consummation of the Kwik Wash Acquisition, KWL, Kwik Wash and the Kwik Wash Partnership were merged with and into the Company. On March 14, 1997, the Company acquired substantially all of the assets of Atlanta Washer & Dryer Leasing, Inc. (d/b/a Appliance Warehouse) for approximately $6.3 million in cash and promissory notes (the "AW Notes") issued by Coinmach Laundry aggregating $1.2 million (the "Appliance Warehouse Acquisition"). The Appliance Warehouse Acquisition increases the Company's presence in the South by adding approximately 14,000 machines to the Company's base and expands the Company's core operations into the related machine rental market, creating valuable operating synergies for the Company. At any time after March 14, 1998, the holders of the AW Notes may convert such notes, subject to terms and conditions therein, into a specified number of shares of Common Stock. CREDIT FACILITY Concurrent with the Kwik Wash Acquisition, the Company entered into a credit agreement (the "Credit Agreement") with Bankers Trust Company, First Union National Bank of North Carolina, Lehman Commercial Paper, Inc. and certain other lending institutions named therein providing for, among other things, a $130 million term loan facility and a $70 million revolving credit facility (the "New Credit Facility"). The New Credit Facility, which replaced the Company's then existing credit facility, funded the Kwik Wash Acquisition and provides financing to support the Company's acquisition strategy. Effective June 2, 1997, the Credit Agreement was amended to, among other things, increase the term loan facility by $60.0 million, of which $50.0 million was used to repay outstanding revolver borrowings under the New Credit Facility. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources- New Credit Facility." 3 RECENT DEVELOPMENTS On April 23, 1997, the Company acquired the route business of Reliable Holding Corp. ("Reliable") through a series of merger transactions for a cash purchase price of approximately $44.0 million funded by revolver borrowings under the New Credit Facility. The Reliable Acquisition provides the Company with a strong foothold into the California market and adds approximately 49,000 machines to the Company's base. Effective June 2, 1997, the New Credit Facility was amended to, among other things, increase the term loan facility by $60.0 million. See "Management's Discussion and Analysis of Financial Condition and Results of Operations- Liquidity and Capital Resources-New Credit Facility." DESCRIPTION OF THE BUSINESS OVERVIEW The coin-operated laundry equipment services industry provides coin-operated washer and dryer services to individuals living in multi-family housing properties. The Company's core business involves leasing laundry rooms from building owners and management companies, installing and servicing laundry equipment and collecting revenues generated from laundry machines. The Company typically sets pricing for the use of laundry machines on location, and the owner or property manager maintains the premises and provides utilities such as gas, electricity and water. The Company's existing customer base for its core business is comprised of landlords, property management companies, and owners of rental apartment buildings, condominiums and cooperatives, university and institutional housing and other multi-family housing properties. Prior to giving effect to the Reliable Acquisition, the Company owns and operates approximately 337,000 coin-operated washers and dryers in over 30,000 multi-family housing properties on routes located in 30 states and the District of Columbia and in 150 retail laundromats located throughout Texas. The Company's routes are located throughout the Northeast, Mid-Atlantic, Southeast, South-Central and Mid-West regions of the United States. Management believes, based on its knowledge of the industry and after giving effect to the Reliable Acquisition, that the Company is the largest supplier of coin-operated laundry equipment services for multi-family housing properties throughout the United States. As a result of its strategy to acquire route operators that contribute to the Company's core operations, the Company has also selectively acquired certain related businesses which expand and diversify the types of services provided by the Company. Through Super Laundry, the Company constructs and finances turnkey laundromat operations, and sells and distributes coin- operated washers, dryers and laundry equipment. With the Kwik Wash Acquisition, the Company now operates 150 retail laundromats throughout Texas and provides laundromat services at all such locations. As a result of the Appliance Warehouse Acquisition, the Company leases laundry equipment and other household appliances to corporate relocation entities, individuals, property owners and managers of multi-family housing properties. The Company believes that these non-core businesses, although not material to the Company's operations, provide a significant platform for expansion and diversification of the Company's services. See "Business-Description of Business-Super Laundry" and "Business-Description of Business-Laundromat Operations". 4 The Company maintains its executive offices in Roslyn, New York, a corporate development office in Charlotte, North Carolina and regional offices in each of the major regions in which it conducts operating activities, including sales, service and collections. The following table sets forth certain information relating to the Company's regional operations as of March 28, 1997:
MID- SOUTH- NORTHEAST ATLANTIC SOUTHEAST CENTRAL MID-WEST TOTAL ---------- --------- ------------- ----------- ----------- ------ States.................. NY, NJ, CT D.C., MD, VA, WV, NC, TX, LA, FL, IL, IA, SD, 31 PA, DE SC, GA, KY, AK, MS, OK NE, MO, KS, AL, TN IN, MI, WI, OH Approximate Revenue (in $79.6 $29.3 $25.1 $62.4(/5/) $10.5 $206.9 millions).............. Employees............... 255(/1/) 81 145(/2/)(/3/) 657(/4/) 42 1,180
- -------- (/1/)Includes 36 executive, financial and administrative personnel at the Company's headquarters located in Roslyn, New York. (/2/)Includes five executive, financial and administrative personnel at the Company's corporate development office located in Charlotte, North Carolina. (/3/)Includes 24 contract employees employed by the Company through a lease arrangement with an independent employment company in connection with the Appliance Warehouse Acquisition. (/4/)Includes 280 laundromat attendants in the Company's retail laundromats in Texas. (/5/)Includes revenue resulting from the Kwik Wash Acquisition for the period subsequent to January 8, 1997. BUSINESS STRATEGY The Company's business strategy is to increase operating cash flow and profitability through a combination of internal expansion and selective acquisitions. Internal expansion is comprised of: (i) increasing the installed machine base by adding new customers, (ii) converting owner-operated facilities to Company-managed facilities; and (iii) implementing selective price increases within the Company's operating regions. The Company's acquisition strategy is to acquire additional local, regional and multi- regional route businesses from independent operators. Management believes that by pursuing its business strategy the Company will be positioned to realize: (i) additional operating leverage and economies of scale associated with expanding its installed base of machines, including without limitation, reduced equipment and parts costs on a per unit basis due to increased purchasing requirements and (ii) reduced operating expenses through consolidation of overhead functions and facilities. In January 1995, management, with its equity sponsor, Golder, Thoma, Cressey, Rauner Fund IV, L.P., acquired the Company and initiated a strategy of growth through acquisitions. This strategy was designed to increase the installed machine base in its existing operating regions (throughout the Northeast region) and to provide the Company with a strong market presence in new regions. Since January 1995, the Company has expanded into the Mid- Atlantic, Southeast, South-Central and Midwest regions of the United States and grown its installed base from approximately 54,000 machines to approximately 337,000 machines as of March 28, 1997. Revenues and EBITDA/1/ have grown from approximately $72.9 million and approximately $13.6 million, respectively, for the twelve months ended March 31, 1995, to approximately $206.9 million and approximately $62.8 million (before deducting non-cash stock based compensation charges), respectively, for the twelve months ended March 28, 1997. These acquisitions have enabled the Company to improve its operating margins and to expand internally by competing more aggressively for new business. - -------- /1/EBITDA represents earnings from continuing operations before deductions for interest, income taxes, depreciation and amortization. EBITDA for the period ending March 28, 1997 is before the deduction for stock based compensation charges. EBITDA is used by management and certain investors as an indicator of a company's historical ability to service debt. Management believes that an increase in EBITDA is an indication of a company's improved ability to service existing debt, to sustain potential future increases in debt and to satisfy capital requirements. However, EBITDA is not intended to represent cash flows for the period, nor has it been presented as an alternative to either (a) operating income (as determined by generally accepted accounting principles) as an indicator of operating performance or (b) cash flows from operating, investing and financing activities (as determined by generally accepted accounting principles) as a measure of liquidity. Given that EBITDA is not a measurement determined in accordance with generally accepted accounting principles and is thus susceptible to varying calculations, EBITDA as presented may not be comparable to other similarly titled measures of other companies. 5 Internal Expansion New Locations. The Company's aggressive sales and marketing efforts focus on ------------- two areas of expansion within its existing operating regions. The Company's primary means of internal expansion is by marketing the Company's products and services to building managers and property owners whose leases with other laundry equipment services providers are near expiration. Many large customers require competitive bids for expiring lease contracts. The Company's proprietary, fully-automated management information and control systems (the "Integrated Computer Systems") track information on the lease expirations of its competitors. The Company secures leases with new customers through aggressive bidding for new contracts and its long standing industry reputation for prompt and reliable service, effective data management on competition, and its ability in coordinating and targeting its marketing efforts. Conversions. Management believes, based on industry estimates, that there ----------- are approximately 1.0 million machines installed in locations that are managed by owner-operators. Building owners or managers can forgo significant cash outlays by contracting with the Company to purchase, service and maintain laundry equipment. Accordingly, the Company aggressively pursues building owners and managers to convert from owner-operated laundry facilities. The Company offers a full range of services from the design, construction and installation of new laundry facilities to the refurbishment of existing facilities. Management believes these services provide a competitive advantage in securing new customers. Price Increases. In addition to growing the Company's installed base of --------------- machines, management regularly reviews its pricing policies and procedures under existing leases. Management expects that the Company should realize increases in revenue and cash flow from operations through selective price increases and other pricing procedures in the forthcoming year. Management believes that its strategy of growth within its existing operating regions will result in additional economies of scale and operating efficiencies associated with an expanded machine base. Such growth, however, will be dependent upon a number of factors beyond the Company's control, such as the Company's ability to secure new contracts from owner-operators on commercially favorable terms and competitive forces that may reduce the number of opportunities to secure new locations or to effect price increases. Selective Acquisitions The Company intends to continue to capitalize on opportunities within the fragmented laundry services industry through selective acquisitions of local, regional and multi-regional route businesses. In particular, there are numerous private, family-owned businesses that may lack the financial resources to provide advance rental payments, install new equipment, make laundry room improvements or otherwise compete effectively with larger independent operators such as the Company to secure new or renewal locations. Consequently, such independent operators, many of which are undergoing generational ownership changes, may represent potential acquisition opportunities for the Company within its operating regions. Management believes the Company is well positioned to continue to capitalize on such opportunities for growth and expansion due to its operating efficiencies, its access to capital resources, and senior management's extensive experience and relationships in the industry. The Company evaluates potential acquisitions based on certain criteria, including the size of the business (in terms of revenues and machine base), the geographic concentration of the business, market penetration, service history, customer relations, existing contract terms and potential operating efficiencies and cost savings. The Company considers three types of acquisition candidates: (i) small, local route operators; (ii) regional route operators; and (iii) large, multi- regional route operators. Local route operators. The acquisition of small, local operators (businesses --------------------- operating within one of the Company's existing regions) results in a reduction of the target's existing cost structure through the complete absorption of the machine base into the Company's operations. The Company evaluates opportunities to acquire route businesses from independent operators to further increase operating leverage within its operating regions. 6 In many regions, the Company may be able to acquire routes adjacent to its existing areas of operation without incurring significant incremental operating, collection, security, service and maintenance costs. During the past fiscal year, the Company acquired several local route operators. Regional route operators. The Company's acquisition of regional route ------------------------ operators provides opportunities to improve its cash flow by eliminating duplicative corporate and administrative functions, reducing capital expenditures through improved purchasing power and implementing the Company's Integrated Computer Systems. One such regional acquisition, the Allied Acquisition, was part of the Company's plan to establish a larger market presence in the Mid-West. See "Business-General Development of Business- Selective Acquisitions." Multi-regional route operators. The acquisition of a large, multi-regional ------------------------------ route operator may result in a number of operating efficiencies, including significant cost savings through the elimination of duplicative financial and administrative functions and related fixed costs. In addition, the increased volume of equipment purchases may result in reduced per unit capital expenditures. Moreover, as is the case with all types of acquisitions, the Company's Integrated Computer Systems would be utilized to provide further operating efficiencies and related cost savings. On January 8, 1997, the Company completed the Kwik Wash Acquisition. Management expects to integrate substantially all of the operations formerly conducted by the Kwik Wash Partnership into the Company's operations during 1997 and to achieve significant targeted cost savings as a result of such integration. The combination of the Company with the Kwik Wash Partnership for the twelve months ended March 28, 1997, assuming no cost savings, results in combined pro forma revenues of approximately $255.7 million and pro forma EBITDA of approximately $78.8 million (before deducting non-cash stock based compensation charges). See "Business-General Development of Business-Selective Acquisitions." On April 23, 1997, the Company also completed the Reliable Acquisition. See "Business-General Development of Business-Recent Developments." INDUSTRY The coin-operated laundry services industry is fragmented nationally with many small, private and family-owned route businesses continuing to operate throughout all major metropolitan areas. According to information provided by the Multi-housing Laundry Association, the industry is comprised of over 280 independent operators. Based upon industry estimates, management believes there are approximately 3.5 million machines installed throughout the United States, approximately 2.5 million of which are managed by independent operators such as the Company and approximately 1.0 million of which are managed by owner-operators. Despite the overall fragmentation of the industry, there are currently three companies including the Company with significant operations in multiple regions throughout the United States. Management believes that its two major multi-regional competitors are strongest in California and Chicago, Illinois. See "Business-Description of Business- Competition." The industry is highly capital intensive, and customers require prompt and reliable service. The majority of capital costs are incurred upon procurement of new leases. Such initial costs include replacing or repairing existing washers and dryers, refurbishing laundry rooms and making advance rental payments to secure long-term, renewable leases. After the initial expenditures, ongoing working capital requirements are minimal, since machines operate for many years if serviced properly, and variable costs are paid out of revenues collected from the machines. Historically, the industry has been characterized by stable demand and has proven to be resistant to changing market conditions and general economic cycles. Management believes that this is due to the consistent demand for laundry services by building occupants. Management believes that the industry's consistent and predictable revenue and cash flow from operations are primarily due to: (i) the long-term nature of location leases; (ii) the stable demand for laundry services; and (iii) minimal ongoing working capital requirements. 7 DESCRIPTION OF PRINCIPAL OPERATIONS The principal aspects of the Company's operations include: (i) location leasing; (ii) service; (iii) remanufacturing; (iv) security; (v) information management; and (vi) sales and marketing. Location Leasing The Company's leases provide the Company the exclusive right to operate and service the laundry equipment, including repairs and maintenance. The Company typically sets pricing for the use of the machines on location, and the property owner or manager maintains the premises and provides utilities such as gas, electricity and water. In return for the exclusive right to provide laundry equipment services, most of the Company's leases provide for monthly commission payments to the location owners. Under the majority of leases, these commissions are based on a percentage of the cash collected from the laundry machines. Many of the Company's leases require the Company to make advance rental payments to the location owner in addition to commissions. The Company's leases typically include provisions that allow for unrestricted price increases, a right of first refusal (an opportunity to match competitive bids at the expiration of the lease term) and termination rights if the Company does not receive minimum net revenues from a lease. The Company has some flexibility in negotiating its leases and, subject to regional competitive factors, may vary the terms and conditions of a lease, including commission rates and advance rental payments. The Company evaluates each lease opportunity through its Integrated Computer Systems, which are designed to achieve certain targeted levels of profitability. Management estimates that approximately 90% of its locations are subject to long-term leases with initial terms of three to ten years. Of the remaining locations not subject to long term leases, the Company believes that it has retained a majority of such customers through long-standing relationships and intends to continue to service such customers. Approximately 75% of the Company's leases renew automatically, and the Company has a right of first refusal on termination in approximately 45% of its leases. The Company's automatic renewal clause typically provides that, if the building owner fails to take any action prior to the end of the original lease term or any renewal term, the lease will automatically renew on substantially similar terms. As of March 28, 1997, the Company's leases have an average remaining life to maturity of approximately 40 months (without giving effect to automatic renewals). Service The Company's employees deliver, install, service and collect from coin- operated washers and dryers in laundry facilities at its leased locations. The Company's fleet of 314 radio-equipped service vehicles allows the quick dispatch of service technicians in response to both computer-generated (for preventive maintenance) and customer-generated service calls. On a daily basis, the Company receives and responds to approximately 2,200 service calls. Management estimates that less than 1% of the Company's machines are out of service on any given day. The ability to reduce machine down time, especially during peak usage, serves to enhance revenue and improve the Company's reputation with its customers. In a business that emphasizes prompt and efficient service, management believes that the Company's Integrated Computer Systems provide a significant competitive advantage in terms of responding promptly to customer needs. Computer-generated service calls for preventive maintenance are based on previous service history, repeat service call analysis and monitoring of service areas. These operations coordinate the Company's radio-equipped service vehicles that allow the Company to address customer needs quickly and efficiently. Remanufacturing The Company's remanufacturing operations provide approximately one-third of its anticipated annual machine installation requirements. The Company rebuilds and reinstalls a portion of its machines at approximately one-third the cost of acquiring new machines, providing significant cost savings. Remanufactured 8 machines are restored to virtually new condition with the same estimated average life and service requirements as new machines. Machines that can no longer be remanufactured are stripped and added to the Company's inventory of spare parts, generating additional cost savings. The Company maintains three regional remanufacturing facilities which provide for consistent machine quality and efficient operations and are strategically located to service each of its operating regions. Security Management believes that it provides the highest level of security control in the laundry equipment services industry. The Company utilizes numerous precautionary procedures with respect to cash collection, including frequent alteration of collection patterns, extensive monitoring of collections and other control mechanisms. The Company enforces stringent employee standards and screening procedures with prospective employees. Employees responsible for or who have access to the collection of funds are tested randomly and frequently. Additionally, the Company's security department performs trend and variance analyses of daily collections by location. Security personnel monitor locations, conduct investigations, and implement additional security procedures as necessary. Information Management Management believes that the Company's Integrated Computer Systems significantly enhance its operating efficiencies as well as its sales and marketing efforts. The Integrated Computer Systems provide speed and accuracy throughout the entire service cycle by integrating the functions of service call entry, dispatching service personnel, parts and equipment purchasing, installation, distribution and collection. Management is able to obtain daily, monthly, quarterly and annual reports on location performance, coin collection, service and sales activity by salesperson. Management also believes that the Integrated Computer Systems enhance the Company's ability to successfully integrate acquired businesses into its existing operations. With the acquisition of Solon Automated Services, Inc. ("Solon") in April 1995 (the "Solon Acquisition"), the Company completed a comprehensive systems review and upgrade throughout the operating regions. In addition to coordinating all aspects of the service cycle, the Company's Integrated Computer Systems track contract performance which indicate unreported machine failure or pilferage and provide data to forecast future equipment problems. Data on machine performance are used by the sales staff to forecast revenue by location. The purchasing department tracks bids on the Company's equipment requirements to support an aggressive competitive bidding process. The Integrated Computer Systems also provide the sales staff with an extensive database essential to the Company's marketing strategy to obtain new business through competitive bidding or owner-operator conversion opportunities. Sales and Marketing The Company markets its products and services through a sales staff with an average industry experience of over ten years. The principal responsibility of the sales staff is to solicit and negotiate lease arrangements with building owners and managers. All sales personnel are paid commissions that comprise 50% or more of their annual compensation. Selling commissions are based on a percentage of a location's annualized earnings before interest and taxes. Sales personnel must be proficient with the application of sophisticated financial analyses to achieve their targeted goals in securing location contracts and renewals. Management believes that its sales staff is among the most competent and effective in the industry. The Company's marketing strategy emphasizes service excellence offered by its experienced, highly skilled personnel and its quality equipment that maximizes efficiency and revenue and minimizes machine down-time. Additionally, the Integrated Computer Systems monitor performance, repairs and maintenance, as well as the 9 profitability of locations on a daily basis. The Company's sales staff targets potential new and renewal lease locations by utilizing its Integrated Computer Systems' extensive database that provides information on the Company's, as well as its competitors' locations. All sales activity, from sale entries to data on service and installation is recorded and monitored daily on a custom- designed, computerized sales planner. No single customer represents more than 2% of the Company's revenues or installed machine base. In addition, the Company's ten largest customers taken together account for less than 10% of the Company's revenues. LAUNDROMAT OPERATIONS In connection with the Kwik Wash Acquisition, the Company acquired 150 retail laundromats located throughout Texas. The operation of the retail laundromats involves leasing store locations in desired geographic areas, maintaining an appropriate mix of washers and dryers at each store location and servicing such washers and dryers at such locations. The Company is also responsible for maintaining the premises at each laundromat and paying for utilities and related expenses. SUPER LAUNDRY Super Laundry, a wholly-owned subsidiary of the Company, is a construction and laundromat equipment distribution company. Super Laundry's business consists of constructing complete turnkey retail laundromats, retrofitting existing retail laundromats, distributing exclusive lines of commercial coin and non-coin machines and parts, and selling service contracts. The construction of laundromats and related equipment sales constitute approximately 90% of the revenues of Super Laundry. Super Laundry's customers generally enter into sales contracts pursuant to which Super Laundry constructs and equips a complete laundromat operation, including location identification, construction, plumbing, electrical wiring and all required permits. COMPETITION The coin-operated laundry equipment services industry is highly competitive, capital intensive and requires reliable, quality service. Despite the overall fragmentation of the industry, there are currently three companies including the Company with significant operations in multiple regions throughout the United States. Management believes that the Company's two major multi-regional competitors, Web Service Company, Inc. and Macke Laundry Service, L.P., are strongest in California and Chicago, Illinois, respectively. The Company has a minimal presence in Chicago, Illinois and after consummation of the Reliable Acquisition, competes with Web Service Company, Inc. in California. EMPLOYEES As of March 28, 1997, the Company employed 1,180 full time employees (including 24 contract employees employed by the Company through a lease arrangement with an independent employment company in connection with the Appliance Warehouse Acquisition and 280 laundromat attendants in the Company's retail laundromats in Texas). Approximately 140 hourly workers in the Northeast region are represented by Local 966, affiliated with the International Brotherhood of Teamsters (the "Union"). Management believes that the Company has maintained a good relationship with the Union employees and has never experienced a work stoppage since its inception. SEASONALITY The Company's business is generally not seasonal. ITEM 2. PROPERTIES. As of March 28, 1997, the Company leases 26 offices throughout its operating regions serving various operational purposes, including sales and service activities, collections and warehousing. The Company presently 10 maintains its headquarters in Roslyn, New York, leasing approximately 40,000 square feet pursuant to a five year lease terminating April 30, 2001. The Company's Roslyn facility is used for general corporate purposes, as well as for remanufacturing and warehouse space for the Northeast operating region. The Company has an option to purchase the Roslyn facility, which it presently does not intend to exercise. The Company also maintains a facility in Charlotte, North Carolina as its corporate development office, leasing approximately 3,000 square feet pursuant to a five year lease. ITEM 3. LEGAL PROCEEDINGS. The Company and its predecessors have been named as defendants in a number of legal actions arising in the ordinary course of business. Although the amount of any liability that could arise with respect to these actions cannot be accurately predicted, management believes that any such liabilities, individually or in the aggregate, will not have a material adverse effect on the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. 11 PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Coinmach Laundry completed an initial public offering of its Common Stock on July 23, 1996 at a price of $14.00 per share. Coinmach Laundry's Common Stock is traded on the Nasdaq National Market under the symbol "WDRY". The table below sets forth, for the periods indicated, the high and low closing sales prices for the Common Stock as reported on the Nasdaq National Market. The prices shown below do not include retail markups, markdowns or commissions.
1997 FISCAL QUARTER ENDED HIGH LOW ------------------------- ------- ------ September 27, 1996...................................... $20.125 $13.00 December 27, 1996....................................... $22.75 $17.25 March 28, 1997.......................................... $20.25 $17.00
As of May 26, 1997, Coinmach Laundry had outstanding 10,004,278 shares of Common Stock, and 480,648 shares of Non-Voting Common Stock. As of May 26, 1997, there were 29 stockholders of record of the Common Stock and two stockholders of record of the Non-Voting Common Stock. The Company has not declared or paid any cash dividends on the Common Stock and does not intend to pay cash dividends on the Common Stock in the foreseeable future. At the present time, the Credit Agreement prohibits the payment of cash dividends and certain other distributions. Recent Sales of Unregistered Securities On May 10, 1996, Coinmach Laundry sold 1,415, 1,415 and 599 shares of pre- Offering Class B common stock, par value $.01 per share, to Stephen R. Kerrigan, Mitchell Blatt and Robert M. Doyle, respectively, for $21,795, $21,795 and $9,226, respectively, which stock was issued and outstanding prior to the Offering and reclassified into shares of Common Stock in the Reclassification. Such shares of common stock were sold on reliance upon Rule 506 of Regulation D of the Securities Act of 1933, as amended, an exemption from the registration requirements thereof. In connection with the Offering, Coinmach Laundry approved the Reclassification, pursuant to which all seven classes of its authorized capital stock prior to the Offering were converted into Preferred Stock, Common Stock and Non-Voting Common Stock. As part of the Reclassification, holders of Coinmach Laundry's pre-Offering Class A common stock, Class E common stock and Class F common stock (collectively, the "Preference Shares") also received a distribution consisting of shares of Common Stock or shares of Preferred Stock representing an amount equal to the sum of: (a) preferred dividends on such Preference Shares in an amount equal to the accrued yield (at a rate of 8% per annum, compounded quarterly) on the original investment in such Preference Shares through July 23, 1996; and (b) an amount equal to the original investment in such Preference Shares. Holders of Preference Shares who were members of Coinmach Laundry's management received an aggregate of approximately 28,425 shares of Common Stock, and holders of the Preference Shares who were not members of Coinmach Laundry's management received an aggregate of 1,000 shares of Preferred Stock. In connection with the Reclassification, Coinmach Laundry also approved an approximate 23-to-1 stock split payable to stockholders of record on July 12, 1996. 12 ITEM 6. SELECTED FINANCIAL DATA. SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA The following tables present summary historical consolidated financial information of the Company and its subsidiaries. Such tables include the consolidated financial information of the Company for the year ended March 28, 1997 ("1997 Fiscal Year"), for the six month transition period ended March 29, 1996, and the period from April 5, 1995 to September 29, 1995 giving effect to the combination of Solon and The Coinmach Corporation ("TCC") on November 30, 1995. The six month transition period ended March 29, 1996 and the period from April 5, 1995 to September 29, 1995 have been combined to facilitate comparison of such combined period with the year ended March 28, 1997. Also included in such tables is summary historical consolidated financial information of (i) TCC and its predecessor, including the two month period ended March 31, 1995, the one month period ended January 31, 1995, and fiscal years ended December 31, 1994, 1993 and 1992 and (ii) Solon, including the six month period from October 1, 1994 to April 4, 1995, and fiscal years ended September 30, 1994, 1993 and 1992. The financial data set forth below should be read in conjunction with the Company's audited historical consolidated financial statements and the related notes thereto presented in Item 8 "Financial Statements and Supplementary Data" and with the information presented in Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Form 10-K.
THE COMPANY/1/ -------------- SIX MONTH PERIOD FROM YEAR ENDED TRANSITION PERIOD APRIL 5, 1995 TO MARCH 28, ENDED SEPTEMBER PERIOD ENDED 1997 MARCH 29, 1996 29, 1995 MARCH 29, 1996 ---------- ----------------- ---------------- -------------- (IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA) OPERATING DATA: Revenues................ $ 206,852 $ 89,070 $ 89,719 $178,789 Laundry operating ex- penses................. 139,446 60,536 62,905 123,441 General and administra- tive expenses.......... 4,613 1,844 2,351 4,195 Depreciation and amorti- zation................. 46,316 18,212 18,423 36,635 Stock based compensation charge................. 2,152 -- -- -- Restructuring expense... -- -- 2,200 2,200 --------- -------- -------- -------- Operating income........ 14,325 8,478 3,840 12,318 Interest expense, net... 26,859 11,999 11,818 23,817 Income taxes (benefits). (2,307) (998) (1,862) (2,860) --------- -------- -------- -------- Loss before extraordi- nary item.............. (10,227) (2,523) (6,116) (8,639) Extraordinary loss (net of taxes)/2/........... (296) (8,925) -- (8,925) --------- -------- -------- -------- Net loss................ $ (10,523) $(11,448) $ (6,116) $(17,564) ========= ======== ======== ======== Net loss per share...... $ (1.14) -- -- -- Pro forma net loss per share.................. -- $ (1.47) $ (0.79) $ (2.26) BALANCE SHEET DATA (AT END OF PERIOD): Property and equipment, net.................... $ 112,116 $ 82,699 $ 80,706 Total assets............ 472,921 249,148 241,433 Total debt.............. 345,486 202,765 176,415 Stockholders' equity (deficit).............. 23,563 (1,308) 10,140 FINANCIAL RATIOS AND OTHER DATA: Cash flow from operating activities............. $ 34,732 $ 12,337 $ 12,066 $ 24,403 Cash used for investing activities............. (196,698) (14,162) (25,039) (39,201) Cash from financing ac- tivities............... 156,837 11,372 12,510 23,882 EBITDA/3/............... 62,793 26,690 24,463 51,153 EBITDA margin/4/........ 30.4% 30.0% 27.3% 28.6% Operating margin/5/..... 6.9% 9.5% 4.3% 6.9% Capital expenditures/6/. $ 41,588 $ 14,219 $ 13,119 $ 27,338
13 - -------- /1/Historical financial data for each of TCC (and its predecessors) and Solon (for periods prior to April 5, 1995), in each case, the predecessors of Coinmach Laundry, are contained in the Selected Historical Financial Data and the financial statements and related notes thereto presented elsewhere in this Form 10-K. /2/Represents extraordinary loss on the early extinguishment of debt on February 14, 1997 and November 30, 1995, net of taxes. /3/EBITDA represents earnings from continuing operations before deductions for interest, income taxes, depreciation and amortization. EBITDA for the period ending March 28, 1997 is before the deduction for stock based compensation charges, and EBITDA for the period ending September 29, 1995 is before the deduction for restructuring costs. EBITDA is used by management and certain investors as an indication of a company's ability to service existing debt, to sustain potential future increases in debt and to satisfy capital requirements. However, EBITDA is not intended to represent cash flows for the period, nor has it been presented as an alternative to either (a) operating income (as determined by generally accepted accounting principles) as an indicator of operating performance or (b) cash flows from operating, investing and financing activities (as determined by generally accepted accounting principles) as a measure of liquidity. Given that EBITDA is not a measurement determined in accordance with generally accepted accounting principles and is thus susceptible to varying calculations, EBITDA as presented may not be comparable to other similarly titled measures of other companies. /4/EBITDA margin represents EBITDA as a percentage of revenues. Management believes that EBITDA margin is a useful measure to evaluate the Company's performance over various sales levels. EBITDA margin should not be considered as an alternative for measurements determined in accordance with generally accepted accounting principles. /5/Operating margin represents operating income as a percentage of revenues. /6/Capital expenditures include additions to property and equipment and advance rental payments to location owners. 14 TCC's fiscal year end was March 31, and TCC's predecessor's fiscal year end was December 31, thus creating a three-month transition period. On January 31, 1995, TCC was formed by certain of the Company's current owners, and, accordingly, periods prior to and after January 31, 1995 are reflected as predecessor and successor periods, respectively.
THE COINMACH CORPORATION ("TCC") -------------------------------- PREDECESSOR/1/ SUCCESSOR/1/ ----------------------------------------- ------------ ONE MONTH TWO MONTHS YEARS ENDED DECEMBER 31, ENDED ENDED ---------------------------- JANUARY 31, MARCH 31, 1992 1993 1994 1995 1995 -------- -------- -------- ----------- ------------ (IN THOUSANDS) OPERATING DATA: Revenues................ $ 72,172 $ 71,859 $ 73,857 $ 5,879 $11,515 Laundry operating ex- penses................. 53,163 52,805 54,737 4,229 8,951 General and administra- tive expenses.......... 5,712 5,570 4,938 450 799 Depreciation and amorti- zation................. 16,755 15,256 14,504 980 2,144 -------- -------- -------- -------- ------- Operating income (loss). (3,458) (1,772) (322) 220 (379) Interest expense, net... 9,573 10,509 4,012 395 774 Other expense (income).. -- -- 1,341 -- -- Income taxes............ (4) 17 27 -- 2 -------- -------- -------- -------- ------- Loss before extraordi- nary gain.............. (13,027) (12,298) (5,702) (175) (1,155) Extraordinary gain/2/... -- -- 20,420 -- -- -------- -------- -------- -------- ------- Net income (loss)....... $(13,027) $(12,298) $ 14,718 $ (175) $(1,155) ======== ======== ======== ======== ======= BALANCE SHEET DATA (AT END OF PERIOD): Property and equipment, net.................... $ 19,030 $ 17,293 $ 16,285 $ 16,120 $24,330 Total assets............ 52,114 47,443 36,924 36,069 61,035 Total debt.............. 76,409 75,827 42,184 41,800 42,351 Stockholders' equity (deficit).............. (53,995) (68,003) (13,416) (13,591) 9,729 FINANCIAL RATIOS AND OTHER DATA (UNAUDITED): Cash flow from operating activities............. $ 7,613 $ 7,736 $ 8,724 $ 1,197 $ 73 Cash used for investing activities............. (5,124) (6,119) (6,577) (611) (990) Cash from (used for) fi- nancing activities..... (1,945) (1,405) (2,547) (411) (327) EBITDA/3/............... 13,297 13,484 14,182 1,200 1,765 Capital expenditures.... 4,884 5,879 6,571 576 990
- -------- /1/The term "Predecessor" refers to the period in time prior to the Coinmach Acquisition and consists of CIC and TCC. The term "Successor" refers to the period in time after the Coinmach Acquisition. Successor is presented on a different basis of accounting and therefore, is not comparable to the Predecessor. The Successor period reflects the effects of purchase accounting, whereby assets and liabilities were adjusted to their estimated fair values at the date of the Coinmach Acquisition. /2/Represents extraordinary gain on the early extinguishment of debt in 1994. /3/EBITDA represents earnings from continuing operations before deductions for interest, income taxes, depreciation and amortization. EBITDA is used by management and certain investors as an indication of a company's improved ability to service existing debt, to sustain potential future increases in debt and to satisfy capital requirements. However, EBITDA is not intended to represent cash flows for the period, nor has it been presented as an alternative to either (a) operating income (as determined by generally accepted accounting principles) as an indicator of operating performance or (b) cash flows from operating, investing and financing activities (as determined by generally accepted accounting principles) as a measure of liquidity. Given that EBITDA is not a measurement determined in accordance with generally accepted accounting principles and is thus susceptible to varying calculations, EBITDA as presented may not be comparable to other similarly titled measures of other companies. 15 The fiscal year end of Solon was the Friday closest to September 30. On April 5, 1995, the voting stock of Solon was acquired by Coinmach Laundry, and accordingly, periods prior to and after April 5, 1995 are reflected as predecessor and successor periods, respectively.
SOLON/1/ -------- PREDECESSOR/2/ ---------------------------------------- (IN THOUSANDS) OCTOBER 1, YEARS ENDED SEPTEMBER, 1994 TO ---------------------------- APRIL 4, 1992/3/ 1993 1994 1995 -------- -------- -------- ---------- OPERATING DATA: Revenues.............................. $104,311 $104,888 $104,553 $52,207 Laundry operating expenses............ 67,138 67,420 66,418 33,165 General and administrative expenses... 3,125 2,576 2,839 1,539 Depreciation and amortization......... 20,745 21,002 21,347 10,304 -------- -------- -------- ------- Operating income...................... 13,303 13,890 13,949 7,199 Interest expense, net................. 15,857 17,453 18,105 8,928 -------- -------- -------- ------- Income (loss) before income taxes and extraordinary item................... (2,554) (3,563) (4,156) (1,729) -------- -------- -------- ------- Income taxes (benefit)................ (416) (768) 2,762 50 -------- -------- -------- ------- Loss before extraordinary item........ (2,138) (2,795) (6,918) (1,779) Extraordinary item (net of tax)/4/.... (833) -- -- (848) -------- -------- -------- ------- Net loss.............................. $ (2,971) $ (2,795) $ (6,918) $(2,627) ======== ======== ======== ======= BALANCE SHEET DATA (AT END OF PERIOD): Property and equipment, net........... $ 50,679 $ 50,593 $ 48,727 -- Total assets.......................... 155,827 150,402 143,589 -- Total debt............................ 128,737 128,299 128,487 -- Stockholders' equity (deficit)........ 1,004 (1,636) (8,721) -- FINANCIAL RATIOS AND OTHER DATA (UNAU- DITED): Cash flow from operating activities... $ 11,842 $ 16,547 $ 17,914 $10,216 Cash used for investing activities.... (16,168) (18,500) (16,763) (6,537) Cash from (used for) financing activi- ties................................. 10,272 (636) (270) (1,068) EBITDA/5/............................. 34,048 34,892 35,296 17,503 Capital expenditures/6/............... 16,563 18,556 16,779 6,944
- -------- /1/Certain amounts have been reclassified to conform the presentation above with TCC. /2/The term "Predecessor" refers to the period in time prior to the Solon Acquisition. /3/Fiscal year 1992 was a 53-week year. All other fiscal years were 52-week years. /4/Represents extraordinary loss on early extinguishment of debt in 1992 and change of control in the Solon Acquisition on April 5, 1995, net of tax. /5/EBITDA represents earnings from continuing operations before deductions for interest, income taxes, depreciation and amortization. EBITDA is used by management and certain investors as an indication of a company's improved ability to service existing debt, to sustain potential future increases in debt and to satisfy capital requirements. However, EBITDA is not intended to represent cash flows for the period, nor has it been presented as an alternative to either (a) operating income (as determined by generally accepted accounting principles) as an indicator of operating performance or (b) cash flows from operating, investing and financing activities (as determined by generally accepted accounting principles) as a measure of liquidity. Given that EBITDA is not a measurement determined in accordance with generally accepted accounting principles and is thus susceptible to varying calculations, EBITDA as presented may not be comparable to other similarly titled measures of other companies. /6/Capital expenditures include additions to property and equipment and advance rental payments to location owners. 16 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. GENERAL Business and Sources of Revenue The Company is principally engaged in the business of supplying coin- operated laundry equipment services to multi-family housing properties. Prior to giving effect to the Reliable Acquisition, the Company owns and operates approximately 337,000 coin-operated washers and dryers in approximately 30,000 multi-family housing properties on routes located in 30 states and the District of Columbia and in 150 retail laundromats throughout Texas. The Company's routes are located throughout the Northeast, Mid-Atlantic, Southeast, South-Central and Midwest regions of the United States. The Company, through Super Laundry, its wholly-owned subsidiary, is also a construction and laundromat equipment distribution company. The Company's most significant revenue source is derived from its route business. The Company provides coin-operated laundry equipment services to locations by leasing designated laundry rooms in buildings, typically on a long-term, renewable basis. In return for the exclusive right to provide laundry equipment services, most of the Company's leases provide for commission payments to the location owners. Commission expense (also referred to as rent expense), the Company's single largest expense item, is included in laundry operating expenses and represents payments to location owners. Commissions may be fixed amounts or percentages of revenues and are generally paid monthly. Also included in laundry operating expenses are the cost of servicing and collections in the route business, including, payroll, parts, vehicles and other related items, the cost of sales associated with Super Laundry and certain expenses related to the operation of retail laundromats acquired in the Kwik Wash Acquisition. In addition to commission payments, many of the Company's leases require the Company to make advance rental payments to the location owners. These advance payments are capitalized and amortized over the life of the applicable lease. Other revenue sources for the Company include (i) leasing laundry equipment and other household appliances and electronic items to corporate relocation entities, individuals, property owners and managers of multi-family housing properties; (ii) operating, maintaining and servicing retail laundromats; and (iii) constructing complete turnkey retail laundromats, retrofitting existing retail laundromats, distributing exclusive lines of commercial coin and non- coin machines and parts, and selling service contracts. Certain Other Transactions On January 31, 1995, in connection with the acquisition of Coinmach Industries Co., L.P. and Super Laundry Co., L.P., certain asset values, primarily contract rights and fixed assets, were recorded at their then fair market value, adjusted to reflect a pro rata allocation of the excess of fair market value of net assets acquired, based on an independent appraisal, over the purchase price. On November 30, 1995, TCC merged with Solon (the "Merger") through an exchange of stock, whereupon the surviving corporation changed its name to Coinmach Corporation. Both Solon and TCC were under common ownership commencing April 5, 1995. The Merger was accounted for in a manner similar to a pooling of interests. In connection with a series of refinancing transactions on November 30, 1995, the Company issued approximately $196.7 million of Senior Notes (as hereinafter defined) which enabled the Company to, among other things, extend the maturity of its debt obligations, retire the remaining debt of TCC and provide additional working capital. 17 RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes thereto included in Item 8 and the Selected Historical Consolidated Financial Data included in Item 6 of this Form 10-K. FISCAL YEAR ENDED MARCH 28, 1997 COMPARED TO FISCAL YEAR ENDED MARCH 29, 1996 The discussion below should be read in conjunction with the following table, which combines the six month transition period ended March 29, 1996 and the period from April 5, 1995 to September 29, 1995 and the combined periods to be referred to as the prior fiscal year (in thousands):
SIX MONTH PERIOD TRANSITION PERIOD APRIL 5, 1995 TO YEAR ENDED ENDED MARCH 29, SEPTEMBER 29, MARCH 28, 1997 1996 1995 COMBINED -------------- ----------------- ---------------- -------- Revenues................ $206,852 $ 89,070 $ 89,719 $178,789 Laundry operating ex- penses................. 139,446 60,536 62,905 123,441 General and administra- tive expenses.......... 4,613 1,844 2,351 4,195 Depreciation and amorti- zation................. 46,316 18,212 18,423 36,635 Stock based compensation charge................. 2,152 -- -- -- Restructuring expenses.. -- -- 2,200 2,200 -------- -------- -------- -------- Operating income (loss). 14,325 8,478 3,840 12,318 Interest expense, net... 26,859 11,999 11,818 23,817 -------- -------- -------- -------- Loss before extraordinary items and income taxes........... (12,534) (3,521) (7,978) (11,499) Income tax (benefit) ex- pense.................. (2,307) (998) (1,862) (2,860) -------- -------- -------- -------- Loss before extraordi- nary items............. (10,227) (2,523) (6,116) (8,639) Extraordinary items, net of tax................. (296) (8,925) -- (8,925) -------- -------- -------- -------- Net loss................ $(10,523) $(11,448) $ (6,116) $(17,564) ======== ======== ======== ========
Revenues increased by approximately 16% for the 1997 Fiscal Year as compared to the prior fiscal year. The improvement in revenues was primarily attributable to increased route revenues resulting from internal expansion, the Allied Acquisition, the Kwik Wash Acquisition and an increase in revenues from Super Laundry. During the 1997 Fiscal Year, the Company's installed base increased by approximately 7,500 machines from internal growth due primarily to the elimination of capital constraints existing at Solon prior to the Merger, as compared to a reduction of approximately 750 machines during the twelve months ended March 29, 1996. Laundry operating expenses increased by approximately 13% for the 1997 Fiscal Year, as compared to the prior fiscal year. The increase was due primarily to the Allied Acquisition and the Kwik Wash Acquisition as well as an increase in the cost of sales related to Super Laundry's increased sales volume. Such increase in laundry operating expenses was offset by the implementation of cost savings programs in the Company's field operations and the consolidation of certain operating regions. General and administrative expenses increased by approximately $0.4 million or 10% for the 1997 Fiscal Year as compared to the prior fiscal year. The increase for the period was due to expenses associated with (i) the implementation of the Company's acquisition strategy, including legal and financial due diligence investigations of potential targets and related costs, (ii) the development and implementation of procedures for the management of investor relations, and (iii) systems development, refinement and integration. This increase includes a reduction of certain expenses resulting from the consolidation of the Company's corporate staff into its existing facility in Roslyn, New York on September 29, 1995. Depreciation and amortization increased by approximately 27% for the 1997 Fiscal Year, as compared to the prior fiscal year, due primarily to the Allied Acquisition and the Kwik Wash Acquisition, as well as an 18 increase in capital expenditures for the installed base of machines resulting from the elimination of capital constraints existing at Solon prior to the Merger. As a result of the Company's acquisition activity since early 1995, the Company incurred approximately $26.8 million in non-cash purchase accounting related depreciation and amortization charges for the 1997 Fiscal Year as compared to $23.6 million for the prior fiscal year. The Company incurred restructuring costs of approximately $2.2 million during the twelve months ended March 29, 1996 to cover severance obligations to certain personnel, costs to relocate certain corporate functions to Roslyn, New York, systems integration costs, and expenses related to the consolidation of certain of its regional offices, in each case, as a result of the Solon Acquisition and the Merger. The extraordinary items for the 1997 Fiscal Year consisted of costs related to the extinguishment of debt in February, 1997 and the termination of the then existing revolving credit facility. The extraordinary items for the six month period ending March 29, 1996 consisted of costs related to the extinguishment of debt in connection with the Company's refinancing in November 1995. Prior to the Offering, Coinmach Laundry issued, in privately negotiated transactions, 79,029 shares of its Class B common stock to certain members of management. The Company recorded a stock-based compensation charge of approximately $887,000 attributable to the issuance of such stock. In addition, approximately $103,000 of receivables relating to loans to management in connection with prior purchases of Coinmach Laundry's common stock were forgiven and have been recorded as a stock-based compensation charge. Coinmach Laundry also granted options to management and certain other individuals to purchase shares of Common Stock at a 15% discount to the initial offering price of the Common Stock. With respect to such options granted to its employees, Coinmach Laundry will record such discount as a stock-based compensation charge over the applicable four year vesting period. Coinmach Laundry also granted to two of its disinterested directors options to purchase up to a total of 120,000 shares of Common Stock. Coinmach Laundry will record the difference between the exercise price of such options and the fair market value of the Common Stock on the date of grant as a stock-based compensation charge over the applicable three year vesting period. During the 1997 Fiscal Year, Coinmach Laundry recorded a stock-based compensation charge of approximately $1,162,000 relating to such options. The Company's operating income margin, approximately 7% of revenues for the 1997 Fiscal Year, was equal to that for the twelve month's ended March 29, 1996. Interest expense, net, increased by approximately 13% for the 1997 Fiscal Year as compared to the prior year due primarily to the Company's refinancing in November 1995 as well as entering into the Credit Agreement in January 1997. Partially offsetting this increase in interest expense was the decrease in the effective interest rate applied against outstanding borrowings as the result of such refinancing, as well as interest income earned on excess cash balances generated from operations. EBITDA/2/ was approximately $62.8 million (before deduction for stock-based compensation charges) for the 1997 Fiscal Year as compared to approximately $51.2 million (before deduction for restructuring costs) for the prior fiscal year, representing an improvement of approximately 23%. EBITDA margins improved to approximately 30% of revenues for the current year compared to approximately 29% of revenues for the prior year. - -------- /2EBITDA/represents earnings from continuing operations before deductions for interest, income taxes, depreciation and amortization. EBITDA is used by management and certain investors as an indicator of a company's historical ability to service debt. Management believes that an increase in EBITDA is an indication of a company's improved ability to service existing debt, to sustain potential future increases in debt and to satisfy capital requirements. However, EBITDA is not intended to represent cash flows for the period, nor has it been presented as an alternative to either (a) operating income (as determined by generally accepted accounting principles) as an indicator of operating performance or (b) cash flows from operating, investing and financing activities (as determined by generally accepted accounting principles) as a measure of liquidity. Given that EBITDA is not a measurement determined in accordance with generally accepted accounting principles and is thus susceptible to varying calculations, EBITDA as presented may not be comparable to other similarly titled measures of other companies. 19 SIX MONTH TRANSITION PERIOD ENDED MARCH 29, 1996 COMPARED TO THE PERIOD OCTOBER 1, 1994 TO APRIL 4, 1995 Prior to the merger of Solon and TCC, Solon's fiscal year was the fifty-two or fifty-three week period ended on the Friday nearest September 30. Effective upon the Merger, the Company changed its fiscal year end to the Friday nearest to March 31. The discussion below should be read in conjunction with the following table which combines the operating results of Solon and TCC for the period October 1, 1994 to April 4, 1995 (the predecessor period) (in thousands). The operating results of TCC are reflected in order to present comparable data.
PERIOD FROM OCTOBER 1, 1994 SIX MONTH TO APRIL 4, 1995 TRANSITION PERIOD --------------------------------- ENDED (PREDECESSOR)/1/,/2/ MARCH 29, 1996 (SUCCESSOR)/1/ TCC SOLON COMBINED ----------------- --------- --------- ----------- Revenues.................... $ 89,070 $ 35,789 $ 52,207 $ 87,996 Laundry operating expenses.. 60,536 28,253 33,165 61,418 General and administrative expenses................... 1,844 1,345 1,539 2,884 Depreciation and amortiza- tion....................... 18,212 6,009 10,304 16,313 -------- --------- --------- --------- Operating income............ 8,478 182 7,199 7,381 Interest expense, net....... 11,999 2,464 8,928 11,392 Other expense............... -- 1,341 -- 1,341 -------- --------- --------- --------- Loss before extraordinary item and income taxes...... (3,521) (3,623) (1,729) (5,352) Income tax (benefit) ex- pense...................... (998) 4 50 54 -------- --------- --------- --------- Loss before extraordinary item....................... (2,523) (3,627) (1,779) (5,406) Extraordinary item, net of tax........................ (8,925) -- (848) (848) -------- --------- --------- --------- Net loss.................... $(11,448) $ (3,627) $ (2,627) $ (6,254) ======== ========= ========= =========
- -------- /1/The term "Predecessor" refers to the period in time prior to the Solon Acquisition. The term "Successor" refers to the period in time after the Solon Acquisition and includes the historical results of Solon which have been restated to include the pooling of interests of TCC. Successor is presented on a different basis of accounting and, therefore, is not comparable to the Predecessor. /2/Certain reclassifications have been made to conform to the 1996 presentation. Revenues for the six month transition period ended March 29, 1996 were approximately 1.2% higher than combined revenues for the prior period. The improvement in revenues consisted primarily of increased revenues from Super Laundry of approximately $2.5 million. Such improvement was partially offset by a decrease of approximately $1.4 million in revenues from the route business. The average machine base for the six month transition period ended March 29, 1996 was approximately 1.4% lower than the prior period primarily as the result of constraints on available capital prior to the Merger. From September 30, 1995, through March 29, 1996, the Company successfully implemented a program to maintain its base of installed machines and eliminate any additional erosion. The effect of the decreased number of machines was partially offset by increased revenue per machine from price increases. Laundry operating expenses decreased by approximately 1.4% primarily as the result of decreased expenses of approximately $0.8 million related to implementation of cost savings programs in the Company's field operations and a decrease in commission expense of approximately 2.3%. These decreases were partially offset by an increase in the cost of sales related to the increased volume of Super Laundry. General and administrative expenses decreased by approximately $1.0 million, or 36.1%, primarily due to the consolidation of corporate staff by closing Solon's Philadelphia, Pennsylvania office and combining its operations into the Company's existing facility in Roslyn, New York on September 29, 1995. 20 Depreciation and amortization increased by approximately $1.9 million or 11.6% due primarily to purchase accounting adjustments resulting from the Solon Acquisition. Interest expense, net, increased by approximately 5.3%. Approximately $1.8 million of such increase was due primarily to the increased debt level that resulted from the Company's refinancing in November 1995. Offsetting this increase is approximately $0.8 million due to the decrease in the effective interest rate as the result of such refinancing. The increased debt resulted in an excess cash balance, which was contemplated to be used for working capital purposes and for future acquisition opportunities. The extraordinary item for the six month transition period ending March 29, 1996, consisted of costs related to the extinguishment of debt in connection with the Company's refinancing in late 1995. The extraordinary item for the period ended April 4, 1995, consisted of costs related to the change in control in connection with the Solon Acquisition. PERIOD APRIL 4, 1995 TO SEPTEMBER 29, 1995 COMPARED TO SIX MONTHS ENDED SEPTEMBER 30, 1994 The discussion below should be read in conjunction with the following table which combines the Predecessor period for the six months ended September 30, 1994 (in thousands):
PERIOD APRIL 5, 1995 TO SIX MONTHS ENDED SEPTEMBER 29, 1995 SEPTEMBER 30, 1994 -------------------- -------------------------- (SUCCESSOR)/1/ (PREDECESSOR)/1/,/2/ TCC SOLON COMBINED ------- ------- -------- Revenues....................... $89,719 $37,154 $51,577 $88,731 Laundry operating expenses..... 62,905 28,576 32,337 60,913 General and administrative ex- penses........................ 2,351 1,123 1,444 2,567 Depreciation and amortization.. 18,423 7,576 10,966 18,542 Restructuring costs............ 2,200 -- -- -- ------- ------- ------- ------- Operating income (loss)........ 3,840 (121) 6,830 6,709 Interest expense, net.......... 11,818 2,214 9,053 11,267 ------- ------- ------- ------- Loss before income taxes....... (7,978) (2,335) (2,223) (4,558) Income tax (benefit) expense... (1,862) 24 3,208 3,232 ------- ------- ------- ------- Net Loss....................... $(6,116) $(2,359) $(5,431) $(7,790) ======= ======= ======= =======
- -------- /1/The term "Predecessor" refers to the period in time prior to the Solon Acquisition. The term "Successor" refers to the period in time after the Solon Acquisition and includes the historical results of Solon which have been restated to include the pooling of interests of TCC. Successor is presented on a different basis of accounting and therefore, is not comparable to the Predecessor. /2/Certain reclassifications have been made to conform to the 1995 presentation. Revenues for the period April 5, 1995 to September 29, 1995 were approximately 1.1% higher than combined revenues for the prior period. The improvement in revenues consisted primarily of increased revenues from Super Laundry of approximately $1.3 million. Such improvement was partially offset by a decrease of approximately $0.3 million in revenues from routes, primarily due to a 2.0% decline in the average number of laundry machines on location, due to constraints on capital prior to the Merger. The effect of the decreased number of machines was partially offset by increased revenue per machine of approximately 1.6% primarily due to price increases. Laundry operating expenses increased by approximately 3.3%, primarily due to an increase of $1.0 million in the cost of sales related to the increase in Super Laundry revenue. The remaining increase is primarily the result of the method of accounting for installation costs applied in the Successor period. This increase is the result of increased cost of sales related to the increased volume of Super Laundry. In addition, the Company's commission expense decreased by approximately 1.0%. 21 General and administrative expenses decreased by approximately $0.2 million, or 8.4% primarily due to a decrease in the corporate staff. The Company provided for restructuring costs of approximately $2.2 million to cover severance payments to certain of Solon's management, administrative and regional personnel, costs to relocate Solon's financial and administrative functions to Roslyn, New York, costs to integrate certain financial and operating systems, and costs related to the consolidation of certain of Solon's regional offices. Interest expense, net, increased to approximately 4.9% primarily due to an increase in the interest rate on TCC's revolver, which was based on the prime lending rate. IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In February 1997, the Financial Accounting Standards Board issued Statement No. 128 "Earnings Per Share" ("FAS 128"). This standard changes the method of calculating earnings per share and will be effective for periods ending after December 15, 1997. Earlier application is not permitted. However, when adopted all prior period earnings per share data presented will be required to be restated to conform with the new standard. The Company anticipates that the impact of FAS 128 will not be material on the calculation of earnings per share. Effective March 30, 1996, the Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("FAS 121"), which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. FAS 121 also addresses the accounting treatment for long- lived assets that are expected to be disposed of. The effect of the Company's adoption of FAS 121 did not have an effect on the Company's results of operations or financial condition for the 1997 Fiscal Year. In October 1995, the Financial Accounting Standards Board issued Statement No. 123, "Accounting for Stock-Based Compensation" ("FAS 123"). FAS 123 establishes financial accounting and reporting standards for stock-based employee compensation plans. FAS 123 is effective for transactions entered into in fiscal years beginning after December 15, 1995. The Company has elected to account for stock-based compensation awards pursuant to the provisions of Accounting Principles Board Opinion No. 25, as permitted by FAS 123. LIQUIDITY AND CAPITAL RESOURCES The Company continues to have substantial indebtedness and debt service requirements. At March 28, 1997, the Company had outstanding long-term debt of approximately $345.5 million and stockholders' equity of approximately $22.0 million. FINANCING ACTIVITIES Senior Notes In December 1995, the Company issued 11 3/4% Senior Notes due 2005 pursuant to the terms of an indenture, between the Company and Fleet Bank of Connecticut (formerly Shawmut Bank Connecticut, National Association) (as amended, the "Indenture") in an aggregate principal amount of $196,655,000. On March 28, 1996, the Company consummated a registered exchange offer, pursuant to which all issued and outstanding 11 3/4% Senior Notes due 2005 were exchanged for Series B 11 3/4% Senior Notes due 2005 (the "Senior Notes"). The Senior Notes, which mature on November 15, 2005, are unsecured senior obligations of Coinmach Corporation, a wholly-owned subsidiary of Coinmach Laundry ("Coinmach Corporation") and are redeemable, at the Company's option, in whole or in part at any time or from time to time, on and after November 15, 2000, upon not less than 30 nor more than 60 days notice, at the redemption prices set forth in the Indenture, plus, in each case, accrued and unpaid interest thereon, if any, to the date of redemption. 22 The Indenture contains a number of restrictive covenants and agreements, including covenants with respect to the following matters: (i) limitation on indebtedness; (ii) limitation on certain payments (in the form of the declaration or payment of certain dividends or distributions on the capital stock of Coinmach Corporation or its subsidiaries, the purchase, redemption or other acquisition of any capital stock of Coinmach Corporation, the voluntary prepayment of subordinated indebtedness, or an Investment (as defined in the Indenture) in any other person or entity); (iii) limitation on transactions with affiliates; (iv) limitation on liens; (v) limitation on sales of assets; (vi) limitation on sale and leaseback transactions; (vii) limitation on conduct of business; (viii) limitation on dividends and other payment restrictions affecting subsidiaries; and (ix) limitation on consolidations, mergers and sales of substantially all of the assets of Coinmach Corporation. The events of default under the Indenture include provisions that are typical of senior unsecured debt financings. Upon the occurrence and continuance of certain events of default, the trustee or the holders of not less than 25% in aggregate principal amount of outstanding Senior Notes may declare all unpaid principal and accrued interest on all of the Senior Notes to be immediately due and payable. Upon the occurrence of a Change of Control (as defined in the Indenture), each holder of Senior Notes will have the right to require that the Company purchase all or a portion of such holder's Senior Notes pursuant to the offer described in the Indenture, at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase. Redemption of 12 3/4% Senior Notes due 2001 On February 18, 1997, Coinmach Corporation redeemed its outstanding 12 3/4% Senior Notes due 2001 at a redemption price of 106.375% of the principal amount thereof, together with accrued interest from January 15, 1997 to February 18, 1997, in an aggregate amount of approximately $5.4 million. New Credit Facility On January 8, 1997, the Company entered into the Credit Agreement with Bankers Trust Company, First Union National Bank of North Carolina, Lehman Commercial Paper, Inc. and other lending institutions named therein (collectively, the "Banks"), which provides for the New Credit Facility. The New Credit Facility replaced the Company's then existing credit facility. The New Credit Facility, as amended effective June 2, 1997, and prior to any principal installment payments, consists of a $70 million revolving credit facility and a $190 million term loan facility, which is comprised of a Tranche A term loan in the amount of $30.0 million, payable quarterly commencing March 1997, and a Tranche B term loan in the amount of $160.0 million, payable semi-annually commencing June 1997. The New Credit Facility also provides for up to $10 million of letter of credit financings and short term borrowings under a swing line facility of up to $5 million. At March 28, 1997, $130 million was outstanding under the Credit Agreement. Effective June 2, 1997, the Credit Agreement was amended to, among other things, increase the Tranche B portion of the term loan facility to $160.0 million. Subject to the terms and conditions of the Credit Agreement, the Company may, at its option, convert Base Rate Loans (as defined in the Credit Agreement) into Eurodollar Loans (as defined in the Credit Agreement). Interest on the Company's borrowings under the Credit Agreement is payable at a rate per annum no greater than the sum of the Applicable Base Rate Margin plus the Base Rate or the sum of the Applicable Eurodollar Margin plus the Eurodollar Rate (in each case, as defined in the Credit Agreement). Indebtedness under the Credit Agreement is secured by all of the Company's real and personal property. Coinmach Laundry has guaranteed the indebtedness under the Credit Agreement and pledged to Bankers Trust Company, as Collateral Agent, its interests in all of the issued and outstanding shares of capital stock of Coinmach Corporation. The Credit Agreement contains a number of restrictive covenants and agreements, including covenants with respect to limitations on (i) indebtedness; (ii) certain payments (in the form of the declaration or payment of 23 certain dividends or distributions on the capital stock of Coinmach Laundry or its subsidiaries or the purchase, redemption or other acquisition of any capital stock of Coinmach Laundry or its subsidiaries); (iii) voluntary prepayments of previously existing indebtedness; (iv) Investments (as defined in the Credit Agreement); (v) transactions with affiliates; (vi) liens; (vii) sales or purchases of assets; (viii) conduct of business; (ix) dividends and other payment restrictions affecting subsidiaries; (x) consolidations and mergers; (xi) capital expenditures; (xii) issuances of certain equity securities of the Company; and (xiii) creation of subsidiaries. The Credit Agreement also requires that the Company satisfy certain financial ratios, including a maximum leverage ratio and a minimum consolidated interest coverage ratio. The Credit Agreement contains certain events of default, including the following: (i) the failure of the Company to pay any of its obligations under the Credit Agreement when due; (ii) certain failures by the Company to pay principal or interest on indebtedness or certain breaches or defaults by the Company in respect of certain indebtedness, in each case, after the expiration of any applicable grace periods; (iii) certain defaults by the Company in the performance or observance of the agreements or covenants under the Credit Agreement or related agreements, beyond any applicable cure periods; (iv) the falsity in any material respect of certain of the Company's representations or warranties under the Credit Agreement; (v) certain judgments against the Company; and (vi) certain events of bankruptcy or insolvency of the Company. OPERATING ACTIVITIES The Company's level of indebtedness will have several important effects on its future operations including, but not limited to, the following: (i) a significant portion of the Company's cash flow from operations will be required to pay interest on its indebtedness and will not be available for other purposes; (ii) the financial covenants contained in certain of the agreements governing the Company's indebtedness will require the Company to meet certain financial tests and will limit its ability to borrow additional funds or to dispose of assets; (iii) the Company's ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or general corporate purposes may be impaired; and (iv) the Company's ability to adapt to changes in the coin-operated laundry equipment services industry and to economic conditions in general could be limited. The Company anticipates that it will continue to utilize cash flows from operations to finance its capital expenditures and working capital needs, including interest payments on its outstanding indebtedness. Capital expenditures for the 1997 Fiscal Year were approximately $213.0 million (including approximately $16.2 million of promissory notes). Of such amount, the Company spent approximately $171.5 million (including approximately $16.2 million of promissory notes) in acquisition and related transaction costs, including the Kwik Wash Acquisition and the Allied Acquisition, and approximately $12.4 million related to a net increase in the installed base of machines. The balance was used to maintain the existing base and for general corporate purposes. The full impact on revenues and EBITDA generated from capital expended on acquisitions and the net increase in the installed base are not expected to be reflected in the Company's financial results until subsequent reporting periods, depending on the timing of the capital expended. The Company anticipates that capital expenditures, excluding acquisitions and internal growth, will be approximately $38.0 million for the twelve months ending March 31, 1998. While the Company estimates that it will generate sufficient cash flows from operations to finance anticipated capital expenditures, there can be no assurances that it will be able to do so. The Company's working capital requirements are, and are expected to continue to be, minimal since a significant portion of the Company's operating expenses are not paid until after cash is collected from the installed machines. The Company is required to make monthly cash interest payments pursuant to the Credit Agreement and semi-annual cash interest payments on the Senior Notes. Management believes that the Company's future operating activities will generate sufficient cash flow to repay borrowings under the Senior Notes, the New Credit Facility, the Kwik Wash Note and the AW Notes and to permit any necessary refinancings thereof. An inability of the Company, however, to comply with covenants or other conditions contained in the Indenture or in the Credit Agreement could result in an acceleration of all 24 amounts due under the Senior Notes and the New Credit Facility. If the Company is unable to meet its debt service obligations, it could be required to take certain actions such as reducing or delaying capital expenditures, selling assets, refinancing or restructuring its indebtedness, selling additional equity capital or other actions. There is no assurance that any of such actions could be effected on commercially reasonable terms or on terms permitted under the Credit Agreement or the Indenture. CERTAIN ACCOUNTING TREATMENT The Company's depreciation and amortization expenses, aggregating approximately $46.3 million for the 1997 Fiscal Year, have the effect of reducing net income but not operating cash flow. In accordance with generally accepted accounting principles, a significant amount of the purchase price of businesses acquired by the Company is allocated to "contract rights", which costs are amortized over periods of up to 15 years. Although such accounting treatment can have a favorable effect on operating cash flow by reducing taxes, such treatment also reduces net income. INFLATION AND SEASONALITY In general, the Company's laundry operating expenses and general and administrative expenses are affected by inflation, and the effects of inflation may be experienced by the Company in future periods. Management believes that such effects have not been nor will be material to the Company. The Company's business generally is not seasonal. FORWARD LOOKING STATEMENTS This report and other reports and statements filed by the Company from time to time with the Securities and Exchange Commission (collectively, "SEC Filings") contain or may contain certain forward looking statements and information that are based on the beliefs of the Company's management as well as estimates and assumptions made by, and information currently available to, the Company's management. When used in SEC Filings, the words "anticipate," "believe," "estimate," "expect," "future," "intend," "plan" and similar expressions, as they relate to the Company or the Company's management, identify forward looking statements. Such statements reflect the current views of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions relating to the Company's operations and results of operations, competitive factors, shifts in market demand, and other risks and uncertainties, including, in addition to any uncertainties specifically identified in the text surrounding such statements, uncertainties with respect to changes or developments in social, economic, business, industry, market, legal and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including the Company's stockholders, customers, suppliers, competitors, legislative, regulatory, judicial and other governmental authorities. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may vary significantly from those anticipated, believed, estimated, expected, intended or planned. ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Audited consolidated financial statements and the notes thereto are contained in pages F-1 through F-22 hereto. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. There were no disagreements with accountants on accounting and financial disclosure. A change in accountants, effective on May 30, 1995, was reported on the Company's Form 8-K, dated June 2, 1995. 25 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT. Information concerning the directors and executive officers of the Company is set forth in the Proxy Statement to be provided to stockholders in connection with the Company's 1997 Annual Meeting of Stockholders (the "Proxy Statement") under the caption "Security Ownership of the Company-Section 16(a) Beneficial Ownership Reporting Compliance" and each of the headings "Election of Directors" and "Executive Officers," which information is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION. Information concerning executive compensation is set forth in the Proxy Statement under the heading "Executive Compensation," which information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Information concerning security ownership of certain beneficial owners and management is set forth in the Proxy Statement under the heading "Security Ownership of the Company," which information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information concerning certain relationships and related transactions is set forth in the Proxy Statement under the heading "Certain Relationships and Related Transactions," which information is incorporated herein by reference. 26 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) The following documents are filed as a part of this report: (1) Financial Statements-see Index to Financial Statements appearing on Page F-1. (2) Exhibits:
EXHIBIT NUMBER/1/ DESCRIPTION --------- ----------- 3.1 Third Amended and Restated Certificate of Incorporation of Coinmach Laundry (incorporated by reference from exhibit 3.1 to Coinmach Laundry's Form 10-Q for the quarterly period ended September 27, 1996, file number 1-11907) 3.2 Certificate of Powers, Designations, Preferences and Relative Participating, Optional and other Special Rights of Series A Preferred Stock and Qualifications, Limitations and Restrictions Thereof (incorporated by reference from exhibit 3.2 to Coinmach Laundry's Form 10-Q for the quarterly period ended June 28, 1996, file number 1-11907) 3.3 Third Amended and Restated Bylaws of Coinmach Laundry (incorporated by reference from exhibit 3.1 to Coinmach Laundry's Form 10-Q for the quarterly period ended September 27, 1996, file number 1-11907) 10.1 Indenture, dated as of November 30, 1995, by and between Coinmach Corporation ("Coinmach"), as Issuer, and Fleet National Bank of Connecticut (formerly, Shawmut Bank Connecticut, National Association), as Trustee (incorporated by reference from exhibit number 4.1 to Coinmach's Registration Statement on Form S-1, file number 333-00620) 10.2 First Supplemental Indenture, dated as of December 11, 1995, by and between Coinmach, as Issuer, and Fleet National Bank of Connecticut (formerly, Shawmut Bank Connecticut, National Association), as Trustee (incorporated by reference from exhibit number 4.2 to Coinmach's Registration Statement on Form S-1, file number 333- 00620) 10.3 First Supplemental Indenture, dated as of November 28, 1995, by and between Solon Automated Services, Inc. ("Solon") and U.S. Trust Company of New York, as Trustee (incorporated by reference from exhibit number 4.3 to Coinmach's Registration Statement on Form S-1, file number 333-00620) 10.4 Registration Rights Agreement, dated as of November 30, 1995, by and between Coinmach and Lazard Freres & Co. LLC ("Lazard"), as Initial Purchaser (incorporated by reference from exhibit number 4.6 to Coinmach's Registration Statement on Form S-1, file number 333- 00620) 10.5 Addendum to Registration Rights Agreement, dated December 14, 1995, by and between Coinmach and Lazard, as Initial Purchaser (incorporated by reference from exhibit number 4.8 to Coinmach's Registration Statement on Form S-1, file number 333-00620) 10.6 Employment Agreement, dated as of August 4, 1995, by and between Solon and John E. Denson (incorporated by reference from exhibit number 10.13 to Coinmach's Registration Statement on Form S-1, file number 333-00620) 10.7 Employment Agreement, dated as of July 1, 1995, by and between Solon, Michael E. Stanky and GTCR Fund IV (incorporated by reference from exhibit number 10.14 to Coinmach's Registration Statement on Form S-1, file number 333-00620) 10.8 Equity Purchase Agreement, dated as of July 26, 1995, between GTCR Fund IV and SAS Acquisitions Inc. ("SAS"), subsequently amended by the Omnibus Agreement (as hereinafter defined) (incorporated by reference from exhibit number 10.21 to Coinmach Laundry's Registration Statement on Form S-1, file number 333-03587) 10.9 Investor Purchase Agreement, dated as of July 26, 1995, among SAS, GTCR Fund IV, Heller Financial, Inc. ("Heller"), Jackson National Life Insurance Company, Jackson National Life Insurance Company of Michigan, James N. Chapman, Michael E. Marrus, Harvard, MCS Capital, Inc., Mitchell Blatt, and Michael Stanky, subsequently amended by the Omnibus Agreement (as hereinafter defined) (incorporated by reference from exhibit number 10.22 to Coinmach Laundry's Registration Statement on Form S-1, file number 333-03587)
- -------- /1/Exhibit numbers are referenced to Item 601 of Regulation S-K under the Securities Exchange Act of 1934, as amended. 27
EXHIBIT NUMBER/1/ DESCRIPTION --------- ----------- 10.10 Executive Stock Agreement, dated as of July 26, 1995, among SAS, GTCR Fund IV, MCS Capital, Inc., Mitchell Blatt, Robert M. Doyle and Michael Stanky (with spousal consents), subsequently amended by the Omnibus Agreement (as hereinafter defined) (incorporated by reference from exhibit number 10.23 to Coinmach Laundry's Registration Statement on Form S-1, file number 333-03587) 10.11 Stockholders Agreement, dated as of July 26, 1995, among SAS and GTCR Fund IV, Robert M. Doyle, Heller, Jackson National Life Insurance Company, Jackson National Life Insurance Company of Michigan, James N. Chapman, Michael E. Marrus, Harvard, MCS Capital, Inc., Mitchell Blatt, and Michael Stanky (collectively, the "SAS Stockholders") (incorporated by reference from exhibit number 10.24 to Coinmach Laundry's Registration Statement on Form S-1, file number 333-03587) 10.12 Registration Agreement, dated as of July 26, 1995, among SAS and each of the SAS Stockholders, subsequently amended by the Omnibus Agreement (as hereinafter defined) (incorporated by reference from exhibit number 10.25 to Coinmach Laundry's Registration Statement on Form S-1, file number 333-03587) 10.13 Management and Consulting Services Agreement, dated as of July 26, 1995, between SAS and GTCR IV, L.P. (incorporated by reference from exhibit number 10.26 to Coinmach Laundry's Registration Statement on Form S-1, file number 333-03587) 10.14 Supply Agreement, dated July 26, 1995, by and among SAS, Solon and Speed Queen Company (incorporated by reference from exhibit number 10.16 to Coinmach's Registration Statement on Form S-1, file number 333-00620) 10.15 Dealer Manager Agreement, dated October 20, 1995, by and among TCC, Solon, Lazard and Fieldstone Private Capital Group, L.P. (incorporated by reference from exhibit number 10.17 to Coinmach's Registration Statement on Form S-1, file number 333-00620) 10.16 Purchase Agreement, dated November 15, 1995, by and among TCC, Solon and Lazard (incorporated by reference from exhibit number 10.18 to Coinmach's Registration Statement on Form S-1, file number 333-00620) 10.17 Addendum to Purchase Agreement, dated December 11, 1995, by and between Coinmach and Lazard (incorporated by reference from exhibit number 10.19 to Coinmach's Registration Statement on Form S-1, file number 333-00620) 10.18 Omnibus Agreement, dated as of November 30, 1995, among SAS, Solon, TCC and each of the other parties executing a signature page thereto (the "Omnibus Agreement") (incorporated by reference from exhibit number 10.20 to Coinmach's Registration Statement on Form S-1, file number 333-00620) 10.19 Credit Agreement, dated as of November 30, 1995, by and between Coinmach, as Borrower and Heller Financial, Inc. ("Heller") (incorporated by reference from exhibit number 10.21 to Coinmach's Registration Statement on Form S-1, file number 333-00620) 10.20 First Amendment to Credit Agreement, dated as of December 9, 1995, by and among Coinmach, Heller, SAS, and Super Laundry Equipment Corp. ("SLEC") (incorporated by reference from exhibit number 10.22 to Coinmach's Registration Statement on Form S-1, file number 333-00620) 10.21 Form of Note, dated November 30, 1995, of Coinmach in favor of Heller (included as an exhibit to Exhibit 10.26 hereto) (incorporated by reference from exhibit number 10.23 to Coinmach's Registration Statement on Form S-1, file number 333-00620) 10.22 Pledge Agreement, dated as of November 30, 1995, by and between Coinmach and Heller (incorporated by reference from exhibit number 10.24 to Coinmach's Registration Statement on Form S-1, file number 333-00620) 10.23 Guaranty, dated as of January 31, 1995, by Super Laundry Management Corp. in favor of Heller (incorporated by reference from exhibit number 10.25 to Coinmach's Registration Statement on Form S-1, file number 333-00620)
- -------- /1/Exhibit numbers are referenced to Item 601 of Regulation S-K under the Securities Exchange Act of 1934, as amended. 28
EXHIBIT NUMBER/1/ DESCRIPTION --------- ----------- 10.24 Guaranty, dated as of November 30, 1995, by SLEC in favor of Heller (incorporated by reference from exhibit number 10.26 to Coinmach's Registration Statement on Form S-1, file number 333-00620) 10.25 Security Agreement, dated as of November 30, 1995, by and between Coinmach and Heller (incorporated by reference from exhibit number 10.27 to Coinmach's Registration Statement on Form S-1, file number 333-00620) 10.26 Security Agreement, dated as of November 30, 1995, by and between SLEC and Heller (incorporated by reference from exhibit number 10.28 to Coinmach's Registration Statement on Form S-1, file number 333- 00620) 10.27 Collateral Assignment of Leases of Coinmach to Heller, dated as of November 30, 1995 (incorporated by reference from exhibit number 10.29 to Coinmach's Registration Statement on Form S-1, file number 333-00620) 10.28 Collateral Assignment of Leases of SLEC to Heller, dated as of November 30, 1995 (incorporated by reference from exhibit number 10.30 to Coinmach's Registration Statement on Form S-1, file number 333-00620) 10.29 Amended and Restated Management and Consulting Services Agreement, dated as of November 30, 1995, by and between GTCR Fund IV and SAS (incorporated by reference from exhibit number 10.42 to Coinmach Laundry's Registration Statement on Form S-1, file number 333-03587) 10.30 Amended and Restated Stockholders Agreement, dated as of November 30, 1995, among SAS and the signatories thereto (incorporated by reference from exhibit number 10.43 to Coinmach Laundry's Registration Statement on Form S-1, file number 333-03587) 10.31 Second Amended and Restated 1996 Employee Stock Option Plan of Coinmach Laundry (incorporated by reference from exhibit 10.1 to Coinmach Laundry's Form 10-Q for the quarterly period ended September 27, 1996 file number 1-11907) 10.32 Reclassification Agreement among Coinmach Laundry and the signatories thereto, dated July 17, 1996 (incorporated by reference from exhibit 10.45 to Coinmach Laundry's Form 10-Q for the quarterly period ended June 28, 1996, file number 1-11907) 10.33 Option Agreement between Coinmach Laundry and MCS Capital, Inc., dated July 23, 1996 (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) 10.34 Option Agreement between Coinmach Laundry and Ronald S. Brody, dated July 23, 1996 (incorporated by reference from exhibit 10.47 to Coinmach Laundry's Form 10-Q for the quarterly period ended June 28, 1996, file number 1-11907) 10.35 Option Agreement between Coinmach Laundry and James N. Chapman, dated July 23, 1996 (incorporated by reference from exhibit 10.48 to Coinmach Laundry's Form 10-Q for the quarterly period ended June 28, 1996, file number 1-11907) 10.36 Option Agreement between Coinmach Laundry and Robert M. Doyle, dated July 23, 1996 (incorporated by reference from exhibit 10.49 to Coinmach Laundry's Form 10-Q for the quarterly period ended June 28, 1996, file number 1-11907) 10.37 Option Agreement between Coinmach Laundry and Michael E. Stanky, dated July 23, 1996 (incorporated by reference from exhibit 10.50 to Coinmach Laundry's Form 10-Q for the quarterly period ended June 28, 1996, file number 1-11907) 10.38 Option Agreement between Coinmach Laundry and David A. Siegel, dated July 23, 1996 (incorporated by reference from exhibit 10.51 to Coinmach Laundry's Form 10-Q for the quarterly period ended June 28, 1996, file number 1-11907) 10.39 Option Agreement between Coinmach Laundry and R. Daniel Osborne, dated July 23, 1996 (incorporated by reference from exhibit 10.52 to Coinmach Laundry's Form 10-Q for the quarterly period ended June 28, 1996, file number 1-11907)
- -------- /1/Exhibit numbers are referenced to Item 601 of Regulation S-K under the Securities Exchange Act of 1934, as amended. 29
EXHIBIT NUMBER/1/ DESCRIPTION --------- ----------- 10.40 Option Agreement between Coinmach Laundry and John E. Denson, dated July 23, 1996 (incorporated by reference from exhibit 10.53 to Coinmach Laundry's Form 10-Q for the quarterly period ended June 28, 1996, file number 1-11907) 10.41 Form of Option Agreement Relating to the Second Amended and Restated 1996 Employee Stock Option Plan (incorporated by reference from exhibit 10.2 to Coinmach Laundry's Form 10-Q for the quarterly period ended September 27, 1996, file number 1-11907) 10.42 Omnibus Amendment to Option Agreements, dated as of September 17, 1996, by and among Coinmach Laundry, MCS Capital, Inc., Ronald S. Brody, James N. Chapman, Robert M. Doyle, Michael E. Stanky, David E. Siegel, R. Daniel Osborne, John E. Denson, James McDonnell, Russell Harrison, Charles Prato and Michael E. Marrus (incorporated by reference from exhibit 10.3 to Coinmach Laundry's Form 10-Q for the quarterly period ended September 27, 1996, file number 1-11907) 10.43 Option Agreement, dated as of September 17, 1996, by and between Coinmach Laundry and Arthur B. Laffer (incorporated by reference from exhibit 10.4 to Coinmach Laundry's Form 10-Q for the quarterly period ended September 27, 1996, file number 1-11907) 10.44 Option Agreement, dated as of September 17, 1996, by and among Coinmach Laundry and Stephen G. Cerri (incorporated by reference from exhibit 10.5 to Coinmach Laundry's Form 10-Q for the quarterly period ended September 27, 1996, file number 1-11907) 10.45 Waiver of Registration Rights, dated May 8, 1996 among Coinmach Laundry and the signatories thereto (incorporated by reference from exhibit number 10.54 to Coinmach Laundry's Registration Statement on Form S-1, file number 333-03587) 10.46 Voting Agreement among Coinmach Laundry and the signatories thereto, dated July 23, 1996 (incorporated by reference from exhibit 10.55 to Coinmach Laundry's Form 10-Q for the quarterly period ended June 28, 1996, file number 1-11907) 10.47 Termination Agreement, dated as of July 23, 1996, by and between GTCR IV, L.P. and Coinmach Laundry (incorporated by reference from exhibit 10.56 to Coinmach Laundry's Form 10-Q for the quarterly period ended June 28, 1996, file number 1-11907) 10.48 Commitment Letter, dated November 22, 1996, from Bankers Trust Company ("Bankers Trust"), First Union Bank of North Carolina ("First Union") and Lehman Commercial Paper, Inc. ("Lehman"), addressed to Coinmach Laundry (incorporated by reference from exhibit 10.1 to Coinmach Laundry's Form 10-Q for the quarterly period ended December 27, 1996, file number 1-11907) 10.49 Stock Purchase Agreement, dated November 25, 1996, by and among Tamara Lynn Ford, Robert Kyle Ford, Traci Lea Ford, Tucker F. Enthoven, Richard F. Enthoven, Richard Franklin Ford, Jr., Trustee u/d/t February 4, 1994, KWL, Inc., Kwik-Wash Laundries, Inc., Kwik Wash Laundries, L.P. and Coinmach (the "Stock Purchase Agreement") (incorporated by reference from exhibit 10.2 to Coinmach Laundry's Form 10-Q for the quarterly period ended December 27, 1996, file number 1-11907) 10.50 First Amendment to Stock Purchase Agreement, dated as of January 8, 1997 (incorporated by reference from exhibit 10.3 to Coinmach Laundry's Form 10-Q for the quarterly period ended December 27, 1996, file number 1-11907) 10.51 Registration Rights Agreement, dated as of March 14, 1997, between Coinmach and Atlanta Washer & Dryer Leasing, Inc. 10.52 Amended and Restated Employment Agreement, dated as of June 1, 1996, by and between Coinmach and John E. Denson (incorporated by reference from exhibit 10.56 to Coinmach Laundry's Registration Statement on Form S-1, file number 333-03587) 10.53 Promissory Note, dated February 11, 1997, of Stephen R. Kerrigan in favor of Coinmach 10.54 Underwriting Agreement, dated July 17, 1996, by and among Coinmach Laundry and Lehman Brothers, Inc., Dillon, Read & Co., Inc., Lazard and Fieldstone FPCG Services, L.P. (collectively, the "Representatives")
- -------- /1/Exhibit numbers are referenced to Item 601 of Regulation S-K under the Securities Exchange Act of 1934, as amended. 30
EXHIBIT NUMBER/1/ DESCRIPTION --------- ----------- 10.55 Lock-Up Agreement, dated July 23, 1996, among Coinmach Laundry and the Representatives 10.56 Promissory Note, dated January 8, 1997, of Coinmach Laundry in favor of Richard F. Enthoven, as agent for Tamara Lynn Ford, Richard Kyle Ford, Traci Lea Ford, Tucker F. Enthoven, Richard F. Enthoven, and Richard Franklin Ford, Jr., Trustee u/d/t February 4, 1994 10.57 Tax Cooperation Agreement, dated as of January 8, 1997, by and among Kwik Wash Laundries, L.P., KWL, Inc., Kwik-Wash Laundries, Inc., Coinmach and the Sellers 10.58 Consulting Services Agreement, dated as of January 8, 1997, by and between Richard F. Enthoven and Coinmach 10.59 Credit Agreement dated January 8, 1997, among Coinmach, the Lending Institutions listed therein, Bankers Trust Company ("Bankers Trust"), First Union National Bank of North Carolina ("First Union") and Lehman Commercial Paper, Inc. ("Lehman") 10.60 Tranche A Term Notes, each dated January 8, 1997, by Coinmach in favor of each of Bankers Trust, First Union, Lehman, Heller, The Nippon Credit Bank, Ltd., Credit Lyonnais New York Branch, Bank of Scotland and Bank of Boston 10.61 Tranche B Term Notes, each dated January 8, 1997, by Coinmach in favor of each of Bankers Trust, First Union, Lehman, Fleet National Bank, Heller, The Nippon Credit Bank, Ltd., Bank of Scotland, Bank of Boston, Massachusetts Mutual Life Insurance Company, Pilgrim America Prime Rate Trust, Prime Income Trust, The Ing Capital Senior Secured High Income Fund, L.P., and Merrill Lynch Senior Floating Rate Fund, Inc. 10.62 Revolving Notes, each dated January 8, 1997, by Coinmach in favor of each of Bank of Boston, Bankers Trust, First Union, Lehman, Fleet National Bank, Heller, The Nippon Credit Bank, Ltd., Credit Lyonnais New York Branch, and Bank of Scotland 10.63 Swing Line Note, dated January 8, 1997, in the principal amount of $5,000,000 in favor of Bankers Trust 10.64 Holders Pledge Agreement, dated January 8, 1997, made by Coinmach Laundry to Bankers Trust and Richard F. Enthoven, as Seller Agent 10.65 Borrower Pledge Agreement, dated January 8, 1997, made by Coinmach to Bankers Trust 10.66 Security Agreement, dated January 8, 1997, between Coinmach and Bankers Trust and the Assignment of Security Interest in United States Trademarks and Patents 10.67 Collateral Assignment of Leases, dated January 8, 1997, by Coinmach in favor of Bankers Trust 10.68 Collateral Assignment of Location Leases, dated January 8, 1997, by Coinmach in favor of Bankers Trust 10.69 Amendment to Investor Purchase Agreements, dated January 8, 1997, by and among Coinmach Laundry, GTCR Fund IV, Coinmach, Heller Jackson National Life Insurance Company, individually and as successor by merger with Jackson National Life Insurance Company of Michigan (collectively, "JNL"), Harvard, James N. Chapman and Michael E. Marrus 10.70 Amendment to Investor Purchase Agreement, dated January 8, 1997, by and among Coinmach Laundry, GTCR Fund IV, Heller, JNL, Harvard, MCS Capital, Inc., James N. Chapman, Michael E. Marrus, Mitchell Blatt and Michael Stanky 10.71 Promissory Note, dated March 24, 1997, of John E. Denson in favor of Coinmach 10.72 Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, made by Coinmach to Bankers Trust, as executed on March 27, 1997 and recorded with the County Clerk of Dallas County, Texas on April 7, 1997 11.1 Pro Forma Computation of Loss Per Common Share 16.1 Letter, dated June 29, 1995, from Arthur Andersen LLP to the Securities and Exchange Commission regarding change in certifying accountants (incorporated by reference from exhibit number 16.1 to Coinmach's Registration Statement on Form S-1, file number 333- 00620) 21.1 Subsidiaries of Coinmach Laundry 27.1 Financial Data Schedule
- -------- /1/Exhibit numbers are referenced to Item 601 of Regulation S-K under the Securities Exchange Act of 1934, as amended. 31 (b) Reports on Form 8-K: Registrant filed a report on Form 8-K, dated January 8, 1997, as amended by a Form 8-K/A and Form 8-K/A Amendment No. 2, reporting the Kwik Wash Acquisition and New Credit Facility. Such Form 8-K, as amended, also included the following financial statements: 1. Financial Statements. The audited combined financial statements of Kwik Wash Laundries, Inc. and KWL, Inc. for the years ended December 31, 1996, 1995 and 1994, together with auditors' report thereon. 2. Pro forma financial information. The unaudited pro forma combined financial statements of Coinmach Laundry Corporation for the nine-month period ended December 27, 1996 and for the year ended March 29, 1996. 32 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, THE COMPANY HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ROSLYN, STATE OF NEW YORK ON JUNE 13, 1997. COINMACH LAUNDRY CORPORATION /s/ STEPHEN R. KERRIGAN By: _________________________________ Stephen R. Kerrigan Chief Executive Officer PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED. /s/ STEPHEN R. KERRIGAN Date: June 13, By: ____________________________ 1997 Stephen R. Kerrigan Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer) /s/ MITCHELL BLATT Date: June 13, By: ____________________________ 1997 Mitchell Blatt Director, President and Chief Operating Officer Date: June 13, /s/ ROBERT M. DOYLE 1997 By: ____________________________ Robert M. Doyle Chief Financial Officer, Senior Vice President, Secretary and Treasurer (Principal Financial and Accounting Officer) /s/ JOHN E. DENSON Date: June 13, By: ____________________________ 1997 John E. Denson Senior Vice President-Corporate Development /s/ MICHAEL STANKY Date: June 13, By: ____________________________ 1997 Michael Stanky Senior Vice President 33 /s/ DAVID A. DONNINI Date: June 13, By: ____________________________ 1997 David A. Donnini Director Date: June 13, /s/ JAMES N. CHAPMAN 1997 By: ____________________________ James N. Chapman Director /s/ BRUCE V. RAUNER Date: June 13, By: ____________________________ 1997 Bruce V. Rauner Director Date: June 13, /s/ STEPHEN G. CERRI 1997 By: ____________________________ Stephen G. Cerri Director /s/ ARTHUR B. LAFFER Date: June 13, By: ____________________________ 1997 Arthur B. Laffer Director 34 COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE NUMBER ----------- Independent Auditors' Report...................................... F-2 Consolidated Balance Sheets--As of Years Ended March 28, 1997 and March 29, 1996.................................................... F-3 For the Year Ended March 28, 1997, the Six-Month Transition Period Ended March 29, 1996 and the Period from April 5, 1995 to September 29, 1995: Consolidated Statements of Operations........................... F-4 Consolidated Statements of Stockholders' Equity (Deficit)....... F-5 Consolidated Statements of Cash Flows........................... F-7 Notes to Consolidated Financial Statements........................ F-8
F-1 REPORT OF INDEPENDENT AUDITORS To the Board of Directors of Coinmach Laundry Corporation We have audited the accompanying consolidated balance sheets of Coinmach Laundry Corporation and Subsidiaries (the "Company") as of March 28, 1997 and March 29, 1996, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for the year ended March 28, 1997, the six-month transition period ended March 29, 1996 and the period from April 5, 1995 to September 29, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Coinmach Laundry Corporation and Subsidiaries at March 28, 1997 and March 29, 1996, and the consolidated results of their operations and their cash flows for the year ended March 28, 1997, the six-month transition period ended March 29, 1996, and for the period from April 5, 1995 to September 29, 1995, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Melville, New York May 13, 1997, except for Note 5b., as to which the date is June 2, 1997 F-2 COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS OF DOLLARS)
MARCH 28, MARCH 29, ASSETS 1997 1996 - ------ --------- --------- Cash and cash equivalents.................................. $ 14,729 $ 19,858 Receivables, less allowance of $555 and $454............... 6,894 5,260 Inventories................................................ 7,959 4,443 Prepaid expenses........................................... 3,170 2,641 Advance rental payments.................................... 38,472 20,320 Property and equipment: Laundry equipment and fixtures........................... 135,656 89,394 Land, building and improvements.......................... 14,266 10,965 Trucks and other vehicles................................ 4,211 1,849 -------- -------- 154,133 102,208 Less accumulated depreciation............................ (42,017) (19,509) -------- -------- Net property and equipment................................. 112,116 82,699 Contract rights, net of accumulated amortization of $19,815 and $8,925................................................ 180,557 59,745 Goodwill, net of accumulated amortization of $5,574 and $2,386.................................................... 95,771 44,071 Other assets............................................... 13,253 10,111 -------- -------- Total assets............................................... $472,921 $249,148 ======== ======== MARCH 28, MARCH 29, LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) 1997 1996 - ---------------------------------------------- --------- --------- Accounts payable........................................... $ 8,941 $ 6,085 Accrued commissions........................................ 10,573 7,380 Accrued interest........................................... 9,712 7,745 Other accrued expenses..................................... 8,996 7,557 Deferred income taxes...................................... 65,650 18,924 11 3/4% senior notes....................................... 196,655 196,655 Credit facility............................................ 130,000 -- 9 7/8% promissory note..................................... 15,000 -- 12 3/4% senior notes....................................... -- 5,000 Other long-term debt....................................... 3,831 1,110 Stockholders' equity (deficit): Common stock............................................. 105 62 Capital in excess of par value........................... 53,160 17,841 Accumulated deficit...................................... (29,263) (18,719) -------- -------- 24,002 (816) Receivables from stockholders............................ (439) (492) -------- -------- Total stockholders' equity (deficit)....................... 23,563 (1,308) -------- -------- Total liabilities and stockholders' equity (deficit)....... $472,921 $249,148 ======== ========
See accompanying notes. F-3 COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
SIX-MONTH YEAR TRANSITION APRIL 5, 1995 ENDED PERIOD ENDED TO MARCH 28, MARCH 29, SEPTEMBER 29, 1997 1996 1995 --------- ------------ ------------- Revenues................................ $206,852 $ 89,070 $89,719 Costs and expenses: Laundry operating expenses............ 139,446 60,536 62,905 General and administrative............ 4,613 1,844 2,351 Depreciation and amortization......... 46,316 18,212 18,423 Stock based compensation charge....... 2,152 -- -- Restructuring expenses................ -- -- 2,200 -------- -------- ------- 192,527 80,592 85,879 -------- -------- ------- Operating income........................ 14,325 8,478 3,840 Interest expense, net................... 26,859 11,999 11,818 -------- -------- ------- Loss before income taxes and extraordi- nary items............................. (12,534) (3,521) (7,978) -------- -------- ------- Provision (benefit) for income taxes: Currently payable..................... 200 50 420 Deferred.............................. (2,507) (1,048) (2,282) -------- -------- ------- (2,307) (998) (1,862) -------- -------- ------- Loss before extraordinary items......... (10,227) (2,523) (6,116) Extraordinary items, net of income tax benefit of $206 for the year ended March 28, 1997 and $5,305 for the six- month transition period ended March 29, 1996................................... (296) (8,925) -- -------- -------- ------- Net loss................................ $(10,523) $(11,448) $(6,116) ======== ======== ======= Loss per share: Before extraordinary items............ $ (1.11) Extraordinary items................... (.03) -------- Net loss per share...................... $ (1.14) ======== Pro forma loss per share: Before extraordinary items............ $ (.32) $ (.79) Extraordinary items................... (1.15) -- -------- ------- Pro forma net loss per share............ $ (1.47) $ (.79) ======== =======
See accompanying notes. F-4 COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (IN THOUSANDS OF DOLLARS, EXCEPT PAR VALUE AND SHARES)
BALANCE BALANCE BALANCE APRIL 5, NET SEPTEMBER 29, RECAPITALIZATION MARCH 29, 1995 LOSS 1995 NET LOSS OF COMMON STOCK 1996 -------- ------- ------------- -------- ---------------- --------- Voting Class A common stock, par value $.01: Authorized shares-- 15,000,000 issued shares, end of period--0, 0 and 10,004,278............ $ -- $ -- $ -- $ -- $ -- $ -- Non-voting Class B common stock, par value $.01: Authorized shares-- 1,000,000 issued shares, end of period--0, 0 and 480,648............... -- -- -- -- -- -- Class A common stock, par value $.01: Authorized shares-- 1,959,021 issued shares, end of period--1,959,021, 1,783,584 and 0....... 19 -- 19 -- (1) 18 Class B common stock, par value $.01: Authorized shares-- 345,710 issued shares, end of each period-- 265,044, 265,044 and 0..................... 3 -- 3 -- -- 3 Class C common stock, par value $.01: Authorized shares-- 305,212 issued shares, end of period--0, 305,212 and 0......... -- -- -- -- 3 3 Class D common stock, par value $.01: Authorized shares-- 305,212 issued shares, end of each period--0. -- -- -- -- -- -- Class E common stock, par value $.01: Authorized shares-- 175,436 issued shares, end of period--0, 175,436 and 0................. -- -- -- -- 2 2 Class F common stock, par value $.01: Authorized shares-- 3,086,045 issued shares, end of period--0, 3,086,045 and 0................. -- -- -- -- 30 30 Class G common stock, par value $.01: Authorized shares-- 618,428 issued shares, end of period--0, 578,509 and 0................. -- -- -- -- 6 6 Series A Preferred stock, par value $.01: 10,000 authorized, issued shares, end of period-- 0....................... -- -- -- -- -- -- Capital in excess of par value................... 17,881 -- 17,881 -- (40) 17,841 Accumulated deficit...... (1,155) (6,116) (7,271) (11,448) -- (18,719) ------- ------- ------- -------- ---- -------- 16,748 (6,116) 10,632 (11,448) -- (816) Receivables from stockholders............ (492) -- (492) -- -- (492) ------- ------- ------- -------- ---- -------- Total stockholders' equity (deficit)........ $16,256 $(6,116) $10,140 $(11,448) $ -- $(1,308) ======= ======= ======= ======== ==== ========
See accompanying notes. F-5 COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)--(CONTINUED) (IN THOUSANDS OF DOLLARS, EXCEPT PAR VALUE AND SHARES)
BALANCE MARCH 29, ISSUANCE REDEMPTION ISSUANCE NET 1996, OF OF OF ACTIVITY BALANCE BROUGHT RECLASSIFICATION PREFERRED PREFERRED COMMON STOCK STOCK BASED IN LOANS TO MARCH 28, FORWARD NET LOSS OF COMMON STOCK STOCK STOCK STOCK DIVIDEND COMPENSATION STOCKHOLDERS 1997 --------- -------- ---------------- --------- ---------- -------- -------- ------------ ------------ --------- Voting Class A common stock, par value $.01: Authorized shares-- 15,000,000 issued shares, end of period-- 0, 0 and 10,004,278...... $ -- $ -- $57 $ -- $ -- $ 43 $ -- $ -- $-- $ 100 Non-voting Class B common stock, par value $.01: Authorized shares-- 1,000,000 issued shares, end of period--0, 0 and 480,648......... -- -- 5 -- -- -- -- -- -- 5 Class A common stock, par value $.01: Authorized shares-- 1,959,021 issued shares, end of period-- 1,959,021, 1,783,584 and 0. 18 -- (18) -- -- -- -- -- -- -- Class B common stock, par value $.01: Authorized shares--345,710 issued shares, end of each period--265,044, 265,044 and 0... 3 -- (3) -- -- -- -- -- -- -- Class C common stock, par value $.01: Authorized shares--305,212 issued shares, end of period-- 0, 305,212 and 0............... 3 -- (3) -- -- -- -- -- -- -- Class D common stock, par value $.01: Authorized shares--305,212 issued shares, end of each period--0....... -- -- -- -- -- -- -- -- -- -- Class E common stock, par value $.01: Authorized shares--175,436 issued shares, end of period-- 0, 175,436 and 0............... 2 -- (2) -- -- -- -- -- -- -- Class F common stock, par value $.01: Authorized shares-- 3,086,045 issued shares, end of period--0, 3,086,045 and 0. 30 -- (30) -- -- -- -- -- -- -- Class G common stock, par value $.01: Authorized shares--618,428 issued shares, end of period-- 0, 578,509 and 0............... 6 -- (6) -- -- -- -- -- -- -- Series A Preferred stock, par value $.01: 10,000 authorized, issued shares, end of period-- 0............... -- -- -- 19,207 (19,207) -- -- -- -- -- Capital in excess of par value..... 17,841 -- -- (19,207) -- 53,764 (398) 1,160 -- 53,160 Accumulated deficit.......... (18,719) (10,523) -- -- -- -- (21) -- -- (29,263) ------- -------- --- ------- -------- ------- ----- ------ --- ------- (816) (10,523) -- -- (19,207) 53,807 (419) 1,160 -- 24,002 Receivables from stockholders..... (492) -- -- -- -- -- -- -- 53 (439) ------- -------- --- ------- -------- ------- ----- ------ --- ------- Total stockholders' equity (deficit). $(1,308) $(10,523) $-- $ -- $(19,207) $53,807 $(419) $1,160 $53 $23,563 ======= ======== === ======= ======== ======= ===== ====== === =======
See accompanying notes. F-6 COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS OF DOLLARS)
SIX-MONTH TRANSITION YEAR PERIOD APRIL 5, 1995 ENDED ENDED TO MARCH 28, MARCH 29, SEPTEMBER 29, 1997 1996 1995 --------- ---------- ------------- OPERATING ACTIVITIES Net loss................................... $ (10,523) $(11,448) $ (6,116) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization............. 46,316 18,212 18,423 Deferred income taxes..................... (2,507) (1,048) (2,000) Amortization of debt discount and deferred issue costs..................... 627 508 735 Stock based compensation.................. 2,152 -- -- Extraordinary charges for early extinguishment of debt, net of taxes..... 296 8,925 -- Increase or decrease in operating assets and liabilities, net of businesses acquired: (Increase) decrease in other assets..... (2,462) 24 (1,054) Increase in receivables, net............ (1,100) (1,489) (197) (Increase) decrease in inventories and prepaid expenses....................... (3,008) (1,100) 930 Increase (decrease) in accounts payable. 2,002 (6) (610) Increase (decrease) in accrued interest. 1,956 3,193 (25) Increase (decrease) in other accrued expenses, net.......................... 983 (3,434) 1,980 --------- -------- -------- Net cash provided by operating activities.. 34,732 12,337 12,066 --------- -------- -------- INVESTING ACTIVITIES Additions to property and equipment........ (29,779) (10,757) (9,550) Advance rental payments to location owners. (11,809) (3,462) (3,569) Additions to net assets related to acquisitions of businesses (net of promissory notes of $16,208 in 1997)...... (155,247) -- (11,925) Sales of property and equipment............ 137 57 5 --------- -------- -------- Net cash used in investing activities...... (196,698) (14,162) (25,039) --------- -------- -------- FINANCING ACTIVITIES Debt transactions: Proceeds from issuance of 11 3/4% senior notes.................................... -- 72,655 -- Proceeds from issuance of term loans from credit facility.......................... 130,000 -- -- Net (repayments) borrowings of bank and other borrowings......................... (325) (48,715) 6,126 Repayment of 12 3/4% senior notes......... (5,000) -- -- Principal payments on capitalized lease obligations.............................. (1,007) (262) (143) Deferred debt issuance costs.............. (178) (5,397) -- Debt extinguishment costs................. (319) (6,909) -- Equity transactions: Proceeds from public offering of common stock.................................... 52,894 -- -- Redemption of preferred stock............. (19,207) -- -- Dividend paid--preferred stock............ (21) -- -- Loans to stockholders..................... -- -- (154) Sale of common stock...................... -- -- 6,681 --------- -------- -------- Net cash provided by financing activities.. 156,837 11,372 12,510 --------- -------- -------- Net (decrease) increase in cash and cash equivalents............................... (5,129) 9,547 (463) Cash and cash equivalents, beginning of period.................................... 19,858 10,311 10,774 --------- -------- -------- Cash and cash equivalents, end of period... $ 14,729 $ 19,858 $ 10,311 ========= ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid.............................. $ 24,845 $ 8,500 $ 10,900 ========= ======== ========
See accompanying notes. F-7 COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 28, 1997 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements of Coinmach Laundry Corporation ("Coinmach Laundry") and Subsidiaries (the "Company") include the accounts of its wholly-owned subsidiary, Coinmach Corporation ("Coinmach") (formerly Solon Automated Services, Inc. ("Solon") and the consolidated accounts of The Coinmach Corporation ("TCC")). The Company was formed on April 5, 1995, at which time it acquired Solon (the "Solon Acquisition"), and is controlled by Golder Thoma Cressey Rauner, Inc. ("GTCR"). TCC was formed in January 1995 by an investor group, comprised principally of the same investors who formed the Company, and acquired Coinmach Industries Co. ("Industries") and Super Laundry Equipment Co. L.P. ("Super Laundry LP") on January 31, 1995 (the "TCC Acquisition"). Both the Solon Acquisition and the TCC Acquisition were accounted for as purchases and, accordingly, the acquired assets and liabilities were recorded at their estimated fair values at the respective acquisition dates. As described in Note 2, Solon completed a merger with TCC on November 30, 1995. This transaction was accounted for in a manner similar to a pooling of interests. As a result of the common investor group's control over both Solon and TCC, the accompanying consolidated financial statements have been prepared to reflect the accounts of the Company, Solon and TCC and their wholly-owned subsidiaries on a consolidated basis since the date of common control, April 5, 1995. The Company is primarily engaged in providing coin-operated laundry equipment services to multi-family housing properties throughout the United States. The Company owns and operates approximately 337,000 coin-operated washers and dryers in over 30,000 multi-family housing units on routes located in 30 states and the District of Columbia and in 150 retail laundromats located throughout Texas. The Company's wholly-owned subsidiary, Super Laundry Equipment Corp. ("Super Laundry"), also is a construction and laundromat equipment distribution company. All material intercompany accounts and transactions have been eliminated in consolidation. FISCAL YEAR Prior to the merger of Solon and TCC, the Company's fiscal year was the fifty-two or fifty-three week period which ended on the Friday nearest September 30th. Effective with the merger of Solon and TCC, the Company changed its fiscal year end to the last Friday in March. The period from April 5, 1995 to September 29, 1995 is referred to as "1995", the period from September 30, 1995 to March 29, 1996 is referred to as "1996T" and the year ended March 28, 1997 is referred to as "1997". RECOGNITION OF LAUNDRY REVENUES The Company has agreements with various property owners which provide for the Company's installation and operation of laundry machines at various locations in return for a commission. These agreements provide for both contingent (percentage of revenues) and fixed commission payments. The Company reports revenues from laundry machines on the accrual basis and has accrued the cash computed to be in the machines at the end of the fiscal period. Super Laundry's customers generally sign sales contracts pursuant to which Super Laundry constructs and equips complete laundromat operations, including location identification, construction, plumbing, electrical F-8 COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) wiring and all required permits. Revenue is recognized on the completed contract method. A contract is considered complete when all costs have been incurred and either the installation is operating according to specifications or has been accepted by the customer. The duration of such contracts is normally less than six months. Sales of laundromats amounted to approximately $18.8 million, $7.8 million and $7.9 million in 1997, 1996T, and 1995, respectively. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. CASH EQUIVALENTS The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. INVENTORIES Inventories are valued at the lower of cost (first-in, first-out) or market and consist of the following (in thousands):
MARCH 28, MARCH 29, 1997 1996 --------- --------- Laundry equipment..................................... $6,198 $3,774 Machine repair parts.................................. 1,761 669 ------ ------ $7,959 $4,443 ====== ======
PROPERTY AND EQUIPMENT Property, equipment and leasehold improvements are carried at cost and are depreciated or amortized on a straight-line basis over the lesser of the estimated useful lives or lease life, whichever is shorter: Laundry equipment and fixtures.............................. 3 to 10 years Leasehold improvements...................................... 4 to 10 years Trucks and other vehicles................................... 3 to 4 years
Upon the sale or retirement of property and equipment, the cost and related accumulated depreciation are eliminated from the respective accounts, and the resulting gain or loss is included in income. Maintenance and repairs are charged to operations currently, and replacements of laundry machines and significant improvements are capitalized. Depreciation expense was $22.6 million, $9.4 million and $9.5 million for 1997, 1996T and 1995, respectively. GOODWILL AND CONTRACT RIGHTS Goodwill, under purchase accounting, represents the excess of cost over fair value of net assets acquired. Goodwill recorded as a result of the Solon Acquisition on April 5, 1995 (see Note 2) is being amortized on a straight- line basis over 20 years. Goodwill recorded on acquisitions subsequent thereto is being amortized over 15 years on a straight-line basis. F-9 COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) Contract rights represent amounts expended for location contracts arising from the acquisition of laundry machines on location. These amounts, which arose solely from purchase price allocations, are amortized on a straight-line basis over the period of expected benefit ranging from 3 to 15 years based on independent appraisals or present valued future cash flows at prevailing discount rates. Management periodically evaluates the realizability of the goodwill and contract rights balances based upon the Company's expectations of undiscounted cash flows and operating income. Based upon present operations and strategic plans, management believes that no impairment of goodwill or contract rights has occurred. ADVANCE RENTAL PAYMENTS Advance rental payments to location owners are amortized on a straight-line basis over the contract term, which generally ranges from 5 to 10 years. INTEREST EXPENSE Interest expense is reported net of interest income of approximately $966,000, $277,000 and $148,000 for 1997 and 1996T and 1995, respectively. RECLASSIFICATION Certain 1996T balances have been reclassified to conform with the 1997 presentation. LOSS PER SHARE Loss per share for 1997 was calculated based upon the weighted average number of common shares outstanding of 9,232,530. Pro forma loss per share for 1996T and 1995 was calculated based upon the weighted average number of common shares of 7,774,017, which amount gives effect to the transactions discussed below. The Company's historical capitalization differs significantly from its capitalization effective with its July 23, 1996 initial public offering of stock (see Note 8a). Accordingly, historical net loss per common share for the six month transition period ended March 29, 1996 and the period from April 5, 1995 to September 29, 1995 is not considered meaningful and has not been presented herein; rather, a pro forma net loss per share is presented for these periods in the accompanying statement of operations. The calculation of the shares used in computing pro forma net loss per share includes the effect of the stock issued and options granted discussed further in Note 8a, as well as the redemption of preferred stock, as more fully described in Note 8c. Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No. 83, common stock sold or issued at prices below the initial public offering price per share in the twelve months preceding the initial public offering have been included in the calculation as if outstanding for 1996T and 1995. In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." This standard changes the method of calculating earnings per share and will be effective for periods ending after December 15, 1997. Earlier application is not permitted; however, when adopted, all prior period earnings per share data presented will be required to be restated to conform with the new standard. The Company has determined that the impact of SFAS No. 128 will not have a material effect on the calculations of earnings per share. EMPLOYEE STOCK OPTIONS The Company has a stock option program which is more fully described in Note 8d. The Company accounts for stock option grants in accordance with Accounting Principles Board Opinion ("APB") No. 25, "Accounting F-10 COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) for Stock Issued to Employees." Under the Company's stock option program, options are granted with an exercise price not less than the market price of the underlying common stock of the Company on the date of grant. Accordingly, no compensation expense is recognized in connection with the grant of these stock options. In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation". SFAS 123 defines a fair value method of accounting for the issuance of stock options and other equity instruments. Under the fair value method, compensation cost is measured at the grant date based on the fair value of the award and is recognized over the service period, which is usually the vesting period. Pursuant to SFAS No. 123, companies are encouraged, but are not required, to adopt the fair value method of accounting for employee stock-based transactions. Companies are also permitted to continue to account for such transactions under APB No. 25, but are required to disclose in the financial statement footnotes, pro forma net (loss) income and per share amounts as if the Company had applied the new method of accounting for all grants made during 1997 and 1996. SFAS No. 123 also requires increased disclosures for stock-based compensation arrangements. Effective March 30, 1996, the Company adopted the disclosure requirements of SFAS No. 123. INCOME TAXES The Company accounts for income taxes under SFAS No. 109, "Accounting for Income Taxes". SFAS No. 109 requires the asset and liability method of accounting for income taxes. Under the asset and liability method of SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. SFAS No. 109 requires that any tax benefits recognized for net operating loss carryforwards and other items be reduced by a valuation allowance where it is more likely than not that the benefits may not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. IMPAIRMENT OF LONG-LIVED ASSETS Effective March 30, 1996, the Company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 121 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. SFAS No. 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The adoption of SFAS No. 121 did not have an effect on the results of operations or financial condition of the Company. 2. BUSINESS COMBINATIONS A. THE KWIK WASH ACQUISITION On January 8, 1997, pursuant to the terms and conditions of a Stock Purchase Agreement dated as of November 25, 1996, Coinmach completed the acquisition of 100% of the outstanding voting securities of each of KWL, Inc. ("KWL"), a Nevada corporation, and Kwik-Wash Laundries, Inc. ("Kwik Wash"), a Nevada corporation, for approximately $125 million in cash (excluding transaction expenses) and a $15 million promissory note issued by Coinmach Laundry (the "Kwik Wash Acquisition"). KWL and Kwik Wash are the sole partners of Kwik Wash Laundries, L.P. (the "Kwik Wash Partnership"), a Texas limited partnership. The Kwik Wash Partnership, based in Dallas, Texas, provides coin-operated laundry equipment services to multi- F-11 COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 2. BUSINESS COMBINATIONS--(CONTINUED) family dwellings in Texas, Louisiana, Arkansas and Oklahoma and operates approximately 150 retail laundromats located throughout Texas. Simultaneously with the acquisition, KWL, Kwik Wash and the Kwik Wash Partnership merged with and into Coinmach. Concurrently with the Kwik Wash Acquisition, Coinmach entered into a new senior financing arrangement providing up to $200 million (the "New Credit Facility") (see Note 5). The New Credit Facility, proceeds of which were used in part to fund the Kwik Wash Acquisition, replaced the Company's then existing credit facility and will provide financing to support the Company's acquisition strategy. The Kwik Wash Acquisition has been accounted for as a purchase and, accordingly, assets and liabilities were recorded at fair value at the date of acquisition and the results of operations are included subsequent to that date. The excess of cost over the net tangible assets acquired was allocated to contract rights of approximately $123.3 million, goodwill of $49.4 million and deferred taxes payable of approximately $49.4 million. The following table reflects unaudited pro forma combined results of operations of the Company and Kwik Wash as if such acquisition had taken place at the beginning of each of the periods presented (in thousands except per share data):
SIX-MONTH TRANSITION YEAR PERIOD ENDED ENDED MARCH MARCH 29, 28, 1997 1996 -------- ---------- Revenues............................................. $255,605 $121,687 Loss before extraordinary items...................... (11,148) (3,190) Net loss............................................. (11,444) (12,115) Loss before extraordinary items per common share..... (1.21) (.41) Net loss per common share............................ (1.24) (1.56)
These unaudited pro forma results have been presented for comparative purposes only and include certain adjustments, such as increased interest expense on the related acquisition debt and additional amortization expense of intangible assets, offset by the capitalization of installation and decorating costs to conform to the accounting policy of the Company. In management's opinion, the unaudited pro forma combined results of operations are not indicative of the actual results that would have occurred had the Kwik Wash Acquisition been consummated at the beginning of each period or the results of future operations of the combined companies under the ownership and management of the Company. B. OTHER ACQUISITIONS During the 1997 fiscal year, the Company made acquisitions of several small route businesses or assets of businesses with purchase prices aggregating approximately $26.3 million, of which the Company paid approximately $25.2 million in cash and $1.2 million in promissory notes issued by the Company, which are included in other long-term debt. Such promissory notes have a conversion option which allows the holder of the option to convert these promissory notes, after the one-year anniversary of the issue date, into shares of the Company's Class A Common Stock at the principal amount then outstanding at a conversion price equal to 115% of the average daily closing price per share of Common Stock over the twenty business day period immediately preceding the issue date. F-12 COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 2. BUSINESS COMBINATIONS--(CONTINUED) C. THE SOLON ACQUISITION Solon entered into a Stock Purchase Agreement, dated as of March 7, 1995, with Ford Coin Laundries, Inc. ("Ford"), and certain other parties named therein, whereby Ford purchased all of Solon's outstanding Common Stock (the "Common Stock") and substantially all of Solon's Class A Common Stock (the "Class A Common Stock") (collectively, the "Shares"). The purchase price for the Shares was $11.5 million. The foregoing transaction closed on April 5, 1995. The source of funds used by Ford for the Shares was the cash proceeds from the sales by Ford to the Company of (i) Ford's non-voting Class A Common Stock (the "Ford Non-Voting Common Stock") pursuant to a Stock Purchase Agreement, dated April 4, 1995, and (ii) an option to purchase Ford's voting common stock (the "Ford Voting Common Stock") pursuant to a Letter Agreement dated April 4, 1995. As of April 5, 1995, Ford beneficially owned, and had the sole power to dispose of, the Shares. The Shares beneficially owned by Ford represented 100% of the outstanding Common Stock and approximately 97% of the outstanding Class A Common Stock. Pursuant to the Stock Purchase Agreement with Ford, the Company purchased from Ford all of the outstanding shares of Ford Non-Voting Common Stock. The purchase price for the Ford Non-Voting Common Stock was of $11.4 million. The sources of the funds used by the Company for the Ford Non-Voting Common Stock were certain shareholders of TCC, including GTCR. As of April 5, 1995, the Company beneficially owned, and had the sole power to dispose of, 1,000 shares of Ford Non-Voting Common Stock. Pursuant to the Letter Agreement dated April 4, 1995, Ford granted to the Company, among other things, an option (the "Option") to purchase, subject to the terms and conditions contained therein, all of the Ford Voting Common Stock, for an aggregate purchase price of $100,000. On April 28, 1995, the Company exercised the Option. The sources of funds used by the Company to exercise the Option were substantially the same sources used to purchase Ford Non-Voting Common Stock. As of April 28, 1995, the Company beneficially owned, and had the sole power to vote and dispose of, ten shares of Ford Voting Common Stock. D. THE TCC ACQUISITION TCC was incorporated in January 1995 and was capitalized primarily through an equity investment by an investor group led by the majority shareholder, GTCR, and senior management and bank financing. TCC was a holding company which was formed to acquire partnership interests in Industries and Super Laundry LP. On January 31, 1995, TCC acquired its partnership interests in Industries and Super Laundry from CIC I Acquisition Corp. ("CIC I"). The transaction resulted in TCC owning 100% interests in both Industries and Super Laundry LP. The aggregate purchase price for these interests was $8.57 million, paid in cash. The acquisition was accounted for using the purchase method of accounting. The fair value of assets acquired (based on an independent appraisal for certain assets) less liabilities assumed exceeded the purchase price by approximately $7.7 million. The excess was allocated against property, equipment and intangible assets ratably based on their respective fair values. F-13 COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 2. BUSINESS COMBINATIONS--(CONTINUED) E. THE MERGER WITH TCC On November 30, 1995, Solon completed a merger ("Merger") with TCC through an exchange of stock. Shares of common stock of the Company were issued in exchange for all of the issued and outstanding shares of common stock of TCC. The Company then contributed its stock of TCC to Solon. Solon became the surviving corporation after the merger, whereupon it changed its name to Coinmach Corporation. Details of the results of operations of TCC and Solon for the periods prior to the Merger are as follows (in thousands):
APRIL 5, 1995 SEPTEMBER 30, TO 1995 TO SEPTEMBER 29, NOVEMBER 29, 1995 1995 ------------- ------------- REVENUES Solon......................................... $51,256 $17,909 TCC........................................... 38,463 13,018 ------- ------- Combined...................................... $89,719 $30,927 ======= ======= NET (LOSS) INCOME Solon......................................... $(5,496) $ (525) TCC........................................... (450) 49 ------- ------- Combined...................................... $(5,946) $ (476) ======= =======
The combined financial results presented above include an adjustment to decrease TCC's net loss by approximately $180,000 in 1995 and $70,000 for the period from September 30, 1995 to November 29, 1995, to conform its accounting policy for the capitalization of machine installation costs to that of Solon. Intercompany transactions between the two companies for the period presented were not material. 3. RECEIVABLES Receivables consist of the following (in thousands):
MARCH 28, MARCH 29, 1997 1996 --------- --------- Trade receivables..................................... $5,551 $3,113 Notes receivable...................................... 1,225 1,811 Finance lease receivables............................. 380 625 Other................................................. 293 165 ------ ------ 7,449 5,714 Allowance for doubtful accounts....................... 555 454 ------ ------ $6,894 $5,260 ====== ======
Notes receivable, which arise from the sale of laundromats, bear interest at a weighted average rate of approximately 10% per annum and mature through 1998. The notes are collateralized by the underlying laundry equipment. The Company periodically sells notes receivable arising from the sale of laundromats to third party finance companies. Included in other receivables are finance reserves, which arise when the Company sells notes and a portion of the proceeds are retained by the finance company. As the notes are collected, the finance companies remit a portion of the collections to the Company. Many of the notes receivable are sold with recourse to the Company (see Note 9). Control of the notes sold with recourse is surrendered by the Company on the date of transfer. The Company generally sells its receivables with recourse at cost, recognizing no gain or loss. F-14 COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 4. RESTRUCTURING COSTS Restructuring charges for 1995 consist of costs aggregating approximately $2.2 million, which includes approximately $1.3 million of severance payments for 55 of Solon's management, administrative and regional personnel, approximately $300,000 of costs to relocate Solon's financial and administrative functions to Roslyn, New York, approximately $100,000 of costs to integrate certain financial and operating systems, and approximately $500,000 of costs related to the consolidation of certain of Solon's regional offices. Of the total restructuring costs of $2.2 million, approximately $300,000 was paid during the period ended September 29, 1995, approximately $1.3 million was paid during the six months ended March 29, 1996, and the remaining portion of approximately $600,000 was paid during the fiscal year ending March 28, 1997. The 55 employee terminations include 5 management employees, 17 corporate staff financial and administrative employees and 33 regional laundry operational employees. Notifications to employees were made on various dates through September 1995. 5. DEBT Debt consists of the following (in thousands):
MARCH MARCH 28, 1997 29, 1996 -------- -------- 11 3/4% Senior Notes due 2005.......................... $196,655 $196,655 12 3/4% Senior Notes due 2001.......................... -- 5,000 Credit facility........................................ 130,000 -- 9 7/8% Promissory Note due 2004........................ 15,000 -- Obligations under capital leases....................... 1,711 686 Other long-term debt with varying terms and maturities. 2,120 424 -------- -------- $345,486 $202,765 ======== ========
A. SENIOR NOTES On November 30, 1995, Coinmach completed an exchange offer with substantially all the holders of certain 12 3/4% Senior Notes due 2001 (the "Senior Notes") and certain 13 3/4% Senior Subordinated Debentures due 2002 (the "Subordinated Debentures"). Through December 14, 1995, Coinmach issued a total of $196.7 million of 11 3/4% Senior Notes due 2005 (the "Notes") which enabled it to complete this exchange offer, consummate the merger with TCC, retire its remaining debt, and provide additional working capital. Coinmach incurred costs of approximately $4.0 million, net of income taxes, related to a 5.5% premium paid to retire its Senior Notes and Subordinated Debentures, wrote-off the unamortized balance of the related original issue discount and deferred finance costs of approximately $1.3 million and $1.8 million, net of income taxes, respectively, and also incurred costs related to the retirement of a revolving credit facility of TCC of approximately $1.8 million, net of income taxes. The aggregate of the foregoing items totaling $8.9 million, net of income taxes, is shown as an extraordinary item in 1996T. Interest on the Notes is payable semi-annually on May 15 and November 15. The Notes are redeemable at the option of Coinmach at any time after November 15, 2000 at a price equal to 105 7/8% declining to par if redeemed after November 15, 2002. The Notes contain certain financial covenants and were exchanged for identical notes in a registered exchange offer in April 1996. Additionally, the Notes restrict the payment of certain dividends, distributions or other payments from Coinmach to Coinmach Laundry. In February 1997, Coinmach redeemed all of its outstanding Senior Notes at a redemption price of 106.375% of the principal amount thereof, together with accrued interest from January 15, 1997 to February 18, F-15 COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 5. DEBT--(CONTINUED) 1997, in an aggregate amount of approximately $5.4 million. As part of the premium paid to redeem the Senior Notes, together with the writeoff of all unamortized financing costs associated with the Senior Notes, Coinmach recognized an extraordinary charge of $502,000 (net of a tax benefit of $206,000). B. CREDIT FACILITY On November 30, 1995, Coinmach entered into a revolving credit facility ("Credit Facility"), which provided up to a maximum of $35 million and which replaced certain credit facilities of both Solon and TCC. Availability under the Credit Facility was limited by an amount equal to one semi-annual interest payment on the Notes. Interest on the borrowings was payable monthly at a rate per annum no greater than the sum of LIBOR plus 2.50%. The Company was obligated to pay an unused line fee in an amount equal to 0.5% of the unused availability payable monthly in arrears. Borrowings under the Credit Facility were secured by real and personal property of the Company and also required the Company, among other things, to maintain certain financial ratios and restrict additional investments and indebtedness. On January 8, 1997, the Company entered into a senior financing arrangement under the New Credit Facility with Bankers Trust Company, First Union National Bank of North Carolina, Lehman Commercial Paper, Inc. and certain other lending institutions named therein (collectively, the "Banks"), replacing the Company's then existing credit facility. The New Credit Facility, as amended effective June 2, 1997 and prior to any principal installments made, consists of a $70 million revolving credit facility and a $190 million term loan facility, which is comprised of a Tranche A term loan in the amount of $30 million and a Tranche B term loan in the amount of $160 million. The Tranche B term loan was increased by $60 million effective June 2, 1997. The New Credit Facility also provides for up to $10 million of letter of credit financing and short term borrowings under a swing line facility of up to $5 million. Interest on the Company's borrowings under the New Credit Facility is payable quarterly in arrears with respect to Base Rate Loans and the last day of each applicable interest period with respect to Eurodollar Loans and at a rate per annum no greater than the sum of the Applicable Base Rate Margin plus the Base Rate or the sum of the Applicable Eurodollar Margin plus the Eurodollar Rate (in each case, as defined in the New Credit Facility). Indebtedness under the New Credit Facility is secured by all of the Company's real and personal property. The Company has guaranteed the indebtedness under the New Credit Facility and pledged to Bankers Trust Company, as Collateral Agent, its interests in all of the issued and outstanding shares of capital stock of Coinmach. In addition to certain terms and provisions, events of default, as defined, and customary restrictive covenants and agreements, the New Credit Facility contains certain covenants including, but not limited to, a maximum leverage ratio, a minimum consolidated interest coverage ratio, and limitations on indebtedness, capital expenditures, advances, investments and loans, mergers and acquisitions, dividends, stock issuances and transactions with affiliates. Debt outstanding under the New Credit Facility as of March 28, 1997, consisted of the following (in thousands): Term loan A, quarterly payments of $750 commencing March 31, 1997, and increasing to $1,000 March 31, 1998, $1,250 March 31, 1999, and $2,000 March 31, 2002. (Interest rate of 7.6875% at March 28, 1997)............................................................. $ 30,000 Term loan B, semi-annual payments of $500 commencing June 30, 1997 with the final three payments of $31,333 on June 30, 2003, December 31, 2003 and June 30, 2004. (Interest rate of 8.125% at March 28, 1997)................................................... 100,000 Revolving line of credit........................................... -- -------- $130,000 ========
F-16 COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 5. DEBT--(CONTINUED) C. PROMISSORY NOTE Pursuant to the Kwik Wash Acquisition, Coinmach Laundry issued a $15.0 million 9 7/8% promissory note due June 15, 2004. Annual payments (in thousands) of $1,000 commence January 15, 1998 and increasing to $2,000 January 15, 2000, $3,000 January 15, 2003 and $4,000 June 15, 2004. 6. RETIREMENT SAVINGS PLANS Coinmach maintains several defined contribution plans (including the Coinmach Plan, Solon Plan and Kwik Wash Plan collectively, the "Plans") meeting the guidelines of Section 401(k) of the Internal Revenue Code. All of the Plans require employees to meet certain age, employment status and minimum entry requirements as allowed by law. Contributions to the Plans for 1997, 1996T and 1995 amounted to approximately $140,000, $43,000 and $43,000, respectively. The Company does not provide any other post-retirement benefits. 7. INCOME TAXES The components of the Company's net deferred tax liabilities were as follows (in thousands):
MARCH 28, MARCH 29, 1997 1996 --------- --------- Deferred tax liabilities: Accelerated depreciation and contract rights........ $73,809 $26,537 Other, net.......................................... 1,516 1,449 ------- ------- 75,325 27,986 ------- ------- Deferred tax assets: Net operating loss carryforwards.................... 9,544 8,549 Stock compensation expense.......................... 476 -- Other............................................... 115 973 Valuation allowance for deferred tax assets......... (460) (460) ------- ------- 9,675 9,062 ------- ------- Net deferred tax liabilities.......................... $65,650 $18,924 ======= =======
Deferred taxes arise primarily from timing differences resulting from using accelerated depreciation for tax purposes and straight-line depreciation for financial reporting purposes, and contract rights acquired which are not deductible for tax purposes. As of April 5, 1995, the deferred tax asset and related valuation allowance relating to Solon were netted and reduced to $2.6 million to reflect the net operating loss available pursuant to limitations imposed under provisions of the Internal Revenue Code regarding changes in ownership. In addition, as of April 5, 1995, TCC had recorded a deferred tax asset of $460,000 with a valuation allowance of the same amount. The deferred tax assets recorded subsequently do not reflect a valuation allowance because the loss can be utilized against the deferred tax liabilities in the carryforward period. The net operating loss carryforwards, which expire between fiscal years 2001 through 2008, consist of approximately $7 million (after the limitation) relating to Solon and approximately $16.3 million relating to the Company. F-17 COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 7. INCOME TAXES--(CONTINUED) The benefit for income taxes consists of (in thousands):
YEAR PERIOD APRIL 5, 1995 ENDED ENDED TO MARCH 28, MARCH 29, SEPTEMBER 29, 1997 1996 1995 --------- --------- ------------- Federal................................. $(2,039) $(5,215) $(1,760) State................................... (474) (1,088) (102) ------- ------- ------- $(2,513) $(6,303) $(1,862) ======= ======= =======
The effective income tax rate differs from the amount computed by applying the U.S. federal statutory rate to loss before taxes as a result of state taxes and permanent book/tax differences as follows (in thousands):
YEAR PERIOD APRIL 5, 1995 ENDED ENDED TO MARCH 28, MARCH 29, SEPTEMBER 29, 1997 1996 1995 --------- --------- ------------- Expected tax benefit................... $(4,563) $(1,201) $(2,655) State tax benefit, net of federal tax- es.................................... (308) (170) (320) Permanent book/tax differences: Goodwill............................. 1,100 373 1,000 Stock compensation expense........... 311 -- -- Other................................ 947 -- 113 ------- ------- ------- Tax provision/(benefit)................ $(2,513) $ (998) $(1,862) ======= ======= =======
The Company made cash payments for income taxes of approximately $204,000 and $36,000 for 1997 and 1996T, respectively. 8. STOCKHOLDERS' EQUITY A. INITIAL PUBLIC OFFERING On July 23, 1996, the Company completed its initial public offering (the "Offering") of 4,120,000 shares of its Common Stock at an initial public offering price of $14.00 per share. The Company's Registration Statement for 4,000,000 shares of Common Stock was filed with the Securities and Exchange Commission on May 13, 1996 and subsequently declared effective on July 17, 1996. On July 18, 1996, the Company filed an additional registration statement on Form S-1 with respect to the registration of an additional 120,000 shares of Common Stock, which registration statement was effective upon filing. In connection with the Offering, the underwriters were granted a 30-day option to purchase up to an aggregate of 618,000 additional shares of Common Stock to cover over-allotments (the "Over-Allotment Option"), which Over- Allotment Option was exercised on August 16, 1966 with respect to the purchase of an additional 63,642 shares of Common Stock. Proceeds from the Offering were approximately $54.5 million (after giving effect to the exercise of the Over-Allotment Option), after underwriting discounts and commissions and before expenses. After giving effect to the redemption of the Preferred Stock (as described below), proceeds from the Offering were approximately $35.3 million, before expenses. Prior to the Offering, the Company issued, in privately negotiated transactions, 79,029 shares of its Class B common stock to certain members of management. The Company recorded a stock based compensation charge F-18 COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 8. STOCKHOLDERS' EQUITY--(CONTINUED) in an amount of approximately $887,000 attributable to the issuance of such stock in 1997. In addition, approximately $103,000 of outstanding receivables relating to loans to management in connection with prior purchases of the Company's common stock were forgiven and have been accounted for as a stock- based compensation charge in 1997. B. RECLASSIFICATION AND STOCK SPLIT In connection with the Offering, the Company approved a reclassification (the "Reclassification") of all of its capital stock pursuant to which all seven classes of the previously issued and outstanding capital stock of the Company prior to the Offering were converted into a class of preferred stock, a class of voting common stock and a class of non-voting common stock. As part of the Reclassification, holders of the Company's Class A common stock, Class E common stock and Class F common stock immediately prior to the Offering (collectively, the "Preference Shares") also received a distribution consisting of shares of Common Stock and shares of Series A preferred stock, par value $.01 per share (the "Preferred Stock"), representing an amount equal to the sum of: (a) preferred dividends on such Preference Shares in an amount equal to the accrued yield (at a rate of 8% per annum, compounded quarterly) on the original investment in such Preference Shares through July 23, 1996; and (b) an amount equal to the original investment in such Preference Shares. Holders of Preference Shares who are members of the Company's management received an aggregate of 28,425 shares of Common Stock, and holders of the Preference Shares who were not members of the Company's management received an aggregate of 1,000 shares of Preferred Stock. In connection with the Reclassification, the Company also approved an approximate 23-to-1 stock split (the "Stock Split") payable to shareholders of record of the Company on July 12, 1996. C. REDEMPTION OF PREFERRED STOCK Immediately following the Offering, approximately $19.2 million of the proceeds of the Offering were used by the Company to retire all of the issued and outstanding shares of Preferred Stock. D. STOCK OPTION PLAN Prior to the Offering, the Company adopted the 1996 Employee Stock Option Plan (as amended and restated, the "Stock Option Plan") which provides that the Company may grant options for the purchase of up to 1,109,147 shares of common stock to key employees of the Company over a period not to exceed ten years. The Company may grant incentive stock options or options which do not qualify as incentive stock options at an exercise price per share not less than 100% of the fair market value of the Common Stock at the date of grant. All options granted under the Stock Option Plan vest over four years in five equal installments (20% immediately) and expire ten years from the date of grant. The Company has granted 181,250 options to various employees of the Company pursuant to the Stock Option Plan, through March 28, 1997. On July 23, 1996, in connection with the Offering, the Company granted certain nonqualified options (the "Options") to certain members of management (collectively, the "Option Holders") to purchase up to 735,618 shares of Common Stock at 85% of the initial offering price of the Common Stock. On September 17, 1996, for the purpose of preserving the Option Holders' percentage interest of Common Stock represented by the Options (which percentage interest was decreased as a result of the exercise of the Over- Allotment Option), the Company granted to the Option Holders additional nonqualified stock options to purchase up to 3,819 shares of Common Stock (the "Additional Options"). The Options and Additional Options vest in equal annual installments (20% F-19 COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 8. STOCKHOLDERS' EQUITY--(CONTINUED) vested immediately on the date of grant and the remainder over a four year period) commencing on July 23, 1996, the effective date of the Offering. With respect to Options and Additional Options granted to employees of Coinmach, Coinmach will record the difference between the exercise price and the initial offering price of Common Stock as a stock-based compensation charge over the applicable vesting period. On September 17, 1996, the Company granted to certain directors each of whom was appointed by the Board of Directors of the Company on such date to serve as independent directors, options entitling each such director to purchase up to 60,000 shares of Common Stock (the "Independent Director Options"). The Independent Director Options vest in equal annual installments (25% vest immediately on the date of grant and the remainder over a three year period), commencing on September 17, 1996, and entitle each such director to purchase shares of Common Stock at the initial public offering price of the Common Stock. Coinmach will record the difference between the exercise price of the Independent Director Options and the fair market value of the Common Stock on September 17, 1996 as a stock-based compensation charge over the applicable vesting period. For the year ended March 28, 1997, the Company has recorded a stock-based compensation charge of approximately $1,162,000 relating to the Options, the Additional Options and the Independent Director Options. The Company has elected to comply with APB No. 25 and related interpretations in accounting for its employee stock options because the alternate fair value accounting provided for under SFAS No. 123 requires use of option valuation models which were not developed for use in valuing such employee stock options. Under APB No. 25, compensation expense is recognized only when the exercise price of the Company's employee stock options is less than the market price of the underlying stock on the date of grant. In accordance with SFAS No. 123, pro-forma information regarding net loss and loss per common share has been determined as if the Company had accounted for its employee stock options under the fair value method required by SFAS No. 123. The fair value for these options was estimated at the date of each grant using a Black-Scholes option pricing model with the following weighted average assumptions for 1997: risk-free interest rate of 6.6%; dividend yields of 0%, volatility factor of the expected market price of the Company's common stock of 24.5% and a weighted-average expected life of the options of five years. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. In management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options due to changes in subjective input assumptions which may materially affect the fair value estimate, and because the Company's employee stock options have characteristics significantly different from those of traded options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting periods. The Company's pro forma net loss and net loss per share as of March 31, 1997 is as follows: Pro forma net loss......................................... $(10,307,000) Pro forma net loss per share............................... $ (1.12)
SFAS No. 123 is applicable only to options granted subsequent to March 30, 1996 (no options were granted in fiscal 1996). F-20 COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 8. STOCKHOLDERS' EQUITY--(CONTINUED) Information with respect to options for the year ended March 28, 1997 is as follows:
WEIGHTED AVERAGE WEIGHTED FAIR AVERAGE VALUE OF EXERCISE OPTIONS OPTIONS PRICE GRANTED --------- -------- -------- Options outstanding--beginning of year -- $ -- $ -- Options granted: Nonqualified options issued at market price...... 181,250 14.00 4.87 Directors' options issued at below market price.. 120,000 14.00 9.36 Nonqualified options issued at below market price........................................... 739,437 11.90 6.00 Options exercised.................................. -- -- -- Options cancelled and expired...................... -- -- -- --------- ------ ----- Options outstanding--end of year................... 1,040,687 $12.51 $6.17 ========= ====== ===== Options exercisable at end of year................. 214,151 $12.55 $6.26 ========= ====== =====
Exercise prices for options outstanding as of March 28, 1997 were as follows:
NUMBER OF RANGE OF OPTIONS EXERCISE PRICES - --------- ---------------- 1,040,687 $11.90 to $14.00
The weighted average remaining contractual life of those options is approximately 9.2 years. Shares of Common Stock reserved for future issuance as of March 28, 1997 are as follows:
NUMBER OF SHARES --------- Stock options................................................... 1,968,584 Conversion shares............................................... 480,648 Convertible notes............................................... 56,466 --------- 2,505,698 =========
9. COMMITMENTS AND CONTINGENCIES Rental expense for all operating leases, which principally cover office facilities, laundromats and vehicles, was approximately $2,307, $1,235 and $1,139 for 1997, 1996T and 1995, respectively (in thousands). Future minimum rental commitments under all noncancellable operating leases as of March 28, 1997, are as follows (in thousands): 1998............................................................. $ 4,140 1999............................................................. 3,668 2000............................................................. 3,056 2001............................................................. 2,287 2002............................................................. 1,218 2003 and future periods.......................................... 1,096 ------- $15,465 =======
F-21 COINMACH LAUNDRY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 9. COMMITMENTS AND CONTINGENCIES--(CONTINUED) The Company is contingently liable on receivables sold with recourse to finance companies. The total amount of such receivables outstanding as of March 28, 1997 is approximately $1.6 million. The Company is party to various legal proceedings incidental to its business. Although the ultimate disposition of these proceedings is not presently determinable, management does not believe that adverse determinations in any or all such proceedings would have a material adverse effect upon the financial condition or results of operations of the Company. In connection with insurance coverages, which include workers compensation, general liability and other coverages, annual premiums are subject to limited retroactive adjustment based on actual loss experience. 10. FAIR VALUE OF FINANCIAL INSTRUMENTS Under the provisions of SFAS No. 107, "Disclosures About Fair Value of Financial Instruments," the Company is required to disclose fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate the value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. The carrying amounts of cash and cash equivalents, receivables, the New Credit Facility, the promissory note related to the Kwik Wash Acquisition and other long-term debt approximates their fair market value at March 28, 1997. The carrying amount and related estimated fair value for the Company's Senior Notes at March 28, 1997 (the carrying amount approximated the estimated fair market at March 29, 1996) are as follows (in thousands):
CARRYING ESTIMATED AMOUNT FAIR VALUE -------- ---------- 11 3/4% Senior Notes.................................. $196,655 $216,320
The fair value of the Senior Notes has been determined through information obtained from quoted market prices. 11. OTHER ASSETS In connection with the Company's establishment of a corporate development office in Charlotte, North Carolina and the relocation of an executive officer of the Company to such office in September 1996, the Company extended a loan to such officer in the principal amount of $500,000 payable in five equal annual installments commencing in July 1997, with interest accruing at a rate of 7.5% per annum. The amount of such loan is included in other assets as of March 28, 1997. 12. SUBSEQUENT EVENTS Through May 1997, the Company completed certain acquisitions of businesses or assets of businesses, with purchase prices aggregating approximately $46.0 million, utilizing funds available under the New Credit Facility. F-22 EX-10.51 2 REGISTRATION RIGHTS AGREEMENT EXHIBIT 10.51 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT ("Agreement") is made as of March 14, 1997, between Coinmach Laundry Corporation, a Delaware corporation (the "Company"), and Atlanta Washer & Dryer Leasing, Inc., a Georgia corporation ("AWDL"). Unless otherwise provided in this Agreement, capitalized terms used herein shall have the meanings set forth in paragraph 6 hereof. The parties hereto agree as follows: 1. Piggyback Registrations. ------------------------ (a) Right to Piggyback. Whenever the Company proposes to register any of ------------------ its Common Stock under the Securities Act in a secondary registration on behalf of holders of the Common Stock and the registration form to be used may be used for the registration of Registrable Securities (a "Piggyback Registration"), the Company shall give prompt written notice to all holders of AWDL Registrable Securities of its intention to effect such a registration and shall include in such registration all AWDL Registrable Securities with respect to which the Company has received written requests for inclusion therein within 10 days after the receipt of the Company's notice. (b) Piggyback Expenses. The Registration Expenses of the holders of AWDL ------------------ Registrable Securities shall be paid by the Company in all Piggyback Registrations. (c) Priority on Piggyback Registrations. If the Company (in the case of a ------------------------------------ registered offering not involving an underwriting) or the managing underwriter or underwriters (in the case of a registered underwritten offering) shall reasonably determine that the number or kind of securities requested to be included in a Piggyback Registration exceeds the number which can be sold in such offering without adversely affecting the Company or the marketability or success of the offering, the Company shall include in such registration (y) first, the securities requested to be included therein by the holder or holders initially requesting such registration (in the case of a registration undertaken by the Company at the demand of one or more holders of Common Stock), and (z) second, to the extent not included in the immediately preceding clause (y), the GTCR Registrable Securities, Executive Registrable Securities, Investor Registrable Securities, AWDL Registrable Securities and any other securities of the Company requested to be included in such registration, in each instance, which in the opinion of the Company or such underwriters, as the case may be, can be sold without adversely affecting the Company or the marketability or success of the offering, pro rata among the holders thereof on the basis of the number of shares requested to be included in such registration by each such holder. (d) Underwriting; Selection of Underwriters. In the event of a registered ---------------------------------------- public offering involving an underwriting with respect to which the Company has given notice pursuant to paragraph 1(a) above, the right of any holder of AWDL Registrable Securities to registration pursuant to this Agreement shall be conditioned upon such holder's participation in such underwriting and the inclusion of AWDL Registrable Securities in the underwriting to the extent provided herein. All holders of AWDL Registrable Securities, if proposing to distribute their securities through such underwriting, shall (together with the Company and the other holders of Registrable Securities distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the managing underwriter or underwriters selected for such underwriting. The selection of investment banker(s) and manager(s) in connection with any Piggyback Registration that is an underwritten offering must be approved by the holders of a majority of the GTCR Registrable Securities, Executive Registrable Securities and Investor Registrable Securities included in such Piggyback Registration. (e) Other Registrations. If the Company has previously filed a -------------------- registration statement with respect to Registrable Securities, and if such previous registration has not been withdrawn or abandoned, the Company shall not file or cause to be effected any other registration of any of its equity securities or securities convertible or exchangeable into or exercisable for its equity securities under the Securities Act (except on Form S-8 or any successor form), whether on its own behalf or at the request of any holder or holders of such securities, until a period of at least 180 days has elapsed from the effective date of such previous registration. 2. Holdback Agreements. -------------------- (a) Each holder of Registrable Securities shall not effect any public sale or distribution (including sales pursuant to Rule 144) of equity securities of the Company, or any securities convertible into or exchangeable or exercisable for such securities, during the seven days prior to and the 180-day period beginning on the effective date of any underwritten Piggyback Registration (except as part of such underwritten registration), unless the underwriter or underwriters managing the registered public offering otherwise agree. (b) The Company shall not effect any public sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during the seven days prior to and during the 180-day period beginning on the effective date of any underwritten Piggyback Registration (except as part of such underwritten registration or pursuant to registrations on Form S-8 or any successor form), unless the underwriter or underwriters managing the registered public offering otherwise agree. 3. Registration Expenses. ---------------------- (a) All expenses incident to the Company's performance of or compliance with this Agreement, including without limitation all registration and filing fees, fees and expenses of compliance with securities or blue sky laws, printing expenses, messenger and delivery expenses, fees and disbursements of custodians, and fees and disbursements of counsel for the Company and all independent certified public accountants, underwriters (excluding discounts and commissions) and other Persons retained by the Company (all such expenses being herein called "Registration Expenses"), shall be borne by the Company, and the Company shall pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit or quarterly review, the expense of any liability insurance and the expenses and fees for listing the securities to be registered on each securities exchange on which similar securities issued by the Company are then listed or on the NASD automated quotation system. (b) In connection with each Piggyback Registration, each holder of AWDL Registrable Securities included in such registration shall be responsible for the reasonable fees and disbursements of its counsel. 4. Indemnification. ---------------- (a) The Company agrees to indemnify, to the extent permitted by law, each holder of AWDL Registrable Securities, its officers and directors and each Person who controls such holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses caused by any untrue or alleged untrue statement of material fact contained in any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by such holder for use therein or by such holder's failure to deliver a copy of the registration statement or prospectus or any amendments or supplements thereto after the Company has furnished such holder with a sufficient number of copies of the same. In connection with an underwritten offering, the Company shall indemnify such underwriters, their officers and directors and each Person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the holders of AWDL Registrable Securities. (b) In connection with any registration statement in which a holder of AWDL Registrable Securities is participating, each such holder shall furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such registration statement or prospectus and, to the extent permitted by law, shall indemnify the Company, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of material fact contained in the registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such holder. (c) Any Person entitled to indemnification hereunder shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give prompt notice shall not impair any Person's right to indemnification hereunder to the extent such failure has not prejudiced the indemnifying party) and (ii) unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent shall not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. (d) The indemnification provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and shall survive the transfer of securities. The Company also agrees to make such provisions, as are reasonably requested by any indemnified party, for contribution to such party in the event the Company's indemnification is unavailable for any reason. 5. Participation in Underwritten Registrations. No Person may participate -------------------------------------------- in any registration hereunder which is underwritten unless such Person (i) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved by the Person or Persons entitled hereunder to approve such arrangements, (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements, and (iii) completes and executes any other documents reasonably required. 6. Definitions. ------------ "AWDL Registrable Securities" means, irrespective of which Person actually --------------------------- holds such securities, (i) any shares of Common Stock acquired as of the date hereof by AWDL, (ii) any shares of Common Stock acquired hereafter by AWDL, and (iii) any capital stock of the Company issued or issuable with respect to the securities referred to in clauses (i) or (ii) above by way of a stock dividend, stock split, conversion or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization. As to any particular AWDL Registrable Securities, such securities will cease to be AWDL Registrable Securities when they have been distributed to the public pursuant to an offering registered under the Securities Act or sold to the public through a broker, dealer or market maker in compliance with Rule 144 (or any similar rule then in force) under the Securities Act. For purposes of this Agreement, a Person will be deemed to be a holder of AWDL Registrable Securities whenever such Person has the right to acquire such AWDL Registrable Securities (upon conversion, or exercise in connection with a transfer of securities or otherwise, but disregarding any restrictions or limitations upon the exercise of such right), whether or not such acquisition has actually been effected. "Common Stock" means the Class A Common Stock, par value $.01 per share, ------------ and Class B Common Stock, par value $.01 per share, of the Company and any other class of the common stock of the Company hereafter outstanding. "Executive" means any of Mitchell Blatt, Robert M. Doyle, Michael Stanky --------- and MCS Capital, Inc. "Executive Registrable Securities" means, irrespective of which Person -------------------------------- actually holds such securities, (i) any shares of Common Stock acquired as of the date hereof by the Executives (ii) any shares of Common Stock acquired hereafter by the Executives or any executive employee of the Company or its Subsidiaries who becomes a party to this Agreement, and (iii) any capital stock of the Company issued or issuable with respect to the securities referred to in clauses (i) or (ii) above by way of a stock dividend, stock split, conversion or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization. As to any particular Executive Registrable Securities, such securities will cease to be Executive Registrable Securities when they have been distributed to the public pursuant to an offering registered under the Securities Act or sold to the public through a broker, dealer or market maker in compliance with Rule 144 (or any similar rule then in force) under the Securities Act. For purposes of this Agreement, a Person will be deemed to be a holder of Executive Registrable Securities whenever such Person has the right to acquire such Executive Registrable Securities (upon conversion or exercise in connection with a transfer of securities or otherwise, but disregarding any restrictions or limitations upon the exercise of such right), whether or not such acquisition has actually been effected. "GTCR" means Golder, Thoma, Cressey, Rauner Fund IV, L.P., a Delaware ---- limited partnership. "GTCR Registrable Securities" means, irrespective of which Person actually --------------------------- holds such securities, (i) any shares of Common Stock acquired as of or prior to the date hereof by GTCR, (ii) any shares of Common Stock acquired hereafter by GTCR, and (iii) any capital stock of the Company issued or issuable with respect to the securities referred to in clauses (i) or (ii) above by way of a stock dividend, stock split, conversion or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization. As to any particular GTCR Registrable Securities, such securities will cease to be GTCR Registrable Securities when they have been distributed to the public pursuant to an offering registered under the Securities Act or sold to the public through a broker, dealer or market maker in compliance with Rule 144 (or any similar rule then in force) under the Securities Act. For purposes of this Agreement, a Person will be deemed to be a holder of GTCR Registrable Securities whenever such Person has the right to acquire such GTCR Registrable Securities (upon conversion, or exercise in connection with a transfer of securities or otherwise, but disregarding any restrictions or limitations upon the exercise of such right), whether or not such acquisition has actually been effected. "Investor" means Heller Financial, Inc., Jackson National Life Insurance -------- Company, James N. Chapman, Michael E. Marrus and President and Fellows of Harvard College. "Investor Registrable Securities" means, irrespective of which Person ------------------------------- actually holds such securities, (i) any shares of Common Stock acquired as of the date hereof by any Investor, (ii) any shares of Common Stock acquired hereafter by any Investor, and (iii) any capital stock of the Company issued or issuable with respect to the securities referred to in clauses (i) or (ii) above by way of a stock dividend, stock split, conversion or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization. As to any particular Investor Registrable Securities, such securities will cease to be Investor Registrable Securities when they have been distributed to the public pursuant to an offering registered under the Securities Act or sold to the public through a broker, dealer or market maker in compliance with Rule 144 (or any similar rule then in force) under the Securities Act. For purposes of this Agreement, a Person will be deemed to be a holder of Investor Registrable Securities whenever such Person has the right to acquire such Investor Registrable Securities (upon conversion, or exercise in connection with a transfer of securities or otherwise, but disregarding any restrictions or limitations upon the exercise of such right), whether or not such acquisition has actually been effected. "Person" means an individual, a partnership, a joint venture, a ------ corporation, a trust, a limited liability company, an unincorporated organization or a government or any department or agency thereof. "Registrable Securities" means, collectively, the Executive Registrable ---------------------- Securities, the GTCR Registrable Securities, the Investor Registrable Securities and the AWDL Registrable Securities. "Securities Act" means the Securities Act of 1933, as amended. -------------- "Securities Exchange Act" means the Securities Exchange Act of 1934, as ----------------------- amended. 8. Miscellaneous. -------------- (a) Remedies. Any Person having rights under any provision of this -------- Agreement shall be entitled to enforce such rights specifically to recover damages caused by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or other security) for specific performance and for other injunctive relief in order to enforce or prevent violation of the provisions of this Agreement. (b) Amendments and Waivers. Except as otherwise provided herein, the ---------------------- provisions of this Agreement may be amended or waived only upon the prior written consent of the Company and holders of a majority of the AWDL Registrable Securities; provided, however, that no such amendment or waiver shall materially and adversely affect the rights hereunder of any of the parties hereto without the prior written approval of such party. (c) Successors and Assigns. All covenants and agreements in this Agreement ---------------------- by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. In addition, whether or not any express assignment has been made, the provisions of this Agreement which are for the benefit of purchasers or holders of AWDL Registrable Securities are also for the benefit of, and enforceable by, any subsequent holder of AWDL Registrable Securities. (d) 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. (e) 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. (f) Descriptive Headings. The descriptive headings of this Agreement are -------------------- inserted for convenience only and do not constitute a part of this Agreement. (g) Governing Law. All issues and questions concerning the construction, ------------- validity, interpretation and enforcement of this Agreement and the exhibits and schedules hereto shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law rules or provisions (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. (h) 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 overnight 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 each holder of AWDL Registrable Securities at the address indicated by the Company's records and to the Company at the address indicated below: If to the Company, to: Coinmach Laundry Corporation 55 Lumber Road Roslyn, NY 11576 Attention: Robert M. Doyle Senior Vice President with a copy, which will not constitute notice to the Company, to: Anderson Kill & Olick, P.C. 1251 Avenue of the Americas New York, NY 10020 Attention: Ronald S. Brody, Esq. If to AWDL, to: Mr. R. Lee Pritchard 5195 Lake Forrest Drive Atlanta, Georgia 30342 and Mr. Angus K. Hill 615 Longwood Drive Atlanta, Georgia 30305 With a copy to: Alston & Bird, LLP One Atlantic Center 1201 W. Peachtree Street Atlanta, Georgia 30309 Attention: Robert O. Ball III, Esq. 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. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. COINMACH LAUNDRY CORPORATION By: /s/ STEPHEN R. KERRIGAN --------------------------------- Name: Stephen R. Kerrigan Title: Chief Executive Officer ATLANTA WASHER & DRYER LEASING, INC. By: /s/ R. LEE PRITCHARD --------------------------------- Name: R. Lee Pritchard Title: President EX-10.53 3 PROMISSORY NOTE EXHIBIT 10.53 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 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 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) EXHIBIT B STOCK PLEDGE AGREEMENT, DATED JANUARY 31, 1995 (Incoporated by reference from Exhibit 10.5 to Coinmach's Registration Statement on Form S-1, file number 333-00620) 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. Pledgor 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 Pledgor'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. 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. Pledgor 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 Pledgor 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 Pledgor 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, Pledgor 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. 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 EX-10.54 4 UNDERWRITING AGREEMENT EXHIBIT 10.54 4,120,000 SHARES COINMACH LAUNDRY CORPORATION COMMON STOCK UNDERWRITING AGREEMENT ---------------------- July 17, 1996 LEHMAN BROTHERS INC. DILLON, READ & CO. INC. LAZARD FRERES & CO. LLC FIELDSTONE FPCG SERVICES, L.P., As Representatives of the several Underwriters named in Schedule 1, c/o Lehman Brothers Inc. Three World Financial Center New York, New York 10285 Ladies and Gentlemen: Coinmach Laundry Corporation, a Delaware corporation (the "Company"), proposes to sell an aggregate of 4,120,000 shares (the "Firm Stock") of the Company's Common Stock, par value $.01 per share (the "Common Stock"). In addition, the Company proposes to grant to the Underwriters named in Schedule 1 hereto (the "Underwriters") an option to purchase up to an additional 618,000 shares of Common Stock on the terms and for the purposes set forth in Section 3 (the "Option Stock"). The Firm Stock and the Option Stock, if purchased, are hereinafter collectively called the "Stock." This is to confirm the agreement concerning the purchase of the Stock from the Company by the Underwriters. 1. Representations, Warranties and Agreements of the Company. The --------------------------------------------------------- Company represents, warrants and agrees that: (a) A registration statement on Form S-1 and the amendments thereto with respect to the Stock have (i) been prepared by the Company in conformity with the requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the rules and regulations (the "Rules and Regulations") of the Securities and Exchange Commission (the "Commission") thereunder, (ii) been filed with the Commission under the Securities Act and (iii) become -2- effective under the Securities Act. Copies of such registration statement and the amendments thereto have been delivered by the Company to you as the representatives (the "Representatives") of the Underwriters. As used in this Agreement, "Effective Time" means the date and the time as of which such registration statement, or the most recent post-effective amendment thereto, if any, was declared effective by the Commission; "Effective Date" means the date of the Effective Time; "Preliminary Prospectus" means each prospectus included in such registration statement, or amendments thereof, before it became effective under the Securities Act and any prospectus filed with the Commission by the Company with the consent of the Representatives pursuant to Rule 424(a) of the Rules and Regulations; "Registration Statement" means such registration statement, including any Rule 462(b) Registration Statement, as amended at the Effective Time, including all information contained in the final prospectus filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations in accordance with Section 5 hereof and deemed to be a part of the registration statement as of the Effective Time pursuant to paragraph (b) of Rule 430A of the Rules and Regulations; and "Prospectus" means such final prospectus, as first filed with the Commission pursuant to paragraph (1) or (4) of Rule 424(b) of the Rules and Regulations. The Commission has not issued any order preventing or suspending the use of any Preliminary Prospectus. "Rule 462(b) Registration Statement" means a registration statement filed pursuant to Rule 462(b) of the Rules and Regulations relating to the offering covered by the initial registration statement (No. 333-03587). (b) The Registration Statement conforms, and the Prospectus and any further amendments or supplements to the Registration Statement or the Prospectus will, when they become effective or are filed with the Commission, as the case may be, conform in all material respects to the requirements of the Securities Act and the Rules and Regulations and do not and will not, as of the applicable effective date (as to the Registration Statement and any amendment thereto) and as of the applicable filing date (as to the Prospectus and any amendment or supplement thereto) contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that no representation or warranty is made as to information concerning any Underwriter contained in or omitted from the Registration Statement or the -3- Prospectus in reliance upon and in conformity with written information furnished to the Company through the Representatives by or on behalf of any Underwriter specifically for inclusion therein. (c) The Company and each of its subsidiaries (as defined in Section 15) have been duly incorporated and are validly existing as corporations in good standing under the laws of their respective jurisdictions of incorporation, are duly qualified to do business and are in good standing as foreign corporations in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective business requires such qualification, except where the failure to be so qualified would not be reasonably expected to have a material adverse effect on the consolidated financial position, stockholders' equity, result of operations, business or business prospects of the Company and its subsidiaries, taken as a whole (a "Material Adverse Effect"), and have all power and authority necessary to own or hold their respective properties and to conduct the businesses in which they are engaged; and none of the subsidiaries of the Company (other than Coinmach Corporation, a Delaware corporation and a wholly owned subsidiary of the Company) is a "significant subsidiary," as such term is defined in Rule 405 of the Rules and Regulations. (d) The Company has an authorized capitalization as set forth in the Prospectus, and all of the issued shares of capital stock of the Company have been duly and validly authorized and issued, are fully paid and non- assessable and conform in all material respects to the description thereof contained in the Prospectus; and all of the issued shares of capital stock of each subsidiary of the Company have been duly and validly authorized and issued and are fully paid and non-assessable and are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims, except for liens, encumbrances, equities or claims of Heller Financial, Inc. ("Heller") pursuant to those certain Pledge Agreements, dated November 30, 1995, between Heller and each of the Company and Coinmach Corporation (the "Pledge Agreements"). (e) The shares of the Stock to be issued and sold by the Company to the Underwriters hereunder have been duly and validly authorized and, when issued and delivered against payment therefor as provided herein will be duly and validly -4- issued, fully paid and non-assessable, and will conform to the description thereof contained in the Prospectus. (f) This Agreement has been duly authorized, executed and delivered by the Company. (g) The execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any material indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, nor will such actions result in any violation of the provisions of the charter or by-laws of the Company or any of its subsidiaries or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets; and except for the registration of the Stock under the Securities Act and such consents, approvals, authorizations, registrations or qualifications as may be required under the Exchange Act and applicable state securities laws in connection with the purchase and distribution of the Stock by the Underwriters, no consent, approval, authorization or order of, or filing or registration with, any such court or governmental agency or body is required for the execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby. (h) Except as described in the Registration Statement or the exhibits thereto or in the Prospectus, there are no contracts, agreements or understandings between the Company and any person granting such person the right (other than rights that have been waived or satisfied) to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to the Registration Statement or in any securities being registered pursuant to any other registration statement filed by the Company under the Securities Act. -5- (i) Except as described in the Registration Statement or the Prospectus, the Company has not sold or issued any shares of Common Stock during the six-month period preceding the date of the Prospectus, including any sales pursuant to Rule 144A under, or Regulations D or S of, the Securities Act. (j) Neither the Company nor any of its subsidiaries has sustained, since the date of the latest audited financial statements included in the Prospectus, any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus; and, since such date, to the actual knowledge of Stephen R. Kerrigan, Mitchell Blatt, Robert M. Doyle or John E. Denson (the "Officers"), there has not been any change in the capital stock or long-term debt of the Company or any of its subsidiaries or any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Company and its subsidiaries, otherwise than as set forth or contemplated in the Prospectus. (k) The financial statements (including the related notes and supporting schedules) filed as part of the Registration Statement or included in the Prospectus present fairly the financial condition and results of operations of the entities purported to be shown thereby, at the dates and for the periods indicated, and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved. The pro forma financial statements and other pro forma financial information (including the notes thereto) included in the Registration Statement and the Prospectus (i) present fairly the information shown therein, (ii) have been prepared in accordance with the applicable requirements of Rule 11-02 of the Rules and Regulations, (iii) have been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial statements and (iv) have been properly compiled on the basis described therein and the assumptions used in the preparation of the pro forma financial statements and other pro forma financial information (including the notes thereto) and included in the Registration Statement and the Prospectus are reasonable and the adjustments used therein are appropriate to give -6- effect to the transactions or circumstances referred to therein. (l) Ernst & Young, LLP ("E&Y"), who have certified certain financial statements of the Company, whose report appears in the Prospectus and who have delivered an initial letter referred to in Section 7(g) hereof, are independent public accountants as required by the Securities Act and the Rules and Regulations; and KPMG Peat Marwick, LLP ("KPMG") and Arthur Andersen LLP ("AA"), whose reports appear in the Prospectus and who have each delivered an initial letter referred to in Section 7(g) hereof, were independent accountants as required by the Securities Act and the Rules and Regulations during the periods covered by the financial statements on which they reported contained in the Prospectus. (m) (i) Neither the Company nor any of its subsidiaries own any real property other than the real property located in Baltimore, Maryland; (ii) the Company and each of its subsidiaries have marketable title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects, except as are described in the Propectus or such as do not materially interfere with the use made and proposed to be made (as described in the Prospectus) of such property by the Company and its subsidiaries and (iii) all real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases, except (A) the Company's facility located in Roslyn, New York, and (B) where the failure to so hold real property and buildings under valid, subsisting and enforceable leases would not be reasonably expected to result in a Material Adverse Effect. (n) Except as described in the Prospectus, the Company and each of its subsidiaries carry, or are covered by, insurance in such amounts and covering such risks as is, in the reasonable judgment of the Company, adequate for the conduct of their respective businesses and the value of their respective properties. (o) The Company and each of its subsidiaries own or possess adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights and licenses necessary for the conduct of their respective businesses and the Officers have no reason to -7- believe that the conduct of their respective businesses will conflict with, and have not received any notice of any claim of conflict with, any such rights of others. (p) Except as disclosed in the Prospectus, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property or assets of the Company or any of its subsidiaries is the subject that, if determined adversely to the Company or any of its subsidiaries, might have a Material Adverse Effect; and to the actual knowledge of the Officers, no such proceedings are threatened by governmental authorities or by others. (q) There are no contracts or other documents to which the Company or any of its subsidiaries is a party that are required to be described in the Prospectus or filed as exhibits to the Registration Statement by the Securities Act or by the Rules and Regulations that have not been described in the Prospectus or filed as exhibits to the Registration Statement or incorporated therein by reference as permitted by the Rules and Regulations. (r) No relationship, direct or indirect, exists between or among the Company, on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company, on the other hand, that is required to be described in the Prospectus that is not so described. (s) Except as disclosed in the Prospectus, no labor disturbance by the employees of the Company exists or, to the actual knowledge of the Officers, is imminent that might reasonably be expected to have a Material Adverse Effect. (t) The Company is in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for which the Company would have any liability; the Company has not incurred and does not expect to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the "Code"); and each "pension plan", except for the Solon Profit Sharing and Retirement -8- Savings Plan, for which the Company would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification. (u) The Company has filed or properly been granted an extension for filing all federal, state and local income and franchise tax returns required to be filed through the date hereof and has paid all taxes due thereon, and no tax deficiency has been determined that has had (nor do the Officers have any actual knowledge of any tax deficiency that might reasonably be expected to have) a Material Adverse Effect. (v) Since the date as of which information is given in the Prospectus through the date hereof, and except as may otherwise be disclosed in the Prospectus, the Company has not (i) issued or granted any securities, (ii) incurred any liability or obligation, direct or contingent, other than liabilities and obligations that were incurred in the ordinary course of business and consistent with past practice, (iii) entered into any transaction not in the ordinary course of business and consistent with past practice or (iv) declared or paid any dividend on its capital stock. (w) The Company (i) makes and keeps accurate books and records in all material respects and (ii) maintains internal accounting controls that provide reasonable assurance that (A) material transactions are executed in accordance with management's authorization and (B) material transactions are recorded as necessary to permit preparation of its financial statements and to maintain accountability for its assets. (x) Neither the Company nor any of its subsidiaries (i) is in violation of its charter or by-laws, (ii) is in default in any material respect, and, to the actual knowledge of the Officers, no event has occurred that, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any material indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of its properties or assets is subject or (iii) is in violation in any material respect of any law, -9- ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject or has failed to obtain any material license, permit, certificate, franchise or other governmental authorization or permit necessary to the ownership of its property or to the conduct of its business. (y) Neither the Company nor any of its subsidiaries, nor any director or, officer, nor to the knowledge of any of the Officers any agent, employee or other person authorized to act on behalf of the Company or any of its subsidiaries, has used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977; or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment. (z) There has been no storage, disposal, generation, manufacture, refinement, transportation, handling or treatment of toxic wastes, medical wastes, hazardous wastes or hazardous substances by the Company or any of its subsidiaries (or, to the actual knowledge of the Officers, any of their predecessors in interest) at, upon or from any of the property now or previously owned or leased by the Company or its subsidiaries in violation of any applicable law, ordinance, rule, regulation, order, judgement, decree or permit or that would require remedial action under any applicable law, ordinance, rule, regulation, order, judgment, decree or permit, except for any violation or remedial action that would not be reasonably likely to have, singularly or in the aggregate with all such violations and remedial actions, a Material Adverse Effect; there has been no material spill, discharge, leak, emission, injection, escape, dumping or release of any kind onto such property or into the environment surrounding such property of any toxic wastes, medical wastes, solid wastes, hazardous wastes or hazardous substances due to or caused by the Company or any of its subsidiaries or with respect to which the Officers have actual knowledge, except for any such spill, discharge, leak, emission, injection, escape, dumping or release that would not be reasonably likely to have, singularly or in the aggregate with all such spills, discharges, leaks, emissions, injections, escapes, dumpings and releases, a Material Adverse Effect; and the terms "hazardous wastes", "toxic wastes", "hazardous substances" and "medical wastes" -10- shall have the meanings specified in any applicable local, state, federal and foreign laws or regulations with respect to environmental protection. (aa) Neither the Company nor any subsidiary is an "investment company" within the meaning of such term under the Investment Company Act of 1940 and the rules and regulations of the Commission thereunder. 2. Purchase of the Stock by the Underwriters. On the basis of the ----------------------------------------- representations and warranties contained in, and subject to the terms and conditions of, this Agreement, the Company agrees to sell 4,120,000 shares of the Firm Stock to the several Underwriters and each of the Underwriters, severally and not jointly, agrees to purchase the number of shares of the Firm Stock set opposite that Underwriter's name in Schedule 1 hereto. The respective purchase obligations of the Underwriters with respect to the Firm Stock shall be rounded among the Underwriters to avoid fractional shares, as the Representatives may determine. In addition, the Company grants to the Underwriters an option (the "Option") to purchase up to 618,000 shares of Option Stock. Such option is granted solely for the purpose of covering over-allotments in the sale of Firm Stock and is exercisable as provided in Section 4 hereof. Shares of Option Stock shall be purchased severally for the account of the Underwriters in proportion to the number of shares of Firm Stock set opposite the name of such Underwriters in Schedule 1 hereto. The respective purchase obligations of each Underwriter with respect to the Option Stock shall be adjusted by the Representatives so that no Underwriter shall be obligated to purchase Option Stock other than in 100 share amounts. The price of both the Firm Stock and any Option Stock shall be $13.02 per share. The Company shall not be obligated to deliver any of the Stock to be delivered on the First Delivery Date or the Second Delivery Date (as hereinafter defined), as the case may be, except upon payment for all the Stock to be purchased on such Delivery Date as provided herein. 3. Offering of Stock by the Underwriters. Upon authorization by the ------------------------------------- Representatives of the release of the Firm Stock, the several Underwriters propose to offer the Firm Stock for sale upon the terms and conditions set forth in the Prospectus. 4. Delivery of and Payment for the Stock. Delivery of and payment ------------------------------------- for the Firm Stock shall be made at the office of -11- Cahill Gordon & Reindel, 80 Pine Street, New York, New York, at 10:00 A.M., New York City time, on the fourth full business day following the date of this Agreement or at such other date or place as shall be determined by agreement between the Representatives and the Company. This date and time are sometimes referred to as the "First Delivery Date." On the First Delivery Date, the Company shall deliver or cause to be delivered certificates representing the Firm Stock to the Representatives for the account of each Underwriter against payment to or upon the order of the Company of the purchase price by wire transfer of immediately available funds. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligation of each Underwriter hereunder. Upon delivery, the Firm Stock shall be registered in such names and in such denominations as the Representatives shall request in writing not less than two full business days prior to the First Delivery Date. For the purpose of expediting the checking and packaging of the certificates for the Firm Stock, the Company shall make the certificates representing the Firm Stock available for inspection by the Representatives in New York, New York, not later than 2:00 P.M., New York City time, on the business day prior to the First Delivery Date. At any time on or before the thirtieth day after the date of this Agreement the Option may be exercised by written notice being given to the Company by the Representatives. Such notice shall set forth the aggregate number of shares of Option Stock as to which the Option is being exercised, the names in which the shares of Option Stock are to be registered, the denominations in which the shares of Option Stock are to be issued and the date and time, as determined by the Representatives, when the shares of Option Stock are to be delivered; provided, however, that this date and time shall not be earlier than the First Delivery Date nor earlier than the second business day after the date on which the Option shall have been exercised nor later than the fifth business day after the date on which the Option shall have been exercised. The date and time the shares of Option Stock are delivered are sometimes referred to as the "Second Delivery Date" and the First Delivery Date and the Second Delivery Date are sometimes each referred to as a "Delivery Date." Delivery of and payment for the Option Stock shall be made at the place specified in the first sentence of the first paragraph of this Section 4 (or at such other place as shall be determined by agreement between the Representatives and the Company) at 10:00 A.M., New York City time, on the Second -12- Delivery Date. On the Second Delivery Date, the Company shall deliver or cause to be delivered the certificates representing the Option Stock to the Representatives for the account of each Underwriter against payment to or upon the order of the Company of the purchase price by wire transfer of immediately available funds. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligation of each Underwriter hereunder. Upon delivery, the Option Stock shall be registered in such names and in such denominations as the Representatives shall request in the aforesaid written notice. For the purpose of expediting the checking and packaging of the certificates for the Option Stock, the Company shall make the certificates representing the Option Stock available for inspection by the Representatives in New York, New York, not later than 2:00 P.M., New York City time, on the business day prior to the Second Delivery Date. 5. Further Agreements of the Company. The Company agrees: --------------------------------- (a) To prepare the Prospectus in a form approved by the Representatives and to file such Prospectus pursuant to Rule 424(b) under the Securities Act not later than the Commission's close of business on the second business day following the execution and delivery of this Agreement or, if applicable, such earlier time as may be required by Rule 430A(a)(3) under the Securities Act; to make no further amendment or any supplement to the Registration Statement or to the Prospectus except as permitted herein; to advise the Representatives, promptly after it receives notice thereof, of the time when any amendment to the Registration Statement has been filed or becomes effective or any supplement to the Prospectus or any amended Prospectus has been filed and to furnish the Representatives with copies thereof; to advise the Representatives, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus, of the suspension of the qualification of the Stock for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement or the Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus or suspending any such qualification, to use promptly all commercially reasonable efforts to obtain its withdrawal; -13- (b) To furnish promptly to each of the Representatives and to counsel for the Underwriters a signed copy of the Registration Statement as originally filed with the Commission, and each amendment thereto filed with the Commission, including all consents and exhibits filed therewith; (c) To deliver promptly to the Representatives such number of the following documents as the Representatives shall reasonably request: (i) conformed copies of the Registration Statement as originally filed with the Commission and each amendment thereto (in each case excluding exhibits other than this Agreement) and (ii) each Preliminary Prospectus, the Prospectus and any amended or supplemented Prospectus; and, if the delivery of a prospectus is required at any time after the Effective Time in connection with the offering or sale of the Stock or any other securities relating thereto and if at such time any events shall have occurred as a result of which, in the reasonable judgment of Cahill Gordon & Reindel, outside counsel for the Underwriters, the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus is delivered, not misleading, or, if for any other reason it shall be necessary to amend or supplement the Prospectus in order to comply with the Securities Act, to notify the Representatives and, upon their request, to prepare and furnish without charge to each Underwriter and to any dealer in securities as many copies as the Representatives may from time to time reasonably request of an amended or supplemented Prospectus that will correct such statement or omission or effect such compliance; (d) To file promptly with the Commission any amendment to the Registration Statement or the Prospectus or any supplement to the Prospectus that may, in the judgment of the Company or the reasonable judgment of the Representatives, be required by the Securities Act or requested by the Commission; (e) Prior to filing with the Commission any amendment to the Registration Statement or supplement to the Prospectus or any Prospectus pursuant to Rule 424 of the Rules and Regulations, to furnish a copy thereof to the Representatives and counsel for the Underwriters a reasonable amount of time prior to such proposed filing and -14- will not file any such amendment or supplement to which the Representatives or counsel for the Underwriters shall reasonably object; (f) As soon as practicable after the Effective Date, to make generally available to the Company's securityholders and to deliver to the Representatives an earnings statement of the Company and its subsidiaries (which need not be audited) complying with Section 11(a) of the Securities Act and the Rules and Regulations (including, at the option of the Company, Rule 158); (g) For a period of five years following the Effective Date, to furnish to the Representatives copies of all materials furnished by the Company to its stockholders and all public reports and all reports and financial statements furnished by the Company to the principal national securities exchange upon which the Common Stock may be listed pursuant to requirements of or agreements with such exchange or to the Commission pursuant to the Exchange Act or any rule or regulation of the Commission thereunder; (h) Promptly from time to time to take such action as the Representatives may reasonably request to qualify the Stock for offering and sale under the securities laws of such jurisdictions as the Representatives may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Stock; provided that in connection therewith the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction; (i) For a period of 180 days from the date of the Prospectus, not to, directly or indirectly, offer for sale, sell or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of Common Stock (other than the Stock and shares issued pursuant to employee benefit plans, qualified stock option plans or other employee compensation plans existing on the date hereof), or sell or grant options, rights or warrants with respect to any shares of Common Stock (other than the grant of options pursuant to option plans existing on the date hereof or the granting of options as disclosed in the Prospectus), without the prior written consent of Lehman Brothers Inc.; and to cause each -15- officer, director and holder of Common Stock of the Company to furnish to the Representatives, prior to the First Delivery Date, a letter or letters, in form and substance satisfactory to counsel for the Underwriters, pursuant to which each such person shall agree not to, directly or indirectly, offer for sale, sell or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of Common Stock for a period of 180 days from the date of the Prospectus, without the prior written consent of Lehman Brothers Inc.; (j) Prior to the Effective Date, to apply for the listing of the Stock on the Nasdaq National Market and to use all commercially reasonable efforts to complete that listing, subject only to official notice of issuance, prior to the First Delivery Date; (k) Prior to filing with the Commission any reports on Form SR pursuant to Rule 463 of the Rules and Regulations, to furnish a copy thereof to the counsel for the Underwriters and receive and consider its comments thereon, and to deliver promptly to the Representatives a signed copy of each report on Form SR filed by it with the Commission; (l) To apply the net proceeds from the sale of the Stock being sold by the Company as set forth in the Prospectus; (m) To take such steps as shall be reasonably necessary to ensure that neither the Company nor any subsidiary shall become an "investment company" within the meaning of such term under the Investment Company Act of 1940 and the rules and regulations of the Commission thereunder. 6. Expenses. The Company agrees to pay (a) the costs incident to -------- the authorization, issuance, sale and delivery of the Stock and any taxes payable in that connection; (b) the costs incident to the preparation, printing and filing under the Securities Act of the Registration Statement and any amendments and exhibits thereto; (c) the costs of distributing the Registration Statement as originally filed and each amendment thereto and any post-effective amendments thereof (including, in each case, exhibits), any Preliminary Prospectus, the Prospectus and any amendment or supplement to the Prospectus, all as provided in this Agreement; (d) the costs of producing and -16- distributing this Agreement and any other related documents in connection with the offering, purchase, sale and delivery of the Common Stock; (e) the filing fees and the reasonable fees and disbursements of counsel for the Underwriters incident to securing any required review by the National Association of Securities Dealers, Inc. of the terms of sale of the Stock; (f) any applicable listing or other fees; (g) the fees and expenses of qualifying the Stock under the securities laws of the several jurisdictions as provided in Section 5(h) and of preparing, printing and distributing a Blue Sky Memorandum (including related reasonable fees and expenses of counsel to the Underwriters); (h) any fees charged by securities rating services for rating the Stock; and (i) all other costs and expenses incident to the performance of the obligations of the Company under this Agreement; provided that, except as provided in this Section 6 and in Section 11, the Underwriters shall pay their own costs and expenses, including the costs and expenses of their counsel, any transfer taxes on the Stock that they may sell and the expenses of advertising any offering of the Stock made by the Underwriters. 7. Conditions of Underwriters' Obligations. The respective --------------------------------------- obligations of the Underwriters hereunder are subject to the accuracy, when made and on each Delivery Date, of the representations and warranties of the Company contained herein, to the performance by the Company of its obligations hereunder, and to each of the following additional terms and conditions: (a) The Prospectus shall have been timely filed with the Commission in accordance with Section 5(a); no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; and any request of the Commission for inclusion of additional information in the Registration Statement or the Prospectus or otherwise shall have been complied with. (b) No Underwriter shall have discovered and disclosed to the Company on or prior to such Delivery Date that the Registration Statement or the Prospectus or any amendment or supplement thereto contains an untrue statement of a fact that in the reasonable opinion of Cahill Gordon & Reindel, counsel for the Underwriters, is material or omits to state a fact that in the reasonable opinion of such counsel, is material and is required to be stated therein or is necessary to make the statements therein not misleading. -17- (c) All corporate proceedings and other legal matters incident to the authorization, form and validity of this Agreement, the Stock, the Registration Statement and the Prospectus, and all other legal matters relating to this Agreement and the transactions contemplated hereby shall be reasonably satisfactory in all material respects to counsel for the Underwriters, and the Company shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters. (d) Anderson Kill Olick & Oshinsky, P.C., as counsel to the Company, shall have furnished to the Representatives its written opinion, addressed to the Underwriters and dated such Delivery Date, in form and substance reasonably satisfactory to the Representatives, to the effect set forth in Exhibit A hereto: (e) The Representatives shall have received from Cahill Gordon & Reindel, counsel for the Underwriters, such opinion or opinions, dated such Delivery Date, with respect to the issuance and sale of the Stock, the Registration Statement, the Prospectus and other related matters as the Representatives may reasonably require, and the Company shall have furnished to such counsel such documents as such counsel reasonably request for the purpose of enabling it to pass upon such matters. (f) At the time of execution of this Agreement, the Representatives shall have received from each of E&Y, KPMG and AA a letter, in form and substance satisfactory to the Representatives, addressed to the Underwriters and dated the date hereof (i) confirming that they are independent public accountants within the meaning of the Securities Act and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission, (ii) stating, as of the date hereof (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Prospectus, as of a date not more than five days prior to the date hereof), the conclusions and findings of such firm with respect to the financial information and other matters ordinarily covered by accountants' "comfort letters" to underwriters in connection with registered public offerings. (g) With respect to the letter of each of E&Y, KPMG and AA referred to in the preceding paragraph and delivered to the Representatives concurrently with the execution of -18- this Agreement (the "initial letter"), the Company shall have furnished to the Representatives a letter (the "bring-down letter") of such accountants, addressed to the Underwriters and dated such Delivery Date (i) confirming that they are independent public accountants within the meaning of the Securities Act and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission, (ii) stating, as of the date of the bring-down letter (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Prospectus, as of a date not more than five days prior to the date of the bring-down letter), the conclusions and findings of such firm with respect to the financial information and other matters covered by the initial letter and (iii) confirming in all material respects the conclusions and findings set forth in the initial letter. (h) The Company shall have furnished to the Representatives a certificate, dated such Delivery Date, of its Chairman of the Board and Chief Executive Officer and its Senior Vice President and Chief Financial Officer stating that: (i) The representations and warranties of the Company in Section 1 that are qualified with reference to a Material Adverse Effect or materiality are true and correct as of such Delivery Date; and the representations and warranties of the Company that are not so qualified shall be true and correct in all material respects, in each case as of such Delivery Date; the Company has complied in all material respects with all its agreements contained herein; and the conditions set forth in Sections 7(a) and 7(i) have been fulfilled in all material respects; and (ii) They have carefully examined the Registration Statement and the Prospectus and, in their opinion (A) as of the Effective Date, the Registration Statement and Prospectus did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (B) since the Effective no event has occurred that should have been set forth in a supplement or amendment to the Registration Statement or the Prospectus. -19- (i) (i) Neither the Company nor any of its subsidiaries shall have sustained since the date of the latest audited financial statements included in the Prospectus any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus or (ii) since such date there shall not have been any change in the capital stock or long-term debt of the Company or any of its subsidiaries or any change, or any development involving a prospective change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Company and its subsidiaries, otherwise than as set forth or contemplated in the Prospectus, the effect of which, in any such case described in clause (i) or (ii), is, in the reasonable judgment of the Representatives, so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Stock being delivered on such Delivery Date on the terms and in the manner contemplated in the Prospectus. (j) Subsequent to the execution and delivery of this Agreement (i) no downgrading shall have occurred in the rating accorded the Company's debt securities by any "nationally recognized statistical rating organization," as that term is defined by the Commission for purposes of Rule 436(g)(2) of the Rules and Regulations and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company's debt securities. (k) Subsequent to the execution and delivery of this Agreement there shall not have occurred any of the following: (i) trading in securities generally on the New York Stock Exchange or the American Stock Exchange or in the over-the-counter market, or trading in any securities of the Company on any exchange or in the over-the-counter market, shall have been suspended or minimum prices shall have been established on any such exchange or such market by the Commission, by such exchange or by any other regulatory body or governmental authority having jurisdiction, (ii) a banking moratorium shall have been declared by Federal or state authorities, (iii) the United States shall have become engaged in hostilities, there shall have been an escalation in hostilities involving the United States or there shall have been a declaration of a national emergency or war by -20- the Untied States or (iv) there shall have occurred such a material adverse change in general economic, political or financial conditions (or the effect of international conditions on the financial markets in the United States shall be such) as to make it, in the reasonable judgment of a majority in interest of the several Underwriters, impracticable or inadvisable to proceed with the public offering or delivery of the Stock being delivered on such Delivery Date on the terms and in the manner contemplated in the Prospectus. (l) The Nasdaq National Market shall have approved the Stock for inclusion, subject only to official notice of issuance and evidence of satisfactory distribution. All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Underwriters. 8. Indemnification and Contribution. -------------------------------- (a) The Company and Coinmach Corporation, its principal operating subsidiary (the "Principal Subsidiary"), jointly and severally, shall indemnify and hold harmless each Underwriter, its officers and employees and each person, if any, who controls any Underwriter within the meaning of the Securities Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, but not limited to, any loss, claim, damage, liability or action relating to purchases and sales of Stock), to which that Underwriter, officer, employee or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained (A) in any Preliminary Prospectus, the Registration Statement or the Prospectus or in any amendment or supplement thereto or (B) in any blue sky application or other document prepared or executed by the Company (or based upon any written information furnished by the Company) specifically for the purpose of qualifying any or all of the Stock under the securities laws of any state or other jurisdiction (any such application, document or information being hereinafter called a "Blue Sky Application"), (ii) the omission or alleged omission to state in any Preliminary Prospectus, the Registration Statement or the Prospectus, or in any amendment or supplement thereto, or in any Blue Sky Application any material fact required to be -21- stated therein or necessary to make the statements therein not misleading or (iii) any act or failure to act or any alleged act or failure to act by any Underwriter in connection with, or relating in any manner to, the Stock or the offering contemplated hereby, and that is included as part of or referred to in any loss, claim, damage, liability or action arising out of or based upon matters covered by clause (i) or (ii) above (provided that the Company and the -------- Principal Subsidiary shall not be liable under this clause (iii) to the extent that it is determined in a final judgment by a court of competent jurisdiction that such loss, claim, damage, liability or action resulted directly from any such acts or failures to act undertaken or omitted to be taken by such Underwriter through its negligence or willful misconduct), and shall reimburse each Underwriter and each such officer, employee or controlling person promptly upon demand for any legal or other expenses reasonably incurred by that Underwriter, officer, employee or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, -------- ------- that the Company and the Principal Subsidiary shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Prospectus, the Registration Statement or the Prospectus, or in any such amendment or supplement, or in any Blue Sky Application, in reliance upon and in conformity with written information concerning such Underwriter furnished to the Company through the Representatives by or on behalf of any Underwriter specifically for inclusion therein; provided, further, that the indemnification and contribution -------- ------- agreements contained in this Section 8 with respect to any Preliminary Prospectus, or the Prospectus after it has been amended or supplemented, shall not inure to the benefit of any Underwriter (or any person controlling such Underwriter) from whom the person asserting such loss, claim, damage, liability or action shall have purchased Stock that are the subject thereof it, after a sufficient number of copies thereof have been delivered by the Company to such Underwriter, such Underwriter shall have failed to send or give a copy of the final Prospectus or of the Prospectus as then amended or supplemented, as the case may be, to such person at or prior to the confirmation of such sale of such Stock to such person, and, if such loss, claim, damage, liability or action would not have arisen but for such failure. The foregoing indemnity agreement is in addition to any liability that the Company or the Principal Subsidiary may otherwise have to any Underwriter or to any officer, employee or controlling person of that Underwriter. -22- (b) Each Underwriter, severally and not jointly, shall indemnify and hold harmless the Company, its officers and employees, each of its directors and each person, if any, who controls the Company within the meaning of the Securities Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company or any such director, officer or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained (A) in any Preliminary Prospectus, the Registration Statement or the Prospectus or in any amendment or supplement thereto, or (B) in any Blue Sky Application or (ii) the omission or alleged omission to state in any Preliminary Prospectus, the Registration Statement or the Prospectus, or in any amendment or supplement thereto, or in any Blue Sky Application any material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning such Underwriter furnished to the Company through the Representatives by or on behalf of that Underwriter specifically for inclusion therein, and shall reimburse the Company and any such director, officer, employee or controlling person for any legal or other expenses reasonably incurred by the Company or any such director, officer, employee or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred. The foregoing indemnity agreement is in addition to any liability that any Underwriter may otherwise have to the Company or any such director, officer, employee or controlling person. (c) Promptly after receipt by an indemnified party under this Section 8 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that -------- ------- the failure to notify the indemnifying party shall not relieve it from any liability that it may have under this Section 8 except to the extent it has been materially prejudiced by such failure and, provided further, that the failure -------- to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than under this Section 8. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party -23- thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 8 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that the Representatives -------- ------- shall have the right to employ counsel to represent jointly the Representatives and those other Underwriters and their respective officers, employees and controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Underwriters against the Company or the Principal Subsidiary under this Section 8 if, in the reasonable judgment of the legal counsel of the Representatives, it is advisable for the Representatives and those Underwriters, officers, employees and controlling persons to be jointly represented by separate counsel due to (y) the existence of actual or potential differing interests between such Representatives, Underwriters, officers, employees and controlling persons or (z) the availability of different defenses among such parties, and in that event the fees and expenses of such separate counsel shall be paid by the Company or the Principal Subsidiary. No indemnifying party shall (i) without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld), settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding, or (ii) be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with the consent of the indemnifying party or if there be a final judgment of the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. (d) If the indemnification provided for in this Section 8 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 8(a) or 8(b) -24- in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company and the Principal Subsidiary on the one hand and the Underwriters on the other from the offering of the Stock or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Principal Subsidiary on the one hand and the Underwriters on the other with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Principal Subsidiary on the one hand and the Underwriters on the other with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Stock purchased under this Agreement (before deducting expenses) received by the Company and the Principal Subsidiary on the one hand, and the total underwriting discounts and commissions received by the Underwriters with respect to the shares of the Stock purchased under this Agreement, on the other hand, bear to the total gross proceeds from the offering of the shares of the Stock under this Agreement, in each case as set forth in the table on the cover page of the Prospectus. The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company, the Principal Subsidiary or the Underwriters, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. For purposes of the preceding two sentences, the net proceeds deemed to be received by the Company shall be deemed to be also for the benefit of the Principal Subsidiary and information supplied by the Company shall also be deemed to have been supplied by the Principal Subsidiary. The Company, the Principal Subsidiary and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section were to be determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, -25- referred to above in this Section shall be deemed to include, for purposes of this Section 8(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Not withstanding the provisions of this Section 8(d), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Stock underwritten by it and distributed to the public was offered to the public exceeds the amount of any damages which such Underwriter has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 8(e) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute as provided in this Section 8(d) are several in proportion to their respective underwriting obligations and not joint. (e) The Underwriters severally confirm and the Company acknowledges that the statements with respect to the public offering of the Stock by the Underwriters set forth in the last paragraph on the cover page of, the legend concerning over-allotments on the inside front cover page of and the concession and reallowance figures appearing under the caption "Underwriting" in, the Prospectus are correct and constitute the only information concerning such Underwriters furnished in writing to the Company by or on behalf of the Underwriters specifically for inclusion in the Registration Statement and the Prospectus. 9. Defaulting Underwriters. ----------------------- If, on either Delivery Date, any Underwriter defaults in the performance of its obligations under this Agreement, the remaining non- defaulting Underwriters shall be obligated to purchase the Stock that the defaulting Underwriter agreed but failed to purchase on such Delivery Date in the respective pro portions that the number of shares of the Firm Stock set opposite the name of each remaining non-defaulting Underwriter in Schedule 1 hereto bears to the total number of shares of the Firm Stock set opposite the names of all the remaining non- defaulting Underwriters in Schedule 1 hereto; provided, however, that the remaining non- defaulting Underwriters shall not be - -------- ------- obligated to purchase any of the Stock on such Delivery Date if the total number of shares of the Stock that the defaulting Underwriter or Underwriters agreed but failed to purchase on such date exceeds 9.09% of the total number of shares of the Stock to be purchased -26- on such Delivery Date, and any remaining non-defaulting Underwriter shall not be obligated to purchase more than 110% of the number of shares of the Stock that it agreed to purchase on such Delivery Date pursuant to the terms of Section 2. If the foregoing maximums are exceeded, the remaining non-defaulting Underwriters, or those other underwriters satisfactory to the Representatives who so agree, shall have the right, but shall not be obligated, to purchase, in such proportion as may be agreed upon among them, all the Stock to be purchased on such Delivery Date. If the remaining Underwriters or other underwriters satisfactory to the Representatives do not elect to purchase the shares that the defaulting Underwriter or Underwriters agreed but failed to purchase on such Delivery Date, this Agreement (or, with respect to the Second Delivery Date, the obligation of the Underwriters to purchase, and of the Company to sell, the Option Stock) shall terminate without liability on the part of any non- defaulting Underwriter or the Company, except that the Company will continue to be liable for the payment of expenses to the extent set forth in Sections 6 and 11. As used in this Agreement, the term "Underwriter" includes, for all purposes of this Agreement unless the context requires otherwise, any party not listed in Schedule 1 hereto who, pursuant to this Section 9, purchase Firm Stock that a defaulting Underwriter agreed but failed to purchase. Nothing contained herein shall relieve a defaulting Underwriter of any liability it may have to the Company for damages caused by its default. If other underwriters are obligated or agree to purchase the Stock of a defaulting or with drawing Underwriter, either the Representatives or the Company may postpone the Delivery Date for up to seven full business days in order to effect any changes that in the opinion of counsel for the Company or counsel for the Underwriters may be necessary in the Registration Statement, the Prospectus or in any other document or arrangement. 10. Termination. The obligations of the Underwriters hereunder may ----------- be terminated by the Representatives by notice given to and received by the Company prior to delivery of and payment for the Firm Stock if, prior to that time, any of the events described in Sections 7(i), 7(j) or 7(k), shall have occurred or if the Underwriters shall decline to purchase the Stock for any reason permitted under this Agreement. 11. Reimbursement of Underwriters' Expenses. If (a) the Company --------------------------------------- shall fail to tender the Stock for delivery to the Underwriters by reason of any failure, refusal or inability on the part of the Company to perform any agreement on its part -27- to be performed, or because any other condition of the Under writers' obligations hereunder required to be fulfilled by the Company is not fulfilled, the Company will reimburse the Under writers for all reasonable out-of-pocket expenses (including fees and disbursements of counsel) incurred by the Underwriters in connection with this Agreement and the proposed purchase of the Stock, and upon demand the Company shall pay the full amount thereof to the Representatives. If this Agreement is terminated pursuant to Section 9 by reason of the default of one or more Underwriters, the Company shall not be obligated to reimburse any defaulting Underwriter on account of those expenses. 12. Notices, etc. All statements, request, notices and agreements ------------ hereunder shall be in writing, and: (a) if to the Underwriters, shall be delivered or sent by mail, telex or facsimile transmission to Lehman Brothers Inc., Three World Financial Center, New York, New York 10285, Attention: Syndicate Department (Fax: 212-526-6588), with a copy, in the case of any notice pursuant to Section 8(d), to the Director of Litigation, Office of the General Counsel, Lehman Brothers Inc., 3 World Financial Center, 10th Floor, New York, NY 10285; (b) if to the Company or the Principal Subsidiary, shall be delivered or sent by mail, telex or facsimile transmission to the address of the Company set forth in the Registration Statement, Attention: Robert M. Doyle (Fax: (516) 484-0905); provided, however, that any notice to an Underwriter pursuant to Section 8(d) - -------- ------- shall be delivered or sent by mail, telex or facsimile transmission to such Underwriter at its address set forth in its acceptance telex to the Representatives, which address will be supplied to any other party hereto by the Representatives upon request. Any such statements, requests, notices or agreements shall take effect at the time of receipt thereof. The Company shall be entitled to act and rely upon any request, consent, notice or agreement given or made on behalf of the Underwriters by Lehman Brothers Inc. on behalf of the Representatives. 13. Persons Entitled to Benefit of Agreement. This Agreement shall ---------------------------------------- inure to the benefit of and be binding upon the Underwriters, the Company and its respective successors. This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except that (A) the representa tions, warranties, indemnities and agreement of the Company -28- contained in this Agreement shall also be deemed to be for the benefit of the person or persons, if any, who control any Underwriter within the meaning of Section 15 of the Securities Act and (B) the indemnity agreement of the Underwriters contained in Section 8(b) of this Agreement shall be deemed to be for the benefit of directors of the Company, officers of the Company who have signed the Registration Statement and any person controlling the Company within the meaning of Section 15 of the Securities Act. Nothing in this Agreement is intended or shall be construed to give any person, other than the persons referred to in this Section 13, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. 14. Survival. The respective indemnities, representations, -------- warranties and agreement of the Company, the Principal Subsidiary and the Underwriters contained in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall survive the delivery of and payment for the Stock and shall remain in full force and effect, regardless of any investigation made by or on behalf of any of them or any person controlling any of them. 15. Definition of the Terms "Business Day" and "Subsidiary". For ------------------------------------------------------- purposes of this Agreement, (a) "business day" means any day on which the New York Stock Exchange, Inc. is open for trading and (b) "subsidiary" has the meaning set forth in Rule 405 of the Rules and Regulations. 16. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED ------------- IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 17. Counterparts. This Agreement may be executed in one or more ------------ counterparts and, if executed in more than one counterpart, the executed counterparts shall each be deemed to be an original but all such counterparts shall together constitute one and the same instrument. 18. Headings. The 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. -29- If the foregoing correctly sets forth the agreement by and among the Company, the Principal Subsidiary and the Underwriters, please indicate your acceptance in the space provided for that purpose below. Very truly yours, Coinmach Laundry Corporation By: /s/ ROBERT M. DOYLE ------------------------------- Name: Robert M. Doyle Title: Senior Vice President and Chief Financial Officer Coinmach Corporation, the Principal Subsidiary By: /s/ ROBERT M. DOYLE ------------------------------- Name: Robert M. Doyle Title: Senior Vice President and Chief Financial Officer Accepted: Lehman Brothers Inc. Dillon, Read & Co. Inc. Lazard Freres & Co. LLC Fieldstone FPCG Services, L.P. For themselves and as Representatives of the several Underwriters named in Schedule 1 hereto By LEHMAN BROTHERS INC. By: /s/ THEODORE NEIDERMEYER ------------------------------- Authorized Representative Exhibit A --------- Letterhead of Anderson Kill Olick ,P.C. (212) 278-1258 July 23, 1996 Lehman Brothers Inc. Dillon, Read & Co. Inc. Lazard Freres & Co. LLC Fieldstone FPCG Services, L.P. c/o Lehman Brothers Inc. Three World Financial Center New York, New York 10285 Ladies and Gentlemen: We have acted as special counsel to Coinmach Laundry Corporation, a Delaware corporation (the "Company"), in connection with the preparation of a ------- registration statement on Form S-1 (No. 333-03587) which was filed by the Company with the Securities and Exchange Commission on May 13, 1996 (the "First ----- Registration Statement") and a registration statement on Form S-1 (No. 333- - ---------------------- 08331) filed with the Securities and Exchange Commission on July 18, 1996 (the "Second Registration Statement") (as the First Registration Statement and the - ------------------------------ Second Registration Statement may be amended from time to time, and including all documents incorporated by reference in such registration statements, together, the "Registration Statement"). The Registration Statement relates to ---------------------- the registration by the Company under the Securities Act of 1933, as amended (the "Securities Act"), of up to 4,120,000 shares (the "Firm Stock") of the -------------- ---------- Company's Class A common stock, par value $.01 per share (the "Common Stock"), ------------ and the sale of up to an additional 618,000 shares of the Common Stock to cover the exercise of an over-allotment option by the Underwriters (the "Option Stock" ------------ and, together with the Firm Stock, the "Stock"). This opinion is furnished to ----- you pursuant to Section 7(d) of the Underwriting Agreement, dated as of July 17, 1996 (the "Underwriting Agreement"), among the Company and each of you (the ---------------------- "Underwriters"). Capitalized terms used but not otherwise specifically defined - ------------- herein shall have the meanings ascribed to such terms in the Underwriting Agreement. In rendering the opinions expressed below, we have been furnished with and, without independent investigation but with your consent have relied upon, (i) certificates of officers, directors and representatives of the Company and its Subsidiaries (as hereinafter defined) with respect to certain factual Lehman Brothers Inc. Dillon, Read & Co. Inc. Lazard Freres & Co. LLC Fieldstone FPCG Services, L.P. July 23, 1996 Page 2 defined) with respect to certain factual matters, (ii) certificates, documents, instruments and assurances of public officials as we have deemed appropriate or advisable, and (iii) representations and warranties made in the Underwriting Agreement. We have also examined originals, or copies identified to our satisfaction as being true copies, of the documents listed below, and we have made no independent investigation of any factual information contained therein or contained in any documents incorporated by reference or otherwise referred to therein (collectively, the "Documents"): --------- A. Underwriting Agreement; B. Registration Statement; C. Resolutions of the boards of directors of each of the Company, Coinmach Corporation, a Delaware corporation ("Coinmach"), Super Laundry -------- Equipment Corp., a New York corporation ("SLEC"), and Grand Wash & Dry ---- Launderette, Inc., a New York corporation ("Grand Wash," together with Coinmach ---------- and SLEC, the "Subsidiaries" or each a "Subsidiary"), in each case certified by ------------ ---------- its respective Secretary; D. Certified copies of the certificates of incorporation, as amended and restated, of the Company and each Subsidiary; E. Certified copies of the bylaws, as amended and restated, of the Company and of each Subsidiary; F. Good standing certificates from the Secretary of State of the state of incorporation of the Company and each of the Subsidiaries; and G. Incumbency certificates for the officers of the Company and each Subsidiary. In addition, for the purposes of the opinions rendered herein, we have assumed with your permission and without independent verification: (a) that all signatures of all persons signing all Documents (other than those persons signing Documents on behalf of the Company or the Subsidiaries) in connection with which this opinion is rendered are genuine and authorized; Lehman Brothers Inc. Dillon, Read & Co. Inc. Lazard Freres & Co. LLC Fieldstone FPCG Services, L.P. July 23, 1996 Page 3 (b) that all Documents submitted to us as true copies, whether certified or not, conform to authentic original Documents; (c) the existence, good standing, capacity and, where applicable, qualification to do business, of all of the parties (other than the existence, good standing and capacity of the Company and the Subsidiaries and other than the qualification to do business of the Company and the Subsidiaries in the State of Delaware) to the Documents; (d) the corporate power and authority of each of the parties (other than the Company or the Subsidiaries) to the Documents to enter into and perform their respective obligations under the Documents; (e) the due authorization, execution and delivery by all of the parties (other than the Company or the Subsidiaries) to each of the Documents; (f) that each of the Documents constitutes the legal, valid and binding obligations of all of the parties thereto (other than the Company or the Subsidiaries) enforceable against each of such parties in accordance with their respective terms; and (g) that the Documents accurately describe and contain the understandings of the parties, and that there are no oral or written statements or agreements that modify, amend or vary, or purport to modify, amend or vary, any of the terms of the Documents. In rendering the opinions expressed below, we have made no independent investigation with respect to any matter in connection with which we did not represent the Company and the Subsidiaries. To render these opinions, we have relied upon the actual knowledge of the attorneys in our firm who have devoted substantial attention to the transactions contemplated by the Underwriting Agreement, and not to the knowledge of the firm generally. All references in this opinion to the "knowledge" of this firm or to matters with respect to which it is "aware" are to be construed as to the actual knowledge of such attorneys and are subject to this limitation. Without limiting the generality of the foregoing, we have not made any search of the dockets or other public records of any court or administrative agency or governmental authority with respect to pending suits, actions, claims, investigations, proceedings, judgments, orders or decrees or with respect to assessments, mortgages, security interests or encumbrances. Based upon the foregoing, we are of the opinion that, subject to the qualifications discussed herein, as of the date hereof: Lehman Brothers Inc. Dillon, Read & Co. Inc. Lazard Freres & Co. LLC Fieldstone FPCG Services, L.P. July 23, 1996 Page 4 (i) The Company and each of the Subsidiaries have been duly incorporated and are validly existing and in good standing under the laws of their respective jurisdictions of incorporation, and have the corporate power and authority to own or hold their respective properties and to conduct the businesses in which they are currently engaged and as described in the Prospectus. (ii) All of the outstanding capital stock of the Company (other than the Stock) has been duly and validly authorized and issued, is fully paid and non-assessable and conforms in all material respects to the description thereof contained in the Prospectus. With respect to the shares of Stock being delivered pursuant to the Underwriting Agreement, such Stock has been duly and validly authorized, and upon receipt of payment therefor, shall be duly issued, fully paid and non-assessable. The Stock conforms in all material respects to the description thereof contained in the Prospectus. All of the outstanding capital stock of each Subsidiary has been duly and validly authorized and issued and is fully paid, non-assessable and, to our knowledge, is owned by the Company free and clear of all liens, encumbrances, equities or claims, except for any liens, encumbrances, equities or claims (a) of Heller Financial, Inc. ("Heller") ------ under the Pledge Agreements, or (b) which may be described in the Prospectus. (iii) Except as may be described in the Prospectus, (a) there are no preemptive or other rights in the Company's certificate of incorporation or bylaws to subscribe for or to purchase, nor any restriction upon the voting or transfer of, any shares of Stock and (b) to our knowledge, there are no preemptive or other rights to subscribe for or to purchase, nor any restriction upon the voting or transfer of, any shares of Stock in any other agreement or instrument. (iv) To our knowledge, neither the Company nor any of the Subsidiaries own any real property other than the real property located in Baltimore, Maryland. To our knowledge, the Company and each of the Subsidiaries have marketable title to all personal property owned by them, free and clear of all liens, encumbrances and defects, except (A) liens arising under that certain Credit Agreement, dated as of November 30, 1995, between Coinmach and Heller, (B) purchase money liens arising in the ordinary course of business, and (C) such liens, encumbrances and defects that do not materially interfere with the use made and proposed to be made, as described in the Registration Statement, of such personal property by the Company or any Subsidiary. To our knowledge, all real property and buildings held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases, except (A) laundry room or location leases entered into by the Company or any of the Subsidiaries, (B) the Company's facility located in Lehman Brothers Inc. Dillon, Read & Co. Inc. Lazard Freres & Co. LLC Fieldstone FPCG Services, L.P. July 23, 1996 Page 5 Roslyn, New York, (C) any real property or buildings the failure of which to so hold would not be reasonably expected to result in a Material Adverse Effect, and (D) to the extent that such validity or enforceability may be limited by (1) bankruptcy, insolvency, fraudulent conveyance, preferential transfer, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors' rights and remedies generally; (2) general principles of equity (whether such enforceability is considered in a proceeding in equity or at law), and by the discretion of the court before which any proceeding therefor may be brought, including, without limitation, (x) the possible unavailability of specific performance, injunctive relief or any other equitable remedy, and (y) concepts of materiality, reasonableness, good faith and fair dealing. (v) To our knowledge and other than as set forth in the Prospectus, there are no legal or governmental proceedings pending to which the Company or any of the Subsidiaries is a party or of which any property or assets of the Company or any of the Subsidiaries is the subject that, if determined adversely to the Company or any of the Subsidiaries, might reasonably be expected to have a Material Adverse Effect; and, to our knowledge, no such proceedings are threatened by governmental authorities or by others except as disclosed in the Prospectus. (vi) The First Registration Statement was declared effective under the Securities Act as of 5:00 p.m. July 17, 1996; the Second Registration Statement was declared effective on July 18, 1996; the Prospectus was filed with the Securities and Exchange Commission pursuant to subparagraph (1) of Rule 424(b) of the rules and regulations promulgated under the Securities Act (the "Rules ----- and Regulations") on July 18, 1996; and, to our knowledge, no stop order - --------------- suspending the effectiveness of the Registration Statement has been issued and, to our knowledge, no proceeding for that purpose is pending. (vii) The Registration Statement and the Prospectus and any further amendments or supplements thereto made by the Company prior to the Delivery Date (other than the financial statements and related schedules therein, as to which financial statements and related schedules we express no opinion) comply as to form in all material respects with the requirements of the Securities Act and the Rules and Regulations. (viii) To our knowledge, there are no contracts or other documents that are required to be described in the Prospectus or filed as exhibits to the Registration Statement by the Securities Act or by the Rules and Regulations that have not been described in the Prospectus or filed as exhibits to the Registration Statement. Lehman Brothers Inc. Dillon, Read & Co. Inc. Lazard Freres & Co. LLC Fieldstone FPCG Services, L.P. July 23, 1996 Page 6 (ix) The Underwriting Agreement has been duly authorized, executed and delivered by the Company. (x) The issuance and sale of the shares of Stock being delivered on the Delivery Date by the Company and the compliance by the Company with the provisions of the Underwriting Agreement will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument, in each such case known to us and to which the Company or any of the Subsidiaries is a party or by which any of the property or assets of the Company or of any of the Subsidiaries is subject, except for any such conflicts, breaches, violations or defaults that would not reasonably be expected to result in a Material Adverse Effect, nor will such actions result in (i) any violation of the provisions of the Second Amended and Restated Certificate of Incorporation of the Company or the Second Amended and Restated By-laws of the Company or the charter or by-laws of any of the Subsidiaries, or (ii) to our knowledge, any violation of any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of the Subsidiaries or any of their properties or assets and which could reasonably be expected to result in a Material Adverse Effect. Except for the registration of the Stock under the Securities Act and such consents, approvals, authorizations, registrations or qualifications as may be required under or by the Securities Exchange Act of 1934, as amended, the Securities Act, the National Association of Securities Dealers, Inc., the Nasdaq National Market and applicable state securities laws in connection with the purchase and distribution of the Stock by the Underwriters, no consent, approval, authorization or order of, or filing or registration with, any such court or governmental agency or body is required for the execution, delivery and performance of the Underwriting Agreement by the Company and the consummation of the transactions contemplated thereby. (xi) To our knowledge and except as may be described in the Registration Statement, there are no contracts, agreements or understandings between the Company or any of the Subsidiaries and any person granting such person the right (other than rights that have been waived or satisfied) to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to the Registration Statement. In addition, we have participated in conferences with officers and other representatives of the Company, representatives of the independent public accountants for the Company, and representatives of you and your counsel, at which the contents of the Lehman Brothers Inc. Dillon, Read & Co. Inc. Lazard Freres & Co. LLC Fieldstone FPCG Services, L.P. July 23, 1996 Page 7 Registration Statement and Prospectus and related matters were discussed and, although we did not independently verify, we are not passing upon, and do not assume any responsibility for, the accuracy, completeness or fairness of the statements contained in the Registration Statement and Prospectus (except for the statements made in the Registration Statement under the caption "Description of Capital Stock" and "Shares Eligible for Future Resale" insofar as such statements relate to the Stock and concern legal matters), on the basis of the foregoing (relying as to materiality to a large extent upon the statements of officers and other representatives of the Company) no facts have come to our attention that cause us to believe that (i) the Registration Statement, as of the date and time as of which the First Registration Statement is declared effective by the Securities and Exchange Commission, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (ii) the Prospectus, as of its date and as of the date hereof, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; it being understood that we are not commenting on and express no opinion with respect to the financial statements and related notes thereto, schedules or other financial or statistical data included in or omitted from the Registration Statement, the Prospectus or any amendments or supplements thereto. Our opinions set forth above are subject to the following additional qualifications: (a) Our opinions are limited to the specific issues addressed herein and are limited in all respects to the laws as they exist as of the date hereof and the facts as stated herein and purport to express what a court would conclude based on such facts. By rendering our opinions, we do not undertake to advise you of any changes in such laws or facts which may occur on or after the date hereof. (b) We express no opinion as to, or the effect or applicability of, any laws other than the laws of the State of New York, the Federal laws of the United States of America and the General Corporation Law of the State of Delaware. We assume no responsibility with respect to the application to the subject transactions, or the effect thereon, of the laws of any other jurisdiction. Lehman Brothers Inc. Dillon, Read & Co. Inc. Lazard Freres & Co. LLC Fieldstone FPCG Services, L.P. July 23, 1996 Page 8 This opinion is being rendered only to you for your exclusive benefit and is intended to be relied upon by you in connection with the transactions contemplated by the Underwriting Agreement. This opinion is not to be quoted in whole or in part or otherwise referred to, nor is it to be filed with any governmental agency or any other person, firm or entity without our prior written consent. This opinion may not be used for any other purpose, or relied on by any other person, firm or entity for any purpose, without our prior written consent. Very truly yours, ANDERSON KILL & OLICK, P.C., a New York Professional Corporation By: /s/ RONALD S. BRODY --------------------------- Ronald S. Brody, a Member of the Firm SCHEDULE 1 Number of Underwriters Shares - ------------ --------- Lehman Brothers Inc............................ 681,500 Dillon, Read & Co. Inc......................... 681,500 Lazard Freres & Co. LLC........................ 681,500 Fieldstone Private Capital Group............... 681,500 Alex. Brown & Sons Incorporated................ 103,000 Donaldson, Lufkin & Jenrette Securities Corporation.................................. 103,000 A.G. Edwards & Sons, Inc....................... 103,000 Everen Securities, Inc......................... 103,000 Goldman, Sachs & Co............................ 103,000 Merrill Lynch, Pierce, Fenner & Smith Incorporated........................... 103,000 Morgan Stanley & Co. Incorporated.............. 103,000 Smith Barney Inc............................... 103,000 Robert W. Baird & Co. Incorporated............. 57,000 Doft & Co., Inc................................ 57,000 Fahnestock & Co., Inc.......................... 57,000 Gilford Securities Incorporated................ 57,000 McDonald & Company Securitries, Inc............ 57,000 Nesbitt Burns Securities Inc................... 57,000 Raymond James & Associates, Inc................ 57,000 Stifel, Nicolaus & Company, Incorporated....... 57,000 Sutro & Co. Incorporated....................... 57,000 Unterberg Harris............................... 57,000 TOTAL 4,120,000 ========= EX-10.55 5 LOCK-UP AGREEMENT EXHIBIT 10.55 Coinmach Laundry Corporation Lock-Up Agreement July 23, 1996 Lehman Brothers Inc. Dillon Read & Co. Lazard Freres & Co., LLC Fieldstone FPCG Services, Inc. as Representatives of the Several Underwriters c/o Lehman Brothers Inc. Three World Financial Center New York, New York 10285 Ladies and Gentlemen: The undersigned, as a holder of securities of Coinmach Laundry Corporation, a Delaware corporation (the "Company"), irrevocably agrees not to, directly or indirectly, without the prior written approval of Lehman Brothers Inc., offer, sell or otherwise dispose of any shares of the Company's capital stock (the "Common Stock") (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition of any shares of Common Stock) or sell or grant options, rights or warrants with respect to any shares of Common Stock of the Company (the "Securities") that the undersigned may own directly or indirectly for a period of one hundred and eighty (180) days (the "Lock-up Period") following the day on which the Form S-1 Registration Statement (the "Registration Statement") filed with the Securities and Exchange Commission on May 13, 1996 on behalf of the Company in connection with the initial public offering of the Company's Class A common stock, par value $.01 per share (the "Offering"), shall become effective by order of the Securities and Exchange Commission. The undersigned understands that the underwriters and the Company will rely upon the representations set forth in this Agreement in proceeding with the Offering. The undersigned understands that this Agreement is irrevocable and shall be binding on the undersigned and the undersigned's successors, heirs, personal representatives and assigns. The undersigned agrees and consents to the entry of stop transfer instructions with the Company's transfer agent against the transfer of Securities of the Company held by the undersigned except in compliance with this Agreement. -1- Notwithstanding anything else herein, if the Offering is not consummated on or before September 30, 1996, the terms and provisions of this Agreement shall be of no further force or effect. COINMACH LAUNDRY CORPORATION By: /s/ ROBERT M. DOYLE ------------------------------- Name: Robert M. Doyle Title: Senior Vice President -2- EX-10.56 6 PROMISSORY NOTE EXHIBIT 10.56 PROMISSORY NOTE $15,000,000 January 8, 1997 New York, New York FOR VALUE RECEIVED, Coinmach Laundry Corporation, a Delaware corporation ("Maker"), hereby unconditionally promises to pay to the order of Richard F. Enthoven, as agent for and on behalf of each of the individuals listed on Schedule A attached hereto ("Payee"), or to the Escrow Agent (as hereinafter - ---------- defined) as nominee for and on behalf of Payee, in each case subject to the terms and conditions of this Promissory Note, in lawful money of the United States of America and in immediately available funds, the principal sum of Fifteen Million Dollars ($15,000,000) (the "Principal Amount"), in the amounts and on the respective dates set forth on the amortization schedule attached hereto, together with interest thereon at the rate of 9.875% per annum. Interest shall accrue from the date hereof until this Promissory Note is paid in full, shall be payable in arrears at the same time each installment of principal is due and shall be computed based on a 360-day year in accordance with the actual number of days elapsed. In no event shall interest charged hereunder, in whatever manner such rate of interest may be characterized or computed, exceed the highest rate permissible under applicable law. All payments or prepayments of principal under this Promissory Note (including any principal payments made as a result of the acceleration of any payment obligations hereunder) shall be payable by Maker as follows: (i) an amount equal to seventy percent (70%) of each principal payment shall be paid to Merrill Lynch Trust Co. (the "Escrow Agent"), to be held by the Escrow Agent subject to the terms and conditions of that certain Escrow Agreement, dated as of even date herewith by and among the Maker, Payee and the Escrow Agent (the "Escrow Agreement"), and (ii) an amount equal to thirty percent (30%) of each principal payment shall be paid to Payee. This Promissory Note is secured by a pledge of all of the capital stock of Coinmach Corporation, a Delaware corporation and a wholly-owned subsidiary of Maker, pursuant to that certain pledge agreement, dated as of even date herewith, between the Maker and the Payee (the "Pledge Agreement"), the provisions of which are incorporated herein by reference and form a part hereof. If (a) Maker fails to make any payment of principal or interest on this Promissory Note when due, (b) a default in the payment of principal or interest under the Credit Agreement (as defined in the Pledge Agreement) occurs and is continuing, which default results in the acceleration of all of the indebtedness thereunder prior to the express maturity thereof, or (c) a court of competent jurisdiction enters a judgement, decree or order for relief in respect of the Maker in an involuntary case or proceeding under any federal or state bankruptcy law, which shall (i) approve as properly filed a petition seeking reorganization, arrangement, adjustment or composition in respect of the Maker, (ii) appoint a custodian, receiver, trustee, liquidator or similar official for the Maker or for substantially all of its property or assets, or (iii) order the winding-up or liquidation of its affairs, and such judgement, decree or order shall remain unstayed and in effect for a period of sixty (60) consecutive days, then all unpaid principal of and all accrued and unpaid interest on this Promissory Note shall become and be immediately due and payable. Payment due under this Promissory Note may be offset by the Maker in the event of any breach of or default under, or other claim by the Maker arising under, that certain Stock Purchase Agreement, dated as of November 25, 1996, by and among Maker, Payee and certain other parties thereto (the "Purchase Agreement"), including, without limitation, any indemnity obligations arising under Section 11.2(a) thereof, or any other agreement between the Maker and the Payee executed in connection with the Purchase Agreement or contemplated thereunder. Any such offset (each, an "Offset") shall be treated as a prepayment of principal due on this Promissory Note and applied against the next succeeding payment or payments of principal due hereunder. Any such Offset hereunder shall be subject to the applicable provisions contained in the Purchase Agreement and the Escrow Agreement. Any notice relating to this Promissory Note shall be in writing and shall be deemed to be effective if given and received in the manner expressly provided in the Purchase Agreement. This Promissory Note may be prepaid, in whole or in part, at any time without penalty or premium, with interest to the date of such prepayment; provided, however, that this Promissory Note shall be prepaid in part in a - -------- ------- principal amount of not less than $7,500,000 (net of any prepayments made hereunder) on or prior to the date on which the Maker consummates the issuance and sale, in an underwritten public offering, of shares of any class of Maker's voting equity securities having an aggregate offering value of at least $50 million. Any such prepayment (other than prepayments deemed to have been made in connection with Offsets hereunder) shall be credited first against accrued and unpaid interest and second against unpaid principal hereof. Maker hereby waives presentment for payment, demand, protest, notice of protest and notice of dishonor or nonpayment of this Promissory Note. THIS PROMISSORY NOTE HAS BEEN DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN NEW YORK, NEW YORK AND SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO SHALL BE DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW PROVISIONS. EACH OF MAKER AND PAYEE IRREVOCABLY CONSENTS AND SUBMITS TO THE NON- EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND WAIVES ANY OBJECTION BASED ON VENUE OR FORUM NON ----- --- CONVENIENS WITH RESPECT TO ANY ACTION INSTITUTED THEREIN ARISING UNDER THIS - ---------- PROMISSORY NOTE OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF MAKER AND PAYEE IN RESPECT OF THIS PROMISSORY NOTE OR THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE, AND AGREES THAT ANY DISPUTE ARISING OUT OF THE RELATIONSHIP BETWEEN MAKER AND PAYEE OR THE CONDUCT OF SUCH PERSONS IN CONNECTION WITH THIS PROMISSORY NOTE OR OTHERWISE SHALL BE HEARD ONLY IN THE COURTS DESCRIBED ABOVE. EACH OF MAKER AND PAYEE HEREBY WAIVES PERSONAL SERVICE OF PROCESS AND AGREES THAT A SUMMONS AND COMPLAINT COMMENCING AN ACTION OR PROCEEDING IN ANY SUCH COURT SHALL BE PROPERLY SERVED AND SHALL CONFER PERSONAL JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL TO SUCH PARTY. EACH OF MAKER AND PAYEE CONFIRMS THAT THE FOREGOING WAIVERS ARE INFORMED AND FREELY MADE. Whenever possible each provision of this Promissory Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Promissory Note shall 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 such provision or the remaining provisions of this Promissory Note. All references in this Promissory Note to Maker, Payee and Escrow Agent shall be deemed to include, as applicable, a reference to their respective successors and assigns. The provisions of this Promissory Note shall be binding upon and shall inure to the benefit of the successors and assigns of Maker and the successors and assigns of Payee. IN WITNESS WHEREOF, Maker has executed this Promissory Note as of the day and year first written above. COINMACH LAUNDRY CORPORATION By: /s/ ROBERT M. DOYLE ---------------------------- Name: Robert M. Doyle Title: Senior Vice President AMORTIZATION SCHEDULE
INSTALLMENTS PORTION OF PORTION OF OF PRINCIPAL PRINCIPAL PRINCIPAL TO BE PAID INSTALLMENT TO INSTALLMENT TO ON PAYMENT BE PAID TO BE PAID TO PAYMENT DATE DATE ESCROW AGENT SELLERS' AGENT ================================================================ January 15, 1998 $1,000,000 $ 700,000 $ 300,000 January 15, 1999 $1,000,000 $ 700,000 $ 300,000 January 15, 2000 $2,000,000 $1,400,000 $ 600,000 January 15, 2001 $2,000,000 $1,400,000 $ 600,000 January 15, 2002 $2,000,000 $1,400,000 $ 600,000 January 15, 2003 $3,000,000 $2,100,000 $ 900,000 June 15, 2004 $4,000,000 $2,800,000 $1,200,000 ================================================================
AMORTIZATION PAYMENT SCHEDULE
OFFSET OF PRINCIPAL PRINCIPAL PRINCIPAL PURSUANT PAYMENT DATE PAYMENT PREPAYMENT TO ESCROW AGREEMENT ========================================================== ==========================================================
SCHEDULE A ---------- LIST OF SELLERS Tamara Lynn Ford Robert Kyle Ford Traci Lea Ford Tucker F. Enthoven Richard F. Enthoven Richard Franklin Ford, Jr., Trustee U/D/T February 4, 1994 EX-10.57 7 TAX COOPERATION AGREEMENT EXHIBIT 10.57 TAX COOPERATION AGREEMENT PREAMBLE -------- This Tax Cooperation Agreement ("Agreement"), dated as of January 8, 1997, is entered into by and among Kwik Wash Laundries, L.P., a Texas limited partnership (the "Partnership"), KWL, Inc., a Nevada corporation and sole general partner of the Partnership (the "GP"), Kwik-Wash Laundries, Inc., a Nevada corporation and sole limited partner of the Partnership (the "LP" and, together with the GP, the "Partners"), Coinmach Corporation, a Delaware corporation (the "Buyer"), and each of the parties listed on Schedule A attached to this Agreement (each, a "Seller" and, collectively, the "Sellers"). RECITALS -------- A. The Sellers collectively own all of the issued and outstanding shares of common stock, par value $.10 per share, of GP (the "GP Stock") and all of the issued and outstanding shares of common stock, par value $1.00 per share, of LP (the "LP Stock" and, together with the GP Stock, the "Stock"), constituting all of the issued and outstanding capital stock of the Partners. B. The Sellers, the Buyer, the Partners and the Partnership have entered into a Stock Purchase Agreement, dated as of November 25, 1996 (the "Stock Purchase Agreement"), relating to the purchase by the Buyer from the Sellers of all of the Stock. C. In connection with the purchase of the Stock pursuant to the Stock Purchase Agreement, the Sellers, the Buyer, the Partners and the Partnership wish to set forth their agreement with respect to certain tax matters as set forth below. AGREEMENT --------- NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. Capitalized terms used herein without definition ----------- shall have the meanings ascribed to them in the Stock Purchase Agreement. In the case of a conflict of meanings of such capitalized terms between the Stock Purchase Agreement and this Agreement, this Agreement shall control. 2. Indemnity by Sellers. Except as otherwise provided in this -------------------- Agreement, the Sellers shall be liable for, and shall indemnify and hold harmless the Buyer's Indemnitees from and against, (i) any Taxes that may be imposed on or incurred by the Partners and/or the Partnership with respect to all taxable periods ending on or prior to the Closing Date; and (ii) any Taxes allocated to the Sellers pursuant to Section 3 hereof. The indemnification described in this Section 2 shall not apply to the extent of any Taxes (other than United States federal income Taxes) that are reflected as a current accrued tax liability on the 1996 Balance Sheet. Anything in this Agreement to the contrary notwithstanding, the indemnification described in this Section 2 shall be subject to and governed by the provisions of Article 11 of the Stock Purchase Agreement, with the indemnified amount to be treated under said Article 11 as Damages incurred by reason of breach of the representations and warranties in Section 4.24 of the Stock Purchase Agreement. 3. Allocation of Taxes and Tax Items. The Sellers, the Partners, --------------------------------- the Partnership and the Buyer will, to the extent permitted by applicable law, elect with the relevant Taxing Authority (as hereinafter defined) or Taxing Authorities to close any taxable periods of the Partners and the Partnership as of the Tax Effective Time, as hereinafter defined, and the Parties shall take all steps, and do all acts and things, including the filing of elections or Tax Returns with Taxing Authorities, as are or may be reasonably necessary or appropriate to cause any such period to end as of the Tax Effective Time. In order to accomplish this result, the Buyer, the Partners and the Partnership agree, to the extent allowed by applicable law, regulations and rulings, that, unless the Partnership is dissolved and liquidated on or before March 31, 1997, the Partnership will change its taxable year to a taxable year ending March 31, so that the Partnership will experience a taxable year end on March 31, 1997. For purposes of this Agreement, "Party" shall mean one of the members of the group consisting of the Sellers, the Partners, the Partnership and the Buyer; "Parties" shall mean all of the members of such group; "Taxing Authority" shall mean a federal, local, municipal, state, or other governmental body; and "Tax Effective Time" shall mean (i) the close of business on the day before the Closing Date when used with reference to either (a) federal income Taxes, or (b) state or local income Taxes in the case of each state or local Taxing Authority imposing an income Tax with respect to which the taxable income or loss of the Partners is, by reason of the sale of stock to be consummated at the Closing, determined based on a taxable period ending as of the close of business on the day before the Closing, or (ii) the close of business on the Closing Date when used with reference to either (a) all Taxes other than income Taxes, or (b) state or local income Taxes other than those described in clause (b) of part (i) of this definition of Tax Effective Time. In any case where applicable law does not permit the Partnership or one of the Partners to close its taxable period as of the Tax Effective Time, then Taxes (whether based on income, capital, ownership of property or otherwise), if any, attributable to the taxable period of such Party, as applicable, that includes the Tax Effective Time, but does not end as of the Tax Effective Time, shall be allocated to (i) the Sellers for the period up to and including the Tax Effective Time (the "Pre-Closing Period"), and (ii) the Partners and/or the Buyer for the period subsequent to the Tax Effective Time (the "Post-Closing Period"). For purposes of applying Section 4.24 of the Stock Purchase Agreement to determine the extent to which the Taxes for all taxable periods ending after the Closing Date are properly attributable to the portion of any such taxable period ending on the Closing Date, the Taxes allocated hereunder to the Pre-Closing Period shall be considered to be properly attributable to the portion of such taxable period ending on the Closing Date, Tax Cooperation Agreement - ------------------------- Page 2 and the Taxes allocated hereunder to the Post-Closing Period shall be considered to be properly attributable to the portion of such taxable period occurring after the Closing Date. For purposes of this Section 3, the allocation of Taxes between the Pre-Closing Period and the Post-Closing Period shall be determined as follows: (a) In the case of property or ad valorem Taxes or franchise Taxes (which are not measured by, or based upon, net income), such Taxes for the Pre- Closing Period and for the Post-Closing Period shall be determined ratably on an equal per diem basis; and (b) In the case of (i) other Taxes, including without limitation income Taxes, and (ii) Tax Items, as hereinafter defined, such other Taxes and Tax Items shall be determined on the basis of an interim closing of the books of the Partnership and each of the Partners as of the Tax Effective Time (except that exemptions, allowances, and deductions for a taxable period that are calculated on an annual or periodic basis, such as the deduction for depreciation, shall be apportioned between the Pre-Closing Period and the Post- Closing Period ratably on an equal per diem basis). For purposes of this Agreement, "Tax Items" of an entity shall mean the taxable income or loss of such entity, each item of income, gain, loss or deduction that is a constituent of such taxable income or loss, and each item of income, gain, loss, deduction and credit that is required to be separately stated for income tax purposes. The actual Tax for a taxable period that includes the Tax Effective Time shall be apportioned between the Pre-Closing Period and the Post-Closing Period in proportion to the hypothetical Taxes that would result for the Pre-Closing Period and the Post-Closing Period if each such period were a separate taxable period, determined without adjustment for the length of the period. Except as otherwise required by law, where the timing of an item cannot be determined from the books and records of the Partnership or the Partners, it shall be prorated in an equitable manner on the basis of the best available evidence. Tax brackets, fixed statutory deductions and similar items do not require proration for purposes of this Section 3. (c) The Change of Control Payments, as well as the federal and state payroll taxes incurred by the Partnership as a result of making the Change of Control Payments (collectively, the Change of Control Payments and the described payroll taxes hereinafter referred to as the "Special Bonus Payments"), will be claimed as deductions (the "Special Bonus Deductions") for income tax purposes by the Partnership in the period beginning on January 1, 1997 and ending on the Tax Effective Time (the "1997 Pre-Closing Period"), and will be included as deductions in determining the Tax Items of the Partnership that are allocated among the Partners for income tax purposes for the 1997 Pre-Closing Period. In turn, the taxable income or loss of the Partners for the 1997 Pre-Closing Period will be determined for income tax purposes by including as a current deduction, deductible by the Partnership during the 1997 Pre-Closing Period, the aggregate amount of the Special Bonus Payments, so that (i) the taxable income or loss of the Partners allocated to the Sellers with respect to the operations of the Partnership for the 1997 Pre-Closing Period will in the aggregate be determined based on a current deduction being claimed by the Partnership during the Tax Cooperation Agreement - ------------------------- Page 3 1997 Pre-Closing Period equal to the aggregate of the Special Bonus Payments, and (ii) the aggregate taxable income or loss recognized by the Sellers resulting from the operations of the Partnership for 1997 will be determined based on such taxable income being reduced, or if applicable such taxable loss being increased, by an amount equal to the aggregate of the Special Bonus Payments. The Parties agree that, anything in this Agreement to the contrary notwithstanding, (i) the Special Bonus Deductions shall be allocated entirely to, and claimed as deductions by the Partnership within, the 1997 Pre-Closing Period, and (ii) neither the Partnership, the Partners nor the Buyer makes any representations or warranties as to the deductibility to any Party of the Special Bonus Payments or as to any tax benefits to which any Party may or may not be entitled as a result of the Partnership making the Special Bonus Payments. Except as provided in Section 3(d) hereof, the Buyer, the Partnership and the Partners each agrees not to claim during the Post-Closing Period or any taxable period occurring thereafter, and the Buyer agrees to cause the Partnership and/or either or both of the Partners not to claim during the Post- Closing Period or any taxable period occurring thereafter, any deductions whatsoever for income tax purposes arising from the payment of the Special Bonus Payments. Except as provided in Section 3(d) hereof, each of the Parties agrees not to take a position for income tax purposes, whether on a Tax Return or as a result of an examination or audit by any Taxing Authority or otherwise, contrary to the provisions of this Section 3(c). (d) If for any reason the Sellers are denied deductions for federal income tax purposes for their respective allocable shares (based upon the Sellers' respective indirect percentages of ownership of the Partnership) of the Special Bonus Payments by a Final Determination, as hereinafter defined (whether such denial occurs by reason of (i) disallowing the Special Bonus Deductions in whole or in part as deductions to the Partnership during the 1997 Pre-Closing Period, (ii) denying, in whole or in part, the effect of such deductions on a pass-through basis to the Sellers, or (iii) otherwise), then subsequent to the date of such Final Determination, but not before such date, the Partnership, the Partners, and/or the Buyer shall, to the extent of such disallowance, be entitled to attempt to claim all or any portion of such Special Bonus Payments as deductions for federal income tax purposes without regard to the provisions of Section 3(c) hereof. If for any reason the Sellers are denied deductions for state or local income tax purposes for their respective allocable shares of the Special Bonus Payments by a Final Determination (whether such denial occurs by reason of (i) disallowing the Special Bonus Deductions in whole or in part as deductions to the Partnership during the 1997 Pre-Closing Period, (ii) denying, in whole or in part, the effect of such deductions on a pass-through basis to the Sellers, or (iii) otherwise), then subsequent to the date of such Final Determination, but not before such date, with respect to the particular state or local income tax involved, the Partnership, the Partners and/or the Buyer shall, to the extent of such disallowance, be entitled to attempt to claim all or any portion of the Special Bonus Payments as deductions for purposes of calculating such state or local income tax without regard to the provisions of Section 3(c) hereof. In the event the Partnership, the Partners and/or the Buyer become entitled to attempt to claim all or any portion of the Special Bonus Payments as deductions as provided in this Tax Cooperation Agreement - ------------------------- Page 4 Section 3(d), the Sellers make no representation or warranty as to whether any such deductions will be allowable to any Party. For purposes of this Agreement, "Final Determination" shall mean the final resolution of a Seller Tax Issue, as hereinafter defined, by (i) a decision of the Tax Court or judgment, decree, or other order by a court of competent jurisdiction, which has become final and unappealable; (ii) IRS Form 870, 870-AD, 870-L, 870-L(AD), 870-P, 870-P(AD), 870-S, or 870-S(AD) (or any successor forms thereto), on the date of acceptance by or on behalf of the IRS, or by a comparable agreement form under the laws of other jurisdictions; except that a Form 870, 870-AD, 870-L, 870-L(AD), 870-P, 870-P(AD), 870-S, or 870-S(AD) or comparable form that reserves the right of the taxpayer to file a claim for refund and/or the right of the Taxing Authority to assert a further deficiency shall not constitute a final determination; (iii) a closing agreement or offer in compromise under Sections 7121 or 7122 of the Code or under corresponding provisions of any subsequently enacted Federal tax laws, or comparable agreements under the laws of other jurisdictions; (iv) any allowance of a refund or credit in respect of any overpayment of tax, including any related interest or penalties, but only after the expiration of all periods during which such refund may be recovered (including by way of offset) by the Tax imposing jurisdiction; or (v) any other final disposition by reason of the expiration of the applicable statute of limitations or the expiration of the period during which a protest may be filed. For purposes of this Agreement, the final resolution of a "Seller Tax Issue" shall mean the final resolution of the Tax liability of the Sellers for 1997, the final resolution of the amount of taxable income or loss of the Partnership allocable among the Partners for the 1997 Pre-Closing Period, or the final resolution of the amount of taxable incomes or losses of the Partners allocable among the Sellers for 1997. 4. Indemnification by Buyer. Except as otherwise provided in this ------------------------ Agreement, the Buyer shall be liable for, and shall indemnify and hold harmless the Sellers' Indemnitees from and against, (i) any Taxes arising from any event occurring on the Closing Date, but after the Closing, which is outside the ordinary course of the Business, (ii) any Taxes arising from an election or deemed election, or election imposed by a Taxing Authority, under Section 338 of the Code (or any comparable provision of state, local or foreign law) with respect to the purchase of the Stock; (iii) any Taxes that may be imposed on or incurred by the Partnership or the Partners with respect to all taxable periods beginning after the Tax Effective Time; (iv) any sales, use, transfer, real property transfer or gain, stamp, documentary or similar Taxes arising out of or resulting from any transaction contemplated by the Stock Purchase Agreement; and (v) any attorneys' fees or other costs incurred by any of Sellers' Indemnitees thereof in collecting any payment from the Buyer under this Agreement in the event such payment is not made by the Buyer as provided herein. 5. Tax Refunds. The Buyer agrees to pay (and to cause each of the ----------- Partners and the Partnership to pay) to the Sellers all refunds of any Taxes for which the Sellers are liable under Section 2 hereof, but only to the extent such refund has not been reflected as a receivable on the 1996 Balance Sheet. The Sellers agree to pay to the Buyer all refunds of any income Taxes imposed on taxable income or gains allocated to Tax Cooperation Agreement - ------------------------- Page 5 the Post-Closing Period pursuant to Section 3 hereof and any other Taxes allocated to the Post-Closing Period pursuant to Section 3 hereof. The Parties shall cooperate in order to take all reasonably necessary steps to claim any such refund. Any such refund received by a Party (considering, for purposes of this sentence, the Buyer, the Partners and the Partnership as one Party, and the Sellers as the other Party) or the respective Affiliates of such Party for the account of the other Party shall be paid to such other Party within thirty (30) days after such refund is received. For purposes of this Agreement, a refund of Tax includes the application of an amount otherwise refundable as a reduction of amounts owed or to be owed. 6. Payment of Taxes. All Taxes with respect to the Partners and the ---------------- Partnership shall be paid to the appropriate Taxing Authority by the Party that is responsible therefor under the applicable tax law. Except as otherwise provided in this Agreement, any amount to which a Party is entitled under this Agreement shall be promptly paid to such Party by the Party obligated to make such payment following written notice to the Party so obligated stating that the Taxes to which such amount relates are due and providing details supporting the calculation of such amount. 7. Tax Returns. ----------- (a) All Tax Returns that relate to any Taxes of the Partners and the Partnership shall be prepared and filed by the Party that is legally responsible therefor. (b) The Buyer, the Partnership and the Partners each agree that the Partnership and the Partners shall afford Mr. Richard F. Enthoven, on behalf of the Sellers, a reasonable opportunity to review its calculations of Tax Items which are included on all Seller-Affected Tax Returns (as hereinafter defined) filed after the Closing prior to their inclusion in the applicable Tax Returns. For purposes of this Agreement, "Seller-Affected Tax Return" shall mean any Tax Return filed by, or on behalf of, the Partnership or either of the Partners that includes Tax Items that are allocable, directly or indirectly, between or among parties that include one or more of the Sellers. An indirect allocation of a share of a Tax Item to a Seller would include, without limitation, the allocation of a Tax Item of the Partnership among the Partners that in turn affects the amount of one or more Tax Items of either or both Partners that is allocable to such Seller. (i) With respect to each Tax Return that is a Seller-Affected Tax Return, the Partnership and each Partner, as applicable, shall provide the Sellers and their authorized representatives with copies of such completed Tax Return at least sixty (60) business days prior to the due date (or the extended due date, if an extension of time for filing has been obtained) for the filing of such Tax Return, and the Sellers and their authorized representatives shall have the right to review such Tax Returns, and the Sellers shall have the right to approve the Tax Cooperation Agreement - ------------------------- Page 6 contents of each such Tax Return prior to the filing thereof with the appropriate Taxing Authority. (ii) Each Seller-Affected Tax Return to be filed after Closing shall be prepared (in the absence of (i) a controlling change in law or circumstances or (ii) consent of the Sellers) consistent with past practices, elections, accounting methods, conventions and principles of taxation used for the most recent taxable period for which Tax Returns involving similar Tax Items have been filed; provided that, anything in this Agreement to the contrary notwithstanding, each Seller-Affected Tax Return shall be prepared and filed based on the allocations of Tax Items between the Pre-Closing Period and the Post-Closing Period as provided in Section 3 hereof. (iii) Any disagreement between the Parties (considering, for purposes of this Section 7(b)(iii), the Buyer, the Partners and the Partnership as one Party, and the Sellers as the other Party) with respect to any aspect of the treatment of any Tax Item on a Seller-Affected Tax Return to be filed after Closing which is not resolved by mutual agreement of the Parties shall be resolved by a nationally recognized independent public accounting firm chosen by and mutually acceptable to the Parties (the"Tax Matters Referee"). Such Tax Matters Referee shall be chosen by the Parties within ten (10) business days from the date on which one Party serves written notice on the other Party requesting the appointment of a Tax Matters Referee, provided that such notice specifically describes the matters to be considered and resolved by the Tax Matters Referee. For purposes of the preceding sentence, notice to the Party consisting of the Sellers may be given by giving notice to Richard F. Enthoven, and notice to the Party consisting of the Buyer, the Partners and the Partnership may be given by giving notice to the Buyer. In the event the Parties cannot agree on the selection of a Tax Matters Referee, then the Tax Matters Referee shall be the Dallas office of the public accounting firm of Arthur Andersen LLP. Within twenty (20) days of appointment, the Tax Matters Referee shall resolve any such disagreements that are specified in the notice; provided that, in determining its resolution of each disagreement, the Tax Matters Referee shall be bound by the requirements set forth in Section 7(b)(ii) hereof for the preparation of Seller-Affected Tax Returns. Any resolution of an issue submitted to the Tax Matters Referee shall be final and binding on the parties to this Agreement without further recourse. The Parties shall share the costs and fees of the Tax Matters Referee equally. (c) The Sellers and their Affiliates will not take any action to amend or change the manner in which any Tax Items with respect to the Partnership or either of the Partners have been reported on any previously filed Tax Returns; provided, however, the Sellers and their Affiliates shall be entitled to amend - -------- ------- any such Tax Returns in a manner which does not adversely affect the Buyer or the Affiliates of such Party, and further provided that the Sellers and their Affiliates may amend Tax Returns to the extent Tax Cooperation Agreement - ------------------------- Page 7 required to reflect any adjustment or adjustments made as a result of an audit or audits by any Taxing Authority. (d) The Buyer and its Affiliates, including the Partners and the Partnership, shall cooperate with the Sellers and shall make available all necessary books and records and timely take all action reasonably necessary to allow the Sellers and their Affiliates to prepare and file the Tax Returns that they are responsible for preparing and filing under this Section 7 and to prepare and file the Tax Returns of the Sellers. (e) The Buyer, the Partnership, the Partners and their respective Affiliates will not take any action to amend or change the manner in which any Tax Items with respect to the Partnership or either of the Partners have been reported on any Seller-Affected Tax Return. (f) Richard F. Enthoven is hereby designated as the tax matters person on the Tax Returns on Form 1120S filed for the Partners for the taxable period or periods ending on or before the Closing. In the event that Richard F. Enthoven shall fail or refuse to serve as tax matters person, the Sellers may designate a person to serve as tax matters person in a writing executed by a majority of the Sellers. 8. Cooperation in Preparation of Tax Returns. The Buyer, including ----------------------------------------- without limitation the Partners and the Partnership, and the Sellers shall cooperate fully with each other and make available to each other such tax data and other information as may be reasonably required for the preparation by the Buyer or the Sellers of any Tax Returns required to be prepared and filed by the Buyer or the Sellers hereunder, as well as Tax Returns required by law to be filed by Sellers. 9. Tax Audits. In the event the Buyer, either or both of the ---------- Partners, the Partnership or their Affiliates receive written notice (the "Audit Notice") of any pending Tax audit or assessment which may affect the determination of Taxes for which the Sellers are or may be liable under Section 2 hereof or pursuant to Section 4.24 of the Stock Purchase Agreement, the Buyer shall notify the Sellers in writing thereof (the "Buyer Notice") no later than the earlier of (i) thirty (30) days after the receipt by the Buyer, either or both of the Partners, the Partnership or their Affiliates of the Audit Notice, or (ii) ten (10) days prior to the deadline for responding to the Audit Notice. As to any Taxes covered by such Tax audit or assessment for which the Sellers are solely liable under Section 2 hereof or Section 4.24 of the Stock Purchase Agreement, the Sellers shall be entitled at their expense to control or settle the contest (including the employment of counsel of its choice) of any Tax audit or administrative or court proceeding relating thereto, provided the Sellers notify the Buyer in writing (the "Sellers Notice") that they desire to control such contest no later than the earlier of (a) forty-five (45) days after receipt of the Buyer Notice, or (b) five (5) days prior to the deadline for responding to the Audit Notice. The Parties agree that they will cooperate, and cause each of their respective Affiliates to cooperate, fully with each other and with their respective counsel in the defense against or compromise of any claim in any said Tax Cooperation Agreement - ------------------------- Page 8 proceeding. Only one Sellers Notice shall be required regarding any pending Tax Audit or assessment. 10. Exchange of Information; Access to Records. ------------------------------------------ (a) Each Party (considering, for purposes of this sentence, the Buyer, the Partners and the Partnership as one Party, and the Sellers as the other Party) will provide, or cause to be provided, to the other Party copies of all correspondence received from any Taxing Authority by such Party or any of its Affiliates in connection with the liability of either of the Partners or the Partnership for Taxes for any period for which such other Party is or may be liable under Sections 2 or 4 hereof. (b) The Buyer will, and will cause the Partners and the Partnership to, (i) cooperate with the Sellers and permit the Sellers to have full access, at any reasonable time and from time to time, at the business location at which the books and records of the Partners and the Partnership are maintained, after the Closing Date, to such Tax data relating exclusively to either or both of the Partners or the Partnership or to the determination of the Tax liability of any Seller or Sellers as the Sellers may from time to time reasonably request, and (ii) gather and furnish, and request the independent accountants of the Buyer or either or both of the Partners and the Partnership to gather and furnish, to the Sellers such additional Tax and other information and documents in the possession of such persons either (i) relating to the Partnership and/or either or both of the Partners, or (ii) relating to the determination of the liability for Taxes of any one or more of the Sellers, as the Sellers may from time to time reasonably request in connection with (a) preparing or filing any Tax Return or claim for refund, (b) determining a liability or a right of refund, or (c) conducting or responding to any audit, investigation or other proceeding, in respect of Taxes for any period for which the Sellers are or may be liable. Similarly, the Sellers will (i) cooperate with the Buyer, the Partners and the Partnership and permit the Buyer, the Partners, and/or the Partnership to have full access, at any reasonable time and from time to time, at the business location at which the appropriate books and records are maintained, after the Closing Date, to such Tax data relating exclusively to the Partnership or to either or both of the Partners in the possession of the Sellers as the Buyer, the Partners and/or the Partnership may from time to time reasonably request, and (ii) gather and furnish, and request the independent accountants of the Sellers to gather and furnish to the Buyer, the Partners and/or the Partnership such additional Tax and other information and documents relating to the Partnership and/or either or both of the Partners in the possession of such persons as the Buyer may from time to time reasonably request in connection with preparing or filing any Tax Return or claim for refund, in determining a liability or a right of refund or in conducting or responding to any audit, investigation or other proceeding, in respect of Taxes for any period for which the Sellers are or may be liable. (c) Each Party (considering, for purposes of this sentence, the Buyer, the Partners and the Partnership as one Party, and the Sellers as the other Party) agrees that such information and documents relating to the Partnership and/or either or Tax Cooperation Agreement - ------------------------- Page 9 both of the Partners as are, pursuant to the terms of the Stock Purchase Agreement, in its possession after the Closing, including without limitation books, records, Tax Returns, claims for refund and all schedules, work papers and all material records or other documents relating to any such Tax Returns, claims, audits or other proceedings, shall be preserved and retained until the close of the twelve (12) month period immediately following the expiration of the applicable Tax statute of limitations (giving effect to any extension, waiver or mitigation thereof); provided, however, that, in the event that, prior -------- ------- to the expiration of such period, (i) a proceeding has been instituted for which the information or documents may be requested, and (ii) the keeper of such information or documents is given notice of such proceeding prior to the expiration of such period, the information or documents shall be retained until the expiration of the twelve (12) month period immediately following the later of (a) the final determination with respect to such proceeding, and (b) the date any obligations with respect thereto are fully satisfied. Each Party (considering, for purposes of this sentence, the Buyer, the Partners and the Partnership as one Party and the Sellers as the other Party) shall make such information and documents available to the other Party or any Affiliate thereof, and their respective officers, employees and agents, upon reasonable notice and at reasonable times, it being understood that such representatives shall be entitled to make copies of any such books and records relating to the Partners, the Partnership and/or the Tax Items of either or both of the Partners or the Partnership that affect the Sellers' respective Tax liabilities as they shall deem necessary. Any information or documents obtained pursuant to this Section 10 shall be kept confidential, except as required by law or legal process or as may be otherwise necessary in connection with the filing of Tax Returns or claims for refund or in conducting or responding to any audit, investigation or other proceeding. Each Party shall provide the cooperation and information and documents required by this Section 10 at its own expense. (d) If either Party (considering, for purposes of this Section 10(d), the Buyer, the Partners and the Partnership as one Party, and the Sellers as the other Party) fails to provide any information or documents requested pursuant to this Section 10 within a reasonable period, as determined in good faith by the Party requesting the information or documents, then the requesting Party shall have the right to engage a public accounting firm to gather such information or documents, provided that thirty (30) days prior written notice is given to the unresponsive Party before taking such action. If the unresponsive Party fails to provide the requested information or documents within thirty (30) days of receipt of such notice, then such unresponsive Party shall permit the requesting Party's public accounting firm full access to all appropriate records or other information or documents as reasonably necessary, and shall reimburse the requesting Party, or pay directly, all costs connected with the requesting Party's engagement of the public accounting firm to gather the requested information or documents. 11. Payment as Purchase Price Adjustment. The Sellers and the Buyer ------------------------------------ agree that any payment made hereunder or pursuant to Article 11 of the Stock Purchase Agreement will be treated by the Parties on their Tax Returns as an adjustment to the aggregate Purchase Price for the Stock. Tax Cooperation Agreement - ------------------------- Page 10 12. Amendments; Waivers. No provision of this Agreement may be ------------------- amended, waived or otherwise modified without the prior written consent of the Sellers and the Buyer. No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. 13. Binding Effect. This Agreement shall be binding upon and inure -------------- to the benefit of the Parties and their respective successors and permitted assigns. No assignment of this Agreement or of any rights or obligations hereunder may be made by any Party (by operation of law or otherwise) without the prior written consent of the other Parties, and any attempted assignment without the required consent shall be void; provided, however, that, in the event the Buyer sells the Stock or one or both of the Partners sell their interests in the Partnership to a third Party prior to the termination of this Agreement, (i) such third Party shall be substituted for the Buyer and/or the selling Partner or Partners hereunder, and (ii) any such sale shall be conditioned upon such third Party agreeing to be bound by the terms of this Agreement as applicable to the Buyer and/or the Partners hereunder. 14. Other Actions and Documents. Subject to the provisions hereof, --------------------------- the Parties hereto shall make, execute, acknowledge and deliver such other instruments and documents, and take all such other actions, as may be reasonably requested by another Party in order to effectuate the purposes of this Agreement. 15. No Third Party Rights. Except as herein otherwise specifically --------------------- provided, nothing in this Agreement expressed or implied is intended to confer any right or benefit upon any person, firm, partnership or corporation other than the Parties and their respective successors and permitted assigns. 16. Changes in Law, Regulation or Interpretation. If, due to any -------------------------------------------- change in applicable law or regulations or the interpretation thereof by any court of law or other governing body having jurisdiction subsequent to the date of this Agreement, performance of any provision of this Agreement or any transaction contemplated thereby shall become impracticable or impossible, the Parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such provision. 17. Costs and Expenses. Except as expressly set forth in this ------------------ Agreement, each Party shall bear its own costs and expenses incurred pursuant to this Agreement. 18. Counterparts; Headings. This Agreement may be executed in one or ---------------------- more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. The headings in this Agreement are for convenience of reference only and shall not be deemed a part of this Agreement. Tax Cooperation Agreement - ------------------------- Page 11 19. Severability. The Parties hereby agree that if any provision of ------------ this Agreement should be adjudicated to be invalid or unenforceable, such provision shall be deemed deleted herefrom with respect, and only with respect, to the operation of such provision in the particular jurisdiction in which such adjudication was made, and only to the extent of the invalidity, and any such invalidity or unenforceability in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. All other remaining provisions of this Agreement shall remain in full force and effect for the particular jurisdiction and all other jurisdictions. 20. Entire Agreement. This Agreement and the Stock Purchase ---------------- Agreement contain the entire agreement between the Parties with respect to the subject matter hereof. Any tax indemnity, sharing, allocation or similar agreements, arrangements, or practices between the Sellers and any Affiliates thereof, on one hand, and either of the Partners and/or the Partnership, on the other hand, are hereby terminated, and all rights and duties thereunder are hereby extinguished, effective as of the Closing Date, and no such agreements, arrangements or practices shall be or shall have been entered into or implemented thereafter, except as provided in this Agreement or the Stock Purchase Agreement. Except as provided herein, this Agreement shall not create any rights in any person other than the Parties to this Agreement. 21. Governing Law. This Agreement shall be governed by and construed ------------- in accordance with the laws of the State of New York without giving effect to conflicts of law principles thereof. 22. Notices. Any notices required hereunder shall be given as ------- provided in the Stock Purchase Agreement, provided that notice given to the Buyer shall be deemed to be notice also to each of the Partners and the Partnership. 23. Survival of Obligations. Notwithstanding anything in this ----------------------- Agreement or the Stock Purchase Agreement to the contrary, this Agreement shall remain in effect and its provisions shall survive for the full period of all applicable statutes of limitation (giving effect to any extension, waiver or mitigation thereof), plus six (6) months; provided, however, that in the event a claim is brought against one or more of the Sellers, the Buyer, either or both of the Partners, or the Partnership in respect of any item of Tax within the applicable survival period, the rights and obligations under this Agreement with respect thereto shall survive the expiration of such period until such claim is finally resolved and any obligations with respect thereto are fully satisfied. 24. Good Faith Clause. The Parties agree to cooperate in good faith ----------------- and to take all reasonable steps to carry out the terms and the intent of this Agreement. 25. Buyer's Commitment Regarding Obligations of Partnership and ----------------------------------------------------------- Partners. The Buyer agrees to cause each Partner and the Partnership to perform - -------- all of their respective obligations under this Agreement applicable to the time period following the Closing. Tax Cooperation Agreement - ------------------------- Page 12 IN WITNESS WHEREOF, the undersigned have executed this Agreement on the date first above written. KWL, INC. By: /s/ RICHARD F. ENTHOVEN ------------------------------ Name: Richard F. Enthoven Title: President KWIK-WASH LAUNDRIES, INC. By: /s/ RICHARD F. ENTHOVEN ------------------------------ Name: Richard F. Enthoven Title: President KWIK WASH LAUNDRIES, L.P. By: /s/ RICHARD F. ENTHOVEN ------------------------------ Name: Richard F. Enthoven Title: President of the General Partner COINMACH CORPORATION By: /s/ JOHN E. DENSON ------------------------------ Name: John E. Denson Title: Senior Vice President SELLERS: /s/ TAMARA LYNN FORD ------------------------------------ Tamara Lynn Ford /s/ ROBERT KYLE FORD ------------------------------------ Robert Kyle Ford Tax Cooperation Agreement - ------------------------- Page 13 /s/ TRACI LEA FORD ------------------------------------ Traci Lea Ford /s/ TUCKER F. ENTHOVEN ------------------------------------ Tucker F. Enthoven /s/ RICHARD F. ENTHOVEN ------------------------------------ Richard F. Enthoven /s/ RICHARD FRANKLIN FORD, JR. ------------------------------------ Richard Franklin Ford, Jr. Trustee U/D/T February 4, 1994 Tax Cooperation Agreement - ------------------------- Page 14 SCHEDULE A TO TAX COOPERATION AGREEMENT Shareholders in KWL, Inc.: - ------------------------- Tamara Lynn Ford Robert Kyle Ford Traci Lea Ford Tucker F. Enthoven Richard F. Enthoven Richard Franklin Ford, Jr., Trustee U/D/T Feb. 4, 1994 Shareholders in Kwik-Wash Laundries, Inc.: - ----------------------------------------- Tamara Lynn Ford Robert Kyle Ford Traci Lea Ford Tucker F. Enthoven Richard F. Enthoven Richard Franklin Ford, Jr., Trustee U/D/T Feb. 4, 1994 Schedule A Page 1 of 1 - ---------- EX-10.58 8 CONSULTING SERVICES AGREEMENT EXHIBIT 10.58 CONSULTING SERVICES AGREEMENT ----------------------------- CONSULTING SERVICES AGREEMENT ("Agreement"), dated as of January 8, --------- 1997, by and between Richard Enthoven ("Enthoven") and Coinmach Corporation, a -------- Delaware corporation ("Coinmach"). -------- WHEREAS, Coinmach has entered into that certain Stock Purchase Agreement, dated as of even date herewith, pursuant to which Coinmach has acquired all of the capital stock of each of KWL, Inc., a Nevada corporation and sole general partner of Kwik-Wash Laundries, L.P. (the "Partnership"), and Kwik- ----------- Wash Laundries, Inc., a Nevada corporation and sole limited partner of the Partnership; WHEREAS, Coinmach desires to continue the business of the Partnership which includes, among other things, (i) providing coin-operated and non-coin operated laundry equipment services to customers in multi-family dwellings, (ii) operating, maintaining and servicing laundromat retail stores, and (iii) the sale and distribution of laundry equipment parts (the foregoing, together with all other businesses, activities, divisions and operations of the Partnership and their respective affiliates other than the business, activities and operations of Titlelink, the "Business"); -------- WHEREAS, Enthoven was the former President and Chief Executive Officer of the Partnership and is generally knowledgeable about the Business; WHEREAS, in an effort to provide for an effective and successful transition of ownership of the Business, Coinmach desires to receive certain advisory and management consulting services from Enthoven relating to the Business and to obtain the benefit of Enthoven's experience in managing and operating the Business; and WHEREAS, subject to the compensation arrangements and other provisions set forth in this Agreement, Enthoven is willing to provide to Coinmach certain advisory and management consulting services related to the Business; NOW, THEREFORE, in consideration of the foregoing promises and the respective agreements hereinafter set forth and the mutual benefits to be derived herefrom and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Enthoven and Coinmach hereby agree as follows: 1. Engagement. Coinmach hereby engages Enthoven to provide certain ---------- advisory and management consulting services related to the Business, and Enthoven hereby agrees to provide to Coinmach certain advisory and management consulting services related to the Business, in each case on the terms and subject to the conditions set forth in this Agreement. 2. Term. This Agreement shall have an initial term of six months, ---- commencing on the date hereof (the "Initial Term"). After the Initial Term, this ------------ Agreement shall automatically renew for successive one month periods (each such renewal period and the Initial Term, collectively, the "Engagement Period") and ----------------- shall remain in full force and effect, unless sooner terminated by either party upon thirty (30) calendar days prior written notice. 3. Duties. Enthoven hereby agrees during the Engagement Period to ------ consult with Coinmach in such manner and on such business and financial matters as may be reasonably requested from time to time by Coinmach, including, but not limited to, advisory matters in connection with (i) the servicing and maintenance of route leases pursuant to which the Partnership provides laundry equipment services in the course of the Business; (ii) the maintenance and operation of retail laundromat stores in the course of the Business; (iii) the preservation and development of Coinmach's relationships with customers and suppliers of the Partnership and other third parties involved in the operation of the Business; and (iv) the financial condition of the Business and any tax and accounting matters related thereto. Enthoven agrees to render services to Coinmach conscientiously and to devote reasonable efforts and abilities thereto at such times and in such reasonable manner as Coinmach and Enthoven shall mutually agree, it being acknowledged and agreed among the parties that Enthoven's services shall be on a non-exclusive basis and shall be performed at such places and at such times as are reasonably agreed upon between Enthoven and Coinmach; provided, however, that, notwithstanding the foregoing, Enthoven ----------------- shall be required to devote no greater than 20 hours per week to his services hereunder. 4. Compensation, Benefits and Expenses. ----------------------------------- (a) CONSULTING FEE. From and after the date hereof and during the Engagement Period, Coinmach shall pay to Enthoven a monthly consulting fee (the "Consulting Fee") in an amount equal to the product of the number of hours -------------- worked by Enthoven during such month multiplied by $250 (fractions of an hour to be accounted for in tenths of an hour); provided, however, that (i) with respect ----------------- to any given month during the Engagement Period, Enthoven shall not be entitled to a Consulting Fee in an amount in excess of $16,000 and (ii) as a condition precedent to the payment of a Consulting Fee hereunder, Enthoven shall provide to Coinmach, within five calendar days after the end of each month, a written summary (the "Summary") setting forth in reasonable detail: (i) the total ------- number of hours (which hours shall include any hours expended in connection with any -2- travel time required hereunder) worked for the month and on a daily basis; and (ii) a brief description of the nature and scope of the services performed. Coinmach shall have the right in its reasonable discretion to dispute all or any portion of the Summary and to adjust the amount of any Consulting Fee related thereto. The Consulting Fee shall be payable within 30 days after the submission by Enthoven of the Summary as herein provided; provided, however, --------- ------- that, if this Agreement is terminated by either party, Enthoven shall be entitled to a Consulting Fee as calculated above in respect of any services performed during the period commencing on the first day of the month in which this Agreement is terminated through and including the date of termination. (b) BENEFITS. During the Engagement Period, Enthoven shall not be entitled to any benefits of any kind presently or hereafter granted to other employees of Coinmach, including, without limitation, any retirement, medical, stock option, incentive compensation or disability insurance programs. (c) EXPENSES. Except as otherwise provided in this Agreement, Coinmach shall promptly reimburse Enthoven for such reasonable travel and other out-of-pocket fees and expenses actually incurred by Enthoven in connection with the rendering of services under this Agreement and accounted for and evidenced in accordance with the standard policies, practices or procedures regarding expense reimbursement that Coinmach may establish from time to time. 5. Engagement Representation. Enthoven represents and warrants to ------------------------- Coinmach that he is under no contractual, fiduciary or other restriction or obligation which is inconsistent with the execution of this Agreement, the performance of his duties or obligations hereunder, or the rights of Coinmach hereunder. 6. Confidential Information. Enthoven acknowledges that the ------------------------ information, observations and data obtained by Enthoven during the course of Enthoven's performance under this Agreement concerning the Business and the business and affairs of Coinmach or any of Coinmach's affiliates will be the property of such entities. Therefore, Enthoven agrees that he will not disclose to any unauthorized person or entity or use for the account of any person or entity other than Coinmach, any such information, observations or data including, without limitation, any business secrets or methods, policies, manuals or instructions, reports, lists of names of customers or suppliers, personnel information, pricing information or any other confidential or proprietary information of Coinmach or the Partnership or any of their respective affiliates or related parties (collectively, "Confidential ------------ Information") without Coinmach's prior written consent, unless and to the extent - ------------ that the aforementioned matters -3- become generally known to and available for use by the public other than as a result of Enthoven's acts or omissions to act and except as required by law or legal process. Additionally, the parties hereto will not, without the prior written consent of the other party hereto, disclose to any person or entity either the existence of this Agreement or any of the terms, conditions or agreements contained herein. 7. Independent Contractor Status. Enthoven and Coinmach agree that ----------------------------- Enthoven shall perform services hereunder as an independent contractor, retaining control over and responsibility for his own operations and personnel. Neither Enthoven nor Enthoven's affiliates, partners, agents or related parties shall be considered employees or agents of Coinmach as a result of this Agreement, nor shall any of them have authority to contract in the name of or bind Coinmach, except as expressly agreed to in writing by Coinmach. 8. Notices. Any notice, report or payment required or permitted to ------- be given or made under this Agreement by one party to the other party shall be deemed to have been duly given or made if personally delivered (including by courier) or, if mailed, when mailed by registered or certified mail, postage prepaid, to the other party at the following addresses (or at such other address as shall be given in writing by one party to the other party): If to Enthoven: Richard Enthoven 5538 Falls Road Dallas, Texas 75225 Telephone: (214) 373-1708 Facsimile: (214) 373-1708 with a copy to: Strasburger & Price, L.L.P. Suite 4300 901 Main Street Dallas, Texas 75202 Attention: Fred Fowler, Esq. Telephone: (214) 651-4300 Facsimile: (214) 651-4330 If to Coinmach: Coinmach Corporation 521 East Morehead, Suite 590 Charlotte, North Carolina 28202 Attention: Stephen R. Kerrigan Telephone: (800) 747-9379 -4- Facsimile: (704) 375-8986 with a copy to: Anderson Kill & Olick, P.C. 1251 Avenue of the Americas New York, New York 10020 Attention: Ronald S. Brody, Esq. Telephone: (212) 278-1000 Facsimile: (212) 278-1733 9. Choice of Law. This Agreement shall be governed by and construed ------------- in accordance with the internal laws of the State of Texas, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas. 10. Arbitration. Any controversy or claim arising out of or relating ----------- to this Agreement, or breach thereof, shall be settled by arbitration in Dallas, Texas or such other location agreed to by the parties and in accordance with the rules of the American Arbitration Association. The controversy or claim shall be submitted to three neutral arbitrators: (a) one to be chosen by Coinmach, (b) a second to be chosen by Enthoven, and (c) a third to be selected by the two arbitrators chosen by Coinmach and Enthoven. To the extent permitted by the rules of the American Arbitration Association, the selected arbitrators may grant equitable relief. Judgment upon any proper award rendered by the arbitrators may be entered in any court having jurisdiction thereof. Each party shall pay the fees of the arbitrator selected by him and of his own attorneys, and the expenses of his witnesses and all other expenses connected with the presentation of his case. The costs of the arbitration including the cost of the record or transcripts thereof, if any, administrative fees, and all other fees and expenses shall be shared equally by Coinmach and Enthoven. Notwithstanding anything to the contrary in the preceding sentence, the arbitrators shall be permitted to order the unsuccessful party to pay the reasonable legal fees of the successful party, if the arbitrators find that the unsuccessful party asserted a claim or defense under this Agreement in bad faith. 11. Survival. The covenants, agreements, representations, and -------- warranties contained in or made pursuant to this Agreement shall survive the termination of this Agreement, irrespective of any investigation made by or on behalf of any party. 12. Responsibility for Taxes. It is understood that Enthoven shall ------------------------ be solely responsible for any taxes that become -5- due, if any, in connection with any compensation or other benefits Enthoven receives in connection with this Agreement. 13. Waiver of Breach. The waiver by either party of a breach of any ---------------- provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach of that provision or any other provision hereof. 14. Amendment. This Agreement may be amended only by an instrument --------- in writing executed by the parties hereto that expressly states that it is the intention of each of the parties to amend this Agreement. Commencement or continuation of any custom, course of dealing, practice or usage by Coinmach shall not constitute an amendment hereof or otherwise give rise to enforceable rights or create obligations of Coinmach. 15. Entire Agreement. This Agreement contains the complete and ---------------- entire understanding and agreement of Enthoven and Coinmach with respect to the subject matter hereof and supersedes all prior and contemporaneous understandings, conditions and agreements, oral or written, express or implied, respecting the engagement of Enthoven in connection with the subject matter hereof 16. No Third-Party Beneficiaries. Except as provided in Section 19 ---------------------------- below, this Agreement does not create, and shall not be construed as creating, any rights enforceable by any person not a party to this Agreement. 17. Assignment. Neither Enthoven nor Coinmach may assign its rights ---------- or obligations under this Agreement without the express written consent of the other party. 18. Successors and Assigns. The provisions of this Agreement shall ---------------------- be binding upon and inure to the benefit of Enthoven and his heirs and personal representatives, and shall be binding upon and inure to the benefit of Coinmach and its successors and assigns. 19. Severability. If any provision of this Agreement or portion ------------ thereof is held invalid, illegal, void or unenforceable by reason of any rule of law, administrative or judicial provision or public policy, all other provisions of this Agreement shall nevertheless remain in full force and effect. 20. Headings. The headings contained herein are for the convenience -------- of reference only and are not intended to define, limit, expand or describe the scope or intent of any provision of this Agreement. 21. Counterparts. This Agreement may be executed in one or more ------------ counterparts, each of which shall be deemed an -6- original, but all of which taken together shall constitute one and the same instrument. * * * * * -7- IN WITNESS WHEREOF, Enthoven and Coinmach have caused this Agreement to be duly executed and delivered on the date and year first above written. COINMACH CORPORATION By: /s/ John E. Denson ----------------------------- Name: John E. Denson Title: Senior Vice President /s/ Richard Enthoven --------------------------------- Richard Enthoven -8- EX-10.59 9 CREDIT AGREEMENT EXHIBIT 10.59 ================================================================================ CREDIT AGREEMENT among COINMACH LAUNDRY CORPORATION, COINMACH CORPORATION, THE LENDING INSTITUTIONS LISTED HEREIN, and BANKERS TRUST COMPANY, as ADMINISTRATIVE AGENT, and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as SYNDICATION AGENT, and LEHMAN COMMERCIAL PAPER, INC., as DOCUMENTATION AGENT __________________________________ Dated as of January 8, 1997 __________________________________ ================================================================================ TABLE OF CONTENTS ----------------- Page ---- SECTION 1. Amount and Terms of Credit............................. 1 1.01 The Commitments......................................... 1 1.02 Minimum Amount of Each Borrowing........................ 4 1.03 Notice of Borrowing..................................... 4 1.04 Disbursement of Funds................................... 5 1.05 Notes................................................... 6 1.06 Conversions............................................. 7 1.07 Pro Rata Borrowings..................................... 8 1.08 Interest................................................ 8 1.09 Interest Periods........................................ 9 1.10 Increased Costs, Illegality, etc........................ 10 1.11 Compensation............................................ 12 1.12 Change of Lending Office................................ 13 1.13 Replacement of Banks.................................... 13 SECTION 2. Letters of Credit...................................... 14 2.01 Letters of Credit....................................... 14 2.02 Letter of Credit Requests............................... 15 2.03 Letter of Credit Participations......................... 15 2.04 Agreement to Repay Letter of Credit Payments............ 17 2.05 Increased Costs......................................... 18 SECTION 3. Commitment Commission; Fees; Reductions of Commitment.. 19 3.01 Fees.................................................... 19 3.02 Voluntary Termination of Unutilized Commitments......... 20 3.03 Mandatory Reduction of Commitments...................... 21 SECTION 4. Prepayments; Payments; Taxes........................... 22 4.01 Voluntary Prepayments................................... 22 4.02 Mandatory Repayments and Commitment Reductions.......... 23 4.03 Method and Place of Payment............................. 31 4.04 Net Payments............................................ 31 SECTION 5. Conditions Precedent to Loans.......................... 33 5.01 Execution of Agreement; Notes........................... 34 5.02 Payment of Fees......................................... 34 5.03 Opinions of Counsel..................................... 34 5.04 Corporate Documents; Proceedings; etc................... 34 5.05 Certain Agreements...................................... 35 5.06 Acquisition............................................. 35 5.07 Officer's Certificate................................... 35 (i) PAGE ---- 5.08 Approvals............................................... 35 5.09 Existing Credit Agreement............................... 36 5.10 Pledge and Security Agreements and Collateral Assignment of Leases.................................. 36 5.11 Mortgages; Title Insurance; Surveys; etc................ 37 5.12 Adverse Change, etc..................................... 38 5.13 Litigation.............................................. 38 5.14 Evidence of Insurance................................... 38 5.15 Pro Forma Balance Sheet................................. 39 SECTION 6. Conditions Precedent to All Credit Events.............. 39 6.01 No Default; Representations and Warranties.............. 39 6.02 Notice of Borrowing; Letter of Credit Request........... 39 SECTION 7. Representations, Warranties and Agreements............. 40 7.01 Corporate Status........................................ 40 7.02 Corporate Power and Authority........................... 40 7.03 No Violation............................................ 41 7.04 Governmental Approvals.................................. 41 7.05 Financial Statements; Financial Condition; Undisclosed Liabilities; Projections; etc............. 41 7.06 Litigation.............................................. 44 7.07 True and Complete Disclosure............................ 44 7.08 Use of Proceeds; Margin Regulations..................... 44 7.09 Tax Returns and Payments................................ 44 7.10 Compliance with ERISA................................... 45 7.11 The Security Documents.................................. 46 7.12 Representations and Warranties in Documents............. 47 7.13 Properties.............................................. 47 7.14 Capitalization.......................................... 47 7.15 Subsidiaries............................................ 48 7.16 Compliance with Statutes, etc........................... 48 7.17 Investment Company Act.................................. 48 7.18 Public Utility Holding Company Act...................... 48 7.19 Environmental Matters................................... 48 7.20 Labor Relations......................................... 49 7.21 Patents, Licenses, Franchises and Formulas.............. 50 7.22 Indebtedness............................................ 50 7.23 Acquisition............................................. 50 SECTION 8. Affirmative Covenants.................................. 51 8.01 Information Covenants................................... 51 (ii) PAGE ---- 8.02 Books, Records and Inspections.......................... 55 8.03 Maintenance of Property; Insurance...................... 55 8.04 Corporate Franchises.................................... 56 8.05 Compliance with Statutes, etc........................... 57 8.06 Compliance with Environmental Laws...................... 57 8.07 ERISA................................................... 58 8.08 End of Fiscal Years; Fiscal Quarters.................... 59 8.09 Performance of Obligations.............................. 59 8.10 Payment of Taxes........................................ 59 8.11 Additional Security; Further Assurances................. 60 SECTION 9. Negative Covenants..................................... 61 9.01 Liens................................................... 61 9.02 Consolidation, Merger, Sale or Purchase of Assets, etc. ........................................... 64 9.03 Dividends, etc. ........................................ 67 9.04 Indebtedness............................................ 68 9.05 Advances, Investments and Loans......................... 70 9.06 Transactions with Affiliates............................ 72 9.07 Capital Expenditures.................................... 73 9.08 Leverage Ratio.......................................... 74 9.09 Consolidated Interest Coverage Ratio.................... 75 9.10 Minimum Consolidated EBITDA............................. 76 9.11 Limitation on Voluntary Payments and Modifications of Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain Other Agreements; etc. ...................................... 77 9.12 Limitation on Certain Restrictions on Subsidiaries...... 77 9.13 Limitation on Issuance of Capital Stock................. 78 9.14 Business................................................ 79 9.15 Limitation on the Creation of Subsidiaries.............. 79 9.16 Restriction on Tax Consolidation........................ 79 SECTION 10. Events of Default..................................... 80 10.01 Payments............................................... 80 10.02 Representations, etc. ................................. 80 10.03 Covenants.............................................. 80 10.04 Default Under Other Agreements......................... 80 10.05 Bankruptcy, etc. ...................................... 80 10.06 ERISA.................................................. 81 10.07 Security Documents..................................... 81 10.08 Guaranty............................................... 82 (iii) PAGE ---- 10.09 Judgments.............................................. 82 10.10 Change of Control...................................... 82 SECTION 11. Definitions and Accounting Terms...................... 83 11.01 Defined Terms.......................................... 83 SECTION 12. The Administrative Agent.............................. 112 12.01 Appointment............................................ 112 12.02 Nature of Duties....................................... 113 12.03 Lack of Reliance on the Administrative Agent........... 113 12.04 Certain Rights of the Administrative Agent............. 113 12.05 Reliance............................................... 114 12.06 Indemnification........................................ 114 12.07 The Administrative Agent in Its Individual Capacity.... 114 12.08 Holders................................................ 115 12.09 Resignation by the Administrative Agent................ 115 SECTION 13. Miscellaneous......................................... 115 13.01 Payment of Expenses, etc............................... 115 13.02 Right of Set-off....................................... 117 13.03 Notices................................................ 117 13.04 Benefit of Agreement................................... 117 13.05 No Waiver; Remedies Cumulative......................... 119 13.06 Payments Pro Rata...................................... 119 13.07 Calculations; Computations............................. 120 13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL............................ 121 13.09 Counterparts........................................... 122 13.10 Effectiveness.......................................... 122 13.11 Headings Descriptive................................... 123 13.12 Amendment or Waiver; etc. ............................. 123 13.13 Survival............................................... 125 13.14 Domicile of Loans...................................... 125 13.15 Register............................................... 125 13.16 Confidentiality........................................ 126 SECTION 14. Guaranty.............................................. 126 14.01 The Guaranty........................................... 126 14.02 Bankruptcy............................................. 128 14.03 Nature of Liability.................................... 129 14.04 Independent Obligation................................. 129 14.05 Authorization.......................................... 129 (iv) PAGE ---- 14.06 Reliance............................................... 130 14.07 Subordination.......................................... 130 14.08 Waiver................................................. 131 ANNEX I Commitments ANNEX II Bank Addresses SCHEDULE 2.01 Existing Letters of Credit SCHEDULE 5.10 Leases SCHEDULE 5.11 Real Property SCHEDULE 7.01 Corporate Status SCHEDULE 7.04 Governmental Approvals SCHEDULE 7.05 Financials SCHEDULE 7.06 Litigation SCHEDULE 7.07 True and Complete Disclosure SCHEDULE 7.13 Properties SCHEDULE 7.15 Subsidiaries SCHEDULE 7.16 Compliance with Statutes SCHEDULE 7.19 Environmental SCHEDULE 7.20 Labor Relations SCHEDULE 7.21 Patents, Licenses, Franchises and Formulas SCHEDULE 7.22 Indebtedness SCHEDULE 8.03 Insurance SCHEDULE 9.01 Existing Liens SCHEDULE 9.05 Investments SCHEDULE 9.06 Transactions with Affiliates EXHIBIT A Form of Notice of Borrowing EXHIBIT B-1 Form of Tranche A Term Note EXHIBIT B-2 Form of Tranche B Term Note EXHIBIT B-3 Form of Revolving Note EXHIBIT B-4 Form of Swingline Note EXHIBIT C Form of Letter of Credit Request EXHIBIT D Form of Section 4.04(b)(ii) Certificate EXHIBIT E Form of Opinion of Anderson, Kill & Olick, P.C., Special Counsel to Holdings and the Borrower EXHIBIT F Form of Officers' Certificate EXHIBIT G Form of Intercompany Note EXHIBIT H Form of Assignment and Assumption Agreement EXHIBIT I-1 Form of Borrower Pledge Agreement EXHIBIT I-2 Form of Holdings Pledge Agreement EXHIBIT J Form of Security Agreement (v) EXHIBIT K Form of Mortgage EXHIBIT L Form of Collateral Assignment of Leases EXHIBIT M Form of Collateral Assignment of Location Leases EXHIBIT N Form of Landlord Consent (vi) CREDIT AGREEMENT, dated as of January 8, 1997 among COINMACH LAUNDRY CORPORATION, a Delaware corporation ("Holdings"), COINMACH CORPORATION, a -------- Delaware corporation (the "Borrower"), the lending institutions from time to -------- time party hereto (each, a "Bank" and collectively, the "Banks"), BANKERS TRUST ---- ----- COMPANY, as Administrative Agent, FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as Syndication Agent, and LEHMAN COMMERCIAL PAPER, INC., as Documentation Agent. Unless otherwise defined herein, all capitalized terms used herein and defined in Section 11 are used herein as therein defined). W I T N E S S E T H : - - - - - - - - - - WHEREAS, the Borrower will incur loans from the Banks, the proceeds of which will be used to finance the Acquisition and to provide working capital after the Acquisition; WHEREAS, this Agreement and the loans incurred by the Borrower hereunder are intended to replace any and all loans made and/or credit facilities provided under the Existing Credit Agreement; WHEREAS, contemporaneously with the funding of the initial Loans hereunder, the Acquisition will take place; WHEREAS, subject to and upon the terms and conditions set forth herein, the Banks are willing to make available to the Borrower the respective credit facilities provided for herein; NOW, THEREFORE, IT IS AGREED: SECTION 1. Amount and Terms of Credit. -------------------------- 1.01 The Commitments. (a) Subject to and upon the terms and --------------- conditions set forth herein, each Bank with a Tranche A Term Loan Commitment ("Tranche A Term Loan Banks") severally agrees to make on the Effective Date a - --------------------------- term loan (each such term loan, a "Tranche A Term Loan" and, collectively, the ------------------- "Tranche A Term Loans") to the Borrower, which Tranche A Term Loans (i) shall be - --------------------- made and initially maintained as a single Borrowing of Base Rate Loans (subject to the option to convert such Tranche A Term Loans pursuant to Section 1.06); provided that, except as otherwise specifically provided in Section 1.10(b), all - -------- Tranche A Term Loans comprising the same Borrowing shall at all times be of the same Type, and (ii) shall equal for each Bank, in initial aggregate principal amount, an amount which equals the Tranche A Term Loan Commitment of such Bank on the Effective Date (before giving effect to any reductions thereto on such date pursuant to Section 3.03(a)). Once repaid, Tranche A Term Loans incurred hereunder may not be reborrowed. (b) Subject to and upon the terms and conditions set forth herein, each Bank with a Tranche B Term Loan Commitment ("Tranche B Term Loan Banks") ------------------------- severally agrees to make on the Effective Date a term loan (each such term loan, a "Tranche B Term Loan" and, collectively, the "Tranche B Term Loans") to the ------------------- -------------------- Borrower, which Tranche B Term Loans (i) shall be made and initially maintained as a single Borrowing of Base Rate Loans (subject to the option to convert such Tranche B Term Loans pursuant to Section 1.06); provided that, except as -------- otherwise specifically provided in Section 1.10(b), all Tranche B Term Loans comprising the same Borrowing shall at all times be of the same Type, and (ii) shall equal for each Bank, in initial aggregate principal amount, an amount which equals the Tranche B Term Loan Commitment of such Bank on the Effective Date (before giving effect to any reductions thereto on such date pursuant to Section 3.03(b)). Once repaid, Tranche B Term Loans incurred hereunder may not be reborrowed. (c) Subject to and upon the terms and conditions set forth herein, each Bank with a Revolving Loan Commitment ("Revolving Loan Banks") severally -------------------- agrees, at any time and from time to time on and after the Effective Date and prior to the Revolving Loan Maturity Date, to make a revolving loan or revolving loans (each, a "Revolving Loan" and, collectively, the "Revolving Loans") to the -------------- --------------- Borrower, which Revolving Loans (i) shall, at the option of the Borrower, be Base Rate Loans or Eurodollar Loans; provided that (A) except as otherwise -------- specifically provided in Section 1.10(b), all Revolving Loans comprising the same Borrowing shall at all times be of the same Type and (B) no Revolving Loans maintained as Eurodollar Loans may be incurred prior to the earlier of (1) the 60th day after the Effective Date or (2) the Syndication Date, (ii) may be repaid and reborrowed in accordance with the provisions hereof, (iii) shall not exceed for any Bank at any time outstanding that aggregate principal amount which, when added to the product of (x) such Bank's Adjusted Percentage and (y) the aggregate amount of all Letter of Credit Outstandings plus all Swingline Loans then outstanding (exclusive of Unpaid Drawings and Swingline Loans which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans) at such time, equals the Revolving Loan Commitment of such Bank at such time and (iv) shall not exceed for all Banks at any time outstanding that aggregate principal amount which, when added to the amount of all Swingline Loans then outstanding and all Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans) at such time the Total Revolving Loan Commitment then in effect. -2- (d) Subject to and upon the terms and conditions herein set forth, BTCo agrees to make at any time and from time to time on and after the Effective Date and prior to the Swingline Expiry Date, a loan or loans to the Borrower (each, a "Swingline Loan" and, collectively, the "Swingline Loans"), which -------------- --------------- Swingline Loans (i) shall be made and maintained as Base Rate Loans, (ii) may be repaid and reborrowed in accordance with the provisions hereof, (iii) shall not exceed in aggregate principal amount at any time outstanding, when combined with the aggregate principal amount of all Revolving Loans then outstanding and the Letter of Credit Outstandings (exclusive of Unpaid Drawings relating to Letters of Credit which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans) at such time, an amount equal to the Total Revolving Loan Commitment then in effect and (iv) shall not exceed in aggregate principal amount at any time outstanding the Maximum Swingline Amount. BTCo shall not be obligated to make any Swingline Loans at a time when a Bank Default exists unless BTCo has entered into arrangements satisfactory to it and the Borrower to eliminate BTCo's risk with respect to each Bank's (including any Defaulting Bank's) participation in such Swingline Loans, including by cash collateralizing such Defaulting Bank's or Banks' Percentage of the outstanding Swingline Loans. BTCo will not make a Swingline Loan after it has received written notice from the Borrower or the Required Banks stating that a Default or an Event of Default exists until such time as BTCo shall have received a written notice of (i) rescission of such notice from the party or parties originally delivering the same or (ii) a waiver of such Default or Event of Default from the Required Banks. (e) On any Business Day, BTCo may, in its sole discretion, give notice to the Revolving Loan Banks and the Borrower that all outstanding Swingline Loans shall be funded with a Borrowing of Revolving Loans (provided -------- that each such notice shall be deemed to have been automatically given upon the occurrence of a Default or an Event of Default under Section 10.05 or upon the exercise of any of the remedies provided in the last paragraph of Section 10), in which case a Borrowing of Revolving Loans constituting Base Rate Loans (each such Borrowing, a "Mandatory Borrowing") shall be made on the immediately ------------------- succeeding Business Day by all Revolving Loan Banks pro rata based on each --- ---- Bank's Percentage, and the proceeds thereof shall be applied directly to repay BTCo for such outstanding Swingline Loans. Each Revolving Loan Bank hereby irrevocably agrees to make Base Rate Loans upon one Business Day's notice pursuant to each Mandatory Borrowing in the amount and in the manner specified in the preceding sentence and on the date specified in writing by BTCo notwithstanding (i) that the amount of the Mandatory Borrowing may not comply with the Minimum Borrowing Amount otherwise required hereunder, (ii) whether any conditions specified in Section 6 are then satisfied, (iii) whether a Default or an Event of Default has occurred and is continuing, (iv) the date of such Mandatory Borrowing and (v) any reduction in the Total Revolving Loan Commitment after any such Swingline Loans were made. In the event that any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including, without limitation, -3- as a result of the commencement of a proceeding under the Bankruptcy Code in respect of the Borrower), each Revolving Loan Bank (other than BTCo) hereby agrees that it shall forthwith purchase from BTCo (without recourse or warranty) such assignment of the outstanding Swingline Loans as shall be necessary to cause the Revolving Loan Banks to share in such Swingline Loans ratably based upon their respective Percentages; provided that all interest payable on the -------- Swingline Loans shall be for the account of BTCo until the date the respective assignments is purchased and, to the extent attributable to the purchased assignment, shall be payable to the Bank purchasing same from and after such date of purchase. 1.02 Minimum Amount of Each Borrowing. The aggregate principal -------------------------------- amount of each Borrowing of any Tranche of Term Loans shall not be less than $5,000,000 and, if greater, shall be in an integral multiple of $500,000. The aggregate principal amount of each Borrowing of Revolving Loans shall be not less than $1,000,000 and, if greater, shall be in an integral multiple of $100,000. More than one Borrowing may occur on the same date, but at no time shall there be outstanding more than nine Borrowings of Eurodollar Loans. The principal amount of each Borrowing of Swingline Loans shall not be less than $250,000 and, if greater, shall be in an integral multiple of $50,000. 1.03 Notice of Borrowing. (a) Whenever the Borrower desires to make ------------------- a Borrowing hereunder (excluding Borrowings of Swingline Loans and Revolving Loans incurred pursuant to a Mandatory Borrowing), it shall give the Administrative Agent at its Notice Office at least one Business Day's prior written (or telephonic promptly confirmed in writing) notice of each Base Rate Loan and at least three Business Days' prior written (or telephonic promptly confirmed in writing) notice of each Eurodollar Loan to be made hereunder; provided that any such notice shall be deemed to have been given on a certain - -------- day only if given before 12:00 Noon (New York time) on such day. Each such written notice or written confirmation of telephonic notice (each, a "Notice of Borrowing"), except as otherwise expressly provided in Section 1.10, shall be irrevocable and shall be given by the Borrower in the form of Exhibit A, --------- appropriately completed to specify the aggregate principal amount of the Loans to be made pursuant to such Borrowing, the date of such Borrowing (which shall be a Business Day), whether the Loans being made pursuant to such Borrowing shall constitute Tranche A Term Loans, Tranche B Term Loans or Revolving Loans and whether, subject to the other terms and provisions hereof, the Loans being made pursuant to such Borrowing are to be initially maintained as Base Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the initial Interest Period to be applicable thereto. The Administrative Agent shall promptly give each Bank which is required to make Loans of the Tranche specified in the respective Notice of Borrowing, notice of such proposed Borrowing, of such Bank's proportionate share thereof and of the other matters required by the immediately preceding sentence to be specified in the Notice of Borrowing. -4- (b) (i) Whenever the Borrower desires to incur Swingline Loans hereunder, it shall give BTCo not later than 12:00 noon (New York time) on the day such Swingline Loan is to be made, written notice (or telephonic notice promptly confirmed in writing) of each Swingline Loan to be made hereunder. Each such notice shall be irrevocable and shall specify in each case (x) the date of such Borrowing (which shall be a Business Day) and (y) the aggregate principal amount of the Swingline Loan to be made pursuant to such Borrowing. (ii) Mandatory Borrowings shall be made upon the notice specified in Section 1.01(e), with the Borrower hereby irrevocably agreeing, by its incurrence of any Swingline Loan, to the making of Mandatory Borrowings as set forth in such Section 1.01(e). (c) Without in any way limiting the obligation of the Borrower to confirm in writing any telephonic notice of any Borrowing of Loans, the Administrative Agent or BTCo (in the case of Swingline Loans), as the case may be, may act without liability upon the basis of telephonic notice of such Borrowing, reasonably believed by the Administrative Agent or BTCo, as the case may be, in good faith to be from an Authorized Officer of the Borrower prior to receipt of written confirmation. In each such case, the Borrower hereby waives the right to dispute the Administrative Agent's or BTCo's, as the case may be, record of the terms of such telephonic notice of such Borrowing of Loans. 1.04 Disbursement of Funds. No later than 12:00 Noon (New York time) --------------------- on the date specified in each Notice of Borrowing, each Bank with a Commitment of the respective Tranche will make available its pro rata portion of each such --- ---- Borrowing requested to be made on such date (or in the case of Swingline Loans, BTCo shall make available the full amount thereof). All such amounts shall be made available in Dollars and in immediately available funds at the Payment Office of the Administrative Agent, and the Administrative Agent will make available to the Borrower at the Payment Office the aggregate of the amounts so made available by the Banks. Unless the Administrative Agent shall have been notified by any Bank prior to the date of Borrowing that such Bank does not intend to make available to the Administrative Agent such Bank's portion of any Borrowing to be made on such date, the Administrative Agent may assume that such Bank has made such amount available to the Administrative Agent on such date of Borrowing and the Administrative Agent, in reliance upon such assumption, may (in its sole discretion and without obligation to do so) make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Bank, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Bank. If such Bank does not pay such corresponding amount forthwith upon the Agent's demand therefore, the Administrative Agent shall promptly notify the Borrower and the Borrower shall immediately pay such corresponding amount to the Administrative Agent. The Administrative Agent shall also be entitled to recover on -5- demand from such Bank or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Borrower until the date such corresponding amount is recovered by the Administrative Agent, at a rate per annum equal to (i) if recovered from such Bank, at the overnight Federal Funds Rate and (ii) if recovered from the Borrower, the rate of interest applicable to the respective Borrowing, as determined pursuant to Section 1.08. Nothing in this Section 1.04 shall be deemed to relieve any Bank from its obligation to make Loans hereunder or to prejudice any rights which the Borrower may have against any Bank as a result of any failure by such Bank to make Loans hereunder. 1.05 Notes. (a) The Borrower's obligation to pay the principal of, ----- and interest on, the Loans made by each Bank shall be evidenced (i) if Tranche A Term Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B-1 with blanks appropriately completed in ----------- conformity herewith (each, a "Tranche A Term Note" and, collectively, the ------------------- "Tranche A Term Notes"), (ii) if Tranche B Term Loans, by a promissory note duly - --------------------- executed and delivered by the Borrower substantially in the form of Exhibit B-2 ----------- with blanks appropriately completed in conformity herewith (each, a "Tranche B --------- Term Note" and, collectively, the "Tranche B Term Notes"), (iii) if Revolving - --------- -------------------- Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B-3, with blanks appropriately completed in ----------- conformity herewith (each, a "Revolving Note" and, collectively, the "Revolving -------------- --------- Notes") and (iv) if Swingline Loans, by a promissory note duly executed and - ----- delivered by the Borrower substantially in the form of Exhibit B-4, with blanks appropriately completed in conformity herewith (the "Swingline Note"). -------------- (b) The Tranche A Term Note issued to each Bank shall (i) be executed by the Borrower, (ii) be payable to the order of such Bank and be dated the Effective Date, (iii) be in a stated principal amount equal to the Tranche A Term Loan made by such Bank on the Effective Date and be payable in the principal amount of Tranche A Term Loans evidenced thereby, (iv) mature on the Tranche A Term Loan Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to voluntary prepayments as provided in Section 4.01 and mandatory repayment as provided in Section 4.02 and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (c) The Tranche B Term Note issued to each Bank shall (i) be executed by the Borrower, (ii) be payable to the order of such Bank and be dated the Effective Date, (iii) be in a stated principal amount equal to the Tranche B Term Loans made by such Bank on the Effective Date and be payable in the principal amount of Tranche B Term Loans evidenced thereby, (iv) mature on the Tranche B Term Loan Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, -6- (vi) be subject to voluntary prepayments as provided in Section 4.01 and mandatory repayment as provided in Section 4.02 and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (d) The Revolving Note issued to each Bank shall (i) be executed by the Borrower, (ii) be payable to the order of such Bank and be dated the Effective Date, (iii) be in a stated principal amount equal to the Revolving Loan Commitment of such Bank and be payable in the principal amount of the Revolving Loans evidenced thereby, (iv) mature on the Revolving Loan Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to voluntary prepayments as provided in Section 4.01 and mandatory repayment as provided in Section 4.02 and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (e) The Swingline Note issued to BTCo shall (i) be executed by the Borrower, (ii) be payable to the order of BTCo and be dated the Effective Date, (iii) be in a stated principal amount equal to the Maximum Swingline Amount and be payable in the principal amount of the outstanding Swingline Loans evidenced thereby, (iv) mature on the Swingline Expiry Date, (v) bear interest as provided in Section 1.08 in respect of the Base Rate Loans evidenced thereby, (vi) be subject to voluntary prepayments as provided in Section 4.01 and mandatory repayment as provided in Section 4.02, and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (f) Each Bank will note on its internal records the amount of each Loan made by it and each payment in respect thereof and will prior to any transfer of any of its Notes endorse on the reverse side thereof the outstanding principal amount of Loans evidenced thereby. Failure to make any such notation shall not affect the Borrower's obligations in respect of such Loans. 1.06 Conversions. The Borrower shall have the option to convert, on ----------- any Business Day occurring on or after the earlier of (1) the 60th day after the Effective Date or (2) the Syndication Date, all or a portion equal to at least (x) in the case of a conversion of Term Loans, $5,000,000 (and, if greater, in an integral multiple of $500,000) and (y) in the case of a conversion of Revolving Loans, $1,000,000 (and, if greater, in an integral multiple of $100,000), of the outstanding principal amount of Loans made pursuant to one or more Borrowings (so long as of the same Tranche) of one or more Types of Loans into a Borrowing (of the same Tranche) of another Type of Loan; provided that -------- (i) except as otherwise provided in Section 1.10(b), Eurodollar Loans may be converted into Base Rate Loans only on the last day of an Interest Period applicable to the Loans being converted and no such partial conversion of Eurodollar Loans shall reduce the outstanding principal amount of such Eurodollar Loans made pursuant to a single Borrowing to less than (x) in the case of Term Loans, $5,000,000 and (y) in the case of Revolving Loans, $1,000,000, (ii) Base Rate Loans may only be -7- converted into Eurodollar Loans if no Default or Event of Default is in existence on the date of the conversion, and (iii) no conversion pursuant to this Section 1.06 shall result in a greater number of Eurodollar Borrowings than is permitted under Section 1.02. Each such conversion shall be effected by the Borrower by giving the Administrative Agent at its Notice Office prior to 12:00 Noon (New York time) at least three Business Days' prior notice (each, a "Notice ------ of Conversion") specifying the Loans to be so converted, the Borrowing(s) - ------------- pursuant to which such Loans were made and, if to be converted into Eurodollar Loans, the Interest Period to be initially applicable thereto. The Administrative Agent shall give each Bank prompt notice of any such proposed conversion affecting any of its Loans; provided that the failure of the -------- Administrative Agent to give any such notice shall not affect the rights or obligations of the Borrower hereunder. 1.07 Pro Rata Borrowings. All Borrowings of Tranche A Term Loans, ------------------- Tranche B Term Loans and Revolving Loans under this Agreement shall be incurred from the Banks pro rata on the basis of their Tranche A Term Loan Commitments, --- ---- Tranche B Term Loan Commitments or Revolving Loan Commitments, as the case may be. It is understood that no Bank shall be responsible for any default by any other Bank of its obligation to make Loans hereunder and that each Bank shall be obligated to make the Loans provided to be made by it hereunder, regardless of the failure of any other Bank to make its Loans hereunder. 1.08 Interest. (a) The Borrower agrees to pay interest in respect -------- of the unpaid principal amount of each Base Rate Loan from the date the proceeds thereof are made available to the Borrower until the earlier of (i) the maturity (whether by acceleration or otherwise) of such Base Rate Loan and (ii) the conversion of such Base Rate Loan to a Eurodollar Loan pursuant to Section 1.06, at a rate per annum which shall be equal to the sum of the Applicable Base Rate Margin plus the Base Rate in effect from time to time. (b) The Borrower agrees to pay interest in respect of the unpaid principal amount of each Eurodollar Loan from the date the proceeds thereof are made available to the Borrower until the earlier of (i) the maturity (whether by acceleration or otherwise) of such Eurodollar Loan and (ii) the conversion of such Eurodollar Loan to a Base Rate Loan pursuant to Section 1.06, 1.09 or 1.10(b), as applicable, at a rate per annum which shall, during each Interest Period applicable thereto, be equal to the sum of the Applicable Eurodollar Margin plus the Eurodollar Rate for such Interest Period. (c) Overdue principal and, to the extent permitted by law, overdue interest in respect of each Loan and any other overdue amount payable hereunder shall, in each case, bear interest at a rate per annum equal to the greater of (x) 2% per annum in excess of the rate otherwise applicable to Base Rate Loans of the respective Tranche -8- of Loans from time to time and (y) the rate which is 2% in excess of the rate then borne by such Loans, in each case with such interest to be payable on demand. (d) Accrued (and theretofore unpaid) interest shall be payable (i) in respect of each Base Rate Loan, quarterly in arrears on each Quarterly Payment Date, (ii) in respect of each Eurodollar Loan, on the last day of each Interest Period applicable thereto and, in the case of an Interest Period in excess of three months, on each date occurring at three month intervals after the first day of such Interest Period and (iii) in respect of each Loan, on any repayment or prepayment (on the amount repaid or prepaid), upon conversion, at maturity (whether by acceleration or otherwise) and, after such maturity, on demand. (e) Upon each Interest Determination Date, the Administrative Agent shall determine the Eurodollar Rate for each Interest Period applicable to Eurodollar Loans and shall promptly notify the Borrower and the applicable Banks thereof. Each such determination shall, absent manifest error, be final and conclusive and binding on all parties hereto. (f) All computations of interest hereunder shall be made in accordance with Section 13.07(b). 1.09 Interest Periods. At the time it gives any Notice of Borrowing ---------------- or Notice of Conversion in respect of the making of, or conversion into, any Eurodollar Loan (in the case of the initial Interest Period applicable thereto) or on the third Business Day prior to the expiration of an Interest Period applicable to such Eurodollar Loan (in the case of any subsequent Interest Period), the Borrower shall have the right to elect, by giving the Administrative Agent notice thereof, the interest period (each, an "Interest -------- Period") applicable to such Eurodollar Loan, which Interest Period shall, at the - ------ option of the Borrower, be a one, two, three or six-month period; provided that: -------- (i) all Eurodollar Loans comprising a Borrowing shall at all times have the same Interest Period; (ii) the initial Interest Period for any Eurodollar Loan shall commence on the date of Borrowing of such Eurodollar Loan (including the date of any conversion thereto from a Loan of a different Type) and each Interest Period occurring thereafter in respect of such Eurodollar Loan shall commence on the day on which the next preceding Interest Period applicable thereto expires; (iii) if any Interest Period relating to a Eurodollar Loan begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month; -9- (iv) if any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided, however, that if any Interest Period for -------- ------- a Eurodollar Loan would otherwise expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (v) no Interest Period may be selected at any time when a Default or Event of Default is then in existence; (vi) no Interest Period in respect of any Borrowing of any Tranche of Loans shall be selected which extends beyond the respective Maturity Date for such Tranche of Loans; and (vii) no Interest Period in respect of any Borrowing of Tranche A Term Loans or Tranche B Term Loans, as the case may be, shall be selected which extends beyond any date upon which a mandatory repayment of such Tranche of Term Loans will be required to be made under Section 4.02(c) or (d), as the case may be, if the aggregate principal amount of Tranche A Term Loans or Tranche B Term Loans, as the case may be, which have Interest Periods which will expire after such date will be in excess of the aggregate principal amount of Tranche A Term Loans or Tranche B Term Loans, as the case may be, then outstanding less the aggregate amount of such required prepayment. If upon the expiration of any Interest Period applicable to a Borrowing of Eurodollar Loans, the Borrower has failed to elect, or is not permitted to elect, a new Interest Period to be applicable to such Eurodollar Loans as provided above, the Borrower shall be deemed to have elected to convert such Eurodollar Loans into Base Rate Loans effective as of the expiration date of such current Interest Period. 1.10 Increased Costs, Illegality, etc. (a) In the event that any -------------------------------- Bank shall have determined (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto but, with respect to clause (i) below, may be made only by the Administrative Agent): (i) on any Interest Determination Date that, by reason of any changes arising after the date of this Agreement affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of Eurodollar Rate; or (ii) at any time, that such Bank shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to any Eurodollar Loan because of (x) any Change in Law since the date of this -10- Agreement, such as, for example, but not limited to: (A) a change in Covered Taxes resulting from the payment to any Bank of the principal of or interest such Eurodollar Loan or any other amounts payable hereunder, but without duplication of any amounts payable in respect of Taxes pursuant to Section 4.04(a), or (B) a change in official reserve requirements, but, in all events, excluding reserves required under Regulation D to the extent included in the computation of the Eurodollar Rate and/or (y) other circumstances since the date of this Agreement affecting such Bank or the interbank Eurodollar market or the position of such Bank in such market; or (iii) at any time, that the making or continuance of any Eurodollar Loan has been made (x) unlawful by any law or governmental rule, regulation or order, (y) impossible by compliance by any Bank in good faith with any governmental request (whether or not having force of law) or (z) impracticable as a result of a contingency occurring after the date of this Agreement which materially and adversely affects the interbank Eurodollar market; then, and in any such event, such Bank (or the Administrative Agent, in the case of clause (i) above) shall promptly give notice (by telephone confirmed in writing) to the Borrower and, except in the case of clause (i) above, to the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each of the other Banks). Thereafter (x) in the case of clause (i) above, Eurodollar Loans shall no longer be available until such time as the Administrative Agent notifies the Borrower and the Banks that the circumstances giving rise to such notice by the Administrative Agent no longer exist, and any Notice of Borrowing or Notice of Conversion given by the Borrower with respect to Eurodollar Loans which have not yet been incurred (including by way of conversion) shall be deemed rescinded by the Borrower, (y) in the case of clause (ii) above, the Borrower shall pay to such Bank, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Bank in its sole discretion shall determine) as shall be required to compensate such Bank for such increased costs or reductions in amounts received or receivable hereunder (a written notice as to the additional amounts owed to such Bank, showing the basis for the calculation thereof, submitted to the Borrower by such Bank in good faith shall, absent manifest error, be final and conclusive and binding on all the parties hereto) and (z) in the case of clause (iii) above, the Borrower shall take one of the actions specified in Section 1.10(b) as promptly as possible and, in any event, within the time period required by law. Each of the Administrative Agent and each Bank agrees that if it gives notice to the Borrower of any of the events described in clause (i) or (iii) above, it shall promptly notify the Borrower and, in the case of any such Bank, the Agent, if such event ceases to exist. If any such event described in clause (iii) above ceases to exist as to a Bank, the obligations of such Bank to make Eurodollar Loans and to convert Base Rate Loans into Eurodollar Loans on the terms and conditions contained herein shall be reinstated. -11- (b) At any time that any Eurodollar Loan is affected by the circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and in the case of a Eurodollar Loan affected by the circumstances described in Section 1.10(a)(iii) shall) either (x) if the affected Eurodollar Loan is then being made initially or pursuant to a conversion, cancel the respective Borrowing by giving the Administrative Agent telephonic notice (confirmed in writing) on the same date that the Borrower was notified by the affected Bank pursuant to Section 1.10(a)(ii) or (iii) or (y) if the affected Eurodollar Loan is then outstanding, upon at least three Business Days' written notice to the Administrative Agent, require the affected Bank to convert such Eurodollar Loan into a Base Rate Loan; provided that, if more than one Bank is affected at any -------- time, then all affected Banks must be treated the same pursuant to this Section 1.10(b). (c) If at any time after the Effective Date, any Bank determines that the introduction of or any change in any applicable law or governmental rule, regulation, order, guideline, directive or request (whether or not having the force of law) concerning capital adequacy, or any change in interpretation or administration thereof by any governmental authority, central bank or comparable agency, will have the effect of increasing the amount of capital required or expected to be maintained by such Bank or any corporation controlling such Bank based on the existence of such Bank's Commitments hereunder or its obligations hereunder, then the Borrower shall pay to such Bank, upon its written demand therefor, such additional amounts as shall be required to compensate such Bank or such other corporation for the increased cost to such Bank or such other corporation or the reduction in the rate of return to such Bank or such other corporation as a result of such increase of capital. Such Bank's reasonable good faith determination of compensation owing under this Section 1.10(c) shall, absent manifest error, be final and conclusive and binding on all the parties hereto. Each Bank, upon determining that any additional amounts will be payable pursuant to this Section 1.10(c), will give prompt written notice thereof to the Borrower, which notice shall set forth the basis of the calculation of such additional amounts, although the failure to give any such notice shall not release or diminish the Borrower's obligations to pay additional amounts pursuant to this Section 1.10(c) upon the subsequent receipt of such notice. 1.11 Compensation. The Borrower shall compensate each Bank, upon its ------------ written request (which request shall set forth the reason for requesting such compensation), for all reasonable losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Bank to fund its Eurodollar Loans but excluding any loss of anticipated profit) which such Bank may sustain: (i) if for any reason (other than a default by such Bank) a Borrowing of, or conversion from or into, Eurodollar Loans does not occur on a date specified therefor in a Notice of Borrowing or Notice of Conversion (whether or not withdrawn by the Borrower or deemed withdrawn pursuant to Section 1.10(a)); (ii) if any repayment (including any repayment made pursuant to Section 4.02 or as a result of an acceleration of the Loans -12- pursuant to Section 10) or conversion of any of its Eurodollar Loans occurs on a date which is not the last day of an Interest Period with respect thereto; (iii) if any prepayment of any of its Eurodollar Loans is not made on any date specified in a notice of prepayment given by the Borrower; or (iv) as a consequence of (x) any other default by the Borrower to repay its Loans when required by the terms of this Agreement or any Note held by such Bank or (y) any election made pursuant to Section 1.10(b). Calculation of all amounts payable to a Bank under this Section 1.11 shall be made as though that Bank had actually funded its relevant Eurodollar Loan through the purchase of a Eurodollar deposit bearing interest at the Eurodollar Rate in an amount equal to the amount of that Loan, having maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit from an offshore office of that Bank to a domestic office of that Bank in the United States of America; provided, however, -------- ------- that each Bank may fund each of its Eurodollar Loans in any manner it sees fit and the foregoing assumption shall be utilized only for the calculation of amounts payable under this Section 1.11. 1.12 Change of Lending Office. Each Bank agrees that on the ------------------------ occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 2.05 or Section 4.04 with respect to such Bank, it will, if requested by the Borrower, use reasonable good faith efforts (subject to overall policy considerations of such Bank) to designate another lending office for any Loans or Letters of Credit affected by such event; provided that such designation is made on such terms that such Bank and its - -------- lending office suffer no significant economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of such Section. Nothing in this Section 1.12 shall affect or postpone any of the obligations of the Borrower or the right of any Bank provided in Sections 1.10, 2.05 and 4.04. 1.13 Replacement of Banks. (x) If any Bank becomes a Defaulting -------------------- Bank, (y) upon the occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 2.05 or Section 4.04 with respect to any Bank which results in such Bank charging to the Borrower increased costs in excess of those being generally charged by the other Banks or becoming incapable of making Eurodollar Loans, or (z) as provided in Section 13.12(b) in the case of certain refusals by a Bank to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Banks, the Borrower shall have the right, if no Default or Event of Default will exist immediately after giving effect to the respective replacement, to either replace such Bank (the "Replaced Bank") with one or more other Eligible Transferee or Transferees, none - -------------- of whom shall constitute a Defaulting Bank at the time of such replacement reasonably acceptable to the Administrative Agent (collectively, the "Replacement Bank"); provided that (i) at the time of any replacement pursuant - ----------------- -------- to this Section 1.13, the Replacement Bank shall enter into one or more Assignment and Assumption Agreements pursuant to Section 13.04(b) (and with all fees payable pursuant to said -13- Section 13.04(b) to be paid by the Replacement Bank) pursuant to which the Replacement Bank shall acquire all of the Commitments and outstanding Loans of, and in each case participations in Letters of Credit and Swingline Loans by, the Replaced Bank and, in connection therewith, shall pay to (x) the Replaced Bank in respect thereof an amount equal to the sum of (A) an amount equal to the principal of, and all accrued interest on, all outstanding Loans of the Replaced Bank, (B) an amount equal to all Unpaid Drawings and Swingline Loans that have been funded by (and not reimbursed to) such Replaced Bank, together with all then unpaid interest with respect thereto at such time and (C) an amount equal to all accrued, but theretofore unpaid, Fees owing to the Replaced Bank pursuant to Section 3.01 and (y) BTCo an amount equal to such Replaced Bank's Adjusted Percentage (for this purpose, determined as if the adjustment described in clause (y) of the immediately succeeding sentence had been made with respect to such Replaced Bank) of any Unpaid Drawing (which at such time remains an Unpaid Drawing) or Swingline Loans to the extent such amount was not theretofore funded by such Replaced Bank, and (ii) all obligations of the Borrower owing to the Replaced Bank (other than those specifically described in clause (i) above in respect of which the assignment purchase price has been, or is concurrently being, paid) shall be paid in full to such Replaced Bank concurrently with such replacement. Upon the execution of the respective Assignment and Assumption Agreements, the payment of amounts referred to in clauses (i) and (ii) above and, if so requested by the Replacement Bank, delivery to the Replacement Bank of the appropriate Note or Notes executed by the Borrower, (x) the Replacement Bank shall become a Bank hereunder and, unless the respective Replaced Bank continues to have outstanding Term Loans hereunder, the Replaced Bank shall cease to constitute a Bank hereunder, except with respect to indemnification provisions under this Agreement (including, without limitation, Sections 1.10, 1.11, 2.05, 4.04, 13.01 and 13.06) and the other Credit Documents, which shall survive as to such Replaced Bank and (y) the Adjusted Percentages of the Banks shall be automatically adjusted at such time to give effect to such replacement (and to give effect to the replacement of a Defaulting Bank with one or more Non-Defaulting Banks). SECTION 2. Letters of Credit. ----------------- 2.01 Letters of Credit. (a) Subject to and upon the terms and ----------------- conditions herein set forth, the Borrower may request that any Issuing Bank issue, at any time and from time to time on and after the Effective Date and prior to the Revolving Loan Maturity Date, for the account of the Borrower and for the benefit of any holder (or any trustee, agent or other similar representative for any such holders) of L/C Supportable Indebtedness of the Borrower or any of its Subsidiaries that are Guarantors, an irrevocable standby letter of credit, in a form customarily used by such Issuing Bank or in such other form as has been approved by such Issuing Bank (each such standby letter of credit, a "Letter of Credit") in support of such L/C Supportable ---------------- Indebtedness. -14- (b) Notwithstanding the foregoing, (i) no Letter of Credit shall be issued the Stated Amount of which, when added to the Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and prior to the issuance of, the respective Letter of Credit) at such time would exceed either (x) $10,000,000 or (y) when added to the aggregate principal amount of all Revolving Loans made by Non-Defaulting Banks and then outstanding, an amount equal to the Adjusted Total Revolving Loan Commitment at such time, (ii) each Letter of Credit shall by its terms terminate on or before, the date which occurs 12 months after the date of the issuance thereof but not beyond the 30th day prior to Revolving Loan Maturity Date (although any such Standby Letter of Credit may be extendable for successive periods of up to 12 months, but not beyond the 30th day prior to Revolving Loan Maturity Date), on terms acceptable to the Issuing Bank thereof) and (iii) each Letter of Credit shall be denominated in Dollars. 2.02 Letter of Credit Requests. (a) Whenever the Borrower desires ------------------------- that a Letter of Credit be issued for its account, the Borrower shall give the Administrative Agent and the respective Issuing Bank at least two Business Days' (or such shorter period as is acceptable to the respective Issuing Bank) written notice thereof. Each notice shall be in the form of Exhibit C (each, a "Letter ------ of Credit Request"). - ----------------- (b) The making of each Letter of Credit Request shall be deemed to be a representation and warranty by the Borrower that such Letter of Credit may be issued in accordance with, and will not violate the requirements of, Section 2.01(b). Unless the respective Issuing Bank has received notice from any Bank before it issues a Letter of Credit that one or more of the conditions specified in Sections 5 or 6 are not then satisfied, or that the issuance of such Letter of Credit would violate Section 2.01(b), then such Issuing Bank shall issue the requested Letter of Credit for the account of the Borrower in accordance with such Issuing Bank's usual and customary practices. Upon its issuance of any Letter of Credit or any amendment thereto, such Issuing Bank shall promptly notify each Bank of such issuance or amendment, which notice, shall be accompanied by a copy of the amendment or Letter of Credit actually issued. 2.03 Letter of Credit Participations. (a) Immediately upon the ------------------------------- issuance by any Issuing Bank of any Letter of Credit, such Issuing Bank shall be deemed to have sold and transferred to each Bank with a Revolving Loan Commitment, other than a Defaulting Bank or such Issuing Bank (each such Bank, in its capacity under this Section 2.03, a "Participant"), and each such ----------- Participant shall be deemed irrevocably and unconditionally to have purchased and received from such Issuing Bank, without recourse or warranty, an undivided interest and participation, to the extent of such Participant's Adjusted Percentage, in such Letter of Credit, each drawing made thereunder and the obligations of the Borrower under this Agreement with respect thereto, and any security therefor or guaranty pertaining thereto. Upon any change in the Revolving Loan Commitments or Adjusted Percentages of the Banks pursuant to Section 1.13 or 13.04 or as a result of a Bank Default, it is hereby agreed that, with -15- respect to all outstanding Letters of Credit and Unpaid Drawings, there shall be an automatic adjustment to the participations pursuant to this Section 2.03 to reflect the new Adjusted Percentages of the assignor and assignee Bank or of all Banks with Revolving Loan Commitments (other than Defaulting Banks), as the case may be. (b) In determining whether to pay under any Letter of Credit, such Issuing Bank shall have no obligation relative to the other Banks other than to confirm that any documents required to be delivered under such Letter of Credit appear to have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by any Issuing Bank under or in connection with any Letter of Credit if taken or omitted in the absence of gross negligence or willful misconduct, shall not create for such Issuing Bank any resulting liability to the Borrower or any Bank. (c) In the event that any Issuing Bank makes any payment under any Letter of Credit and the Borrower shall not have reimbursed such amount in full to such Issuing Bank pursuant to Section 2.04(a), such Issuing Bank shall promptly notify the Agent, which shall promptly notify each Participant, of such failure, and each Participant shall promptly and unconditionally pay to such Issuing Bank the amount of such Participant's Adjusted Percentage of such unreimbursed payment in Dollars and in same day funds. If the Administrative Agent so notifies, prior to 11:00 A.M. (New York time) on any Business Day, any Participant required to fund a payment under a Letter of Credit, such Participant shall make available to such Issuing Bank in Dollars such Participant's Adjusted Percentage of the amount of such payment on such Business Day in same day funds. If and to the extent such Participant shall not have so made its Adjusted Percentage of the amount of such payment available to such Issuing Bank, such Participant agrees to pay to such Issuing Bank, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to such Issuing Bank at the overnight Federal Funds Rate. The failure of any Participant to make available to such Issuing Bank its Adjusted Percentage of any payment under any Letter of Credit shall not relieve any other Participant of its obligation hereunder to make available to such Issuing Bank its Adjusted Percentage of any Letter of Credit on the date required, as specified above, but no Participant shall be responsible for the failure of any other Participant to make available to such Issuing Bank such other Participant's Adjusted Percentage of any such payment. (d) Whenever any Issuing Bank receives a payment of a reimbursement obligation as to which it has received any payments from the Participants pursuant to clause (c) above, such Issuing Bank shall pay to each Participant which has paid its Adjusted Percentage thereof, an amount equal to such Participant's share (based upon the proportionate aggregate amount originally funded by such Participant to the aggregate amount funded by all Participants) of the principal amount of such -16- reimbursement obligation and interest thereon accruing after the purchase of the respective participations. (e) Upon the request of any Participant, each Issuing Bank shall furnish to such Participant copies of any Letter of Credit issued by it. (f) The obligations of the Participants to make payments to each Issuing Bank with respect to Letters of Credit issued by it shall be irrevocable and not subject to any qualification or exception whatsoever and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including, without limitation, any of the following circumstances: (i) any lack of validity or enforceability of this Agreement or any of the other Credit Documents; (ii) the existence of any claim, set-off, defense or other right which the Borrower or any of its Subsidiaries may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), the Agent, any Participant, or any other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between the Borrower and the beneficiary named in any such Letter of Credit); (iii) any draft, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Credit Documents; or (v) the occurrence of any Default or Event of Default unless the Issuing Bank has received written notice from the Borrower or the Required Banks stating that a Default or an Event of Default exists prior to the issuance of a Letter of Credit. 2.04 Agreement to Repay Letter of Credit Payments. (a) The Borrower -------------------------------------------- hereby agrees to reimburse the respective Issuing Bank, by making payment to the Administrative Agent in immediately available funds at the Payment Office, for any payment or disbursement made by it under any Letter of Credit (each such amount, so paid until reimbursed, an "Unpaid Drawing"), no later than one -------------- Business Day after the date of such payment or disbursement, with interest on the amount so paid or disbursed by such Issuing Bank, to the extent not reimbursed prior to 12:00 Noon (New York time) on the date of such payment or disbursement, from and including the date paid -17- or disbursed to but excluding the date such Issuing Bank was reimbursed by the Borrower therefor at a rate per annum which shall be the Base Rate in effect from time to time plus the Applicable Margin for Base Rate Loans; provided, -------- however, to the extent such amounts are not reimbursed prior to 12:00 Noon (New - ------- York time) on the third Business Day following such payment or disbursement, interest shall thereafter accrue on the amounts so paid or disbursed by such Issuing Bank (and until reimbursed by the Borrower) at a rate per annum which shall be the Base Rate in effect from time to time plus the Applicable Base Rate Margin plus 2%, in each such case, with interest to be payable on demand. The respective Issuing Bank shall give the Borrower prompt notice of each Drawing under any Letter of Credit; provided that the failure to give any such notice -------- shall in no way affect, impair or diminish the Borrower's obligations hereunder. (b) The obligations of the Borrower under this Section 2.04 to reimburse the respective Issuing Bank with respect to drawings on Letters of Credit (each, a "Drawing") (including, in each case, interest thereon) shall be ------- absolute and unconditional under any and all circumstances and irrespective of any set-off, counterclaim or defense to payment which the Borrower may have or have had against any Bank (including in its capacity as issuer of the Letter of Credit or as Participant), or any nonapplication or misapplication by the beneficiary of the proceeds of such Drawing, the respective Issuing Bank's only obligation to the Borrower being to confirm that any documents required to be delivered under such Letter of Credit appear to have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by any Issuing Bank under or in connection with any Letter of Credit if taken or omitted in the absence of gross negligence or willful misconduct, shall not create for such Issuing Bank any resulting liability to the Borrower. 2.05 Increased Costs. If at any time after the Effective Date, any --------------- Change in Law by any Governmental Authority charged with the interpretation or administration thereof, or compliance by any Issuing Bank or any Participant with any request or directive by any such authority (whether or not having the force of law), or any change in generally acceptable accounting principles, shall either (i) impose, modify or make applicable any reserve, deposit, capital adequacy or similar requirement against letters of credit issued by any Issuing Bank or participated in by any Participant, or (ii) impose on any Issuing Bank or any Participant any other conditions relating, directly or indirectly, to this Agreement or any Letter of Credit; and the result of any of the foregoing is to increase the cost to any Issuing Bank or any Participant of issuing, maintaining or participating in any Letter of Credit, or reduce the amount of any sum received or receivable by any Issuing Bank or any Participant hereunder or reduce the rate of return on its capital with respect to Letters of Credit, but without duplication of any amounts payable in respect of taxes pursuant to Section 4.04(a), then, upon demand to the Borrower by such Issuing Bank or any Participant (a copy of which demand shall be sent by such Issuing Bank or such Participant to the Administrative Agent), the -18- Borrower shall pay to such Issuing Bank or such Participant such additional amount or amounts as will compensate such Bank for such increased cost or reduction in the amount receivable or reduction on the rate of return on its capital. Any Issuing Bank or any Participant, upon determining that any additional amounts will be payable pursuant to this Section 2.05, will give prompt written notice thereof to the Borrower, which notice shall include a certificate submitted to the Borrower by such Issuing Bank or such Participant (a copy of which certificate shall be sent by such Issuing Bank or such Participant to the Administrative Agent), setting forth in reasonable detail the basis for the calculation of such additional amount or amounts necessary to compensate such Issuing Bank or such Participant. The certificate required to be delivered pursuant to this Section 2.05 shall, if delivered in good faith and absent manifest error, be final and conclusive and binding on the Borrower. SECTION 3. Commitment Commission; Fees; Reductions of Commitment. ----------------------------------------------------- 3.01 Fees. (a) The Borrower agrees to pay the Administrative Agent ---- for distribution to each Non-Defaulting Bank with a Revolving Loan Commitment a commitment commission (the "Commitment Commission") for the period from the --------------------- Effective Date to and including the Revolving Loan Maturity Date (or such earlier date as the Total Revolving Loan Commitment shall have been terminated), computed at a rate for each day equal to 1/2 of 1% per annum on the daily Unutilized Revolving Loan Commitment of such Non-Defaulting Bank; provided that -------- the Commitment Commission shall be computed at a rate equal to 3/8 of 1% per annum for each day on which (i) no Default or Event of Default exists and (ii) the Leverage Ratio of Holdings is less than 3.0 to 1.0. Accrued Commitment Commission shall be due and payable quarterly in arrears on each Quarterly Payment Date and on the Revolving Loan Maturity Date or such earlier date upon which the Total Revolving Loan Commitment is terminated. (b) The Borrower agrees to pay to the Administrative Agent for distribution to each Non-Defaulting Bank with a Revolving Loan Commitment (based on their respective Adjusted Percentages) a fee in respect of each Letter of Credit issued hereunder (the "Letter of Credit Fee"), for the period from and -------------------- including the date of issuance of such Letter of Credit to and including the termination of such Letter of Credit, computed at a rate per annum equal to the Applicable Margin for Eurodollar Loans (other than Eurodollar Loans constituting Tranche B Loans) as in effect from time to time on the daily Stated Amount of such Letters of Credit. Accrued Letter of Credit Fees shall be due and payable quarterly in arrears on each Quarterly Payment Date and upon the first day on or after the termination of the Total Revolving Loan Commitment upon which no Letters of Credit remain outstanding. (c) The Borrower agrees to pay to the respective Issuing Bank, for its own account, a facing fee in respect of each Letter of Credit issued for its account hereunder (the "Facing Fee") for the period from and including the date ---------- of issuance of -19- such Letter of Credit to and including the termination of such Letter of Credit, computed at a rate equal to 1/4 of 1% per annum of the daily Stated Amount of such Letter of Credit; provided that in no event shall the annual Facing Fee -------- with respect to each Letter of Credit be less than $500. Accrued Facing Fees shall be due and payable quarterly in arrears on each Quarterly Payment Date and on the date upon which the Total Revolving Loan Commitment has been terminated and such Letter of Credit has been terminated in accordance with its terms. (d) The Borrower shall pay, upon each drawing under, issuance of, or amendment to, any Letter of Credit, such amounts as shall at the time of such event be the administrative charge and the reasonable expenses which the respective Issuing Bank is generally imposing in connection with such occurrence with respect to letters of credit. (e) The Borrower shall pay to each of the Agents, for their own respective accounts, such other fees as have been agreed to in writing by the Borrower and such Agent, in each case, when and as due. (f) All computations of fees hereunder shall be made in accordance with Section 13.07(b). 3.02 Voluntary Termination of Unutilized Commitments. (a) Upon at ----------------------------------------------- least two Business Days' prior notice to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Banks), the Borrower shall have the right, at any time or from time to time, without premium or penalty, to terminate the Total Unutilized Revolving Loan Commitment, in whole or in part, in integral multiples of $1,000,000 in the case of partial reductions to the Total Unutilized Revolving Loan Commitment; provided that (i) each such reduction shall apply proportionately to permanently - -------- reduce the Revolving Loan Commitment of each Bank with such a Commitment and (ii) the reduction to the Total Unutilized Revolving Loan Commitment shall in no case be in an amount which would cause the Revolving Loan Commitment of any Bank to be reduced (as required by preceding clause (i)) by an amount which exceeds the Unutilized Revolving Loan Commitment of such Bank as in effect immediately before giving effect to such reduction. (b) In the event of certain refusals by a Bank as provided in Section 13.12(b) to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Banks, and subject to obtaining the consents required by Section 13.12(b), the Borrower may, upon five Business Days' written notice to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Banks) terminate all of the Revolving Loan Commitment of such Bank so long as all Loans, together with accrued and unpaid interest, Fees and all other amounts, owing to such Bank (other than amounts owing in respect of either Tranche of Loans maintained by -20- such Bank, if such Tranche of Loans are not being repaid pursuant to Section 13.12(b)) are repaid concurrently with the effectiveness of such termination (at which time Schedule I shall be deemed modified to reflect such changed amounts), and at such time, unless the respective Bank continues to have outstanding Loans and/or commitments hereunder, such Bank shall no longer constitute a "Bank" for purposes of this Agreement, except with respect to indemnification provisions under this Agreement (including, without limitation, Sections 1.10, 1.11, 2.05, 4.04, 13.01 and 13.06) and the other Credit Documents, which shall survive as to such repaid Bank. 3.03 Mandatory Reduction of Commitments. (a) In addition to any ---------------------------------- other mandatory commitment reductions pursuant to this Section 3.03, the Total Tranche A Term Loan Commitment (and the Tranche A Term Loan Commitment of each Bank) shall (i) terminate in its entirety on the Effective Date (after giving effect to the making of the Tranche A Term Loans on such date) and (ii) prior to the termination of the Total Tranche A Term Loan Commitment as provided in clause (i) above, be reduced from time to time to the extent required by Section 4.02. (b) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, the Total Tranche B Term Loan Commitment (and the Tranche B Term Loan Commitment of each Bank) shall (i) terminate in its entirety on the Effective Date (after giving effect to the making of the Tranche B Term Loans on such date) and (ii) prior to the termination of the Total Tranche B Term Loan Commitment as provided in clause (i) above, be reduced from time to time to the extent required by Section 4.02. (c) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, the Total Revolving Loan Commitment (and the Revolving Loan Commitment of each Bank) shall terminate in its entirety on the Revolving Loan Maturity Date. (d) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, on each date after the Effective Date upon which a mandatory prepayment of Term Loans pursuant to Section 4.02(g) is required (and exceeds in amount the aggregate principal amount of Term Loans then outstanding) or would be required if Term Loans were then outstanding, the Total Revolving Loan Commitment shall be permanently reduced by the amount, if any, by which the amount required to be applied pursuant to said Section (determined as if an unlimited amount of Term Loans were actually outstanding) exceeds the aggregate principal amount of Term Loans then outstanding. (e) Each reduction to the Total Tranche A Term Loan Commitment, the Total Tranche B Term Loan Commitment and the Total Revolving Loan Commitment pursuant to this Section 3.03 (or pursuant to Section 4.02) shall be applied proportionately to reduce the Tranche A Term Loan Commitment, the Tranche B Term -21- Loan Commitment or the Revolving Loan Commitment, as the case may be, of each Bank with such a Commitment. (f) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, the Swingline Commitment shall terminate in its entirety on the Swingline Expiry Date. SECTION 4. Prepayments; Payments; Taxes. ---------------------------- 4.01 Voluntary Prepayments. The Borrower shall have the right to --------------------- prepay the Loans, without premium or penalty, in whole or in part at any time and from time to time on the following terms and conditions: (i) the Borrower shall give the Administrative Agent prior to 12:00 Noon (New York time) at its Notice Office (x) at least one Business Day prior to the date that a prepayment of Base Rate Loans or Swingline Loans is to be made prior written notice (or telephonic notice promptly confirmed in writing) of its intent to prepay Base Rate Loans and (y) at least three Business Days' prior written notice (or telephonic notice promptly confirmed in writing) of its intent to prepay Eurodollar Loans, whether Term Loans, Revolving Loans or Swingline Loans shall be prepaid, the amount of such prepayment and the Types of Loans to be prepaid and, in the case of Eurodollar Loans, the specific Borrowing or Borrowings pursuant to which made, which notice, except in the case of Swingline Loans, the Administrative Agent shall promptly transmit to each of the Banks; (ii) each prepayment shall be in an aggregate principal amount of at least (x) $1,000,000 (or, if less, the full amount of such outstanding Loans) in the case of Term Loans, (y) $500,000 (or, if less, the full amount of such outstanding Loans) in the case of Revolving Loans or (z) $100,000 (or, if less, the full amount of Swingline Loans then outstanding) in the case of Swingline Loans; provided that -------- if any partial prepayment of Eurodollar Loans made pursuant to any Borrowing shall reduce the outstanding Eurodollar Loans made pursuant to such Borrowing to an amount less than (1) in the case of Term Loans, $5,000,000 and (2) in the case of Revolving Loans, $1,000,000, then such Borrowing may not be continued as a Borrowing of Eurodollar Loans and any election of an Interest Period with respect thereto given by the Borrower shall have no force or effect; (iii) prepayments of Eurodollar Loans made pursuant to this Section 4.01 on any day other than the last day of an Interest Period applicable thereto shall be accompanied by the amounts required under Section 1.11; (iv) each prepayment in respect of any Loans made pursuant to a Borrowing shall, except as set forth below, be applied pro rata among such Loans; (v) in the event of certain --- ---- refusals by a Bank as provided in Section 13.12(b) to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Banks, the Borrower may, upon five (5) Business Days' written notice to the Administrative Agent at its Notice Office (which notice, except in the case of Swingline Loans, the Administrative Agent shall promptly transmit to each of the Banks) repay all Loans, together with accrued and unpaid interest, Fees, and other amounts owing to such Bank (or owing to such Bank with respect to each Tranche -22- which gave rise to the need to obtain such Bank's individual consent) in accordance with said Section 13.12(b) so long as (A) in the case of the repayment of Revolving Loans for any Bank pursuant to this clause (v) the Revolving Loan Commitment of such Bank is terminated concurrently with such repayment, and (B) the consents required by Section 13.12(b) in connection with the repayment pursuant to this clause (v) have been obtained; and (vi) each voluntary prepayment of Term Loans pursuant to this Section 4.01, except pursuant to preceding clause (v), shall be applied to the Tranche A Term Loans and the Tranche B Term Loans, on a pro rata basis (based upon the then --- ---- outstanding principal amount of Tranche A Term Loans and Tranche B Term Loans); provided that at the Borrower's election (and with the consent of the - -------- Administrative Agent, unless the Administrative Agent is the Defaulting Bank) in connection with any prepayment of Revolving Loans pursuant to this Section 4.01, such prepayment shall not be applied to any Revolving Loan of a Defaulting Bank. Each prepayment of principal of Tranche A Term Loans and Tranche B Term Loans pursuant to this Section 4.01 shall be applied to reduce, in order of maturity for Scheduled Repayments, the next succeeding four remaining Scheduled Repayments of each such Tranche of Term Loans and thereafter, to the then remaining Scheduled Repayments of each such Tranche of Term Loans pro rata based --- ---- upon the then remaining principal amount of each Scheduled Repayment. Notwithstanding anything to the contrary contained in the immediately preceding sentence, repayments of either Tranche of Term Loans pursuant to clause (v) of the first sentence of Section 4.01 shall only apply to reduce the then remaining Scheduled Repayments of such Tranche to the extent the Term Loans so repaid are not replaced pursuant to Section 13.12(b), with any such reductions to reduce the then remaining Scheduled Repayments in the manner set forth in the immediately preceding sentence. 4.02 Mandatory Repayments and Commitment Reductions. (a) On any day ---------------------------------------------- on which the sum of (i) the aggregate outstanding principal amount of the Revolving Loans and Swingline Loans (after giving effect to all other repayments thereof on such date) made by Non-Defaulting Banks plus (ii) the Letter of Credit Outstanding as then in effect exceeds the Adjusted Total Revolving Loan Commitment as then in effect, the Borrower shall prepay on such date the principal of Swingline Loans, and if no Swingline Loans are or remain outstanding, Revolving Loans of Non-Defaulting Banks in an amount equal to such excess. If, after giving effect to the prepayment of all outstanding Swingline Loans and Revolving Loans of Non-Defaulting Banks, the aggregate amount of the Letter of Credit Outstandings exceeds the Adjusted Total Revolving Loan Commitment as then in effect, the Borrower shall pay to the Administrative Agent at the Payment Office on such date an amount of cash or Cash Equivalents equal to the amount of such excess (up to a maximum amount equal to the Letter of Credit Outstandings at such time), such cash or Cash Equivalents to be held as security for all obligations of the Borrower to Non-Defaulting Banks hereunder in a cash collateral account to be established by the Administrative Agent. -23- (b) On any day on which the aggregate outstanding principal amount of the Revolving Loans made by any Defaulting Bank exceeds the Revolving Loan Commitment of such Defaulting Bank, the Borrower shall upon prior written notice from such Defaulting Bank prepay principal of Revolving Loans of such Defaulting Bank in an amount equal to such excess. (c) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, on each date set forth below, the Borrower shall be required to repay that principal amount of Tranche A Term Loans, to the extent then outstanding, as is set forth opposite such date (each such repayment, as the same may be reduced as provided in Sections 4.01 and 4.02(j), a "Tranche A Scheduled Repayment," and each such date, a "Tranche A ----------------------------- --------- Scheduled Repayment Date"): - ------------------------ Tranche A Scheduled Repayment Date Amount ---------------------------------- ------ Quarterly Payment Date in March, 1997 $750,000 Quarterly Payment Date in June, 1997 $750,000 Quarterly Payment Date in Sept., 1997 $750,000 Quarterly Payment Date in Dec., 1997 $750,000 Quarterly Payment Date in March, 1998 $1,000,000 Quarterly Payment Date in June, 1998 $1,000,000 Quarterly Payment Date in Sept., 1998 $1,000,000 Quarterly Payment Date in Dec., 1998 $1,000,000 Quarterly Payment Date in March, 1999 $1,250,000 Quarterly Payment Date in June, 1999 $1,250,000 Quarterly Payment Date in Sept., 1999 $1,250,000 Quarterly Payment Date in Dec., 1999 $1,250,000 Quarterly Payment Date in March, 2000 $1,250,000 Quarterly Payment Date in June, 2000 $1,250,000 Quarterly Payment Date in Sept., 2000 $1,250,000 Quarterly Payment Date in Dec., 2000 $1,250,000 Quarterly Payment Date in March, 2001 $1,250,000 Quarterly Payment Date in June, 2001 $1,250,000 Quarterly Payment Date in Sept., 2001 $1,250,000 Quarterly Payment Date in Dec., 2001 $1,250,000 Quarterly Payment Date in March, 2002 $2,000,000 Quarterly Payment Date in June, 2002 $2,000,000 Quarterly Payment Date in Sept., 2002 $2,000,000 Quarterly Payment Date in Dec., 2002 $2,000,000 -24- (d) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, on each date set forth below, the Borrower shall be required to repay that principal amount of Tranche B Term Loans, to the extent then outstanding, as is set forth opposite such date (each such repayment, as the same may be reduced as provided in Sections 4.01 and 4.02(j), a "Tranche B Term Loan Scheduled Repayment," and each such date, a --------------------------------------- "Tranche B Scheduled Repayment Date"): - ----------------------------------- Tranche B Scheduled Repayment Date Amount ---------------------------------- ------ Semi-Annual Payment Date in June, 1997 $500,000 Semi-Annual Payment Date in Dec., 1997 $500,000 Semi-Annual Payment Date in June, 1998 $500,000 Semi-Annual Payment Date in Dec., 1998 $500,000 Semi-Annual Payment Date in June, 1999 $500,000 Semi-Annual Payment Date in Dec., 1999 $500,000 Semi-Annual Payment Date in June, 2000 $500,000 Semi-Annual Payment Date in Dec., 2000 $500,000 Semi-Annual Payment Date in June, 2001 $500,000 Semi-Annual Payment Date in Dec., 2001 $500,000 Semi-Annual Payment Date in June, 2002 $500,000 Semi-Annual Payment Date in Dec., 2002 $500,000 Semi-Annual Payment Date in June, 2003 $31,333,333 Semi-Annual Payment Date in Dec., 2003 $31,333,333 Semi-Annual Payment Date in June, 2004 $31,333,334 (e) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, on each date after the Effective Date upon which Holdings or any of its Subsidiaries receives any cash proceeds from any sale or issuance of its equity (including preferred stock) (other than (i) proceeds received from the issuance of Holdings Common Stock on or prior to the Effective Date, (ii) proceeds, in an amount not to exceed $15,000,000 (less any amount of Indebtedness provided by a Strategic Investor excluded from mandatory repayments pursuant to the proviso of 4.02(f)), received from any sale or issuance by Holdings of equity to a Strategic Investor and (iii) proceeds received from the issuance of Common Stock of Holdings and/or any of its Subsidiaries to the extent such proceeds are used to (I) promptly finance all or a portion of the purchase price and costs related to Permitted -25- Acquisitions effected in accordance with the requirements of Section 9.02, (II) promptly repay the CLC Notes, (III) promptly repay the 12 3/4% Notes or (IV) redeem or repurchase within 120 days of receipt of such proceeds by Holdings up to an aggregate of 35% of the 11 3/4% Notes at a price not to exceed the redemption price set forth in the indenture under which such 11 3/4% Notes were issued as in effect on the Effective Date) an amount equal to 50% of the cash proceeds of the respective sale or issuance (net of underwriting discounts and commissions and other direct costs associated therewith including, without limitation, legal and other professional fees and expenses) shall be applied as a mandatory repayment of principal of outstanding Term Loans in accordance with the requirements of Section 4.02(j) and (k). (f) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, on each date after the Effective Date upon which Holdings or any of its Subsidiaries receives any proceeds from any incurrence by Holdings or any of its Subsidiaries of Indebtedness for borrowed money (other than Indebtedness to the extent such proceeds thereof are used to (I) finance Permitted Acquisitions effected in accordance with the requirements of Section 9.02, (II) repay the CLC Notes, or (III) repay the 12 3/4% Notes), an amount equal to 50% of the cash proceeds (net of underwriting discounts and commissions and other costs associated therewith including, without limitation, legal and other professional fees and expenses) of the respective incurrence of Indebtedness shall be applied as a mandatory repayment of principal of outstanding Term Loans in accordance with the requirements of Section 4.02(j) and (k); provided, however, if (A) the Indebtedness so incurred is subordinated -------- ------- to the Senior Bank Financing on terms satisfactory to the Agents and no Default or Event of Default exists or is continuing, (B) the subordinated Indebtedness so issued matures after September 30, 2004, (C) the amortization requirements of such subordinated Indebtedness are on terms satisfactory to the Agents and (D) such subordinated Indebtedness is provided by a Strategic Investor, then the proceeds of such subordinated Indebtedness in excess of an aggregate of $15,000,000 (less any amount of equity from a Strategic Investor excluded from mandatory repayments pursuant to Section 4.02(e)(ii)) shall be applied as a mandatory repayment of outstanding Term Loans in accordance with the requirements of Section 4.02(j) and (k). (g) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, on each date after the Effective Date upon which Holdings or any of its Subsidiaries receives proceeds from any sale of assets (including capital stock and securities held thereby, but excluding (i) sales or transfers of inventory or equipment in the ordinary course of business (including, without limitation, sales or transfers of inventory or equipment to Subsidiaries), (ii) the sale or other disposition of obsolete equipment or inventory, (iii) the sale of overdue receivables in the ordinary course of business, and (iv) sales of assets between the Borrower and its Subsidiaries that are Guarantors and/or sales of assets between Subsidiaries of the Borrower that are Guarantors, in each case to the extent permitted by Section 9.02, an amount equal to 100% of the Net Sale Proceeds therefrom shall be -26- applied as a mandatory repayment of principal of outstanding Term Loans in accordance with the requirements of Section 4.02(j) and (k); provided that, in -------- addition to the exceptions set forth above, so long as no Default or Event of Default then exists, up to an aggregate of $7,500,000 of Net Sale Proceeds in any fiscal year shall not be required to be so applied on the date of receipt thereof to the extent that the Borrower has delivered a certificate to the Administrative Agent within 15 days following such date stating that such Net Sale Proceeds shall be reinvested or shall be committed to be reinvested in the Business within 180 days following such date (and to the extent the asset sold constituted Collateral, the assets in which such Net Sales Proceeds are reinvested shall be pledged as Collateral pursuant to the appropriate Security Documents); provided further, that if all or any portion of such Net Sale -------- ------- Proceeds not required to be applied to the repayment of Term Loans pursuant to the preceding proviso are either (a) not so used or committed to be so used within 180 days after the date of receipt of such Net Sale Proceeds or (b) if committed to be so used within 180 days after the date of receipt of such Net Sale Proceeds and not so used within 270 days after the date of receipt of such Net Sale Proceeds, then, in either such case, such remaining portion not used or committed to be used in the case of preceding clause (a) and not used in the case of preceding clause (b) shall be applied on the date which is 180 days after the date of receipt of such Net Sale Proceeds in the case of clause (a) above or the date occurring 270 days after the date of receipt of such Net Sale Proceeds in the case of clause (b) above as a mandatory repayment of principal of outstanding Term Loans in accordance with the requirements of Sections 4.02(j) and (k); provided further, that, in addition to the exceptions set forth -------- ------- above, so long as no Default or Event of Default then exists, up to an aggregate of 50% of Net Sale Proceeds of the non-route laundry business shall not be required to be so applied on the date of receipt thereof to the extent that the Borrower has delivered a certificate to the Administrative Agent within 15 days following such date stating that such Net Sale Proceeds shall be reinvested or shall be committed to be reinvested in the Business within 180 days following such date (and to the extent the assets sold constituted Collateral, the assets in which such Net Sales Proceeds are reinvested shall be pledged as Collateral pursuant to the appropriate Security Documents); provided further, that if all -------- ------- or any portion of such Net Sale Proceeds not required to be applied to the repayment of Term Loans pursuant to the preceding proviso are either (a) not so used or committed to be so used within 180 days after the date of receipt of such Net Sale Proceeds or (b) if committed to be so used within 180 days after the date of receipt of such Net Sale Proceeds and not so used within 270 days after the date of receipt of such Net Sale Proceeds, then, in either such case, such remaining portion not used or committed to be used in the case of preceding clause (a) and not used in the case of preceding clause (b) shall be applied on the date which is 180 days after the date of receipt of such Net Sale Proceeds in the case of clause (a) above or the date occurring 270 days after the date of receipt of such Net Sale Proceeds in the case of clause (b) above as a mandatory repayment of principal of outstanding Term Loans in accordance with the requirements of Sections 4.02(j) and (k). -27- (h) In addition to any other mandatory repayments pursuant to this Section 4.02, on each Excess Cash Payment Date, an amount, if positive, equal to the applicable Excess Cash Flow Percentage of Excess Cash Flow for the relevant Excess Cash Payment Period shall be applied as a mandatory repayment of principal of outstanding Term Loans in accordance with the requirements of Sections 4.02(j) and (k). (i) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, within 10 days following each date after the Effective Date on which Holdings or any of its Subsidiaries receives any proceeds from any Recovery Event, an amount equal to 100% of the net proceeds of such Recovery Event (net of reasonable costs and taxes incurred in connection with such Recovery Event including any amounts paid by the Borrower in connection with self-insurance payments or obligations) shall be applied as a mandatory repayment of principal of outstanding Term Loans in accordance with the requirements of Sections 4.02(j) and (k); provided that (x) so long as no -------- Default or Event of Default then exists and such proceeds do not exceed $5,000,000, such proceeds shall not be required to be so applied on such date to the extent that the Borrower has delivered a certificate to the Administrative Agent on or prior to such date stating that such proceeds shall be used to replace or restore any properties or assets in respect of which such proceeds were paid within 180 days following the date of such Recovery Event (which certificate shall set forth the estimates of the proceeds to be so expended) and (y) so long as no Default or Event of Default then exists and to the extent that (a) the amount of such proceeds exceeds $5,000,000, (b) the amount of such proceeds is at least equal to 90% of the cost of replacement or restoration of the properties or assets in respect of which such proceeds were paid as determined by the Borrower and as supported by such estimates or bids from contractors or subcontractors or such other supporting information as the Administrative Agent may reasonably request, and (c) the Borrower has delivered to the Administrative Agent a certificate on or prior to the date the application would otherwise be required pursuant to this Section 4.02(i) in the form described in clause (x) above and also certifying its determination as required by preceding clause (b), then the entire amount and not just the portion in excess of $5,000,000 shall be deposited with the Administrative Agent pursuant to a cash collateral arrangement satisfactory to the Administrative Agent whereby such proceeds shall be disbursed to the Borrower from time to time as needed to pay actual costs incurred by it in connection with the replacement or restoration of the respective properties or assets (pursuant to such certification requirements as may be established by the Administrative Agent); provided further, that at any time while an Event of Default has occurred and is - -------- ------- continuing (other than an Event of Default existing solely as a result of the violation of any or all of Sections 9.08, 9.09 and 9.10, but in each case only if, and to the extent, that the violation of said covenant has occurred as a result of the underlying event giving rise to the Recovery Event), the Required Banks may direct the Administrative Agent (in which case the Administrative Agent shall, and is hereby authorized by the Borrower to, follow said directions) to apply any or all proceeds then on deposit in such collateral -28- account to the repayment of Obligations hereunder in the same manner as proceeds would be applied pursuant to the Borrower Pledge Agreement; and provided -------- further, that if all or any portion of such proceeds not required to be applied - ------- to the repayment of Term Loans pursuant to the second preceding proviso (whether pursuant to clause (x) or (y) thereof) are either (A) not so used or committed to be so used within 180 days after the date of the respective Recovery Event or (B) if committed to be used within 180 days after the date of receipt of such proceeds and not so used within 270 days after the date of the respective Recovery Event, then, in either such case, such remaining portion not used or committed to be used in the case of preceding clause (A) and not used in the case of preceding clause (B) shall be applied on the date which is 270 days after the date of the receipt of proceeds from the respective Recovery Event in the case of clause (A) above or the date occurring 270 days after the date of the receipt of proceeds from the respective Recovery Event in the case of clause (B) above as a mandatory repayment of principal of outstanding Term Loans in accordance with the requirements of Sections 4.02(j) and (k). (j) Each amount required to be applied to Term Loans (or to the Total Term Loan Commitment) pursuant to Sections 4.02(e), (f), (g), (h) and (i) shall be applied pro rata to each Tranche of Term Loans (with each Tranche of Term --- ---- Loans to be allocated that percentage of the amount to be applied as is equal to a fraction (expressed as a percentage) the numerator of which is the then outstanding principal amount of such Tranche of Term Loans and the denominator of which is equal to the then outstanding principal amount of all Term Loans). Any amount required to be applied to either Tranche of Term Loans pursuant to Sections 4.02(e), (f), (g), (h) and (i) shall be applied to repay the outstanding principal amount of Term Loans of the respective Tranche then outstanding and, if no Term Loans remain outstanding, all such amounts shall be applied to repay outstanding borrowings under the Revolving Loan. The amount of each principal repayment of Term Loans (and the amount of each reduction to the Term Loan Commitments) made as required by Section 4.02(e), (f), (g), (h) and (i) shall be applied to reduce the then remaining Scheduled Repayments of the respective Tranche pro rata based upon the then remaining principal amount of --- ---- each Scheduled Repayment. (k) With respect to each repayment of Loans required by this Section 4.02, the Borrower may designate the Types of Loans of the respective Tranche which are to be repaid and, in the case of Eurodollar Loans, the specific Borrowing or Borrowings of the respective Tranche pursuant to which made; provided that: (i) repayments of Eurodollar Loans pursuant to this Section 4.02 - -------- may only be made on the last day of an Interest Period applicable thereto unless all Eurodollar Loans of the respective Tranche with Interest Periods ending on such date of required repayment and all Base Rate Loans of the respective Tranche have been paid in full; (ii) if any repayment of Eurodollar Loans made pursuant to a single Borrowing shall reduce the outstanding Eurodollar Loans made pursuant to such Borrowing to an amount less than (x) in the case of Term Loans, $5,000,000 and (y) in the case of Revolving Loans, -29- $1,000,000, such Borrowing shall be converted at the end of the then current Interest Period into a Borrowing of Base Rate Loans; and (iii) each repayment of any Loans made pursuant to a Borrowing shall be applied pro rata among such --- ---- Loans. In the absence of a designation by the Borrower as described in the preceding sentence, the Administrative Agent shall, subject to the above, make such designation in its sole discretion. (l) Notwithstanding anything to the contrary contained above in this Section 4.02, with respect to any mandatory repayments of Tranche B Term Loans (excluding Tranche B Scheduled Repayments) otherwise required above pursuant to this Section 4.02, if on or prior to the date the respective mandatory repayment is otherwise required to be made pursuant to this Section 4.02, the Borrower has given the Administrative Agent written notification that the Borrower has elected to give each Bank with a Tranche B Term Loan the right to waive such Bank's rights to receive such repayment (the "Waivable Mandatory Repayment"), ---------------------------- the Administrative Agent shall notify such Banks of such receipt and the amount of the repayment to be applied to each such Bank's Tranche B Term Loan. In the event any such Bank with a Tranche B Term Loan desires to waive such Bank's right to receive any such Waivable Mandatory Repayment in whole or in part, such Bank shall so advise the Administrative Agent no later than 5:00 P.M. (New York time) five Business Days after the date of such notice from the Administrative Agent which notice shall also include the amount the Bank desires to receive. If the Bank does not reply to the Administrative Agent within such five Business Day period, it will be deemed acceptance of the total payment. If the Bank does not specify an amount it wishes to receive, it will be deemed acceptance of 100% of the total payment. In the event that any such Bank waives such Bank's right to any such Waivable Mandatory Repayment, the Administrative Agent shall apply 100% of the amount so waived by such Banks to (x) prepay the Tranche A Term Loans in accordance with Sections 4.02(j) and (k). If the Borrower elects to give the notice described above in Section 4.02(l) with respect to any mandatory repayment, the amount of the respective Waivable Mandatory Repayment shall be deposited with the Administrative Agent on the date the mandatory repayment would otherwise be required pursuant to the relevant provisions of this Section 4.02 (and held by the Administrative Agent as cash collateral for the Tranche B Term Loans and, but only to the extent Banks with Tranche B Term Loans waive their right to receive their share of the Waivable Mandatory Repayment, for the benefit of the Tranche A Term Loans in a cash collateral account which shall permit the investment thereof in Cash Equivalents reasonably satisfactory to the Administrative Agent until the proceeds are applied to the secured obligations) and the respective mandatory repayment shall not be required to be made until the seventh Business Day occurring after the date the respective mandatory repayment would otherwise have been required to be made. Notwithstanding anything to the contrary contained above, if one or more Banks waives its right to receive all or any part of any Waivable Mandatory Repayment, but less than all the Banks holding Tranche B Term Loans waive in full their right to receive 100% of the total payment otherwise required with respect to the Tranche B Term Loans, then -30- of the amount actually applied to the repayment of Tranche B Term Loans of Banks which have waived in part, but not in full, their right to receive 100% of such repayment, such amount shall be applied to each then outstanding Borrowing of Tranche B Term Loans on a pro rata basis (so that each Bank holding Tranche B Term Loans shall, after giving effect to the application of the respective repayment, maintain the same percentage (as determined for such Bank, but not the same percentage as the other Banks hold and not the same percentage held by such Bank prior to repayment) of each Borrowing of Tranche B Term Loans, which remains outstanding after giving effect to such application). (m) Notwithstanding anything to the contrary contained elsewhere in this Agreement, all other then outstanding Loans shall be repaid in full on the respective Maturity Date for such Loans. 4.03 Method and Place of Payment. Except as otherwise specifically --------------------------- provided herein, all payments under this Agreement or any Note shall be made to the Administrative Agent for the account of the Bank or Banks entitled thereto not later than 1:00 P.M. (New York time) on the date when due and shall be made in Dollars in immediately available funds at the Payment Office of the Administrative Agent. Whenever any payment to be made hereunder or under any Note shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable at the applicable rate during such extension. 4.04 Net Payments. (a) Except as provided in this Section 4.04, all ------------ payments by the Borrower to each Bank or any Agent under this Agreement and any Note shall be made free and clear of, and without deduction or withholding for, any Covered Taxes levied or imposed by any Governmental Authority with respect to such payments. In addition, the Borrower agrees to pay any current or future stamp, intangible or documentary taxes or any other excise or property taxes, charges or similar levies (including mortgage recording taxes and similar fees but not including any Excluded Taxes) that arise from the execution, delivery or registration of or otherwise with respect to (other than as to any payments, Taxes on which shall be governed by the preceding sentence) this Agreement, or any other document in connection with this Agreement or any Note (all such taxes, charges and levies are hereinafter referred to as, collectively, "Other ----- Taxes"). - ----- (b) If the Borrower shall be required by law to deduct or withhold any Covered Taxes from or in respect of any sum payable hereunder to any Bank or any Agent, then except as provided in this Section 4.04: (i) the sum payable shall be increased as necessary so that after making all such required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section 4.04) such Bank or such Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions or -31- withholdings been made; (ii) the Borrower shall make such deductions and withholdings; and (iii) the Borrower shall pay the full amount deducted or withheld to the relevant taxing authority or other authority in accordance with applicable law. Within 30 days after the date of any payment by the Borrower of Covered Taxes or Other Taxes, the Borrower shall furnish to the Administrative Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment reasonably satisfactory to the Administrative Agent. (c) The Borrower agrees to indemnify and hold harmless each Bank and each Agent for (i) the full amount of Covered Taxes (including any Covered Taxes imposed on amounts payable under this Section 4.04) which arise from any payment made under this Agreement or any Note and are paid by such Bank or such Agent and any liability (including penalties, interest, additions to tax and expenses) arising therefrom or with respect thereto, whether or not such Covered Taxes were correctly or legally asserted, and (ii) any Taxes paid or payable by such Bank or such Agent (the amount of which will be determined by such Bank or such Agent in its sole discretion, and will be binding on all parties to this Agreement unless manifestly unreasonable) which were levied or imposed by any Governmental Authority on any additional amounts paid by the Borrower under this Section 4.04. A certificate as to the amount of any such required indemnification payment prepared with a reasonable basis by the Bank or such Agent shall be final, conclusive and binding for all purposes. Payment under this indemnification shall be made within 30 days after the date such Bank or such Agent makes written demand therefor by the delivery of such certificate. (d) If a Bank or Agent receives a refund or credit of Taxes paid by the Borrower pursuant to paragraph (b) or (c) of this Section 4.04, then such Bank or such Agent shall promptly repay the Borrower such refund or credit net of all out-of-pocket expenses related thereto; provided, however, that if, due -------- ------- to any adjustment of such Taxes, such Bank or such Agent loses the benefit of all or any portion of such refund or credit, the Borrower will indemnify and hold harmless such Lender or such Agent in accordance with this subsection; provided further, however, that such Bank will determine the amount of any such - -------- ------- ------- refund or credit, and the amount of any lost benefit in respect thereof, in its sole discretion, and such determinations will be binding on all parties to this Agreement unless manifestly unreasonable. (e) If the Borrower is required to pay additional amounts to any Bank or any Agent on behalf of any Bank pursuant to this Section 4.04, then such Bank shall use reasonable efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its Lending Office or take other appropriate action so as to eliminate any such additional payment by the Borrower which may thereafter accrue, if such change or other action in the reasonable judgment of such Bank is not otherwise disadvantageous to such Bank. (f) (i) Each Bank which is not a U.S. Person agrees that: -32- (A) it shall, no later than the Closing Date (or, in the case of a Bank which becomes a party hereto after the Closing Date, the date upon which such Bank becomes a party hereto) deliver to the Administrative Agent and to the Borrower through the Administrative Agent (x) two accurate and complete signed originals of Internal Revenue Service Form 4224 or any successor thereto ("Form 4224"), or two accurate and complete signed --------- originals of Internal Revenue Service Form 1001 or any successor thereto ("Form 1001"), as appropriate, or (y) if such Bank is not a "bank" within ----------- the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either Form 1001 or Form 4224 pursuant to clause (x) above, a certificate substantially in the form of Exhibit I (any such certificate, a "Section --------- ------- 4.04(f) Certificate") and, in the case of either (x) or (y), two accurate ------------------- and complete original signed copies of Internal Revenue Service Form W-8 or any successor thereto ("Form W-8") or Internal Revenue Service Form W-9 or -------- any successor thereto ("Form W-9"), whichever is applicable; and -------- (B) it shall, before or promptly after the occurrence of any event (including the passing of time) requiring a change in or renewal of the most recent Form 4224, Form 1001, Form W-8, Form W-9 or Section 4.04 Certificate previously delivered by such Bank, deliver to the Administrative Agent and to the Borrower through the Administrative Agent two accurate and complete original signed copies of Form 4224, Form 1001, Form W-8, Form W-9 and a Section 4.04 Certificate, in replacement of the forms previously delivered by such Bank. (ii) Each Bank shall, unless unable to do so by virtue of a Change in Law occurring after the date such Bank becomes a party hereto, certify (x) in the case of a Form 1001 or 4224, that it is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes and (y) in the case of a Form W-8 or W-9, that it is entitled to an exemption from United States backup withholding tax. (iii) Notwithstanding the foregoing provisions of this subsection (f) or any other provision of this Section 4.04, no Bank shall be required to deliver any form pursuant to this Section 4.04 if such Bank is not legally able to do so. (g) The Borrower will not be required to pay any additional amount in respect of Taxes pursuant to this Section 4.04 to any Bank or to the Administrative Agent with respect to any Bank if the obligation to pay such additional amount would not have arisen but for a failure by such Bank to comply with its obligations under subsection 4.04(f). SECTION 5. Conditions Precedent to Loans. The occurrence of the ----------------------------- Effective Date pursuant to Section 13.10, and the obligation of each Bank to make -33- Loans, and the obligation of each Issuing Bank to issue Letters of Credit, on the Effective Date, is subject at the time of the making of such Loans or the issuance of such Letters of Credit to the satisfaction of the following conditions: 5.01 Execution of Agreement; Notes. On or prior to the Effective ----------------------------- Date (i) this Agreement shall have been executed and delivered as provided in Section 13.10 and (ii) there shall have been delivered to the Administrative Agent for the account of each of the Banks the appropriate Tranche A Term Note, Tranche B Term Note and/or Revolving Note and to BTCo the Swingline Note executed by the Borrower, in each case in the amount, maturity and as otherwise provided herein. 5.02 Payment of Fees. On or before the Effective Date and thereafter --------------- at the time of each Credit Event and after giving effect thereto, all costs, fees and expenses, and all other compensation contemplated by this Agreement or any other agreement with any of the Agents, due to any of the Agents, or the Banks (including, without limitation, legal fees and expenses) shall have been paid to the extent then due. 5.03 Opinions of Counsel. On the Effective Date, the Agents shall ------------------- have received, with sufficient copies for each Bank (i) from Anderson Kill & Olick, P.C., special counsel to Holdings and the Borrower, an opinion addressed to the Agents and each of the Banks and dated the Effective Date covering the matters set forth in Exhibit E and (ii) from local counsel satisfactory to the Agents, opinions each of which shall be in form and substance reasonably satisfactory to the Agents and the Required Banks and shall cover the perfection of the security interests granted pursuant to the Security Agreement and the Mortgages and such other matters incident to the transactions contemplated herein as the Agents may reasonably request. 5.04 Corporate Documents; Proceedings; etc. (a) On the Effective ------------------------------------- Date, the Agents shall have received a certificate, with sufficient copies for each Bank, dated the Effective Date, signed by an Authorized Officer and attested to by the Secretary or any Assistant Secretary of each Credit Party, in the form of Exhibit F with appropriate insertions, together with copies of the Certificate of Incorporation and By-Laws of such Credit Party and the resolutions of such Credit Party referred to in such certificate, and the foregoing shall be reasonably acceptable to the Agents. (b) All corporate and legal proceedings and all instruments and agreements in connection with the transactions contemplated by this Agreement and the other Documents shall be reasonably satisfactory in form and substance to the Agents and the Required Banks, and the Agents shall have received all information and copies of all documents and papers, including records of corporate proceedings, governmental approvals, good standing certificates and bring-down telegrams, if any, which the Agents reasonably may have requested in connection therewith, such documents and papers where appropriate to be certified by proper corporate or governmental authorities. -34- 5.05 Certain Agreements. On the Effective Date, there shall have ------------------ been delivered to the Agents true and correct copies, certified as true and complete by an appropriate officer of the appropriate Credit Party, of: (i) each of the Acquisition Documents, including each of the CLC Notes, and each other agreement or understanding relating to the Acquisition or the CLC Notes or with the holders of the CLC Notes; (ii) all agreements evidencing or relating to material Indebtedness of Holdings or any Subsidiary of Holdings which is to remain outstanding after giving effect to the incurrence of Loans on the Effective Date (collectively, the "Debt Agreements"); and --------------- (iii) all tax sharing, tax allocation and other similar agreements entered into by Holdings or any Subsidiary of Holdings (collectively, the "Tax Sharing Agreements"); ----------------------- all of which shall be (x) in form and substance reasonably satisfactory to the Agents and the Required Banks and (y) in full force and effect on the Effective Date. 5.06 Acquisition. (a) On or prior to the Effective Date, the ----------- Acquisition shall have been consummated in accordance with the Acquisition Documents (without waiver of any of the provisions thereof) and in a manner reasonably satisfactory to the Agents. (b) Each of the Borrower's and Holdings' and, to the best of their knowledge, each other Person's representations and warranties in each of the Acquisition Documents shall be true and correct in all material respects. 5.07 Officer's Certificate. On the Effective Date, the Agents shall --------------------- have received certificates, with sufficient copies for each Bank, dated such date signed by an appropriate officer of Holdings and the Borrower stating that all of the applicable conditions set forth in Sections 5.02, 5.08, 5.12, 5.13, 5.09(a) and (b) (deleting the reference to the Agents therein), 5.06 (deleting the reference to the Agents therein), exist as of such date. 5.08 Approvals. On or prior to the Effective Date, all necessary and --------- material governmental (domestic and foreign) and third party approvals in connection with the Acquisition, the transactions contemplated by the Documents and otherwise referred to herein or therein shall have been obtained and remain in effect and all applicable waiting periods shall have expired without any action being taken by any competent authority which materially restrains, prevents or imposes materially adverse conditions upon the consummation of the Acquisition, the transactions contemplated by the Documents and otherwise referred to herein or therein. Additionally, there shall -35- not exist any judgment, order, injunction or other restraint issued or filed or a hearing seeking injunctive relief or other restraint pending or notified prohibiting or imposing materially adverse conditions upon the consummation of the Acquisition or the making of Loans. 5.09 Existing Credit Agreement. (a) On the Effective Date, the ------------------------- commitments under the Existing Credit Agreement shall have been terminated, all loans thereunder shall have been repaid in full, together with all accrued and unpaid interest thereon, all accrued and unpaid fees thereon shall have been repaid in full, all letters of credit issued thereunder shall have been terminated or incorporated hereunder as Letters of Credit, and all other amounts then owing pursuant to the Existing Credit Agreement shall have been repaid in full. (b) On the Effective Date, all security interests and Liens created under the Existing Credit Agreement and the related security documents on the capital stock of, and assets (including intercompany notes) owned by, the Borrower and its Subsidiaries shall have been terminated and released, and the Agents shall have received all such releases as may have been requested by the Agents, which releases shall be in the form and substance reasonably satisfactory to the Administrative Agent. (c) The Agents shall have received evidence from the lenders under the Existing Credit Agreement in form, scope and substance reasonably satisfactory to it that the matters set forth in this Section 5.09(a) and (b) have been satisfied at such time. 5.10 Pledge and Security Agreements and Collateral Assignment of ----------------------------------------------------------- Leases. (a) On the Effective Date, Holdings shall have duly authorized, - ------ executed and delivered the Holdings Pledge Agreement, the Holdings Pledge Agreement shall be in full force and effect and the Collateral Agent shall have in its possession all the Pledged Securities referred to in the Holdings Pledge Agreement then owned by Holdings, together with executed and undated stock powers. (b) On the Effective Date, the Borrower shall have duly authorized, executed and delivered the Borrower Pledge Agreement, the Borrower Pledge Agreement shall be in full force and effect and the Collateral Agent shall have in its possession all the Pledged Securities referred to in the Borrower Pledge Agreement then owned by the Borrower, together with executed and undated stock powers. (c) On the Effective Date, (i) the Security Agreement shall be in full force and effect, (ii) no filings, recordings, registrations or other actions shall be necessary or desirable to perfect the security interests granted pursuant to the Security Agreement in the Security Agreement Collateral covered thereby, and (iii) the Banks shall have received: -36- (x) evidence of the completion of all recordings and filings of, or with respect to, the Security Agreement as may be reasonably necessary or, in the opinion of the Collateral Agent, desirable to perfect the security interests intended to be created by the Security Agreement; (y) evidence that all other actions necessary or, in the opinion of the Collateral Agent, desirable to perfect and protect the security interests purported to be created by the Security Agreement have been taken; and (z) the Collateral Agent shall have received judgment, tax and UCC lien search reports listing all effective financing statements which name Holdings, the Borrower or any Subsidiary Guarantor as debtor and which are filed in those jurisdictions in which any of the Collateral is located and the jurisdictions in which Holdings', the Borrower's and each Subsidiary Guarantor's principal place of business is located, none of which, except as set forth on Exhibit 9.01, shall encumber the Collateral covered or intended to be covered by the Security Agreement. (d) On the Effective Date, the Borrower shall have duly authorized, executed and delivered to the Collateral Agent a Collateral Assignment of Leases with respect to each office or warehouse facility leased by the Borrower and listed on Schedule 5.10, such Collateral Assignments of Leases shall be substantially in full force and effect and the Borrower shall endeavor in a reasonable manner to obtain and deliver to the Collateral Agent a Landlord Consent from each lessor under those leases so indicated on Schedule 5.10 pursuant to which the Borrower leases office or warehouse space, within 90 days of the Effective Date. (e) On the Effective Date, the Borrower shall have duly authorized, executed and delivered to the Collateral Agent a Collateral Assignment of Location Leases with respect to all premises leased by the Borrower at which Collateral constituting personal property is located and such Collateral Assignment of Location Leases shall be substantially in full force and effect. 5.11 Mortgages; Title Insurance; Surveys; etc. Within 15 days after ---------------------------------------- the acquisition of the Mortgaged Property, the Collateral Agent shall have received: (i) fully executed counterparts of Mortgages, in form attached hereto as Exhibit K, covering such of the Real Property owned or leased by --------- the Borrower or any of the Subsidiary Guarantors as shall be designated as such on Schedule 5.11, together with evidence that counterparts of the Mortgages have been delivered to the title insurance company insuring the Lien of the Mortgages for recording in all places to the extent necessary to create a valid and enforceable first priority mortgage lien (subject to Permitted Encumbrances relating thereto) on each Mortgaged Property in favor of the Collateral Agent -37- (or such other trustee as may be required or desired under local law) for the benefit of the Secured Creditors; and (ii) Mortgage Policies on each Mortgaged Property issued by Chicago Title or another national title insurer licensed to do business in Texas and Maryland and assuring the Collateral Agent that the Mortgages are valid and enforceable first priority mortgage Liens on the respective Mortgaged Properties, free and clear of all defects and encumbrances except Permitted Encumbrances and such Mortgage Policies shall otherwise be in form and substance reasonably satisfactory to the Collateral Agent and shall include, as appropriate, an endorsement for future advances under this Agreement and the Notes and for any other matter that the Collateral Agent in its discretion may reasonably request to the extent available in the jurisdictions in which such Mortgaged Property is located. 5.12 Adverse Change, etc. At the time of each Credit Event and after ------------------- giving effect thereto, nothing shall have occurred since March 31, 1996 (and the Banks shall have become aware of no facts, conditions or other information not previously available to them) which the Agents or the Required Banks reasonably believe could have a material adverse effect on: (i) the rights or remedies of the Agents or the Banks, (ii) the ability of Holdings or the Borrower to perform their respective obligations to the Agents and the Banks or (iii) the business operations, assets, liabilities, condition (financial or otherwise) or prospects of Holdings and its Subsidiaries taken as a whole or on the Borrower and its Subsidiaries taken as a whole (the circumstances described in clauses (i), (ii) and (iii) as they apply to Holdings and the Borrower and their respective Subsidiaries being collectively referred to as a "Material Adverse Effect"). ----------------------- 5.13 Litigation. On the Effective Date, no litigation by any entity ---------- (private or governmental) shall be pending or threatened with respect to the Acquisition or this Agreement or any documentation executed in connection therewith, or which the Agents or the Required Banks shall reasonably believe could have a Materially Adverse Effect. 5.14 Evidence of Insurance. On the Effective Date, the Borrower --------------------- shall cause to be delivered to the Agents evidence of insurance complying with the requirements of Section 8.03 with respect to each of the Mortgaged Properties and for the business and properties of Holdings and its Subsidiaries, in scope, form and substance reasonably satisfactory to the Administrative Agent and the Required Banks and naming the Collateral Agent, in the case of Collateral, as an additional insured and/or loss payee, and stating that such insurance shall not be canceled or revised without at least 30 days' prior written notice, as of a recent date, by the respective insurer to the Collateral Agent. -38- 5.15 Pro Forma Balance Sheet. On the Effective Date, the Banks shall ----------------------- have received an unaudited projected pro forma consolidated balance sheet of the --- ----- Borrower prepared on a basis substantially consistent in all material respects with the Projections and in accordance with GAAP except as specifically set forth in the notes to such balance sheets, both immediately before and immediately after giving effect to the Acquisition, the related financing thereof and the other transactions contemplated hereby and thereby, which projected pro forma consolidated balance sheet shall be in form and substance --- ----- reasonably satisfactory to the Agents and the Required Banks. SECTION 6. Conditions Precedent to All Credit Events. The obligation ----------------------------------------- of each Bank to make Loans (including Loans made on the Effective Date), and the obligation of an Issuing Bank to issue any Letter of Credit, is subject, at the time of each such Credit Event (except as hereinafter indicated), to the satisfaction of the following conditions: 6.01 No Default; Representations and Warranties. At the time of each ------------------------------------------ such Credit Event and also after giving effect thereto (i) there shall exist no Default or Event of Default, (ii) there shall not exist or become known any facts, conditions, or circumstances which the Agents or the Required Banks reasonably believe could have a Material Adverse Effect and (iii) all representations and warranties contained herein or in any other Credit Document shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on the date of the making of such Credit Event (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date). 6.02 Notice of Borrowing; Letter of Credit Request. (a) Prior to --------------------------------------------- the making of each Loan, the Agent shall have received the notice required by Section 1.03(a). (b) Prior to the issuance of each Letter of Credit, the Agent and the respective Issuing Bank shall have received a Letter of Credit Request meeting the requirements of Section 2.02(a). The occurrence of the Effective Date and each Credit Event and the acceptance of the proceeds of each Credit Event shall constitute a representation and warranty by the Borrower to the Agents and each of the Banks that all the conditions specified in Section 5 and in this Section 6 and applicable to the occurrence of the Effective Date and such Credit Event exist as of that time (except to the extent that any of the conditions specified in Section 5 are required to be satisfactory to or determined by any Bank, the Required Banks and/or the Agents). All of the Notes, certificates, legal opinions and other documents and papers referred to in Section 5 and in this Section 6, unless otherwise specified, shall be delivered to the Administrative Agent at -39- the Notice Office for the account of each of the Banks and, except for the Notes, in sufficient counterparts for each of the Banks. SECTION 7. Representations, Warranties and Agreements. In order to ------------------------------------------ induce the Banks to enter into this Agreement and to make the Loans, and issue (or participate in) the Letters of Credit as provided herein, each of Holdings and the Borrower makes the following representations, warranties and agreements, in each case after giving effect to the Acquisition, all of which shall survive the execution and delivery of this Agreement and the Notes and the making of the Loans and issuance of the Letters of Credit, with the occurrence of each Credit Event on or after the Effective Date being deemed to constitute a representation and warranty that the matters specified in this Section 7 are true and correct in all material respects on and as of the Effective Date and on the date of each such Credit Event (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct only as of such specified date). 7.01 Corporate Status. Except as set forth on Schedule 7.01, ---------------- Holdings, the Borrower and each of their respective Subsidiaries (i) is a duly organized and validly existing corporation in good standing under the laws of the jurisdiction of its incorporation, (ii) has the corporate power and authority to own its property and assets and to transact the business in which it is engaged and (iii) is duly qualified and is authorized to do business and is in good standing in each jurisdiction where the conduct of its business requires such qualifications except for failures to be so qualified which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 7.02 Corporate Power and Authority. Each Credit Party has the ----------------------------- corporate power and authority to execute, deliver and perform the terms and provisions of each of the Documents to which it is party and has taken all necessary corporate or partnership action to authorize the execution, delivery and performance by it of each of such Documents. Each Credit Party has duly executed and delivered each of the Documents to which it is party, and, assuming due execution and delivery of each other party thereto, each of such Documents constitutes its legal, valid and binding obligation of such Credit Party enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by (a) bankruptcy, insolvency, fraudulent conveyance, preferential transfer, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors' rights and remedies generally, (b) general principles of equity (whether such enforceability is considered in a proceeding in equity or at law), and by the discretion of the court before which any proceeding therefor may be brought, or (c) public policy considerations or court administrative, regulatory or other governmental decisions that may limit rights to indemnification or contribution or limit or affect any covenants or agreements relating to competition or future employment. -40- 7.03 No Violation. Neither the execution, delivery or performance by ------------ any Credit Party of the Documents to which it is a party, nor compliance by it with the terms and provisions thereof, (i) will contravene any provision of any applicable law, statute, rule or regulation or any applicable order, writ, injunction or decree of any court or governmental instrumentality, in each case, to the extent such contravention could reasonably be expected to result in a Material Adverse Effect, (ii) will conflict with or result in any breach of any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien (except pursuant to the Security Documents) upon any of the material properties or assets of Holdings, the Borrower or any of their respective Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust, credit agreement or loan agreement, or any other material agreement, contract or instrument, to which Holdings, the Borrower or any of their respective Subsidiaries is a party or by which it or any of its property or assets is bound or to which it may be subject, which conflict, breach or default would not reasonably be expected to have a Material Adverse Effect or (iii) will violate any provision of the Certificate of Incorporation or By-Laws of Holdings, the Borrower or any of their respective Subsidiaries. 7.04 Governmental Approvals. Except as set forth on Schedule 7.04, ---------------------- no order, consent, approval, license, authorization or validation of, or filing, recording or registration with (except as have been obtained or if failed to obtain would not reasonably be expected to have a Material Adverse Effect or (in the case of filings, recordings or registrations) made prior to the Effective Date), or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with, (i) the execution, delivery and performance of any Document or (ii) the legality, validity, binding effect or enforceability of any such Document. 7.05 Financial Statements; Financial Condition; Undisclosed ------------------------------------------------------ Liabilities; Projections; etc. To the best knowledge of Holdings and the - ----------------------------- Borrower, (a) the statements of financial condition of Holdings and its Subsidiaries at September 28, 1996 and of KWIK Wash and its Subsidiaries at September 30, 1996 and the related statements of income and cash flow for the last fiscal year and six-month period (or in the case of KWIK Wash, nine-month period) ended on such date, as the case may be, and furnished to the Banks prior to the Effective Date present fairly in all material respects the financial condition of Holdings and its Subsidiaries and of KWIK Wash and its Subsidiaries at the date of such statements of financial condition and the results of the operations of Holdings and its Subsidiaries and of KWIK Wash and its Subsidiaries for the respective last fiscal year or six-month or nine-month period, as the case may be. To the best knowledge of Holdings and the Borrower, all such financial statements have been prepared in accordance with GAAP consistently applied, except as disclosed therein and subject to normal year end audit adjustments. -41- (b) The annual and interim financial statements included in the SEC Reports (both as to Holdings and as to its Subsidiaries on a combined basis) (including statements of income and cash flows and changes in shareholders' equity), present fairly in all material respects the financial condition of the relevant Persons at the dates of said statements and the results for the periods covered thereby. All such financial statements have been prepared in accordance with GAAP consistently applied and the financial statements as of and for the fiscal years have been audited by and accompanied by the opinion of Ernst & Young LLP, independent public accountants. (c) Since March 31, 1996, after giving effect to the Acquisition, nothing has occurred that has had or could reasonably be expected to have a Material Adverse Effect. (d) Except as fully reflected in the financial statements described in Section 7.05(b) and the Indebtedness incurred under this Agreement and except as set forth in Schedule 7.05, (i) there were as of the Effective Date (and after giving effect to any Loans made on such date), no liabilities or obligations (excluding obligations or liabilities incurred in the ordinary course of business, which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect) with respect to Holdings or the Borrower or any of their respective Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether or not due), and (ii) neither Holdings nor the Borrower nor any of their respective Subsidiaries knows of any basis for the assertion against Holdings or the Borrower or any of their respective Subsidiaries of any such liability or obligation which, either individually or in the aggregate, has, or could be reasonably likely to have, a Material Adverse Effect. (e) The pro forma information contained in the SEC Reports and the --- ----- Projections are based on good faith estimates and assumptions made by Holdings or Borrower, and on the Effective Date Holdings or Borrower believes that the Projections and such pro forma information were reasonable and, in the case of --- ----- the Projections, attainable under the facts and circumstances known to Holdings or Borrower, it being recognized by the Banks, however, that projections as to future events are not to be viewed as facts and that the actual results during the period or periods covered by the Projections are likely to differ from the projected results and that the differences could be material. There is no material fact known to Holdings or the Borrower or any of their respective Subsidiaries which would have a Material Adverse Effect and which is not publicly available or has not been disclosed herein or in such other documents, certificates and statements furnished to the Banks for use in connection with the transactions contemplated hereby. (f) (i) On and as of the Effective Date, after giving effect to the Acquisition and to all Indebtedness (including the Loans) being incurred or assumed and Liens created by the Borrower in connection therewith (assuming the full utilization of -42- all Commitments on the Effective Date), (a) the sum of the assets, at a going business value (i.e., the amount that may be realized within a reasonable time, --- considered to be six months to one year, either through collection or sale at the regular market value, conceiving the latter as the amount that would be obtained for such assets within such period by a capable and diligent businessman from an interested buyer who is willing to purchase under ordinary selling conditions), of each of Holdings, individually, and the Borrower, individually, will exceed its debts; (b) each of Holdings, individually, and the Borrower, individually, has not incurred and does not intend to incur, and does not believe that it will incur, debts beyond its ability to pay such debts as such debts mature; and (c) each of Holdings, individually, and the Borrower, individually, will have sufficient capital with which to conduct its business. For purposes of this Section 7.05(f), "debt" means any liability on a claim, and ---- "claim" means (i) right to payment, whether or not such a right is reduced to ----- judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured or (ii) right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured; provided that to the extent any such "claim" is not fixed, -------- liquidated and contingent, the amount thereof shall equal the Company's good faith estimate of the maximum amount thereof. (g) Except as fully disclosed in the financial statements delivered pursuant to Section 7.05(a), there were as of the Effective Date no liabilities or obligations with respect to Holdings, the Borrower or any of their respective Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether or not due) which, either individually or in aggregate, would be material to Holdings, the Borrower or to the Borrower and its Subsidiaries taken as a whole. As of the Effective Date, neither Holdings nor the Borrower knows of any basis for the assertion against it of any liability or obligation of any nature whatsoever that is not fully disclosed in the financial statements delivered pursuant to Section 7.05(a) which, either individually or in the aggregate, could be material to Holdings or the Borrower. (h) On and as of the Effective Date, the financial projections (the "Projections") previously delivered to the Administrative Agent and the Banks - ------------ have been prepared on a basis consistent with the financial statements referred to in Section 7.05(a) (other than as set forth or presented in such Projections), and there are no statements or conclusions in any of the Projections which are based upon or include information known to the Borrower to be misleading in any material respect or which fail to take into account material information regarding the matters reported therein. On the Effective Date, the Borrower believed that the Projections were reasonable and attainable; it being recognized by the Banks, however, that projections as to future events are not viewed as facts and that the actual results during the period or periods -43- covered by the Projections are likely to differ from the projected results and the differences could be material. 7.06 Litigation. Except as set forth on Schedule 7.06, there are no ---------- actions, suits or proceedings pending or, to the best knowledge of Holdings and the Borrower, threatened that could reasonably be expected to, singly or in the aggregate, have a Material Adverse Effect. 7.07 True and Complete Disclosure. To the best of Holdings' and the ---------------------------- Borrower's knowledge, all factual information (taken as a whole) furnished by or on behalf of Holdings or the Borrower in writing and listed on Schedule 7.07 to any of the Agents or any Bank for purposes of or in connection with this Agreement, the other Credit Documents or any transaction contemplated herein or therein is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of Holdings or the Borrower in writing to any of the Agents or any Bank will be, true and accurate in all material respects on the date as of which such information is dated or certified. 7.08 Use of Proceeds; Margin Regulations. (a) All proceeds of the ----------------------------------- Term Loans shall be used by the Borrower (x) to effect the Acquisition and (y) to pay fees and expenses related to the Acquisition. (b) All proceeds of Revolving Loans shall be used (subject to the terms and conditions contained herein) for general corporate purposes of Holdings and the Borrower and its Subsidiaries; provided that no more than -------- $35,000,000 in aggregate amount may be used to finance the cash portion of the consideration paid to effect Permitted Acquisitions. (c) No part of the proceeds of any Loan will be used to purchase or carry any Margin Stock or to extend credit for the purpose of purchasing or carrying any Margin Stock. Neither the making of any Loan nor the use of the proceeds thereof nor the occurrence of any other Credit Event will violate or be inconsistent with the provisions of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. 7.09 Tax Returns and Payments. Holdings, the Borrower and each of ------------------------ their respective Subsidiaries are members of an affiliated group of corporations filing consolidated returns for Federal income tax purposes, of which Holdings is the "common parent" (within the meaning of Section 1504 of the Code) of such group. Each of Holdings, the Borrower and each of their respective Subsidiaries have timely filed or caused to be timely filed, on the due dates thereof or within applicable grace periods, with the appropriate taxing authority, all Federal and all material state and other returns, statements, forms and reports for taxes (the "Returns") required to be filed by or with ------- respect to the income, properties or operations of Holdings, the -44- Borrower and/or any of their respective Subsidiaries. To the best knowledge of Holdings, the Returns accurately reflect all liability for taxes of Holdings, the Borrower and their respective Subsidiaries for the periods covered thereby. To the best knowledge of Holdings, each of Holdings, the Borrower and each of their respective Subsidiaries have paid all taxes payable by them other than taxes which are not delinquent, and other than those contested in good faith and for which adequate reserves have been established in accordance with GAAP. Except as disclosed in the financial statements referred to in Section 7.05(a), there is no material action, suit, proceeding, investigation, audit, or claim now pending or, to the best knowledge of Holdings or the Borrower, threatened by any authority regarding any taxes relating to Holdings, the Borrower or any of their respective Subsidiaries. The charges, accruals and reserves on the books of Holding and its Subsidiaries in respect of taxes and other governmental charges are, in the opinion of Holdings and the Borrower, adequate. As of the Effective Date, none of Holdings, the Borrower or any of their respective Subsidiaries has entered into an agreement or waiver or been requested to enter into an agreement or waiver extending any statute of limitations relating to the payment or collection of taxes of Holdings, the Borrower or any of their respective Subsidiaries, or is aware of any circumstances that would cause the taxable years or other taxable periods of Holdings, the Borrower or any of their respective Subsidiaries not to be subject to the normally applicable statute of limitations. None of Holdings, the Borrower or any of their respective Subsidiaries has provided, with respect to themselves or property held by them, any consent under Section 341 of the Code. None of Holdings, the Borrower or any of their respective Subsidiaries has incurred, or reasonably expect to incur, any material tax liability in connection with the Acquisition and the other transactions contemplated hereby. 7.10 Compliance with ERISA. Each Plan is in substantial compliance --------------------- with ERISA and the Code; no Reportable Event has occurred with respect to a Plan; no Plan is insolvent or in reorganization; no Plan has Unfunded Current Liability; no Plan has an accumulated or waived funding deficiency, has permitted decreases in its funding standard account or has applied for an extension of any amortization period within the meaning of Section 412 of the Code; all contributions required to be made with respect to a Plan have been timely made; none of Holdings, the Borrower, or any of their respective Subsidiaries nor any ERISA Affiliate has incurred any material liability to or on account of a Plan pursuant to Section 409, 502(i), 502(1), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or expects to incur any liability under any of the foregoing Sections with respect to any Plan; no proceedings have been instituted to terminate or appoint a trustee to administer any Plan; no condition exists which presents a material risk to Holdings, the Borrower or any of their respective Subsidiaries or any ERISA Affiliate of incurring a liability to or on account of a Plan pursuant to the foregoing provisions of ERISA and the Code; using actuarial assumptions and computation methods consistent with Part 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of Holdings, the Borrower, their respective Subsidiaries and their ERISA Affiliates to all -45- Plans which are multiemployer plans (as defined in Section 4001(a)(3) of ERISA) in the event of a complete withdrawal therefrom, as of the close of the most recent fiscal year of each such Plan ended prior to the date of the most recent Credit Event, would not exceed $50,000; no lien imposed under the Code or ERISA on the assets of Holdings, the Borrower or any of their respective Subsidiaries or any ERISA Affiliate exists or is likely to arise on account of any Plan; and Holdings, the Borrower and their respective Subsidiaries may cease contributions to or terminate any Plan maintained by any of them without incurring any material liability. 7.11 The Security Documents. (a) The provisions of the Security ---------------------- Agreement are effective to create in favor of the Collateral Agent for the benefit of the Secured Creditors a legal, valid and enforceable security interest in all right, title and interest of the Borrower and the Subsidiary Guarantors in the Security Agreement Collateral described therein, and the Security Agreement, upon the filing of Form UCC-1 financing statements or the appropriate equivalent (which filings have been made) or other methods of perfection (which have been completed), creates, a fully perfected first lien on, and security interest in, all right, title and interest in all of the Security Agreement Collateral described therein, which security interest shall be subject to no other Liens other than Permitted Filings. The recordation of the Assignment of Security Interest in U.S. Patents and Trademarks in the form attached to the Security Agreement in the United States Patent and Trademark Office together with filings on Form UCC-1 made pursuant to the Security Agreement are effective, under applicable law, to perfect the security interest granted to the Collateral Agent in the trademarks and patents covered by the Security Agreement and the recordation of the Assignment of Security Interest in U.S. Copyrights in the form attached to the Security Agreement with the United States Copyright Office together with filings on Form UCC-1 made pursuant to the Security Agreement are effective under federal law to perfect the security interest granted to the Collateral Agent in the copyrights covered by the Security Agreement. The Borrower and each Subsidiary Guarantor has good and marketable title to all Security Agreement Collateral pledged by it under the Security Agreement, free and clear of all Liens except those described above in this clause (a). (b) The security interests created in favor of the Collateral Agent, as Pledgee, for the benefit of the Secured Creditors under the Pledge Agreements, upon the delivery of the Pledged Securities to the Collateral Agent, constitute first priority perfected security interests in the Pledged Securities described in the Pledge Agreements, subject to no security interests of any other Person. No filings or recordings are required in order to perfect the security interests created in the Pledged Securities and the proceeds thereof under the Pledge Agreements other than filings on Form UCC-1 deemed necessary by the Collateral Agent. (c) After the recording thereof, the Mortgages will create, as security for the obligations purported to be secured thereby, a valid and enforceable perfected security interest in and mortgage lien on all of the Mortgaged Properties in favor of the -46- Collateral Agent (or such other trustee as may be required or desired under local law) for the benefit of the Secured Creditors, superior to and prior to the rights of all third persons (except that the security interest and mortgage lien created in the Mortgaged Properties may be subject to the Permitted Encumbrances related thereto) and subject to no other Liens. Schedule 5.11 contains a true and complete list of each parcel of Real Property owned or leased by the Borrower and the Subsidiary Guarantors on the Effective Date, and the type of interest therein held by the Borrower or such Subsidiary Guarantor. The Borrower and each of the Subsidiary Guarantors have good and indefeasible title to all fee owned Mortgaged Properties on the Effective Date free and clear of all Liens except those described in the first sentence of this subsection (c). 7.12 Representations and Warranties in Documents. All ------------------------------------------- representations and warranties set forth in the other Documents are true and correct in all material respects at the time as of which such representations and warranties were made (or deemed made) and will be true and correct in all material respects on the Effective Date. 7.13 Properties. Except as set forth on Schedule 7.13, Holdings, the ---------- Borrower and each of their respective Subsidiaries have good and valid title to all properties owned in fee by them, including all property reflected in the balance sheet referred to in Section 7.05(a) and in the pro forma balance sheet --- ----- referred to in Section 5.15 (except as sold or otherwise disposed of since the date of such balance sheet in the ordinary course of business or in accordance with the terms of this Agreement), free and clear of all Liens, other than Liens which are (x) in the case of Mortgaged Real Property, Prior Liens and Liens permitted by the applicable Mortgage and (y) in the case of other Real Property, Permitted Liens. 7.14 Capitalization. (a) On the Effective Date, the authorized -------------- capital stock of Holdings shall consist of (i) 15,000,000 shares of Holdings Common Stock, $.01 par value per share, of which 10,004,278 shares shall be issued and outstanding, (ii) 1,000,000 shares of Holdings Nonvoting Common Stock, $.01 par value per share, of which 480,648 shares shall be issued and outstanding and (iii) 1,000,000 shares of Holdings Preferred Stock, $.01 par value per share, none of which shall be issued and outstanding. All such outstanding shares have been duly and validly issued, are fully paid and non- assessable and have been issued free of preemptive rights. As of the Effective Date, Holdings does not have outstanding any securities convertible into or exchangeable for its capital stock or outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreement providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, its capital stock, in each case other than as set forth in the SEC Reports. (b) The authorized capital stock of the Borrower shall consist of 1,000 shares of common stock, $.01 par value per share, 100 of which shall be issued and -47- outstanding. All such outstanding shares of common stock have been duly and validly issued, are fully paid and nonassessable and are free of preemptive rights. As of the Effective Date, the Borrower does not have outstanding any securities convertible into or exchangeable for its capital stock or outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, its capital stock. 7.15 Subsidiaries. On and as of the Effective Date, the Borrower has ------------ no Subsidiaries other than those Subsidiaries listed on Schedule 7.15 and as of the Effective Date, Holdings has no direct Subsidiary other than the Borrower and no indirect Subsidiary other than the direct Subsidiaries of the Borrower listed on Schedule 7.15. 7.16 Compliance with Statutes, etc. Except as set forth on Schedule ----------------------------- 7.16, each of Holdings, the Borrower and their respective Subsidiaries is in compliance with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property, except such noncompliances as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 7.17 Investment Company Act. None of Holdings, the Borrower or any ---------------------- of their respective Subsidiaries is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. 7.18 Public Utility Holding Company Act. None of Holdings, the ---------------------------------- Borrower or any of their respective Subsidiaries is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. 7.19 Environmental Matters. Except as set forth on Schedule 7.19, --------------------- (a) Holdings, the Borrower and each of their respective Subsidiaries have complied in all material respects with, and on the date of each Credit Event will be in compliance in all material respects with, all Environmental Laws and the requirements of any permits, licenses or other authorizations issued under such Environmental Laws. There are no pending or, to the best knowledge of Holdings and the Borrower, past or threatened Environmental Claims against Holdings, the Borrower or any of their respective Subsidiaries or any Real Property now or formerly owned or operated by Holdings, the Borrower or any of their respective Subsidiaries. There are no facts, circumstances, conditions or occurrences on any Real Property now or formerly owned or operated by Holdings, the Borrower or any of their respective Subsidiaries or, to the -48- best knowledge of Holdings or the Borrower, on any property adjoining or in the vicinity of any such Real Property that, to the best knowledge of Holdings or the Borrower, could reasonably be expected (i) to form the basis of an Environmental Claim against Holdings, the Borrower or any of their respective Subsidiaries or any such Real Property, which Environmental Claim could reasonably be expected to result in a Material Adverse Effect, individually or in the aggregate with all other Environmental Claims, or (ii) to cause any such Real Property to be subject to any restrictions on the ownership, occupancy, use or transferability of such Real Property by Holdings, the Borrower or any of their respective Subsidiaries under any Environmental Law. (b) Hazardous Materials have not at any time been generated, used, treated or stored on, or transported to or from, any Real Property owned or operated by Holdings, the Borrower or any of their respective Subsidiaries where such generation, use, treatment or storage has violated or resulted in liability under, or could reasonably be expected to violate or to result in liability under, any Environmental Law, which violation or liability could reasonably be expected to result in a Material Adverse Effect, individually or in the aggregate with all other violations of or liability under any Environmental Law. Hazardous Materials have not at any time been Released on or from any Real Property owned or operated by Holdings, the Borrower or any of their respective Subsidiaries where such Release has violated or resulted in material liability under, or could reasonably be expected to violate or to result in material liability under, any Environmental Law. There are not now nor have there been any underground storage tanks or related piping located on any Real Property owned or operated by Holdings, the Borrower or any of their respective Subsidiaries. (c) Notwithstanding anything to the contrary in this Section 7.19, the representations made in this Section 7.19 shall only be untrue if the aggregate effect of all failures, noncompliances and liabilities of the types described above could reasonably be expected to result in a Material Adverse Effect. 7.20 Labor Relations. Except as set forth on Schedule 7.20, none of --------------- Holdings, the Borrower or any of their respective Subsidiaries is engaged in any unfair labor practice that could reasonably be expected to have a material adverse effect on Holdings, the Borrower or on the Borrower and its Subsidiaries taken as a whole. There is (i) no unfair labor practice complaint pending against Holdings, the Borrower or any of their respective Subsidiaries or, to the best knowledge of Holdings or the Borrower, threatened against any of them, before the National Labor Relations Board, and no material grievance or arbitration proceeding arising out of or under any collective bargaining agreement is so pending against Holdings, the Borrower or any of their respective Subsidiaries or, to the best knowledge of Holdings or the Borrower, threatened against any of them, (ii) no strike, labor dispute, slowdown or stoppage pending against Holdings, the Borrower or any of their respective Subsidiaries or, to the best knowledge of the Borrower, threatened against Holdings, the Borrower or any -49- of their respective Subsidiaries and (iii) to the best knowledge of Holdings and the Borrower, no union representation proceeding is pending with respect to the employees of Holdings or the Borrower or any of their respective Subsidiaries, except (with respect to any matter specified in clause (i), (ii) or (iii) above, either individually or in the aggregate) such as could not reasonably be expected to result in a Material Adverse Effect. 7.21 Patents, Licenses, Franchises and Formulas. Except as set forth ------------------------------------------ on Schedule 7.21, each of Holdings, the Borrower and their respective Subsidiaries owns all material patents, trademarks, permits, service marks, trade names, copyrights, licenses, franchises and formulas, or rights with respect to the foregoing, and has obtained assignments of all leases and other rights of whatever nature, reasonably necessary for the present conduct of its business, without any known conflict with the rights of others which, or the failure to obtain which, as the case may be, would reasonably be expected to result in a Material Adverse Effect. 7.22 Indebtedness. Schedule 7.22 sets forth a true and complete list ------------ of all Indebtedness of Holdings, the Borrower and their respective Subsidiaries as of the Effective Date and which is to remain outstanding after giving effect to the Acquisition and the incurrence of Loans on such date (excluding the Loans and the Letters of Credit, the "Existing Indebtedness"), in each case showing --------------------- the aggregate principal amount thereof and the name of the respective borrower and any other entity which directly or indirectly guaranteed such debt. 7.23 Acquisition. At the time of consummation thereof, the ----------- Acquisition shall have been consummated in all material respects and substantially in accordance with the terms of the respective Documents and all applicable laws. At the time of consummation of the Acquisition, all consents and approvals of, and filings and registrations with, and all other actions in respect of, all governmental agencies, authorities or instrumentalities required in order to make or consummate the Acquisition will have been obtained, given, filed or taken and are or will be in full force and effect (or effective judicial relief with respect thereto has been obtained), except where the failure to so obtain, give, file or take would not have a Material Adverse Effect. All applicable waiting periods with respect thereto have or, prior to the time when required, will have, expired without, in all such cases, any action being taken by any competent authority which restrains, prevents, or imposes material adverse conditions upon the Acquisition. Additionally, to the best of Holdings' and the Borrower's knowledge, there does not exist any judgment, order or injunction prohibiting or imposing material adverse conditions upon the Acquisition, or the occurrence of any Credit Event or the performance by Holdings or the Borrower of its obligations under the respective Documents. All actions taken by the Borrower pursuant to or in furtherance of the Acquisition have been taken in material compliance with the respective Documents and all applicable laws. -50- SECTION 8. Affirmative Covenants. Holdings and the Borrower hereby --------------------- covenant and agree that as of the Effective Date and thereafter for so long as this Agreement is in effect and until the Total Commitments have terminated, no Letters of Credit (other than Letters of Credit, together with all Fees that have accrued and will accrue thereon through the stated termination date of such Letters of Credit, which have been cash collateralized in a cash collateral account satisfactory to the Letter of Credit Issuer in its sole and absolute discretion) or Notes are outstanding and the Loans, together with interest, Fees and all other obligations (other than indemnities described in Section 13.13 which are not then due and payable) incurred hereunder are paid in full: 8.01 Information Covenants. Holdings and/or the Borrower will --------------------- furnish to each Bank: (a) Monthly Reports. Within 30 days after the end of each fiscal --------------- month of Holdings, (i) the consolidated and consolidating balance sheets of Holdings and its consolidated Subsidiaries as at the end of such month and the related consolidated and consolidating statements of operations and retained earnings/stockholders deficiency and statement of cash flows for such month and for the elapsed portion of the fiscal year ended with the last day of such month, in each case setting forth comparative figures for the corresponding month in the prior fiscal year and the budgeted figures for such month as set forth in the respective budget delivered pursuant to Section 8.01(e) and (ii) management's discussion and analysis of the important operational and financial developments during the month and year- to-date periods, all of which shall be certified by the chief financial officer or other Authorized Officer of the Company, subject to certain recurring quarter-end adjustments and normal year-end audit adjustments and the absence of footnotes. (b) Quarterly Financial Statements. Within 45 days after the close ------------------------------ of each of the first three quarterly accounting periods in each fiscal year of Holdings, consolidated and consolidating balance sheet of Holdings and its Subsidiaries as at the end of such quarterly accounting period and the related consolidated and consolidating statements of operations, statements of changes in stockholders equity and statements of cash flows for such quarterly accounting period and for the elapsed portion of the fiscal year ended with the last day of such quarterly accounting period; all of which shall be in reasonable detail and certified by the chief financial officer or other Authorized Officer of Holdings that they fairly present in all material respects the financial condition of Holdings and its Subsidiaries taken as a whole as of the dates indicated and the results of their operations and changes in their cash flows for the periods indicated, subject to normal year-end audit adjustments and the absence of footnotes. -51- (c) Annual Financial Statements. Within 95 days after the close of --------------------------- each fiscal year of Holdings, (i) the consolidated and consolidating balance sheets of Holdings and its consolidated Subsidiaries as at the end of such fiscal year and the related consolidated statements of operation and retained earnings/stockholder deficiency and of cash flows for such fiscal year setting forth comparative figures for the preceding fiscal year and certified by Ernst & Young LLP or such other independent certified public accountants of recognized national standing reasonably acceptable to the Agents, together with a report of such accounting firm stating that in the course of its regular audit of the financial statements of Holdings and its Subsidiaries, which audit was conducted in accordance with generally accepted auditing standards, such accounting firm obtained no knowledge of any Default or Event of Default which has occurred and is continuing under Sections 9.04, 9.05 or 9.07 through 9.10 inclusive or, if in the opinion of such accounting firm such a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof and (ii) management's discussions and analysis of the important operational and financial developments during such fiscal year. (d) Management Letters. Promptly after the receipt thereof by ------------------ Holdings, the Borrower or any of their respective Subsidiaries, a copy of any final "management letter" received by any of them from its certified public accountants and the management's responses thereto. (e) Budgets. No later than 35 days following the commencement of the ------- first day of each fiscal year of Holdings, a budget in form consistent with past practices and in the form delivered to the Agents on or prior to the Effective Date (including budgeted statements of operation and sources and uses of cash and balance sheets) prepared by Holdings for (x) each of the twelve months of such fiscal year prepared in detail and (y) each of the five years immediately following such fiscal year prepared in summary form, in each case, of Holdings and its Subsidiaries, accompanied by the statement of the Chief Financial Officer or Treasurer of the Borrower to the effect that, to the best of his knowledge, the budget is a reasonable estimate for the period covered thereby, the principal assumptions upon which such budgets are based. Together with each delivery of financial statements pursuant to Section 7.01(b) and (c), a comparison of the current year to date financial results (other than in respect of the balance sheets included therein) against the budgets required to be submitted pursuant to this clause (e) shall be presented. (f) Officer's Certificates. At the time of the delivery of the ---------------------- financial statements provided for in Sections 8.01(a), (b) and (c), certificates of an Authorized Officer of each of the Borrower and Holdings to the effect that, to the best of such officer's knowledge, no Default or Event of Default has occurred and is continuing or, if any Default or Event of Default has occurred -52- and is continuing, specifying the nature and extent thereof and what action the Borrower and Holdings propose to take with respect thereto, which certificate shall, in the case of any such financial statements delivered in respect of a period ending on the last day of the respective fiscal quarter or year, (x) set forth the calculations required to establish whether there was compliance with the provisions of Sections 4.02(g) and (h) (but with respect to Section 4.02(h) only to the extent delivered with the financial statements required by Sections 8.01(a)), 9.04, 9.05 and 9.07 through 9.10, inclusive, at the end of such fiscal quarter or year, as the case may be, and (y) if delivered with the financial statements required by Section 8.01(a), set forth the amount of Excess Cash Flow for the respective Excess Cash Payment Period. (g) Notice of Default or Litigation. Promptly, and in any event ------------------------------- within three Business Days after an officer of Holdings or the Borrower obtains knowledge thereof, notice of (i) the occurrence of any event which constitutes a Default or Event of Default specifying the nature and extent thereof and what action the Borrower and Holdings propose to take with respect thereto and (ii) any litigation or governmental investigation or proceeding pending (x) against Holdings, the Borrower or any of their respective Subsidiaries which, singly or in the aggregate could reasonably be expected to have a Materially Adverse Effect, (y) with respect to (i) the CLC Notes or (ii) any material Indebtedness of the Borrower and its Subsidiaries taken as a whole or (z) with respect to any Document. (h) Other Reports and Filings. Promptly, copies of all financial ------------------------- information, proxy materials and other information and reports ("SEC --- Reports"), if any, which Holdings, the Borrower or any of their respective ------- Subsidiaries shall file with the Securities and Exchange Commission or any successor thereto (the "SEC") or sent generally to analysts or holders of --- capital stock or other securities of Holdings, the Borrower or any of their respective Subsidiaries (in their capacities as such) including holders of its Indebtedness (including the CLC Notes) pursuant to the terms of the documentation governing such Indebtedness (or any trustee, agent or other representative therefor). (i) Environmental Matters. Promptly upon, and in any event within --------------------- ten Business Days after, an officer of Holdings, the Borrower or any of their respective Subsidiaries obtains knowledge thereof, notice of one or more of the following environmental matters, unless such environmental matters could not, individually or when aggregated with all other such environmental matters, be reasonably expected to materially and adversely affect the business, operations, assets, liabilities, condition (financial or otherwise) or prospects of Holdings, the Borrower or of the Borrower and its Subsidiaries taken as a whole: -53- (i) any pending or threatened Environmental Claim against Holdings, the Borrower or any of its Subsidiaries or any Real Property owned or operated by the Borrower or any of their respective Subsidiaries; (ii) any condition or occurrence on or arising from any Real Property owned or operated by Holdings, the Borrower or any of their respective Subsidiaries that (a) results in noncompliance by Holdings, the Borrower or any of their respective Subsidiaries with any applicable Environmental Law or (b) could reasonably be expected to form the basis of an Environmental Claim against Holdings, the Borrower or any of their respective Subsidiaries or any such Real Property; (iii) any condition or occurrence on any Real Property owned or operated by Holdings, the Borrower or any of their respective Subsidiaries that could reasonably be expected to cause such Real Property to be subject to any restrictions on the ownership, occupancy, use or transferability by Holdings, the Borrower or any of their respective Subsidiaries of such Real Property under any Environmental Law; and (iv) the taking of any removal or remedial action in response to the actual or alleged presence of any Hazardous Material on any Real Property owned or operated by Holdings, the Borrower or any of their respective Subsidiaries as required by any Environmental Law or any governmental or other administrative agency; provided that in any -------- event Holdings and the Borrower shall deliver to each Bank all notices received by it or any of their respective Subsidiaries from any government or governmental agency under, or pursuant to, CERCLA. All such notices shall describe in reasonable detail the nature of the claim, investigation, condition, occurrence or removal or remedial action and Holdings', the Borrower's or such Subsidiary's response thereto. In addition, the Borrower will provide the Banks with copies of all material communications with any government or governmental agency relating to Environmental Laws, all material communications with any Person (other than its attorneys) relating to Environmental Claims, and such detailed reports of any Environmental Claim as may reasonably be requested by the Banks. (j) Annual Meetings with Banks. At the request of the Administrative -------------------------- Agent, Holdings shall within 120 days after the close of each fiscal year of Holdings hold a meeting at a time and place selected by Holdings and acceptable to the Agents with all of the Banks at which meeting shall be reviewed the financial results of the previous fiscal year and the financial condition of -54- Holdings and the budgets presented for the current fiscal year of Holdings and its Subsidiaries. (k) Other Information. From time to time, such other information or ----------------- documents (financial or otherwise) with respect to Holdings, the Borrower or their respective Subsidiaries as any Bank may reasonably request in writing. (l) Promptly upon, and in any event within five Business Days after, the closing of a Permitted Acquisition, Holdings will deliver to the Administrative Agent a certificate of an Authorized Officer setting forth in reasonable detail the pro forma calculation of Pro Forma Leverage Ratio --- ----- as of the date of the Permitted Acquisition, giving effect thereto. 8.02 Books, Records and Inspections. Holdings and the Borrower will, ------------------------------ and will cause each of their respective Subsidiaries to, keep proper books of record and account in which full, true and correct entries in conformity with GAAP and all requirements of law shall be made of all dealings and transactions in relation to its business and activities. Holdings and the Borrower will, and will cause each of their respective Subsidiaries to, permit officers and designated representatives of the Agents or any Bank to visit and inspect, during regular business hours and under guidance of officers of Holdings and the Borrower or such Subsidiary, any of the properties of Holdings and the Borrower or such Subsidiary, and to examine the books of account of Holdings and the Borrower or such Subsidiary and discuss the affairs, finances and accounts of Holdings and the Borrower or such Subsidiary with, and be advised as to the same by, its and their officers and independent accountants, all at such reasonable times and intervals and to such reasonable extent as the Agents or such Bank may request. 8.03 Maintenance of Property; Insurance. (a) Schedule 8.03 sets ---------------------------------- forth a true and complete listing of all insurance maintained by Holdings, the Borrower and their respective Subsidiaries as of the Effective Date. Holdings and the Borrower will, and will cause each of their respective Subsidiaries to, (i) keep all property necessary in its business in good working order and condition (ordinary wear and tear excepted), (ii) maintain insurance on all its property in at least such amounts and against at least such risks as is consistent and in accordance with industry practice and (iii) furnish to each Bank, upon written request, full information as to the insurance carried. In addition to the requirements of the immediately preceding sentence, Holdings and the Borrower will at all times cause insurance of the types described in Schedule 8.03 to be maintained (with the same scope of coverage as that described in Schedule 8.03) at levels which are at least as great as the respective amount described on Schedule 8.03 in footnotes (1) and (2) thereof. (b) Holdings and the Borrower will, and will cause their respective Subsidiaries to, at all times keep their respective property insured in favor of the -55- Collateral Agent, and all policies or certificates (or certified copies thereof) with respect to such insurance (and any other insurance maintained by Holdings, the Borrower or any of their respective Subsidiaries) (i) shall be endorsed to the Collateral Agent's satisfaction for the benefit of the Collateral Agent (including, without limitation, by naming the Collateral Agent as loss payee or as an additional insured), (ii) shall state that such insurance policies shall not be canceled without 30 days' prior written notice thereof by the respective insurer to the Collateral Agent, (iii) shall provide that the respective insurers irrevocably waive any and all rights of subrogation with respect to the Collateral Agent and the Secured Creditors, (iv) shall contain the standard non- contributory mortgagee clause endorsement in favor of the Collateral Agent with respect to hazard insurance coverage, (v) shall, except in the case of public liability insurance and workers' compensation insurance, provide that any losses shall be payable notwithstanding (A) any act or neglect of Holdings, the Borrower or any of their respective Subsidiaries, (B) the occupation or use of the properties for purposes more hazardous than those permitted by the terms of the respective policy if such coverage is obtainable at commercially reasonable rates and is of the kind from time to time customarily insured against by Persons owning or using similar property and in such amounts as are customary, (C) any foreclosure or other proceeding relating to the insured properties if such coverage is available at commercially reasonable rates or (D) any change in the title to or ownership or possession of the insured properties and (vi) shall be deposited with the Collateral Agent if such coverage is available at commercially reasonable rates. (c) If Holdings, the Borrower or any of their respective Subsidiaries shall fail to maintain all insurance in accordance with this Section 8.03, or if Holdings, the Borrower or any of their respective Subsidiaries shall fail to so endorse and deposit all policies or certificates with respect thereto, the Agents and/or the Collateral Agent shall have the right (but shall be under no obligation) to procure such insurance and the Borrower agrees to reimburse the Agents or the Collateral Agent, as the case may be, for all costs and expenses of procuring such insurance. 8.04 Corporate Franchises. Holdings and the Borrower will, and will -------------------- cause each of their respective Subsidiaries to, do or cause to be done, all things necessary to preserve and keep in full force and effect its existence and its material rights, franchises, licenses and patents; provided, however, that -------- ------- nothing in this Section 8.04 shall prevent (i) sales of assets by Holdings, the Borrower or any of their respective Subsidiaries in accordance with Section 9.02 or (ii) the withdrawal by Holdings, the Borrower or any of their respective Subsidiaries of their qualification as a foreign corporation in any jurisdiction where such withdrawal could not reasonably be expected to have a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of Holdings, the Borrower or of the Borrower and its Subsidiaries taken as a whole. -56- 8.05 Compliance with Statutes, etc. Holdings and the Borrower will, ----------------------------- and will cause each of their respective Subsidiaries to, comply with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property, except such noncompliances as could not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of Holdings, the Borrower or of the Borrower and its Subsidiaries taken as a whole. 8.06 Compliance with Environmental Laws. (a) Holdings and the ---------------------------------- Borrower will comply, and will cause each of their respective Subsidiaries to comply, in all material respects with, and not incur material liability under, all Environmental Laws applicable to the business or operations of Holdings, the Borrower or any of their respective Subsidiaries or to the ownership or use of the Real Property now or hereafter owned or operated by Holdings, the Borrower or any of their respective Subsidiaries, will promptly pay or cause to be paid all reasonable costs and expenses incurred in connection with such compliance and liability, and will keep or cause to be kept all such Real Property free and clear of any material Liens imposed pursuant to such Environmental Laws. None of Holdings, the Borrower nor any of their respective Subsidiaries will generate, use, treat, store, release or dispose of, or permit the generation, use, treatment, storage, release or disposal of Hazardous Materials on any Real Property now or hereafter owned or operated by Holdings, the Borrower or any of their respective Subsidiaries, or transport or knowingly permit the transportation of Hazardous Materials to or from any such Real Property except for Hazardous Materials used or stored at any such Real Properties in compliance in all material respects with all Environmental Laws and reasonably required in connection with the operation, use and maintenance of any such Real Property. (b) The Borrower will promptly give notice to the Administrative Agent upon determining the existence of (i) any material violation of any Environmental Law or (ii) any Environmental Claim, in each of clause (i) or (ii), related to the business or operations of Holdings, the Borrower or any of their respective Subsidiaries or to the ownership or use of any Real Property now or hereafter owned or operated by Holdings, the Borrower or any of their respective Subsidiaries, or (iii) any release or threatened release of Hazardous Materials at, on, upon, under or from any Real Property now or hereafter owned or operated by Holdings, the Borrower or any of their respective Subsidiaries, or any facility or equipment thereat, in excess of a reportable quantity or allowable standard or level under any Environmental Laws, or in a manner and/or amount which could reasonably be expected to result in liability under any Environmental Law, in each of clause (i), (ii) or (iii), in excess of $500,000 individually or in the aggregate with any other liability under any Environmental Laws. In each of the aforementioned circumstances, immediately following discovery thereof, Holdings and the Borrower will, and will cause each of their respective Subsidiaries to, -57- take appropriate steps to initiate and expeditiously complete all investigation, compliance, response, corrective and other action required under any Environmental Law to mitigate and eliminate any such violation or liability and shall keep the Administrative Agent apprised of such action. (c) At the written request of the Administrative Agent or the Required Banks, which request shall specify in reasonable detail the basis therefor, at any time and from time to time, the Borrower will provide, at the Borrower's sole cost and expense, an environmental site assessment report concerning any Real Property now or hereafter owned or operated by Holdings, the Borrower or any of their respective Subsidiaries, prepared by an environmental consulting firm approved by the Administrative Agent which approval shall not be unreasonably withheld or delayed, indicating status of compliance with Environmental Laws and the presence or absence of Hazardous Materials and the estimated cost of any compliance, investigation, removal or remedial action in connection with any Hazardous Materials on, at, under or emanating from such Real Property; provided that such request may be made only if (i) there has -------- occurred and is continuing an Event of Default, (ii) the Administrative Agent reasonably believes that Holdings, the Borrower or any such Real Property is not in material compliance with any material Environmental Law, or (iii) circumstances exist that reasonably could be expected to form the basis of a material Environmental Claim against Holdings, the Borrower or any of their respective Subsidiaries or any such Real Property. If the Borrower fails to provide the same within 30 days after such request was made (or within such longer period as the Administrative Agent may approve in writing, such approval not to be unreasonably withheld), the Administrative Agent may order the same, and the Borrower shall grant and hereby grants to the Administrative Agent and the Banks and their agents access to such Real Property and specifically grants the Administrative Agent and the Banks an irrevocable non-exclusive license, subject to the rights of tenants, to undertake such an assessment, all at the Borrower's expense. 8.07 ERISA. As soon as possible and, in any event, within 20 days ----- after Holdings, the Borrower or any of their respective Subsidiaries or any ERISA Affiliate knows or has reason to know of the occurrence of any of the following, Holdings or the Borrower will deliver to each of the Banks a certificate of the Chief Financial Officer or Treasurer of Holdings or the Borrower setting forth details as to such occurrence and the action, if any, that Holdings, the Borrower, such Subsidiary or such ERISA Affiliate is required or proposes to take, together with any notices required or proposed to be given to or filed with or by Holdings, the Borrower, such Subsidiary, the ERISA Affiliate, the PBGC, or a Plan participant or the Plan administrator with respect thereto: that a Reportable Event has occurred; that an accumulated funding deficiency has been incurred or an application may be or has been made to the Secretary of the Treasury for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension of any amortization period under Section 412 of the Code with respect to a Plan; that a -58- contribution required to be made to a Plan has not been timely made; that a Plan has been or may be terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA; that a Plan has an Unfunded Current Liability giving rise to a lien under ERISA or the Code; that proceedings may be or have been instituted to terminate or appoint a trustee to administer a Plan, that a proceeding has been instituted pursuant to Section 515 of ERISA to collect a delinquent contribution to a Plan; that Holdings, the Borrower, any of their respective Subsidiaries or any ERISA Affiliate will or may incur any liability (including any contingent or secondary liability) to or on account of the termination of or withdrawal from a Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan under Section 401(a)(29), 4971 or 4975 of the Code or Section 409 or 502(i) or 502(l) of ERISA; or that Holdings, the Borrower or any Subsidiary may incur any material liability pursuant to any employee welfare benefit plan (as defined in Section 3(1) of ERISA) that provides benefits to retired employees or other former employees (other than as required by Section 601 of ERISA) or any Plan. The Borrower will deliver to each of the Banks a complete copy of the annual report (Form 5500) of each Plan required to be filed with the Internal Revenue Service. In addition to any certificates or notices delivered to the Banks pursuant to the first sentence hereof, copies of annual reports and any material notices received by Holdings, the Borrower or any of their respective Subsidiaries or any ERISA Affiliate with respect to any Plan shall be delivered to the Banks no later than 20 days after the date such report has been filed with the Internal Revenue Service or such notice has been received by Holdings, the Borrower, the Subsidiary or the ERISA Affiliate, as applicable. 8.08 End of Fiscal Years; Fiscal Quarters. Each of Holdings and the ------------------------------------ Borrower shall cause (i) each of its, and each of its Subsidiaries', fiscal years to end on the Friday closest to March 31 and (ii) each of its, and each of its Subsidiaries', fiscal quarters to end on a date consistent with the date of its fiscal year end; provided that Holdings and the Borrower may change such -------- fiscal year to any other fiscal year period of twelve consecutive months with the consent of the Agents, which consent shall not be unreasonably withheld. 8.09 Performance of Obligations. Each of Holdings and the Borrower -------------------------- will, and will cause each of its Subsidiaries to, perform all of its obligations under the terms of each mortgage, indenture, security agreement and other debt instrument by which it is bound, except such non-performances as could not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of Holdings, the Borrower or of the Borrower and its Subsidiaries taken as a whole. 8.10 Payment of Taxes. Each of Holdings and the Borrower will pay ---------------- and discharge or cause to be paid and discharged, and will cause each of their respective Subsidiaries to pay and discharge, all material Taxes imposed upon it or upon its income or profits, or upon any material properties belonging to it, in each case -59- on a timely basis, and all lawful claims which, if unpaid, might become a lien or charge upon any properties of Holdings, the Borrower or any of their respective Subsidiaries; provided that none of Holdings, the Borrower or any of -------- their respective Subsidiaries shall be required to pay any such tax, assessment, charge, levy or claim which is being contested in good faith and by proper proceedings if it has maintained adequate reserves with respect thereto in accordance with GAAP. 8.11. Additional Security; Further Assurances. (a) Pledge of --------------------------------------- --------- Additional Collateral. Promptly, and in any event within 90 days after the - --------------------- acquisition of assets of the type that would have constituted Collateral (if the person acquiring such assets had executed an appropriate Security Document on the Effective Date) at the Effective Date (the "Additional Collateral"), --------------------- Holdings and the Borrower will, and will cause each of the Guarantors to, at the request of the Collateral Agent following consultation with the Company as to the value of any such Additional Collateral, take all necessary action, including entering into the appropriate security documents and filing the appropriate financing statements under the provisions of the UCC or applicable foreign, domestic or local laws, rules or regulations in each of the offices where such filing is necessary or appropriate to grant the Collateral Agent a perfected Lien in such Collateral (or comparable interest under foreign law in the case of foreign Collateral) pursuant to and to the full extent required by the Security Documents and this Agreement, subject to Permitted Liens and Prior Liens; provided that no such action will be required by the Borrower or any -------- Guarantor to the extent that any such Additional Collateral is subject to a preexisting agreement which prohibits the granting of any additional liens; provided further that such preexisting agreement was not entered into in - -------- ------- connection with, or in anticipation of or contemplation of, the acquisition of such assets by the Borrower or any of its Subsidiaries. In the event that the Borrower or a Guarantor acquires an interest in additional real property, the Borrower or such Guarantor, as the case may be, will take such actions and execute such documents as the Administrative Agent shall require to confirm the Lien of a Mortgage, if applicable, or to create a new Mortgage (including, without limitation, satisfaction of the conditions set forth in Sections 5.03 and 5.11) or leasehold mortgage in the event a fee interest is not acquired. All actions taken by the parties in connection with the pledge of Additional Collateral, including, without limitation, reasonable costs of counsel for the Collateral Agent, shall be for the account of the Company, which shall pay all reasonable sums due on demand. (b) Holdings and the Borrower will, and will cause each of the Guarantors to, at the expense of Holdings and the Borrower, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, real property surveys, reports and other assurances or instruments and take such further steps relating to the Collateral covered by any of the Security Documents as the Collateral Agent may reasonably require upon reasonable notice. Furthermore, the Company shall cause to -60- be delivered to the Collateral Agent such opinions of counsel, title insurance surveys and other related documents as may be reasonably requested by the Collateral Agent to assure themselves that this Section 8.11 has been complied with. (c) If the Administrative Agent or the Required Banks reasonably determine (and so advise Holdings and the Borrower) that they are required by law or regulation to have appraisals prepared in respect of the Real Property of the Company and its Subsidiaries constituting Collateral, the Company shall provide to the Collateral Agent appraisals which satisfy the applicable requirements of the Real Estate Appraisal Reform Amendments of the Financial Institution Reform, Recovery and Enforcement Act of 1989 and which shall be in form and substance reasonably satisfactory to the Collateral Agent[; provided -------- however, that no Guarantor, Borrower or Subsidiary, collectively, shall be - ------- required to obtain any such appraisal for any such location more frequently than once in any 36 consecutive month period.] (d) Holdings and the Borrower agree that each action required above by this Section 8.11 shall be completed within 90 days after such action is either requested to be taken by the Administrative Agent or the Required Banks or required to be taken by Holdings or the Borrower or any Subsidiary Guarantor pursuant to the terms of this Section 8.11 or, if such action is not capable of completion within such 90 day period, Holdings or the Borrower or any Subsidiary Guarantor, as the case may be, shall use their reasonable efforts to complete such action within the reasonable period in which it can be expected to be completed; provided that in no event shall Holdings or the Borrower or any of -------- their Subsidiaries be required to take any action, other than using its reasonable efforts, to obtain consents from third parties with respect to its compliance with this Section 8.11. SECTION 9. Negative Covenants. Holdings and the Borrower hereby ------------------ covenant and agree that as of the Effective Date and thereafter for so long as this Agreement is in effect and until the Total Commitments have terminated, no Letters of Credit (other than Letters of Credit, together with all Fees that have accrued and will accrue thereon through the stated termination date of such Letters of Credit, which have been cash collateralized in a cash collateral account in a manner satisfactory to the Letter of Credit Issuer in its sole and absolute discretion) or Notes are outstanding and the Loans, together with interest, Fees and all other Obligations (other than any indemnities described in Section 13.13 which are not then due and payable) incurred hereunder, are paid in full: 9.01 Liens. Holdings and the Borrower will not, and will not permit ----- any of their respective Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with respect to any property or assets (real or personal, tangible or intangible) of Holdings or the Borrower or any of their respective Subsidiaries, whether now owned or hereafter acquired, or sell any such property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or -61- assets, or assign any right to receive income or permit the filing of any financing statement under the UCC or any other similar notice of Lien under any similar recording or notice statute; provided that the provisions of this -------- Section 9.01 shall not prevent the creation, incurrence, assumption or existence of the following (Liens described below are herein referred to as "Permitted --------- Liens"): - ----- (a) inchoate Liens for taxes, assessments or governmental charges or levies not yet due and payable or Liens for taxes, assessments or governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves have been established in accordance with generally accepted accounting principles in the United States; (b) Liens in respect of property or assets of the Borrower or any of its Subsidiaries imposed by law, which were incurred in the ordinary course of business and do not secure Indebtedness for borrowed money, such as carriers', warehousemen's, materialmen's, vendor's and mechanics' liens and other similar Liens arising in the ordinary course of business, and (x) which do not in the aggregate materially detract from the value of the Borrower's or such Subsidiary's property or assets or materially impair the use thereof in the operation of the business of the Borrower or such Subsidiary or (y) which are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien; (c) Liens in existence on the Effective Date which are listed, and the property subject thereto described, in Schedule 9.01, but only to the respective date, if any, set forth in such Schedule 9.01 for the removal and termination of any such Liens, plus renewals, replacements and extensions of such Liens to the extent set forth on Schedule 9.01; provided -------- that (x) the aggregate principal amount of the Indebtedness, if any, secured by such Liens does not increase from that amount outstanding at the time of any such renewal or extension and (y) any such renewal or extension does not encumber any additional assets or properties of Holdings or any of its Subsidiaries; (d) Permitted Encumbrances; (e) Liens created pursuant to the Security Documents or in favor of the Agents or the Banks; (f) licenses, leases or subleases granted to other Persons in the ordinary course of business not materially interfering with the conduct of the business of Holdings and its Subsidiaries taken as a whole or any interest or title of a lessor or sublessor under any lease permitted by Section 9.04(d); -62- (g) easements, rights-of-way, restrictions (including zoning restrictions), encroachments, protrusions and other similar charges or encumbrances, and minor title deficiencies, in each case whether now or hereafter in existence, not securing Indebtedness and not materially interfering with the conduct of the business of the Borrower or any of its Subsidiaries; (h) Liens arising from precautionary UCC financing statement filings regarding operating leases entered into by the Borrower or any of its Subsidiaries in the ordinary course of business; (i) Liens arising out of the existence of judgments or awards not constituting an Event of Default under Section 10.09; provided that no cash -------- or property is deposited or delivered to secure the respective judgment or award (or any appeal bond in respect thereof, except as permitted by following clause (k)); (j) statutory and common law landlords' liens under leases to which Holdings or any of its Subsidiaries is a party; (k) Liens (other than any Lien imposed by ERISA) (x) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or (y) to secure the performance of tenders, statutory obligations, surety, stay, customs and appeal bonds, statutory bonds, bids, leases, government contracts, trade contracts, performance and return of money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (l) Liens (which may be pari passu with Liens securing Obligations) ---- ----- granted in favor of a Bank to secure Obligations of the Borrower and its Subsidiaries in respect of Interest Rate Protection Agreements; (m) Liens in favor of a banking institution arising as a matter of law encumbering deposits (including the right of set-off) held by such banking institutions incurred in the ordinary course of business and which are within the general parameters customary in the banking industry; (n) Liens in favor of customs and revenue authorities arising as a matter of law to secure the payment of customs duties in connection with the importation of goods; (o) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Borrower or any of its Subsidiaries in the ordinary course of business in accordance with the past practices of the Borrower and its Subsidiaries prior to the Effective Date; -63- (p) Deposits made to secure statutory, regulatory, contractual or warranty requirements or obligations, including rights of offset and set- off; (q) Liens arising pursuant to Capitalized Lease Obligations and purchase money obligations or security interests securing Indebtedness representing the purchase price (or financing of the purchase price within 90 days after the respective purchase) of assets acquired after the Effective Date; provided that (i) any such Liens attach only to the assets -------- so purchased and does not encumber any other asset of Holdings or any of its Subsidiaries, (ii) the Indebtedness secured by any such Lien (including refinancings thereof) does not exceed 100% of the lesser of the fair market value or the purchase price of the property being purchased at the time of the incurrence of such Indebtedness and (iii) the Indebtedness secured thereby is permitted to be incurred pursuant to Section 9.04(d); (r) Liens on property or assets acquired pursuant to a Permitted Acquisition, or on property or assets of a Subsidiary of the Borrower in existence at the time such Subsidiary is acquired pursuant to a Permitted Acquisition; provided that (i) any Indebtedness that is secured by such -------- Liens is permitted to exist under Section 9.04(g), and (ii) such Liens are not incurred in connection with, or in contemplation or anticipation of, such Permitted Acquisition and do not attach to any other asset of the Borrower or any of its Subsidiaries; (s) Deposits made in the ordinary course of business to secure liability to insurance carriers in an amount not to exceed $500,000 in the aggregate at any time outstanding; (t) Liens arising out of or created by motor vehicle leases in an amount not to exceed $12,500,000 in the aggregate at any time outstanding; (u) Liens securing reimbursement obligations with respect to commercial letters of credit not issued under this Agreement; and (v) Liens not otherwise permitted by the foregoing clauses (a) through (u) to the extent attaching to properties and assets with an aggregate fair value not in excess of and securing liabilities not in excess of $500,000 in the aggregate at any time outstanding. 9.02 Consolidation, Merger, Sale or Purchase of Assets, etc. ------------------------------------------------------ Holdings and the Borrower will not, and will not permit any of their respective Subsidiaries to, wind up, liquidate or dissolve its affairs or enter into any transaction of merger or consolidation, or convey, sell, lease or otherwise dispose of (or agree to do any of the foregoing at any future time) all or any part of its property or assets (other than -64- inventory in the ordinary course of business, including sales of inventory on consignment in the ordinary course of business), or enter into any partnerships, joint ventures or sale-leaseback transactions, or purchase or otherwise acquire (in one or a series of related transactions) any part of the property or assets (other than purchases or other acquisitions of inventory, materials and equipment in the ordinary course of business) of any Person, except that the following shall be permitted: (a) Holdings and its Subsidiaries may, as lessee or lessor, enter into operating leases in the ordinary course of business with respect to real or personal property; (b) Capital Expenditures by Holdings and its Subsidiaries to the extent not in violation of Section 9.07; (c) the advances, investments and loans permitted pursuant to Section 9.05; (d) Holdings and its Subsidiaries may sell or discount, in each case without recourse, accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof; (e) Holdings and its Subsidiaries may sell or exchange specific items of machinery or equipment, so long as the proceeds of each such sale or exchange is used to acquire (and results within 180 days of such sale or exchange in the acquisition of) replacement items of machinery or equipment which are the functional equivalent of the item of equipment so sold or exchanged; (f) Holdings and its Subsidiaries may, in the ordinary course of business, license, as licensor or licensee, patents, trademarks, copyrights and know-how to third Persons and to one another, so long as any such license by Holdings or its Subsidiaries in its capacity as licensor is permitted to be assigned pursuant to the Security Agreement (to the extent that a security interest in such patents, trademarks, copyrights and know- how is granted thereunder) and does not otherwise prohibit the granting of a Lien by Holdings or any of its Subsidiaries pursuant to the Security Agreement in the intellectual property covered by such license; (g) any Wholly Owned Subsidiary of the Borrower may transfer assets to the Borrower or to any other Wholly Owned Subsidiary of the Borrower, so long as (i) if the transferee is a Subsidiary, such Subsidiary is a Guarantor and (ii) the security interests granted to the Collateral Agent for the benefit of the Secured Creditors pursuant to the Security Documents in the assets so transferred shall remain in full force and effect and perfected (to at least the same extent as in effect immediately prior to such transfer); -65- (h) any Wholly Owned Subsidiary of the Borrower may merge with and into, or be dissolved or liquidated into, the Borrower so long as (i) the Borrower is the surviving corporation of any such merger, dissolution or liquidation and (ii) the security interests granted to the Collateral Agent for the benefit of the Secured Creditors pursuant to the Security Documents in the assets of such Wholly Owned Subsidiary shall remain in full force and effect and perfected (to at least the same extent as in effect immediately prior to such merger, dissolution or liquidation); (i) any Wholly Owned Subsidiary of the Borrower may merge with and into, or be dissolved or liquidated into, any Wholly Owned Subsidiary of the Borrower so long as (i) such Wholly Owned Subsidiary is a Guarantor and is the surviving corporation of any such merger, dissolution or liquidation and (ii) the security interests granted to the Collateral Agent for the benefit of the Secured Creditors pursuant to the Security Documents in the assets of such Wholly Owned Subsidiary shall remain in full force and effect and perfected (to at least the same extent as in effect immediately prior to such merger, dissolution or liquidation); (j) so long as no Default or Event of Default then exists or would result therefrom (including giving pro forma effect to such acquisition and --- ----- any additional Indebtedness resulting therefrom or incurred or assumed in connection therewith as if such acquisition had occurred and such Indebtedness had been incurred as of the first day of the most recently completed Test Period (including any other Permitted Acquisition that occurred, and related Indebtedness that was incurred, during or subsequent to such Test Period)), Holdings or any of its Wholly Owned Subsidiaries may consummate a Permitted Acquisition; provided that (i) Holdings shall have -------- delivered to the Administrative Agent, at the time of delivery of the Permitted Acquisition Notice, a certificate of the Chief Financial Officer of Holdings showing compliance (in reasonable detail as to pro forma calculations) with all of the provisions of this paragraph (j), and (ii) Holdings or the Borrower shall have given the Agents and the Banks at least 30 days prior notice of any Permitted Acquisition (each such notice a "Permitted Acquisition Notice"); ----------------------------- (k) leases or subleases granted by Holdings or any of its Subsidiaries to third Persons not interfering in any material respect with the business of Holdings or any of its Subsidiaries; (l) "inactive" or "shell" Subsidiaries may be dissolved or otherwise liquidated; (m) other sales or dispositions of assets in the ordinary course of business (other than assets disposed of in connection with a Recovery Event); -66- provided that (x) the aggregate Net Sale Proceeds received from all such -------- sales and dispositions shall not exceed $5,000,000 in any fiscal year of the Borrower, (y) each such sale shall be in an amount at least equal to the fair market value thereof (as determined in good faith by the Borrower) and for proceeds consisting solely of not less than (A) 85% cash and (B) seller indebtedness evidenced by promissory notes, which promissory notes shall be pledged and delivered to the Collateral Agent pursuant to the Pledge Agreement, and (z) the Net Cash Proceeds of any such sale are applied to repay the Loans to the extent required by Section 4.02(g); and provided further, that the sale or disposition of the capital stock of (i) -------- ------- any Subsidiary Guarantor shall be prohibited and (ii) any other Subsidiary of the Borrower shall be prohibited unless it is for all of the outstanding capital stock of such Subsidiary owned by the Borrower and its Subsidiaries; and (n) Holdings and its Subsidiaries may (i) purchase or sell inventory, equipment and/or other assets in the ordinary course of business in connection with transactions contemplated by Section 9.05(b) and (ii) dispose of obsolete inventory or equipment not used or useful in the business of Holdings or such Subsidiaries. To the extent the Required Banks waive the provisions of this Section 9.02 with respect to the sale or other disposition of any Collateral, or any Collateral is sold or otherwise disposed of as permitted by this Section 9.02, such Collateral in each case shall be sold or otherwise disposed of free and clear of the Liens created by the Security Documents and the Administrative Agent shall take such actions (including, without limitation, directing the Collateral Agent to take such actions) as are appropriate in connection therewith. 9.03 Dividends, etc. Holdings and the Borrower will not, and will -------------- not permit any of their respective Subsidiaries to, declare or pay any dividends (other than dividends payable solely in common stock or preferred stock (provided such preferred stock meets the requirements of Section 9.13(c)(ii), - --------- (iii), (iv) and (v)) of Holdings or any such Subsidiary, as the case may be) or return any capital to, its stockholders or authorize or make any other distribution, payment or delivery of property or cash to its stockholders as such, or redeem, retire, purchase or otherwise acquire, directly or indirectly, for any consideration, any shares of any class of its capital stock, now or hereafter outstanding (or any warrants for or options or stock appreciation rights in respect of any of such shares), or set aside any funds for any of the foregoing purposes, and the Borrower will not permit any of its Subsidiaries to purchase or otherwise acquire for consideration any shares of any class of the capital stock of the Borrower or any Subsidiary of the Borrower now or hereafter outstanding (or any options or warrants or such stock appreciation rights issued by such Person with respect to its capital stock) (all of the foregoing "Dividends", it being understood that the payments - ---------- -67- made in accordance with the clauses contained in the proviso of Section 9.06 shall not be deemed to be Dividends), except that: (a) any Subsidiary of the Borrower may pay Dividends to the Borrower or any Wholly-Owned Subsidiary of the Borrower; and (b) as long as no Default or Event of Default shall then exist or result therefrom, the Borrower may declare and pay a Dividend on the Borrower's Common Stock in an amount not to exceed the amount required for payment of principal and interest under the terms of the CLC Notes provided, that such Dividend is not declared earlier than thirty days prior -------- to such required payment; (c) Borrower or any Subsidiary of Borrower may make payments to Holdings in an amount not in excess of the federal and state (in such states that permit consolidated or combined tax returns) income tax liability that Holdings, the Borrower and its Subsidiaries would have been liable for if Holdings, the Borrower and its Subsidiaries had filed their taxes on a stand-alone basis; provided that such payments shall be made by -------- Holdings no earlier than five days prior to the date on which Holdings is required to make its payments to the Internal Revenue Service or the applicable taxing authority, as applicable; (d) if no Default or Event of Default shall have occurred and be continuing, Borrower may declare and pay dividends to Holdings so that Holdings may repurchase Holdings Common Stock (or rights to acquire Holdings Common Stock) from members of Holdings' or the Borrower's management in connection with certain executive employment agreements in an aggregate amount not to exceed $750,000 in any fiscal year; (e) if no Default or Event of Default shall have occurred and be continuing, Borrower may declare and pay dividends to Holdings to pay reasonable accounting fees and other support services provided to the Borrower and to pay Holdings' operating expenses, in an aggregate amount not to exceed $500,000 in any fiscal year; and (f) Borrower may declare and pay dividends to Holdings in connection with any payment obligations (including administration costs and expenses) under (i) Holdings' stock purchase program offered to employees of Holdings and/or subsidiaries of Holdings; (ii) the Employee Stock Option Plan; or (iii) options to purchase Holdings Common Stock in an aggregate amount not to exceed $500,000 in any fiscal year. 9.04 Indebtedness. The Holdings and the Borrower will not, and will ------------ not permit any of their respective Subsidiaries to, contract, create, incur, assume or suffer to exist any Indebtedness, except: -68- (a) Indebtedness incurred pursuant to this Agreement and the other Credit Documents; (b) Existing Indebtedness outstanding on the Effective Date and listed on Schedule 7.22, including any extensions, refinancings, replacements or restructurings thereof; provided that the then outstanding principal amount -------- thereof is not increased; provided, however, the Borrower shall not extend, -------- ------- refinance, replace or restructure the 11 3/4% Notes; (c) Indebtedness under Interest Rate Protection Agreements relating to Indebtedness under this Agreement; (d) Capitalized Lease Obligations and Indebtedness of Holdings and its Subsidiaries incurred pursuant to purchase money Liens permitted under Section 9.01(q); provided that all such Capitalized Lease Obligations are -------- permitted under Section 9.02, and (ii) the sum of (x) the aggregate Capitalized Lease Obligations outstanding at any time plus (y) the aggregate principal amount of such purchase money Indebtedness outstanding at such time shall not exceed $15,000,000 (including Capital Lease Obligations referred to on Schedule 7.22); (e) Indebtedness constituting Intercompany Loans to the extent permitted by Section 9.05(g); (f) Indebtedness consisting of guaranties by the Borrower of Indebtedness, leases and other contractual obligations permitted to be incurred by Subsidiaries of the Borrower that are Guarantors; (g) Indebtedness acquired as a result of a Permitted Acquisition (or Indebtedness assumed at the time of a Permitted Acquisition of an asset securing such Indebtedness); provided that (i) such Indebtedness was not -------- incurred in connection with, or in anticipation or contemplation of, such Permitted Acquisition, (ii) at the time of such Permitted Acquisition such Indebtedness does not exceed $10,000,000 in the aggregate, and (iii) so long as, before and after giving effect to such Permitted Acquisition, no Default or Event of Default shall have occurred or would result therefrom; (h) additional Indebtedness (on terms reasonably satisfactory to the Agents) of the Borrower and its Subsidiaries to effect a Permitted Acquisition in an amount not to exceed $200,000,000 in an aggregate principal amount at any time outstanding so long as such Indebtedness is incurred within one year of the Effective Date; -69- (i) additional Indebtedness of Holdings and its Subsidiaries not otherwise permitted hereunder not exceeding $15,000,000 in aggregate principal amount at any time outstanding; provided that no more than -------- $10,000,000 shall be Indebtedness not satisfying the requirements of the proviso to Section 4.02(f); (j) Indebtedness of Holdings and its Subsidiaries represented by letters of credit not issued under this Agreement for the account of Holdings or such Subsidiaries, as the case may be, in an aggregate amount not to exceed $3,000,000; (k) Indebtedness resulting from endorsement of negotiable instruments for collection in the ordinary course of business; (l) Indebtedness arising with respect to customary indemnification and purchase price adjustment obligations incurred in connection with any sale of assets of Holdings or any of its Subsidiaries permitted under Section 9.02; and (m) Indebtedness incurred in the ordinary course of business with respect to surety and appeal bonds, performance and return-of-money bonds and other similar obligations. 9.05 Advances, Investments and Loans. Holdings and the Borrower ------------------------------- will not, and will not permit any of their respective Subsidiaries to, lend money or credit or make advances to any Person, or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any Person, or purchase or own a futures contract or otherwise become liable for the purchase or sale of currency or other commodities at a future date in the nature of a futures contract, or hold any cash, Cash Equivalents (collectively, "Investments"), except: ----------- (a) Holdings and the Borrower and their Subsidiaries may invest in cash and Cash Equivalents; (b) the Borrower and its Subsidiaries may acquire and hold receivables owing to it (and, in the case of Super Laundry, notes receivable created in the ordinary course of business consistent with past practice), if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms (including the dating of receivables) of the Borrower or such Subsidiary (or in the case of Super Laundry, having payment and other terms consistent with past practice); (c) the Borrower and its Subsidiaries may acquire and own investments (including debt obligations) received in connection with the -70- bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; (d) Interest Rate Protection Agreements entered into to protect Borrower against fluctuations in interest rates in respect of the Obligations; (e) advances, loans and investments in existence on the Effective Date and listed on Schedule 9.05 shall be permitted, without giving effect to any additions thereto or replacements thereof (except those additions or replacements which are existing obligations as of the Effective Date but only to the extent such further obligations are described on such Schedule 9.05); (f) deposits made in the ordinary course of business consistent with past practices to secure the performance of leases or other contractual arrangements shall be permitted; (g) Holdings and the Borrower may make intercompany loans and advances to any of their Subsidiaries that are Guarantors and any Subsidiary of Holdings and the Borrower may make intercompany loans and advances to the Borrower or any other Subsidiary of Holdings and the Borrower that is a Guarantor (collectively, "Intercompany Loans"); provided that (x) each ------------------ -------- Intercompany Loan shall contain subordination provisions satisfactory to the Administrative Agent, (y) each Intercompany Loan shall be evidenced by an Intercompany Note and (z) each such Intercompany Note shall be pledged to the Collateral Agent pursuant to the Pledge Agreement; (h) loans and advances by the Borrower and its Subsidiaries to employees of the Borrower and its Subsidiaries in the ordinary course of business and consistent with past practices shall be permitted in an aggregate principal amount not to exceed $500,000 at any one time outstanding; provided, however, that the foregoing limitation shall not -------- ------- apply to loans and advances for moving and travel expenses or relocation expenses incurred in connection with a Permitted Acquisition, which loans, advances and expenses shall be permitted; (i) Permitted Acquisitions shall be permitted; (j) the Borrower and its Subsidiaries may acquire and hold promissory notes and/or equity securities issued by the purchaser or purchasers in connection with the sale of assets to the extent permitted under Section 9.02; (k) Holdings and the Borrower may contribute cash to one or more of their Subsidiaries that are or become Guarantors formed after the Effective -71- Date in accordance with Section 9.15 (including in connection with a Permitted Acquisition) so long as such Subsidiary remains a Guarantor; (l) Holdings and the Borrower may make capital contributions to any of their respective Subsidiaries that are Guarantors; (m) Holdings may acquire Holdings Common Stock issuable to holders of Holdings Common Stock Options granted by Holdings or pursuant to the Employee Stock Option Plan, in each case by means of cashless transactions; and (n) Holdings and its Subsidiaries may make cash Investments not otherwise permitted by clauses (a) through (m) above, in an amount not to exceed $10,000,000 outstanding at any one time; provided such Investment is -------- made with the cash proceeds of equity after giving effect to the application of cash proceeds in accordance with Section 4.02(e); provided -------- further, that before and after giving effect to each such Investment, no ------- Default or Event of Default shall have occurred or result therefrom. 9.06 Transactions with Affiliates. Except as set forth on Schedule ---------------------------- 9.06, Holdings and the Borrower will not, and will not permit any of their respective Subsidiaries to, enter into any transaction or series of related transactions, whether or not in the ordinary course of business, with any Affiliate, other than in the ordinary course of business and on terms and conditions substantially as favorable to Holdings, the Borrower or such Subsidiary as would reasonably be obtained by Holdings, the Borrower or such Subsidiary at that time in a comparable arm's-length transaction with a Person other than an Affiliate, except that: (a) Dividends may be paid to the extent provided in Section 9.03; (b) loans may be made and other transactions may be entered into by the Borrower and its Subsidiaries to the extent permitted by Sections 9.02, 9.04 and 9.05; (c) customary fees may be paid to non-officer directors of Holdings; (d) Holdings and its Subsidiaries may enter into employment arrangements with their respective officers and employees in the ordinary course of business; (e) payments under Tax Sharing Agreements may be paid to the extent permitted by Section 9.03(c); and -72- (f) reasonable fees and compensation may be paid to and indemnity provided on behalf of officers, directors, employees or consultants of Holdings or any of its Subsidiaries. Except as specifically provided above, no management or similar fees shall be paid or payable by Holdings or any of its Subsidiaries to any Person other than the Borrower. 9.07 Capital Expenditures. (a) Holdings will not, and will not -------------------- permit any of its Subsidiaries to, make any Capital Expenditures, except that during any period set forth below (taken as one accounting period) the Borrower and its Subsidiaries may make Capital Expenditures so long as the aggregate amount of such Capital Expenditures made under this Section 9.07(a) does not exceed in any period set forth below the amount set forth opposite such period below: Period Amount ------ ------ Effective Date through last day of Fiscal Year ending closest to March 31, 1998 $50,000,000 Fiscal Year ending closest to March 31, 1999 $50,000,000 Fiscal Year ending closest to March 31, 2000 $50,000,000 Fiscal Year ending closest to March 31, 2001 $55,000,000 Fiscal Year ending closest to March 31, 2002 $55,000,000 Fiscal Year ending closest to March 31, 2003 $55,000,000 Fiscal Year ending closest to March 31, 2004 and each Fiscal Year ending thereafter $60,000,000 (b) Notwithstanding anything to the contrary contained in clause (a) above, to the extent that the Capital Expenditures made by Holdings and its Subsidiaries in any period set forth in clause (a) above are less than the amount permitted to be made in such period (without giving effect to any additional amount available as a result -73- of this clause (b) or clause (c) below), the amount of such difference (the "Rollover Amount") may be carried forward and used to make Capital Expenditures - ---------------- in the immediately succeeding fiscal year of the Borrower; provided that in no -------- event shall the Rollover Amount be greater than $5,000,000. (c) In addition to the Capital Expenditures permitted pursuant to preceding clauses (a) and (b), Holdings and its Subsidiaries may make additional Capital Expenditures as follows: (i) Capital Expenditures consisting of the reinvestment of Net Sale Proceeds of asset sales not required to be applied to prepay the Loans pursuant to Section 4.02(g) as a result of clause (iv) of the parenthetical phrase contained therein or the proviso thereto, (ii) the reinvestment of proceeds of Recovery Events not required to be applied to prepay the Loans pursuant to Section 4.02(i), (iii) Permitted Acquisitions made in accordance with Section 9.02(k) and (iv) Permitted Acquisition Capital Expenditures. 9.08 Leverage Ratio. Holdings and its Subsidiaries will not permit -------------- the Consolidated Adjusted Leverage Ratio for any Test Period (taken as one accounting period) ending on the last day of any fiscal quarter described below to be greater than the ratio set forth opposite such fiscal quarter below: Fiscal Quarter Ended Closest to Ratio -------------------- ----- March 31, 1997 5.00 June 30, 1997 5.00 September 30, 1997 4.75 December 31, 1997 4.75 March 31, 1998 4.60 June 30, 1998 4.50 September 30, 1998 4.45 December 31, 1998 4.35 March 31, 1999 4.25 June 30, 1999 4.15 September 30, 1999 4.05 December 31, 1999 3.95 March 31, 2000 3.90 June 30, 2000 3.80 September 30, 2000 3.70 December 31, 2000 3.60 March 31, 2001 3.50 -74- June 30, 2001 3.40 September 30, 2001 3.30 December 31, 2001 3.20 March 31, 2002 3.10 June 30, 2002 3.05 September 30, 2002 3.00 December 31, 2002 2.95 March 31, 2003 and each Fiscal 2.90 Quarter thereafter 9.09 Consolidated Interest Coverage Ratio. Holdings and its ------------------------------------ Subsidiaries will not permit the Consolidated Interest Coverage Ratio for any Test Period ended on the last day of a fiscal quarter of Holdings described below to be less than the amount set forth opposite such fiscal quarter below: Fiscal Quarter Ended Closest to Ratio -------------------- ----- March 31, 1997 2.00 June 30, 1997 2.00 September 30, 1997 2.00 December 31, 1997 2.00 March 31, 1998 2.00 June 30, 1998 2.00 September 30, 1998 2.05 December 31, 1998 2.10 March 31, 1999 2.15 June 30, 1999 2.20 September 30, 1999 2.25 December 31, 1999 2.30 March 31, 2000 2.35 June 30, 2000 2.40 September 30, 2000 2.45 December 31, 2000 2.50 March 31, 2001 2.55 June 30, 2001 2.60 September 30, 2001 2.65 -75- December 31, 2001 2.75 March 31, 2002 2.85 June 30, 2002 2.90 September 30, 2002 2.95 December 31, 2002 3.00 March 31, 2003 and each Fiscal 3.10 Quarter thereafter 9.10 Minimum Consolidated EBITDA. Holdings and its Subsidiaries will --------------------------- not permit Consolidated EBITDA for any Test Period, in each case taken as one accounting period, ended on the last day of a fiscal quarter of Holdings described below to be less than the amount set forth opposite such fiscal quarter below: Fiscal Quarter Ended Amount Closest to (in millions) -------------------- ------------- March 31, 1997 $ 75.0 June 30, 1997 75.0 September 30, 1997 75.0 December 31, 1997 75.0 March 31, 1998 75.0 June 30, 1998 75.0 September 30, 1998 77.5 December 31, 1998 77.5 March 31, 1999 80.0 June 30, 1999 80.0 September 30, 1999 82.5 December 31, 1999 82.5 March 31, 2000 85.0 June 30, 2000 85.0 September 30, 2000 87.5 December 31, 2000 87.5 March 31, 2001 90.0 June 30, 2001 90.0 September 30, 2001 92.5 December 31, 2001 92.5 March 31, 2002 95.0 -76- Fiscal Quarter Ended Amount Closest to (in millions) -------------------- ------------- June 30, 2002 95.0 September 30, 2002 97.5 December 31, 2002 97.5 March 31, 2003 and each 100.0 Fiscal Quarter thereafter 9.11 Limitation on Voluntary Payments and Modifications of ----------------------------------------------------- Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain - -------------------------------------------------------------------------------- Other Agreements; etc. Holdings and the Borrower will not, and will not permit - --------------------- any of their respective Subsidiaries to: (a) make (or give any notice in respect of) any voluntary or optional payment or prepayment on or redemption or acquisition for value of (including, without limitation, by way of depositing with the trustee with respect thereto or any other Person money or securities before due for the purpose of paying when due) any Existing Indebtedness (other than, as long as no Default or Event of Default exists, (i) the prepayment of the 12 3/4% Notes, (ii) the prepayment of the CLC Notes with the net cash proceeds from the issuance of debt or equity securities by Holdings or any of its Subsidiaries or (iii) prepayment of up to an aggregate of 35% of the 11 3/4% Notes made with the net cash proceeds of equity securities by Holdings to the extent invested by Holdings in the Borrower in the form of a common equity investment by redemption or repurchase within 120 days of receipt of such proceeds by Holdings at a price not to exceed the redemption price set forth in the indenture under which such 11 3/4% Notes were issued as in effect on the Effective Date); (b) amend or modify in any material respect or in any manner adverse to the Borrower or the Banks, or permit such an amendment or modification of, any provision of the Existing Indebtedness; and (c) amend, modify or change in any way adverse to the interests of the Banks, any Tax Sharing Agreement, its Certificate of Incorporation (including, without limitation, by the filing or modification of any certificate of designation) or By-Laws. 9.12 Limitation on Certain Restrictions on Subsidiaries. Holdings -------------------------------------------------- will not, and will not permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any such Subsidiary to (a) pay dividends or make any other distributions on its capital stock or any other interest or participation in its profits -77- owned by Holdings or any Subsidiary of Holdings, or pay any Indebtedness owed to Holdings or a Subsidiary of Holdings, (b) make loans or advances to Holdings or any of Holdings' Subsidiaries or (c) transfer any of its properties or assets to Holdings, except for such encumbrances or restrictions existing under or by reason of (i) applicable law, (ii) this Agreement and the other Credit Documents, (iii) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of the Borrower or a Subsidiary of the Borrower, (iv) customary provisions restricting assignment of any licensing agreement entered into by the Borrower or a Subsidiary of the Borrower in the ordinary course of business, (v) any instrument governing any Indebtedness permitted under Section 9.04(g), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired; (vi) agreements existing on the Effective Date to the extent and in the manner such agreements are in effect on the Effective Date; and (vii) an agreement governing Indebtedness incurred to refinance the Indebtedness issued, assumed or incurred pursuant to an agreement referred to in clauses (ii), (v) or (vi). 9.13 Limitation on Issuance of Capital Stock. Except as provided --------------------------------------- otherwise herein (a) Holdings and the Borrower and their respective Subsidiaries shall not issue (i) any preferred stock or (ii) any redeemable common stock. (b) The Borrower shall not issue, or permit any of its Subsidiaries to issue, any capital stock (including by way of sales of treasury stock) or any options or warrants to purchase, or securities convertible into, capital stock, except (i) for transfers and replacements of then outstanding shares of capital stock, (ii) for stock splits, stock dividends and similar issuances which do not decrease the percentage ownership of Holdings or any of its Subsidiaries in any class of the capital stock of the Borrower or such Subsidiary, (iii) to qualify directors to the extent required by applicable law, (iv) Subsidiaries formed after the Effective Date pursuant to Section 9.15 may issue capital stock to the Borrower or its Wholly-Owned Subsidiaries, in accordance with the other requirements of this Agreement, (v) under or in connection with the Employee Stock Option Plan or options to purchase Holdings Common Stock and (vi) Borrower may issue equity securities to Holdings so long as such equity securities are pledged to the Agents and the Banks as security for Borrower's obligations under this Agreement on substantially the same terms and conditions as the pledge by Holdings of the capital stock of Borrower on the Effective Date and the cash proceeds of such equities will be applied in accordance with Section 4.02(e). (c) Notwithstanding the above, Holdings may issue preferred stock so long as (i) cash proceeds are applied in accordance with Section 4.02(e); (ii) no dividends are payable in cash; (iii) it is not redeemable at the option of the holder thereof in whole or in part; (iv) it is not convertible into Indebtedness of Holdings; and (v) it matures after September 30, 2004 and provides for no mandatory prepayment or mandatory offers to purchase prior to such date. -78- 9.14 Business. (a) Holdings shall engage in no business activities -------- and shall have no assets or liabilities, other than its ownership of the capital stock of the Borrower and liabilities incident thereto and except as otherwise permitted by this Agreement. (b) The Borrower will not, and will not permit any of its Subsidiaries to, engage (directly or indirectly) in any business other than the business in which the Borrower and its Subsidiaries are engaged on the Effective Date and reasonable extensions thereof or businesses complementary to their respective businesses. 9.15 Limitation on the Creation of Subsidiaries. Notwithstanding ------------------------------------------ anything to the contrary contained in this Agreement, Holdings will not, and will not permit any of its Subsidiaries to, establish, create or acquire after the Effective Date any Subsidiary; provided that Holdings and its Wholly Owned -------- Subsidiaries shall be permitted to establish or create Subsidiaries as a result of investments made pursuant to Section 9.05(i), (k), (l) or (n) so long as (i) at least 15 days' prior written notice thereof is given to the Administrative Agent (or such shorter period of time as is acceptable to the Administrative Agent), (ii) the capital stock of such new Subsidiary is promptly pledged pursuant to, and to the extent required by, this Agreement and the Pledge Agreement and the certificates, if any, representing such stock, together with stock powers duly executed in blank, are delivered to the Collateral Agent, (iii) such new Subsidiary promptly executes a counterpart of the Guaranty, the Pledge Agreement and the Security Agreement, and (iv) to the extent requested by the Administrative Agent or the Required Banks, takes all actions required pursuant to Section 8.11; provided that no such action will be required by any -------- new Subsidiary (that is not a Wholly Owned Subsidiary) to the extent such new Subsidiary is a party to a pre-existing agreement which prohibits such new Subsidiary from executing a Guaranty; provided further, such pre-existing -------- ------- agreement was not entered into for the purpose of avoiding the requirements of Section 9.14 and the restrictions contained therein are no more adverse to Holdings and its Subsidiaries than to the other equity owners in such new Subsidiary. In addition, each new Subsidiary that is required to execute any Credit Document shall execute and deliver, or cause to be executed and delivered, all other relevant documentation of the type described in Section 5 as such new Subsidiary would have had to deliver if such new Subsidiary were a Credit Party on the Effective Date. 9.16 Restriction on Tax Consolidation. Holdings will not, and will -------------------------------- not permit any of its Subsidiaries to, file or consent to the filing of any consolidated income tax return with any Person other than Holdings and its Subsidiaries except for tax periods beginning prior to such entity's having become a Subsidiary of Holdings; provided, however, that if Holdings disposes of -------- ------- more than 50% of the outstanding stock of any Subsidiary (by both voting power and value), this Section 9.16 will not apply with respect to such Subsidiary. -79- SECTION 10. Events of Default. Upon the occurrence of any of the ----------------- following specified events (each, an "Event of Default"): ---------------- 10.01 Payments. The Borrower shall (i) default in the payment when -------- due of any principal of any Loan or any Note or (ii) default, and such default shall continue unremedied for three or more Business Days, in the payment when due of any Unpaid Drawings or interest on any Loan or Note, or any Fees or any other amounts owing hereunder or thereunder; or 10.02 Representations, etc. Any representation, warranty or -------------------- statement made by any Credit Party herein or in any other Credit Document or in any certificate delivered pursuant hereto or thereto shall prove to be untrue in any material respect on the date as of which made or deemed made; or 10.03 Covenants. Holdings or the Borrower shall (i) default in the --------- due performance or observance by it of any term, covenant or agreement contained in Section 8.01(g) or (i) or 8.08 or Section 9 or (ii) default in the due performance or observance by it of any other term, covenant or agreement contained in this Agreement and such default shall continue unremedied for a period of 30 days after written notice to the Borrower by the Agents or any Bank; or 10.04 Default Under Other Agreements. Holdings, the Borrower or any ------------------------------ of their respective Subsidiaries shall (i) default in any payment of any Indebtedness (other than the Obligations) beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created or (ii) default in the observance or performance of any agreement or condition relating to any Indebtedness (other than the Obligations) or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause (determined without regard to whether any notice is required), any such Indebtedness to become due prior to its stated maturity, or (iii) any Indebtedness (other than the Obligations) of Holdings, the Borrower or any of their respective Subsidiaries shall be declared to be due and payable, or required to be prepaid other than by a regularly scheduled required prepayment, prior to the stated maturity thereof, provided that (x) it shall not be a Default or Event of Default under this Section 10.04 unless the aggregate principal amount of all Indebtedness as described in preceding clauses (i) through (iii), inclusive, is at least $2,500,000; or 10.05 Bankruptcy, etc. Holdings, the Borrower or any of their --------------- respective Subsidiaries shall commence a voluntary case concerning itself under Title 11 of the United States Code entitled "Bankruptcy," as now or hereafter in ---------- effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary case --------------- is commenced against Holdings, the Borrower or any of their respective Subsidiaries and the petition -80- is not controverted within 10 days, or is not dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of Holdings, the Borrower or any of their respective Subsidiaries, or Holdings, the Borrower or any of their respective Subsidiaries commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to Holdings, the Borrower or any of their respective Subsidiaries, or there is commenced against Holdings, the Borrower or any of their respective Subsidiaries any such proceeding which remains undismissed for a period of 60 days, or Holdings, the Borrower or any of their respective Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or Holdings, the Borrower or any of their respective Subsidiaries suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of 60 days; or Holdings, the Borrower or any of their respective Subsidiaries makes a general assignment for the benefit of creditors; or any corporate action is taken by Holdings, the Borrower or any of their respective Subsidiaries for the purpose of effecting any of the foregoing; or 10.06 ERISA. (a) Any Plan shall fail to satisfy the minimum funding ----- standard required for any plan year or part thereof or a waiver of such standard or extension of any amortization period is sought or granted under Section 412 of the Code, any Plan shall have had or, in the reasonable opinion of the Required Banks, is likely to have a trustee appointed to administer such Plan, any Plan is, shall have been or is likely to be terminated or to be the subject of termination proceedings under ERISA, any Plan shall have an Unfunded Current Liability, a contribution required to be made to a Plan has not been made, Holdings, the Borrower or any their respective Subsidiaries or any ERISA Affiliate has incurred or is likely to incur a liability to or on account of a Plan under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code, or Holdings, the Borrower or any of their respective Subsidiaries has incurred or is likely to incur liabilities pursuant to one or more employee welfare benefit plans (as defined in Section 3(1) of ERISA) which provide benefits to retired employees or other former employees (other than as required by Section 601 of ERISA) or employee pension benefit plans (as defined in Section 3(2) of ERISA); (b) there shall result from any such event or events the imposition of a lien, the granting of a security interest, or a liability or a material risk of incurring a liability; and in each case in clauses (a) and (b) above, such lien, security interest or liability, individually and/or in the aggregate in the reasonable opinion of the Required Banks, will have a material adverse effect upon the business, operations, property, assets, liabilities or condition (financial or otherwise) of Holdings, the Borrower or of the Borrower and its Subsidiaries taken as a whole; or 10.07 Security Documents. At any time after the execution and ------------------ delivery thereof, any of the Security Documents shall cease to be in full force and effect, or -81- shall cease in any material respect to give the Collateral Agent for the benefit of the Secured Creditors the Liens, rights, powers and privileges purported to be created thereby (including, without limitation, except with respect to the Collateral Assignments of Leases and the Collateral Assignment of Location Leases, a perfected security interest in, and Lien on, all of the Collateral), in favor of the Collateral Agent, superior to and prior to the rights of all third Persons, and subject to no other Liens except as permitted pursuant to this Agreement or the Security Documents, or any Credit Party shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to any of the Security Documents and such default shall continue beyond any grace period specifically applicable thereto pursuant to the terms of such Security Document; or 10.08 Guaranty. Any Guaranty or any material provision thereof shall -------- cease to be in full force or effect as to the relevant Guarantor, or any Guarantor or Person acting by or on behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations under the relevant Guaranty, or any Guarantor shall default in the due performance or observance of any material term, covenant or agreement on its part to be performed or observed pursuant to the Guaranty; or 10.09 Judgments. One or more judgments or decrees shall be entered --------- against Holdings, the Borrower or any of their respective Subsidiaries involving in the aggregate for Holdings, the Borrower and their respective Subsidiaries a liability (not paid or fully covered by a reputable and solvent insurance company) and such judgments and decrees either shall be final and non-appealable or shall not be vacated, discharged or stayed or bonded pending appeal for any period of 60 consecutive days, and the aggregate amount of all such judgments exceeds $2,500,000; or 10.10 Change of Control. A Change of Control shall occur; ----------------- then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, the Agents may, and upon the written request of the Required Banks, shall, by written notice to the Borrower, take any or all of the following actions, without prejudice to the rights of any Agents, any Bank or the holder of any Note to enforce its claims against any Credit Party (provided -------- that, if an Event of Default specified in Section 10.05 shall occur with respect to the Borrower or Holdings, the result which would occur upon the giving of written notice by the Agent to the Borrower as specified in clauses (i) and (ii) below shall occur automatically without the giving of any such notice and the Agent may exercise the rights specified in clause (v) below without the giving of any such notice): (i) declare the Total Commitments terminated, whereupon all Commitments of each Bank shall forthwith terminate immediately and any Commitment Commission shall forthwith become due and payable without any other notice of any kind; (ii) declare the principal of and any accrued interest in respect of all Loans and the Notes and all Obligations owing hereunder and thereunder to be, whereupon the same shall become, forthwith due and payable without -82- presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Credit Party; (iii) terminate any Letter of Credit, which may be terminated, in accordance with its terms; (iv) direct the Borrower to pay (and the Borrower agrees that upon receipt of such notice, or upon the occurrence of an Event of Default specified in Section 10.05 with respect to the Borrower or Holdings, it will pay) to the Collateral Agent at the Payment Office such additional amount of cash, to be held as security by the Collateral Agent, as is equal to the aggregate Stated Amount of all Letters of Credit issued for the account of the Borrower and then outstanding; (v) enforce, as Collateral Agent, any or all of the Liens, security interests and rights created pursuant to the Security Documents; and (vi) apply any cash collateral as provided in Section 4.02. SECTION 11. Definitions and Accounting Terms. -------------------------------- 11.01 Defined Terms. As used in this Agreement, the following terms ------------- shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Acquisition" shall mean the acquisition of all of the outstanding capital stock of the partners of KWIK Wash pursuant to the Acquisition Documents and the merger of KWIK Wash into the Borrower. "Acquisition Documents" shall mean the Stock Purchase Agreement and the partnership agreement and related organizational documents of KWIK Wash. "Additional Mortgage" shall have the meaning provided in Section 8.11(a). "Additional Mortgaged Property" shall have the meaning provided in Section 8.11(a). "Adjusted Certificate of Deposit Rate" shall mean, on any day, the sum (rounded to the nearest 1/100 of 1%) of (1) the rate obtained by dividing (x) the most recent weekly average dealer offering rate for negotiable certificates of deposit with a three-month maturity in the secondary market as published in the most recent Federal Reserve System publication entitled "Select Interest Rates," published weekly on Form H.15 as of the date hereof, or if such publication or a substitute containing the foregoing rate information shall not be published by the Federal Reserve System for any week, the weekly average offering rate determined by the Agent on the basis of quotations for such certificates received by it from three certificate of deposit dealers in New York of recognized standing or, if such quotations are unavailable, then on the basis of other sources reasonably selected by the Agent, by (y) a percentage equal to 100% minus the stated maximum rate of all reserve requirements as specified in Regulation D applicable on such day to a three-month certificate of deposit of a member -83- bank of the Federal Reserve System in excess of $100,000 (including, without limitation, any marginal, emergency, supplemental, special or other reserves), plus (2) the then daily net annual assessment rate as estimated by the Agent for determining the current annual assessment payable by BTCo to the Federal Deposit Insurance Corporation for insuring three month certificates of deposit. "Adjusted Percentage" shall mean (x) at a time when no Bank Default exists, for each Bank, such Bank's Percentage and (y) at a time when a Bank Default exists (i) for each Bank that is a Defaulting Bank, zero and (ii) for each Bank that is a Non-Defaulting Bank, the percentage determined by dividing such Bank's Revolving Loan Commitment at such time by the Adjusted Total Revolving Loan Commitment at such time, it being understood that all references herein to Revolving Loan Commitments and the Adjusted Total Revolving Loan Commitment at a time when the Total Revolving Loan Commitment or Adjusted Total Revolving Loan Commitment, as the case may be, has been terminated shall be references to the Revolving Loan Commitments or Adjusted Total Revolving Loan Commitment, as the case may be, in effect immediately prior to such termination; provided that (A) no Bank's Adjusted Percentage shall change upon the occurrence - -------- of a Bank Default from that in effect immediately prior to such Bank Default if after giving effect to such Bank Default, and any repayment of Revolving Loans at such time pursuant to Section 4.02(a) or otherwise, the sum of (i) the aggregate outstanding principal amount of Revolving Loans of all Non-Defaulting Banks plus (ii) the Letter of Credit Outstandings plus (iii) the outstanding principal amount of Swingline Loans exceed the Adjusted Total Revolving Loan Commitment; (B) the changes to the Adjusted Percentage that would have become effective upon the occurrence of a Bank Default but that did not become effective as a result of the preceding clause (A) shall become effective on the first date after the occurrence of the relevant Bank Default on which the sum of (i) the aggregate outstanding principal amount of the Revolving Loans of all Non-Defaulting Banks plus (ii) the Letter of Credit Outstandings plus (iii) the outstanding principal amount of Swingline Loans is equal to or less than the Adjusted Total Revolving Loan Commitment; and (C) if (i) a Non-Defaulting Bank's Adjusted Percentage is changed pursuant to the preceding clause (B) and (ii) any repayment of such Bank's Revolving Loans, or of Unpaid Drawings with respect to Letters of Credit, that were made during the period commencing after the date of the relevant Bank Default and ending on the date of such change to its Adjusted Percentage must be returned to the Borrower as a preferential or similar payment in any bankruptcy or similar proceeding of the Borrower, then the change to such Non-Defaulting Bank's Adjusted Percentage effected pursuant to said clause (B) shall be reduced to that positive change, if any, as would have been made to its Adjusted Percentage if (x) such repayments had not been made and (y) the maximum change to its Adjusted Percentage would have resulted in the sum of the outstanding principal of Revolving Loans made by such Bank plus such Bank's new Adjusted Percentage of the outstanding principal amount of Letter of Credit Outstandings equalling such Bank's Revolving Loan Commitment at such time. -84- "Adjusted Total Revolving Loan Commitment" shall mean at any time the Total Revolving Loan Commitment less the aggregate Revolving Loan Commitments of all Defaulting Banks. "Administrative Agent" shall mean Bankers Trust Company, in its capacity as Agent for the Banks hereunder, and shall include any successor to the Agent appointed pursuant to Section 12.09. "Affiliate" shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person; provided, however, that for purposes of -------- ------- Section 9.06, an Affiliate of Holdings shall include any Person that directly or indirectly owns more than 5% of any class of the capital stock of Holdings and any officer or director of Holdings or any such Person. A Person shall be deemed to control another Person if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise. "Agents" shall mean, collectively, the Administrative Agent, the Syndication Agent and the Documentation Agent. "Agreement" shall mean this Credit Agreement, as modified, supplemented or amended from time to time. "Applicable Base Rate Margin" shall mean a percentage per annum equal to (i) in the case of Loans other than Tranche B Term Loans, 1.25% and (ii) in the case of Tranche B Term Loans, 1.75%; provided that each of the percentages -------- set forth above shall be adjusted by the applicable Leverage Pricing Adjustment. "Applicable Eurodollar Margin" shall mean a percentage per annum equal to (i) in the case of Loans other than Tranche B Term Loans, 2.25% and (ii) in the case of Tranche B Term Loans, 2.75%; provided that each of the percentages -------- set forth above shall be adjusted by the applicable Leverage Pricing Adjustment, if any. "Assignment and Assumption Agreement" shall mean the Assignment and Assumption Agreement substantially in the form of Exhibit H hereto --------- (appropriately completed). "Authorized Officer" of any Credit Party shall mean any of the Chairman of the Board, the President, any Vice President, the Treasurer, the Secretary, any Assistant Secretary, any Assistant Treasurer or the Controller of such Credit Party or any other officer of such Credit Party which is designated in writing to the Agent by any of the foregoing officers of such Credit Party as being authorized to give such notices under this Agreement. -85- "Bank" shall mean each financial institution listed on Schedule I, as well as any Person which becomes a "Bank" hereunder pursuant to 13.04(b). "Bank Default" shall mean (i) the refusal (which has not been retracted) of a Bank to make available its portion of any Borrowing or to fund its portion of any unreimbursed payment under Section 2.03(c) or (ii) a Bank having notified in writing the Borrower and/or the Agent that it does not intend to comply with its obligations under Section 1.01 or Section 2, in the case of either clause (i) or (ii) as a result of any takeover of such Bank by any regulatory authority or agency. "Bankruptcy Code" shall have the meaning provided in Section 10.05. "Base Rate" at any time shall mean the highest of (x) the rate which is 1/2 of 1% in excess of the Adjusted Certificate of Deposit Rate, (y) the Prime Lending Rate and (z) the rate which is 1/2 of 1% in excess of the Federal Funds Rate. "Base Rate Loan" shall mean each Loan designated or deemed designated as such by the Borrower at the time of the incurrence thereof or conversion thereto. "Borrower" shall have the meaning provided in the first paragraph of this Agreement. "Borrower's Common Stock" shall mean the common stock of Coinmach Corporation. "Borrower Pledge Agreement" shall mean the Borrower Pledge Agreement, substantially in the form of Exhibit I-1 hereto, made by the Borrower in favor ----------- of the Collateral Agent, as such agreement may be amended, modified or supplemented from time to time. "Borrowing" shall mean the borrowing of one Type of Loan of a single Tranche from all the Banks having Commitments of the respective Tranche on a given date (or resulting from a conversion or conversions on such date) having in the case of Eurodollar Loans the same Interest Period; provided that Base -------- Rate Loans incurred pursuant to Section 1.10(b) shall be considered part of the related Borrowing of Eurodollar Loans. "BTCo" shall mean Bankers Trust Company in its individual capacity. "Business Day" shall mean (i) for all purposes other than as covered by clause (ii) below, any day except Saturday, Sunday and any day which shall be in New York City a legal holiday or a day on which banking institutions are authorized or required by law or other government action to close and (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, -86- Eurodollar Loans, any day which is a Business Day described in clause (i) above and which is also a day for trading by and between banks in the New York interbank Eurodollar market. "Capital Expenditures" shall mean, with respect to any Person, all expenditures by such Person which should be added to the fixed assets account on the consolidated balance sheet of such Person in accordance with GAAP (which shall not include (i) interest capitalized during construction but only to the extent included in Consolidated Interest Expense and (ii) increases to property and equipment that are reflected (or under the accounting policies and presentation of the Borrower as in effect on the Effective Date, would have been reflected) in "Additions to net assets from acquired businesses" on the Borrower's Condensed Consolidated Statements of Cash Flows), including all such expenditures with respect to plant, property or equipment (including, without limitation, expenditures for maintenance and repairs which should be capitalized in accordance with GAAP and the amount reflected (or under the accounting policies and presentation of the Borrower as in effect on the Effective Date, would have been reflected) in "Advance rental payments to location owners" on the Borrower's Condensed Consolidated Statements of Cash Flows) and the amount of all Capitalized Lease Obligations incurred by such Person. "Capital Lease," as applied to any Person, shall mean any lease of any property (whether real, personal or mixed) by that Person as lessee which, in conformity with GAAP, should be accounted for as a capital lease on the balance sheet of that Person. "Capitalized Lease Obligations" shall mean all obligations under Capital Leases of Holdings or any of its Subsidiaries in each case taken at the amount thereof that should be accounted for as liabilities in accordance with GAAP. "Cash Equivalents" shall mean (i) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United -------- States of America is pledged in support thereof) having maturities of not more than twelve months from the date of acquisition, (ii) U.S. dollar denominated time deposits, certificates of deposit and banker acceptances of (x) any Bank or (y) any bank whose short-term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent thereof (any such bank or Bank, an "Approved Bank"), in each case with maturities of not more than twelve months from the date of acquisition, (iii) commercial paper issued by any Approved Bank or by the parent company of any Approved Bank and commercial paper issued by, or guaranteed by, any industrial or financial company with a short-term commercial paper rating of at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's, as the case may be, and in each case maturing within twelve months after the date of acquisition, (iv) marketable direct obligations issued by any state of the United States -87- of America or any political subdivision of any such state or any public instrumentality thereof maturing within twelve months from the date of acquisition thereof and, at the time of acquisition having one of the two highest ratings obtainable from either S&P or Moody's, (v) any repurchase agreement entered into with any Approved Bank which is secured by any obligation of the type described in any of clauses (i) through (iii) and (vi) investments in money market funds substantially all the assets of which are comprised of securities of the types described in clauses (i) through (iv) above. "CERCLA" shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. (S) 9601 et. seq., as the same may be amended from time to time. "Change in Law" shall mean the introduction of any law or governmental rule, regulation, order, guideline or request (whether or not having the force of law), or any change in law or governmental rule, regulation, order, guideline or request (whether or not having the force of law), or the interpretation or administration thereof. "Change of Control" shall mean (i) Holdings shall at any time cease to own directly 100% of the capital stock of the Borrower; (ii) any "Person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), excluding GTCR, is or shall become the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of a greater percentage of the common stock of Holdings than is owned by GTCR at such time; or (iii) the Board of Directors of Holdings shall cease to consist of a majority of Continuing Directors. "CLC Notes" shall mean the $15,000,000 principal amount of senior promissory notes issued by Holdings in connection with the Acquisition as in effect on the Effective Date. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and the rulings issued thereunder. Section references to the Code are to the Code, as in effect at the date of this Agreement, and to any subsequent provision of the Code, amendatory thereof, supplemental thereto or substituted therefor. "Collateral" shall mean all property (whether real or personal) with respect to which any security interests have been granted (or purported to be granted) pursuant to any Security Document, including, without limitation, all Pledge Agreement Collateral, all Security Agreement Collateral, all Mortgaged Properties and all cash and Cash Equivalents delivered as collateral pursuant to Section 4.02 or 10. "Collateral Agent" shall mean the Administrative Agent acting as collateral agent for the Secured Creditors pursuant to the Security Documents. -88- "Collateral Assignment of Leases" shall mean the Collateral Assignment of Leases, substantially in the form of Exhibit L hereto, made by the Borrower --------- and the Subsidiary Guarantors in favor of the Collateral Agent relating to certain warehouse and office facilities, as such agreement may be amended, modified or supplemented from time to time. "Collateral Assignment of Location Leases" shall mean the Collateral Assignment of Location Leases, substantially in the form of Exhibit M hereto, --------- made by the Borrower and the Subsidiary Guarantors in favor of the Collateral Agent relating to leased premises at which Collateral constituting personal property is located, as such agreement may be amended, modified or supplemented from time to time. "Collective Bargaining Agreements" shall have the meaning provided in Section 5.05. "Commitment" shall mean any of the commitments of any Bank; i.e., --- whether the Tranche A Term Loan Commitment, Tranche B Term Loan Commitment or Revolving Loan Commitment or the commitment of BTCo to make Swingline Loans. "Commitment Commission" shall have the meaning provided in Section 3.01(a). "Consolidated Adjusted Leverage Ratio" shall mean the ratio of Holdings' Consolidated Indebtedness to Holdings' Consolidated EBITDA, measured on a trailing 12 months basis, including any Permitted Acquisition Cost-Savings. "Consolidated Adjusted Senior Leverage Ratio" shall mean the ratio of Holdings' Consolidated Secured Senior Indebtedness to Holdings' Consolidated EBITDA, measured on a trailing 12 months basis, including any Permitted Acquisition Cost-Savings. "Consolidated Current Assets" shall mean, at any time, the consolidated current assets of Holdings and its Consolidated Subsidiaries excluding cash and Cash Equivalents. "Consolidated Current Liabilities" shall mean, at any time, the consolidated current liabilities of Holdings and its Consolidated Subsidiaries at such time, but excluding (i) the current portion of any Indebtedness under this Agreement and any other long-term Indebtedness which would otherwise be included therein and (ii) the current portion of Indebtedness. "Consolidated EBIT" shall mean, for any period, (A) the sum of the amounts for such period of (i) Consolidated Net Income, (ii) provisions for cash taxes based on income, (iii) Consolidated Net Cash Interest Expense, (iv) amortization or -89- write-off of deferred financing costs to the extent deducted in determining Consolidated Net Income and (v) losses on sales of assets (excluding sales in the ordinary course of business) and other extraordinary or nonrecurring losses less (B) the amount for such period of gains on sales of assets (excluding sales - ---- in the ordinary course of business) and other extraordinary or nonrecurring gains, all as determined on a consolidated basis in accordance with GAAP. "Consolidated EBITDA" shall mean, for any period, the sum of the amounts for such period of (i) Consolidated EBIT, (ii) depreciation expense, (iii) amortization expense and (iv) without duplication, all other non-cash charges (including non-cash compensation expenses relating to employee stock options) included in determining Consolidated Net Income during such period, all as determined on a consolidated basis in accordance with GAAP. "Consolidated Indebtedness" shall mean an amount equal to the principal amount of all Indebtedness of Holdings and its Subsidiaries, determined in accordance with GAAP. "Consolidated Interest Coverage Ratio" for any period shall mean the ratio of Consolidated EBITDA to Consolidated Net Cash Interest Expense for such period. "Consolidated Net Cash Interest Expense" shall mean, for any period, without duplication, the total consolidated cash interest expense of Holdings and its Consolidated Subsidiaries on a consolidated basis for such period plus, without duplication, that portion of Capitalized Lease Obligations of Holdings and its Consolidated Subsidiaries representing the interest factor for such period, in each case net of the total consolidated cash interest income of Holdings and its Consolidated Subsidiaries for such period, but excluding the amortization of any deferred financing costs. "Consolidated Net Income" shall mean, for any period, the consolidated net after tax income of Holdings and its Consolidated Subsidiaries determined in accordance with GAAP. "Consolidated Secured Senior Indebtedness" shall mean an amount equal to the principal amount of all funded secured Senior Indebtedness of Holdings and its Subsidiaries determined in accordance with GAAP. "Consolidated Subsidiaries" shall mean, as to any Person, all Subsidiaries of such Person which are consolidated with such Person for financial reporting purposes in accordance with GAAP. -90- "Consolidated Working Capital" shall mean Consolidated Current Assets minus Consolidated Current Liabilities. "Contingent Obligation" shall mean, as to any Person, any obligation of such Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (x) for the purchase or payment of any such primary obligation or (y) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof; provided, however, -------- ------- that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such Person may be liable pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. "Continuing Directors" shall mean the directors of Holdings on the Effective Date and each other director, if such Director's nomination for election to the Board of Directors of Holdings is recommended by a majority of the then Continuing Directors. "Covered Taxes" shall mean any and all Taxes, other than Excluded Taxes. "Credit Documents" shall mean (i) this Agreement, (ii) each Note, (iii) each Security Document and (iv) each Mortgage. "Credit Event" shall mean the making of any Loan or the issuance of any Letter of Credit. "Credit Party" shall mean Holdings, the Borrower and each Subsidiary Guarantor. "Debt Agreements" shall have the meaning provided in Section 5.05. -91- "Default" shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "Defaulting Bank" shall mean any Bank with respect to which a Bank Default is in effect. "Direct Wholly-Owned Subsidiary" shall mean, as to any Person, any other Person which would constitute a Wholly-Owned Subsidiary of such Person even if the phrase "and/or one or more Wholly-Owned Subsidiaries of such Person" appearing in the definition of the term "Wholly-Owned Subsidiary" were deleted. "Dividend" with respect to any Person shall mean that such Person has declared or paid a dividend or returned any equity capital to its stockholders or authorized or made any other distribution, payment or delivery of property (other than common stock of such Person) or cash to its stockholders as such, or redeemed, retired, purchased or otherwise acquired, directly or indirectly, for a consideration any shares of any class of its capital stock outstanding on or after the Effective Date (or any options or warrants issued by such Person with respect to its capital stock), or set aside any funds for any of the foregoing purposes, or shall have permitted any of its Subsidiaries to purchase or otherwise acquire for a consideration any shares of any class of the capital stock of such Person outstanding on or after the Effective Date (or any options or warrants issued by such Person with respect to its capital stock). Without limiting the foregoing, "Dividends" with respect to any Person shall also include all payments made or required to be made by such Person with respect to any stock appreciation rights, plans, equity incentive or achievement plans or any similar plans or setting aside of any funds for the foregoing purposes. "Documentation Agent" shall mean Lehman Commercial Paper, Inc. in its capacity as Documentation Agent for the Banks hereunder, and shall include any successor to the Documentation Agent. "Documents" shall mean the Credit Documents and the Acquisition Documents. "Dollars" and the sign "$" shall each mean freely transferable lawful money of the United States. "Drawing" shall have the meaning provided in Section 2.04(b). "Effective Date" shall have the meaning provided in Section 13.10. "11 3/4% Notes" shall mean the 11 3/4% Notes due 2005 issued pursuant to an indenture between the Borrower and Fleet Bank of Connecticut as in effect on the Effective Date. -92- "Eligible Transferee" shall mean and include a commercial bank, financial institution or other institutional "accredited investor" (as defined in Regulation D of the Securities Act). "Employee Benefit Plans" shall mean all employee benefit plans (other than multiemployer plans as defined in Section 4001(a)(3) of ERISA), or any other similar plans or arrangements for the benefit of employees of Holdings or any Subsidiary of Holdings and any profit sharing plans and deferred compensation plans of Holdings or any Subsidiary of Holdings (collectively, the "Employee Benefit Plans"). ---------------------- "Employee Stock Option Plan" shall mean the Seconded Amended and Restated 1996 Employee Stock Option Plan of Holdings existing on the Effective Date as such plan may be amended from time to time. "Employment Agreements" shall mean any employment agreement entered into by Holdings or any Subsidiary of Holdings. "End Date" shall have the meaning provided in the definition of Leverage Pricing Adjustment contained herein. "Environmental Claims" means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, directives, claims, liens, notices of noncompliance or violation, investigations or proceedings relating in any way to any Environmental Law or any permit issued, or any approval given, under any such Environmental Law (hereafter, "Claims"), including, without ------ limitation, (a) any and all Claims by governmental or regulatory authorities for enforcement, cleanup, investigation, removal, response, remedial or other actions or damages pursuant to any Environmental Law, and (b) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief in connection with alleged injury or threat of injury to health, safety or the environment due to the presence of Hazardous Materials. "Environmental Law" means any applicable Federal, state, foreign or local statute, law, rule, regulation, ordinance, code, legally binding guideline or written policy and any rule of common law now or hereafter in effect and in each case as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, to the extent binding on Holdings, the Borrower or any of their respective Subsidiaries, relating to the environment, employee health and safety or Hazardous Materials, including, without limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33 U.S.C. (S) 1251 et seq.; the Toxic Substances -- --- Control Act, 15 U.S.C. (S) 2601 et seq.; the Clean Air Act, 42 U.S.C. (S) 7401 -- --- et seq.; the Safe Drinking Water Act, 42 U.S.C. (S) 3803 et seq.; the Oil - -- --- -- --- Pollution Act of 1990, 33 U.S.C. (S) 2701 et seq.; the Emergency Planning and -- --- the Community Right-to-Know Act of 1986, 42 U.S.C. (S) 11001 et seq., the -- --- Hazardous -93- Material Transportation Act, 49 U.S.C. (S) 1801 et seq. and the Occupational -- --- Safety and Health Act, 29 U.S.C. (S) 651 et seq. (to the extent it regulates -- --- occupational exposure to Hazardous Materials); and any state and local or foreign counterparts or equivalents, in each case as amended from time to time. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the applicable regulations promulgated thereunder. Section references to ERISA are to ERISA, as in effect at the date of this Agreement and any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor. "ERISA Affiliate" shall mean each person (as defined in Section 3(9) of ERISA) which together with Holdings or any Subsidiary of Holdings would be deemed to be a "single employer" within the meaning of Section 414(b), (c), (m) or (o) of the Code. "Eurodollar Loan" shall mean each Loan designated as such by the Borrower at the time of the incurrence thereof or conversion thereto. "Eurodollar Rate" shall mean with respect a Eurodollar Loan (a) the offered quotation to first-class banks in the New York interbank Eurodollar market by BTCo for Dollar deposits of amounts in immediately available funds comparable to the outstanding principal amount of the Eurodollar Loan for which an interest rate is then being determined with maturities (comparable to the Interest Period applicable to such Eurodollar Loan commencing two Business Days thereafter as of 10:00 A.M. (New York time) on the date which is two Business Days prior to the commencement of such Interest Period, divided (and rounded off to the nearest 1/16 of 1%) by (b) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves required by applicable law) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency funding or liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D). "Event of Default" shall have the meaning provided in Section 10. "Excess Cash Flow" shall mean, for any fiscal year of Holdings, Consolidated EBITDA for such period minus Consolidated Net Cash Interest Expense ----- for such period minus the provision for income taxes for such period (to the ----- extent paid in cash) minus the amount of Capital Expenditures made by Holdings ----- and its Subsidiaries during such period minus (plus) additions (reductions) to ----- Consolidated Working Capital for such period minus scheduled repayments of ----- principal of outstanding Indebtedness to the extent actually paid (including any voluntary payments of principal of Indebtedness but excluding voluntary payments --- of Revolving Loans). -94- "Excess Cash Flow Percentage" shall mean 75% unless and so long as the Consolidated Adjusted Leverage Ratio is less than 3.00:1.00, in which case it shall mean 50%. "Excess Cash Payment Date" shall mean the date occurring 95 days after the last day of each fiscal year of the Borrower (beginning with its fiscal year ended closest to March 31, 1998). "Excess Cash Payment Period" shall mean with respect to the repayment required on each Excess Cash Payment Date, the immediately preceding fiscal year of the Borrower. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Excluded Taxes" shall mean Taxes (including income or franchise Taxes) imposed upon or determined by reference to any Bank's net income or net profits but only to the extent such Taxes are imposed (i) by the United States of America (or any State or local jurisdiction or any agency thereof) including, without limitation, branch profits Taxes; or (ii) by any jurisdiction in which an applicable Bank is organized or has its principal office or applicable lending office. "Existing Credit Agreement" shall mean the revolving credit facility provided to the Borrower pursuant to the Revolving Credit Agreement dated as of November 30, 1995 between the Borrower and Heller Financial Inc. "Existing Indebtedness" shall have the meaning provided in Section 7.22. "Existing Letters of Credit" shall have the meaning provided in Section 2.01(a). "Facing Fee" shall have the meaning provided in Section 3.01(c). "Federal Funds Rate" shall mean for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the -95- Administrative Agent from three Federal Funds brokers of recognized standing selected by the Administrative Agent. "Fees" shall mean all amounts payable pursuant to or referred to in Section 3.01. "Final Scheduled Maturity Dates" shall mean, collectively, the Revolving Loan Maturity Date, the Tranche A Term Loan Maturity Date and the Tranche B Term Loan Maturity Date. "Form 1001" shall have the meaning set forth in Section 4.04(f). "Form 4224" shall have the meaning set forth in Section 4.04(f). "Form W-8" shall have the meaning set forth in Section 4.04(f). "Form W-9" shall have the meaning set forth in Section 4.04(f). "GAAP" shall have the meaning provided in Section 13.07(a). "GTCR" shall mean, collectively, Golder, Thoma, Cressey, Rauner Inc., or any entity controlled thereby. "Governmental Authority" shall mean any government or political subdivision or any agency, authority, board, bureau, central bank, commission, department or instrumentality of either, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guaranteed Obligations" shall mean the irrevocable and unconditional guaranty made by Holdings and each Subsidiary Guarantor (i) to each Bank for the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of the principal and interest on each Note issued by the Borrower to such Bank, and Loans made, under the Credit Agreement and all reimbursement obligations and Unpaid Drawings with respect to Letters of Credit, together with all the other obligations and liabilities (including, without limitation, indemnities, fees and interest thereon) of the Borrower to such Bank now existing or hereafter incurred under, arising out of or in connection with the Credit Agreement or any other Credit Document and the due performance and compliance with all the terms, conditions and agreements contained in the Credit Documents by the Borrower and (ii) to each Bank and each Affiliate of a Bank which enters into an Interest Rate Protection Agreement with the Borrower, which by its express terms are entitled to the benefit of the Guaranty pursuant to Section 14 with the written consent of the Borrower, the full and prompt payment when due (whether by acceleration or otherwise) of all obligations of the -96- Borrower owing under any such Interest Rate Protection Agreement, whether now in existence or hereafter arising, and the due performance and compliance with all terms, conditions and agreements contained therein. "Guarantor" shall mean Holdings and each Subsidiary Guarantor. "Guaranty" shall mean the guaranty issued pursuant to Section 14. "Hazardous Materials" means (a) any petroleum or petroleum products or constituents thereof, radioactive materials, asbestos that is friable, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls in excess of 50 ppm, and radon gas; (b) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous waste," "hazardous materials," "extremely hazardous substances," "restricted hazardous waste," "toxic substances," "toxic pollutants," "contaminants," or "pollutants," or words of similar import, under any applicable Environmental Law; and (c) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority under Environmental Laws. "Holdings" shall have the meaning provided in the first paragraph of this Agreement. "Holdings Common Stock" shall mean the common stock of Holdings. "Holdings Pledge Agreement" shall mean the Holdings Pledge Agreement, substantially in the form of Exhibit I-2 hereto, made by Holdings in favor of ----------- the Collateral Agent, as such agreement may be amended, modified or supplemented from time to time. "Holdings Preferred Stock" shall mean the Preferred Stock, par value $0.01 per share, of Holdings. "Indebtedness" shall mean, as to any Person, without duplication, (i) all indebtedness of such Person for borrowed money (ii) the deferred purchase price of assets or services payable to the sellers thereof or any of such seller's assignees which in accordance with GAAP would be shown on the liability side of the balance sheet of such Person but excluding deferred rent as determined in accordance with GAAP, or for the deferred purchase price of property or services, (iii) the maximum amount available to be drawn under all letters of credit issued for the account of such Person and all unpaid drawings in respect of such letters of credit, (iv) all Indebtedness of the types described in clause (i), (ii), (iii), (iv), (v), (vi), (vii) or (viii) of this definition secured by any Lien on any property owned by such Person, whether or not such Indebtedness has been assumed by such Person (to the extent of the value of the -97- respective property), (v) the aggregate amount required to be capitalized under leases under which such Person is the lessee, (vi) all obligations of such person to pay a specified purchase price for goods or services, whether or not delivered or accepted; i.e., take-or-pay and similar obligations, (vii) all --- Contingent Obligations of such Person and (viii) all obligations under any Interest Rate Protection Agreement or Other Hedging Agreement or under any similar type of agreement. "Intercompany Loans" shall have the meaning provided in Section 9.05(g). "Intercompany Notes" shall mean promissory notes, in the form of Exhibit G, evidencing an Intercompany Loan. - --------- "Interest Determination Date" shall mean, with respect to any Eurodollar Loan, the second Business Day prior to the commencement of any Interest Period relating to such Eurodollar Loan. "Interest Period" shall have the meaning provided in Section 1.09. "Interest Rate Protection Agreement" shall mean any interest rate swap agreement, interest rate cap agreement, interest collar agreement, interest rate hedging agreement or other similar agreement or arrangement. "Issuing Bank" shall mean BTCo and any Bank which at the request of the Borrower and with the consent of the Agent agrees, in such Bank's sole discretion, to become an Issuing Bank for the purpose of issuing Letters of Credit pursuant to Section 2. The sole Issuing Bank on the Effective Date is BTCo. "KWIK Wash" shall mean KWIK Wash Laundries L.P., a Texas limited partnership. "Landlord Consent" shall mean a Landlord Consent substantially in the form of Exhibit N hereto. --------- "L/C Supportable Indebtedness" shall mean (i) obligations of Holdings, the Borrower or the Borrower's Subsidiaries incurred in the ordinary course of business with respect to insurance obligations and workers' compensation, surety bonds and other similar statutory obligations and (ii) such other obligations of Holdings, the Borrower or any of the Borrower's Subsidiaries as are reasonably acceptable to the respective Issuing Bank and otherwise permitted to exist pursuant to the terms of this Agreement. -98- "Leaseholds" of any Person means all the right, title and interest of such Person as lessee or licensee in, to and under leases or licenses of land, improvements and/or fixtures. "Letter of Credit" shall have the meaning provided in Section 2.01(a). "Letter of Credit Fee" shall have the meaning provided in Section 3.01(b). "Letter of Credit Outstandings" shall mean, at any time, the sum of (i) the aggregate Stated Amount of all outstanding Letters of Credit and (ii) the amount of all Unpaid Drawings. "Letter of Credit Request" shall have the meaning provided in Section 2.02(a). "Letter of Credit Sublimit" shall mean $10,000,000. "Leverage Pricing Adjustment" shall mean zero; provided that from and -------- after the first day of any Margin Adjustment Period (the "Start Date") to and ---------- including the last day of such Margin Adjustment Period (the "End Date"), the -------- Leverage Pricing Adjustment shall be the respective percentage per annum set forth in clause (A), (B), (C), or (D) below if, but only if, as of the last day of the most recent fiscal quarter or year, as the case may be, ended immediately prior to such Start Date (the "Test Date"), the applicable conditions set forth --------- in clause (A), (B), (C), or (D) below, as the case may be, are met: (A) in the case of all Loans, +.25% if, but only if, as of the Test Date for such Start Date the Pro Forma Leverage Ratio for the Test Period ended on such Test Date shall be greater than 4.25:1.00; (B) in the case of Loans other than Tranche B Term Loans, -.25% if, but only if, as of the Test Date for such Start Date the Pro Forma Leverage Ratio for the Test Period ended on such Test Date shall be less than 4.00:1.00 and none of the conditions set forth in clause (C) or (D) below, as the case may be, are satisfied; (C) in the case of Loans other than Tranche B Term Loans, -.50% if, but only if, as of the Test Date for such Start Date the Pro Forma Leverage Ratio for the Test Period ended on such Test Date shall be less than 3.50:1.00 and neither of the conditions set forth in clause (D) below, is satisfied; or (D) in the case of Loans other than Tranche B Term Loans, -.75% if, but only if, as of the Test Date for such Start Date the Pro Forma Leverage -99- Ratio for the Test Period ended on such Test Date shall be less than 3.00:1.00. Notwithstanding anything to the contrary contained above in this definition, the Leverage Pricing Adjustment shall be +.25% at all times during which there shall exist a Default or an Event of Default. "Lien" shall mean any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), preference, priority or other security agreement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the UCC or any other similar recording or notice statute, and any lease having substantially the same effect as any of the foregoing) including any agreement to give any of the foregoing. "Loan" shall mean each Tranche A Term Loan, each Tranche B Term Loan, each Revolving Loan and each Swingline Loan. "Mandatory Borrowing" shall have the meaning provided in Section 1.01(e). "Margin Adjustment Period" shall mean each period which shall commence on a date on which the financial statements (or certificate in the case of Section 8.01(l)) are delivered pursuant to Section 8.01(b), (c) or (l), as the case may be, and which shall end on the earlier of (i) the date of actual delivery of the next financial statements (or certificate in the case of Section 8.01(l)) pursuant to Section 8.01(b), (c) or (l), as the case may be, and (ii) the latest date on which the next financial statements (or certificate in the case of Section 8.01(l)) are required to be delivered pursuant to Section 8.01(b), (c) or (l), as the case may be; provided that the first Margin -------- Adjustment Period shall commence on the date that the financial statements are delivered for the Company's first fiscal quarter ending after the Effective Date (other than in the case of a consummation of a Permitted Acquisition, in which case the Margin Adjustment Period shall commence on the consummation of such Permitted Acquisition). "Margin Stock" shall have the meaning provided in Regulation U. "Material Adverse Effect" shall have the meaning provided in Section 5.12. "Maturity Date" shall mean, with respect to any Tranche of Loans, the Tranche A Term Loan Maturity Date, the Tranche B Term Loan Maturity Date, the Revolving Loan Maturity Date or the Swingline Maturity Date, as the case may be. "Maximum Swingline Amount" shall mean $5,000,000. -100- "Mortgage" shall mean fully executed counterparts of mortgages, leasehold mortgages, deeds of trust and leasehold deeds of trust to secure debt executed and delivered on the Effective Date with respect to a Mortgaged Property, in each case in form and substance reasonably satisfactory to the Agent. "Mortgage Policies" shall mean the mortgage title insurance policies issued on the Effective Date in respect of each Mortgage Property. "Mortgaged Properties" shall mean, collectively, each Mortgaged Property and each Additional Mortgaged Property. "Mortgaged Property" shall mean each Real Property owned or leased by the Borrower or a Subsidiary Guarantor and listed on Schedule 5.11 hereto and any Additional Mortgaged Property. "Net Sale Proceeds" shall mean for any sale of assets, the gross cash proceeds (including any cash received by way of deferred payment pursuant to a promissory note, receivable or otherwise, but only as and when received) received from any sale of assets, net of reasonable transaction costs (including, without limitation, any underwriting, brokerage or other customary selling commissions and reasonable legal, advisory and other fees and expenses, including title and recording expenses, associated therewith) and payments of unassumed liabilities relating to the assets sold at the time of, or within 30 days after, the date of such sale, the amount of such gross cash proceeds required to be used to repay any Indebtedness (other than Indebtedness of the Banks pursuant to this Agreement) which is secured by the respective assets which were sold, and the estimated marginal increase in income taxes which will be payable by Holdings' consolidated group with respect to the fiscal year in which the sale occurs as a result of such sale; but excluding any portion of any such gross cash proceeds which Holdings determines in good faith should be reserved for post-closing adjustments (to the extent Holdings delivers to the Banks a certificate signed by its chief financial officer, controller or chief accounting officer as to such determination), it being understood and agreed that on the day that all such post-closing adjustments have been determined, (which shall not be later than six months following the date of the respective asset sale), the amount (if any) by which the reserved amount in respect of such sale or disposition exceeds the actual post-closing adjustments payable by Holdings or any of its Subsidiaries shall constitute Net Sale Proceeds on such date) received by Holdings and/or any of its Subsidiaries from such sale, lease, transfer or other disposition. "Non-Defaulting Bank" shall mean and include each Bank other than a Defaulting Bank. "Note" shall mean each Tranche A Term Note, each Tranche B Term Note, each Revolving Note and the Swingline Note. -101- "Notice of Borrowing" shall have the meaning provided in Section 1.03. "Notice of Conversion" shall have the meaning provided in Section 1.06. "Notice Office" shall mean the office of the Agent located at 130 Liberty Street, New York, New York 10006, Attention: Thomas P. Prior, or such other office as the Agent may hereafter designate in writing as such to the other parties hereto. "Obligations" shall mean all amounts, direct or indirect, contingent or absolute, of every type or description, and at any time existing, owing to the Agent, the Collateral Agent or any Bank pursuant to the terms of any Credit Document. "Other Taxes" shall have the meaning set forth in Section 4.04(a). "Participant" shall have the meaning provided in Section 2.03(a). "Payment Office" shall mean the office of the Administrative Agent located at One Bankers Trust Plaza, New York, New York 10006, or such other office as the Agent may hereafter designate in writing as such to the other parties hereto. "PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA, or any successor thereto. "Percentage" of any Bank at any time shall mean a fraction (expressed as a percentage) the numerator of which is the Revolving Loan Commitment of such Bank at such time and the denominator of which is the Total Revolving Loan Commitment at such time; provided that if the Percentage of any Bank is to be -------- determined after the Total Revolving Loan Commitment has been terminated, then the Percentages of the Banks shall be determined immediately prior (and without giving effect) to such termination. "Permitted Acquisition" shall mean the acquisition by Holdings or its Subsidiaries of all or substantially all of the assets of any Person (or all or substantially all of the assets of a product line or division of any Person) not already a Subsidiary of Holdings or 100% of the capital stock of any such Person; provided that any such acquisition shall only be a Permitted Acquisition -------- so long as (A) no Default or Event of Default exists (or will result from such acquisitions) and pro forma for such acquisitions and the financings incurred --- ----- and conforming accounting adjustments made in connection therewith, (B) (x) the Consolidated Adjusted Senior Leverage Ratio of Holdings is less than 2.25:1.00; and (y) the Consolidated Adjusted Leverage Ratio of Holdings is less than 4.50:1.00; and (C) such Permitted Acquisition is funded with (i) cash and Cash Equivalents as reflected on the consolidated balance sheet of Holdings as of the date of such Permitted Acquisition, (ii) Revolving Loans not to exceed $35,000,000 in the aggregate or (iii) as to any Permitted Acquisition consummated within one year of the -102- Effective Date, proceeds of either Indebtedness incurred pursuant to Section 9.04(h) or equity (subject to the provisions of 4.02(e)); provided, however, -------- ------- that for any Permitted Acquisition funded in accordance with either subclause (i) and/or (ii) of this clause (C), the total consideration, after the first anniversary of the Effective Date, shall be limited to $20,000,000 unless otherwise agreed to by the Agents; and provided further, that to the extent any -------- ------- such Permitted Acquisition or series of Permitted Acquisitions funded under subclause (iii) of this clause (C) is not made by the Borrower or any of its Subsidiaries or is not contributed by Holdings to either the Borrower or any of its Subsidiaries, neither the Borrower nor any of its Subsidiaries shall incur any Indebtedness (including Guarantees) with respect thereto. Notwithstanding anything to the contrary contained in the immediately preceding sentence, an acquisition shall be a Permitted Acquisition only if all requirements of Section 9.02(j) with respect to Permitted Acquisitions are met with respect thereto. "Permitted Acquisition Capital Expenditures" shall be an amount equal to 115% of the Capital Expenditures made by the Person (or in the case of an asset acquisition, the Capital Expenditures relating to the assets) being acquired as a part of a Permitted Acquisition prior to the time of such Permitted Acquisition measured by the amount reported in the quarterly financials for the four immediately preceding fiscal quarters. Such full 115% amount shall be available for Capital Expenditures in each succeeding fiscal year, beginning the next full fiscal year after the date of such Permitted Acquisition, and a pro rata amount for the year in which such Permitted --- ---- Acquisition is consummated shall be available. "Permitted Acquisition Cost-Savings" shall mean certain cost-savings adjustments reasonably anticipated by the Borrower to be achieved in connection with Permitted Acquisitions and upon the Agents' request shall be (i) made in accordance with Regulation S-X; (ii) verified by Ernst & Young L.L.P., or another nationally recognized accounting firm or as otherwise agreed to by the Agents; and (iii) not in excess of 10% of pro forma actual Consolidated EBITDA --- ----- without regard to such cost-savings; provided, however, that all such Permitted -------- ------- Acquisition Cost-Savings shall be estimated on a good-faith basis by the Borrower and shall be reduced by (i) one half, six months following each such Permitted Acquisition, (ii) an additional one quarter, nine months following each such Permitted Acquisition and (iii) an additional one quarter, twelve months following each such Permitted Acquisition. "Permitted Acquisition Notice" shall mean a notice which notice shall contain (I) the date such Permitted Acquisition is scheduled to be consummated, (II) the estimated purchase price of such Permitted Acquisition, (III) a description of the stock and/or assets to be acquired in connection with such Permitted Acquisition, (IV) the sources of cash to be paid in respect of such Permitted Acquisition and (V) in the case of Holdings Common Stock issued as consideration to the seller in connection with a Permitted Acquisition, a description of the Holdings Common Stock to be issued in -103- connection with the consummation of such Permitted Acquisition and the estimated fair market value thereof. "Permitted Encumbrance" shall mean, with respect to any Mortgaged Property, such exceptions to title as are set forth in the title insurance policy or title commitment delivered with respect thereto, all of which exceptions must be acceptable to the Administrative Agent in its reasonable discretion. "Permitted Liens" shall have the meaning provided in Section 9.01. "Person" shall mean any individual, partnership, joint venture, firm, corporation, association, trust or other enterprise or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" shall mean any multiemployer or single-employer plan, as defined in Section 4001 of ERISA, which is maintained or contributed to by (or to which there is an obligation to contribute of), the Borrower or a Subsidiary of the Borrower or an ERISA Affiliate, and each such plan for the five year period immediately following the latest date on which the Borrower, a Subsidiary of the Borrower or an ERISA Affiliate maintained, contributed to or had an obligation to contribute to such plan. "Pledge Agreements" shall mean the Holdings Pledge Agreement and the Borrower Pledge Agreement. "Pledge Agreement Collateral" shall mean all "Collateral" as defined in each of the Pledge Agreements. "Pledged Securities" shall mean "Pledged Securities" as defined in each of the Holdings Pledge Agreement and the Borrower Pledge Agreement. "Pledged Stock" shall mean "Pledged Stock" as defined in each of the Holdings Pledge Agreement and the Borrower Pledge Agreement. "Prime Lending Rate" shall mean the rate which BTCo announces from time to time as its prime lending rate, the Prime Lending Rate to change when and as such prime lending rate changes. The Prime Lending Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. BTCo may make commercial loans or other loans at rates of interest at, above or below the Prime Lending Rate. "Prior Liens" shall have the meaning provided in the Security Agreement. -104- "Pro Forma Leverage Ratio" shall mean, at any time for the determination thereof, the ratio of (x) Consolidated Indebtedness at such time to (y) Consolidated EBITDA for the Test Period then last ended, with such Pro Forma Leverage Ratio to be determined on a pro forma basis as if any Permitted --- ----- Acquisition that occurred during or subsequent to such Test Period (and the incurrence, assumption and/or repayment of any Indebtedness in connection with any such Permitted Acquisition), as the case may be, had occurred on the first day of such Test Period (and such Indebtedness, if any, had remained outstanding (or had not been outstanding, as the case may be) throughout such Test Period) it being understood that in calculating the Pro Forma Leverage Ratio in connection with each and every Permitted Acquisition, Consolidated EBITDA shall include the results of operations of the Person or assets acquired pursuant to each such Permitted Acquisition on a pro forma basis as if such acquisition had --- ----- occurred on the first day of the respective Test Period and shall include any conforming accounting adjustments made in connection therewith. On the date of any Permitted Acquisition pursuant to which the Pro Forma Leverage Ratio is to be calculated and on each date of calculation of Pro Forma Leverage Ratio, Holdings shall deliver to the Agent a certificate of an Authorized Officer of Holdings setting forth in reasonable detail the pro forma calculations required --- ----- to establish the Pro Forma Leverage Ratio (with such pro forma calculations to --- ----- be made on a basis reasonably satisfactory to the Agent and to assume that the interest expense attributable to any Indebtedness (whether existing or being incurred) bearing a floating interest rate shall be computed as if the rate in effect on the date of such Permitted Acquisition (taking into account any Interest Rate Protection Agreement applicable to such Indebtedness if such Interest Rate Protection Agreement has a remaining term in excess of 12 months) had been the applicable rate for the entire period). "Projections" shall have the meaning provided in Section 7.05(h). "Quarterly Payment Date" shall mean the last Business Day of each March, June, September and December, occurring after the Effective Date. "RCRA" shall mean the Resource Conservation and Recovery Act, as the same may be amended from time to time, 42 U.S.C. (S) 6901 et seq. -- --- "Real Property" of any Person shall mean all the right, title and interest of such Person in and to land, improvements and fixtures, including Leaseholds. "Recovery Event" shall mean the receipt by the Borrower or any Subsidiary Guarantor of any cash insurance proceeds or condemnation award payable (i) by reason of theft, loss, physical destruction or damage or any other similar event with respect to any property or assets of the Borrower or any Subsidiary Guarantor and (ii) under any policy of insurance required to be maintained under Section 8.03. "Register" shall have the meaning provided in Section 13.16. -105- "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing reserve requirements. "Regulation G" shall mean Regulation G of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. "Regulation S-X" shall mean Regulation S-X, Title 17, Code of Federal Regulations as from time to time in effect and any successor to all or a portion thereof. "Regulation T" shall mean Regulation T of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. "Regulation U" shall mean Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. "Regulation X" shall mean Regulation X of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. "Release" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing or migration into the environment. "Replaced Bank" shall have the meaning provided in Section 1.13. "Replacement Bank" shall have the meaning provided in Section 1.13. "Reportable Event" shall mean an event described in Section 4043(c) of ERISA with respect to a Plan as to which the 30-day notice requirement has not been waived by the PBGC. "Required Banks" means (i) at any time prior to the Effective Date, Non-Defaulting Banks holding at least a majority of the Total Commitments held by Non-Defaulting Banks and (ii) after the Effective Date, Non-Defaulting Banks holding at least a majority of the outstanding Loans (after giving effect to each Non-Defaulting Bank's Percentage of Swingline Loans), Letter of Credit Outstandings (after giving effect to each Participant's Adjusted Percentage) and Total Unutilized Revolving Loan Commitments held by Non-Defaulting Banks. "Returns" shall have the meaning provided in Section 7.09. -106- "Revolving Loan" shall have the meaning provided in Section 1.01(c). "Revolving Loan Banks" shall have the meaning provided in Section 1.01(c). "Revolving Loan Commitment" shall mean, for each Bank, the amount set forth opposite such Bank's name in Schedule I hereto directly below the column entitled "Revolving Loan Commitment," as same may be (x) reduced from time to time pursuant to Sections 3.02, 3.03, 4.02 and/or 10 or (y) adjusted from time to time as a result of assignments to or from such Bank pursuant to Section 1.13 or 13.04(b). "Revolving Loan Maturity Date" shall mean December 31, 2002. "Revolving Loan Percentage" of any Bank at any time shall mean a fraction (expressed as a percentage) the numerator of which is the Revolving Loan Commitment of such Bank at such time and the denominator of which is the Total Revolving Loan Commitment at such time. "Revolving Note" shall have the meaning provided in Section 1.05(a). "Rollover Amount" shall have the meaning provided in Section 9.07(b). "Scheduled Repayments" shall mean Tranche A Scheduled Repayments and Tranche B Scheduled Repayments. "SEC" shall have the meaning provided in Section 8.01(h). "SEC Reports" shall have the meaning provided in Section 8.01(h). "Section 4.04(f) Certificate" shall have the meaning provided in Section 4.04(f). "Secured Creditors" shall have the meaning assigned that term in the Security Documents. "Securities Act" shall mean the Securities Act of 1933, as amended. "Security Agreement" shall mean the Security Agreement, substantially in the form of Exhibit J hereto, made by the Borrower and the Subsidiary --------- Guarantors in favor of the Collateral Agent, as such agreement may be amended, modified or supplemented from time to time. "Security Agreement Collateral" shall mean all "Collateral" as defined in the Security Agreement. -107- "Security Document" shall mean each Pledge Agreement, the Security Agreement, each Mortgage, each Collateral Assignment of Leases, each Collateral Assignment of Location Leases and, after the execution and delivery thereof, each Additional Mortgage and each Subsidiary Security Document. "Semi-Annual Payment Date" shall mean the last day of each June and December occurring after the Effective Date. "Senior Indebtedness" shall mean, as to any Person, at any date all Indebtedness that would be required to be reflected on a consolidated balance sheet of such Person at such date (including, without limitation, all Capital Leases) exclusive of subordinated Indebtedness. "Start Date" shall have the meaning provided in the definition of Leverage Pricing Adjustment. "Stated Amount" of each Letter of Credit shall, at any time, mean the maximum amount available to be drawn thereunder (in each case determined without regard to whether any conditions to drawing could then be met). "Stock Purchase Agreement" shall mean the Stock Purchase Agreement dated as of November 25, 1996, among the Borrower, KWIK Wash and the selling shareholders named therein, pursuant to which the Borrower shall purchase all the capital stock of the partners of KWIK Wash. "Strategic Investor" shall mean a person engaged in a business which supplies service or equipment to Holdings or its subsidiaries or is otherwise engaged in a related or complementary business. "Subsidiary" shall mean, as to any Person, (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person and/or one or more Subsidiaries of such Person and (ii) any partnership, association, joint venture or other entity in which such Person and/or one or more Subsidiaries of such Person has more than a 50% equity interest at the time. "Subsidiary Guarantor" shall mean (i) each Subsidiary of the Borrower which is a party hereto or (ii) each Subsidiary of Holdings which is a party hereto. "Super Laundry" shall mean Super Laundry Equipment Corp., a New York corporation and a Wholly-Owned Subsidiary of the Borrower. -108- "Supermajority Banks" means (i) at any time prior to the Initial Funding Date, Non-Defaulting Banks holding at least 66 2/3% of the Total Commitments held by the Non-Defaulting Banks and (ii) after the Effective Date, shall mean (x) in the case of Tranche A Term Loans, shall mean Non-Defaulting Banks holding at least 66 2/3% of the outstanding Tranche A Term Loans, (y) in the case of Tranche B Term Loans, shall mean Non-Defaulting Banks holding at least 66 2/3% of the outstanding Tranche B Term Loans, and (z) in the case of Revolving Loans, Non-Defaulting Banks holding at least 66 2/3% of the outstanding Revolving Loans (after giving effect to each Non-Defaulting Bank's Percentage of Swingline Loans), Letter of Credit Outstanding (after giving effect to each Participant's Adjusted Percentage) and Total Unutilized Revolving Loan Commitments held by the Non-Defaulting Banks. "Swingline Expiry Date" shall mean the date which is five Business Days prior to the Revolving Loan Maturity Date. "Swingline Loan" shall have the meaning provided in Section 1.01(d). "Swingline Note" shall have the meaning provided in Section 1.05(a). "Syndication Agent" shall mean First Union National Bank of North Carolina, in its capacity as Syndication Agent for the Banks hereunder, and shall include any successor to the Syndication Agent. "Syndication Date" shall mean that date upon which the Agents determine in their collective sole discretion (and notify the Borrower) that the primary syndication (and resultant addition of institutions as Banks pursuant to Section 13.04) has been completed. "Tax Sharing Agreements" shall have the meaning provided in Section 5.05. "Taxes" shall mean any present or future tax, levy, stamp, impost, duty, deduction, assessment or other charge or withholding (including any intangible, documentary or excise tax), and all liabilities with respect thereto (including penalties, interest and expenses) imposed, levied, collected, withheld or assessed by or on behalf of any Governmental Authority. "Term Loan" shall mean the Tranche A Term Loan and the Tranche B Term Loan. "Term Loan Commitment" shall mean each Tranche A Term Loan Commitment and each Tranche B Term Loan Commitment, with the Term Loan Commitment of any Bank at any time to equal the sum of its Tranche A Term Loan Commitment and Tranche B Term Loan Commitment as then in effect. -109- "Term Note" shall have the meaning provided in Section 1.05(a). "Test Date" shall have the meaning provided in the definition of Leverage Pricing Adjustment. "Test Period" shall mean for any determination the four consecutive fiscal quarters of Holdings (taken as one accounting period), ended, in the case of any determination of Leverage Pricing Adjustment on the applicable Test Date and, in all other cases, ended on the date indicated in the applicable Section hereof. "Total Commitments" shall mean, at any time, the sum of the Commitments of each of the Banks. "Total Revolving Loan Commitment" shall mean, at any time, the sum of the then Revolving Loan Commitments of each of the Banks. "Total Term Loan Commitment" shall mean, at any time, the sum of the Total Tranche A Term Loan Commitment and Total Tranche B Term Loan Commitment. "Total Tranche A Term Loan Commitment" shall mean, at any time, the sum of the Tranche A Term Loan Commitments of each of the Banks. "Total Tranche B Term Loan Commitment" shall mean, at any time, the sum of the Tranche B Term Loan Commitments of each of the Banks. "Total Unutilized Revolving Loan Commitment" shall mean, at any time, an amount equal to the remainder of (x) the then Total Revolving Loan Commitment, less (y) the sum of the aggregate principal amount of Revolving Loans and Swingline Loan then outstanding plus the then aggregate amount of Letter of Credit Outstandings. "Tranche" shall mean the respective facility and commitments utilized in making Loans hereunder, with there being four separate Tranches; i.e., --- Tranche A Term Loans, Tranche B Term Loans, Revolving Loans and Swingline Loans. "Tranche A Scheduled Repayment" shall have the meaning provided in Section 4.02(c). "Tranche A Scheduled Repayment Date" shall have the meaning provided in Section 4.02(c). "Tranche A Term Loan" shall have the meaning provided in Section 1.01(a). -110- "Tranche A Term Loan Commitment" shall mean, for each Bank, the amount set forth opposite such Bank's name in Schedule I hereto directly below the column entitled "Tranche A Term Loan Commitment", as same may be (x) reduced from time to time pursuant to Sections 3.03, 4.02 and/or 10 or (y) adjusted from time to time as a result of assignments to or from such Bank pursuant to Section 1.13 or 13.04. "Tranche A Term Loan Maturity Date" shall mean December 31, 2002. "Tranche A Term Note" shall have the meaning provided in Section 1.05(a). "Tranche B Scheduled Repayment" shall have the meaning provided in Section 4.02(d). "Tranche B Scheduled Repayment Date" shall have the meaning provided in Section 4.02(d). "Tranche B Term Loan" shall have the meaning provided in Section 1.01(b). "Tranche B Term Loan Commitment" shall mean, for each Bank, the amount set forth opposite such Bank's name in Schedule I hereto directly below the column entitled "Tranche B Term Loan Commitment", as same may be (x) reduced from time to time pursuant to Sections 3.03, 4.02 and/or 10 or (y) adjusted from time to time as a result of assignments to or from such Bank pursuant to Section 1.13 or 13.04(b). "Tranche B Term Loan Maturity Date" shall mean June 30, 2004. "Tranche B Term Note" shall have the meaning provided in Section 1.05(a). "12 3/4% Notes" shall mean the 12 3/4% Senior Notes due 2001 issued pursuant to an indenture between the Borrower and Shawmut Bank Connecticut as in effect on the Effective Date. "Type" shall mean the type of Loan determined with regard to the interest option applicable thereto; i.e., whether a Base Rate Loan or a --- Eurodollar Loan. "UCC" shall mean the Uniform Commercial Code as from time to time in effect in the relevant jurisdiction. -111- "Unfunded Current Liability" of any Plan means the amount, if any, by which the actuarial present value of the accumulated benefits under the Plan as of the close of its most recent plan year exceeds the fair market value of the assets allocable thereto, each determined in accordance with Statement of Financial Accounting Standards No. 87, based upon the actuarial assumptions used by the Plan's actuary in the most recent annual valuation of the Plan. "United States" and "U.S." shall each mean the United States of America. "Unpaid Drawing" shall have the meaning provided for in Section 2.04(a). "Unutilized Revolving Loan Commitment" with respect to any Bank, at any time, shall mean such Bank's Revolving Loan Commitment at such time less the sum of (i) the aggregate outstanding principal amount of Revolving Loans made by such Bank (plus, in the case of BTCo, the aggregate outstanding principal amount of Swingline Loans made by BTCo, and (ii) such Bank's Adjusted Percentage of the Letter of Credit Outstandings in respect of Letters of Credit issued under this Agreement. "Voting Stock" means any class or classes of capital stock of Holdings pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the Board of Directors of Holdings. "Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any corporation 100% of whose capital stock (other than director's qualifying shares) is at the time owned by such Person and/or one or more Wholly-Owned Subsidiaries of such Person and (ii) any partnership, association, joint venture or other entity in which such Person and/or one or more Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such time. SECTION 12. The Administrative Agent. ------------------------ 12.01 Appointment. The Banks hereby designate Bankers Trust Company ----------- as Administrative Agent (for purposes of this Section 12, the term "Administrative Agent" shall include BTCo in its capacity as Collateral Agent pursuant to the Security Documents) to act as specified herein and in the other Credit Documents. Each Bank hereby irrevocably authorizes, and each holder of any Note by the acceptance of such Note shall be deemed irrevocably to authorize, the Administrative Agent to take such action on its behalf under the provisions of this Agreement, the other Credit Documents and any other instruments and agreements referred to herein or therein and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the Administrative Agent by the terms hereof and thereof and such other powers as are -112- reasonably incidental thereto. The Administrative Agent may perform any of its duties hereunder by or through its respective officers, directors, agents, employees or affiliates. 12.02 Nature of Duties. The Administrative Agent shall not have any ---------------- duties or responsibilities except those expressly set forth in this Agreement and the Security Documents. Neither the Administrative Agent nor any of its respective officers, directors, agents, employees or affiliates shall be liable for any action taken or omitted by it or them hereunder or under any other Credit Document or in connection herewith or therewith, unless caused by its or their gross negligence or willful misconduct. The duties of the Administrative Agent shall be mechanical and administrative in nature; the Administrative Agent shall not have by reason of this Agreement or any other Credit Document a fiduciary relationship in respect of any Bank or the holder of any Note; and nothing in this Agreement or any other Credit Document, expressed or implied, is intended to or shall be so construed as to impose upon the Administrative Agent any obligations in respect of this Agreement or any other Credit Document except as expressly set forth herein or therein. 12.03 Lack of Reliance on the Administrative Agent. Independently -------------------------------------------- and without reliance upon the Administrative Agent, each Bank and the holder of each Note, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of Holdings and its Subsidiaries in connection with the making and the continuance of the Loans and the taking or not taking of any action in connection herewith and (ii) its own appraisal of the creditworthiness of Holdings and its Subsidiaries and, except as expressly provided in this Agreement, the Administrative Agent shall not have any duty or responsibility, either initially or on a continuing basis, to provide any Bank or the holder of any Note with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter. The Administrative Agent shall not be responsible to any Bank or the holder of any Note for any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of this Agreement or any other Credit Document or the financial condition of Holdings and its Subsidiaries or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any other Credit Document, or the financial condition of Holdings and its Subsidiaries or the existence or possible existence of any Default or Event of Default. 12.04 Certain Rights of the Administrative Agent. If the Agent shall ------------------------------------------ request instructions from the Required Banks with respect to any act or action (including failure to act) in connection with this Agreement or any other Credit Document, the Administrative Agent shall be entitled to refrain from such act or taking -113- such action unless and until the Administrative Agent shall have received instructions from the Required Banks; and the Administrative Agent shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Bank or the holder of any Note shall have any right of action whatsoever against the Administrative Agent as a result of the Administrative Agent acting or refraining from acting hereunder or under any other Credit Document in accordance with the instructions of the Required Banks. 12.05 Reliance. The Administrative Agent shall be entitled to rely, -------- and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cablegram, radiogram, order or other document or telephone message signed, sent or made by any Person that the Administrative Agent believed to be the proper Person, and, with respect to all legal matters pertaining to this Agreement and any other Credit Document and its duties hereunder and thereunder, upon advice of counsel selected by the Administrative Agent. 12.06 Indemnification. To the extent the Administrative Agent is not --------------- reimbursed and indemnified by the Borrower, the Banks will reimburse and indemnify the Administrative Agent, in proportion to their respective "percentages" as used in determining the Required Banks (with such "percentages" to be determined as if there are no Defaulting Banks), for and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, judgments, costs, expenses or disbursements of whatsoever kind or nature which may be imposed on, asserted against or incurred by the Administrative Agent in performing its respective duties hereunder or under any other Credit Document, in any way relating to or arising out of this Agreement or any other Credit Document, except to the extent such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements are finally judicially determined to have resulted from the Administrative Agent's gross negligence or willful misconduct. 12.07 The Administrative Agent in Its Individual Capacity. With --------------------------------------------------- respect to its obligation to make Loans under this Agreement, the Administrative Agent shall have the rights and powers specified herein for a "Bank" and may exercise the same rights and powers as though it were not performing the duties specified herein; and the term "Banks," "Required Banks," "holders of Notes" or any similar terms shall, unless the context clearly otherwise indicates, include the Administrative Agent in its individual capacity. The Administrative Agent may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with any Credit Party or any Affiliate of any Credit Party as if they were not performing the duties specified herein, and may accept fees and other consideration from the Borrower or any other Credit Party for services in connection with this Agreement and otherwise without having to account for the same to the Banks. -114- 12.08 Holders. The Administrative Agent may deem and treat the payee ------- of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Administrative Agent. Any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee, assignee or indorsee, as the case may be, of such Note or of any Note or Notes issued in exchange therefor. 12.09 Resignation by the Administrative Agent. (a) The --------------------------------------- Administrative Agent may resign from the performance of all its functions and duties hereunder and/or under the other Credit Documents at any time by giving 15 Business Days' prior written notice to the Borrower and the Banks. Such resignation shall take effect upon the appointment of a successor Administrative Agent pursuant to clauses (b) and (c) below or as otherwise provided below. (b) Upon any such notice of resignation, the Banks shall appoint a successor Administrative Agent hereunder or thereunder who shall be a commercial bank or trust company reasonably acceptable to the Borrower, except after an Event of Default. (c) If a successor Administrative Agent shall not have been so appointed within such 15 Business Day period, the Administrative Agent, with the consent of the Borrower, except after an Event of Default, shall then appoint a successor Administrative Agent who shall serve as Administrative Agent hereunder or thereunder until such time, if any, as the Banks appoint a successor Administrative Agent as provided above. (d) If no successor Administrative Agent has been appointed pursuant to clause (b) or (c) above by the 20th Business Day after the date such notice of resignation was given by the Administrative Agent, the Administrative Agent's resignation shall become effective and the Banks shall thereafter perform all the duties of the Administrative Agent hereunder and/or under any other Credit Document until such time, if any, as the Banks appoint a successor Administrative Agent as provided above. SECTION 13. Miscellaneous. ------------- 13.01 Payment of Expenses, etc. The Borrower shall: (i) whether or ------------------------ not the transactions herein contemplated are consummated, pay all reasonable out-of-pocket costs and expenses of the Agents (including, without limitation, the reasonable fees and disbursements of Cahill Gordon & Reindel and local counsel) in connection with the preparation, execution and delivery of this Agreement and the other Credit Documents and the documents and instruments referred to herein and therein and any -115- amendment, waiver or consent relating hereto or thereto, and in connection with the initial syndication efforts with respect to this Agreement and of the Agents and, following an Event of Default, each of the Banks in connection with the enforcement of this Agreement and the other Credit Documents and the documents and instruments referred to herein and therein (including, without limitation, the reasonable fees and disbursements of counsel for the Agents and, following an Event of Default, for each of the Banks); (ii) pay and hold each of the Banks harmless from and against any and all present and future stamp, excise and other similar taxes with respect to the foregoing matters and save each of the Banks harmless from and against any and all liabilities with respect to or resulting from any delay or omission to pay such taxes; and (iii) indemnify each of the Agents and each Bank, and each of their Affiliates and each of them and their respective officers, directors, trustees, employees, representatives and agents from and hold each of them harmless against any and all liabilities, obligations (including removal or remedial actions), losses, damages, penalties, claims, actions, judgments, suits, costs, expenses and disbursements (including reasonable attorneys' and consultants' fees and disbursements) incurred by, imposed on or assessed against any of them as a result of, or arising out of, or in any way related to, or by reason of, (a) any investigation, litigation or other proceeding (whether or not any Agent or any Bank is a party thereto) related to the entering into and/or performance of this Agreement or any other Credit Document or the use of any Letter of Credit or the proceeds of any Loans hereunder or the consummation of any transactions contemplated herein (including, without limitation, the Acquisition) or in any other Credit Document or the exercise of any of their rights or remedies provided herein or in the other Credit Documents, or (b) the actual or alleged presence of Hazardous Materials in the air, surface water or groundwater or on the surface or subsurface of any Real Property owned or at any time operated by Holdings or any of its Subsidiaries, the generation, storage, transportation, handling or disposal of Hazardous Materials at any location, whether or not owned or operated by Holdings or any of its Subsidiaries, the non-compliance of any Real Property with foreign, federal, state and local laws, regulations, and ordinances (including applicable permits thereunder) applicable to any Real Property, or any Environmental Claim asserted against Holdings, any of its Subsidiaries or any Real Property owned or at any time operated by Holdings or any of its Subsidiaries, including, in each case, without limitation, the reasonable fees and disbursements of counsel and other consultants incurred in connection with any such investigation, litigation or other proceeding (but excluding any losses, liabilities, claims, damages or expenses to the extent finally judicially determined to have been incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified). To the extent that the undertaking to indemnify, pay or hold harmless any Agent or any Bank set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, the Borrower shall make the maximum contribution to the payment and satisfaction of each of the indemnified liabilities which is permissible under applicable law. -116- 13.02 Right of Set-off. In addition to any rights now or hereafter ---------------- granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default, each Agent, each Letter of Credit Issuer and each Bank is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to Holdings or the Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other Indebtedness at any time held or owing by such Agent, such Letter of Credit Issuer and such Bank (including, without limitation, by branches and agencies of such Agent, such Letter of Credit Issuer and such Bank wherever located) to or for the credit or the account of Holdings or the Borrower or any other Guarantor against and on account of the Obligations and liabilities of Holdings or the Borrower or any other Guarantor to such Agent, such Letter of Credit Issuer and such Bank under this Agreement or under any of the other Credit Documents, including, without limitation, all interests in Obligations purchased by such Bank pursuant to Section 13.06(b), and all other claims of any nature or description arising out of or connected with this Agreement or any other Credit Document, irrespective of whether or not such Agent, such Letter of Credit Issuer and such Bank shall have made any demand hereunder and although said Obligations, liabilities or claims, or any of them, shall be contingent or unmatured. 13.03 Notices. Except as otherwise expressly provided herein, all ------- notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, telecopier or cable communication) and mailed, telegraphed, telexed, telecopied, cabled or delivered: if to Holdings, at Holdings' address specified opposite its signature below; if to the Borrower, at the Borrower's address specified opposite its signature below; if to any Bank and any Agent (other than the Administrative Agent), at its address specified opposite its name on Schedule II below; and if to the Administrative Agent, at its Notice Office; or, as to any Credit Party or the Administrative Agent, at such other address as shall be designated by such party in a written notice to the other parties hereto and, as to each Bank or any other Agent, at such other address as shall be designated by such Bank in a written notice to the Borrower and the Administrative Agent. All such notices and communications shall, when mailed, telegraphed, telexed, telecopied, or cabled or sent by overnight courier, be effective when deposited in the mails, delivered to the telegraph company, cable company or overnight courier, as the case may be, or sent by telex or telecopier, except that notices and communications to the Administrative Agent and the Borrower shall not be effective until received by the Administrative Agent or the Borrower, as the case may be. 13.04 Benefit of Agreement. (a) This Agreement shall be binding -------------------- upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided, however, no Credit Party may assign -------- ------- or transfer any of its rights, obligations or interest hereunder or under any other Credit Document without the prior written consent of the Banks; and provided further, that, although any - -------- ------- -117- Bank may transfer, assign or grant participations in its rights hereunder, such Bank shall remain a "Bank" for all purposes hereunder (and may not transfer or assign all or any portion of its Commitments hereunder except as provided in Section 13.04(b)) and the transferee, assignee or participant, as the case may be, shall not constitute a "Bank" hereunder; and provided further, that no Bank -------- ------- shall transfer or grant any participation under which the participant shall have rights to approve any amendment to or waiver of this Agreement or any other Credit Document except to the extent such amendment or waiver would (i) extend the Final Scheduled Maturity of the Facility or Tranche in which such participant is participating, or reduce the rate or extend the time of payment of interest or Fees thereon (except in connection with a waiver of applicability of any post-default increase in interest rates) or reduce the principal amount thereof, or increase the amount of the participant's participation over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory reduction in the Total Commitment shall not constitute a change in the terms of such participation, and that an increase in any Commitment or Loan shall be permitted without the consent of any participant if the participant's participation is not increased as a result thereof), (ii) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement or (iii) release (x) the Guarantee of Holdings or (y) all or substantially all of the Collateral under all of the Security Documents (except as expressly provided in the Security Documents) or in connection with a sale otherwise permitted hereby), supporting the Loans hereunder in which such participant is participating. In the case of any such participation, the participant shall not have any rights under this Agreement or any of the other Credit Documents (the participant's rights against such Bank in respect of such participation to be those set forth in the agreement executed by such Bank in favor of the participant relating thereto) and all amounts payable by the Borrower hereunder shall be determined as if such Bank had not sold such participation. (b) Notwithstanding the foregoing, any Bank (or any Bank together with one or more other Banks) may (x) assign all or a portion of its Revolving Loan Commitment (and related outstanding Obligations hereunder) and/or its outstanding Term Loans to its parent company and/or any affiliate of such Bank which is at least 50% owned by such Bank or its parent company or to one or more Banks or (y) assign all, or if less than all, a portion equal to at least $5,000,000 in the aggregate for the assigning Bank or assigning Banks, of such Revolving Loan Commitments and/or outstanding principal amount of Term Loans hereunder to one or more Eligible Transferees, each of which assignees shall become a party to this Agreement as a Bank by execution of an Assignment and Assumption Agreement; provided that, (i) at such time Schedule I shall be deemed -------- modified to reflect the Commitments (and/or outstanding Term Loans, as the case may be) of such new Bank and of the existing Banks, (ii) new Notes will be issued, at the Borrower's expense, to such new Bank and to the assigning Bank upon the request of such new Bank or assigning Bank, such new Notes to be in conformity with the requirements of Section 1.05 (with appropriate modifications) to the extent needed to reflect the revised Commitments (and/or -118- outstanding Term Loans, as the case may be), (iii) the consent of BTCo shall be required in connection with any such assignment (which consent shall not be unreasonably withheld) and (iv) the Administrative Agent shall receive at the time of each such assignment, from the assigning or assignee Bank, the payment of a non-refundable assignment fee of $3,500. To the extent of any assignment pursuant to this Section 13.04(b), the assigning Bank shall be relieved of its obligations hereunder with respect to its assigned Commitments. At the time of each assignment pursuant to this Section 13.04(b) to a Person which is not already a Bank hereunder and which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for Federal income tax purposes, the respective assignee Bank shall, to the extent legally entitled to do so, provide to the Borrower in the case of a Bank described in clause (ii) or (iv) of Section 4.04(b), the forms described in such clause (ii) or (iv), as the case may be. To the extent that an assignment of all or any portion of a Bank's Commitments and related outstanding Obligations pursuant to Section 1.13 or this Section 13.04(b) would, at the time of such assignment, result in increased costs under Section 1.10, 1.11 or 4.04 from those being charged by the respective assigning Bank prior to such assignment, then the Borrower shall not be obligated to pay such increased costs (although the Borrower shall be obligated to pay any other increased costs of the type described above resulting from changes after the date of the respective assignment). (c) Nothing in this Agreement shall prevent or prohibit any Bank from pledging its Loans and Notes hereunder to a Federal Reserve Bank in support of borrowings made by such Bank from such Federal Reserve Bank. 13.05 No Waiver; Remedies Cumulative. No failure or delay on the ------------------------------ part of the Administrative Agent or any Bank or any holder of any Note in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the Borrower or any other Credit Party and the Agent, the Syndication Administrative Agent or any Bank or the holder of any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights, powers and remedies herein or in any other Credit Document expressly provided are cumulative and not exclusive of any rights, powers or remedies which the Administrative Agent or any Bank or the holder of any Note would otherwise have. No notice to or demand on any Credit Party in any case shall entitle any Credit Party to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Administrative Agent or any Bank or the holder of any Note to any other or further action in any circumstances without notice or demand. 13.06 Payments Pro Rata. (a) Except as otherwise provided in this ----------------- Agreement, the Administrative Agent agrees that promptly after its receipt of each -119- payment from or on behalf of the Borrower in respect of any Obligations hereunder, it shall distribute such payment to the Banks (other than any Bank that has consented in writing to waive its pro rata share of any such payment) --- ---- pro rata based upon their respective shares, if any, of the Obligations with - --- ---- respect to which such payment was received. (b) Each of the Banks agrees that, if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker's lien, by counterclaim or cross action, by the enforcement of any right under the Credit Documents, or otherwise), which is applicable to the payment of the principal of, or interest on, the Loans, Unpaid Drawings, Commitment Commission or Letter of Credit Fees, of a sum which with respect to the related sum or sums received by other Banks is in a greater proportion than the total of such Obligation then owed and due to such Bank bears to the total of such Obligation then owed and due to all of the Banks immediately prior to such receipt, then such Bank receiving such excess payment shall purchase for cash without recourse or warranty from the other Banks an interest in the Obligations of the respective Party to such Banks in such amount as shall result in a proportional participation by all the Banks in such amount; provided that if all or any portion of such excess amount is -------- thereafter recovered from such Bank, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. (c) Notwithstanding anything to the contrary contained herein, the provisions of the preceding Sections 13.06(a) and (b) shall be subject to the express provisions of this Agreement which require, or permit, differing payments to be made to Non-Defaulting Banks as opposed to Defaulting Banks. 13.07 Calculations; Computations. (a) The financial statements to -------------------------- be furnished to the Banks pursuant hereto shall be made and prepared in accordance with generally accepted accounting principles in the United States consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in writing by the Borrower to the Banks); provided that, except as otherwise specifically provided herein, all -------- computations of Excess Cash Flow and all computations determining compliance with Sections 9.08 through 9.10, inclusive, shall utilize accounting principles and policies in conformity with those used to prepare the financial statements of Holdings for the fiscal year ended September 30, 1996 delivered to the Banks pursuant to Section 7.05(a) (with the foregoing generally accepted accounting principles, subject to the preceding proviso, herein called "GAAP"). (b) All computations of interest, Commitment Commission and Fees hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day (determined in accordance with the terms hereof) occurring in the period for which such interest, Commitment Commission or Fees are payable (except for interest payable in respect of Base Rate -120- Loans based on the Prime Lending Rate, which shall be computed on the bases of a 365/66 day year). 13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF ----------------------------------------------------------- JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS - ---------- AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL, EXCEPT AS OTHERWISE PROVIDED IN CERTAIN OF THE MORTGAGES, BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH OF HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS CT CORPORATION SYSTEM, WITH OFFICES ON THE DATE HEREOF AT 1633 BROADWAY, NEW YORK, NEW YORK 10019 AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE, ACCEPT AND ACKNOWLEDGE FOR AND ON ITS BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. IF FOR ANY REASON SUCH DESIGNEE, APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH, EACH CREDIT PARTY AGREES TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT IN NEW YORK CITY ON THE TERMS AND FOR THE PURPOSES OF THIS PROVISION SATISFACTORY TO THE AGENT UNDER THIS AGREEMENT. EACH OF HOLDINGS AND THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ANY CREDIT PARTY AT ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURE BELOW, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT UNDER THIS AGREEMENT, ANY BANK OR THE HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY CREDIT PARTY IN ANY OTHER JURISDICTION. -121- (b) EACH OF HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. (c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 13.09 Counterparts. This Agreement may be executed in any number of ------------ counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Borrower and each of the Agents. 13.10 Effectiveness. (a) This Agreement shall become effective on ------------- the date (the "Effective Date") on which (i) Holdings, the Borrower, each -------------- Subsidiary Guarantor, each of the Banks, the Required Banks (determined immediately before the occurrence of the Effective Date) (or the consent of the Required Banks is obtained) and each of the Agents shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered (including by way of facsimile device) the same to the Administrative Agent at its Notice Office and (ii) the conditions contained in Sections 5, 6 and 13.10(b) are met to the satisfaction of the Agents and the Required Banks (determined immediately after the occurrence of the Effective Date). Unless the Administrative Agent has received actual notice from any Bank that the conditions contained in Sections 5 and 6 have not been met to its satisfaction, upon the satisfaction of the condition described in clause (i) of the immediately preceding sentence and upon the Agents good faith determination that the conditions described in clause (ii) of the immediately preceding sentence have been met, then the Effective Date shall have been deemed to have occurred, regardless of any subsequent determination that one or more of the conditions thereto had not been met (although the occurrence of the Effective Date shall not release the Borrower, Holdings or any Subsidiary Guarantor from any liability for failure to satisfy one or more of the applicable conditions contained in Section 5 or 6). The Administrative Agent will give the Borrower and each Bank prompt written notice of the occurrence of the Effective Date. -122- (b) On the Effective Date, each Bank shall have delivered to the Administrative Agent for the account of the Borrower an amount equal to the Term Loans and Revolving Loans to be made by such Bank on the Effective Date. Notwithstanding anything to the contrary contained in this Section 13.10(b), in satisfying the foregoing condition, unless the Agent shall have been notified by any Bank prior to the occurrence of the Effective Date that such Bank does not intend to make available to the Administrative Agent such Bank's Term Loans and Revolving Loans required to be made by it on such date, then the Administrative Agent may, in reliance on such assumption, make available to the Borrower the corresponding amounts in accordance with the provisions of Section 1.04, and the making available by the Agent of such amounts shall satisfy the condition contained in this Section 13.10(b). 13.11 Headings Descriptive. The headings of the several sections and -------------------- subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 13.12 Amendment or Waiver; etc. (a) Neither this Agreement nor any ------------------------ other Credit Document nor any terms hereof or thereof may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination is in writing signed by the respective Credit Parties party thereto and the Required Banks, provided that no such change, waiver, discharge or termination -------- shall, without the consent of each Bank (other than a Defaulting Bank) (with Obligations being directly affected in the case of following clause (i)), (i) extend the Final Scheduled Maturity Dates of or extend the stated maturity of any Letter of Credit beyond the Revolving Loan Maturity Date, or reduce the rate or extend the time of payment of interest or Fees thereon, or reduce the principal amount thereof (except to the extent repaid in cash), (ii) release (x) the Guarantee of Holdings or a Subsidiary Guarantor or (y) all or substantially all of the Collateral (except as expressly provided in the Security Documents in connection with a sale otherwise permitted hereby), (iii) amend, modify or waive any provision of this Section 13.12, (iv) reduce the percentage specified in the definition of Required Banks (it being understood that, with the consent of the Required Banks, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Banks on substantially the same basis as the extensions of Term Loans and Revolving Loan Commitments are included on the Effective Date) or (v) consent to the assignment or transfer by the Borrower or Holdings of any of its rights and obligations under this Agreement; provided further, that no such change, waiver, discharge or -------- ------- termination shall (u) increase the Commitments of any Bank over the amount thereof then in effect without the consent of such Bank (it being understood that waivers or modifications of conditions precedent, covenants, Defaults or Events of Default or of a mandatory reduction in the Total Commitment shall not constitute an increase of the Commitment of any Bank, and that an increase in the available portion of any Commitment of any Bank shall not constitute an increase in the Commitment of such Bank), (v) without the consent of BTCo, amend, modify or waive any provision of Section 2 or alter its rights or obligations -123- with respect to Letters of Credit, (w) without the consent of the Administrative Agent, amend, modify or waive any provision of Section 12 as same applies to such Administrative Agent or any other provision as same relates to the rights or obligations of such Administrative Agent, (x) without the consent of the Collateral Agent, amend, modify or waive any provision relating to the rights or obligations of the Collateral Agent, (y) without the consent of the Supermajority Banks of each Tranche which is being allocated a lesser prepayment, repayment or commitment reduction as a result of the actions described below (or without the consent of the Supermajority Banks of each Tranche in the case of an amendment to the definition of Supermajority Banks), amend the definition of Supermajority Banks or alter the required application of any prepayments or repayments (or commitment reductions), as between the various Tranches, pursuant to Section 4.01 or 4.02 (excluding Sections 4.02(c) and (d)) (although the Required Banks may waive, in whole or in part, any such prepayment, repayment or commitment reduction, so long as the application, as amongst the various Tranches, of any such prepayment, repayment or commitment reduction which is still required to be made is not altered) or (z) without the consent of the Supermajority Banks of the respective Tranche, amend, modify or waive any Tranche A Scheduled Repayment or Tranche B Scheduled Repayment. (b) If, in connection with any proposed change, waiver, discharge or termination to any of the provisions of this Agreement as contemplated by clauses (i) through (v), inclusive, of the first proviso to Section 13.12(a), the consent of the Required Banks is obtained but the consent of one or more of such other Banks whose consent is required is not obtained, then the Borrower shall have the right, so long as all non-consenting Banks whose individual consent is required are treated as described in either clauses (A) or (B) below, to either (A) replace each such non-consenting Bank or Banks (or, at the option of the Borrower if the respective Bank's consent is required with respect to less than all Tranches of Loans (or related Commitments), to replace only the respective Tranche or Tranches of Commitments and/or Loans of the respective non-consenting Bank which gave rise to the need to obtain such Bank's individual consent) with one or more Replacement Banks pursuant to Section 1.13 so long as at the time of such replacement, each such Replacement Bank consents to the proposed change, waiver, discharge or termination or (B) terminate such non- consenting Bank's Revolving Loan Commitment (if such Bank's consent is required as a result of its Revolving Loan Commitment) and/or repay each Tranche of outstanding Term Loans of such Bank which gave rise to the need to obtain such Bank's consent, in accordance with Sections 3.02(b) and/or 4.01(v); provided -------- that, unless the Commitments are terminated, and Loans repaid, pursuant to preceding clause (B) are immediately replaced in full at such time through the addition of new Banks or the increase of the Commitments and/or outstanding Loans of existing Banks (who in each case must specifically consent thereto), then in the case of any action pursuant to preceding clause (B) the Required Banks (determined before giving effect to the proposed action) shall specifically consent thereto; provided further, that in any event the Borrower -------- ------- shall not have the right to replace a Bank, terminate its Revolving Loan -124- Commitment or repay its Loans solely as a result of the exercise of such Bank's rights (and the withholding of any required consent by such Bank) pursuant to the second proviso to Section 13.12(a). 13.13 Survival. All indemnities set forth herein including, -------- without limitation, in Sections 1.10, 1.11, 2.05, 4.04, 13.01 and 13.06 shall, subject to Section 13.15 (to the extent applicable), survive the execution, delivery and termination of this Agreement and the Notes and the making and repayment of the Loans (it being understood and agreed that all such indemnities shall also survive as to any Bank that has assigned all of its obligations hereunder pursuant to Section 13.04(b) with respect to the period of time in which such Bank was a "Bank" hereunder). 13.14 Domicile of Loans. Each Bank may transfer and carry its Loans ----------------- at, to or for the account of any office, Subsidiary or Affiliate of such Bank. Notwithstanding anything to the contrary contained herein, to the extent that a transfer of Loans pursuant to this Section 13.14 would, at the time of such transfer, result in increased costs under Section 1.10, 1.11, 2.05 or 4.04 from those being charged by the respective Bank prior to such transfer, then the Borrower shall not be obligated to pay such increased costs (although the Borrower shall be obligated to pay any other increased costs of the type described above resulting from changes after the date of the respective transfer). 13.15 Register. The Borrower hereby designates the Administrative -------- Agent to serve as the Borrower's agent, solely for purposes of this Section 13.15, to maintain a register (the "Register") on which it will record the Commitments from time to time of each of the Banks, the Loans made by each of the Banks and each repayment in respect of the principal amount of the Loans of each Bank. Failure to make any such recordation, or any error in such recordation shall not affect the Borrower's obligations in respect of such Loans. With respect to any Bank, the transfer of the Commitments of such Bank and the rights to the principal of, and interest on, any Loan made pursuant to such Commitments shall not be effective unless and until such transfer is recorded on the Register maintained by the Agent with respect to ownership of such Commitments and Loans and prior to such recordation all amounts owing to the transferor with respect to such Commitments and Loans shall remain owing to the transferor. The registration of assignment or transfer of all or part of any Commitments and Loans shall be recorded by the Administrative Agent on the Register only upon the acceptance by the Administrative Agent of a properly executed and delivered Assignment and Assumption Agreement pursuant to Section 13.04(b). Coincident with the delivery of such an Assignment and Assumption Agreement to the Administrative Agent for acceptance and registration of assignment or transfer of all or part of a Loan, or as soon thereafter as practicable, the assigning or transferor Bank shall surrender the Note evidencing such Loan, and thereupon one or more new Notes in the same aggregate principal amount shall be issued to the assigning or transferor Bank and/or the new Bank. The Borrower agrees to indemnify the Administrative -125- Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by the Administrative Agent in performing its duties under this Section 13.15. 13.16 Confidentiality. (a) Subject to the provisions of clause (b) --------------- of this Section 13.16, each Bank agrees that it will use its best efforts not to disclose without the prior consent of Holdings or the Borrower (other than to its employees, auditors, advisors or counsel or to another Bank if the Bank or such Bank's holding or parent company in its sole discretion determines that any such party should have access to such information; provided such Persons shall -------- be subject to the provisions of this Section 13.16 to the same extent as such Bank) any information with respect to Holdings or any of its Subsidiaries which is now or in the future furnished pursuant to this Agreement or any other Credit Document and which is designated by Holdings to the Banks in writing as confidential; provided that any Bank may disclose any such information (a) as -------- has become generally available to the public, (b) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over such Bank or to the Federal Reserve Board or the Federal Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere) or their successors, (c) as may be required or appropriate in respect to any summons or subpoena or in connection with any litigation, (d) in order to comply with any law, order, regulation or ruling applicable to such Bank, (e) to the Agent or the Collateral Agent and (f) to any prospective or actual transferee or participant in connection with any contemplated transfer or participation of any of the Notes or Commitments or any interest therein by such Bank; provided that -------- such prospective transferee or participant agrees to be bound by the provisions of this Section. (b) Each of Holdings and the Borrower hereby acknowledge and agrees that each Bank may share with any of its affiliates any information related to Holdings or any of its Subsidiaries (including, without limitation, any nonpublic customer information regarding the creditworthiness of Holdings and its Subsidiaries, provided such Persons shall be subject to the provisions of this Section 13.16 to the same extent as such Bank). SECTION 14. Guaranty. -------- 14.01 The Guaranty. In order to induce the Banks to enter into this ------------ Agreement and to extend credit hereunder and in recognition of the direct benefits to be received by each Guarantor from the proceeds of the Loans and the issuance of the Letters of Credit and to induce the Banks or any of their respective Affiliates to enter into Interest Rate Protection Agreements, each Guarantor hereby agrees with the Banks as follows: Each Guarantor hereby unconditionally and irrevocably, jointly and severally, guarantees as primary obligor and not merely as surety the full and prompt payment when due, whether upon maturity, by acceleration or otherwise, of any and -126- all of the Guaranteed Obligations of the Borrower to the Secured Creditors. If any or all of the Guaranteed Obligations of the Borrower to the Secured Creditors becomes due and payable hereunder, each Guarantor, jointly and severally, unconditionally promises to pay such indebtedness to the Secured Creditors, or order, on demand, together with any and all reasonable expenses which may be incurred by the Agent or the Secured Creditors in collecting any of the Guaranteed Obligations. If claim is ever made upon any Secured Creditor for repayment or recovery of any amount or amounts received in payment or on account of any of the Guaranteed Obligations and any of the aforesaid payees repays all or part of said amount by reason of (i) any judgment, decree or order of any court or administrative body having jurisdiction over such payee or any of its property or (ii) any settlement or compromise of any such claim effected by such payee with any such claimant (including the Borrower), then and in such event each Guarantor agrees that any such judgment, decree, order, settlement or compromise shall be binding upon such Guarantor, notwithstanding any revocation of this Guaranty or any other instrument evidencing any liability of the Company, and each other Guarantor shall be and remain jointly and severally liable to the aforesaid payees hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by any such payee. This is a guaranty of payment and not of collection. (a) Anything contained in this Guaranty to the contrary notwithstanding, the obligations of each Guarantor hereunder shall be limited to a maximum aggregate amount equal to the largest amount that would not render its Obligations and/or the grant of security interests in Collateral to secure its obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of the Bankruptcy Code or any applicable provisions of comparable state law (collectively, the "Fraudulent Transfer Laws"), in each ------------------------ case after giving effect to all other liabilities of such Guarantor, contingent or otherwise, that are relevant under the Fraudulent Transfer Laws (specifically excluding, however, any liabilities of such Guarantor in respect of intercompany Indebtedness to the Borrower or other Affiliates of the Borrower to the extent that such Indebtedness would be discharged in an amount equal to the amount paid by such Guarantor hereunder, and after giving effect (x) to the direct and indirect benefits received by such Guarantor as a result of the Credit Documents and the Loans and (y) as assets to the value (as determined under the applicable provisions of the Fraudulent Transfer Laws) of any rights to subrogation, reimbursement, indemnification or contribution of such Guarantor pursuant to applicable law or pursuant to the terms or any agreement (including without limitation any such right of contribution under Section 13.01(c)). (b) Guarantors under this Guaranty together desire to allocate among themselves in a fair and equitable manner their obligations arising under this Guaranty. Accordingly, in the event any payment or distribution is made on any date by any Guarantor under this Guaranty (a "Funding Guarantor") that exceeds ----------------- its Fair Share (as defined below) as of such date, that Funding Guarantor shall be entitled to a -127- contribution from each of the other Guarantors in the amount of such other Guarantor's Fair Share Shortfall (as defined below) as of such date, with the result that all such contributions will cause each Guarantor's Aggregate Payments (as defined below) to equal its Fair Share as of such date. "Fair ---- Share" means, with respect to a Guarantor as of any date of determination, an - ----- amount equal to (i) the ratio of (x) the Adjusted Maximum Amount (as defined below) with respect to such Guarantor to (y) the aggregate of the Adjusted Maximum Amounts with respect to all Guarantors, multiplied by (ii) the aggregate ---------- -- amount paid or distributed on or before such date by all Funding Guarantors under this Guaranty in respect of the obligations guarantied. "Fair Share ---------- Shortfall" means, with respect to a Guarantor as of any date of determination, - --------- the excess, if any, of the Fair Share of such Guarantor over the Aggregate Payments of such Guarantor. "Adjusted Maximum Amount" means, with respect to a ----------------------- Guarantor as of any date of determination, the maximum aggregate amount of the obligations of such Guarantor under this Guaranty, determined as of such date in accordance with this Section 13.01; provided that, solely for purposes of -------- calculating the "Adjusted Maximum Amount" with respect to any Guarantor for purposes of this Section 13.01(b), any assets or liabilities of such Guarantor arising by virtue of any rights to subrogation, reimbursement or indemnification or any rights to or obligations of contribution hereunder shall not be considered as assets or liabilities of such Guarantor. "Aggregate Payments" ------------------ means, with respect to a Guarantor as of any date of determination, an amount equal to (i) the aggregate amount of all payments and distributions made on or before such date by such Guarantor in respect of this Guaranty (including, without limitation, in respect of this Section 13.01(b)) minus (ii) the ----- aggregate amount of all payments received on or before such date by such Guarantor from the other Guarantors as contributions under this Section 13.01(b). The amounts payable as contributions hereunder shall be determined as of the date on which the related payment or distribution is made by the applicable Funding Guarantor. The allocation among Guarantors of their obligations as set forth in this Section 13.01(b) shall not be construed in any way to limit the liability of any Guarantor hereunder. 14.02 Bankruptcy. Additionally, each Guarantor unconditionally and ---------- irrevocably guarantees the payment of any and all of the Guaranteed Obligations of the Borrower to the Secured Creditors whether or not then due or payable by the Borrower upon the occurrence in respect of the Borrower of any of the events specified in Section 10.05, and unconditionally and irrevocably promises to pay such Guaranteed Obligations to the Secured Creditors, or order, on demand, in lawful money of the United States. If claim is ever made upon any Secured Creditor for repayment or recovery of any amount or amounts received in payment or on account of any of the Guaranteed Obligations and any of the aforesaid payees repays all or part of said amount by reason of (i) any judgment, decree or order of any court or administrative body having jurisdiction over such payee or any of its property or (ii) any settlement or compromise of any such claim effected by such payee with any such claimant (including the Borrower), then and in such event each Guarantor agrees that any such judgment, decree, order, settlement or compromise shall be binding upon such -128- Guarantor, notwithstanding any revocation of this Guaranty or any other instrument evidencing any liability of the Company, and each other Guarantor shall be and remain jointly and severally liable to the aforesaid payees hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by any such payee. This is a guaranty of payment and not of collection. 14.03 Nature of Liability. The liability of each Guarantor hereunder ------------------- is exclusive and independent of any security for or other guaranty of the Guaranteed Obligations of the Borrower whether executed by such Guarantor, any other guarantor or by any other party, and the liability of each Guarantor hereunder shall not be affected or impaired by (a) any direction as to application of payment by the Borrower or by any other party, or (b) any other continuing or other guaranty, undertaking or maximum liability of a guarantor or of any other party as to the Guaranteed Obligations of the Borrower, or (c) any payment on or in reduction of any such other guaranty or undertaking, or (d) any dissolution, termination or increase, decrease or change in personnel by the Borrower, or (e) any payment made to the Administrative Agent or the Secured Creditors on the indebtedness which the Administrative Agent or such Secured Creditors repay the Borrower pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding, and each Guarantor waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding. 14.04 Independent Obligation. The obligations of each Guarantor ---------------------- hereunder are independent of the obligations of any other guarantor or the Borrower, and a separate action or actions may be brought and prosecuted against each Guarantor whether or not action is brought against any other guarantor or the Borrower and whether or not any other guarantor or the Borrower be joined in any such action or actions. Each Guarantor waives, to the fullest extent permitted by law, the benefit of any statute of limitations affecting its liability hereunder or the enforcement thereof. Any payment by the Borrower or other circumstance which operates to toll any statute of limitations as to the Borrower shall operate to toll the statute of limitations as to each Guarantor. 14.05 Authorization. Each Guarantor authorizes the Administrative ------------- Agent and the Secured Creditors without notice or demand (except as shall be required by applicable statute and cannot be waived), and without affecting or impairing its liability hereunder, from time to time to: (a) change the manner, place or terms of payment of, and/or change or extend the time of payment of, renew, increase, accelerate or alter, any of the Guaranteed Obligations (including any increase or decrease in the rate of interest thereon), any security therefor, or any liability incurred directly or indirectly in respect thereof, and the Guaranty herein made shall apply to the Guaranteed Obligations as so changed, extended, renewed or altered; -129- (b) take and hold security for the payment of the Guaranteed Obligations and sell, exchange, release, surrender, realize upon or otherwise deal with in any manner and in any order any property by whomsoever at any time pledged or mortgaged to secure, or howsoever securing, the Guaranteed Obligations or any liabilities (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and/or any offset thereagainst; (c) exercise or refrain from exercising any rights against the Borrower or others or otherwise act or refrain from acting; (d) release or substitute any one or more endorsers, guarantors, the Borrower or other obligors; (e) settle or compromise any of the Guaranteed Obligations, any security therefor or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and may subordinate the payment of all or any part thereof to the payment of any liability (whether due or not) of the Borrower to its creditors other than the Banks; (f) apply any sums by whomsoever paid or howsoever realized to any liability or liabilities of the Borrower to the Secured Creditors regardless of what liability or liabilities of any Guarantor or the Borrower remain unpaid; (g) consent to or waive any breach of, or any act, omission or default under, this Agreement or any of the instruments or agreements referred to herein, or otherwise amend, modify or supplement this Agreement or any of such other instruments or agreements; and/or (h) take any other action which would, under otherwise applicable principles of common law, give rise to a legal or equitable discharge of any Guarantor from its liabilities under this Section 14. 14.06 Reliance. It is not necessary for the Administrative Agent or -------- the Secured Creditors to inquire into the capacity or powers of the Borrower or its Subsidiaries or the officers, directors, partners or agents acting or purporting to act on its behalf, and any Guaranteed Obligations made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder. 14.07 Subordination. Any of the indebtedness of the Borrower ------------- relating to the Guaranteed Obligations now or hereafter owing to any Guarantor is hereby subordinated to the Guaranteed Obligations of the Borrower owing to the Agent and the Secured Creditors; and if the Administrative Agent so requests at a time when an Event of Default exists, all such indebtedness relating to the Guaranteed Obligations of the Borrower to any Guarantor shall be collected, enforced and received by such Guarantor -130- for the benefit of the Secured Creditors and be paid over to the Agent on behalf of the Secured Creditors on account of the Guaranteed Obligations of the Borrower to the Secured Creditors, but without affecting or impairing in any manner the liability of any Guarantor under the other provisions of this Guaranty. Prior to the transfer by any Guarantor of any note or negotiable instrument evidencing any of the indebtedness relating to the Guaranteed Obligations of the Borrower to such Guarantor, such Guarantor shall mark such note or negotiable instrument with a legend that the same is subject to this subordination. 14.08 Waiver. (a) Each Guarantor waives any right (except as shall ------ be required by applicable statute and cannot be waived) to require the Administrative Agent or the Secured Creditors to (i) proceed against the Borrower, any other guarantor or any other party, (ii) proceed against or exhaust any security held from the Borrower, any other guarantor or any other party or (iii) pursue any other remedy in the Administrative Agent's or the Secured Creditors' power whatsoever. Each Guarantor waives any defense based on or arising out of any defense of the Borrower, any other guarantor or any other party, other than payment in full of the Guaranteed Obligations, based on or arising out of the disability of the Borrower, any other guarantor or any other party, or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower other than payment in full of the Guaranteed Obligations. The Administrative Agent and the Secured Creditors may, at their election, foreclose on any security held by the Administrative Agent, the Collateral Agent or the Secured Creditors by one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable (to the extent such sale is permitted by applicable law), or exercise any other right or remedy the Administrative Agent and the Secured Creditors may have against the Borrower or any other party, or any security, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Guaranteed Obligations have been paid. Each Guarantor waives any defense arising out of any such election by the Administrative Agent and the Secured Creditors, even though such election operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against any Borrower or any other party or any security. (b) Each Guarantor waives all presentments, demands for performance, protests and notices, including without limitation notices of nonperformance, notices of protest, notices of dishonor, notices of acceptance of this Guaranty, and notices of the existence, creation or incurring of new or additional Guaranteed Obligations. Each Guarantor assumes all responsibility for being and keeping itself informed of the Borrower's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks which each Guarantor assumes and incurs hereunder, and agrees that the Administrative Agent and the Secured Creditors shall have no duty to advise each Guarantor of information known to them regarding such circumstances or risks. -131- (c) Each Guarantor waives all rights of subrogation until all Guaranteed Obligations have been paid in full in cash. -132- IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Agreement as of the date first above written. Address: - ------- 55 Lumber Road COINMACH LAUNDRY CORPORATION Roslyn, NY 11576 Attention: By: /s/ ROBERT M. DOYLE -------------------------------- Name: Robert M. Doyle Title: Senior Vice President 55 Lumber Road COINMACH CORPORATION Roslyn, NY 11576 Attention: By: /s/ ROBERT M. DOYLE -------------------------------- Name: Robert M. Doyle Title: Senior Vice President BANKERS TRUST COMPANY, Individually and as Administrative Agent By: /s/ PATRICIA HOGAN -------------------------------- Name: Patricia Hogan Title: Vice President -133- FIRST UNION NATIONAL BANK OF NORTH CAROLINA, Individually and as Syndication Agent By: /s/ JORGE GONZALEZ -------------------------------- Name: Jorge Gonzalez Title: Senior Vice President LEHMAN COMMERCIAL PAPER, INC., Individually and as Documentation Agent By: /s/ DENNIS J. DEE -------------------------------- Name: Dennis J. Dee Title: Vice President BANK OF BOSTON By: /s/ TIMOTHY M. BARNES -------------------------------- Name: Timothy M. Barnes Title: Division Executive BANK OF SCOTLAND By: /s/ CATHERINE M. ONIFFREY -------------------------------- Name: Catherine M. Oniffrey Title: Vice President CREDIT LYONNAIS NEW YORK BRANCH By: /s/ ATTILA KOC -------------------------------- Name: Attila Koc Title: Vice President FLEET NATIONAL BANK By: /s/ ERIC C. VANDER MEL -------------------------------- Name: Eric C. Vander Mel Title: Vice President HELLER FINANCIAL By: /s/ LINDA W. WOLF -------------------------------- Name: Linda W. Wolf Title: Senior Vice President THE NIPPON CREDIT BANK, LTD. By: /s/ CLIFFORD ABRAMSKY -------------------------------- Name: Clifford Abramsky Title: Senior Manager -134- PRIME INCOME TRUST By: /s/ RAFAEL SCOLARI -------------------------------- Name: Rafael Scolari Title: V.P. Portfolio Manager THE ING CAPITAL SENIOR SECURED HIGH INCOME FUND, L.P. By: /s/ MICHAEL D. HATLEY -------------------------------- Name: Michael D. Hatley Title: V.P. & Portfolio Manager MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. By: /s/ ANTHONY R. CLEMENTE -------------------------------- Name: Anthony R. Clemente Title: Authorized Signatory PILGRIM AMERICA PRIME RATE TRUST By: /s/ MICHAEL J. BACEVICH -------------------------------- Name: Michael J. Bacevich Title: Vice President MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: /s/ MARK A. AHMED -------------------------------- Name: Mark A. Ahmed Title: Managing Director -135- ANNEX 1 ------- COMMITMENTS -----------
Tranche A Term Tranche B Term Loan Loan Revolving Loan Bank Commitment Commitment Commitment - ---- -------------- -------------- -------------- Bankers Trust Company $ 4,000,000 $ 39,250,000 $ 9,500,000 First Union National Bank of North Carolina $ 4,000,000 $ 3,250,000 $ 9,500,000 Lehman Commercial Paper Inc. $ 3,750,000 $ 3,000,000 $ 9,000,000 Fleet National Bank $ 3,500,000 $ 2,750,000 $ 8,500,000 Heller Financial $ 3,500,000 $ 2,750,000 $ 8,500,000 The Nippon Credit Bank, Ltd. $ 3,250,000 $ 1,500,000 $ 7,500,000 Credit Lyonnais New York Branch $ 3,250,000 $ 0 $ 7,500,000 Bank of Scotland $ 2,375,000 $ 1,250,000 $ 5,000,000 Bank of Boston $ 2,375,000 $ 1,250,000 $ 5,000,000 Massachusetts Mutual Life Insurance Company $ 9,000,000 Pilgrim America Prime Rate Trust $ 9,000,000 Prime Income Trust $ 9,000,000 ING Capital Senior Secured High Income Fund, L.P. $ 9,000,000 Merrill Lynch Senior Floating Rate Fund, Inc. $ 9,000,000 TOTAL: $30,000,000 $100,000,000 $70,000,000
ANNEX II -------- BANK ADDRESSES -------------- Bankers Trust Company 130 Liberty Street New York, New York 10006 Attention: Thomas P. Prior Telephone: (212) 250-7188 Telecopier: (212) 250-7200 First Union National Bank of North Carolina 301 S. College Street, DC-5 Charlotte, North Carolina 28288 Attention: Bragg Comer Telephone: 704-374-2610 Telecopier: 704-374-3300 Bank of Boston 100 Federal Street Mail Stop: 01-09-01 Boston, MA 02106 Attention: Tim Burns Telephone: 617-434-7976 Telecopier: 617-434-4929 Bank of Scotland 565 Fifth Avenue New York, NY 10017 Attention: Cathy Oniffrey Telephone: 212-450-0800 Telecopier: 212-557~9460 Credit Lyonnais New York Branch 1301 Avenue of the Americas New York, NY 10019 Attention: Attila Koc Telephone: 212-261-7358 Telecopier: 212-459-3176 ANNEX II Page 2 Prime Income Trust Two World Trade Center New York, NY 10048 Attention: Peter Gerwitz Telephone: 212-392-9034 Telecopier: 212-392-5345 Fleet National Bank One Federal Street Mail Stop: MA OF DO3C Boston, MA 02110 Attention: Eric Vandermal Telephone: 617-346-3846 Telecopier: 617-346-4806 Heller Financial 500 West Monroe Street Chicago, IL 66661 Attention: Linda Wolf Telephone: 312-441-7000 Telecopier: 312-441-7367 ING Capital Senior Secured High Income Fund, L.P. Advisors, Inc. 333 South Grand Avenue Suite 400 Los Angeles, CA 90071 Attention: Mike Hatley Telephone: 213-621-9061 Telecopier: 213-626-6552 ANNEX II Page 3 Lehman Brothers Lehman Commerical Paper Inc. 3 World Financial Center New York, NY 10285 Attention: Dennis Dee Telephone: 212-526-4059 Telecopier: 212-528-0819 Massachusetts Mutual Life Insurance Company 1295 State Street Springfield, MA 01111 Attention: Steven Katz, Esq. Telephone: 413-744-6125 Telecopier: 413-744-6210 Merrill Lynch Senior Floating Rate Fund, Inc. 800 Scudders Mill Road Plainsboro, NJ 08536 Attention: Anthony Clemente Telephone: 609-282-2092 Telecopier: 609-282-2756 The Nippon Credit Bank, Ltd. 245 Park Avenue New York, NY 10167 Attention: Cliff Abramsky Telephone: 212-984-1238 Telecopier: 212-490-3895 ANNEX II Page 4 Pilgrim America Prime Rate Trust Two Renaissance Square Phoenix, AZ 85004-4424 Attention: Tim Hunt Telephone: 602-417-8257 Telecopier: 602-417-8327 SCHEDULE 2.01 EXISTING LETTERS OF CREDIT 1. See item 8 of Schedule 7.22. SCHEDULE 5.10 LEASES See Attached Schedules. SCHEDULE 5.11 REAL PROPERTY 1. 4240 Bronze Way, Dallas, Texas. 2. 4322-4330 Bronze Way, Dallas, Texas. SCHEDULE 7.04 GOVERNMENTAL APPROVALS None. SCHEDULE 7.05 FINANCIALS None. SCHEDULE 7.07 TRUE AND COMPLETE DISCLOSURE 1. Part I. Selected Historical Consolidated Financial Data set forth in the Confidential Memorandum, dated November 1996, of Holdings, Bankers Trust Company, First Union Capital Markets, as Syndication Agent, and Lehman Brothers, as Documentation Agent (the "Memorandum") 2. Part VII. Historical Financial Information set forth in the Memorandum 3. Part VIII. Projected Financial Information set forth in the Memorandum 4. Exhibit I. Financial Model set forth in the Memorandum 5. Audited financial statements for Solon Automated Services, Inc. ("Solon") for 1992, 1993 and 1994. 6. Audited financial statements for CIC I Acquisition Corp. for 1992, 1993 and 1994. 7. Schedule of gross revenues by regional business unit for various periods ended in 1993 through June 1996 for Borrower, Solon, Super Laundry Equipment Corp. and Allied Laundry Equipment Company ("Allied"). 8. Top 15 customers of Borrower based on gross revenues for the twelve months ended August 1996. 9. Top 25 current laundry location contracts for Borrower based on gross revenues for the twelve months ended September 1996. 10. Schedule on post acquisition cost savings for the Solon and Allied acquisitions. 11. Audited financial statements for Kwik Wash for the years ended December 31, 1995 and 1994; and unaudited financial statements for the eight months ended August 31, 1996 and 1995, and the nine months ended September 30, 1996 and 1995. 12. Schedule of gross revenues from routes, stores and other sources by branch for Kwik Wash for the years ended December 31, 1995 and 1994 and the eight months ended August 31, 1996 and 1995. 13. Top 15 customers for Kwik Wash based on gross revenues for the eight months ended August 31, 1996. 14. Schedule of Kwik Wash capital expenditures, including the number of washers and dryers purchased, for the year ended December 31, 1995. 15. Detailed internal monthly management report (financial statements and reports) for Kwik Wash for the eight months ended August 31, 1996 and 1995. 16. Schedule of the projected annual cost savings for the Kwik Wash acquisition. 17. Schedule showing the number of machines on location by region for Solon as of September 30, 1993, 1994 and 1995; March 31, 1995 and 1996; and June 30, 1995 and 1996. SCHEDULE 7.15 SUBSIDIARIES 1. Super Laundry Equipment Corp. 2. Grand Wash & Dry Launderette, Inc. SCHEDULE 7.19 ENVIRONMENTAL MATTERS 1. None. SCHEDULE 7.20 LABOR RELATIONS 1. On June 5, 1996, the International Union of Electrical Workers filed a petition with the National Labor Relations Board ("NLRB") seeking to represent a unit of approximately 55 of Borrower's employees based in Elkridge, Maryland. The petition failed but the union could seek a new election next year. 2. Borrower's employees in the New York region are members of the Local 966 International Brotherhood of Teamsters. The contract between Borrower and the Teamsters is currently being negotiated. SCHEDULE 7.21 PATENTS, LICENSES, FRANCHISES AND FORMULAS 1. Borrower and each of its Subsidiaries have developed computer software programs, formulae, routines and other processes in connection with the conduct of their respective businesses, none of which have been registered with the United States Copyright Office. SCHEDULE 7.22 INDEBTEDNESS 1. All indebtedness reflected in the financial statements described in Section 7.05(b) of the Credit Agreement. 2. Approximately $196.7 million face amount of issued and outstanding 11 3/4% Senior Notes due 2005 3. $5.0 million face amount of issued and outstanding 12 3/4% Senior Notes due 2001 4. Promissory Note in the aggregate principal amount of $15.0 million, payable by Coinmach Laundry Corporation to Richard F. Enthoven, as agent for and on behalf of each of the individuals listed on Schedule A attached thereto 5. Note Payable in the aggregate principal amount of $437,000 payable by Coinmach Corporation to Jan Sussman pursuant to the Consulting Agreement by and between Jan R. Sussman, Carefree Capital Co. and Coinmach Corporation, dated as of February 4, 1994 6. Contingent Obligations: (a) Sebco Corporation v. Cross Bay Cooperative, Inc., et al. (Supreme -------------------------------------------------------- Court, New York County, New York) This action commenced on or about November 4, 1985 seeks damages against the owner and managing agent of certain premises in the amount of $50,000, plus interest and attorney's fees, for alleged breach of contract and breach of warranty for allegedly preventing Sebco from installing laundry equipment in certain premises. Borrower is not a defendant herein but its potential liability arises from an indemnity agreement whereby Borrower agreed to hold defendants harmless. This matter is still in the discovery stage of litigation and has not been actively pursued by plaintiff. (b) Erwin Rosenfeld v. Jan Sussman, et al. (Supreme Court, County of New -------------------------------------- York, New York). This action was commenced against Jan Sussman and three other individual defendants on or about January 11, 1989. Plaintiff seeks damages of $300,000 plus interest at a rate of 15% per annum from July 22, 1986 arising out of a loan he made to the other defendants which was to be secured by certain equipment. The complaint alleges, among other things, fraud against the other defendants and breach of fiduciary duty and a wrongful defeat of an "equitable lien" in certain equipment against Sussman. Borrower has agreed to indemnify Sussman against this claim. Sussman answered the complaint, denying any liability thereunder and raising certain affirmative defenses. Plaintiff moved for an order dismissing Sussman's affirmative defenses. This motion was granted and affirmed on appeal. The action, which was marked off the active calendar on March 6, 1992, has been restored to the active calendar. Discovery has recommenced. (c) Tax indemnity letter, dated February 4, 1994, executed by CIC I Acquisition Corp. ("CIC") in favor of MCS Capital, Inc. and assumed by The Coinmach Corporation. 7. In connection with the acquisition of substantially all of the assets of Allied Laundry Equipment Company: (a) The Borrower owes to Morrie Zimring $625,000.00, payable in five equal annual installments of $125,000.00 each, beginning on the first day of the first month after the first anniversary of April 1, 1996 and continuing on the four succeeding annual anniversary dates. (b) Borrower has assumed certain motor vehicle obligations as set forth on the attached schedule. 8. Letters of Credit
AMOUNT BENEFICIARY BANK - ------ ----------- ---- $ 300,000.00 Reliance National Indemnity Company Chase 77 Water Street Manhattan New York, NY 10005 Bank-New York $1,200,000.00 National Union Fire Insurance Company Chase of Pittsburgh, PA and American Manhattan Home Assurance Company Bank-New York The Insurance Company of the State of PA Commerce and Industry Insurance Company AIU Insurance Company Birmingham Fire Insurance Company of PA Illinois National Insurance Company American Global Insurance Company National Union Fire Insurance Company of LA Landmark Insurance Company as their interests may appear 70 Pine Street New York, NY 10005
$1,432,000.00 National Union Fire Insurance Company Chase of Pittsburgh, PA and American Manhattan Home Assurance Company Bank-New York The Insurance Company of the State of PA Commerce and Industry Insurance Company AIU Insurance Company Birmingham Fire Insurance Company of PA Illinois National Insurance Company American Global Insurance Company National Union Fire Insurance Company of LA Landmark Insurance Company as their interests may appear 80 Pine Street New York, NY 10005
9. Capital Lease Obligations as of September 27, 1996: (a) Vehicles: $997.063 (b) IBM Computer Equipment: $153,622 10. Loan from Borrower to Stephen R. Kerrigan, dated August, 1996, in the principal amount of $500,000.00 11. Loan from Borrower to Daniel Osborne, dated August, 1996, in the principal amount of $50,000.00 SCHEDULE 8.03 INSURANCE 1. See attached Schedule of Insurance Policies in force as of November 14, 1996. SCHEDULE 9.01 EXISTING LIENS 1. Kwik Wash Laundries L.P. has provided seller financing in connection with six laundromat store locations (three in Austin, three in Dallas and one in Houston, Texas). All such financings are secured by liens on such laundromat stores. 2. Borrower's computer system and related equipment are pledged as security under capital leases pursuant to a rollover agreement with IBM Credit Corporation, Master Agreement Number HR11512, dated August 28, 1995. 3. The Inter-Tel 36 Telephone System including all substitutions, modifications and proceeds thereof are covered by a UCC-1 Financing statement which states that the property rental property and that the UCC-1 was filed only to make the rental a matter of public record. The secured party was Inter-Tel Leasing, Inc. before assigned to Heller Financial, Inc. 4. The Tie Ultracom AT Telephone System including all substitutions, modifications and proceeds thereof are covered by a UCC-1 Financing statement which states that the property rental property and that the UCC-1 was filed only to make the rental a matter of public record. The secured party was Inter-Tel Leasing, Inc. 5. Orix Credit Alliance, Inc., as Secured Party, UCC-1, File Number: 93-2920, File Date: June 21, 1993 6. Yale Financial Services, Inc., as Secured Party, UCC-1, File Number: 94- 144, File Date: January 1, 1994 7. Associates Leasing, Inc., as Secured Party, UCC-1, File Number: 219142, File Date: November 2, 1992 8. Orix Credit Alliance, Inc., as Secured Party, UCC-1, File Number 119466, File Date: June 18, 1993 9. Hudson United Bank, as Secured Party, UCC-1, File Number 94-1030, File Date: April 14, 1994 (Borrower will have this lien removed after the Closing Date) SCHEDULE 9.05 ADVANCES, INVESTMENTS AND LOANS 1. Promissory Notes*, dated as of January 31, 1995, in favor of Borrower (as successor in interest to TCC) by each of: a. MCS Capital, Inc. (face amount $140,000) b. Mitchell Blatt (face amount $140,000) c. David Tulkop (face amount $11,666.80) d. Robert M. Doyle (face amount $23,333.60) e. Russell Harrison (face amount $5,833.40) f. Charles Prato (face amount $17,500.20) * On June 25, 1996, the first of the four annual installments of indebtedness evidenced by such Promissory Notes was forgiven. 2. Promissory Notes*, dated as of July 26, 1995, in favor of SAS from each of: a. MCS Capital, Inc. (face amount $52,369.52) b. Mitchell Blatt (face amount $52,369.52) c. Robert M. Doyle (face amount $26,184.80) d. Michael E. Stanky (face amount $19,638.56) * On July 23, 1996, the first of the eight annual installments of indebtedness evidenced by such Promissory Notes was forgiven. 3. $21,794.96 Promissory Note, dated May 10, 1996, issued by Mitchell Blatt in favor of Holdings together with the Stock Subscription Agreement, dated as of May 10, 1996, by and between Blatt and Holdings in respect of the purchase of 1,415 shares of Class B Common Stock, $.01 par value, of Holdings 4. $9,226.28 Promissory Note, dated May 10, 1996, issued by Robert M. Doyle in favor of Holdings together with the Stock Subscription Agreement, dated as of May 10, 1996, by and between Doyle and Holdings in respect of the purchase of 599 shares of Class B Common Stock, $.01 par value, of Holdings 5. $21,794.96 Promissory Note, dated May 10, 1996, issued by Stephen R. Kerrigan in favor of Holdings together with the Stock Subscription Agreement, dated as of May 10, 1996, by and between Kerrigan and Holdings in respect of the purchase of 1,415 shares of Class B Common Stock, $.01 par value, of Holdings 6. Kwik Wash Laundries L.P. has provided seller financing in connection with six laundromat store locations (three in Austin, three in Dallas and one in Houston, Texas). All such financings are secured by liens on such laundromat stores. The outstanding notes receivable in connection with such laundromat stores was $139,267.14 as of December 5, 1996. 7. Loan from Borrower to Stephen R. Kerrigan, dated August, 1996, in the principal amount of $500,000.00 8. Loan from Borrower to Daniel Osborne, dated August, 1996, in the principal amount of $50,000.00 SCHEDULE 7.01 CORPORATE STATUS 1. Coinmach Corporation is not in good standing in the State of New Jersey. SCHEDULE 7.06 LITIGATION 1. Perkinson v. Solon - Docket No. 42, 432-461 (District Court, Brozos County, ------------------ Texas; 361st Judicial District). EEOC charge dropped after Solon responded to Texas Commission on Human Rights. Citation was issued to Solon on September 1, 1995 charging Solon in violation of Texas Labor Code, Section 21.051 in discharging Perkinson because of his disability and age. Solon has denied all charges. The case is in the pre-trial discovery stage. 2. Thorpe v. Solon - Charge No:15A950373, EEOC, Miami District Office. Notice --------------- of discrimination was issued to Solon on July 12, 1995 on behalf of William F. Thorpe. The cause cited was discrimination based on religion and disability. Solon denies all charges. A response was submitted to the EEOC on November 6, 1995 after an attempt at a negotiated settlement was rejected by the claimant. The case is in the pre-trial discovery stage. 3. Listed below are certain legal actions, to Borrower's knowledge, that have arisen against Borrower, Holdings and any of their respective Subsidiaries which will exceed (i) $1,000,000 in the aggregate, or (ii) $250,000 individually, and which in each case are not adequately covered by insurance. (a) Superior Laundries, Inc. v. Coinmach Industries Corp., et al. This ------------------------------------------------------------- action was commenced on or about February 18, 1986, by a commercial laundry equipment leasing company against Coinmach Industries Corp., Opel On-Premises Equipment Leasing Corporation ("OPEL"), and certain individual employees of OPEL, and an unrelated group of defendants known as Borg-Warner defendants. The complaint seeks compensatory damages of $592,889.78 and punitive damages of $3,600,000, based upon various allegations of tortious interference with business relations, wrongful filing of UCC financing statements, unfair competition, conspiracy, and breach of an alleged agreement to sell, deliver and service laundry equipment. The complaint also seeks a permanent injunction and an accounting and imposition of a constructive trust on the profits and proceeds from certain laundry service accounts. Coinmach/OPEL vigorously defended the action and successfully defeated the motion for preliminary injunction. Plaintiff has not pursued the case since approximately 1987 or 1988, the date of the denial of the preliminary injunction. The following are not quantifiable: (b) Assurance and Discontinuance Agreement between Solon and the State of Maryland dated and approved on december 5, 1985. (c) Final Judgment and Consent to Entry of Final Judgment By Solon Automated Services, Inc., dated April 21, 1977, in SEC v. Solon, Civil ------------ Action No. 77-0705, United States District Court for the District of Columbia. SCHEDULE 7.13 PROPERTIES 1. 3101 West Belvedere Avenue, Baltimore, Maryland. SCHEDULE 7.16 COMPLIANCE WITH STATUTES, ETC. 1. Certain of Borrower's multi-family sites are located in townships that require licenses or permits. Borrower is not aware of any such expired licenses or permits. Borrower also believes that the lapse of any of such licenses or permits would not result in a Material Adverse Effect. 2. As disclosed in the Environmental Site Assessment prepared by Environ Corporation, dated December 1994, regarding the facilities Coinmach Industries and Selected Subsidiaries located in the State of New York. In addition, according to such Assessment, Coinmach Industries Co., L.P. was referred in 1991 to the Legal Department of the New York Department of Environmental Conservation in connection with its former air permit. Borrower has requested that the permit be updated and reissued based on laboratory test performed on samples taken by Nassau County Department of Health. Borrower was told in May 1996 that a permit would be issued but has not received it yet. 3. As disclosed in the Environmental Site Assessment prepared by Environ Corporation, dated January, 1996, regarding the facility located at 4430 Bronze Way, Dallas, Texas. 4. As disclosed in the Phase I Environmental Site Assessment prepared by KEI for Kwik Wash Laundries, L.P., dated December 19, 1996, regarding the facility located at 4330/4240 Bronze Way, Dallas, Texas. SCHEDULE 9.06 TRANSACTIONS WITH AFFILIATES 1. Tax indemnity letter, dated February 4, 1994, executed by CIC in favor of MCS Capital, Inc. and assumed by The Coinmach Corporation ("TCC"). 2. Agreement, dated as of November 30, 1995, among SAS Acquisitions Inc. ("SAS"), Solon, TCC and the signatories thereto (the "Omnibus Agreement"). 3. Executive Stock Purchase Agreements, dated as of January 31, 1995, as amended by the Omnibus Agreement, between Borrower as successor in interest to TCC, Golder, Thoma, Cressey, Rauner Fund IV L.P. ("GTCR") and each of: a. Charles Prato b. Russell Harrison c. David Tulkop 4. Investor Purchase Agreements, dated as of January 31, 1995, as amended by the Omnibus Agreement, by and among Borrower (as successor in interest to TCC), GTCR and each of: a. Heller Financial, Inc. b. Jackson National Life Insurance Company c. Jackson National Life Insurance Company of Michigan d. President and Fellows of Harvard College e. James N. Chapman f. Michael E. Marrus g. MCS Capital, Inc. h. MCS Capital Management, Inc. i. Mitchell Blatt 5. Equity Purchase Agreement, dated as of January 31, 1995, as amended by the Omnibus Agreement, between Borrower (as successor in interest to TCC) and GTCR. 6. Promissory Notes*, dated as of January 31, 1995, as amended by the Omnibus Agreement, in favor of Borrower (as successor in interest to TCC) by each of: a. MCS Capital, Inc. b. Mitchell Blatt c. David Tulkop d. Robert M. Doyle e. Russell Harrison f. Charles Prato * On June 25, 1996, the first of the four annual installments of indebtedness evidenced by such Promissory Notes was forgiven. 7. Stock Pledge Agreements, dated as of January 31, 1995, between Borrower (as successor in interest to TCC) and each of: a. MCS Capital, Inc. b. Mitchell Blatt c. Robert M. Doyle d. David Tulkop e. Russell Harrison f. Charles Prato 8. Equity Purchase Agreement, dated as of July 26, 1995, as amended by the Omnibus Agreement, by and between GTCR and SAS. 9. Investor Purchase Agreements, dated as of July 26, 1995, as amended by the Omnibus Agreement, by and among SAS, GTCR and the Purchasers listed on the signature page attached thereto. 10. Executive Stock Agreements, dated as of July 26, 1995, as amended by the Omnibus Agreement, by and among SAS, GTCR and each of: a. MCS Capital, Inc. b. Mitchell Blatt c. Robert M. Doyle d. Michael E. Stanky 11. Promissory Notes*, dated as of July 26, 1995, as amended by the Omnibus Agreement, in favor of SAS from each of: a. MCS Capital, Inc. (including guaranty of Stephen Kerrigan) b. Mitchell Blatt c. Robert M. Doyle d. Michael E. Stanky * On July 23, 1996, the first of the eight annual installments of indebtedness evidenced by such Promissory Notes was forgiven. 12. Stock Pledge Agreements, dated as of July 26, 1995, between SAS and each of: a. MCS Capital, Inc. b. Mitchell Blatt c. Robert M. Doyle d. Michael E. Stanky 13. Amended and Restated Stockholders Agreement, dated as of November 30, 1995, among SAS, GTCR and each of (collectively, the "Stockholders"): a. Heller Financial, Inc. b. Jackson National Life Insurance Company c. Jackson National Life Insurance Company of Michigan d. James N. Chapman e. Michael E. Marrus f. President and Fellows of Harvard College g. MCS Capital, Inc. h. Mitchell Blatt i. Michael E. Stanky j. Robert M. Doyle k. Michael E. Stanky l. Charles Prato m. David Tulkop n. Russell Harrison o. MCS Capital Management, Inc. 14. Registration Agreement, dated as of July 26, 1995, as amended by the Omnibus Agreement, among the Company and each of the Stockholders. 15. Option Agreements, dated July 23, 1996, and as amended by the Omnibus Amendment to Option Agreements, dated September 27, 1996, by and between Holdings and each of the following persons or entities, a. MCS Capital, Inc. b. James N. Chapman c. Robert M. Doyle d. Michael E. Stanky e. David A. Siegel f. R. Daniel Osborne g. John E. Denson h. James McDonnell 16. Option Agreements, dated September 17, 1996, by and between Holdings and each of Dr. Arthur B. Laffer and Mr. Stephen G. Cerri. 17. Grant of non-qualified options on August 8, 1996 to purchase up to 181,250 shares of Common Stock, par value $.01 per share pursuant to Borrower's Second Amended and Restated 1996 Employee Stock Option Plan to certain members of management and other employees of Borrower. 18. $21,794.96 Promissory Note, dated May 10, 1996, issued by Mitchell Blatt in favor of Holdings together with the Stock Subscription Agreement, dated as of May 10, 1996, by and between Blatt and Holdings in respect of the purchase of 1,415 shares of Class B Common Stock, $.01 par value, of Holdings 19. $9,226.28 Promissory Note, dated May 10, 1996, issued by Robert M. Doyle in favor of Holdings together with the Stock Subscription Agreement, dated as of May 10, 1996, by and between Doyle and Holdings in respect of the purchase of 599 shares of Class B Common Stock, $.01 par value, of Holdings 20. $21,794.96 Promissory Note, dated May 10, 1996, issued by Stephen R. Kerrigan in favor of Holdings together with the Stock Subscription Agreement, dated as of May 10, 1996, by and between Kerrigan and Holdings in respect of the purchase of 1,415 shares of Class B Common Stock, $.01 par value, of Holdings 21. Voting Agreement, dated as of July 23, 1996, by and among Holdings and the shareholders of Holdings set forth on the signature pages thereto 22. Loan from Borrower to Stephen R. Kerrigan, dated August, 1996, in the principal amount of $500,000.00 23. Loan from Borrower to Daniel Osborne, dated August, 1996, in the principal amount of $50,000.00 24. Amendment to Investor Purchase Agreements, dated January, 1997, by and among Holdings, GTCR, Borrower, Heller Financial, Inc., Jackson National Life Insurance Company, individually and as successor by merger with Jackson National Life Insurance Company of Michigan, President and Fellows of Harvard College, James N. Chapman and Michael E. Marrus. 25. Amendment to Investor Purchase Agreements, dated January, 1997, by and among Holdings, GTCR, Heller Financial, Inc., Jackson National Life Insurance Company, individually and as successor by merger with Jackson National Life Insurance Company of Michigan, President and Fellows of Harvard College, MCS Capital, Inc., James N. Chapman, Michael E. Marrus, Mitchell Blatt and Michael Stanky. EXHIBIT A --------- [FORM OF NOTICE OF BORROWING] _______________, 1997 Bankers Trust Company, as Administrative Agent for the Banks party to the Credit Agreement referred to below One Bankers Trust Plaza New York, New York 10006 Attention: Gentlemen: The undersigned, Coinmach Corporation (the "Borrower"), refers to the Credit Agreement, dated as of January 8, 1997 (the "Credit Agreement", the terms defined therein being used herein as therein defined), among Coinmach Laundry Corporation, the Borrower, various Banks from time to time party thereto, First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper, Inc., as Documentation Agent, and you, as Administrative Agent for such Banks, and hereby gives you notice, irrevocably, pursuant to Section 1.03 of the Credit Agreement, that the undersigned hereby requests a Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Borrowing (the "Proposed Borrowing") as required by Section 1.03 of the Credit Agreement: (i) The Business Day of the Proposed Borrowing is _________, 19__./1/ (ii) The aggregate principal amount of the Proposed Borrowing is $___________. (iii) The Proposed Borrowing is to consist of [Tranche A Term Loans] [Tranche B Term Loans] [Revolving Loans]. - ---------- /1/ Shall be a Business Day at least three Business Days in the case of Eurodollar Rate Loans after the date hereof. (iv) The Loans to be made pursuant to the Proposed Borrowing shall be initially maintained as [Base Rate Loans] [Eurodollar Loans]./2/ (v) The initial Interest Period for the Proposed Borrowing is ___ month(s)./3/ The undersigned hereby certifies that the following statements are true and correct on the date hereof, and will be true and correct on the date of the Proposed Borrowing: (A) the representations and warranties contained in the Credit Documents are and will be true and correct in all material respects, both before and after giving effect to the Proposed Borrowing and to the application of the proceeds thereof, as though made on such date (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date); and (B) no Default or Event of Default has occurred and is continuing, or would result from such Proposed Borrowing or from the application of the proceeds thereof. Very truly yours, COINMACH CORPORATION By ---------------------------- Name: Title: - ---------- /2/ Eurodollar Loans may not be incurred prior to the earlier of (x) the 60th day after the Initial Borrowing Date and (y) the Syndication Date. /3/ To be included for a Proposed Borrowing of Eurodollar Loans. EXHIBIT B-1 Tranche A Term Notes (See Exhibit 10.60 filed herewith) EXHIBIT B-2 Tranche B Term Notes (See Exhibit 10.61 filed herewith) EXHIBIT B-3 Revolving Notes (See Exhibit 10.62 filed herewith) EXHIBIT B-4 Swing Line Note (See Exhibit 10.63 filed herewith) EXHIBIT C --------- [FORM OF LETTER OF CREDIT REQUEST] No. (1) Dated (2) ----- --------- Bankers Trust Company, individually and as Administrative Agent under the Credit Agreement (as amended, modified or supplemented from time to time, the "Credit Agreement"), dated as of January 8, 1997, among Coinmach Laundry Corporation, Coinmach Corporation, the Subsidiary Guarantors named therein, the lenders from time to time party thereto, First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper, Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent One Bankers Trust Plaza New York, New York 10006 Dear Sirs: We hereby request that [Name of Proposed Issuing Bank], in its individual capacity, issue a [Standby] Letter of Credit for the account of the undersigned on (3) (the "Date of Issuance") in the aggregate stated amount ----- of (4) . --------- For purposes of this Letter of Credit Request, unless otherwise defined herein, all capitalized terms used herein which are defined in the Credit Agreement shall have the respective meaning provided therein. - ---------- (1) Letter of Credit Request Number. (2) Date of Letter of Credit Request. (3) Date of Issuance which shall be at least 2 Business Days (or, in each case such shorter period as is acceptable to such Issuing Bank). (4) Aggregate initial stated amount of Letter of Credit. The beneficiary of the requested Letter of Credit will be (5) , --------- and such Letter of Credit will be in support of (6) and will have a stated ------- expiration date of (7) . --------- We hereby certify that: (1) The representations and warranties contained in the Credit Documents will be true and correct in all material respects on the Date of Issuance, both before and after giving effect to the issuance of the Letter of Credit requested hereby (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date). (2) No Default or Event of Default has occurred and is continuing nor, after giving effect to the issuance of the Letter of Credit requested hereby, would such a Default or Event of Default occur. Copies of all documentation with respect to the supported transaction are attached hereto. COINMACH CORPORATION By ------------------------------ Title: - ---------- (5) Insert name and address of beneficiary. (6) Insert description of L/C Supportable Indebtedness and describe obligation to which it relates in the case of Standby Letters of Credit. (7) Insert last date upon which drafts may be presented which may not be later than 12 months after the Date of Issuance or 30 days prior to the Revolving Loan Maturity Date, whichever is the earliest for Standby Letters of Credit. EXHIBIT D --------- [Form of Section 4.04(b)(ii) Certificate] ----------------------------------------- Reference is hereby made to the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, Coinmach Corporation, various Banks, First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper, Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (the "Credit Agreement"). Pursuant to the provisions of Section 4.04(b)(ii) of the Credit Agreement, the undersigned hereby certifies that it is not a "bank" as such term is used in Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended. [NAME OF BANK] By: ------------------------ Title: EXHIBIT E January 8, 1997 To Bankers Trust Company, as Administrative Agent, and each of the Banks party to the Credit Agreement referred to below c/o Bankers Trust Company One Bankers Trust Plaza New York, New York 10006 Re: Coinmach Corporation -------------------- Ladies and Gentlemen: We have acted as special counsel to Coinmach Corporation, a Delaware corporation (the "Company"), and Coinmach Laundry Corporation, Delaware ------- corporation ("CLC" together with the Company, the "Credit Parties"), in --- -------------- connection with the negotiation, execution and delivery of, and the consummation of the transactions contemplated by, that certain Credit Agreement, dated as of even date herewith, among the Company, CLC, First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper, Inc., as Documentation Agent, Bankers Trust Company, as Administrative Agent, and the Banks party thereto (the "Credit Agreement"). Capitalized terms used herein without ---------------- definition shall have the meanings assigned to such terms in the Credit Agreement. Throughout this opinion, the term "Collateral" shall mean and refer only to Collateral (as defined in the Credit Agreement), which Collateral is located in the State of New York and is of a type in which a security interest is perfected under the Uniform Commercial Code as enacted in the State of New York (the "UCC") solely by filing a financing statement in the Filing Office (as --- defined below), and shall not include fixtures of any kind or nature, any real property, any patents, trademarks, copyrights or any other intellectual property or the Securities (as defined in the Holdings Pledge Agreement and the Borrower Pledge Agreement). This opinion is delivered to each of you pursuant to Section 5.03 of the Credit Agreement. We have reviewed the Credit Agreement, the financing statements (the "Financing Statements") to be filed by Agent (as defined below) in the Filing - --------------------- Office (as defined below), the January 8, 1997 Page 2 Notes, Security Agreement, Holdings Pledge Agreement, Borrower Pledge Agreement, Assignment and Assumption Agreement, Collateral Assignment of Leases, and Collateral Assignment of Location Leases, in each case, dated as of even date herewith (collectively, the "Loan Documents"). -------------- We have also examined originals or copies, certified or otherwise, identified to our satisfaction as being true copies, of Certificates of Incorporation and bylaws of each of the Credit Parties and such certificates or comparable documents of public officials and of officers and representatives of each of the Credit Parties with respect to good standing or qualifications for each of the Credit Parties, in each case in the respective states in which the Credit Parties are qualified. In our capacity as special counsel, we have made such legal and factual examinations and inquiries, including an examination of originals or copies certified to our satisfaction as being true copies, of such records, documents or other instruments as in our judgment are necessary and appropriate to enable us to render the opinions expressed below. We have also made such inquiries of such officers and representatives as we have deemed relevant and necessary as a basis for the opinions hereinafter set forth. In rendering the opinions expressed below, we have been furnished with, and, without independent investigation but with your consent have relied upon, (i) certificates of officers, directors and representatives of the Credit Parties with respect to certain factual matters, (ii) certificates, documents, instruments and assurances of public officials as we have deemed appropriate or advisable, and (iii) representations and warranties as to factual matters made in the Loan Documents. In addition, we have assumed, with your permission and without independent verification: (a) all signatures of all persons signing all documents in connection with which this opinion is rendered are genuine and authorized (other than the persons signing on behalf of the Credit Parties); (b) all documents submitted to us as true copies, whether certified or not, conform to authentic original documents; (c) your corporate and regulatory power and authority to enter into and perform your obligations relating to the Loan Documents to which you are a party; January 8, 1997 Page 3 (d) the due authorization, execution and delivery by, and enforceability against, you of the Loan Documents to which you are a party; (e) each of the Credit Parties has "rights in the Collateral" existing on the date hereof, as such phrase is used in Section 9-203(1)(c) of the UCC, and will have rights in the Collateral arising after the date hereof; (f) value (as defined in Section 1-201(44) of the UCC) has been given by you to the Credit Parties for the security interests and other rights in and assignments of Collateral and Securities described in or contemplated by the Loan Documents; and (g) the descriptions of Collateral in the Loan Documents reasonably describe the property intended to be described as Collateral, and the description of the Collateral in the Financing Statements is substantially the same as that described in the applicable Loan Document, and the Holdings Pledge Agreement and the Borrower Pledge Agreement accurately describe the Securities pledged thereunder. In rendering the opinions expressed below, we have made no independent investigation with respect to any matter in connection with which we did not represent the Credit Parties. Accordingly, any matter expressed as to our knowledge is based solely on such actual knowledge as we have acquired in the course of our representation of the Credit Parties. Our knowledge of the business, records, transactions and activities of the Credit Parties is limited to the information which has been brought to our attention by certificates executed and delivered to us by officers of the Credit Parties in connection with this opinion letter. Without limiting the generality of the foregoing, (i) we have not made any search of the docket or other public records of any court or administrative agency or governmental authority with respect to pending suits, actions, claims, investigations, proceedings, orders or decrees or with respect to assessments, or mortgages, and (ii) we have only made a search of the public records with respect to security interests or encumbrances on personal property in the jurisdictions and for the entities set forth on Schedule I ---------- attached hereto. To render this opinion we have relied upon the actual knowledge of the attorneys in our firm who have devoted substantive attention to the transactions contemplated by the Loan Documents, and not to the knowledge of the firm generally. All references in this opinion to the "knowledge" of this firm or January 8, 1997 Page 4 to matters with respect to which it is "aware" are subject to this limitation. On the basis of and subject to the foregoing, and subject to the limitations, qualifications, assumptions and exceptions hereinafter set forth, we are of the opinion that as of the date hereof: 1. Each of the Credit Parties is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation, except as set forth on Schedule II attached hereto. ----------- 2. Each of the Credit Parties has the corporate power and authority to own, lease and operate its properties and conduct its business as presently conducted. 3. Each of the Credit Parties has the corporate power and authority to execute and deliver the Loan Documents to which each is a party, to perform its respective obligations thereunder and to consummate the transactions contemplated thereby. The execution, delivery and performance by each of the Credit Parties of the Loan Documents to which it is a party and the consummation by each such Credit Party of the transactions contemplated thereby have been duly authorized by all necessary corporate action on the part of each such Credit Party. 4. The Loan Documents have been duly and validly executed and delivered by each of the Credit Parties party thereto, and assuming the due authorization, execution and delivery of the Loan Documents by each of you, each Loan Document constitutes a legal, valid and binding obligation of each respective Credit Party party thereto enforceable against such Credit Party in accordance with the terms thereof subject to the qualifications contained herein. 5. The authorized, issued and outstanding capital stock of each of the Credit Parties is as described on Schedule III attached hereto. All such ------------ issued and outstanding capital stock is validly issued, fully paid and nonassessable. 6. To our knowledge, based solely upon the inquiries of officers of the Credit Parties and other than as disclosed in the Loan Documents, there are no judgments outstanding with respect to the Credit Parties nor is there now pending any action, suit or proceeding before any court or any governmental or regulatory authority with respect to the Credit Parties which would reasonably be expected to result in any material adverse January 8, 1997 Page 5 change in the business or financial condition of the Credit Parties, taken as a whole. 7. To our knowledge, no consent or waiver of, filing with, authorization, approval or other action by any federal or New York State governmental or regulatory authority, which has not already been obtained or done (collectively, the "Consents"), is required in connection with the -------- execution, delivery and performance by any Credit Party of any of the Loan Documents to which such Credit Party is a party or the consummation by each Credit Party of the transactions contemplated thereby or compliance by each Credit Party with the provisions thereof pertaining to such party, except (i) certain filings necessary to perfect the Liens of Bankers Trust Company, as Administrative Agent, created by certain of the Loan Documents, (ii) those required by federal and state securities and blue sky laws, as to which we express no opinion, and (iii) for such Consents for which the failure to so do or obtain would not have a material adverse effect on the business or financial condition of the Credit Parties, taken as a whole. 8. The execution and delivery of the Loan Documents by each of the Credit Parties to which it is a party and the consummation of the transactions contemplated thereby will not: (a) violate any existing order or decree applicable to any of the Credit Parties of any Federal or New York court or governmental authority of which we are aware; (b) result in a breach or violation of the certificates of incorporation or bylaws of each of the Credit Parties as in effect on the date hereof; (c) to our knowledge, result in the creation of any Lien on any of the Collateral, except as contemplated by the Loan Documents or as otherwise disclosed on the schedules to the Credit Agreement; or (d) to our knowledge, conflict with, constitute a default (with or without notice or lapse of time or both) under, or result in a breach or violation of the provisions of any material agreement under which any Credit Party has incurred Indebtedness. In connection with the foregoing, we express no opinion as to: (i) any agreement, the violation of which would not have any material adverse effect on the Credit Parties, taken as a whole; (ii) any agreement which might be violated by a misrepresentation or omission or a fraudulent act; or (iii) any law, rule, order or agreement to which such Credit Party may be subject as a result of your legal or regulatory status, the syndication of Loans by you, or the involvement by you in any of the transactions contemplated by the Loan Documents. 9. The Security Agreement creates a valid security interest for the benefit of the secured parties named therein, in all of the Company's right, title and interest in the Collateral January 8, 1997 Page 6 to the extent that a security interest therein can be created under Article 9 of the UCC, and, to the extent provided in Section 9-306 of the UCC, all proceeds thereof. Assuming that the Financing Statements as executed by the Credit Parties have been duly filed in the office of the Secretary of State of the State of New York (the "Filing Office") in the form reviewed by us, the security ------------- interests of Bankers Trust Company, as Administrative Agent (the "Agent") on ----- behalf of the Agents and Banks, in the Collateral, to the extent such Collateral is located, or deemed located, in the State of New York, and based solely upon the representations and warranties of each of the Credit Parties to us concerning the nature and location of its assets and the location of its chief executive office, will be perfected to the extent such security interests can be perfected solely by filing a financing statement under the UCC, and, upon the due filing thereof, no further filing of any document or instrument or other action will be required to so perfect such security interests, except that: (a) continuation statements with respect to each Financing Statement must be filed within the period of six months prior to the expiration of five years from the date of the original filings thereof, and within like periods thereafter, in order to maintain the effectiveness of such filings; (b) additional filings may be necessary if either Credit Party changes its name, identity, corporate structure or the jurisdiction in which its places of business, its chief executive office or the Collateral are located; (c) we express no opinion as to the perfection of, or need for further filings to perfect, such security interests in goods now or hereafter located in any jurisdiction other than the jurisdictions in which the Filing Office is located; (d) although the filing of a UCC-1 Financing Statement will perfect a security interest in chattel paper and instruments, the perfected security interest therein is subject to the rights of subsequent holders or purchasers (including secured parties) without actual knowledge of Agent's security interest as provided in Sections 9-308 and 9-309 of the UCC; (e) a perfected security interest in Collateral located in one state may become unperfected: January 8, 1997 Page 7 (i) if the Collateral is removed from such state, and appropriate steps are not taken by Agent in a timely fashion in such other jurisdiction to which such Collateral is moved; or (ii) if the Financing Statements become misleading, and appropriate steps are not taken by Agent in a timely fashion to file new Financing Statements or amendments thereto; (f) the Agent's security interest, to the extent it secures future advances, may be subject to the prior rights of a lien creditor pursuant to Section 9-301(4) of the UCC; (g) as provided in Sections 9-312 and 9-313 of the UCC, holders of purchase money security interests created after the date hereof may have rights in the Collateral subject thereto superior to Agent's rights under certain circumstances; (h) as provided in Section 9-310 of the UCC, persons who provide materials or services with respect to the Collateral on or after the date hereof may under certain circumstances obtain liens on such Collateral prior to Agent's; (i) the Agent's security interest in accessions and products is subject to the limitations set forth in Sections 9-313, 9-314 and 9- 315 of the UCC; (j) as provided in Section 9-318 of the UCC, the Collateral may be subject to any rights, defenses or claims of an account debtor to which the rights of an assignee would be subject; and (k) the perfection of the Agent's security interests in the Collateral will be terminated as to Collateral disposed of by the Credit Parties in a manner authorized by Agent in the Credit Agreement or otherwise. 10. Assuming (a) the continued exclusive possession within the State of New York by the Agent ("Pledgee") of all stock certificates (the "Pledged ------- ------- Shares") listed on Part I of Annex A to each of the Holdings Pledge Agreement - ------ and the Borrower Pledge Agreement (each a "Pledge Agreement"), each of which ---------------- Pledge Agreement was executed pursuant to the Credit Agreement, together with stock powers properly executed in blank with January 8, 1997 Page 8 respect thereto and (b) that the Pledgee was without notice of any adverse claim (as such term is used in Section 8-302 of the UCC) with respect to the Pledged Shares, the Holdings Pledge Agreement and the Borrower Pledge Agreement, together with the delivery of the certificates representing the Pledged Shares thereunder to Agent in the State of New York, creates in Agent's favor a perfected security interest under the UCC in such Pledged Shares. Assuming Agent acquired Agent's interest in such Pledged Shares in good faith and without notice of any adverse claims and that each such certificate is either in bearer or registered form issued or endorsed in Agent's name or in blank, Agent will acquire Agent's security interest in such Pledged Shares free of adverse claims. Our opinions set forth above are subject to the following additional qualifications: (a) we express no opinion as to, or the effect or applicability of, any laws other than the laws of the State of New York, the Federal law of the United States of America and the General Corporation Law of the State of Delaware; further, our security interest opinions in paragraphs 9 and 10 are limited to Articles 8 and 9 of the UCC, and therefore those opinion paragraphs do not address (i) laws of jurisdictions other than that of the State of New York, except for Articles 8 and 9 of the UCC, and (ii) collateral of a type not subject to Articles 8 and 9 of the UCC, and (iii) under Section 9-103 of the UCC what law governs perfection of the security interests granted in the Collateral covered herein. We assume no responsibility with respect to the application to the subject transactions, or the effect thereon, of the laws of any other jurisdiction; (b) we express no opinion regarding the perfection of security interests with respect to collateral or transactions which are excluded from Article 9 of the UCC, subject to opinion paragraph 10 above, including, without limitation, any item or transaction excluded from the coverage of the UCC by Section 9-104 thereof; (c) we express no opinion with respect to the perfection of any security interests in any accounts, chattel paper, documents, instruments or general intangibles with respect to which the account debtor or obligor is the United States of America, any state, county, city, municipality or other governmental body, or any department, agency or instrumentality thereof, January 8, 1997 Page 9 unless the same has been assigned to Agent pursuant to the Assignment of Claims Act of 1940, as amended, and all similar laws and regulations relating to the assignment or pledge thereof; (d) with respect to opinion paragraphs 4, 9 and 10, our opinion is subject to the effect of bankruptcy, insolvency, reorganization, arrangements for the benefit of creditors and remedies, preferential transfer, moratorium, fraudulent conveyance or other similar laws and rules, whether now or hereafter in effect, relating to or affecting creditors and remedies generally or the effects of general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforceability thereof is considered in a proceeding in equity or law), and except to the extent that rights to indemnification hereunder may be limited by federal or state securities laws or public policy relating thereto, and by the discretion of the court before which any proceeding therefor may be brought, including, without limitation, the effect of such laws and rules, general principles or court discretion on the legality, validity or enforceability of a guaranty of a subsidiary of the obligations of its parent; (e) any purported assignment of, or any transfer of any interest in, any agreement, lease or governmental or regulatory approval, license or permit may be subject to restrictions upon assignment or transfer which, although not necessarily applicable to assignments intended as security, will be required to be satisfied before Agent or Agent's successor(s) or assign(s) will be treated as an assignee thereof, except to the extent that consents to or approvals of such assignment have been obtained from the appropriate governmental or regulatory body or third party; (f) we express no opinion with respect to the priority of any Lien, the existence of any of the Collateral or other property of the Credit Parties or the validity or condition of the title of the Credit Parties thereto; (g) our opinions are limited to the specific issues addressed herein and are limited in all respects to laws and facts existing on the date hereof, and, by rendering our opinion, we do not undertake to advise January 8, 1997 Page 10 Agent of any changes in such laws or facts which may occur after the date hereof; (h) that Agent retain exclusive possession of the Securities under the Holdings Pledge Agreement and the Borrower Pledge Agreement (as defined in such agreements) at all times; as to any hereafter- arising Securities thereunder as to which the UCC requires possession in order to perfect Agent's security interest therein, that Agent are in exclusive possession thereof at the time that Agent's security interest therein attaches; the Pledged Shares are "certificated securities" (as defined in Section 8-102(1)(a) of the UCC) and none of the Pledged Shares now owned or hereafter arising are "uncertificated securities" (as defined in Section 8-102(1)(b) of the UCC); when Agent takes possession of any portion of such Securities which constitutes a "security" (as defined by Section 8-102(1)(a) of the UCC) Agent shall be a "bona fide purchaser" (as defined in Section 8-302(1) of the UCC) ---- ---- of the security; Section 8-302(4) of the UCC is inapplicable to Agent; and further, the perfected security interest in the Securities is subject to the rights of subsequent holders or purchasers (including secured parties) as provided in Sections 8-301 and 8-302 of the UCC; (i) we express no opinion as to the enforceability of provisions: (i) to the effect that failure to exercise or delay in exercising a right or remedy will not operate as a waiver of the right or remedy; (ii) indemnifying or prospectively releasing a creditor against liability for its own wrongful or negligent acts or where the release or indemnification is contrary to public policy; (iii) purporting to preclude the modification of the Loan Documents or any of the other agreements through conduct, custom, or course of performance, action, or dealing; (iv) requiring the payment or reimbursement of fees, costs, expenses, or other amounts without regard to whether they are reasonable in nature or amount; January 8, 1997 Page 11 (v) respecting various self-help or summary remedies, particularly if their operation would work a substantial forfeiture, impose a substantial penalty upon the burdened party, or result in a breach of the peace, or which permit the appointment of a receiver without notice and an opportunity for a hearing; and (vi) due-on-lease, due-on-encumbrance, or due-on-sale clauses; (j) we express no opinion regarding the effect of statutory rights of debtors to reinstate, redeem or cure defaults; (k) with respect to the guaranty by Holdings as set forth in Section 14 of the Credit Agreement (each a "Guaranty"), we express no -------- opinion as to: (i) the effect of any failure to provide a guarantor under the Loan Documents with written notice of any default under the Loan Documents that would require a payment under the Loan Documents and with an opportunity to cure the default; (ii) the effect of any modification or amendments to the Notes or Credit Agreement that materially affects a guarantor's obligations without the consent of any guarantor under the Credit Agreement; or (iii) the possible ineffectiveness of any waiver under a Guaranty that is too vague; (l) with respect to each Guaranty our opinion is limited by the substantial body of case law which treats guarantors as "debtors" under the UCC thereby affording guarantors rights and remedies of debtors established by the UCC; additionally, we express no opinion as to the enforceability of guaranties by subsidiaries of parent obligations or of cross-corporate guaranties by guarantors of common corporate parents and the limiting effect of the substantial body of case law with respect to such matters; (m) since there has been no filing of the Collateral Assignment of Leases and the Collateral Assignment of Location Leases, we express no opinion as the perfection of any security interests or liens on the leases subject to the Collateral Assignment of Leases or the location contracts subject to the Collateral Assignment of Location Leases; (n) to the extent the parties to the Credit Agreement have agreed not to file a Financing Statement January 8, 1997 Page 12 in a certain location, we express no opinion as the perfection of any security interests or liens on the Collateral located in such location; and (o) with respect to (i) federal tax liens accorded priority under law and (ii) liens created under Title IV of the Employee Retirement Income Security Act of 1974 which are properly filed after the date hereof, we express no opinion as to the relative priority of such liens and the security interests created by the Loan Documents; (p) with respect to any claim (including for taxes) in favor of any state or any of its respective agencies, authorities, municipalities or political subdivisions which claim is given lien status and/or priority under any law of such state, we express no opinion as to the relative priority of such liens and the security interests created by the Loan Documents; (q) Agent's security interest in the "proceeds" of the Collateral is subject to the limitations set forth in Sections 9-306 and 8-321(1) of the UCC; (r) as provided in Sections 8-301, 8-302, 9-306, 9-307, 9-308 and 9-309 of the UCC, buyers and purchasers of the Collateral may, in certain circumstances, acquire the Collateral free of Agent's security interest; (s) Agent's security interest relating to the time of attachment and perfection of a security interest in the items of Collateral in which each Credit Party does not now have rights and of which it does not now have possession is limited by Section 9-204 of the UCC; and (t) Agent's security interest with respect to any Collateral acquired by either Credit Party subsequent to the commencement of a case against either Credit Party under Title 11 of the United States Code is limited by Section 552 of such Code. Additionally, the opinions expressed herein are qualified to the extent that enforceability of any of the terms of the Loan Documents may be limited by or otherwise affected by: (a) compliance with, and limitations imposed by, procedural requirements relating to the exercise of January 8, 1997 Page 13 remedies by Agent, but which requirements do not in our opinion make Agent's remedies inadequate for the practical realization of the benefits intended to be provided thereby; (b) provisions of applicable law limiting a person's right to waive the benefits or vary provisions of law, rules or regulations or at common law; and (c) limitations on the rights of a creditor to exercise rights and remedies or impose penalties if it is determined that the defaults are not material or the penalties bear no reasonable relation to the damage suffered as a result of delinquencies or defaults or a creditor's enforcement of covenants or provisions under circumstances which would violate such creditor's implied covenant of good faith and fair dealing. This opinion is being issued to Agent for Agent's exclusive benefit and is intended to be relied upon by Agent in connection with the transactions contemplated by the Credit Agreement. This opinion may not be used for any other purpose, or relied on by any other person, firm or entity, without our express written consent. Very truly yours, ANDERSON KILL & OLICK, P.C. By: ________________________________ Steven M. Manket, Esq., a Member of the Firm SCHEDULE I UCC FINANCING STATEMENT SEARCHES 1. COINMACH CORPORATION -------------------- Alabama - Secretary of State Baldwin Mobile Montgomery Russell Arkansas - Secretary of State Chicot Desha Lincoln Jefferson Connecticut - Secretary of State Bridgeport Stamford Hamden New Haven District of Columbia Delaware - Secretary of State Kent New Castle Sussex Florida - Secretary of State Broward Dade Duval Orange Georgia - Cobb Dodge Fulton Richmond Illinois - Secretary of State Champaign Jackson Macon St. Clair Indiana - Secretary of State Marion Iowa - Secretary of State Iowa Linn Polk Scott Kansas - Secretary of State Atchison Douglas Johnson Riley Kentucky - Secretary of State Bell Whitley Louisiana - East Baton Rouge Jefferson Lafayette Orleans St. Mary Maryland - Secretary of State Anne Arundel Baltimore Howard Montgomery Prince George's Michigan - Secretary of State Mississippi - Secretary of State Harrison (1st and 2nd District) Hinds Jackson Washington Missouri - Secretary of State St. Louis Nebraska - Secretary of State Douglas Sarpy New Jersey - Secretary of State Atlantic Camden Cape May Salem New York - Secretary of State Bronx Kings New York Queens North Carolina - Secretary of State Durham Halifax Mecklenberg Wake Ohio - Secretary of State Cuyahoga Lucas Oklahoma - Oklahoma County Clerk Pennsylvania - Secretary of the Commonwealth Chester Dauphin Montgomery Philadelphia South Carolina - Secretary of State Charleston Greenville Richland Spartanburg South Dakota - Secretary of State Clay Lincoln Minnehaha Tennessee - Secretary of State Hamilton Knox Sullivan Washington Texas - Secretary of State Dallas Harris Jefferson Tarrant Virginia - Secretary of State Alexandria City Fairfax Norfolk City Virginia Beach West Virginia - Secretary of State Berkeley Mercer Mineral Wisconsin - Secretary of State Milwaukee 2. SOLON AUTOMATED SERVICES, INC. ----------------------------- Alabama - Secretary of State Baldwin Mobile Montgomery Russell Arizona - Secretary of State Maricopa Arkansas - Secretary of State Chicot Desha Lincoln Jefferson California - Secretary of State Los Angeles Orange San Diego San Mateo Connecticut - Secretary of State Bridgeport Stamford Hamden New Haven District of Columbia Delaware - Secretary of State Kent New Castle Sussex Florida - Secretary of State Broward Dade Duval Orange Georgia - Cobb Dodge Fulton Richmond Kentucky - Secretary of State Bell Whitley Louisiana - East Baton Rouge Jefferson Lafayette Orleans Maryland - Secretary of State Anne Arundel Baltimore Howard Montgomery Prince George's Minnesota - Secretary of State Hennepin Ramsey Mississippi - Secretary of State Harrison Hinds Jackson Washington New Jersey - Secretary of State Atlantic Camden Cape May Salem New York - Secretary of State Bronx Kings New York Queens North Carolina - Secretary of State Durham Halifax Mecklenberg Wake Ohio - Cuyoga Lucas Oklahoma - Oklahoma County Clerk Pennsylvania - Secretary of the Commonwealth Chester Dauphin Montgomery Philadelphia South Carolina - Secretary of State Charleston Greenville Richland Spartanburg Tennessee - Secretary of State Hamilton Knox Sullivan Washington Texas - Secretary of State Dallas Harris Jefferson Tarrant Virginia - Secretary of State Alexandria City Fairfax Norfolk City Virginia Beach West Virginia - Secretary of State Berkeley Mercer Mineral 3. ALLIED LAUNDRY EQUIPMENT COMPANY -------------------------------- Illinois - Secretary of State Champaign Jackson Macon St. Clair Indiana - Secretary of State Marion Iowa - Secretary of State Iowa Linn Polk Scott Kansas - Secretary of State Atchison Douglas Johnson Riley Kentucky - Secretary of State Bell Whitley Michigan - Secretary of State Missouri - Secretary of State St. Louis Nebraska - Secretary of State Douglas Sarpy Ohio - Secretary of State Cuyahoga Lucas South Dakota - Secretary of State Clay Lincoln Minnehaha Tennessee - Secretary of State Hamilton Knox Sullivan Washington Wisconsin - Secretary of State Milwaukee 4. HI-RISE LAUNDRY EQUIPMENT COMPANY --------------------------------- New York - Secretary of State Nassau 5. COINMACH LAUNDRY CORPORATION ---------------------------- Delaware - Secretary of State New York - Secretary of State Nassau 6. GRAND WASH & DRY LAUNDERETTE, INC. ---------------------------------- New York - Secretary of State Nassau 7. SUPER LAUNDRY EQUIPMENT CORP. ----------------------------- New York - Secretary of State Nassau Connecticut - Secretary of State Maryland - Secretary of State Baltimore Carroll Howard New Jersey - Secretary of State 8. WASCO LAUNDRY EQUIPMENT COMPANY ------------------------------- New Jersey - Secretary of State New York - Secretary of State Nassau 9. LUCA LAUNDRY EQUIPMENT COMPANY ------------------------------ New York - Secretary of State Nassau 10. WASHRITE COMPANY ---------------- New York - Secretary of State Dutchess Rockland New Jersey - Secretary of State Bergen Hudson Connecticut - Secretary of State Town of Fair Haven 11. JEFFREY ERNST (INDIVIDUAL) -------------------------- New York - Secretary of State Dutchess Rockland New Jersey - Secretary of State Bergen Hudson Connecticut - Secretary of State Town of Fair Haven 12. KWL, INC. --------- Nevada - Secretary of State 13. KWIK WASH LAUNDRIES (INC OR L.P.) --------------------------------- Nevada - Secretary of State Arkansas - Secretary of State Craighead Garland Miller Pulaski Louisiana - Caddo Calcasieu East Baton Rouge Jefferson Mississippi - Secretary of State Hancock Jackson Pearl River Warren Oklahoma County Clerk Texas - Secretary of State Bexar Dallas Harris County Travis SCHEDULE II Coinmach Corporation is not is good standing in the following states: New Jersey and West Virginia. SCHEDULE III CAPITALIZATION 1. The authorized capital stock of CLC consists of 15,000,000 shares of Class A Common Stock, par value $.01 per share (the "CLC Class A Common Stock"), 1,000,000 shares of Class B Common Stock, par value $.01 per share (the "CLC Class B Common Stock"), and 1,000,000 shares of series preferred stock, par value $.01 per share, of which 1,000 shares have been designated "Series A Preferred Stock" (the "CLC Preferred Stock"). As of the date hereof, there are 10,004,278 shares of Class A Common Stock issued and outstanding, 480,648 shares of Class B Common Stock issued and outstanding, and no shares of CLC Preferred Stock issued and outstanding. 2. The authorized capital stock of the Company consists of 1,000 shares of common stock, par value $.01 per share (the "Company Common Stock"). As of the date hereof, there are 100 shares of Company Common Stock issued and outstanding. EXHIBIT F OFFICER'S CERTIFICATE --------------------- OF COINMACH LAUNDRY CORPORATION The undersigned, being the duly appointed and serving Senior Vice President of Coinmach Laundry Corporation, a Delaware Corporation (the "Corporation"), does hereby certify as follows: - ------------ 1. Attached hereto as Exhibit A is a true, correct and complete copy --------- of the Third Amended and Restated Certificate of Incorporation and any additional amendments (collectively, the "Certificates") of the Corporation as ------------ in effect on the date hereof. Such Certificates have not been amended, altered or repealed and remain in full force and effect as of the date hereof. 2. Attached hereto as Exhibit B is a true, correct and complete copy --------- of the Corporation's Bylaws. Such Bylaws have not been amended, altered or repealed and remain in full force and effect as of the date hereof. 3. Attached hereto as Exhibit C is a true, correct and complete copy --------- of resolutions duly adopted by a unanimous written consent of the Board of Directors of the Corporation as of January __, 1997. Such resolutions have not been amended, altered or repealed and remain in full force and effect as of the date hereof. 4. Each of the persons set forth below are the duly elected and qualified incumbents in the offices set forth below opposite his name and has been and is duly authorized by the Board of Directors of the Corporation, in conformity with the Corporation's Certificates and Bylaws, to execute, deliver and perform all acts required by any certificate, instruction, notice or other instrument, or to give oral instruction on behalf of the Corporation, including without limitation, all Credit Documents to which the Corporation is a party (as such term is defined in the Credit Agreement, dated as of January __, 1997, by and among the Corporation, Coinmach Corporation, the Subsidiary Guarantors named therein, the Banks listed therein, Bankers Trust Company, as Administrative Agent, First Union National Bank of North Carolina, as Syndication Agent, and Lehman Commercial Paper, Inc., as Documentation Agent) and all Transaction Documents to which the Corporation is a party (as such term is defined in the Stock Purchase Agreement, dated November 25, 1996, by and among each of the parties listed on Schedule A attached thereto, KWL, Inc., Kwik-Wash Laundries, Inc., Kwik Wash Laundries, L.P. and Coinmach Corporation), and the signatures set forth opposite their names on any such documents are their authentic and genuine signatures.
Name Office Signature - -------------------------- --------------------------- --------- Stephen R. Kerrigan Chairman of the Board ____________________ and Chief Executive Officer Mitchell Blatt President and Chief ____________________ Operating Officer
Robert M. Doyle Senior Vice President, __________________________ Chief Financial Officer, Treasurer and Secretary John E. Denson Senior Vice President __________________________ IN WITNESS WHEREOF, the undersigned has executed and delivered this Officer's Certificate as of the ___ day of ___________, 199_. ________________________________ John E. Denson Senior Vice President I, Robert M. Doyle, Secretary of Coinmach Laundry Corporation, a Delaware corporation (the "Corporation"), certify that John E. Denson is the duly appointed and acting Senior Vice President of the Corporation and that his signature above is genuine. _________________________ Robert M. Doyle Secretary OFFICER'S CERTIFICATE OF COINMACH CORPORATION The undersigned, being the duly appointed and serving Senior Vice President of Coinmach Corporation, a Delaware Corporation (the "Corporation"), ----------- does hereby certify as follows: 1. Attached hereto as Exhibit A is a true, correct and complete copy --------- of the Restated Certificate of Incorporation and any additional amendments (collectively, the "Certificates") of the Corporation as in effect on the date ------------ hereof. Such Certificates have not been amended, altered or repealed and remain in full force and effect as of the date hereof. 2. Attached hereto as Exhibit B is a true, correct and complete copy --------- of the Corporation's Bylaws. Such Bylaws have not been amended, altered or repealed and remain in full force and effect as of the date hereof. 3. Attached hereto as Exhibit C is a true, correct and complete copy --------- of resolutions duly adopted by a unanimous written consent of the Board of Directors of the Corporation as of January __, 1997. Such resolutions have not been amended, altered or repealed and remain in full force and effect as of the date hereof. 4. Each of the persons set forth below are the duly elected and qualified incumbents in the offices set forth below opposite his name and has been and is duly authorized by the Board of Directors of the Corporation, in conformity with the Corporation's Certificates and Bylaws, to execute, deliver and perform all acts required by any certificate, instruction, notice or other instrument, or to give oral instruction on behalf of the Corporation, including without limitation, all Credit Documents to which the Corporation is a party (as such term is defined in the Credit Agreement, dated as of January __, 1997, by and among the Corporation, Coinmach Laundry Corporation, the Subsidiary Guarantors named therein, the Banks listed therein, Bankers Trust Company, as Administrative Agent, First Union National Bank of North Carolina, as Syndication Agent, and Lehman Commercial Paper, Inc., as Documentation Agent) and all Transaction Documents to which the Corporation is a party (as such term is defined in the Stock Purchase Agreement, dated November 25, 1996, by and among each of the parties listed on Schedule A attached thereto, KWL, Inc., Kwik-Wash Laundries, Inc., Kwik Wash Laundries, L.P. and the Corporation), and the signatures set forth opposite their names on any such documents are their authentic and genuine signatures.
Name Office Signature - -------------------------- --------------------------- --------- Stephen R. Kerrigan Chairman of the Board ____________________ and Chief Executive Officer Mitchell Blatt President and Chief ____________________ Operating Officer
Robert M. Doyle Senior Vice President, __________________________ Chief Financial Officer, Treasurer and Secretary John E. Denson Senior Vice President __________________________ IN WITNESS WHEREOF, the undersigned has executed and delivered this Officer's Certificate as of the ___ day of ___________, 199_. ________________________________ John E. Denson Senior Vice President I, Robert M. Doyle, Secretary of Coinmach Corporation, a Delaware corporation (the "Corporation"), certify that John E. Denson is the duly appointed and acting Senior Vice President of the Corporation and that his signature above is genuine. _________________________ Robert M. Doyle Secretary EXHIBIT G --------- [FORM OF INTERCOMPANY NOTE] --------------------------- New York, New York , 1997 FOR VALUE RECEIVED, [Name of Subsidiary] (the "Borrower"), hereby promises to pay on demand to the order of Coinmach Corporation or its assigns (the "Payee"), in lawful money of the United States of America in immediately available funds, at such location in the United States of America as the Payee shall from time to time designate, the unpaid principal amount of all loans and advances made by the Payee to the Borrower. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at such rate per annum as shall be agreed upon from time to time by the Borrower and Payee. Upon the commencement of any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar proceeding of any jurisdiction relating to the Borrower, the unpaid principal amount hereof shall become immediately due and payable without presentment, demand, protest or notice of any kind in connection with this Note. This Note evidences certain permitted intercompany Indebtedness referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Payee, the Subsidiary Guarantors named therein, various banks, First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper, Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as amended, modified or supplemented from time to time, the "Credit Agreement"), and is subject to the terms thereof, and shall be pledged by the Payee pursuant to the Security Documents (as defined in the Credit Agreement). The Borrower hereby acknowledges and agrees that the Collateral Agent pursuant to and as defined in the Security Documents, as in effect from time to time, may exercise all rights provided therein with respect to this Note. The Payee is hereby authorized to record all loans and advances made by it to the Borrower (all of which shall be evidenced by this Note), and all repayments or prepayments thereof, in its books and records, such books and records constituting prima facie evidence of the accuracy of the information contained therein. EXHIBIT G Page 2 All payments under this Note shall be made without offset, counterclaim or deduction of any kind. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. [NAME OF SUBSIDIARY] By___________________________ Title: COINMACH CORPORATION By_________________________ Title: Pay to the order of ___________________________ EXHIBIT H --------- [FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT] Date _______, 19__ Reference is made to the Credit Agreement described in Item 2 of Annex I hereto (as such Credit Agreement may hereafter be amended, supplemented or otherwise modified from time to time, the "Credit Agreement"). Unless defined in Annex I hereto, terms defined in the Credit Agreement are used herein as therein defined. ___________ (the "Assignor") and __________ (the "Assignee") hereby agree as follows: 1. The Assignor hereby sells and assigns to the Assignee without recourse and without representation or warranty (other than as expressly provided herein), and the Assignee hereby purchases and assumes from the Assignor, that interest in and to all of the Assignor's rights and obligations under the Credit Agreement as of the date hereof which represents the percentage interest specified in Item 4 of Annex I hereto (the "Assigned Share") of all of the outstanding rights and obligations under the Credit Agreement relating to the facilities listed in Item 4 of Annex I hereto, including, without limitation, [(v) in the case of any assignment of all or any portion of the Total Tranche A Term Loan Commitment, all rights and obligations with respect to the Assigned Share of such Total Tranche A Term Loan Commitment,]/1/ [(w) in the case of any assignment of all or any portion of the Total Tranche B Term Loan Commitment, all rights and obligations with respect to the Assigned Share of such Total Tranche B Term Loan Commitment,]/2/ (x) in the case of any assignment of outstanding Tranche A Term Loans, all rights and obligations with respect to the Assigned Share of such Tranche A Term Loans, (y) in the case of any assignment of outstanding Tranche B Term Loans, all rights and obligations with respect to the Assigned Share of such outstanding Tranche B Term Loans and (z) in the case of any assignment of all or any portion of the Total Revolving Loan Commitment, all rights and obligations with respect to the Assigned Share of such Total Revolving Loan Commitment and of any outstanding Revolving Loans and Letters of Credit. After giving effect to such sale and assignment, the Assignee's Revolving Loan Commitment[, Tranche A Term - ---------- /1/ Delete bracketed language in Assignment and Assumption Agreements executed after the termination of the Total Tranche A Term Loan Commitment. /2/ Delete bracketed language in Assignment and Assumption Agreements executed after the termination of the Total Tranche B Term Loan Commitment. EXHIBIT H Page 2 Loan Commitment]/3/ [, Tranche B Term Loan Commitment]/4/ and the amount of the outstanding Term Loans owing to the Assignee will be as set forth in Item 4 of Annex I hereto. 2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the other Credit Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or the other Credit Documents or any other instrument or document furnished pursuant thereto; and (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or any of its Subsidiaries or the performance or observance by the Borrower or any of its Subsidiaries of any of their obligations under the Credit Agreement or the other Credit Documents to which they are a party or any other instrument or document furnished pursuant thereto. 3. The Assignee (i) confirms that it has received a copy of the Credit Agreement and the other Credit Documents, together with copies of the financial statements referred to therein and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption Agreement; (ii) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) confirms that it is an Eligible Transferee under Section [13.04(b)] of the Credit Agreement; (iv) appoints and authorizes the Agent and the Collateral Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement and the other Credit Documents as are delegated to the Agent and the Collateral Agent, as the case may be, by the terms thereof, together with such powers as are reasonably incidental thereto; [and] (v) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Bank[; and (vi) to the extent legally entitled to do so, attaches the forms described in Section 13.04(b) of the Credit Agreement]/5/. - ---------- /3/ Delete bracketed language in Assignment and Assumption Agreements executed after the termination of the Total Tranche A Term Loan Commitment. /4/ Delete bracketed language in Assignment and Assumption Agreements executed after the termination of the Total Tranche B Term Loan Commitment. /5/ Include if the Assignee is organized under the laws of a jurisdiction outside of the United States. EXHIBIT H Page 3 4. Following the execution of this Assignment and Assumption Agreement by the Assignor and the Assignee, an executed original hereof (together with all attachments) will be delivered to the Agent. The effective date of this Assignment and Assumption Agreement shall be the date of execution hereof by the Assignor and the Assignee and the receipt of the consent of the Agent and the Borrower to the extent required by Section 13.04(b) of the Credit Agreement and receipt by the Agent of the administrative fee referred to in such Section 13.04(b), unless otherwise specified in Item 5 of Annex I hereto (the "Settlement Date"). 5. Upon the delivery of a fully executed original hereof to the Agent, as of the Settlement Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Assumption Agreement, have the rights and obligations of a Bank thereunder and under the other Credit Documents and (ii) the Assignor shall, to the extent provided in this Assignment and Assumption Agreement, relinquish its rights and be released from its obligations under the Credit Agreement and the other Credit Documents, provided that all indemnities of the Credit Parties under the Credit Agreement and the other Credit Documents for the benefit of the Assignor shall survive in accordance with the terms thereof. 6. It is agreed that the Assignee shall be entitled to (x) all interest on the Assigned Share of the Loans at the rates specified in Item 6 of Annex I; (y) all Commitment Commission (if applicable) on the Assigned Share of the Total Revolving Loan Commitment, Total Tranche A Term Loan Commitment and/or Total Tranche B Term Loan Commitment (if not theretofore terminated) at the rate specified in Item 7 of Annex I hereto; and (z) all Letter of Credit Fees (if applicable) on the Assignee's participation in all Letters of Credit at the rate specified in Item 8 of Annex I hereto, which, in each case, accrue on and after the Settlement Date, such interest and, if applicable, Commitment Commission and Letter of Credit Fees, to be paid by the Agent directly to the Assignee. It is further agreed that all payments of principal made on the Assigned Share of the Loans which occur on and after the Settlement Date will be paid directly by the Agent to the Assignee. Upon the Settlement Date, the Assignee shall pay to the Assignor an amount specified by the Assignor in writing which represents the Assigned Share of the principal amount of the respective Loans made by the Assignor pursuant to the Credit Agreement which are outstanding on the Settlement Date, net of any closing costs, and which are being assigned hereunder. The Assignor and the Assignee shall make all appropriate adjustments in payments under the Credit Agreement for periods prior to the Settlement Date directly between themselves. EXHIBIT H Page 4 7. THIS ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Assignment and Assumption Agreement, as of the date first above written, such execution also being made on Annex I hereto. Accepted this 8th day [NAME OF ASSIGNOR] of January, 1997 as Assignor By_____________________________ Title: [NAME OF ASSIGNEE] as Assignee By_____________________________ Title: [Acknowledged and Agreed: BANKERS TRUST COMPANY, as Agent] By________________________ Title:/6/ - ---------- /6/ The consent of Bankers Trust Company is required for assignments pursuant to Section 13.04(b)(y) of the Credit Agreement. ANNEX FOR ASSIGNMENT AND ASSUMPTION AGREEMENT ANNEX I 1. Borrower: Coinmach Corporation 2. Name and Date of Credit Agreement: Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, Coinmach Corporation, the Subsidiary Guarantors named therein, various Banks from time to time party thereto, First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper, Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent, as amended to the date hereof. 3. Date of Assignment Agreement: 4. Amounts (as of date of item #3 above):
[Tranche A [Tranche B Principal of Principal of Revolving Term Loan Term Loan Tranche A Tranche B Loan Commitment Commitment Term Loans Term Loans Commitment ---------------- --------------- ------------- ------------- ----------- a. Aggregate Amount $__________ $__________ $_________ $_________ $_________ for all Banks b. Assigned Share __________% __________% _________% _________% _________% c. Amount of $__________]/7/ $_________]/8/ $_________ $_________ $_________ Assigned Share
5. Settlement Date: - ---------- /7/ This column should be deleted in the case of Assignment and Assumption Agreements executed after the termination of the Total Tranche A Term Loan Commitment. /8/ This column should be deleted in the case of Assignment and Assumption Agreements executed after the termination of the total Tranche B Term Loan Commitment. Annex I Page 2 6. Rate of Interest As set forth in Section 1.08 of the Credit Agreement to the Assignee: (unless otherwise agreed to by the Assignor and the Assignee)/9/ 7. Commitment Commission: As set forth in Sections 3.01(a) (unless otherwise agreed to by the Assignor and the Assignee)/10/ 8. Letter of Credit As set forth in Section 3.01(b) of the Credit Fees to the Assignee: Agreement (unless otherwise agreed to by the Assignor and the Assignee)/11/ - ---------- /9/ Coinmach Corporation and the Agent shall direct the entire amount of the interest to the Assignee at the rate set forth in Section 1.08 of the Credit Agreement, with the Assignor and Assignee effecting the agreed upon sharing of the interest through payments by the Assignee to the Assignor. /10/ Coinmach Corporation and the Administrative Agent shall direct the entire amount of the Commitment Commission to the Assignee at the rate set forth in Section 3.01(a) of the Credit Agreement, with the Assignor and the Assignee effecting the agreed upon sharing of Commitment Commission through payment by the Assignee to the Assignor. /11/ Insert "Not Applicable" in lieu of text if no portion of the Total Revolving Loan Commitment is being assigned. Otherwise, Desa International, Inc. and the Agent shall direct the entire amount of the Letter of Credit Fees to the Assignee at the rate set forth in Section 3.01(b) of the Credit Agreement, with the Assignor and the Assignee effecting the agreed upon sharing of Letter of Credit Fees through payment by the Assignee to the Assignor. Annex I Page 3 9. Notice: ASSIGNOR: _____________________ _____________________ _____________________ _____________________ Attention: Telephone: Telecopier: Reference: ASSIGNEE: _____________________ _____________________ _____________________ _____________________ Attention: Telephone: Telecopier: Reference: Payment Instructions: ASSIGNOR: _____________________ _____________________ _____________________ _____________________ Attention: Reference: Annex I Page 4 ASSIGNEE: _____________________ _____________________ _____________________ _____________________ Attention: Reference: Accepted and Agreed: [NAME OF ASSIGNEE] [NAME OF ASSIGNOR] By_______________________ By______________________ _______________________ ______________________ (Print Name and Title) (Print Name and Title) EXHIBIT I-1 Borrower Pledge Agreement (See Exhibit 10.65 filed herewith) EXHIBIT I-2 Holders Pledge Agreement (See Exhibit 10.64 filed herewith) EXHIBIT J Security Agreement (See Exhibit 10.66 filed herewith) EXHIBIT K Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing. (See Exhibit 10.72 filed herewith) EXHIBIT L Collateral Assignment of Leases (See Exhibit 10.67 filed herewith) EXHIBIT M Collateral Assignment of Location Leases (See Exhibit 10.68 filed herewith) Exhibit N --------- [FORM OF LANDLORD CONSENT] TO: BANKERS TRUST COMPANY 130 Liberty Street New York, New York 10006 Coinmach Corporation, a Delaware corporation ("Tenant") and the undersigned ("Landlord") have entered into a lease, dated as of January 8, 1997 (as amended, the "Lease"), demising the premises located in _______, _______ and legally (or otherwise) described on Exhibit A attached hereto and made a part --------- hereof (the "Leased Premises"). A copy of the Lease is attached hereto as Exhibit B. - --------- Tenant and certain affiliates of tenant intend to enter into certain financing arrangements with Bankers Trust Company ("Collateral Agent") and certain other lending institutions (collectively, the "Lenders") evidenced by, among other things, a credit agreement (the "Credit Agreement"). As a condition to the Lenders making the loans and extending other financial accommodations to Tenant, the Lenders require, among other things, that Tenant collaterally assign its leasehold interest in the Lease to Collateral Agent pursuant to a Collateral Assignment of Lease (the "Assignment"), in substantially the form attached hereto as Exhibit C. --------- To induce the Lenders to enter into such financing arrangements, and for other good and valuable consideration, Landlord hereby agrees that: 1. Landlord consents to the execution by Tenant of the Assignment. Landlord agrees that, notwithstanding anything to the contrary contained in the Lease, the execution, delivery and performance by Tenant of the Assignment will not constitute a default under the Lease. 2. The Lease is valid and is in full force and effect and has not been assigned, modified, supplemented or amended in any way, except as described on Exhibit B, and represents the entire agreement between the parties thereto. --------- Tenant is the current owner of the leasehold interest in the Lease. 3. To the best knowledge of Landlord, neither Landlord nor Tenant is in default under the terms of the Lease and no event has occurred which with the giving of notice or the passage of time would constitute a default under the Lease. - 2 - 4. None of Tenant's laundry machinery, laundry equipment, furniture, trade fixtures, inventory or other personal property located on or about the Leased Premises, including any additions, replacements or substitutions thereof ("Tenant's Personal Property") will be deemed by Landlord to be fixtures or to constitute part of the Leased Premises. 5. Landlord will not assert, and hereby waives, any liens, whether granted by the Lease, statute or otherwise (including, without limitation, rights of levy or distraint for rent), against Tenant's Personal Property located on the Leased Premises, including, without limitation, Tenant's additions, replacements or substitutions therefor (collectively, the "Property"). 6. If Tenant defaults on its obligations to the Lenders, and as a result, Collateral Agent exercises its rights under the Assignment, or otherwise undertakes to enforce its security interest in Tenant's assets, Landlord will permit Collateral Agent to enter and take possession of the Leased Premises without terminating the Lease and Landlord will recognize Collateral Agent (or a nominee of Collateral Agent) as the Tenant under the Lease, entitled to all of the benefits thereof. Collateral Agent may cause the Leased Premises to be leased or assigned to an entity designated by Collateral Agent whose financial condition is reasonably acceptable to Landlord. 7. Collateral Agent may, at no expense to Landlord and in accordance with the terms of the Credit Agreement and the other loan documents, enter onto the Leased Premises at any time or times and take possession of, sever, or remove the Property or any part thereof and said Property upon severance and/or removal may be sold, transferred or otherwise disposed of free and clear of all liens, claims, demands, rights or interests of Landlord. 8. Landlord: (a) will give copies of all notices of default sent to Tenant under the Lease to Collateral Agent at: Bankers Trust Company 130 Liberty Street New York, New York 10006 Attn: Thomas P. Prior or to such other address as Collateral Agent may designate from time to time by notice given to Landlord at the address set forth after its signature hereto and (b) prior to exercising any of Landlord's rights and remedies under the Lease or at law or in - 3 - equity, Collateral Agent shall have the right (but not the obligation) to cure or cause to be cured such default within the following time periods from and after receipt by Collateral Agent of notice of such default from Landlord: ten (10) days with respect to monetary defaults and thirty (30) days with respect to non-monetary defaults after the period of time granted to Tenant to cure such defaults under the terms of the Lease; provided however, that if the nature of -------- ------- any non-monetary default is such that the same cannot be cured within such thirty (30) day period, Collateral Agent shall be given such additional period of time as may be necessary to cure the default provided that Collateral Agent commences the cure within such thirty (30) day period and proceeds diligently thereafter to complete such cure. 9. Any acquisition of any interest in Tenant by Collateral Agent, in accordance with the terms of the Credit Agreement, the Assignment or any other loan documents, shall not create a default under, or require Landlord's consent under, any applicable provisions of the Lease, if any, and shall be fully effective notwithstanding any provision to the contrary contained in the Lease. 10. Landlord agrees to disclose this Landlord Consent to any purchaser or successor to Landlord's interest in the Leased Premises. 11. The statements and agreements contained herein shall be binding upon, and shall inure to the benefit of, Collateral Agent and Tenant, mortgagees of the Leased Premises and the successors and assigns of all of the foregoing. - 4 - Dated this 8th day of January, 1997. LANDLORD: --------------------------------- By: ------------------------------ LANDLORD'S ADDRESS: --------------------------------- --------------------------------- EX-10.60 10 TRANCHE A TERM NOTES EXHIBIT 10.60 TRANCHE A TERM NOTE $4,000,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of BANKERS TRUST COMPANY (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Tranche A Term Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of FOUR MILLION DOLLARS ($4,000,000) or, if less, the then unpaid principal amount of all Tranche A Term Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Tranche A Term Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Tranche A Term Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President TRANCHE A TERM NOTE $4,000,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of FIRST UNION NATIONAL BANK OF NORTH CAROLINA (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Tranche A Term Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of FOUR MILLION DOLLARS ($4,000,000) or, if less, the then unpaid principal amount of all Tranche A Term Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Tranche A Term Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Tranche A Term Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President TRANCHE A TERM NOTE $3,750,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of LEHMAN COMMERCIAL PAPER INC. (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Tranche A Term Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of THREE MILLION SEVEN HUNDRED FIFTY THOUSAND DOLLARS ($3,750,000) or, if less, the then unpaid principal amount of all Tranche A Term Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Tranche A Term Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Tranche A Term Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President TRANCHE A TERM NOTE $3,500,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of HELLER FINANCIAL (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Tranche A Term Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of THREE MILLION FIVE HUNDRED THOUSAND DOLLARS ($3,500,000) or, if less, the then unpaid principal amount of all Tranche A Term Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Tranche A Term Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Tranche A Term Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President TRANCHE A TERM NOTE $3,250,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of THE NIPPON CREDIT BANK, LTD. (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Tranche A Term Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of THREE MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS ($3,250,000) or, if less, the then unpaid principal amount of all Tranche A Term Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Tranche A Term Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Tranche A Term Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President TRANCHE A TERM NOTE $3,250,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of CREDIT LYONNAIS NEW YORK BRANCH (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Tranche A Term Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of THREE MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS ($3,250,000) or, if less, the then unpaid principal amount of all Tranche A Term Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Tranche A Term Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Tranche A Term Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President TRANCHE A TERM NOTE $2,375,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of BANK OF SCOTLAND (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Tranche A Term Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of TWO MILLION THREE HUNDRED SEVENTY FIVE THOUSAND DOLLARS ($2,375,000) or, if less, the then unpaid principal amount of all Tranche A Term Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Tranche A Term Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Tranche A Term Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President TRANCHE A TERM NOTE $2,375,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of BANK OF BOSTON (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Tranche A Term Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of TWO MILLION THREE HUNDRED SEVENTY FIVE THOUSAND DOLLARS ($2,375,000) or, if less, the then unpaid principal amount of all Tranche A Term Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Tranche A Term Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Tranche A Term Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President EX-10.61 11 TRANCHE B TERM NOTES Exhibit 10.61 ------------- TRANCHE B TERM NOTE $39,250,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of BANKERS TRUST COMPANY (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Tranche B Term Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of THIRTY NINE MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS ($39,250,000) or, if less, the then unpaid principal amount of all Tranche B Term Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Tranche B Term Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Tranche B Term Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President TRANCHE B TERM NOTE $3,250,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of FIRST UNION NATIONAL BANK OF NORTH CAROLINA (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Tranche B Term Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of THREE MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS ($3,250,000) or, if less, the then unpaid principal amount of all Tranche B Term Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Tranche B Term Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Tranche B Term Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President TRANCHE B TERM NOTE $3,000,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of LEHMAN COMMERCIAL PAPER INC. (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Tranche B Term Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of THREE MILLION DOLLARS ($3,000,000) or, if less, the then unpaid principal amount of all Tranche B Term Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Tranche B Term Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Tranche B Term Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President TRANCHE B TERM NOTE $2,750,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of FLEET NATIONAL BANK (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Tranche B Term Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of TWO MILLION SEVEN HUNDRED FIFTY THOUSAND DOLLARS ($2,750,000) or, if less, the then unpaid principal amount of all Tranche B Term Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Tranche B Term Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Tranche B Term Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President TRANCHE B TERM NOTE $2,750,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of HELLER FINANCIAL (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Tranche B Term Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of TWO MILLION SEVEN HUNDRED FIFTY THOUSAND DOLLARS ($2,750,000) or, if less, the then unpaid principal amount of all Tranche B Term Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Tranche B Term Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Tranche B Term Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President TRANCHE B TERM NOTE $1,500,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of THE NIPPON CREDIT BANK, LTD. (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Tranche B Term Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000) or, if less, the then unpaid principal amount of all Tranche B Term Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Tranche B Term Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Tranche B Term Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President TRANCHE B TERM NOTE $1,250,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of BANK OF SCOTLAND (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Tranche B Term Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of ONE MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS ($1,250,000) or, if less, the then unpaid principal amount of all Tranche B Term Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Tranche B Term Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Tranche B Term Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President TRANCHE B TERM NOTE $1,250,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of BANK OF BOSTON (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Tranche B Term Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of ONE MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS ($1,250,000) or, if less, the then unpaid principal amount of all Tranche B Term Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Tranche B Term Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Tranche B Term Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President TRANCHE B TERM NOTE $9,000,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Tranche B Term Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of NINE MILLION DOLLARS ($9,000,000) or, if less, the then unpaid principal amount of all Tranche B Term Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Tranche B Term Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Tranche B Term Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President TRANCHE B TERM NOTE $9,000,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of PILGRIM AMERICA PRIME RATE TRUST (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Tranche B Term Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of NINE MILLION DOLLARS ($9,000,000) or, if less, the then unpaid principal amount of all Tranche B Term Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Tranche B Term Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Tranche B Term Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President TRANCHE B TERM NOTE $9,000,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of PRIME INTEREST TRUST (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Tranche B Term Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of NINE MILLION DOLLARS ($9,000,000) or, if less, the then unpaid principal amount of all Tranche B Term Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Tranche B Term Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Tranche B Term Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President TRANCHE B TERM NOTE $9,000,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of THE ING CAPITAL SENIOR SECURED HIGH INCOME FUND, L.P. (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Tranche B Term Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of NINE MILLION DOLLARS ($9,000,000) or, if less, the then unpaid principal amount of all Tranche B Term Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Tranche B Term Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Tranche B Term Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President TRANCHE B TERM NOTE $9,000,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Tranche B Term Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of NINE MILLION DOLLARS ($9,000,000) or, if less, the then unpaid principal amount of all Tranche B Term Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Tranche B Term Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Tranche B Term Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President EX-10.62 12 REVOLVING NOTES Exhibit 10.62 ------------- REVOLVING NOTE $5,000,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of BANK OF BOSTON (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Revolving Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of FIVE MILLION DOLLARS ($5,000,000) or, if less, the then unpaid principal amount of all Revolving Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Revolving Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper, Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Revolving Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President REVOLVING NOTE $9,500,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of BANKERS TRUST COMPANY (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Revolving Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of NINE MILLION FIVE HUNDRED THOUSAND DOLLARS ($9,500,000) or, if less, the then unpaid principal amount of all Revolving Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Revolving Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper, Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Revolving Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President REVOLVING NOTE $9,500,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of FIRST UNION NATIONAL BANK OF NORTH CAROLINA (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Revolving Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of NINE MILLION FIVE HUNDRED THOUSAND DOLLARS ($9,500,000) or, if less, the then unpaid principal amount of all Revolving Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Revolving Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper, Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Revolving Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President REVOLVING NOTE $9,000,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of LEHMAN COMMERCIAL PAPER INC. (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Revolving Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of NINE MILLION DOLLARS ($9,000,000) or, if less, the then unpaid principal amount of all Revolving Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Revolving Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper, Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Revolving Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President REVOLVING NOTE $8,500,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of FLEET NATIONAL BANK (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Revolving Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of EIGHT MILLION FIVE HUNDRED THOUSAND DOLLARS ($8,500,000) or, if less, the then unpaid principal amount of all Revolving Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Revolving Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper, Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Revolving Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President REVOLVING NOTE $8,500,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of HELLER FINANCIAL (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Revolving Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of EIGHT MILLION FIVE HUNDRED THOUSAND DOLLARS ($8,500,000) or, if less, the then unpaid principal amount of all Revolving Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Revolving Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper, Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Revolving Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President REVOLVING NOTE $7,500,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of THE NIPPON CREDIT BANK, LTD. (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Revolving Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($7,500,000) or, if less, the then unpaid principal amount of all Revolving Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Revolving Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper, Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Revolving Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President REVOLVING NOTE $7,500,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of CREDIT LYONNAIS NEW YORK BRANCH (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Revolving Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($7,500,000) or, if less, the then unpaid principal amount of all Revolving Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Revolving Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper, Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Revolving Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President REVOLVING NOTE $5,000,000 New York, New York January 8, 1997 FOR VALUE RECEIVED, COINMACH CORPORATION, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of BANK OF SCOTLAND (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Revolving Loan Maturity Date (as defined in the Agreement referred to below) the principal sum of FIVE MILLION DOLLARS ($5,000,000) or, if less, the then unpaid principal amount of all Revolving Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Agreement. This Note is one of the Revolving Notes referred to in the Credit Agreement, dated as of January 8, 1997, among Coinmach Laundry Corporation, the Borrower, the lenders from time to time party thereto (including the Bank), First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper, Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent (as from time to time in effect, the "Agreement"), and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note is secured by the Security Documents (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Revolving Loan Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. COINMACH CORPORATION /s/ ROBERT M. DOYLE By_____________________________ Title: Senior Vice President EX-10.63 13 SWING LINE NOTE Exhibit 10.63 ------------- SWING LINE NOTE New York, New York January 8, 1997 $5,000,000 FOR VALUE RECEIVED, Coinmach Corporation, a Delaware corporation ("Borrower"), promises to pay to BANKERS TRUST COMPANY or its registered assigns ("Payee"), on or before December 23, 2002, the lesser of (x) FIVE MILLION DOLLARS ($5,000,000) or (y) the unpaid principal amount of all advances made by Payee to the Company as Swing Line Loans under the Credit Agreement referred to below. The Company also promises to pay interest on the unpaid principal amount hereof from the date hereof until paid in full at the rates and at the times which shall be determined in accordance with the provisions of the Credit Agreement dated as of January 8, 1997 (said agreement, as it may hereafter be amended, modified or supplemented, the "Credit Agreement"; capitalized terms used herein and not otherwise defined have the meanings assigned to such terms in the Credit Agreement) among Borrower, Coinmach Laundry Corporation, the Lenders named therein, First Union National Bank of North Carolina, as Syndication Agent, Lehman Commercial Paper Inc., as Documentation Agent, and Bankers Trust Company, as Administrative Agent. This Note is the Company's Swing Line Note and is issued pursuant to and entitled to the benefits of the Credit Agreement to which reference is hereby made for a more complete statement of the terms and conditions under which the Swing Line Loan evidenced hereby was made and is to be repaid. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds to Bankers Trust Company, as Administrative Agent, at its office located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Until notified in writing of the transfer of this Note and the recordation thereof in the Register, the Company and the Administrative Agent shall be entitled to deem Payee or such person in whose name this Note is registered in the Register as the holder of this Note, as the owner and holder of this Note. Each of Payee and any subsequent holder of this Note agrees, by its acceptance hereof, that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided that the -------- failure to make (or any error in the making of) a notation of any payment made on this Note shall not limit or otherwise affect the obligation of the Company hereunder with respect to payments of principal or interest on this Note. Page 2 This Note is subject to mandatory prepayment as provided in the Credit Agreement. THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued by unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. The registration of assignment or other transfer of all or part of this Note shall be recorded by the Administrative Agent on the Register only upon the acceptance by such Agent of a properly executed and delivered Registered Transfer Supplement. Coincident with the delivery of such Registered Transfer Supplement to the Administrative Agent for acceptance and registration of assignment or sale of all or part of the Swing Line Loan, or as soon thereafter as practicable, the assigning or transferor Lender shall surrender this Note, and thereupon one or more new Swing Line Notes in the same aggregate principal amount shall be issued to the assigning or transferor Lender and/or the new Lender. The Company promises to pay all costs and expenses including attorneys' fees, all as provided in subsection 3.01 of the Credit Agreement, incurred in the collection and enforcement of this Note. The Company and endorsers of this Note hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. Page 3 IN WITNESS WHEREOF, the Company has caused this Note to be executed and delivered by its duly authorized officer, as of the day and year and at the place first above written. COINMACH CORPORATION /s/ ROBERT M. DOYLE By:__________________________________ Name: Robert M. Doyle Title: Senior Vice President TRANSACTIONS ON SWING LINE NOTE
Amount of Outstanding Type of Amount of Principal Principal Loan Made Loan Made Paid Balance Notation Date This Date This Date This Date This Date Made By - ------------- --------- --------- ----------- --------- -------
EX-10.64 14 HOLDINGS PLEDGE AGREEMENT Exhibit 10.64 ------------- HOLDINGS PLEDGE AGREEMENT ------------------------- PLEDGE AGREEMENT (as amended, modified or supplemented from time to time, this "Agreement"), dated as of January 8, 1997, made by COINMACH LAUNDRY CORPORATION (the "Pledgor"), to BANKERS TRUST COMPANY, as Collateral Agent (together with any successor, the "Collateral Agent") for the benefit of (x) the Banks (as hereinafter defined), the Administrative Agent (as hereinafter defined), the Syndication Agent (as hereinafter defined), the Documentation Agent (as hereinafter defined) and the Collateral Agent under, and any other lenders from time to time party to, the Credit Agreement hereinafter referred to (such Banks, the Administrative Agent, the Syndication Agent, the Documentation Agent, the Collateral Agent and such other lenders, if any, are hereinafter called the "Bank Creditors"), (y) if one or more Banks or any Affiliate of a Bank enters into one or more (i) interest rate protection agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements), (ii) foreign exchange contracts, currency swap agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency values and/or (iii) other types of hedging agreements from time to time (collectively, the "Interest Rate Protection or Other Hedging Agreements"), with, or guaranteed by, the Pledgor, any such Bank or Banks or Affiliate or Affiliates (even if the respective Bank subsequently ceases to be a Bank under the Credit Agreement for any reason) so long as any such Bank or Affiliate participates in the extension of such Interest Rate Protection or Other Hedging Agreements, and their subsequent assigns, if any (collectively, the "Other Creditors"), and (z) each of the individuals listed on Schedule A, as payee under that certain Promissory Note, in the amount of $15,000,000.00 dated January 8, 1997 (the "Seller Promissory Note") made by Coinmach Laundry Corporation to Richard F. Enthoven (the "Seller Agent"), as agent for each of such individuals (collectively the "Seller Creditors"; together with the Other Creditors and the Bank Creditors, the "Secured Creditors"). Except as otherwise defined herein, terms used herein and defined in the Credit Agreement shall be used herein as so defined. Page 2 R E C I T A L S : --------------- 1. The Pledgor, Coinmach Corporation (the "Borrower"), the lenders (the "Banks") from time to time party thereto, Bankers Trust Company, as Administrative Agent (together with any successor, the "Administrative Agent"), First Union National Bank of North Carolina as Syndication Agent (together with any successor, the "Syndication Agent") and Lehman Commercial Paper, Inc., as Documentation Agent (together with any successor, the "Documentation Agent") have entered into a Credit Agreement, dated as of the date hereof, providing for the making of Loans and the issuance of, and participation in, Letters of Credit as contemplated therein (such agreement, as amended, modified, extended, renewed, replaced, restated or supplemented from time to time, and including any agreement extending the maturity of, or restructuring all or any portion of the Indebtedness under such agreement or any successor agreement, the "Credit Agreement"). 2. The Pledgor, pursuant to Section 14 of the Credit Agreement, has provided a guaranty (the "Holdings Guaranty") of the obligations and liabilities of the Borrower under and in connection with (x) the Credit Documents and (y) each Interest Rate Protection or Other Hedging Agreement with one or more Other Creditors. 3. The Pledgor may at any time and from time to time enter into, or guarantee obligations of its Subsidiaries under, one or more Interest Rate Protection or Other Hedging Agreements with one or more Other Creditors. 4. The Pledgor has agreed to enter into this Agreement to secure its obligations to the Seller Creditors pursuant to the Seller Promissory Note. 5. It is a condition to each of the above-described extensions of credit to the Borrower and its Subsidiaries that the Pledgor shall have executed and delivered this Agreement. 6. The Pledgor desires to enter into this Agreement in order to satisfy the condition described in the preceding paragraphs. Page 3 A G R E M E N T: --------------- NOW, THEREFORE, in consideration of the above-described extensions of credit to be made to the Pledgor and other benefits accruing to the Pledgor, the receipt and sufficiency of which are hereby acknowledged, the Pledgor hereby makes the following representations and warranties as of the date hereof to the Collateral Agent for the benefit of the Secured Creditors and hereby covenants and agrees with the Collateral Agent for the benefit of the Secured Creditors as follows: Section 1. SECURITY FOR OBLIGATIONS. This Agreement is made by the Pledgor for the benefit of the Secured Creditors to secure: (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise in accordance with the terms of the Credit Agreement) of all obligations and indebtedness (including, without limitation, indemnities, Fees and interest thereon) of the Pledgor to the Bank Creditors (including, without limitation, the obligations of the Pledgor under the Holdings Guaranty), whether now existing or hereafter incurred under, arising out of, or in connection with the Credit Agreement and the other Credit Documents and the due performance and compliance by the Pledgor with all of the terms, conditions and agreements contained in the Credit Agreement and the other Credit Documents (all such principal, interest, obligations and liabilities described in this clause (i), collectively the "Credit Agreement Obligations"); (ii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise in accordance with the terms of the Credit Agreement) of all obligations and liabilities owing by the Pledgor to the Other Creditors under, or with respect to, any Interest Rate Protection or Other Hedging Agreement (including, without limitation, the obligations of the Pledgor under the Holdings Guaranty), whether such Interest Rate Protection or Other Hedging Agreement is now in existence or hereafter arising in connection with the Credit Documents, and the due performance and compliance by the Pledgor with all of the terms, conditions and agreements contained therein (all such obligations and liabilities described in this clause (ii) collectively, the "Other Obligations"); Page 4 (iii) any and all sums advanced and not repaid by the Collateral Agent in order to preserve the Collateral (as hereinafter defined) or preserve its security interest in the Collateral in accordance with the terms hereof and the other Credit Documents; (iv) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities of the Pledgor referred to in clauses (i) and (ii), after an Event of Default (as such term is defined in the Security Agreement) shall have occurred and be continuing and the Collateral Agent has given notice under Article X of the Credit Agreement, the commercially reasonable expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Collateral Agent of its rights hereunder, together with reasonable attorneys' fees and court costs in accordance with the terms hereof and the other Credit Documents; and (v) the full and prompt payment when due (whether at stated maturity, by acceleration or otherwise) of all principal, interest and expenses (including reasonable attorney's fees and court costs) owing by the Pledgor to the Seller Creditors under, or with respect to, the Seller Promissory Note (the "Seller Obligations"); all such obligations, liabilities, sums and expenses set forth in clauses (i) through (v) of this Section 1 collectively, the "Obligations," it being acknowledged and agreed that the "Obligations" shall include extensions of credit of the types described above, whether outstanding on the date of this Agreement or extended from time to time after the date of this Agreement. Section 2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used herein, (i) the term "Stock" shall mean (x) with respect to corporations incorporated under the laws of the United States or any State or territory thereof (each a "Domestic Corporation"), all of the issued and outstanding shares of capital stock at any time owned by the Pledgor of any Domestic Corporation and (y) with respect to corporations not Domestic Corporations (each a "Foreign Corporation"), all of the issued and outstanding shares of capital stock at any time owned by the Pledgor of any Foreign Corporation, provided -------- that, except as provided in the last sentence of this Section 2, the Pledgor shall not be required to pledge hereunder more than 65% of the total combined voting power of all Page 5 classes of capital stock of any Foreign Corporation entitled to vote and (ii) the term "Notes" shall mean (x) all promissory notes at any time issued to the Pledgor by any of its Subsidiaries or Affiliates and (y) except as provided in the last sentence of this Section 2, the Pledgor shall not be required to pledge hereunder any promissory notes issued to the Pledgor by any Subsidiary of the Pledgor which is a Foreign Corporation. If and to the extent that the Collateral Agent receives or holds stock certificates representing more than 65% of the total combined voting power of all classes of capital stock of any Foreign Corporation entitled to vote, the Collateral Agent agrees to act as bailee and custodian for the benefit of the Pledgor with respect to any portion of such capital stock representing more than 65% of the total combined voting power of all classes of capital stock of any Foreign Corporation entitled to vote except as otherwise provided in the last sentence of this Section 2. As used herein, the term "Securities" shall mean all of the Stock and Notes. The Pledgor represents and warrants, as to the stock of corporations and promissory notes owned by the Pledgor, that on the date hereof (a) the Stock consists of the number and type of shares of the stock of the corporations as described in Part I of Schedule A hereto; (b) such Stock constitutes that percentage of the ---------- issued and outstanding capital stock of the issuing corporation as is set forth in Part I of Schedule A hereto; (c) the Notes consist of the promissory notes ---------- described in Part II of Schedule A hereto; and (d) the Pledgor is the holder of ---------- record and sole beneficial owner of the Stock and the Notes and there exist no options or preemption rights in respect of any of the Stock. If following a change in the relevant sections of the Code or the regulations, rules, rulings, notices or other official pronouncements issued or promulgated thereunder which would permit a pledge (x) of 66 2/3% or more (or would be adjusted to permit a pledge of less than 66 2/3%) of the total combined voting power of all classes of capital stock of any Foreign Corporation entitled to vote and (y) of any promissory note issued by any Subsidiary of the Pledgor which is a Foreign Corporation without causing the undistributed earnings of such Foreign Corporation as determined for Federal income taxes to be treated as a deemed dividend to the Pledgor for Federal income tax purposes, then the 65% limitation set forth in clause (i)(y) and the limitation in the proviso of clause (ii) in each case of this Section 2 shall no longer be applicable (or shall be adjusted as appropriate) and the Pledgor shall duly pledge and deliver to the Collateral Agent such of the Securities not theretofore required to be pledged Page 6 hereunder or the Collateral Agent shall return such Securities as applicable. Section 3. PLEDGE OF SECURITIES, ETC. Section 3.1. Pledge. To secure the Obligations and for the purposes ------ set forth in Section 1, the Pledgor (i) hereby grants to the Collateral Agent for the benefit of (a) the Bank Creditors and the Other Creditors, a first priority security interest in all of the Collateral (as hereinafter defined) and (b) the Seller Creditors, a security interest (which security interest shall be subject and subordinate in all respects to the security interest described in clause (a) above) in all of the Collateral (ii) hereby pledges and deposits with the Collateral Agent the Securities owned by the Pledgor on the date hereof, and delivers to the Collateral Agent certificates therefor, duly endorsed in blank in the case of promissory notes and accompanied by undated stock powers duly executed in blank by the Pledgor (and accompanied by any transfer tax stamps required in connection with the pledge of such Securities) in the case of capital stock, or such other instruments of transfer as are reasonably acceptable to the Collateral Agent and (iii) hereby collaterally assigns, transfers, hypothecates and sets over to the Collateral Agent all of the Pledgor's right, title and interest in and to such Securities (and in and to the certificates or instruments evidencing such Securities), to be held by the Collateral Agent as collateral security for the Obligations, upon the terms and conditions set forth in this Agreement. The Pledgor and the Collateral Agent acknowledge that all Collateral held by the Collateral Agent is held on behalf of the Secured Creditors. The Seller Creditors agree that, so long as any of the Obligations owing to the Bank Creditors or the Other Creditors remain outstanding, the security interest described in clause (i)(b) in the preceding paragraph shall not entitle them to foreclosure or any other right or remedy in respect of the Collateral without the consent of the Bank Creditors and the Other Creditors, provided that the foregoing shall in no event limit the right of the Seller Creditors to receive proceeds as described in Sections 7 and 9 hereof and, to the extent required by applicable law, participate in any foreclosure or enforcement proceeding; provided that such participation shall not confer any rights (including any rights relating to the direction of or the providing of consents in connection with any such proceeding) on the Seller Creditors other than as set forth above. The Seller Creditors also agree that, so long as any of the Obligations Page 7 owing to the Bank Creditors or the Other Creditors remain outstanding, the Collateral Agent shall not, by reason of such security interest of the Seller Creditors, have any duty, express or implied, to provide any notices to the Seller Creditors in respect of the Collateral or their interests therein or to take any other action not expressly set forth herein. Section 3.2. Subsequently Acquired Securities. If the Pledgor shall -------------------------------- acquire (by purchase, stock dividend or otherwise) any additional Securities at any time or from time to time after the date hereof, the Pledgor will promptly thereafter pledge and deposit such Securities (or certificates or instruments representing Securities) as security with the Collateral Agent and deliver to the Collateral Agent certificates or instruments therefor, duly endorsed in blank in the case of promissory notes, and accompanied by undated stock powers duly executed in blank by the Pledgor (and accompanied by any transfer tax stamps required in connection with the pledge of such Securities) in the case of capital stock, or such other instruments of transfer as are reasonably acceptable to the Collateral Agent, and will promptly thereafter deliver to the Collateral Agent a certificate executed by a principal executive officer of the Pledgor describing such Securities and certifying that the same has been duly pledged with the Collateral Agent hereunder. Subject to the last sentence of Section 2, the Pledgor shall not be required at any time to pledge hereunder any promissory notes issued to the Pledgor by a Subsidiary which is a Foreign Corporation or more than 65% of the total combined voting power of all classes of capital stock of any Foreign Corporation entitled to vote. Section 3.3. Uncertificated Securities. Notwithstanding anything to ------------------------- the contrary contained in Sections 3.1 and 3.2, if any Securities (whether now owned or hereafter acquired) are uncertificated securities, the Pledgor shall promptly notify the Collateral Agent thereof, and shall promptly take all actions reasonably required to perfect the security interest of the Collateral Agent under applicable law (including, in any event, under Sections 8-313 and 8- 321 of the New York Uniform Commercial Code if applicable). The Pledgor further agrees to take such actions as the Collateral Agent deems reasonably necessary or desirable to effect the foregoing and to permit the Collateral Agent to exercise any of its rights and remedies hereunder, and agrees to provide an opinion of counsel reasonably satisfactory to the Collateral Agent with respect to any such pledge of Page 8 uncertificated Securities promptly upon the reasonable request of the Collateral Agent. Section 3.4. Definitions of Pledged Stock; Pledged Notes; Pledged ---------------------------------------------------- Securities and Collateral. All Stock at any time pledged or required to be - ------------------------- pledged hereunder is hereinafter called the "Pledged Stock;" all Notes at any time pledged or required to be pledged hereunder are hereinafter called the "Pledged Notes;" all Pledged Stock and Pledged Notes together are called the "Pledged Securities;" and the Pledged Securities, together with all proceeds thereof, including any securities and moneys received and at any time held by the Collateral Agent hereunder, are hereinafter called the "Collateral." Section 4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Collateral Agent shall have the right to appoint one or more sub-agents, at the cost and expense of the Collateral Agent, for the purpose of retaining physical possession of the Pledged Securities on behalf of the Collateral Agent, which may be held (in the reasonable discretion of the Collateral Agent) in the name of the Pledgor, endorsed or assigned in blank or in favor of the Collateral Agent or any nominee or nominees of the Collateral Agent or a sub-agent appointed by the Collateral Agent. Section 5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until there shall have occurred and be continuing an Event of Default and the Collateral Agent has given written notice to the Pledgor in accordance with Article X of the Credit Agreement, the Pledgor shall be entitled to vote any and all Pledged Securities owned by it, and to give consents, waivers or ratifications in respect thereof, provided that no vote shall be cast or any -------- consent, waiver or ratification given or any action taken which would violate, result in breach of any covenant contained in this Agreement, the Credit Agreement or any other Credit Document, or which is not permitted under any of the Credit Documents and could reasonably be expected to have the effect of materially impairing the value of the Collateral or any material part thereof or the position or interests of the Collateral Agent or any Secured Creditor. All such rights of the Pledgor to vote and to give consents, waivers and ratifications shall cease in case an Event of Default has occurred and is continuing and the Collateral Agent has given written notice to the Pledgor in accordance with Article X of the Credit Agreement, and Section 7 hereof shall become applicable. Page 9 Section 6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless and until there shall have occurred and be continuing an Event of Default and the Collateral Agent has given written notice to the Pledgor in accordance with Article X of the Credit Agreement, all cash dividends and distributions payable in respect of the Pledged Stock and all payments in respect of the Pledged Notes shall be paid to the Pledgor. The Collateral Agent shall be entitled to receive directly, and to retain as part of the Collateral: (a) all other or additional stock or securities (other than cash) paid or distributed by way of dividend or otherwise, as the case may be, in respect of the Pledged Stock; (b) all other or additional stock or other securities paid (other than cash) or distributed in respect of the Pledged Stock by way of stock-split, spin-off, split-up, reclassification, combination of shares or similar rearrangement; and (c) all other or additional stock or other securities or property (excluding cash) which may be paid in respect of the Collateral by reason of any consolidation, merger, exchange of stock, conveyance of assets, liquidation or similar corporate reorganization. Nothing contained in this Section 6 shall limit or restrict in any way the Collateral Agent's right to receive proceeds of the Collateral in any form in accordance with Section 3 of this Agreement. All dividends, distributions or other payments which are received by the Pledgor contrary to the provisions of this Section 6 and Section 7 shall be received in trust for the benefit of the Collateral Agent, shall be segregated from other property or funds of the Pledgor and shall be forthwith paid or delivered over to the Collateral Agent as Collateral in the same form as so received (with any necessary endorsement). Section 7. REMEDIES IN CASE OF EVENTS OF DEFAULT. If there shall have occurred and be continuing an Event of Default and the Collateral Agent has given written notice to the Pledgor in accordance with Article X of the Credit Agreement, then and in every such case, the Collateral Agent shall be entitled to exercise all of the rights, powers and remedies (whether vested in it by this Agreement, any other Credit Document, any Interest Rate Protection or Other Hedging Agreement or by law) for the protection and enforcement of its rights in respect of the Collateral, and Page 10 the Collateral Agent shall be entitled to exercise all the rights and remedies of a secured party under the Uniform Commercial Code and also shall be entitled, without limitation, to exercise the following rights, which the Collateral Agent agrees to exercise in a commercially reasonable manner: (a) to receive all amounts payable in respect of the Collateral otherwise payable under Section 6 to the Pledgor; (b) to transfer all or any part of the Collateral into the Collateral Agent's name or the name of its nominee or nominees; (c) to accelerate any Pledged Note which may be accelerated in accordance with its terms, and take any other lawful action to collect upon any Pledged Note at such times and under the conditions set forth therein; (d) to vote all or any part of the Pledged Stock (whether or not transferred into the name of the Collateral Agent) and give all consents, waivers and ratifications in respect of the Collateral and otherwise act with respect thereto in a commercially reasonable manner as though it were the outright owner thereof (the Pledgor hereby irrevocably constituting and appointing the Collateral Agent the proxy and attorney-in-fact of the Pledgor, with full power of substitution to do so upon the occurrence and during the continuance of an Event of Default provided that the Collateral Agent has delivered written notice to the Pledgor in accordance with Article X of the Credit Agreement); and (e) to sell, assign and deliver, or grant options to purchase, all or any part of the Collateral, or any interest therein, at any public or private sale, without demand of performance, advertisement or notice of intention to sell or of the time or place of sale or adjournment thereof or to redeem or otherwise (all of which are hereby waived by the Pledgor), for cash, on credit or for other property, for immediate or future delivery without any assumption of credit risk, and for such price or prices and on such terms as the Collateral Agent may determine in a commercially reasonable manner, provided that at least 10 days' written notice of the -------- time and place of any such sale shall be given to the Pledgor. The Collateral Agent shall not be obligated to make any such sale of Collateral regardless of whether Page 11 any such notice of sale has theretofore been given. The Pledgor hereby waives and releases to the fullest extent permitted by law any right or equity of redemption with respect to the Collateral, whether before or after sale hereunder other than the Pledgor's right to receive any excess proceeds or Collateral remaining after payment in full of the Obligations, and all rights, if any, of marshalling the Collateral and any other security for the Obligations or otherwise. At any such sale, unless prohibited by applicable law, the Collateral Agent on behalf of the Secured Creditors may bid for and purchase all or any part of the Collateral so sold free from any such right or equity of redemption. Neither the Collateral Agent nor any Secured Creditor shall be liable for failure to collect (except in such cases where the Collateral Agent bids for and purchases all or part of the Collateral) or realize upon any or all of the Collateral or for any delay in so doing nor shall any of them be under any obligation to take any action whatsoever with regard thereto. Section 8. REMEDIES, ETC., CUMULATIVE. Each and every right, power and remedy of the Collateral Agent provided for in this Agreement, the other Credit Documents, or the Interest Rate Protection or Other Hedging Agreements, or now or hereafter existing at law or in equity or by statute shall be cumulative and concurrent and shall be in addition to every other such right, power or remedy. The exercise or beginning of the exercise by the Collateral Agent or any Secured Creditor of any one or more of the rights, powers or remedies provided for in this Agreement, the other Credit Documents or the Interest Rate Protection or Other Hedging Agreements or now or hereafter existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or later exercise by the Collateral Agent or any Secured Creditor of all such other rights, powers or remedies, and no failure or delay on the part of the Collateral Agent or any Secured Creditor to exercise any such right, power or remedy shall operate as a waiver thereof except as required by applicable law. Unless otherwise required by the Credit Documents, no notice to or demand on the Pledgor in any case shall entitle it to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Collateral Agent or any Secured Creditor to any other or further action in any circumstances without notice or demand. Section 9. APPLICATION OF PROCEEDS. All moneys collected by the Collateral Agent upon any sale or other Page 12 disposition of the Collateral, together with all other moneys received by the Collateral Agent hereunder, shall be applied as follows: (i) first, to the payment of all Obligations owing to the Collateral Agent of the type described in clauses (iii) and (iv) of Section 1 of this Agreement; (ii) second, to the extent moneys remain after the application pursuant to the preceding clause (i), an amount equal to the outstanding Primary Obligations (as hereinafter defined) shall be paid to the Secured Creditors (other than the Seller Creditors) as provided in Section 9(e), with each Secured Creditor (other than the Seller Creditors) receiving an amount equal to its outstanding Primary Obligations or, if the proceeds are insufficient to pay in full all such Primary Obligations, its Pro Rata Share of the amount remaining to be distributed; (iii) third, to the extent proceeds remain after the application pursuant to the preceding clauses (i) and (ii), an amount equal to the outstanding Secondary Obligations (as hereinafter defined) shall be paid to the Secured Creditors (other than the Seller Creditors) as provided in Section 9(e), with each Secured Creditor (other than the Seller Creditors) receiving an amount equal to its outstanding Secondary Obligations or, if the proceeds are insufficient to pay in full all such Secondary Obligations, its Pro Rata Share of the amount remaining to be distributed; and (iv) fourth, to the extent proceeds remain after the application pursuant to the preceding clauses (i), (ii) and (iii), an amount equal to the outstanding Seller Obligations (as hereinafter defined) shall be paid to the Seller Creditors as provided in section 9(e), with each Seller Creditor receiving an amount equal to its outstanding Seller Obligations or, if the proceeds are insufficient to pay in full all of the Seller Obligations, its Pro Rata Share of the amount remaining to be distributed; and (v) fifth, to the extent proceeds remain after the application pursuant to the preceding clauses (i) - (iv) and following the termination of this Agreement, to the Pledgor or as required by applicable law. Page 13 (b) For purposes of this Agreement (w) "Pro Rata Share" shall mean, when calculating a Secured Creditor's portion of any distribution or amount, that amount (expressed as a percentage) equal to a fraction the numerator of which is the then unpaid amount of such Secured Creditor's Primary Obligations or Secondary Obligations, as the case may be, and the denominator of which is the then outstanding amount of all Primary Obligations or Secondary Obligations, as the case may be, (x) "Primary Obligations" shall mean (i) in the case of the Credit Agreement Obligations, all principal of, and interest on, all Loans, all Unpaid Drawings theretofore made (together with all interest accrued thereon), the aggregate Stated Amounts of all Letters of Credit issued under the Credit Agreement, and all Fees and (ii) in the case of the Interest Rate Protection Obligations, all amounts due under the Interest Rate Protection or Other Hedging Agreements (other than indemnities, fees (including, without limitation, reasonable attorneys' fees) and similar obligations and liabilities), (y) "Secondary Obligations" shall mean all Obligations other than Primary Obligations and (z) "Seller Obligations" shall mean all principal, interest and expenses (including reasonable attorney's fees and court costs) owing to any Seller Creditor under the Seller Promissory Note. (c) When payments to Bank Creditors or Other Creditors are based upon their respective Pro Rata Shares, the amounts received by such Bank Creditors or Other Creditors hereunder shall be applied (for purposes of making determinations under this Section 9 only) (i) first, to their Primary Obligations and (ii) second, to their Secondary Obligations. If any payment to any Secured Creditor of its Pro Rata Share of any distribution would result in overpayment to such Secured Creditor, such excess amount shall instead be distributed in respect of the unpaid Primary Obligations, Secondary Obligations or Seller Obligations, as the case may be, of the other Secured Creditors, with each Secured Creditor whose Primary Obligations, Secondary Obligations or Seller Obligations, as the case may be, have not been paid in full to receive an amount equal to such excess amount multiplied by a fraction the numerator of which is the unpaid Primary Obligations, Secondary Obligations or Seller Obligations, as the case may be, of such Secured Creditor and the denominator of which is the unpaid Primary Obligations, Secondary Obligations or Seller Obligations, as the case may be, of all Secured Creditors entitled to such distribution. (d) Each of the Secured Creditors agrees and acknowledges that if the Bank Creditors are to receive a Page 14 distribution on account of undrawn amounts with respect to Letters of Credit issued under the Credit Agreement (which shall only occur after all outstanding Loans and Unpaid Drawings with respect to such Letters of Credit have been paid in full), such amounts shall be paid to the Administrative Agent under the Credit Agreement and held by it, for the equal and ratable benefit of the Bank Creditors, as cash security for the repayment of Obligations owing to the Bank Creditors as such. If any amounts are held as cash security pursuant to the immediately preceding sentence, then upon the termination of all outstanding Letters of Credit, and after the application of all such cash security to the repayment of all Obligations owing to the Bank Creditors after giving effect to the termination of all such Letters of Credit, if there remains any excess cash, such excess cash shall be distributed by the Administrative Agent to the Collateral Agent in accordance with Section 9(a) hereof. (e) Except as set forth in Section 9(d) hereof, all payments required to be made hereunder shall be made (i) if to the Bank Creditors, to the Administrative Agent under the Credit Agreement for the account of the Bank Creditors, (ii) if to the Other Creditors, to the trustee, paying agent or other similar representative (each a "Representative") for the Other Creditors or, in the absence of such a Representative, directly to the Other Creditors and (iii) if to the Seller Creditors, to the Seller Agent under the Seller Promissory Note for the benefit of the Seller Creditors. (f) For purposes of applying payments received in accordance with this Section 9, the Collateral Agent shall be entitled to rely upon (i) the Administrative Agent under the Credit Agreement, (ii) the Seller Agent under the Seller Promissory Note and (iii) the Representative for the Other Creditors or, in the absence of such a Representative or Seller Agent, upon the Other Creditors or the Seller Creditors, as the case may be, for a determination (which the Administrative Agent, each Representative for any Secured Creditors, the Seller Agent and the Secured Creditors agree (or shall agree) to provide upon request of the Collateral Agent) of the outstanding Primary Obligations and Secondary Obligations owed to the Bank Creditors or the Other Creditors and the outstanding Seller Obligations owing to the Seller Creditors, as the case may be. Unless it has actual knowledge (including by way of written notice from a Bank Creditor or an Other Creditor) to the contrary, the Administrative Agent and each Representative, in furnishing information pursuant to the preceding sentence, and the Collateral Agent, in acting hereunder, shall be entitled to assume that no Page 15 Secondary Obligations are outstanding. Unless it has actual knowledge (including by way of written notice from an Other Creditor) to the contrary, the Collateral Agent, in acting hereunder, shall be entitled to assume that no Interest Rate Protection or Other Hedging Agreements are in existence. (g) It is understood and agreed that the Pledgor shall remain liable to the extent of any deficiency between the amount of the proceeds of the Collateral hereunder and the aggregate amount of the sums referred to in clauses (i), (ii), (iii) and (iv) of Section 9(a), except to the extent that such proceeds are not applied by the Collateral Agent in accordance with this Agreement and the Credit Agreement. Section 10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the Collateral Agent hereunder (whether by virtue of the power of sale herein granted, pursuant to judicial process or otherwise), the receipt of the Collateral Agent or the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication or nonapplication thereof. Section 11. INDEMNITY. The Pledgor agrees to indemnify and hold harmless the Collateral Agent, the Seller Agent and each Secured Creditor and their respective successors, assigns, employees, agents and servants (each, an "Indemnitee"; collectively, the "Indemnities") from and against any and all claims, demands, losses, judgments and liabilities (including liabilities for penalties) of whatsoever kind or nature, and to reimburse each Indemnitee for all costs and expenses, including reasonable attorneys' fees, growing out of or resulting from this Agreement or the exercise by any Indemnitee of any right or remedy granted to it hereunder or under the other Credit Documents or the Interest Rate Protection and Other Hedging Agreements (but excluding any claims, demands, losses, judgments and liabilities or expenses to the extent finally judicially determined to have been incurred by reason of gross negligence or willful misconduct of such Indemnitee). If and to the extent that the obligations of the Pledgor under this Section 11 are unenforceable for any reason, the Pledgor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. Page 16 Section 12. FURTHER ASSURANCES; POWER-OF-ATTORNEY. (a) The Pledgor agrees that it will join with the Collateral Agent in executing and, at its own expense, file and refile under the Uniform Commercial Code or other applicable law such financing statements, continuation statements and other documents in such offices as the Collateral Agent may deem reasonably necessary and wherever required by law in order to perfect and preserve the Collateral Agent's security interest in the Collateral and hereby authorizes the Collateral Agent to file financing statements and amendments thereto relative to all or any part of the Collateral without the signature of the Pledgor where permitted by law, and agrees to do such further acts and things and to execute and deliver to the Collateral Agent such additional conveyances, assignments, agreements and instruments as the Collateral Agent may reasonably require or deem necessary to carry into effect the purposes of this Agreement or to further assure and confirm unto the Collateral Agent its rights, powers and remedies hereunder. (b) The Pledgor hereby appoints the Collateral Agent the Pledgor's attorney-in-fact, with full authority in the place and stead of the Pledgor and in the name of the Pledgor or otherwise, from time to time after the occurrence and during the continuance of an Event of Default and provided that the Collateral Agent shall have delivered notice to the Pledgor in accordance with Article X of the Credit Agreement, in the Collateral Agent's reasonable discretion to take any action and to execute any instrument which the Collateral Agent may reasonably deem necessary or advisable to accomplish the purposes of this Agreement. Section 13. THE PLEDGEE AS AGENT. The Collateral Agent will hold in accordance with this Agreement all items of the Collateral at any time received under this Agreement. It is expressly understood and agreed by the parties hereto and each Secured Creditor, by accepting the benefits of this Agreement, each such person acknowledges and agrees that the obligations of the Collateral Agent as holder of the Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement. The Collateral Agent shall act hereunder on the terms and conditions set forth herein and in Section 12 of the Credit Agreement. Section 14. TRANSFER BY THE PLEDGOR. The Pledgor will not sell or otherwise dispose of, grant any option with respect to, or mortgage, pledge or otherwise encumber any of Page 17 the Collateral or any interest therein (except as may be permitted in accordance with the terms of the Credit Agreement). 15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGOR. The Pledgor represents and warrants that as of the date hereof (a) it is, or at the time when pledged hereunder will be, the legal, record and beneficial owner of, and has (or will have) good title to, all Securities pledged hereunder, subject to no Lien (except the Lien created by this Agreement); (b) it has full corporate power, authority and legal right to pledge all the Securities pursuant to this Agreement; (c) this Agreement has been duly authorized, executed and delivered by the Pledgor and constitutes a legal, valid and binding obligation of the Pledgor enforceable in accordance with its terms, except to the extent that the enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law); (d) except to the extent already obtained or made, no consent of any other party (including, without limitation, any stockholder or creditor of the Pledgor or any of its Subsidiaries) and no consent, license, permit, approval or authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority is required to be obtained by the Pledgor in connection with (i) the execution, delivery or performance of this Agreement, (ii) the validity or enforceability of this Agreement, (iii) the perfection or enforceability of the Collateral Agent's security interest in the Collateral or (iv) except for compliance with or as may be required by applicable securities laws, the exercise by the Collateral Agent of any of its rights or remedies provided herein; (e) the execution, delivery and performance of this Agreement will not violate any provision of any applicable law or regulation or of any order, judgment, writ, award or decree of any court, arbitrator or governmental authority, domestic or foreign, applicable to the Pledgor, or of the Certificate of Incorporation or By-Laws of the Pledgor or of any securities issued by the Pledgor or any of its Subsidiaries, or of any material mortgage, indenture, lease, loan agreement, credit agreement or other contract, agreement or instrument or undertaking to which the Pledgor or any of its Subsidiaries is a party or which purports to be binding upon the Pledgor or any of its Subsidiaries or upon any of their respective assets and will not result in the creation or imposition of (or the obligation to create or impose) any lien or encumbrance on any of the material assets of the Page 18 Pledgor or any of its Subsidiaries except as contemplated by this Agreement; (f) all the shares of the Stock have been duly and validly issued, are fully paid and non-assessable and are subject to no options to purchase or similar rights; (g) each of the Pledged Notes to the extent executed by the Borrower or any of its Subsidiaries constitutes, or when executed by the obligor thereof will constitute, the legal, valid and binding obligation of such obligor, enforceable in accordance with its terms, except to the extent that the enforceability thereof may by limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law); and (h) the pledge, collateral assignment and delivery to the Collateral Agent of the Securities (other than uncertificated securities) pursuant to this Agreement creates (i) a valid and perfected first priority Lien in the Securities, and the proceeds thereof in favor of the Collateral Agent for the benefit of the Bank Creditors and the Other Creditors subject to no other Lien or to any agreement purporting to grant to any third party a Lien on the property or assets of the Pledgor which would include the Securities other than the lien and security interest described in clause (h)(ii) below and (ii) a valid and perfected security interest in favor of the Collateral Agent for the benefit of the Seller Creditors, which Lien and security interest is subject and subordinate to the Lien and security interest described in clause (h)(i) above. The Pledgor covenants and agrees that it will take commercially reasonable steps to defend the Collateral Agent's right, title and security interest in and to the Securities and the proceeds thereof against the claims and demands of all persons whomsoever; and the Pledgor covenants and agrees that it will have like title to and right to pledge any other property at any time hereafter pledged to the Collateral Agent as Collateral hereunder and will likewise take commercially reasonable steps to defend the right thereto and security interest therein of the Collateral Agent and the Secured Creditors. Section 16. PLEDGOR'S OBLIGATIONS ABSOLUTE, ETC. The obligations of the Pledgor under this Agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, including, without limitation: (a) any renewal, extension, amendment or modification of or addition or supplement to or deletion from the Credit Documents, the Interest Rate Protection or Other Page 19 Hedging Agreements, the Seller Promissory Note or any other instrument or agreement referred to therein, or any assignment or transfer of any thereof; (b) any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such agreement or instrument including, without limitation, this Agreement; (c) any furnishing of any additional security to the Collateral Agent or its assignee or any acceptance thereof or any release of any security by the Collateral Agent or its assignee; (d) any limitation on any party's liability or obligations under any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement or any term thereof; or (e) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to the Pledgor or any Subsidiary of the Pledgor, or any action taken with respect to this Agreement by any trustee or receiver, or by any court, in any such proceeding, whether or not the Pledgor shall have notice or knowledge of any of the foregoing. Section 17. REGISTRATION, ETC. (a) If there shall have occurred and be continuing an Event of Default and acceleration of the Notes then, and in every such case, upon receipt by the Pledgor from the Collateral Agent of a written request or requests that the Pledgor cause any registration, qualification or compliance under any Federal or any state securities law or laws to be effected with respect to all or any part of the Pledged Stock, the Pledgor as soon as practicable and at its expense will use its commercially reasonable efforts to cause such registration to be declared effective (and be kept effective) and will use its commercially reasonable efforts to cause such qualification and compliance to be declared effective (and be kept effective) as may be so requested and as would permit or facilitate the sale and distribution of such Pledged Stock, including, without limitation, registration under the Securities Act of 1933, as then in effect (or any similar statute then in effect), appropriate qualifications under applicable blue sky or other state securities laws and appropriate compliance with any other government requirements, provided that the Collateral Agent shall furnish to the Pledgor -------- such information regarding the Collateral Agent as the Pledgor may request in writing and as shall be required in connection with any such registration, qualification or compliance. Any such registration shall be effected in accordance with customary underwriting practices and in compliance with applicable law. The Pledgor will cause the Collateral Agent to be kept advised in writing as to the Page 20 progress of each such registration, qualification or compliance and as to the completion thereof, will furnish to the Collateral Agent such number of prospectuses, offering circulars or other documents incident thereto as the Collateral Agent from time to time may reasonably request, and will indemnify the Collateral Agent and all others participating in the distribution of such Pledged Stock against all claims, losses, damages and liabilities caused by any untrue statement (or alleged untrue statement) of a material fact contained therein (or in any related registration statement, notification or the like) or by any omission (or alleged omission) to state therein (or in any related registration statement, notification or the like) a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same may have been caused by an untrue statement or omission based upon information furnished in writing to the Pledgor by the Collateral Agent expressly for use therein. (b) If at any time when the Collateral Agent shall determine to exercise its right to sell all or any part of the Pledged Securities pursuant to Section 7, and such Pledged Securities or the part thereof to be sold shall not, for any reason whatsoever, be effectively registered under the Securities Act of 1933, as then in effect, the Collateral Agent may, in its sole and absolute discretion, sell such Pledged Securities or part thereof by private sale in such manner and under such circumstances as the Collateral Agent may deem reasonably necessary or advisable in order that such sale may legally be effected without such registration. Without limiting the generality of the foregoing, in any such event the Collateral Agent, in its commercially reasonable discretion (i) may proceed to make such private sale notwithstanding that a registration statement for the purpose of registering such Pledged Securities or part thereof shall have been filed under such Securities Act, (ii) may approach and negotiate with a single possible purchaser to effect such sale, and (iii) may restrict such sale to a purchaser who will represent and agree that such purchaser is purchasing for its own account, for investment, and not with a view to the distribution or sale of such Pledged Securities or part thereof. In the event of any such sale, the Collateral Agent shall incur no responsibility or liability for selling all or any part of the Pledged Securities at a price which the Collateral Agent, in its commercially reasonable discretion, in good faith deems reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might be realized if the sale were deferred until after registration as aforesaid. Page 21 Section 18. TERMINATION; RELEASE. (a) If the Seller Obligations have been paid in full as of the Termination Date (as defined below), this Agreement and the security interest created hereby shall terminate, and the Collateral Agent, at the request and expense of the Pledgor, will execute and deliver to the Pledgor a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to the Pledgor (without recourse and without any representation or warranty other than a representation that the Collateral Agent has not granted any lien on or security interest in the Collateral) such of the Collateral as may be in the possession of the Collateral Agent or any of its sub-agents and has not theretofore been sold or otherwise applied or released pursuant to this Agreement, together with any moneys at the time held by the Collateral Agent or any of its sub-agents hereunder. As used in this Agreement, "Termination Date" shall mean the date upon which the Commitments and all Interest Rate Protection or Other Hedging Agreements have been terminated, no Note under the Credit Agreement is outstanding (and all Loans have been repaid in full), all Letters of Credit have been terminated and all Obligations then owing have been paid in full. If any Seller Obligations remain outstanding as of the Termination Date, (x) Bankers Trust Company or any successor thereto shall cease to be the Collateral Agent and shall be relieved of all obligations hereunder, (y) the Seller Agent shall become the Collateral Agent succeeding to all of the rights and obligations of Bankers Trust Company or its successor and (z) Bankers Trust company shall deliver to the Seller Agent the certificates and instruments representing the Pledged stock and the Pledged Notes, together with any stock powers or other instruments of transfer then in the Collateral Agent's possession. (b) Notwithstanding anything to the contrary contained above, upon the presentment of satisfactory evidence to the Collateral Agent in its sole discretion that all obligations evidenced by any Pledged Note have been repaid in full, and that any payments received by the Pledgor were permitted to be received by the Pledgor pursuant to Section 6 hereof, the Collateral Agent shall, upon the request and at the expense of the Pledgor, duly assign, transfer and deliver to the Pledgor (without recourse and without any representation or warranty other than a representation that the Collateral Agent has not granted any lien on or security interest in such Pledged Note) such Pledged Note if same is then in the possession of the Collateral Agent or any of its Page 22 sub-agents and has not theretofore been sold or otherwise applied or released pursuant to this Agreement. (c) At any time that the Pledgor desires that Collateral be released as provided in the foregoing sub-section (a) or (b), it shall deliver to the Collateral Agent a certificate signed by its chief financial officer stating that the release of the respective Collateral is permitted pursuant to such subsection (a) or (b). (d) The Collateral Agent shall have no liability whatsoever to any Secured Creditor as the result of any release of Collateral by it in accordance with this Section 18. Section 19. NOTICES ETC. All such notices and communications hereunder shall be telecopied or delivered by messenger or overnight courier service and all such notices and communications shall, when mailed, telegraphed, telexed, telecopied, or cabled or sent by overnight courier, be effective when delivered to the telegraph company, cable company or overnight courier, as the case may be, or sent by telex or telecopier and when mailed shall be effective three Business Days following deposit in the mail with proper postage, except that notices and communications to the Collateral Agent shall not be effective until received by the Collateral Agent. All notices and other communications shall be in writing and addressed as follows: (a) if to the Pledgor, at: Coinmach Laundry Corporation 55 Lumber Road Roslyn, New York 11576 Attention: Robert M. Doyle with a copy to: Anderson Kill & Olick, P.C. 1251 Avenue of the Americas New York, New York 10020-1182 Attention: Ronald S. Brody (b) if to the Collateral Agent, at: Page 23 Bankers Trust Company 130 Liberty Street New York, New York 10006 Attention: Thomas P. Prior (c) if to any Bank Creditor, either (x) to the Administrative Agent, at the address of the Administrative Agent specified in the Credit Agreement or (y) at such address as such Bank Creditor shall have specified in the Credit Agreement; (d) if to any Other Creditor at such address as such Other Creditor shall have specified in writing to the Pledgor and the Collateral Agent; (e) if to any Seller Creditor at such address as such Seller Creditor shall have specified in writing to the Pledgor and the Collateral Agent; or at such other address as shall have been furnished in writing by any Person described above to and received by the party required to give notice hereunder. Section 20. WAIVER; AMENDMENT. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by the Pledgor, the Collateral Agent (with the written consent of the Required Banks or, to the extent required by Section 13.12 of the Credit Agreement, with the consent of each of the Banks) and the Seller Agent to the extent such change, waiver or modification affects the rights of the Seller Creditors as described herein; provided, however, that -------- ------- any change, waiver, modification or variance affecting the rights and benefits of a single Class (as defined below) of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall require the written consent of the Requisite Creditors (as defined below) of such affected Class. For the purpose of this Agreement, the term "Class" shall mean each class of Secured Creditors, i.e., whether (y) the Bank Creditors as holders of the Credit Agreement - ---- Obligations or (z) the Other Creditors as the holders of the Other Obligations. For the purpose of this Agreement, the term "Requisite Creditors" of any Class shall mean each of (x) with respect to the Credit Agreement Obligations, the Required Banks and (y) with respect to the Other Obligations, the holders of 51% of all obligations outstanding from time to time under the Interest Rate Protection Agreements or Other Hedging Agreements. Page 24 Section 21. MISCELLANEOUS. This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of and be enforceable by each of the parties hereto and its successors and assigns. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. The headings in this Agreement are for purposes of reference only and shall not limit or define the meaning hereof. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument. In the event that any provision of this Agreement shall prove to be invalid or unenforceable, such provision shall be deemed to be severable from the other provisions of this Agreement which shall remain binding on all parties hereto. Section 22. RECOURSE. This Agreement is made with full recourse to the Pledgor and pursuant to and upon all the representations, warranties, covenants and agreements on the part of the Pledgor contained herein, in the other Credit Documents, in the Interest Rate Protection or Other Hedging Agreements, the Seller Promissory Note and otherwise in writing in connection herewith or therewith. Page 25 IN WITNESS WHEREOF, the Pledgor and the Collateral Agent have caused this Agreement to be executed by their duly elected officers duly authorized as of the date first above written. COINMACH LAUNDRY CORPORATION as Pledgor By: /s/ Robert M. Doyle -------------------------------- Name: Robert M. Doyle Title: Senior Vice President BANKERS TRUST COMPANY, as Collateral Agent By: /s/ Patricia Hogan -------------------------------- Name: Patricia Hogan Title: Vice President RICHARD F. ENTHOVEN, as Seller Agent By: /s/ Richard F. Enthoven -------------------------------- Name: Richard F. Enthoven Title: Page 26 SCHEDULE A
Part I. Pledged Stock ------------- Percentage of Outstanding Shares Name of Issuing Corporation Type of Shares Number of Shares of Capital Stock - ----------------------------- -------------- ---------------- ------------------ Coinmach Corporation Common Stock, 100 100% par value $.01 per Share
Part II. Pledged Notes ------------- NONE EX-10.65 15 BORROWER PLEDGE AGREEMENT Exhibit 10.65 ------------- BORROWER PLEDGE AGREEMENT ------------------------- PLEDGE AGREEMENT (as amended, modified or supplemented from time to time, this "Agreement"), dated as of January 8, 1997 made by COINMACH CORPORATION (the "Pledgor"), to BANKERS TRUST COMPANY, as Collateral Agent (together with any successor, the "Collateral Agent"), for the benefit of (x) the Banks (as hereinafter defined), the Administrative Agent (as hereinafter defined), the Syndication Agent (as hereinafter defined), the Documentation Agent (as hereinafter defined) and the Collateral Agent under, and any other lenders from time to time party to, the Credit Agreement hereinafter referred to (such Banks, the Administrative Agent, the Syndication Agent, the Documentation Agent, the Collateral Agent and such other lenders, if any, are hereinafter called the "Bank Creditors") and (y) if one or more Banks or any Affiliate of a Bank enters into one or more (i) interest rate protection agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements), (ii) foreign exchange contracts, currency swap agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency values and/or (iii) other types of hedging agreements from time to time (collectively, the "Interest Rate Protection or Other Hedging Agreements"), with, or guaranteed by, the Pledgor, any such Bank or Banks or Affiliate or Affiliates (even if the respective Bank subsequently ceases to be a Bank under the Credit Agreement for any reason) so long as any such Bank or Affiliate participates in the extension of such Interest Rate Protection or Other Hedging Agreements, and their subsequent assigns, if any (collectively, the "Other Creditors"; together with the Bank Creditors, the "Secured Creditors"). Except as otherwise defined herein, terms used herein and defined in the Credit Agreement shall be used herein as so defined. R E C I T A L S : --------------- 1. Coinmach Laundry Corporation, the Pledgor, the lenders (the "Banks") from time to time party thereto, Bankers Trust Company, as Administrative Agent (together with any successor, the "Administrative Agent"), First Union National Bank of North Carolina, as Syndication Agent (together with any successor, the "Syndication Agent") and 1 Page 2 Lehman Commercial Paper, Inc., as Documentation Agent (together with any successor, the "Documentation Agent") have entered into a Credit Agreement, dated as of the date hereof, providing for the making of Loans and the issuance of, and participation in, Letters of Credit as contemplated therein (such agreement, as amended, modified, extended, renewed, replaced, restated or supplemented from time to time, and including any agreement extending the maturity of, or restructuring all or any portion of the Indebtedness under such agreement or any successor agreement, the "Credit Agreement"); 2. The Pledgor may at any time and from time to time enter into, or guarantee obligations of its Subsidiaries under, one or more Interest Rate Protection or Other Hedging Agreements with one or more Other Creditors; 3. It is a condition to each of the above-described extensions of credit that the Pledgor shall have executed and delivered this Agreement; 4. The Pledgor desires to enter into this Agreement in order to satisfy the condition described in the preceding paragraph. A G R E E M E N T : ------------------ NOW, THEREFORE, in consideration of the above-described extensions of credit to be made to the Pledgor and other benefits accruing to the Pledgor, the receipt and sufficiency of which are hereby acknowledged, the Pledgor hereby makes the following representations and warranties as of the date hereof to the Collateral Agent for the benefit of the Secured Creditors and hereby covenants and agrees with the Collateral Agent for the benefit of the Secured Creditors as follows: Section 1. SECURITY FOR OBLIGATIONS. This Agreement is made by the Pledgor for the benefit of the Secured Creditors to secure: (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise in accordance with the terms of the Credit Agreement) of (x) the principal of and interest on the Notes issued, and Loans made, under the Credit Agreement, and all reimbursement obligations and Unpaid Drawings with respect to the Letters of Credit under the Credit Agreement and Page 3 (y) all other obligations and indebtedness (including, without limitation, indemnities, Fees and interest thereon) of the Pledgor to the Bank Creditors now existing or hereafter incurred under, arising out of, or in connection with the Credit Agreement and the other Credit Documents and the due performance and compliance by the Pledgor with all of the terms, conditions and agreements contained in the Credit Agreement and the other Credit Documents (all such principal, interest, obligations and liabilities described in this clause (i) collectively, the "Credit Agreement Obligations"); (ii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise in accordance with the terms of the Credit Agreement) of all obligations and liabilities owing by the Pledgor to the Other Creditors under, or with respect to, any Interest Rate Protection or Other Hedging Agreement, whether such Interest Rate Protection or Other Hedging Agreement is now in existence or hereafter arising in connection with the Credit Documents, and the due performance and compliance by the Pledgor with all of the terms, conditions and agreements contained therein (all such obligations and liabilities described in this clause (ii) collectively, the "Other Obligations"); (iii) any and all sums advanced and not repaid by the Collateral Agent in order to preserve the Collateral (as hereinafter defined) or preserve its security interest in the Collateral in accordance with the terms hereof and the other Credit Documents; and (iv) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities of the Pledgor referred to in clauses (i) and (ii), after an Event of Default (as such term is defined in the Security Agreement) shall have occurred and be continuing and the Collateral Agent has given notice under Article X of the Credit Agreement, the commercially reasonable expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Collateral Agent of its rights hereunder, together with reasonable attorneys' fees and court costs in accordance with the terms hereof and the other Credit Documents; all such obligations, liabilities, sums and expenses set forth in clauses (i) through (iv) of this Section 1 Page 4 collectively, the "Obligations," it being acknowledged and agreed that the "Obligations" shall include extensions of credit of the types described above, whether outstanding on the date of this Agreement or extended from time to time after the date of this Agreement. Section 2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used herein, (i) the term "Stock" shall mean (x) with respect to corporations incorporated under the laws of the United States or any State or territory thereof (each a "Domestic Corporation"), all of the issued and outstanding shares of capital stock at any time owned by the Pledgor of any Domestic Corporation and (y) with respect to corporations not Domestic Corporations (each a "Foreign Corporation"), all of the issued and outstanding shares of capital stock at any time owned by the Pledgor of any Foreign Corporation, provided -------- that, except as provided in the last sentence of this Section 2, the Pledgor shall not be required to pledge hereunder more than 65% of the total combined voting power of all classes of capital stock of any Foreign Corporation entitled to vote and (ii) the term "Notes" shall mean (x) all promissory notes at any time issued to the Pledgor by any of its Subsidiaries or Affiliates and (y) except as provided in the last sentence of this Section 2, the Pledgor shall not be required to pledge hereunder any promissory notes issued to the Pledgor by any Subsidiary of the Pledgor which is a Foreign Corporation. If and to the extent that the Collateral Agent receives or holds stock certificates representing more than 65% of the total combined voting power of all classes of capital stock of any Foreign Corporation entitled to vote, the Collateral Agent agrees to act as bailee and custodian for the benefit of the Pledgor with respect to any portion of such capital stock representing more than 65% of the total combined voting power of all classes of capital stock of any Foreign Corporation entitled to vote except as otherwise provided in the last sentence of this Section 2. As used herein, the term "Securities" shall mean all of the Stock and Notes. The Pledgor represents and warrants, as to the stock of corporations and promissory notes owned by the Pledgor, that on the date hereof (a) the Stock consists of the number and type of shares of the stock of the corporations as described in Part I of Schedule A hereto; (b) such Stock ---------- constitutes that percentage of the issued and outstanding capital stock of the issuing corporation as is set forth in Part I of Schedule A hereto; (c) the ---------- Notes consist of the promissory notes described in Part II of Schedule A hereto; ---------- and (d) the Pledgor is the holder of record and sole beneficial owner of the Stock and the Notes and there exist no options or preemption rights in Page 5 respect of any of the Stock. If following a change in the relevant sections of the Code or the regulations, rules, rulings, notices or other official pronouncements issued or promulgated thereunder which would permit a pledge (x) of 66 2/3% or more (or would be adjusted to permit a pledge of less than 66 2/3%) of the total combined voting power of all classes of capital stock of any Foreign Corporation entitled to vote and (y) of any promissory note issued by any Subsidiary of the Pledgor which is a Foreign Corporation without causing the undistributed earnings of such Foreign Corporation as determined for Federal income taxes to be treated as a deemed dividend to the Pledgor for Federal income tax purposes, then the 65% limitation set forth in clause (i)(y) and the limitation in the proviso of clause (ii) in each case of this Section 2 shall no longer be applicable (or shall be adjusted as appropriate) and the Pledgor shall duly pledge and deliver to the Collateral Agent such of the Securities not theretofore required to be pledged hereunder or the Collateral Agent shall return such Securities, as applicable. Section 3. PLEDGE OF SECURITIES, ETC. Section 3.1. Pledge. To secure the Obligations and for the purposes ------ set forth in Section 1, the Pledgor (i) hereby grants to the Collateral Agent a security interest in all of the Collateral (as hereinafter defined), (ii) hereby pledges and deposits with the Collateral Agent the Securities owned by the Pledgor on the date hereof, and delivers to the Collateral Agent certificates therefor, duly endorsed in blank in the case of promissory notes and accompanied by undated stock powers duly executed in blank by the Pledgor (and accompanied by any transfer tax stamps required in connection with the pledge of such Securities) in the case of capital stock, or such other instruments of transfer as are reasonably acceptable to the Collateral Agent and (iii) hereby collaterally assigns, transfers, hypothecates and sets over to the Collateral Agent all of the Pledgor's right, title and interest in and to such Securities (and in and to the certificates or instruments evidencing such Securities), to be held by the Collateral Agent as collateral security for the Obligations, upon the terms and conditions set forth in this Agreement. Section 3.2. Subsequently Acquired Securities. If the Pledgor shall -------------------------------- acquire (by purchase, stock dividend or otherwise) any additional Securities at any time or from time to time after the date hereof, the Pledgor will promptly thereafter pledge and deposit such Securities (or Page 6 certificates or instruments representing Securities) as security with the Collateral Agent and deliver to the Collateral Agent certificates or instruments therefor, duly endorsed in blank in the case of promissory notes, and accompanied by undated stock powers duly executed in blank by the Pledgor (and accompanied by any transfer tax stamps required in connection with the pledge of such Securities) in the case of capital stock, or such other instruments of transfer as are reasonably acceptable to the Collateral Agent, and will promptly thereafter deliver to the Collateral Agent a certificate executed by a principal executive officer of the Pledgor describing such Securities and certifying that the same has been duly pledged with the Collateral Agent hereunder. Subject to the last sentence of Section 2, the Pledgor shall not be required at any time to pledge hereunder any promissory notes issued to the Pledgor by a Subsidiary which is a Foreign Corporation or more than 65% of the total combined voting power of all classes of capital stock of any Foreign Corporation entitled to vote. Section 3.3. Uncertificated Securities. Notwithstanding anything to ------------------------- the contrary contained in Sections 3.1 and 3.2, if any Securities (whether now owned or hereafter acquired) are uncertificated securities, the Pledgor shall promptly notify the Collateral Agent thereof, and shall promptly take all actions reasonably required to perfect the security interest of the Collateral Agent under applicable law (including, in any event, under Sections 8-313 and 8- 321 of the New York Uniform Commercial Code if applicable). The Pledgor further agrees to take such actions as the Collateral Agent deems reasonably necessary or desirable to effect the foregoing and to permit the Collateral Agent to exercise any of its rights and remedies hereunder, and agrees to provide an opinion of counsel reasonably satisfactory to the Collateral Agent with respect to any such pledge of uncertificated Securities promptly upon the reasonable request of the Collateral Agent. Section 3.4. Definitions of Pledged Stock; Pledged Notes; Pledged ---------------------------------------------------- Securities and Collateral. All Stock at any time pledged or required to be - ------------------------- pledged hereunder is hereinafter called the "Pledged Stock;" all Notes at any time pledged or required to be pledged hereunder are hereinafter called the "Pledged Notes;" all Pledged Stock and Pledged Notes together are called the "Pledged Securities;" and the Pledged Securities, together with all proceeds thereof, including any securities and moneys received and at any time held by the Collateral Agent hereunder, are hereinafter called the "Collateral." Page 7 Section 4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Collateral Agent shall have the right to appoint one or more sub-agents, at the cost and expense of the Collateral Agent, for the purpose of retaining physical possession of the Pledged Securities, which may be held (in the reasonable discretion of the Collateral Agent) in the name of the Pledgor, endorsed or assigned in blank or in favor of the Collateral Agent or any nominee or nominees of the Collateral Agent or a sub-agent appointed by the Collateral Agent. Section 5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until there shall have occurred and be continuing an Event of Default and the Collateral Agent has given written notice to the Pledgor in accordance with Article X of the Credit Agreement, the Pledgor shall be entitled to vote any and all Pledged Securities owned by it, and to give consents, waivers or ratifications in respect thereof, provided that no vote shall be cast or any -------- consent, waiver or ratification given or any action taken which would violate, result in breach of any covenant contained in this Agreement, the Credit Agreement or any other Credit Document or which is not permitted under any of the Credit Documents and could reasonably be expected to have the effect of materially impairing the value of the Collateral or any material part thereof or the position or interests of the Collateral Agent or any Secured Creditor. All such rights of the Pledgor to vote and to give consents, waivers and ratifications shall cease in case an Event of Default has occurred and is continuing and the Collateral Agent has given written notice to the Pledgor in accordance with Article X of the Credit Agreement, and Section 7 hereof shall become applicable. Section 6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless and until there shall have occurred and be continuing an Event of Default and the Collateral Agent has given written notice to the Pledgor in accordance with Article X of the Credit Agreement, all cash dividends and distributions payable in respect of the Pledged Stock and all payments in respect of the Pledged Notes shall be paid to the Pledgor. The Collateral Agent shall be entitled to receive directly, and to retain as part of the Collateral: (a) all other or additional stock or securities (other than cash) paid or distributed by way of dividend or otherwise, as the case may be, in respect of the Pledged Stock; Page 8 (b) all other or additional stock or other securities paid (other than cash) or distributed in respect of the Pledged Stock by way of stock-split, spin-off, split-up, reclassification, combination of shares or similar rearrangement; and (c) all other or additional stock or other securities or property (excluding cash) which may be paid in respect of the Collateral by reason of any consolidation, merger, exchange of stock, conveyance of assets, liquidation or similar corporate reorganization. Nothing contained in this Section 6 shall limit or restrict in any way the Collateral Agent's right to receive proceeds of the Collateral in any form in accordance with Section 3 of this Agreement. All dividends, distributions or other payments which are received by the Pledgor contrary to the provisions of this Section 6 and Section 7 shall be received in trust for the benefit of the Collateral Agent, shall be segregated from other property or funds of the Pledgor and shall be forthwith paid or delivered over to the Collateral Agent as Collateral in the same form as so received (with any necessary endorsement). Section 7. REMEDIES IN CASE OF EVENTS OF DEFAULT. If there shall have occurred and be continuing an Event of Default and the Collateral Agent has given written notice to the Pledgor in accordance with Article X of the Credit Agreement, then and in every such case, the Collateral Agent shall be entitled to exercise all of the rights, powers and remedies (whether vested in it by this Agreement, any other Credit Document, any Interest Rate Protection or Other Hedging Agreement or by law) for the protection and enforcement of its rights in respect of the Collateral, and the Collateral Agent shall be entitled to exercise all the rights and remedies of a secured party under the Uniform Commercial Code and also shall be entitled, without limitation, to exercise the following rights, which the Collateral Agent agrees to exercise in a commercially reasonable manner: (a) to receive all amounts payable in respect of the Collateral otherwise payable under Section 6 to the Pledgor; (b) to transfer all or any part of the Collateral into the Collateral Agent's name or the name of its nominee or nominees; Page 9 (c) to accelerate any Pledged Note which may be accelerated in accordance with its terms, and take any other lawful action to collect upon any Pledged Note at such times and under the conditions set forth therein; (d) to vote all or any part of the Pledged Stock (whether or not transferred into the name of the Collateral Agent) and give all consents, waivers and ratifications in respect of the Collateral and otherwise act with respect thereto in a commercially reasonable manner as though it were the outright owner thereof (the Pledgor hereby irrevocably constituting and appointing the Collateral Agent the proxy and attorney-in-fact of the Collateral Agent, with full power of substitution to do so upon the occurrence and during the continuance of an Event of Default provided the Collateral Agent has delivered written notice to the Pledgor in accordance with Article X of the Credit Agreement); and (e) to sell, assign and deliver, or grant options to purchase, all or any part of the Collateral, or any interest therein, at any public or private sale, without demand of performance, advertisement or notice of intention to sell or of the time or place of sale or adjournment thereof or to redeem or otherwise (all of which are hereby waived by the Pledgor), for cash, on credit or for other property, for immediate or future delivery without any assumption of credit risk, and for such price or prices and on such terms as the Collateral Agent may determine in a commercially reasonable manner, provided that at least 10 days' written notice of the -------- time and place of any such sale shall be given to the Pledgor. The Collateral Agent shall not be obligated to make any such sale of Collateral regardless of whether any such notice of sale has theretofore been given. The Pledgor hereby waives and releases to the fullest extent permitted by law any right or equity of redemption with respect to the Collateral, whether before or after sale hereunder other than the Pledgor's right to receive any excess proceeds or Collateral remaining after payment in full of the Obligations, and all rights, if any, of marshalling the Collateral and any other security for the Obligations or otherwise. At any such sale, unless prohibited by applicable law, the Collateral Agent on behalf of the Secured Creditors may bid for and purchase all or any part of the Collateral so sold free from any such right or equity of redemption. Neither the Collateral Agent nor any Secured Creditor shall be liable for failure to collect (except in such cases Page 10 where the Collateral Agent bids for and purchases all or part of the Collateral) or realize upon any or all of the Collateral or for any delay in so doing nor shall any of them be under any obligation to take any action whatsoever with regard thereto. 8. REMEDIES, ETC., CUMULATIVE. Each and every right, power and remedy of the Collateral Agent provided for in this Agreement, the other Credit Documents, or the Interest Rate Protection or Other Hedging Agreements, or now or hereafter existing at law or in equity or by statute, shall be cumulative and concurrent and shall be in addition to every other such right, power or remedy. The exercise or beginning of the exercise by the Collateral Agent or any Secured Creditor of any one or more of the rights, powers or remedies provided for in this Agreement, the other Credit Documents or the Interest Rate Protection or Other Hedging Agreements or now or hereafter existing at law or in equity or by statute shall not preclude the simultaneous or later exercise by the Collateral Agent or any Secured Creditor of all such other rights, powers or remedies, and no failure or delay on the part of the Collateral Agent or any Secured Creditor to exercise any such right, power or remedy shall operate as a waiver thereof except as required by applicable law. Unless otherwise required by the Credit Documents, no notice to or demand on the Pledgor in any case shall entitle it to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Collateral Agent or any Secured Creditor to any other or further action in any circumstances without notice or demand. Section 9. APPLICATION OF PROCEEDS. All moneys collected by the Collateral Agent upon any sale or other disposition of the Collateral, together with all other moneys received by the Collateral Agent hereunder, shall be applied to the payment of the Obligations in the manner provided by Section 7.4 of the Security Agreement. Section 10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the Collateral Agent hereunder (whether by virtue of the power of sale herein granted, pursuant to judicial process or otherwise), the receipt of the Collateral Agent or the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such Page 11 officer or be answerable in any way for the misapplication or nonapplication thereof. Section 11. INDEMNITY. The Pledgor agrees to indemnify and hold harmless the Collateral Agent and each Secured Creditor and their respective successors, assigns, employees, agents and servants (each an "Indemnitee,"; collectively, the "Indemnitees") from and against any and all claims, demands, losses, judgments and liabilities (including liabilities for penalties) of whatsoever kind or nature, and to reimburse each Indemnitee for all costs and expenses, including reasonable attorneys' fees, growing out of or resulting from this Agreement or the exercise by any Indemnitee of any right or remedy granted to it hereunder or under the other Credit Documents or the Interest Rate Protection and Other Hedging Agreements (but excluding any claims, demands, losses, judgments and liabilities or expenses to the extent finally judicially determined to have been incurred by reason of gross negligence or willful misconduct of such Indemnitee). If and to the extent that the obligations of the Pledgor under this Section 11 are unenforceable for any reason, the Pledgor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. Section 12. FURTHER ASSURANCES; POWER-OF-ATTORNEY. (a) The Pledgor agrees that it will join with the Collateral Agent in executing and, at its own expense, file and refile under the Uniform Commercial Code or other applicable law such financing statements, continuation statements and other documents in such offices as the Collateral Agent may deem reasonably necessary and wherever required by law in order to perfect and preserve the Collateral Agent's security interest in the Collateral and hereby authorizes the Collateral Agent to file financing statements and amendments thereto relative to all or any part of the Collateral without the signature of the Pledgor where permitted by law, and agrees to do such further acts and things and to execute and deliver to the Collateral Agent such additional conveyances, assignments, agreements and instruments as the Collateral Agent may reasonably require or deem necessary to carry into effect the purposes of this Agreement or to further assure and confirm unto the Collateral Agent its rights, powers and remedies hereunder. (b) The Pledgor hereby appoints the Collateral Agent the Pledgor's attorney-in-fact, with full authority in the place and stead of the Pledgor and in the name of the Page 12 Pledgor or otherwise, from time to time after the occurrence and during the continuance of an Event of Default and provided that the Collateral Agent shall have delivered notice to the Pledgor in accordance with Article X of the Credit Agreement, in the Collateral Agent's reasonable discretion to take any action and to execute any instrument which the Collateral Agent may reasonably deem necessary or advisable to accomplish the purposes of this Agreement. Section 13. THE PLEDGEE AS AGENT. The Collateral Agent will hold in accordance with this Agreement all items of the Collateral at any time received under this Agreement. It is expressly understood and agreed by the parties hereto and each Secured Creditor, by accepting the benefits of this Agreement, each such person acknowledges and agrees that the obligations of the Collateral Agent as holder of the Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement. The Collateral Agent shall act hereunder on the terms and conditions set forth herein and in Section 12 of the Credit Agreement. Section 14. TRANSFER BY THE PLEDGOR. The Pledgor will not sell or otherwise dispose of, grant any option with respect to, or mortgage, pledge or otherwise encumber any of the Collateral or any interest therein (except as may be permitted in accordance with the terms of the Credit Agreement). Section 15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGOR. The Pledgor represents and warrants that as of the date hereof (a) it is, or at the time when pledged hereunder will be, the legal, record and beneficial owner of, and has (or will have) good title to, all Securities pledged hereunder, subject to no Lien (except the Lien created by this Agreement); (b) it has full corporate power, authority and legal right to pledge all the Securities pursuant to this Agreement; (c) this Agreement has been duly authorized, executed and delivered by the Pledgor and constitutes a legal, valid and binding obligation of the Pledgor enforceable in accordance with its terms, except to the extent that the enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law); (d) except to the extent already obtained or made, no consent of any other party (including, without limitation, any stockholder or Page 13 creditor of the Pledgor or any of its Subsidiaries) and no consent, license, permit, approval or authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority is required to be obtained by the Pledgor in connection with (i) the execution, delivery or performance of this Agreement, (ii) the validity or enforceability of this Agreement, (iii) the perfection or enforceability of the Collateral Agent's security interest in the Collateral or (iv) except for compliance with or as may be required by applicable securities laws, the exercise by the Collateral Agent of any of its rights or remedies provided herein; (e) the execution, delivery and performance of this Agreement will not violate any provision of any applicable law or regulation or of any order, judgment, writ, award or decree of any court, arbitrator or governmental authority, domestic or foreign, applicable to the Pledgor, or of the Certificate of Incorporation or By-Laws of the Pledgor or of any securities issued by the Pledgor or any of its Subsidiaries, or of any material mortgage, indenture, lease, loan agreement, credit agreement or other contract, agreement or instrument or undertaking to which the Pledgor or any of its Subsidiaries is a party or which purports to be binding upon the Pledgor or any of its Subsidiaries or upon any of their respective material assets and will not result in the creation or imposition of (or the obligation to create or impose) any lien or encumbrance on any of the assets of the Pledgor or any of its Subsidiaries except as contemplated by this Agreement; (f) all the shares of the Stock have been duly and validly issued, are fully paid and non-assessable and are subject to no options to purchase or similar rights; (g) each of the Pledged Notes to the extent executed by Holdings or any of its Subsidiaries constitutes, or when executed by the obligor thereof will constitute, the legal, valid and binding obligation of such obligor, enforceable in accordance with its terms, except to the extent that the enforceability thereof may by limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law); and (h) the pledge, collateral assignment and delivery to the Collateral Agent of the Securities (other than uncertificated securities) pursuant to this Agreement creates a valid and perfected first priority Lien in the Securities, and the proceeds thereof, subject to no other Lien or to any agreement purporting to grant to any third party a Lien on the property or assets of the Pledgor which would include the Securities. The Pledgor covenants and agrees that it will take commercially reasonable steps to defend the Collateral Page 14 Agent's right, title and security interest in and to the Securities and the proceeds thereof against the claims and demands of all persons whomsoever; and the Pledgor covenants and agrees that it will have like title to and right to pledge any other property at any time hereafter pledged to the Collateral Agent as Collateral hereunder and will likewise take commercially reasonable steps to defend the right thereto and security interest therein of the Collateral Agent and the Secured Creditors. Section 16. PLEDGOR'S OBLIGATIONS ABSOLUTE, ETC. The obligations of the Pledgor under this Agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, including, without limitation: (a) any renewal, extension, amendment or modification of or addition or supplement to or deletion from the Credit Documents, the Interest Rate Protection or Other Hedging Agreements or any other instrument or agreement referred to therein, or any assignment or transfer of any thereof; (b) any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such agreement or instrument including, without limitation, this Agreement; (c) any furnishing of any additional security to the Collateral Agent or its assignee or any acceptance thereof or any release of any security by the Collateral Agent or its assignee; (d) any limitation on any party's liability or obligations under any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement or any term thereof; or (e) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to the Pledgor or any Subsidiary of the Pledgor, or any action taken with respect to this Agreement by any trustee or receiver, or by any court, in any such proceeding, whether or not the Pledgor shall have notice or knowledge of any of the foregoing. Section 17. REGISTRATION, ETC. (a) If there shall have occurred and be continuing an Event of Default and acceleration of the Notes then, and in every such case, upon receipt by the Pledgor from the Collateral Agent of a written request or requests that the Pledgor cause any registration, qualification or compliance under any Federal or any state securities law or laws to be effected with respect to all or any part of the Pledged Stock, the Pledgor as soon as practicable and at its expense will use its commercially reasonable efforts to cause such registration to be declared Page 15 effective (and be kept effective) and will use its commercially reasonable efforts to cause such qualification and compliance to be declared effective (and be kept effective) as may be so requested and as would permit or facilitate the sale and distribution of such Pledged Stock, including, without limitation, registration under the Securities Act of 1933, as then in effect (or any similar statute then in effect), appropriate qualifications under applicable blue sky or other state securities laws and appropriate compliance with any other government requirements, provided that the Collateral Agent shall furnish to the Pledgor -------- such information regarding the Collateral Agent as the Pledgor may request in writing and as shall be required in connection with any such registration, qualification or compliance. Any such registration shall be effected in accordance with customary underwriting practices and in compliance with applicable law. The Pledgor will cause the Collateral Agent to be kept advised in writing as to the progress of each such registration, qualification or compliance and as to the completion thereof, will furnish to the Collateral Agent such number of prospectuses, offering circulars or other documents incident thereto as the Collateral Agent from time to time may reasonably request, and will indemnify the Collateral Agent and all others participating in the distribution of such Pledged Stock against all claims, losses, damages and liabilities caused by any untrue statement (or alleged untrue statement) of a material fact contained therein (or in any related registration statement, notification or the like) or by any omission (or alleged omission) to state therein (or in any related registration statement, notification or the like) a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same may have been caused by an untrue statement or omission based upon information furnished in writing to the Pledgor by the Collateral Agent expressly for use therein. (b) If at any time when the Collateral Agent shall determine to exercise its right to sell all or any part of the Pledged Securities pursuant to Section 7, and such Pledged Securities or the part thereof to be sold shall not, for any reason whatsoever, be effectively registered under the Securities Act of 1933, as then in effect, the Collateral Agent may, in its sole and absolute discretion, sell such Pledged Securities or part thereof by private sale in such manner and under such circumstances as the Collateral Agent may deem reasonably necessary or advisable in order that such sale may legally be effected without such registration. Without limiting the generality of the foregoing, in any such Page 16 event the Collateral Agent, in its commercially reasonable discretion (i) may proceed to make such private sale notwithstanding that a registration statement for the purpose of registering such Pledged Securities or part thereof shall have been filed under such Securities Act, (ii) may approach and negotiate with a single possible purchaser to effect such sale, and (iii) may restrict such sale to a purchaser who will represent and agree that such purchaser is purchasing for its own account, for investment, and not with a view to the distribution or sale of such Pledged Securities or part thereof. In the event of any such sale, the Collateral Agent shall incur no responsibility or liability for selling all or any part of the Pledged Securities at a price which the Collateral Agent, in its commercially reasonable discretion, in good faith deems reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might be realized if the sale were deferred until after registration as aforesaid. Section 18. TERMINATION; RELEASE. (a) After the Termination Date (as defined below), this Agreement and the security interest created hereby shall terminate, and the Collateral Agent, at the request and expense of the Pledgor, will execute and deliver to the Pledgor a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to the Pledgor (without recourse and without any representation or warranty other than a representation that the Collateral Agent has not granted any lien on or security interest in the Collateral) such of the Collateral as may be in the possession of the Collateral Agent or any of its sub-agents and has not theretofore been sold or otherwise applied or released pursuant to this Agreement, together with any moneys at the time held by the Collateral Agent or any of its sub-agents hereunder. As used in this Agreement, "Termination Date" shall mean the date upon which the Commitments and all Interest Rate Protection or Other Hedging Agreements have been terminated, no Note under the Credit Agreement is outstanding (and all Loans have been repaid in full), all Letters of Credit have been terminated and all Obligations then owing have been paid in full. (b) Notwithstanding anything to the contrary contained above, upon the presentment of satisfactory evidence to the Collateral Agent in its sole discretion that all obligations evidenced by any Pledged Note have been repaid in full, and that any payments received by the Pledgor were permitted to be received by the Pledgor pursuant to Section 6 hereof, the Collateral Agent shall, upon the request and at Page 17 the expense of the Pledgor, duly assign, transfer and deliver to the Pledgor (without recourse and without any representation or warranty other than a representation that the Collateral Agent has not granted any lien on or security interest in such Pledged Note) such Pledged Note if same is then in the possession of the Collateral Agent or any of its sub-agents and has not theretofore been sold or otherwise applied or released pursuant to this Agreement. (c) In the event that any part of the Collateral is sold in connection with a sale permitted by Section 9.02 of the Credit Agreement or otherwise released at the direction of the Required Banks (or all Banks if required by Section 13.12 of the Credit Agreement) and the proceeds of such sale or sales or from such release are applied in accordance with the provisions of Section 4.02 of the Credit Agreement, to the extent required to be so applied, the Collateral Agent, at the request and expense of the Pledgor, will duly assign, transfer and deliver to the Pledgor (without recourse and without any representation or warranty) such of the Collateral as is then being (or has been) so sold or released and as may be in the possession of the Collateral Agent or any of its sub-agents and has not theretofore been released pursuant to this Agreement. (d) At any time that the Pledgor desires that Collateral be released as provided in the foregoing sub-section (a), (b) or (c), it shall deliver to the Collateral Agent a certificate signed by its chief financial officer stating that the release of the respective Collateral is permitted pursuant to such subsection (a), (b) or (c). (e) The Collateral Agent shall have no liability whatsoever to any Secured Creditor as the result of any release of Collateral by it in accordance with this Section 18. Section 19. NOTICES ETC. All such notices and communications hereunder shall be telecopied or delivered by messenger or overnight courier service and all such notices and communications shall, when mailed, telegraphed, telexed, telecopied, or cabled or sent by overnight courier, be effective when delivered to the telegraph company, cable company or overnight courier, as the case may be, or sent by telex or telecopier and when mailed shall be effective three Business Days following deposit in the mail with proper postage, except that notices and communications to the Collateral Agent shall not be effective until received by the Page 18 Collateral Agent. All notices and other communications shall be in writing and addressed as follows: (a) if to the Pledgor, at: Coinmach Corporation 55 Lumber Road Roslyn, New York 11576 Attention: Robert M. Doyle with a copy to: Anderson Kill & Olick, P.C. 1251 Avenue of the Americas New York, New York 10020-1182 Attention: Ronald S. Brody (b) if to the Collateral Agent, at: Bankers Trust Company 130 Liberty Street New York, New York 10006 Attention: Thomas P. Prior (c) if to any Bank Creditor, either (x) to the Administrative Agent, at the address of the Administrative Agent specified in the Credit Agreement or (y) at such address as such Bank Creditor shall have specified in the Credit Agreement; (d) if to any Other Creditor at such address as such Other Creditor shall have specified in writing to the Pledgor and the Collateral Agent; or at such other address as shall have been furnished in writing by any Person described above to and received by the party required to give notice hereunder. Section 20. WAIVER; AMENDMENT. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by the Pledgor and the Collateral Agent (with the written consent of the Required Banks or, to the extent required by Section 13.12 of the Credit Agreement, with the consent of each of the Banks); provided, however, that any change, waiver, modification or variance affecting - -------- ------- the rights and benefits of a single Class (as defined below) of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall require the written consent of the Requisite Creditors (as defined below) of such affected Class. For the purpose of this Agreement, the term Page 19 "Class" shall mean each class of Secured Creditors, i.e., whether (y) the Bank --- Creditors as holders of the Credit Agreement Obligations or (z) the Other Creditors as the holders of the Other Obligations. For the purpose of this Agreement, the term "Requisite Creditors" of any Class shall mean each of (x) with respect to the Credit Agreement Obligations, the Required Banks and (y) with respect to the Other Obligations, the holders of 51% of all obligations outstanding from time to time under the Interest Rate Protection Agreements or Other Hedging Agreements. Section 21. MISCELLANEOUS. This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of and be enforceable by each of the parties hereto and its successors and assigns. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. The headings in this Agreement are for purposes of reference only and shall not limit or define the meaning hereof. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument. In the event that any provision of this Agreement shall prove to be invalid or unenforceable, such provision shall be deemed to be severable from the other provisions of this Agreement which shall remain binding on all parties hereto. Section 22. RECOURSE. This Agreement is made with full recourse to the Pledgor and pursuant to and upon all the representations, warranties, covenants and agreements on the part of the Pledgor contained herein, in the other Credit Documents, in the Interest Rate Protection or Other Hedging Agreements and otherwise in writing in connection herewith or therewith. Page 20 IN WITNESS WHEREOF, the Pledgor and the Collateral Agent have caused this Agreement to be executed by their duly elected officers duly authorized as of the date first above written. COINMACH CORPORATION, as Pledgor By /s/ Robert M. Doyle ------------------------------- Name: Robert M. Doyle Title: Senior Vice President BANKERS TRUST COMPANY, as Collateral Agent By /s/ Patricia Hogan ------------------------------- Name: Patricia Hogan Title: Vice President Page 21 SCHEDULE A
Part I. Pledged Stock ------------- Percentage of Outstanding Shares Name of Issuing Corporation Type of Shares Number of Shares of Capital Stock - ----------------------------- -------------- ---------------- ------------------ Grand Wash & Dry Common Stock, 10 100% Launderette, Inc. no par value Super Laundry Equipment Common Stock, 10 100% Corp. par value $.01 per Share
Part II. Pledged Notes ------------- NONE EX-10.66 16 SECURITY AGREEMENT Exhibit 10.66 ------------- SECURITY AGREEMENT among COINMACH CORPORATION and BANKERS TRUST COMPANY, as Collateral Agent Dated as of January 8, 1997 TABLE OF CONTENTS Page ARTICLE I SECURITY INTERESTS.................. 2 Section 1.1. Grant of Security Interests.................. 2 Section 1.2. Power of Attorney............................ 3 ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS................... 3 Section 2.1. Necessary Filings............................ 3 Section 2.2. No Liens..................................... 4 Section 2.3. Other Financing Statements................... 4 Section 2.4. Chief Executive Office; Records.............. 4 Section 2.5. Location of Inventory and Equipment.......... 5 Section 2.6. Recourse..................................... 5 Section 2.7. Trade Names; Change of Name.................. 6 ARTICLE III SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS...... 6 Section 3.1. Additional Representations and Warranties.... 6 Section 3.2. Maintenance of Records....................... 7 Section 3.3. Direction to Account Debtors; Contracting Parties; etc............................... 7 Section 3.4. Modification of Terms; etc................... 8 Section 3.5. Collection................................... 8 Section 3.6. Instruments.................................. 9 Section 3.7. Further Actions.............................. 9 ARTICLE IV SPECIAL PROVISIONS CONCERNING MARKS......... 9 Section 4.1. Additional Representations and Warranties.... 9 Section 4.2. Licenses and Assignments..................... 10 -i- Page ---- Section 4.3. Infringements................................ 10 Section 4.4. Preservation of Marks........................ 10 Section 4.5. Maintenance of Registration.................. 10 Section 4.6. Future Registered Marks...................... 10 Section 4.7. Remedies..................................... 11 ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS AND COPYRIGHTS................ 11 Section 5.1. Additional Representations and Warranties.... 11 Section 5.2. Licenses and Assignments..................... 12 Section 5.3. Infringements................................ 12 Section 5.4. Maintenance of Patents....................... 12 Section 5.5. Prosecution of Patent Application............ 12 Section 5.6. Other Patents and Copyrights................. 13 Section 5.7. Remedies..................................... 13 ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL......... 13 Section 6.1. Protection of Collateral Agent's Security.... 13 Section 6.2. Warehouse Receipts Non-negotiable............ 14 Section 6.3. Further Actions.............................. 14 Section 6.4. Financing Statements......................... 14 ARTICLE VII REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT................... 15 Section 7.1. Remedies; Obtaining the Collateral Upon Default.................................... 15 Section 7.2. Remedies; Disposition of the Collateral...... 16 Section 7.3. Waiver of Claims............................. 17 Section 7.4. Application of Proceeds...................... 18 Section 7.5. Remedies Cumulative.......................... 21 Section 7.6. Discontinuance of Proceedings................ 21 -ii- Page ---- ARTICLE VIII INDEMNITY...................... 22 Section 8.1. Indemnity.................................... 22 Section 8.2. Indemnity Obligations Secured by Collateral; Survival................................... 23 ARTICLE IX DEFINITIONS..................... 24 ARTICLE X MISCELLANEOUS.................... 29 Section 10.1. Notices...................................... 29 Section 10.2. Waiver; Amendment............................ 31 Section 10.3. Obligations Absolute......................... 31 Section 10.4. Successors and Assigns....................... 31 Section 10.5. Headings Descriptive......................... 32 Section 10.6. Severability................................. 32 Section 10.7. GOVERNING LAW................................ 32 Section 10.8. Pledgor's Duties............................. 32 Section 10.9. Termination; Release......................... 32 Section 10.10. Counterparts................................. 33 Section 10.11. The Collateral Agent......................... 33 ANNEX A Schedule of Permitted Filings ANNEX B Schedule of Record Locations ANNEX C Schedule of Inventory and Equipment Locations ANNEX D Schedule of Trade, Fictitious and Other Names ANNEX E Schedule of Marks ANNEX F Schedule of License Agreements and Assignments ANNEX G Schedule of Patents and Applications ANNEX H Schedule of Copyrights and Applications ANNEX I Assignments of Security Interest in United States Trademarks and Patents ANNEX J Assignment of Security Interest in United States Copyrights -iii- SECURITY AGREEMENT ------------------ SECURITY AGREEMENT (as amended, modified or supplemented from time to time, this "Agreement"), dated as of January 8, 1997, by COINMACH CORPORATION (the "Pledgor") a Delaware corporation having an office at 55 Lumber Road, Roslyn, New York 11576, in favor of BANKERS TRUST COMPANY, as Collateral Agent (the "Collateral Agent") for the benefit of (x) the Banks, the Administrative Agent (as hereinafter defined), the Syndication Agent (as hereinafter defined), the Documentation Agent (as hereinafter defined) and the Collateral Agent under, and any other lenders from time to time party to, the Credit Agreement hereinafter referred to (such Banks, the Administrative Agent, the Syndication Agent, the Documentation Agent, the Collateral Agent and such other lenders, if any, are hereinafter called the "Bank Creditors") and (y) if one or more Banks (or any Affiliate thereof) enter into one or more (i) interest rate protection agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements), (ii) foreign exchange contracts, currency swap agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency values and/or (iii) other types of hedging agreements from time to time (collectively, the "Interest Rate Protection or Other Hedging Agreements") with, or guaranteed by, the Pledgor, any such Bank or Banks or any Affiliate of such Bank or Banks (even if the respective Bank subsequently ceases to be a Bank under the Credit Agreement for any reason) so long as any such Bank or Affiliate participates in the extension of such Interest Rate Protection or Other Hedging Agreements and their subsequent assigns, if any (collectively, the "Other Creditors"; together with the Bank Creditors, the "Secured Creditors"). Except as otherwise defined herein, terms used herein and defined in the Credit Agreement shall be used herein as so defined. R E C I T A L S : --------------- 1. Coinmach Laundry Corporation, the Pledgor, the lenders (the "Banks") from time to time party thereto, Bankers Trust Company, as Administrative Agent (together with any successor, the "Administrative Agent"), First Union National Bank of North Carolina, as Syndication Agent (together with any successor, the "Syndication Agent") and Lehman Commercial Paper, Inc., as Documentation Agent (together with any successor, the "Documentation Agent")have entered into a Credit Agreement, dated as of the date hereof, providing for the making of Loans and the issuance of, and participation in, Letters of Credit as contemplated therein (such agreement, as amended, modified, extended, renewed, replaced, restated or supplemented from time to time, and including any agreement extending the maturity of, or Page 2 restructuring all or any portion of the Indebtedness under such agreement or any successor agreement, the "Credit Agreement"). 2. The Pledgor may at any time and from time to time enter into, or guarantee obligations of its Subsidiaries under, one or more Interest Rate Protection or Other Hedging Agreements with one or more Other Creditors. 3. It is a condition to each of the above-described extensions of credit to the Pledgor that the Pledgor shall have executed and delivered this Agreement. 4. The Pledgor desires to enter into this Agreement in order to satisfy the condition described in the preceding paragraph. A G R E E M E N T : ----------------- NOW, THEREFORE, in consideration of the extensions of credit to be made to the Pledgor and other benefits accruing to the Pledgor, the receipt and sufficiency of which are hereby acknowledged, the Pledgor hereby makes the following representations and warranties to the Collateral Agent for the benefit of the Secured Creditors and hereby covenants and agrees with the Collateral Agent for the benefit of the Secured Creditors as follows: ARTICLE I SECURITY INTERESTS Section 1.1. Grant of Security Interests. (a) As security for the --------------------------- prompt and complete payment and performance when due of all of the Obligations, the Pledgor does hereby collaterally assign and transfer unto the Collateral Agent, and does hereby grant to the Collateral Agent for the benefit of the Secured Creditors, a continuing security interest of first priority (subject to Liens evidenced by Permitted Filings and other Permitted Liens) in, all of the right, title and interest of the Pledgor in, to and under all of the following, whether now existing or hereafter from time to time acquired: (i) each and every Receivable, (ii) all Contracts, together with all Contract Rights arising thereunder, (iii) all Inventory, (iv) the Cash Collateral Account established for the Pledgor and all monies, securities and instruments deposited or required to be deposited in such Cash Collateral Account, (v) all Equipment, (vi) all Marks, together with the registrations and right to all renewals thereof, and the goodwill of the business of the Pledgor Page 3 symbolized by the Marks, (vii) all Patents and Copyrights, and all reissues, renewals or extensions thereof, (viii) all computer programs of the Pledgor and all intellectual property rights therein and all other proprietary information of the Pledgor, including, but not limited to, Trade Secrets, (ix) all other Goods, General Intangibles, Chattel Paper, Documents and Instruments (other than the Pledged Securities), and (x) all Proceeds and products of any and all of the foregoing (all of the above, collectively, the "Collateral"). (b) The security interests of the Collateral Agent under this Agreement extend to all Collateral of the kind which is the subject of this Agreement which the Pledgor may acquire at any time during the continuation of this Agreement. Section 1.2. Power of Attorney. The Pledgor hereby constitutes and ----------------- appoints the Collateral Agent its true and lawful attorney, irrevocably, with full power after the occurrence of and during the continuance of an Event of Default (in the name of the Pledgor or as otherwise provided herein), in the Collateral Agent's reasonable discretion, to take any action and to execute any instrument which the Collateral Agent may reasonably deem necessary or advisable to accomplish the purposes of this Agreement, which appointment as attorney is coupled with an interest. ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS The Pledgor represents, warrants and covenants, as of the date hereof, which representations, warranties and covenants shall survive execution and delivery of this Agreement, as follows: Section 2.1. Necessary Filings. All filings, registrations and ----------------- recordings necessary or appropriate to create, preserve, protect and perfect the security interest granted by the Pledgor to the Collateral Agent hereby in respect of the Collateral, to the knowledge of the Pledgor, have been filed or concurrently herewith are being filed and the security interest granted to the Collateral Agent pursuant to this Agreement in and to Collateral constitutes or shall constitute upon the appropriate filing a perfected security interest therein prior to the rights of all other Persons therein and subject to no other Liens (except that the Collateral may be subject to the security interests evidenced by the financing statements disclosed on Schedule A hereto, but only ---------- to the respective date, if any, set forth on Schedule A (the "Permitted ---------- Filings") and to any other Page 4 Permitted Liens, and is or shall be entitled to all the rights, priorities and benefits afforded by the Uniform Commercial Code to the extent complied with or other relevant law as enacted in any relevant jurisdiction to perfected security interests. Section 2.2. No Liens. The Pledgor is, and as to Collateral acquired -------- by it from time to time after the date hereof the Pledgor will be, the owner of all Collateral free from any Lien, security interest, encumbrance or other right, title or interest of any Person (other than Liens created hereby, Permitted Liens or Liens evidenced by the Permitted Filings), and the Pledgor shall use its good faith efforts to defend the Collateral against all claims and demands of all Persons at any time claiming the same or any interest therein adverse to the Collateral Agent. Section 2.3. Other Financing Statements. As of the date hereof, -------------------------- there is no financing statement (or similar statement or instrument of registration under the law of any jurisdiction) on file or of record in any relevant jurisdiction covering or purporting to cover any interest of any kind in the Collateral except as disclosed in Schedule A hereto and as may be filed ---------- in connection with Permitted Liens and so long as any Commitment has not been terminated or any Letter of Credit or Note remains outstanding or any of the Obligations remain unpaid or any Interest Rate Protection or Other Hedging Agreement remains in effect or any obligations are owed with respect thereto, the Pledgor shall not execute or authorize to be filed in any public office any financing statement (or similar statement or instrument of registration under the law of any jurisdiction) or statements relating to the Collateral, except financing statements filed or to be filed in respect of and covering the security interests granted hereby by the Pledgor or in respect of the Permitted Liens. Section 2.4. Chief Executive Office; Records. As of the date hereof, ------------------------------- the chief executive office of the Pledgor is located at the location indicated on Schedule B hereto. The Pledgor will not move its chief executive office ---------- except to such new location as the Pledgor may establish in accordance with the last sentence of this Section 2.4. The originals of all documents evidencing all Receivables and Contract Rights and Trade Secrets of the Pledgor and the only original books of account and records of the Pledgor relating thereto are, and will continue to be, kept at the chief executive office of the Pledgor, at such other locations shown on Schedule C hereto or at such new locations as the ---------- Pledgor may establish in accordance with the last sentence of this Section 2.4. All Receivables and Contract Rights of the Pledgor are, and will continue to be, maintained at, and controlled and directed (including, without Page 5 limitation, for general accounting purposes) from, the office locations described above. The Pledgor will not establish a new location for such offices until (i) it shall have given to the Collateral Agent not less than 30 days' prior written notice of its intention so to do, clearly describing such new location and providing such other information in connection therewith as the Collateral Agent may reasonably request, (ii) with respect to such new location, it shall have taken all action to maintain the security interest of the Collateral Agent in the Collateral intended to be granted and perfected hereby at all times fully perfected and in full force and effect, and (iii) the Collateral Agent shall have received reasonably satisfactory evidence that all other actions (including, without limitation, the payment of all filing fees and taxes, if any, payable in connection with such filings) have been taken, in order to perfect (and maintain the perfection and priority of) the security interest granted hereby. Section 2.5. Location of Inventory and Equipment. All Inventory and ----------------------------------- Equipment held on the date hereof by the Pledgor is located at one of the locations shown on Schedule D hereto. The Pledgor agrees that all Inventory and ---------- Equipment now held or subsequently acquired by it shall be kept at (or shall be in transport to) one of the locations shown on Schedule D hereto or such new ---------- location as the Pledgor may establish in accordance with the last sentence of this Section 2.5. The Pledgor shall not establish a new location for Inventory and Equipment until (i) it shall have given to the Collateral Agent not less than 30 days' prior written notice of its intention so to do, clearly describing such new location and providing such other information in connection therewith as the Collateral Agent may request, (ii) with respect to such new location, it shall have taken all action satisfactory to the Collateral Agent to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect, and (iii) the Collateral Agent shall have received evidence that all other actions (including, without limitation, the payment of all filing fees and taxes, if any, payable in connection with such filings) have reasonably been taken, in order to perfect (and maintain the perfection and priority of) the security interest granted hereby. Section 2.6. Recourse. This Agreement is made with full recourse to -------- the Pledgor and pursuant to and upon all the warranties, representations, covenants and agreements on the part of the Pledgor contained herein, in the other Credit Documents, in the Interest Rate Protection or Other Hedging Agreements and otherwise in writing in connection herewith or therewith. Page 6 Section 2.7. Trade Names; Change of Name. The Pledgor does not have --------------------------- or operate in any jurisdiction under, or in the preceding 12 months has not had or has not operated in any jurisdiction under, any trade names, fictitious names or other names (including, without limitation, any names of divisions or operations) except its legal name and such other trade, fictitious or other names as are listed on Schedule E hereto. The Pledgor shall not change its ---------- legal name or assume or operate in any jurisdiction under any trade, fictitious or other name in any manner which might make any financing statement or continuation statement filed in connection therewith seriously misleading within the meaning of Section 9-402(7) of the UCC except those names listed on Schedule -------- E hereto and new names (including, without limitation, any names of divisions or - - operations) established in accordance with the last sentence of this Section 2.7. The Pledgor shall not assume or operate in any jurisdiction under any new trade, fictitious or other name that would make any financing statement or continuation statement filed in connection therewith, seriously misleading within the meaning of Section 9-402(7) of the UCC until (i) it shall have given to the Collateral Agent not less than 30 days' prior written notice of its intention so to do, clearly describing such new name and the jurisdictions in which such new name shall be used and providing such other information in connection therewith as the Collateral Agent may reasonably request and (ii) with respect to such new name, it shall have taken all reasonable action to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect. ARTICLE III SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS Section 3.1. Additional Representations and Warranties. As of the ----------------------------------------- time when each of its Receivables arises, the Pledgor shall be deemed to have represented and warranted that such Receivable, and all records, papers and documents relating thereto (if any) are genuine and in all material respects what they purport to be, and that all papers and documents (if any) relating thereto to the actual knowledge of the Pledgor (i) will represent the genuine, legal, valid and binding obligation of the account debtor evidencing indebtedness unpaid and owed by the respective account debtor arising out of the performance of labor or services or the sale or lease and delivery of the merchandise listed therein, or both, (ii) will be the only original writings evidencing and embodying such obligation of the account debtor named therein (other than copies Page 7 created for general accounting purposes), (iii) will evidence true and valid obligations, enforceable in accordance with their respective terms and (iv) will be in compliance and will conform in each case in all material respects with all applicable federal, state and local laws and applicable laws of any relevant foreign jurisdiction. Section 3.2. Maintenance of Records. The Pledgor will keep and ---------------------- maintain at its own cost and expense satisfactory and complete records of its Receivables and Contracts, including, but not limited to, the originals or copies of all documentation (including each Contract) with respect thereto, records of all payments received, all credits granted thereon, all merchandise returned and all other dealings therewith, and the Pledgor will make the same available on the Pledgor's premises to the Collateral Agent for inspection, at the Pledgor's own cost and expense, at any and all reasonable times; provided, -------- however, if no Event of Default has occurred and is then continuing, Collateral - ------- Agent shall give the Pledgor reasonable prior written notice of any such inspection. Upon the occurrence and during the continuance of an Event of Default and upon the reasonable request of the Collateral Agent, the Pledgor shall, at its own cost and expense, deliver all tangible evidence of its Receivables and Contract Rights (including, without limitation, all documents evidencing the Receivables and all Contracts) and such books and records to the Collateral Agent or to its representatives (copies of which evidence and books and records may be retained by the Pledgor). Upon the occurrence and during the continuance of an Event of Default and the delivery by the Collateral Agent of notice to the Pledgor in accordance with Article X of the Credit Agreement, if the Collateral Agent so directs, the Pledgor shall legend, in form and manner reasonably satisfactory to the Collateral Agent, its Receivables and the Contracts, as well as all books, records and documents of the Pledgor evidencing or pertaining to such Receivables and Contracts with an appropriate reference to the fact that such Receivables and Contracts have been assigned to the Collateral Agent and that the Collateral Agent has a security interest therein. Section 3.3. Direction to Account Debtors; Contracting Parties; etc. ------------------------------------------------------ Upon the occurrence and during the continuance of an Event of Default and delivery of notice to the Pledgor in accordance with Article X of the Credit Agreement, and if the Collateral Agent so directs the Pledgor, to the extent permitted by applicable law, the Pledgor agrees (x) to cause all payments on account of the Receivables and Contracts to be made directly to the Cash Collateral Account, (y) that the Collateral Agent may, at its option, directly notify the obligors with respect to any Receivables and/or under any Contracts to make payments with Page 8 respect thereto as provided in preceding clause (x), and (z) that the Collateral Agent may enforce collection of any such Receivables and Contracts and may adjust, settle or compromise the amount of payment thereof, in the same manner and to the same extent as the Pledgor. Without notice to or assent by the Pledgor, the Collateral Agent may apply any or all amounts then in, or thereafter deposited in, the Cash Collateral Account which application shall be effected in the manner provided in Section 7.4 of this Agreement. The reasonable costs and expenses (including reasonable attorneys' fees) of collection, whether incurred by the Pledgor or the Collateral Agent, shall be borne by the Pledgor. Section 3.4. Modification of Terms; etc. Except as otherwise --------------------------- provided in the Credit Agreement, the Pledgor shall not rescind or cancel any indebtedness evidenced by any Receivable or under any Contract, or modify any term relating to such indebtedness or make any adjustment with respect thereto, or extend or renew the same, or compromise or settle any material dispute, claim, suit or legal proceeding relating thereto, or sell any Receivable or Contract, or interest therein, without the prior written consent of the Collateral Agent (not to be unreasonably withheld), except as permitted by Section 3.5. Except as otherwise provided in the Credit Agreement, the Pledgor will duly fulfill all obligations on its part to be fulfilled under or in connection with the Receivables and Contracts and will do nothing to impair in any material respect the rights of the Collateral Agent in the Receivables or Contracts. Section 3.5. Collection. The Pledgor shall endeavor to cause to be ---------- collected from the account debtor named in each of its Receivables or obligor under any of its Contract, as and when due (including, without limitation, amounts which are delinquent, such amounts to be collected in accordance with generally accepted lawful collection procedures) any and all amounts owing under or on account of such Receivable or Contract, and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Receivable or under such Contract, except that, unless an Event of Default has occurred and is continuing and the Collateral Agent has delivered notice to the Pledgor in accordance with Article X of the Credit Agreement, the Pledgor may allow in the ordinary course of business as adjustments to amounts owing under its Receivables and Contracts (i) an extension or renewal of the time or times of payment, or settlement for less than the total unpaid balance, as the Pledgor finds appropriate in accordance with sound business judgment and (ii) a refund or credit due as a result of returned or damaged merchandise or improperly performed services. The reasonable costs and expenses (including, without limitation, reasonable attorneys' fees) of collection, whether incurred by Page 9 the Pledgor or the Collateral Agent, shall be borne by the Pledgor. Section 3.6. Instruments. If the Pledgor owns or acquires any ----------- Instrument constituting Collateral in an amount in excess of $250,000, the Pledgor will within ten days notify the Collateral Agent thereof, and upon request by the Collateral Agent will promptly deliver such Instrument to the Collateral Agent appropriately endorsed to the order of the Collateral Agent as further security hereunder. Section 3.7. Further Actions. The Pledgor will, at its own expense, --------------- make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take such further steps relating to its Receivables, Contracts, Instruments and other property or rights covered by the security interest hereby granted, as the Collateral Agent may reasonably require. ARTICLE IV SPECIAL PROVISIONS CONCERNING MARKS Section 4.1. Additional Representations and Warranties. The Pledgor ----------------------------------------- represents and warrants that, as of the date hereof, it is the true and lawful exclusive owner of its Marks listed in Schedule F hereto and that said listed ---------- Marks include all the United States federal registrations or applications registered in the United States Patent and Trademark Office. The Pledgor represents and warrants that, to the best of its knowledge, it owns or is licensed to use or is not prohibited from using all Marks that it uses. The Pledgor further warrants that it is aware of no third party claim that any aspect of the Pledgor's present or contemplated business operations infringes or will infringe any Mark. The Pledgor represents and warrants that it is the owner of record of all United States registrations and applications listed in Schedule F hereto and that said registrations are valid, subsisting, have not - ---------- been cancelled and that the Pledgor is not aware of any third-party claim that any of said registrations is invalid or unenforceable. The Pledgor hereby grants to the Collateral Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of an Event of Default and delivery of notice to the Pledgor in accordance with Article X of the Credit Agreement, any document which may be required by the United States Patent and Trademark Office in order to effect an absolute assignment of all right, Page 10 title and interest in each Mark and associated goodwill, and record the same. Section 4.2. Licenses and Assignments. Other than the license ------------------------ agreements listed on Schedule G hereto and any extensions or renewals thereof, ---------- the Pledgor hereby agrees not to divest itself of any right under any Significant Mark absent prior written consent of the Collateral Agent, which consent shall not be unreasonably withheld. Section 4.3. Infringements. The Pledgor agrees, promptly upon ------------- learning thereof, to notify the Collateral Agent in writing of the name and address of, and to furnish such pertinent information that may be available with respect to, any party who may be infringing or otherwise violating any of the Pledgor's rights in and to any Significant Mark, or with respect to any party claiming that the Pledgor's use of any Significant Mark violates any property right of that party, in each case to the extent that the Pledgor reasonably believes that such infringement or violation is material to its business. The Pledgor further agrees, if consistent with good business practice and unless otherwise agreed by the Collateral Agent, diligently to prosecute any Person infringing any Significant Mark to the extent that the Pledgor reasonably believes that such infringement is material to its business. Section 4.4. Preservation of Marks. The Pledgor agrees to use its --------------------- Significant Marks in interstate commerce during the time in which this Agreement is in effect, sufficiently to preserve such Significant Marks as trademarks or service marks registered under the laws of the United States. Section 4.5. Maintenance of Registration. The Pledgor shall, at its --------------------------- own expense, diligently process all documents required by the Trademark Act of 1946, 15 U.S.C. (S)(S) 1051 et seq. to maintain trademark registration, -- ---- including but not limited to affidavits of use and applications for renewals of registration in the United States Patent and Trademark Office for all of its Significant Marks pursuant to 15 U.S.C. (S)(S) 1058(a), 1059 and 1065, and shall pay all fees and disbursements in connection therewith and shall not abandon any such filing of affidavit of use or any such application of renewal prior to the exhaustion of all reasonable administrative and judicial remedies without the prior written consent of the Collateral Agent, which consent shall not be unreasonably withheld. Section 4.6. Future Registered Marks. If any Mark registration ----------------------- issues hereafter to the Pledgor as a result of any application now or hereafter pending before the United States Patent and Trademark Office, within thirty (30) days of receipt Page 11 of such certificate the Pledgor shall deliver a copy of such certificate, and a grant of security interest in such mark to the Collateral Agent, confirming the grant thereof hereunder, the form of such confirmatory grant to be substantially the same as the form hereof. Section 4.7. Remedies. If an Event of Default shall occur and be -------- continuing, the Collateral Agent may, upon delivery to the Pledgor of written notice in accordance with Article X of the Credit Agreement, take any or all of the following actions: (i) declare the entire right, title and interest of the Pledgor in and to each of the Marks and the goodwill of the business associated therewith, together with all trademark rights and rights of protection to the same, vested, in which event such rights, title and interest shall immediately vest, in the Collateral Agent for the benefit of the Secured Creditors, in which case the Collateral Agent shall be entitled to exercise the power of attorney referred to in Section 4.1 to execute, cause to be acknowledged and notarized and record said absolute assignment with the applicable agency; (ii) take and use or sell the Marks and the goodwill of the Pledgor's business symbolized by the Marks and the right to carry on the business and use the assets of the Pledgor in connection with which the Marks have been used; and (iii) direct the Pledgor to refrain, in which event the Pledgor shall refrain, from using the Marks in any manner whatsoever, directly or indirectly, and, if requested by the Collateral Agent, change the Pledgor's corporate name to eliminate therefrom any use of any Mark and execute such other and further documents that the Collateral Agent may request to further confirm this and to transfer ownership of the Marks and registrations and any pending trademark application in the United States Patent and Trademark Office or any equivalent government agency or office in any foreign jurisdiction to the Collateral Agent. ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS AND COPYRIGHTS Section 5.1. Additional Representations and Warranties. The Pledgor ----------------------------------------- represents and warrants that to the best of its knowledge, as of the date hereof, it is the true and lawful exclusive owner of all rights in its Patents listed in Schedule H hereto and in the Copyrights listed in Schedule I hereto, ---------- ---------- that said Patents include all the United States patents and applications for United States patents that the Pledgor now owns and that said Copyrights constitute all the United States Copyrights registered with the United States Copyright Office and Page 12 applications for United States copyrights that the Pledgor now owns. The Pledgor represents and warrants that to the best of its knowledge, as of the date hereof, it owns or is licensed to practice under all Patents and Copyrights that it now uses or practices under. The Pledgor further warrants that it is aware of no third party claim that any aspect of the Pledgor's present or contemplated business operations infringes or will infringe any Patent or any Copyright. The Pledgor hereby grants to the Collateral Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of any Event of Default and delivery of notice to the Pledgor in accordance with Article X of the Credit Agreement, any document which may be required by the United States Patent and Trademark Office or the United States Copyright Office in order to effect an absolute assignment of all right, title and interest in each Patent and Copyright, and record the same. Section 5.2. Licenses and Assignments. Other than the license ------------------------ agreements listed on Schedule F hereto and any extensions or renewals thereof, ---------- the Pledgor hereby agrees not to divest itself of any right under any Significant Patent or Significant Copyright absent prior written consent of the Collateral Agent, which consent shall not be unreasonably withheld. Section 5.3. Infringements. The Pledgor agrees, promptly upon ------------- learning thereof, to furnish the Collateral Agent in writing with all pertinent information available to the Pledgor with respect to any infringement or other violation of the Pledgor's rights in any Significant Patent or Significant Copyright, or with respect to any claim that practice of any Significant Patent or Significant Copyright violates any property right of that party, in each case to the extent that the Pledgor reasonably believes that such infringement or violation is material to its business. The Pledgor further agrees, consistent with good business practice and absent direction of the Collateral Agent to the contrary, diligently to prosecute any Person infringing any Significant Patent or Significant Copyright to the extent that the Pledgor reasonably believes that such infringement is material to its business, which consent shall not be unreasonably withheld. Section 5.4. Maintenance of Patents. At its own expense, the Pledgor ---------------------- shall make timely payment of all post-issuance fees required pursuant to 35 U.S.C. (S) 41 to maintain in force rights under each Significant Patent. Section 5.5. Prosecution of Patent Application. At its own expense, --------------------------------- the Pledgor shall diligently prosecute all applications for Significant Patents listed in Schedule H hereto and shall not abandon any such application prior to ---------- exhaustion of Page 13 all reasonable administrative and judicial remedies, absent written consent of the Collateral Agent, which consent shall not be unreasonably withheld. Section 5.6. Other Patents and Copyrights. Within 30 days of ---------------------------- acquisition of a Patent or Copyright, or of filing of an application for a Patent or Copyright, the Pledgor shall deliver to the Collateral Agent a copy of such Patent or Copyright or such application, as the case may be, with a grant of security as to such Patent or Copyright, as the case may be, confirming the grant thereof hereunder, the form of such confirmatory grant to be substantially the same as the form hereof. Section 5.7. Remedies. If an Event of Default shall occur and be -------- continuing and Collateral Agent has delivered notice to the Pledgor in accordance with Article X of the Credit Agreement, the Collateral Agent may by written notice to the Pledgor, take any or all of the following actions: (i) declare the entire right, title, and interest of the Pledgor in each of its Patents and Copyrights vested, in which event such right, title, and interest shall immediately vest in the Collateral Agent for the benefit of the Secured Creditors, in which case the Collateral Agent shall be entitled to exercise the power of attorney referred to in Section 5.1 to execute, cause to be acknowledged and notarized and record said absolute assignment with the applicable agency; (ii) take and practice or sell the Patents and Copyrights; and (iii) direct the Pledgor to refrain, in which event the Pledgor shall refrain, from practicing the Patents and Copyrights directly or indirectly, and the Pledgor shall execute such other and further documents as the Collateral Agent may request further to confirm this and to transfer ownership of the Patents and Copyrights to the Collateral Agent for the benefit of the Secured Creditors. ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL Section 6.1. Protection of Collateral Agent's Security. The Pledgor ----------------------------------------- will not do anything to impair in any material respect the rights of the Collateral Agent in the Collateral. The Pledgor will at all times keep its Inventory and Equipment insured in favor of the Collateral Agent, at the Pledgor's own expense to the extent and in the manner provided in the Credit Agreement. If the Pledgor shall fail to insure its Inventory and Equipment in accordance with the preceding sentence, or if the Pledgor shall fail to so endorse and deposit all policies with respect thereto, the Collateral Agent shall have the right (but shall be under no obligation), upon prior notice Page 14 to the Pledgor, to procure such insurance and the Pledgor agrees to promptly reimburse the Collateral Agent for all reasonable costs and expenses of procuring such insurance. The Collateral Agent shall, at the time such proceeds of such insurance are distributed to the Secured Creditors, apply such proceeds in accordance with Section 7.4 or as otherwise provided in the Credit Agreement. The Pledgor assumes all liability and responsibility in connection with the Collateral acquired by it and the liability of the Pledgor to pay the Obligations shall in no way be affected or diminished by reason of the fact that such Collateral may be lost, destroyed, stolen, damaged or for any reason whatsoever unavailable to the Pledgor unless such loss or damage is finally judicially determined to have been incurred by reason of the gross negligence or willful misconduct of any Secured Creditor or any agent of any Secured Creditor or the failure of a Secured Creditor, in exercising its remedies hereunder, to act in a commercially reasonable manner. Section 6.2. Warehouse Receipts Non-negotiable. The Pledgor agrees --------------------------------- that if any warehouse receipt or receipt in the nature of a warehouse receipt is issued with respect to any of its Inventory, such warehouse receipt or receipt in the nature thereof shall not be "negotiable" (as such term is used in Section 7-104 of the Uniform Commercial Code as in effect in any relevant jurisdiction or under other relevant law). Section 6.3. Further Actions. The Pledgor will, at its own expense, --------------- make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such lists, descriptions and designations of its Collateral, warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take such further steps relating to the Collateral and other property or rights covered by the security interest hereby granted, which the Collateral Agent deems reasonably appropriate or advisable to perfect, preserve or protect its security interest in the Collateral in accordance with the terms hereof. Section 6.4. Financing Statements. The Pledgor agrees to execute and -------------------- deliver to the Collateral Agent such financing statements, in form reasonably acceptable to the Collateral Agent, as the Collateral Agent may from time to time reasonably request or as are necessary in the reasonable opinion of the Collateral Agent to establish and maintain a valid, enforceable, first priority perfected security interest in the Collateral as provided herein and the other rights and security contemplated hereby all in accordance with the Uniform Commercial Code as Page 15 enacted in any and all applicable jurisdictions or any other applicable law. The Pledgor will pay any applicable filing fees, recordation taxes and related expenses. The Pledgor authorizes the Collateral Agent to file any such financing statements without the signature of the Pledgor where permitted by law. ARTICLE VII REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT Section 7.1. Remedies; Obtaining the Collateral Upon Default. The ----------------------------------------------- Pledgor agrees that, if any Event of Default shall have occurred and be continuing and the Collateral Agent shall have delivered to the Pledgor notice in accordance with Article X of the Credit Agreement, then and in every such case, subject to any mandatory requirements of applicable law then in effect, the Collateral Agent, in addition to any rights now or hereafter existing under applicable law, shall have all rights as a secured creditor under the Uniform Commercial Code in all applicable jurisdictions and may also (subject to laws and regulations governing the national security of the United States): (a) personally, or by agents or attorneys, immediately retake possession of the Collateral or any part thereof, from the Pledgor or any other Person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon the Pledgor's premises where any of the Collateral is located and remove the same and use in connection with such removal any and all services, supplies, aids and other facilities of the Pledgor; possession of machinery shall, however, be subject to the terms of the Location Leases; and (b) instruct the obligor or obligors on any agreement, instrument or other obligation (including, without limitation, the Receivables and the Contracts) constituting the Collateral to make any payment required by the terms of such agreement, instrument or other obligation directly to the Collateral Agent and may exercise any and all remedies of the Pledgor in respect of such Collateral; and (c) withdraw all monies, securities and instruments in the Cash Collateral Account for application to the Obligations in accordance with Section 7.4; and (d) sell, assign or otherwise liquidate, or direct the Pledgor to sell, assign or otherwise liquidate, any or all of its Collateral or any part thereof, and take possession of the proceeds of any such sale or liquidation; and Page 16 (e) take possession of the Collateral or any part thereof, by directing the Pledgor in writing to deliver the same to the Collateral Agent at any commercially reasonable place or places designated by the Collateral Agent, in which event the Pledgor shall at its own expense: (i) forthwith cause the Collateral pledged by it to be moved to the place or places so designated by the Collateral Agent and there delivered to the Collateral Agent, and (ii) store and keep any Collateral so delivered to the Collateral Agent at such place or places pending further action by the Collateral Agent as provided in Section 7.2, and (iii) while the Collateral shall be so stored and kept, provide such guards and maintenance services as shall be necessary to protect the same and to preserve and maintain them in good condition; and (f) license or sublicense (to the extent not in violation of the license), whether on an exclusive or nonexclusive basis, any Marks, Patents or Copyrights included in the Collateral for such term and on such conditions and in such manner as the Collateral Agent shall in its commercially reasonable judgment determine; it being understood that the Pledgor's obligation so to deliver the Collateral is of the essence of this Agreement and that, accordingly, upon application to a court of equity having jurisdiction, the Collateral Agent shall be entitled to a decree requiring specific performance by the Pledgor of said obligation. Section 7.2. Remedies; Disposition of the Collateral. Any Collateral --------------------------------------- repossessed by the Collateral Agent under or pursuant to Section 7.1 and any other Collateral whether or not so repossessed by the Collateral Agent, may be sold, assigned, leased or otherwise disposed of under one or more contracts or as an entirety, and without the necessity of gathering at the place of sale the property to be sold, and in general in such manner, at such time or times, at such place or places and on such terms as the Collateral Agent may, in compliance with any mandatory requirements of applicable law, determine; provided that such terms shall be commercially reasonable. Any of the Collateral may be sold, leased or otherwise disposed of, in the condition in which the same existed when taken by the Collateral Agent or after any commercially reasonable overhaul or repair made by or at the direction of the Collateral Agent. Any such disposition which shall be a private sale or other private proceedings permitted by Page 17 such requirements shall be made upon not less than 10 days' written notice to the Pledgor specifying the time at which such disposition is to be made and the intended sale price or other consideration therefor, and shall be subject, for the 10 days after the giving of such notice, to the right of the Pledgor or any nominee of the Pledgor to acquire the Collateral involved at a price or for such other consideration at least equal to the intended sale price or other consideration so reasonably specified. Any such disposition which shall be a public sale permitted by such requirements shall be made upon not less than 10 days' written notice to the Pledgor specifying the time and place of such sale and, in the absence of applicable requirements of law, shall be by public auction (which may, at the Collateral Agent's option, be subject to reserve), after publication of notice of such auction not less than 10 days prior thereto in two newspapers in general circulation in the City of New York. To the extent permitted by any such requirement of law, the Collateral Agent and the Secured Creditors may bid for and become the purchaser of the Collateral or any item thereof, offered for sale in accordance with this Section without accountability to the Pledgor. If, under mandatory requirements of applicable law, the Collateral Agent shall be required to make disposition of the Collateral within a period of time which does not permit the giving of notice to the Pledgor as hereinabove specified, the Collateral Agent need give the Pledgor only such notice of disposition as shall be reasonably practicable in view of such mandatory requirements of applicable law. The Pledgor agrees to do or cause to be done all such other acts and things as may be reasonably necessary to make such sale or sales of all or any portion of the Collateral valid and binding and in compliance with any and all applicable laws, regulations, orders, writs, injunctions, decrees or awards of any and all courts, arbitrators or governmental instrumentalities, domestic or foreign, having jurisdiction over any such sale or sales, all at the Pledgor's reasonable expense. Section 7.3. Waiver of Claims. Except as otherwise provided in this ---------------- Agreement, THE PLEDGOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH PLEDGOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and the Pledgor hereby further waives, to the extent permitted by law: (a) all damages occasioned by such taking of possession except any damages which are the direct result of the Collateral Agent's gross negligence or willful Page 18 misconduct or failure to act, in exercising its remedies hereunder, in a commercially reasonable manner; (b) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Collateral Agent's rights hereunder; and (c) all rights of redemption, appraisement, valuation, stay, extension or moratorium now or hereafter in force under any applicable law in order to prevent or delay the enforcement of this Agreement or the absolute sale of the Collateral or any portion thereof, and the Pledgor, for itself and all who may claim under it, insofar as it or they now or hereafter lawfully may, hereby waives the benefit of all such laws unless such action or threatened action is not commercially reasonable. Any sale of, or the grant of options to purchase, or any other realization upon, any Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of the Pledgor therein and thereto, and shall be a perpetual bar both at law and in equity against the Pledgor and against any and all Persons claiming or attempting to claim the Collateral so sold, optioned or realized upon, or any part thereof, from, through and under the Pledgor other than any Collateral remaining after payment in full of the Obligations. Section 7.4. Application of Proceeds. (a) All moneys collected by ----------------------- the Collateral Agent (or, to the extent the Pledge Agreement or the Mortgage to which the Pledgor is a party requires proceeds of Collateral under such agreement to be applied in accordance with the provisions of this Agreement, the Pledgee or Mortgagee under such other agreement) upon any sale or other disposition of the Collateral, together with all other moneys received by the Collateral Agent hereunder, shall be applied as follows: (i) first, to the payment of all amounts owing the Collateral Agent of the type described in clauses (iii) and (iv) of the definition of "Obligations"; (ii) second, to the extent proceeds remain after the application pursuant to the preceding clause (i), an amount equal to the outstanding Primary Obligations shall be paid to the Secured Creditors as provided in Section 7.4(f), with each Secured Creditor receiving an amount equal to such outstanding Primary Obligations or, if the proceeds are insufficient to pay in full all such Primary Obligations, its Pro Rata Share of the amount remaining to be distributed; Page 19 (iii) third, to the extent proceeds remain after the application pursuant to the preceding clauses (i) and (ii), an amount equal to the outstanding Secondary Obligations shall be paid to the Secured Creditors as provided in Section 7.4(f), with each Secured Creditor receiving an amount equal to its outstanding Secondary Obligations or, if the proceeds are insufficient to pay in full all such Secondary Obligations, its Pro Rata Share of the amount remaining to be distributed; and (iv) fourth, to the extent proceeds remain after the application pursuant to the preceding clauses (i) through (iii), inclusive, and following the termination of this Agreement pursuant to Section 10.9(a) hereof, to the Pledgor or to whomever may be lawfully entitled to receive such surplus. (b) For purposes of this Agreement (x) "Pro Rata Share" shall mean, when calculating a Secured Creditor's portion of any distribution or amount, that amount (expressed as a percentage) equal to a fraction the numerator of which is the then unpaid amount of such Secured Creditor's Primary Obligations or Secondary Obligations, as the case may be, and the denominator of which is the then outstanding amount of all Primary Obligations or Secondary Obligations, as the case may be, (y) "Primary Obligations" shall mean (i) in the case of the Credit Agreement Obligations, all principal of, and interest on, all Loans, all Unpaid Drawings theretofore made (together with all interest accrued thereon), and the aggregate Stated Amounts of all Letters of Credit issued (or deemed issued) under the Credit Agreement, and all Fees and (ii) in the case of the Other Obligations, all amounts due under the Interest Rate Protection or Other Hedging Agreements (other than indemnities, fees (including, without limitation, reasonable attorneys' fees) and similar obligations and liabilities) and (z) "Secondary Obligations" shall mean all Obligations other than Primary Obligations. (c) When payments to Secured Creditors are based upon their respective Pro Rata Shares, the amounts received by such Secured Creditors hereunder shall be applied (for purposes of making determinations under this Section 7.4 only) (i) first, to their Primary Obligations and (ii) second, to their Secondary Obligations. If any payment to any Secured Creditor of its Pro Rata Share of any distribution would result in overpayment to such Secured Creditor, such excess amount shall instead be immediately distributed in respect of the unpaid Primary Obligations or Secondary Obligations, as the case may be, of the other Secured Creditors, with each Secured Creditor whose Primary Obligations or Secondary Obligations, as the case may be, have Page 20 not been paid in full to receive an amount equal to such excess amount multiplied by a fraction the numerator of which is the unpaid Primary Obligations or Secondary Obligations, as the case may be, of such Secured Creditor and the denominator of which is the unpaid Primary Obligations or Secondary Obligations, as the case may be, of all Secured Creditors entitled to such distribution. (d) Each of the Secured Creditors agrees and acknowledges that if the Bank Creditors are to receive a distribution on account of undrawn amounts with respect to Letters of Credit issued (or deemed issued) under the Credit Agreement (which shall only occur after all outstanding Loans and Unpaid Drawings with respect to such Letters of Credit have been paid in full), such amounts shall be paid to the Administrative Agent under the Credit Agreement and held by it, for the equal and ratable benefit of the Bank Creditors, as cash security for the repayment of Obligations owing to the Bank Creditors as such. If any amounts are held as cash security pursuant to the immediately preceding sentence, then upon the termination of all outstanding Letters of Credit, and after the application of all such cash security to the repayment of all Obligations owing to the Bank Creditors after giving effect to the termination of all such Letters of Credit, if there remains any excess cash, such excess cash shall be distributed by the Collateral Agent in accordance with Section 7.4(a) hereof. (e) Except as set forth in Section 7.4(d), all payments required to be made hereunder shall be made (x) if to the Bank Creditors, to the Administrative Agent under the Credit Agreement for the account of the Bank Creditors, and (y) if to the Other Creditors, to the trustee, paying agent or other similar representative (each a "Representative") for the Other Creditors or, in the absence of such a Representative, directly to the Other Creditors. (f) For purposes of applying payments received in accordance with this Section 7.4, the Collateral Agent shall be entitled to rely upon (i) the Administrative Agent under the Credit Agreement and (ii) the Representative for the Other Creditors or, in the absence of such a Representative, upon the Other Creditors for a determination (which the Administrative Agent, each Representative for any Secured Creditors and the Secured Creditors agree (or shall agree) to provide upon request of the Collateral Agent) of the outstanding Primary Obligations and Secondary Obligations owed to the Bank Creditors or the Other Creditors, as the case may be. Unless it has actual knowledge (including by way of written notice from a Bank Creditor or an Other Creditor) to the contrary, the Administrative Agent and each Representative, in furnishing information pursuant to the Page 21 preceding sentence, and the Collateral Agent, in acting hereunder, shall be entitled to assume that no Secondary Obligations are outstanding. Unless it has actual knowledge (including by way of written notice from an Other Creditor) to the contrary, the Collateral Agent, in acting hereunder, shall be entitled to assume that no Interest Rate Protection or Other Hedging Agreements are in existence. (g) It is understood and agreed that the Pledgor shall remain liable to the extent of any deficiency between the amount of the proceeds of the Collateral hereunder and the aggregate amount of the sums referred to in clauses (i) through (iii), inclusive, of Section 7.4(a), except to the extent that such proceeds are not applied by the Collateral Agent in accordance with this Agreement and the Credit Agreement. Section 7.5. Remedies Cumulative. Each and every right, power and ------------------- remedy hereby specifically given to the Collateral Agent shall be in addition to every other right, power and remedy specifically given under this Agreement, the Interest Rate Protection or Other Hedging Agreements, the other Credit Documents or now or hereafter existing at law or in equity, or by statute and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time or simultaneously and as often and in such order as may be deemed expedient by the Collateral Agent. All such rights, powers and remedies shall be cumulative and the exercise or the beginning of exercise of one shall not be deemed a waiver of the right to exercise of any other or others. No delay or omission of the Collateral Agent in the exercise of any such right, power or remedy, renewal or extension of any of the Obligations and no course of dealing between the Pledgor and the Collateral Agent or any holder of any of the Obligations shall impair any such right, power or remedy or shall be construed to be a waiver of any Default or Event of Default or an acquiescence therein. No notice to or demand on the Pledgor in any case shall entitle it to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Collateral Agent to any other or further action in any circumstances without notice or demand. In the event that the Collateral Agent shall bring any suit to enforce any of its rights hereunder and shall be entitled to judgment, then in such suit the Collateral Agent may recover expenses, including reasonable attorneys' fees, and the amounts thereof shall be included in such judgment. Section 7.6. Discontinuance of Proceedings. In case the Collateral ----------------------------- Agent shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall Page 22 have been discontinued or abandoned for any reason or shall have been determined adversely to the Collateral Agent, then and in every such case the Pledgor, the Collateral Agent and each holder of any of the Obligations shall be restored to their former positions and rights hereunder with respect to the Collateral subject to the security interest created under this Agreement, and all rights, remedies and powers of the Collateral Agent shall continue as if no such proceeding had been instituted. ARTICLE VIII INDEMNITY Section 8.1. Indemnity. (a) The Pledgor agrees to indemnify, --------- reimburse and hold the Collateral Agent, each Secured Creditor and their respective successors, assigns, employees, agents and servants (hereinafter in this Section 8.1 referred to individually as "Indemnitee," and collectively as "Indemnities") harmless from any and all liabilities, obligations, damages, injuries, penalties, claims, demands, actions, suits, judgments and any and all costs, expenses or disbursements (including reasonable attorneys' fees and expenses) (for the purposes of this Section 8.1 the foregoing are collectively called "expenses") of whatsoever kind and nature imposed on, asserted against or incurred by any of the Indemnities arising out of this Agreement, [any Interest Rate Protection or Other Hedging Agreement,] any other Credit Document or any other document executed in connection herewith and therewith or in any other way connected with the administration of the transactions contemplated hereby and thereby or the enforcement of any of the terms of, or the preservation of any rights under any thereof, or in any way relating to or arising out of the manufacture, ownership, ordering, purchase, delivery, control, acceptance, lease, financing, possession, operation, condition, sale, return or other disposition, or use of the Collateral (including, without limitation, latent or other defects, whether or not discoverable), any contract claim or, to the maximum extent permitted under applicable law, the violation of the laws of any country, state or other governmental body or unit, or any tort (including, without limitation, claims arising or imposed under the doctrine of strict liability, or for or on account of injury to or the death of any Person (including any Indemnitee), or property damage); provided that no Indemnitee shall be indemnified pursuant to this Section 8.1(a) for expenses to the extent finally judicially determined to have been incurred by reason of the gross negligence or willful misconduct of such Indemnitee. The Pledgor agrees that upon written notice by any Indemnitee of the assertion of such a liability, obligation, damage, injury, penalty, claim, demand, action, suit or judgment, the Pledgor Page 23 shall assume full responsibility for the defense thereof. Each Indemnitee agrees to use its best efforts to promptly notify the Pledgor of any such assertion of which such Indemnitee has knowledge. (b) Without limiting the application of Section 8.1(a), the Pledgor agrees to pay, or reimburse the Collateral Agent for any and all reasonable fees, costs and expenses of whatever kind or nature incurred in connection with the creation, preservation or protection of the Collateral Agent's Liens on, and security interest in, the Collateral, including, without limitation, all reasonable fees and taxes in connection with the recording or filing of instruments and documents in public offices, payment or discharge of any taxes or Liens upon or in respect of the Collateral, premiums for insurance with respect to the Collateral and all other fees, costs and expenses in connection with protecting, maintaining or preserving the Collateral and the Collateral Agent's interest therein, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions, suits or proceedings arising out of or relating to the Collateral as set forth herein and in the Credit Agreement. (c) Without limiting the application of Section 8.1(a) or (b), the Pledgor agrees to pay, indemnify and hold each Indemnitee harmless from and against any loss, costs, damages and expenses which such Indemnitee may suffer, expend or incur in consequence of or growing out of any material misrepresentation by the Pledgor in this Agreement, any Interest Rate Protection or Other Hedging Agreement, any other Credit Document or in any writing contemplated by or made or delivered pursuant to or in connection with this Agreement, any Interest Rate Protection or Other Hedging Agreement or any other Credit Document as set forth herein and in the Credit Agreement. (d) If and to the extent that the obligations of the Pledgor under this Section 8.1 are unenforceable for any reason, the Pledgor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. Section 8.2. Indemnity Obligations Secured by Collateral; Survival. ----------------------------------------------------- Any amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement shall constitute Obligations secured by the Collateral. The indemnification obligations of the Pledgor contained in this Article VIII shall continue in full force and effect notwithstanding the full payment of all the Notes issued under the Credit Agreement, the termination of all Interest Rate Protection or Other Hedging Agreements and the payment of all other Obligations and notwithstanding the discharge thereof. Page 24 ARTICLE IX DEFINITIONS The following terms shall have the meanings herein specified. Such definitions shall be equally applicable to the singular and plural forms of the terms defined. "Administrative Agent" shall have the meaning provided in the first paragraph of this Agreement. "Agreement" shall mean this Security Agreement as the same may be modified, supplemented or amended from time to time in accordance with its terms. "Bank Creditor" shall have the meaning provided in the first paragraph of this Agreement. "Banks" shall have the meaning provided in the first WHEREAS clause of this Agreement. "Cash Collateral Account" shall mean a non-interest bearing cash collateral account maintained with __________________ for the benefit of the Secured Creditors. "Chattel Paper" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Class" shall have the meaning provided in Section 10.2 of this Agreement. "Collateral" shall have the meaning provided in Section 1.1(a) of this Agreement. "Contract Rights" shall mean all rights of the Pledgor (including, without limitation, all rights to payment) under each Contract. "Contracts" shall mean all contracts between the Pledgor and one or more additional parties (including, without limitation, (i) each partnership agreement to which the Pledgor is a party and (ii) any Interest Rate Protection or Other Hedging Agreements), but excluding (x) licenses to the extent that the terms thereof prohibit the assignment of, or granting of a security interest in, such licenses and (y) location contracts which have not, with the Collateral Agent's approval, been assigned to the Collateral Agent. Page 25 "Copyrights" shall mean any United States copyright which the Pledgor now or hereafter has registered with the United States Copyright Office, as well as any application for a United States copyright registration now or hereafter made with the United States Copyright Office by the Pledgor. "Credit Agreement" shall have the meaning provided in the first paragraph of this Agreement. "Credit Agreement Obligations" shall have the meaning provided in the definition of "Obligations" in this Article IX. "Default" shall mean any event which, with notice or lapse of time, or both, would constitute an Event of Default. "Documents" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Equipment" shall mean any "equipment," as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by the Pledgor and, in any event, shall include, but shall not be limited to, all machinery, equipment, furnishings and movable trade fixtures now or hereafter owned by the Pledgor and any and all additions, substitutions and replacements of any of the foregoing, wherever located, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto. "Event of Default" shall mean any Event of Default under, and as defined in, the Credit Agreement and shall in any event, without limitation, include any payment default on any of the Obligations, after the expiration of any applicable grace and cure periods. "General Intangibles" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York and shall in any event include all of the Pledgor's claims, rights, powers, privileges, authority, options, security interests, liens and remedies under any partnership agreement to which the Pledgor is a party or with respect to any partnership of which the Pledgor is a partner. "Goods" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Indemnitee" shall have the meaning provided in Section 8.1 of this Agreement. Page 26 "Instrument" shall have the meaning provided in Article 9 of the Uniform Commercial Code as in effect on the date hereof in the State of New York but shall not include any Location Leases. "Interest Rate Protection or Other Hedging Agreements" shall have the meaning provided in the first paragraph of this Agreement. "Inventory" shall mean merchandise, inventory and goods, and all additions, substitutions and replacements thereof, wherever located, together with all goods, supplies, incidentals, packaging materials, labels, materials and any other items used or usable in manufacturing, processing, packaging or shipping same; in all stages of production -- from raw materials through work- in-process to finished goods -- and all products and proceeds of whatever sort and wherever located and any portion thereof which may be returned, rejected, reclaimed or repossessed by the Collateral Agent from the Pledgor's customers, and shall specifically include all "inventory" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by the Pledgor. "Marks" shall mean any trademarks and service marks now held or hereafter acquired by the Pledgor, which are registered in the United States Patent and Trademark Office or in any similar office or agency of the United States or any state thereof or any political subdivision thereof and any application for such trademarks and service marks, as well as any unregistered marks used by the Pledgor in the United States and trade dress including logos, designs, trade names, company names, business names, fictitious business names and other business identifiers in connection with which any of these registered or unregistered marks are used in the United States. "Obligations" shall mean (i) (x) the principal of and interest on the Notes issued, and Loans made, under the Credit Agreement, and all reimbursement obligations and Unpaid Drawings with respect to the Letters of Credit under the Credit Agreement and (y) all other obligations and indebtedness (including, without limitation, indemnities, Fees and interest thereon) of the Pledgor to the Bank Creditors now existing or hereafter incurred under, arising out of, or in connection with the Credit Agreement and the other Credit Documents and the due performance and compliance by the Pledgor with all of the terms, conditions and agreements contained in the Credit Agreement and the other Credit Documents (all such principal, interest, obligations and liabilities being herein collectively called the "Credit Agreement Obligations"); (ii) all obligations and liabilities owing by the Pledgor to the Other Creditors under, or with Page 27 respect to, any Interest Rate Protection or Other Hedging Agreement, whether such Interest Rate Protection or Other Hedging Agreement is now in existence or hereafter arising, and the due performance and compliance by the Pledgor with all of the terms, conditions and agreements contained therein (all such obligations and liabilities described in this clause (ii) being herein collectively called the "Other Obligations"); (iii) any and all sums reasonably advanced by the Collateral Agent in order to preserve the Collateral or preserve its security interest in the Collateral in accordance with the terms hereof and the other Credit Documents; (iv) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities of the Pledgor referred to in clauses (i) and (ii), after an Event of Default shall have occurred and be continuing and the Collateral Agent has given notice under Article X of the Credit Agreement, the commercially reasonable expenses of re- taking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Collateral Agent of its rights hereunder, together with reasonable attorneys' fees and court costs in accordance with the terms hereof and the other Credit Documents; and (v) all amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement under Section 8.1 of this Agreement. It is acknowledged and agreed that the "Obligations" shall include extensions of credit of the types described above, whether outstanding on the date of this Agreement or extended from time to time after the date of this Agreement. "Other Creditors" shall have the meaning provided in the first paragraph of this Agreement. "Other Obligations" shall have the meaning provided in the definition of "Obligations" in this Article IX. "Patents" shall mean any United States patent now or hereafter owned by the Pledgor, as well as any application for a United States patent now or hereafter owned by the Pledgor. "Permitted Filings" shall have the meaning provided in Section 2.1 of this Agreement. "Permitted Liens" shall have the meaning provided in the Credit Agreement. "Pledgor" shall have the meaning provided in the first paragraph of this Agreement. "Primary Obligations" shall have the meaning provided in Section 7.4(b) of this Agreement. Page 28 "Pro Rata Share" shall have the meaning provided in Section 7.4(c) of this Agreement. "Proceeds" shall have the meaning provided in the Uniform Commercial Code as in effect in the State of New York on the date hereof or under other relevant law and, in any event, shall include, but not be limited to, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Collateral Agent or the Pledgor from time to time with respect to any of the Collateral, (ii) any and all payments (in any form whatsoever) made or due and payable to the Pledgor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any governmental authority (or any person acting under color of governmental authority) and (iii) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral. "Receivables" shall mean any "account" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by the Pledgor and, in any event, shall include, but shall not be limited to, all of the Pledgor's rights to payment for goods sold or leased or services performed by the Pledgor, whether now in existence or arising from time to time hereafter, including, without limitation, rights evidenced by an account, note, contract, security agreement, chattel paper, or other evidence of indebtedness or security, together with (i) all security pledged, assigned, hypothecated or granted to or held by the Pledgor to secure the foregoing, (ii) all of the Pledgor's right, title and interest in and to any goods, the sale of which gave rise thereto, (iii) all guarantees, endorsements and indemnifications on, or of, any of the foregoing, (iv) all powers of attorney for the execution of any evidence of indebtedness or security or other writing in connection therewith, (v) all books, records, ledger cards, and invoices relating thereto, (vi) all evidences of the filing of financing statements and other statements and the registration of other instruments in connection therewith and amendments thereto, notices to other creditors or secured parties, and certificates from filing or other registration officers, (vii) all credit information, reports and memoranda relating thereto, and (viii) all other writings related in any way to the foregoing. "Representative" shall have the meaning provided in Section 7.4 of this Agreement. "Required Secured Creditors" shall mean (i) the Required Banks (or, to the extent required by Section 13.12 of the Credit Agreement, all of the Banks) under the Credit Page 29 Agreement so long as any Credit Agreement Obligations remain outstanding and (ii) in any situation not covered by the preceding clause (i), the holders of a majority of the outstanding principal amount of the Other Obligations. "Requisite Creditors" shall have the meaning provided in Section 10.2. "Secondary Obligations" shall have the meaning provided in Section 7.4(b) of this Agreement. "Significant Copyrights" shall mean those Copyrights which the Pledgor believes in its reasonable judgment to be material to its business. "Secured Creditors" shall have the meaning provided in the first paragraph of this Agreement. "Significant Marks" shall mean those Marks which the Pledgor believes in its reasonable judgment to be material to its business. "Significant Patents" shall mean those Patents which the Pledgor believes in its reasonable judgment to be material to its business. "Termination Date" shall have the meaning provided in Section 10.9 of this Agreement. "Trade Secrets" shall mean any material know-how, technology, product formulations, procedures and product and manufacturing specifications or standards now or hereafter utilized in the Pledgor's business. ARTICLE X MISCELLANEOUS Section 10.1. Notices. All such notices and communications hereunder ------- shall be telecopied or delivered by messenger or overnight courier service and all such notices and communications shall, when mailed, telegraphed, telexed, telecopied, or cabled or sent by overnight courier, be effective when delivered to the telegraph company, cable company or overnight courier, as the case may be, or sent by telex or telecopier and when mailed shall be effective three Business Days following deposit in the mail with proper postage, except that notices and communications to the Collateral Agent shall not be effective until received by the Collateral Agent. All notices, Page 30 requests, demands or other communications shall be in writing and addressed as follows: (a) if to the Pledgor, at: Coinmach Corporation 55 Lumber Road Roslyn, New York 11576 Attention: with a copy to: Coinmach Corporation ------------------------- Charlotte, North Carolina Attention: ______________ with a copy to: Anderson Kill & Olick, P.C. 1251 Avenue of the Americas New York, New York 10020-1182 Attention: Ronald S. Brody (b) if to the Collateral Agent: Bankers Trust Company 130 Liberty Street New York, New York 10006 Attention: Thomas P. Prior (c ) if to any Bank Creditor, either (x) to the Administrative Agent, at the address of the Administrative Agent specified in the Credit Agreement or (y) at such address as such Bank Creditor shall have specified in the Credit Agreement; (d) if to any Other Creditor, either (x) to the Representative for the Other Creditors, at such address as such Representative may have provided to the Pledgor and the Collateral Agent from time to time, or (y) directly to the Other Creditors at such address as the Other Creditors shall have specified in writing to the Pledgor and the Collateral Agent; or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. Page 31 Section 10.2. Waiver; Amendment. None of the terms and conditions of ----------------- this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by the Pledgor and the Collateral Agent (with the written consent of the Required Banks, or to the extent required by Section 13.12 of the Credit Agreement, all the Banks); provided, however, that -------- ------- any change, waiver, modification or variance affecting the rights and benefits of a single Class of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall require the written consent of the Requisite Creditors of such affected Class. For the purpose of this Agreement, the term "Class" shall mean each class of Secured Creditors, i.e., whether (y) the Bank Creditors ---- as holders of the Credit Agreement Obligations or (z) the Other Creditors as the holders of the Other Obligations; and the term "Requisite Creditors" of any Class shall mean each of (x) with respect to the Credit Agreement Obligations, the Required Banks and (y) with respect to the Other Obligations, the holders of 51% of all obligations outstanding from time to time under the Interest Rate Protection Agreements or Other Hedging Agreements. Section 10.3. Obligations Absolute. The obligations of the Pledgor -------------------- hereunder shall remain in full force and effect without regard to, and shall not be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of the Pledgor; (b) any exercise or non-exercise, or any waiver of, any right, remedy, power or privilege under or in respect of this Agreement, any other Credit Document [or any Interest Rate Protection or Other Hedging Agreement] except as specifically set forth in a waiver granted pursuant to Section 10.2 hereof; or (c) any amendment to or modification of any Credit Document or any Interest Rate Protection or Other Hedging Agreement or any security for any of the Obligations; whether or not the Pledgor shall have notice or knowledge of any of the foregoing. Section 10.4. Successors and Assigns. This Agreement shall be ---------------------- binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the Collateral Agent, each Secured Creditor and the Pledgor and their respective successors and assigns, provided that the Pledgor may not transfer or assign any or all of its rights or obligations hereunder without the written consent of the Required Secured Creditors and no Secured Creditor shall assign its rights hereunder except in accordance with the Credit Agreement. All agreements, statements, representations and warranties made by the Pledgor herein or in any certificate or other instrument delivered by the Pledgor or on its behalf under this Agreement shall be considered to have been relied upon by the Secured Creditors and shall survive the execution and delivery of this Page 32 Agreement, the other Credit Documents and the Interest Rate Protection or Other Hedging Agreements regardless of any investigation made by the Secured Creditors or on their behalf. Section 10.5. Headings Descriptive. The headings of the several -------------------- sections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. Section 10.6. Severability. Any provision of this 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. SECTION 10.7. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND ------------- OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. Section 10.8. Pledgor's Duties. It is expressly agreed, anything ---------------- herein contained to the contrary notwithstanding, that the Pledgor shall remain liable to perform all of the obligations, if any, assumed by it with respect to the Collateral and the Collateral Agent shall not have any obligations or liabilities with respect to any Collateral by reason of or arising out of this Agreement, nor shall the Collateral Agent be required or obligated in any manner to perform or fulfill any of the obligations of the Pledgor under or with respect to any Collateral except to the extent directly resulting from the Collateral Agent's gross negligence or willful misconduct or failure to act, in exercising its remedies hereunder, in a commercially reasonable manner. Section 10.9. Termination; Release. (a) After the Termination Date, -------------------- this Agreement shall terminate and the Collateral Agent, at the request and expense of the Pledgor, will promptly execute and deliver to the Pledgor a proper instrument or instruments (including Uniform Commercial Code termination statements on form UCC-3) acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to the Pledgor (without recourse and without any representation or warranty) such of the Collateral of the Pledgor as may be in the possession of the Collateral Agent and as has not theretofore been sold or otherwise applied or released pursuant to this Agreement. As used in this Agreement, "Termination Date" shall mean the date upon which the Commitments and all Interest Rate Protection or Other Hedging Agreements have Page 33 been terminated, no Note under the Credit Agreement is outstanding (and all Loans have been repaid in full), all Letters of Credit have been terminated and all Obligations then owing have been paid in full. (b) In the event that any part of the Collateral is sold in connection with a sale permitted by Section 9.02 or in connection with an investment made by the Pledgor in accordance with Section 9.05(j) of the Credit Agreement or is otherwise released at the direction of the Required Banks (or all Banks if required by Section 13.12 of the Credit Agreement) and the proceeds of such sale or sales or from such release are applied in accordance with, and to the extent required by, the provisions of Section 4.02 of the Credit Agreement, to the extent required to be so applied, such Collateral will be sold free and clear of the Liens created by this Agreement and the Collateral Agent, at the request and expense of the Pledgor, will duly assign, transfer and deliver to the Pledgor (without recourse and without any representation or warranty) such of the Collateral as is then being (or has been) so sold or released and as may be in the possession of the Collateral Agent and has not theretofore been released pursuant to this Agreement. (c) At any time that the Pledgor desires that the Collateral Agent take any action to acknowledge or give effect to any release of Collateral pursuant to the foregoing Section 10.9(b), it shall deliver to the Collateral Agent a certificate signed by its chief financial officer stating that the release of the respective Collateral is permitted pursuant to Section 10.9(a) or (b). (d) The Collateral Agent shall have no liability whatsoever to any Secured Creditor as a result of any release of Collateral by it in accordance with this Section 10.9. Section 10.10. Counterparts. This Agreement may be executed in any ------------ number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Pledgor and the Collateral Agent. Section 10.11. The Collateral Agent. The Collateral Agent will hold -------------------- in accordance with this Agreement all items of the Collateral at any time received under this Agreement. It is expressly understood and agreed by the parties hereto and each Secured Creditor, by accepting the benefits of this Agreement acknowledges and agrees that the obligations of the Collateral Agent as holder of the Collateral and interests therein and with Page 34 respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement. The Collateral Agent shall act hereunder on the terms and conditions set forth in Section 12 of the Credit Agreement. Page 35 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. COINMACH CORPORATION, as Pledgor By:/s/ Robert M. Doyle _____________________________ Name: Robert M. Doyle Title: Senior Vice President BANKERS TRUST COMPANY, as Collateral Agent By:/s/ Patricia Hogan _____________________________ Name: Patricia Hogan Title: Vice President SCHEDULE A PERMITTED FILINGS 1. Kwik Wash Laundries L.P. has provided seller financing in connection with six laundromat store locations (three in Austin, three in Dallas and one in Houston, Texas). All such financings are secured by liens on such laundromat stores. 2. Borrower's computer system and related equipment are pledged as security under capital leases pursuant to a rollover agreement with IBM Credit Corporation, Master Agreement Number HR11512, dated August 28, 1995. 3. The Inter-Tel 36 Telephone System including all substitutions, modifications and proceeds thereof are covered by a UCC-1 Financing statement which states that the property rental property and that the UCC-1 was filed only to make the rental a matter of public record. The secured party was Inter-Tel Leasing, Inc. before assigned to Heller Financial, Inc. 4. The Tie Ultracom AT Telephone System including all substitutions, modifications and proceeds thereof are covered by a UCC-1 Financing statement which states that the property rental property and that the UCC-1 was filed only to make the rental a matter of public record. The secured party was Inter-Tel Leasing, Inc. 5. Hudson United Bank, as Secured Party, UCC-1, File Number 94-1030, File Date: April 14, 1994 (Borrower will have this lien removed after the Closing Date) SCHEDULE B CHIEF EXECUTIVE OFFICES 1. 55 Lumber Road Roslyn, New York 11576 2. 521 East Morehead Street Charlotte, North Carolina 28202 SCHEDULE C RECORD LOCATIONS 1. 55 Lumber Road Roslyn, New York 11576 2. 521 East Morehead Street Charlotte, North Carolina 28202 SCHEDULE D LOCATIONS OF INVENTORY AND EQUIPMENT Alabama Arizona Arkansas California Connecticut Delaware District of Columbia Florida Georgia Illinois Indiana Iowa Kansas Kentucky Louisiana Maryland Michigan Minnesota Mississippi Missouri Nebraska New Jersey New York North Carolina Ohio Oklahoma Pennsylvania South Carolina South Dakota Tennessee Texas Virginia West Virginia Wisconsin SCHEDULE E TRADE NAMES, FICTITIOUS NAMES OR OTHER NAMES 1. Coinmach Corporation uses the following names: (a) Hi-Rise Laundry Equipment Company or any variation thereof (b) Allied Laundry Equipment Company or any variation thereof (c) Solon Automated Services, Inc. or any variation thereof (d) Kwik-Wash Laundries, L.P. or any variation thereof 2. The Coinmach Corporation was incorporated in the State of Delaware on January 19, 1995. On January 31, 1995, The Coinmach Corporation purchased all of the partnership interests of Coinmach Industries Co., L.P. and Super Laundry Equipment Co., L.P. from CIC I Acquisition Corp. and Coinmach Holding Corp. Coinmach Corporation is the surviving and renamed corporation resulting from the merger of The Coinmach Corporation with and into Solon Automated Services, Inc. on November 30, 1995. Certain of the names of the foregoing entities may be used or referenced to in the operations of Coinmach Corporation. 3. Coinmach Corporation has the following two subsidiaries: (a) Super Laundry Equipment Corp. which does business as Wasco Laundry Equipment Company and Luca Laundry Equipment Company (b) Grand Wash & Dry Launderette, Inc. SCHEDULE F MARKS 1. The service mark "Flexivend" SCHEDULE G LICENSE AGREEMENTS None. SCHEDULE H PATENTS AND APPLICATIONS None. SCHEDULE I COPYRIGHTS None. ANNEX J to Security Agreement ------------------ ASSIGNMENT OF SECURITY INTEREST IN UNITED STATES TRADEMARKS AND PATENTS --------------------------------------------- FOR GOOD AND VALUABLE CONSIDERATION, receipt and sufficiency of which are hereby acknowledged, Coinmach Corporation, a corporation with principal offices at 55 Lumber Road, Roslyn, New York 11576, ("the Assignor"), hereby assigns and grants to Bankers Trust Company, as Collateral Agent, with principal offices at 130 Liberty Street, New York, New York 10006 (the "Assignee"), a security interest in (i) all of Assignor's right, title and interest in and to the United States trademarks, trademark registrations and trademark applications (the "Marks") set forth on Schedule A attached hereto, (ii) all of Assignor's ---------- right, title and interest in and to the United States patents (the "Patents") set forth on Schedule B attached hereto, in each case together with (iii) all ---------- Proceeds (as such term is defined in the Security Agreement referred to below) and products of the Marks and Patents, (iv) the goodwill of the businesses symbolized by the Marks and (v) all causes of action arising prior to or after the date hereof for infringement of any of the Marks and Patents or unfair competition regarding the same. THIS ASSIGNMENT is made to secure the full and prompt performance and payment of all the Obligations of Assignor, as such term is defined in the Security Agreement between Assignor, Assignee and certain other entities party thereto, dated as of January 8, 1997 (as amended from time to time, the "Security Agreement"). Upon the occurrence of the Termination Date (as defined in the Security Agreement), the Assignee shall, upon such satisfaction, execute, acknowledge, and deliver to Assignor an instrument in writing releasing the security interest in the Marks and Patents acquired under this Assignment. This Assignment has been granted in conjunction with the security interest granted to the Assignee under the Security Agreement. The rights and remedies of the Assignee with respect to the security interest granted herein are without prejudice to, and are in addition to those set forth in the Security Agreement, all terms and provisions of which are incorporated herein by reference. In the event that any provisions of this Assignment are deemed to conflict with the Security Agreement, the provisions of the Security Agreement shall govern. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the 8th day of January, 1997. COINMACH CORPORATION, as Assignor By:__________________________________ Name: Title: BANKERS TRUST COMPANY, as Collateral Agent, Assignee By:__________________________________ Name: Title: -2- STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of January, 1997, before me personally came _________________ who, being by me duly sworn, did state as follows: that he is _______________ of Coinmach Corporation, that he is authorized to execute the foregoing Assignment on behalf of said corporation and that he did so by authority of the Board of Directors of said corporation. _________________________ Notary Public STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of January, 1997, before me personally came _____________________ who, being by me duly sworn, did state as follows: that he is __________________ of Bankers Trust Company, that he is authorized to execute the foregoing Assignment on behalf of said corporation and that he did so by authority of the Board of Directors of said corporation. ____________________________ Notary Public SCHEDULE A ---------- MARK REG. NO. REG. DATE - ---- -------- --------- SCHEDULE B ---------- PATENT PATENT NO. ISSUE DATE - ------ ---------- ---------- ANNEX K to Security Agreement ------------------ ASSIGNMENT OF SECURITY INTEREST IN UNITED STATES COPYRIGHTS WHEREAS, Coinmach Corporation, a Delaware corporation, having its chief executive office at 55 Lumber Road, Roslyn, New York 11576, (the "Assignor") is the owner of all right, title and interest in and to the United States copyrights and associated United States copyright registrations and applications for registration set forth in Schedule A attached hereto; ---------- WHEREAS, BANKERS TRUST COMPANY, as Collateral Agent, having its principal offices at 130 Liberty Plaza, New York, NY 10006 (the "Assignee"), desires to acquire a security interest in, and lien on, said copyrights and copyright registrations and applications therefor and the goodwill of the business symbolized by said copyrights; and WHEREAS, Assignor is willing to assign to the Assignee, and to grant to the Assignee a security interest in and lien upon the copyrights and copyright registrations and applications therefor described above; NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, and subject to the terms and conditions of the Security Agreement, dated as of January 8, 1997, between Assignor, the Assignee and certain other entities party thereto (as amended from time to time, the "Security Agreement"), Assignor hereby assigns to the Assignee, and grants to the Assignee a security interest in and a lien upon, the copyrights and copyright registrations and applications therefor set forth in Schedule A ---------- attached hereto and the goodwill of the business symbolized by said copyrights. This Assignment has been granted in conjunction with the security interest granted to the Assignee under the Security Agreement. The rights and remedies of the Assignee with respect to the security interest granted herein are without prejudice to, and are in addition to those set forth in the Security Agreement, all terms and provisions of which are incorporated herein by reference. In the event that any provisions of this Assignment are deemed to conflict with the Security Agreement, the provisions of the Security Agreement shall govern. Executed at New York, New York, the 8th day of January, 1997. COINMACH CORPORATION, as Assignor By__________________________ Name: Title: BANKERS TRUST COMPANY, as Collateral Agent, Assignee By__________________________ Name: Title: -2- STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of January, 1997 before me personally came _______________, who being duly sworn, did depose and say that he is ___________________ of Coinmach Corporation, that he is authorized to execute the foregoing Assignment on behalf of said corporation and that he did so by authority of the Board of Directors of said corporation. _________________________ Notary Public STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of January, 1997 before me personally came _______________, who being duly sworn, did depose and say that he is ___________________ of Bankers Trust Company, that he is authorized to execute the foregoing Assignment on behalf of said corporation and that he did so by authority of the Board of Directors of said corporation. _________________________ Notary Public SCHEDULE A ---------- U.S. COPYRIGHTS --------------- REGISTRATION PUBLICATION NUMBERS DATE COPYRIGHT TITLE -------------- ---------------- --------------- EX-10.67 17 COLLATERAL ASSIGNMENT OF LEASES EXHIBIT 10.67 COLLATERAL ASSIGNMENT OF LEASES COLLATERAL ASSIGNMENT OF LEASES ("Assignment") dated as of January 8, 1997 by COINMACH CORPORATION, a Delaware corporation ("Assignor") in favor of BANKERS TRUST COMPANY, a New York banking corporation, having an office at 130 Liberty Street, New York, New York 10006, in its capacity as collateral agent (in such capacity and together with any successor in such capacity, the "Collateral Agent") for the Secured Creditors (as hereinafter defined). R E C I T A L S : - - - - - - - - A. Assignor, Coinmach Laundry Corporation, certain subsidiaries of Assignor, the lenders (the "Banks") from time to time party thereto, Bankers Trust Company, as Administrative Agent (together with any successor, the "Administrative Agent"), First Union Corporation, as Syndication Agent (together with any successor, the "Syndication Agent") and Lehman Commercial Paper, Inc., as Documentation Agent (together with any successor, the "Documentation Agent") have entered into a Credit Agreement, dated as of the date hereof, providing for the making of loans and the issuance of and participation in, letters of credit, as contemplated therein (such agreement, as amended, modified, extended, renewed, replaced, restated or supplemented from time to time, and including any agreement extending the maturity of, or restructuring all or any portion of the indebtedness under such agreement or any successor agreement, the "Credit Agreement"). Except as otherwise defined herein, terms used herein and defined in the Credit Agreement shall be used herein as so defined. B. Assignor is, or is the successor in interest to, the lessee under those certain leases (individually, a "Lease"; collectively, the "Leases"), copies of which are attached as Exhibit A hereto, with the --------- respective lessors (individually, a "Lessor"; collectively, the "Lessors") thereto. The Leases pertain to the properties (the "Premises") which are described on Exhibit B hereto. --------- C. Assignor may at any time and from time to time enter into, or guarantee obligations of its Subsidiaries under, one or more Interest Rate Protection or other Hedging Agreement (each as hereinafter defined) with one or more Other Creditors (as hereinafter defined). -2- D. It is a condition to each of the above-described extensions of credit to the Assignor that the Assignor shall have executed and delivered this Assignment. E. This Assignment is made by Assignor in favor of the Collateral Agent for the benefit of (x) the Banks, the Administrative Agent, the Syndication Agent, the Documentation Agent, the Collateral Agent and any other lenders from time to time party to the Credit Agreement (collectively, the "Bank Creditors") and (y) if one or more Banks or any Affiliate of a Bank enters into one or more (i) interest rate protection agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements), (ii) foreign exchange contracts, currency swap agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency values and/or (iii) other types of hedging agreements from time to time (collectively, the "Interest Rate Protection or Other Hedging Agreements"), with, or guaranteed by Assignor, any such Bank or Banks or Affiliate or Affiliates (even if the respective Bank subsequently ceases to be a Bank under the Credit Agreement for any reason) so long as any such Bank or Affiliate participates in the extension of such Interest Rate Protection or Other Hedging Agreement and their subsequent assigns, if any, (collectively, the "Other Creditors"; together with the Bank Creditors, the "Secured Creditors"). This Assignment is given to Collateral Agent to secure the Obligations (as defined in the Security Agreement). A G R E E M E N T : - - - - - - - - - Assignor and Collateral Agent hereby agree as follows: 1. Assignment. Assignor hereby transfers and assigns to ---------- Collateral Agent all of Assignor's right, title and interest, whether now owned or hereafter acquired, in and to each of the Leases. This assignment of the Leases is made as collateral security for the payment and performance of the Secured Obligations. 2. No Assumption of Obligations or Duties of the Assignor. This ------------------------------------------------------ Assignment is an assignment only of all right, title and interest of the Assignor in the Leases, and Assignor covenants and agrees to perform and observe all of all material obligations imposed upon Assignor under the Leases as if this Assignment had not been made. Assignor agrees that the Secured Creditors have not assumed and will not be deemed to have assumed any of the obligations or duties of Assignor under or with -3- respect to the Leases unless and until the Secured Creditors shall have given the parties to the Leases written notice that the Secured Creditors have affirmatively assumed such obligations and duties as the result of an Event of Default under the Credit Agreement or the Leases. 3. Representations, Warranties and Covenants of Assignor. ----------------------------------------------------- Assignor represents, warrants and covenants to Collateral Agent: a. (i) That the copy of the Leases attached hereto as Exhibit A --------- is a true and correct copy thereof as in effect on the date hereof, (ii) that Assignor is the sole owner of the entire leasehold interest in each Lease, free and clear and of all Liens, except for the Liens created in favor of the Collateral Agent pursuant to, or in connection with, the Credit Agreement, (iii) each Lease is valid and enforceable, subject to the effect of this Assignment and bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and similar laws, and has not been altered, modified or amended in any manner, except as shown on Exhibit A, (iv) to Assignor's knowledge, --------- neither Assignor nor the Lessor under any Lease is in default under such Lease nor, to the knowledge of Assignor, has any event occurred (other than pursuant to this Assignment) which with the passage of time or the giving of notice would constitute a default under such Lease and (v) no rent reserved in any Lease has been assigned or prepaid except for prepaid rent for the current month and applicable security deposits. b. Assignor agrees (i) to observe and perform all material obligations imposed upon Assignor as the lessee under each Lease and not to do, or permit to be done, anything to materially impair Assignor's rights thereunder; (ii) not to assign Assignor's interest under any Lease or sublet all or any part of the Premises, (iii) other than upon the expiration of the term of the respective Leases in accordance with their terms, not alter, modify or change the terms of any Lease in any material respect, or cancel or terminate any Lease, or surrender possession of the Premises, or any part thereof, without the prior written consent of Collateral Agent, which consent shall not be unreasonably withheld and (iv) to use reasonable efforts to enforce the performance by the Lessor under each Lease of all of such Lessor's obligations under such Lease. c. Assignor has full power and authority to execute, deliver and perform its obligations under this Assignment. d. Upon receipt of a written landlord's consent from -4- the Lessors under the Leases, this Assignment shall be a legal, valid and binding obligation of Assignor, enforceable in accordance with its terms. e. Assignor agrees that Collateral Agent shall have the right, exercisable at any time that the Collateral Agent believes in its commercially reasonable business judgment, that there is a substantial risk that the Assignor will not be able to perform its obligations under the Credit Agreement and the other Credit Documents, to notify the Lessor under any or all of the Leases that the Assignor has executed and delivered this Assignment to the Collateral Agent. 4. Appointment of the Collateral Agent as Attorney-in-Fact. ------------------------------------------------------- Assignor hereby irrevocably constitutes and appoints Collateral Agent as its attorney-in-fact to demand, receive and enforce the respective rights and interests of Assignor with respect to the Leases at any time after the occurrence and during the continuance of an Event of Default under the Credit Agreement and the delivery to Assignor of notice in accordance with Article X of the Credit Agreement, and give appropriate notices for and on behalf of and in the name of Assignor or either of them or, at the option of Collateral Agent in the name of Collateral Agent, with the same force and effect as Assignor could do if this Assignment had not been made. 5. Effect of Assignment; Remedies for Default. The Assignment ------------------------------------------ shall constitute an absolute and present assignment; provided, however, that -------- ------- Collateral Agent shall have no right under this Assignment to enforce the provisions of any Lease unless there shall occur and be continuing an Event of Default under the Credit Agreement. Upon the occurrence and during the continuance of any such Event of Default, Collateral Agent may, without affecting any of its or the Secured Creditors rights or remedies against Assignor under any other instrument, document or agreement, exercise its rights under this Assignment as attorney-in-fact of Assignor in any manner permitted by law, and Collateral Agent shall have the right to exercise and enforce any or all rights and remedies available after default to a secured party under the applicable Uniform Commercial Code. If notice to Assignor of any intended disposition of collateral or any other intended action is required by law in a particular instance, such notice shall be deemed commercially reasonable if given at least ten day's prior to the date of intended disposition. During the continuance of an Event of Default, Collateral Agent may (i) either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court, take -5- possession of any or all of the Premises and have, hold, manage, lease and operate the same, on such terms, and for such period of time, as Collateral Agent may deem proper (but in no event beyond the stated term of the Lease, including any options to extend) and (ii) in connection with the exercise of its rights under clause (i) above, terminate all of Assignor's right to retain, use and enjoy all rights under any Lease. 6. Indemnification. After the occurrence, and during the --------------- continuance, of an Event of Default, Collateral Agent may, but shall not be obligated to, perform or discharge any obligation, duty or liability under any Lease or under or by reason of this Assignment. Furthermore, Assignor shall, and hereby agrees to, indemnify, defend and hold Collateral Agent harmless from, and against, any and all liability, loss, cost, damage or expense which may, or might be, incurred by Collateral Agent, directly, or indirectly, under any Lease or under or by reason of this Assignment and from any and all claims and demands whatsoever which may be asserted against Collateral Agent by reason of any alleged obligations or undertakings on its part to perform or discharge any of the covenants or agreements contained in any Lease other than any such liability, loss, cost or expense incurred as a result of the gross negligence or willful misconduct of Collateral Agent. If Collateral Agent incurs any such liability under any Lease or under or by reason of this Assignment or in defense of any such claims or demands, the amount thereof, including all costs, expenses and reasonable attorneys' fees, shall be added to the Secured Obligations and Assignor shall reimburse Collateral Agent therefor immediately upon demand, and, upon the failure of Assignor to reimburse Collateral Agent within 10 days of demand, Collateral Agent, at its option, may declare all of the Secured Obligations immediately due and payable. The parties hereto understand further that this Assignment shall not operate to place responsibility for the control, care, management or repair of any of the Premises upon Collateral Agent (except as provided in the Lease for matters first arising after Collateral Agent has taken physical possession of the Premises, except for possession solely for the purpose of disposing of the assets of Assignor), or for the carrying out of any of the terms or conditions of any Lease (except for matters first arising after Collateral Agent has taken physical possession of the Premises, except for possession solely for the purpose of disposing of the assets of Assignor), and it shall not operate to make Collateral Agent responsible or liable for any waste committed on any of the Premises by Assignor or any of the Premises or for any negligence in the management, upkeep, repair or control of any of the Premises, resulting in loss, injury or death to any lessee, sublessee, invitee, -6- licensee, employee, stranger or any other Person. 7. Remedies Cumulative. No right or remedy of Collateral Agent ------------------- hereunder is exclusive of any other right or remedy hereunder or now or hereafter existing at law or in equity or under the Credit Agreement, the Notes or the other Credit Documents, but is cumulative and in addition thereto and Collateral Agent may recover judgment thereon, issue execution therefor, and resort to every other right or remedy available at law or in equity or under the Credit Agreement, the Notes or the other Credit Documents, without first exhausting or affecting or impairing the security or any right or remedy afforded under this Assignment. No delay in exercising, or omission to exercise, any such right or remedy will impair any such right or remedy or will be construed to be a waiver of any default by Assignor hereunder, or acquiescence therein, nor will it affect any subsequent default hereunder by Assignor of the same or different nature. Every such right or remedy may be exercised independently or concurrently, and when and so often as may be deemed expedient by Collateral Agent. No term or condition contained in this Assignment may be waived, altered or changed except as evidenced in writing signed by Assignor and Collateral Agent. In case Collateral Agent shall have proceeded to enforce any right under this Assignment and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely to Collateral Agent, then, and in every such case, Assignor and Collateral Agent shall be restored to their former positions with respect to the Leases, and all rights, remedies, and powers of Collateral Agent shall continue as though no such proceedings had been taken. 8. Costs and Expenses. Assignor hereby agrees to pay all ------------------ reasonable costs and expenses (including, without limitation, reasonable attorney's fees and expenses) which Collateral Agent or the Secured Creditors may incur in exercising and enforcing any of their rights and remedies under this Assignment after the occurrence and during the continuance of an Event of Default. 9. Successors and Assigns. Subject to the limitations on further ---------------------- assignment of the Leases by Assignor contained herein, this Assignment shall be binding upon Assignor and its successors and assigns, and shall inure to the benefit of Collateral Agent and its successors and assigns. Collateral Agent may assign its right, title and interest in the Leases upon notice to the Assignor, but without any requirements for the consent of Assignor. 10. Amendment. This Assignment can be waived, --------- -7- modified, amended, terminated or discharged only explicitly in a writing signed by Collateral Agent. A waiver signed by Collateral Agent shall be effective only in the specific instance and for the specific purpose given. 11. Termination. This Assignment shall terminate and be of no ----------- further force and effect as of the date upon which the Commitments of the Banks and all Interest Rate Protection and Other Hedging Agreements have been terminated, no Note under the Credit Agreement is outstanding (and all Loans have been repaid in full), all Letters of Credit have been terminated and all Secured Obligations then owing have been paid in full. Upon such termination, at the request of Assignor, Collateral Agent shall provide written confirmation of such termination to Assignor in form reasonably requested by Assignor, at Assignor's cost and expense. 12. Governing Law. This Assignment shall be governed by, and ------------- shall be construed and enforced in accordance with the laws of the State of New York, without regard to principles of conflicts of law. 13. Notices. Any notice delivered by Assignor or Collateral Agent ------- hereunder shall be delivered in the manner provided in the Credit Agreement. -8- IN WITNESS WHEREOF, Assignor and Collateral Agent have executed this Assignment as of the date first set forth above. COINMACH CORPORATION, as Assignor By: /s/ Robert M. Doyle ---------------------------- Name: Robert M. Doyle Title: Senior Vice President BANKERS TRUST COMPANY, as Collateral Agent, By: /s/ Patricia Hogan ---------------------------- Name: Patricia Hogan Title: Vice President EX-10.68 18 COLLATERAL ASSIGNMENT OF LOCATION LEASES Exhibit 10.68 ------------- COLLATERAL ASSIGNMENT OF LOCATION LEASES COLLATERAL ASSIGNMENT OF LEASES ("Assignment") dated as of January 8, 1997 by COINMACH CORPORATION, a Delaware corporation ("Assignor") in favor of BANKERS TRUST COMPANY, a New York banking corporation, having an office at 130 Liberty Street, New York, New York 10006, in its capacity as collateral agent (in such capacity and together with any successor in such capacity, the "Collateral Agent") for the Secured Creditors (as hereinafter defined). R E C I T A L S : - - - - - - - - A. Assignor, Coinmach Laundry Corporation, certain subsidiaries of Assignor, the lenders (the "Banks") from time to time party thereto, Bankers Trust Company, as Administrative Agent (together with any successor, the "Administrative Agent"), First Union Corporation, as Syndication Agent (together with any successor, the "Syndication Agent") and Lehman Commercial Paper, Inc., as Documentation Agent (together with any successor, the "Documentation Agent") have entered into a Credit Agreement, dated as of the date hereof, providing for the making of loans and the issuance of and participation in, letters of credit, as contemplated therein (such agreement, as amended, modified, extended, renewed, replaced, restated or supplemented from time to time, and including any agreement extending the maturity of, or restructuring all or any portion of the indebtedness under such agreement or any successor agreement, the "Credit Agreement"). Except as otherwise defined herein, terms used herein and defined in the Credit Agreement shall be used herein as so defined. B. Assignor is, or is the successor in interest to, the lessee under those certain leases (individually, a "Lease"; collectively, the "Leases"), a complete list of which is attached as Exhibit A hereto, with the respective --------- lessors (individually, a "Lessor"; collectively, the "Lessors") thereto. The Leases pertain to the properties (the "Premises") which are described on Exhibit ------- B hereto. - - C. Assignor may at any time and from time to time enter into, or guarantee obligations of its Subsidiaries under, one or more Interest Rate Protection or other Hedging Agreement (each as hereinafter defined) with one or more Other Creditors (as hereinafter defined). -2- D. It is a condition to each of the above-described extensions of credit to the Assignor that the Assignor shall have executed and delivered this Assignment. E. This Assignment is made by Assignor in favor of the Collateral Agent for the benefit of (x) the Banks, the Administrative Agent, the Syndication Agent, the Documentation Agent, the Collateral Agent and any other lenders from time to time party to the Credit Agreement (collectively, the "Bank Creditors") and (y) if one or more Banks or any Affiliate of a Bank enters into one or more (i) interest rate protection agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements), (ii) foreign exchange contracts, currency swap agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency values and/or (iii) other types of hedging agreements from time to time (collectively, the "Interest Rate Protection or Other Hedging Agreements"), with, or guaranteed by Assignor, any such Bank or Banks or Affiliate or Affiliates (even if the respective Bank subsequently ceases to be a Bank under the Credit Agreement for any reason) so long as any such Bank or Affiliate participates in the extension of such Interest Rate Protection or Other Hedging Agreement and their subsequent assigns, if any, (collectively, the "Other Creditors"; together with the Bank Creditors, the "Secured Creditors"). This Assignment is given to Collateral Agent to secure the Obligations (as defined in the Security Agreement). A G R E E M E N T : - - - - - - - - - Assignor and Collateral Agent hereby agree as follows: 1. Assignment. Assignor hereby transfers and assigns to Collateral ---------- Agent all of Assignor's right, title and interest, whether now owned or hereafter acquired, in and to each of the Leases. This assignment of the Leases is made as collateral security for the payment and performance of the Secured Obligations. 2. No Assumption of Obligations or Duties of the Assignor. This ------------------------------------------------------ Assignment is an assignment only of all right, title and interest of the Assignor in the Leases, and Assignor covenants and agrees to perform and observe all of all material obligations imposed upon Assignor under the Leases as if this Assignment had not been made. Assignor agrees that the Secured -3- Creditors have not assumed and will not be deemed to have assumed any of the obligations or duties of Assignor under or with respect to the Leases unless and until the Secured Creditors shall have given the parties to the Leases written notice that the Secured Creditors have affirmatively assumed such obligations and duties as the result of an Event of Default under the Credit Agreement or the Leases. 3. Representations, Warranties and Covenants of Assignor. Assignor ----------------------------------------------------- represents, warrants and covenants to Collateral Agent: a. (i) That Schedule A attached hereto contains a complete list as of ---------- the date hereof of the Leases, (ii) that Assignor is the sole owner of the entire leasehold interest in each Lease, free and clear and of all Liens, except for the Liens created in favor of the Collateral Agent pursuant to, or in connection with, the Credit Agreement, (iii) each Lease is valid and enforceable, subject to the effect of this Assignment and bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and similar laws, and has not been altered, modified or amended in any manner, except as shown on Exhibit A, (iv) to Assignor's knowledge, neither Assignor nor the Lessor under - --------- any Lease is in default under such Lease nor, to the knowledge of Assignor, has any event occurred (other than pursuant to this Assignment) which with the passage of time or the giving of notice would constitute a default under such Lease and (v) no rent reserved in any Lease has been assigned or prepaid except for prepaid rent for the current month and applicable security deposits. b. Assignor agrees (i) to observe and perform all material obligations imposed upon Assignor as the lessee under each Lease and not to do, or permit to be done, anything to materially impair Assignor's rights thereunder; (ii) not to assign Assignor's interest under any Lease or sublet all or any part of the Premises, (iii) other than upon the expiration of the terms of the respective Leases in accordance with their terms, not alter, modify or change the terms of any Lease in any material respect, or cancel or terminate any Lease, or surrender possession of the Premises, or any part thereof, without the prior written consent of Collateral Agent, which consent shall not be unreasonably withheld and (iv) to use reasonable efforts to enforce the performance by the Lessor under each Lease of all of such Lessor's obligations under such Lease. -4- c. Assignor has full power and authority to execute, deliver and perform its obligations under this Assignment. d. In the event that Assignor receives a written landlord consent from the Lessors under the Leases, this Assignment shall be a legal, valid and binding obligation of Assignor, enforceable in accordance with its terms with respect to those Leases. e. Assignor agrees that Collateral Agent shall have the right, exercisable at any time that the Collateral Agent believes in its commercially reasonable business judgment, that there is a substantial risk that the Assignor will not be able to perform its obligations under the Credit Agreement and the other Credit Documents, to notify the Lessor under any or all of the Leases that the Assignor has executed and delivered this Assignment to the Collateral Agent. 4. Appointment of the Collateral Agent as Attorney-in-Fact. Assignor ------------------------------------------------------- hereby irrevocably constitutes and appoints Collateral Agent as its attorney-in- fact to demand, receive and enforce the respective rights and interests of Assignor with respect to the Leases at any time after the occurrence and during the continuance of an Event of Default under the Credit Agreement and the delivery to Assignor of notice in accordance with Article X of the Credit Agreement, and give appropriate notices for and on behalf of and in the name of Assignor or either of them or, at the option of Collateral Agent in the name of Collateral Agent, with the same force and effect as Assignor could do if this Assignment had not been made. 5. Effect of Assignment; Remedies for Default. The Assignment shall ------------------------------------------ constitute an absolute and present assignment; provided, however, that -------- ------- Collateral Agent shall have no right under this Assignment to enforce the provisions of any Lease unless there shall occur and be continuing an Event of Default under the Credit Agreement. Upon the occurrence and during the continuance of any such Event of Default, Collateral Agent may, without affecting any of its or the Secured Creditors rights or remedies against Assignor under any other instrument, document or agreement, exercise its rights under this Assignment as attorney-in-fact of Assignor in any manner permitted by law, and Collateral Agent shall have the right to exercise and enforce any or all rights and remedies available after default to a secured party under the applicable Uniform Commercial Code. If notice to Assignor of any intended disposition of collateral or any -5- other intended action is required by law in a particular instance, such notice shall be deemed commercially reasonable if given at least ten day's prior to the date of intended disposition. During the continuance of an Event of Default, Collateral Agent may (i) either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court, take possession of any or all of the Premises and have, hold, manage, lease and operate the same, on such terms, and for such period of time, as Collateral Agent may deem proper (but in no event beyond the stated term of the Lease, including any options to extend) and (ii) in connection with the exercise of its rights under clause (i) above, terminate all of Assignor's right to retain, use and enjoy all rights under any Lease. 6. Indemnification. After the occurrence, and during the --------------- continuance, of an Event of Default, Collateral Agent may, but shall not be obligated to, perform or discharge any obligation, duty or liability under any Lease or under or by reason of this Assignment. Furthermore, Assignor shall, and hereby agrees to, indemnify, defend and hold Collateral Agent harmless from, and against, any and all liability, loss, cost, damage or expense which may, or might be, incurred by Collateral Agent, directly, or indirectly, under any Lease or under or by reason of this Assignment and from any and all claims and demands whatsoever which may be asserted against Collateral Agent by reason of any alleged obligations or undertakings on its part to perform or discharge any of the covenants or agreements contained in any Lease other than any such liability, loss, cost or expense incurred as a result of the gross negligence or willful misconduct of Collateral Agent. If Collateral Agent incurs any such liability under any Lease or under or by reason of this Assignment or in defense of any such claims or demands, the amount thereof, including all costs, expenses and reasonable attorneys' fees, shall be added to the Secured Obligations and Assignor shall reimburse Collateral Agent therefor immediately upon demand, and, upon the failure of Assignor to reimburse Collateral Agent within 10 days of demand, Collateral Agent, at its option, may declare all of the Secured Obligations immediately due and payable. The parties hereto understand further that this Assignment shall not operate to place responsibility for the control, care, management or repair of any of the Premises upon Collateral Agent (except as provided in the Lease for matters first arising after Collateral Agent has taken physical possession of the Premises, except for possession solely for the purpose of disposing of the assets of Assignor), or for -6- the carrying out of any of the terms or conditions of any Lease (except for matters first arising after Collateral Agent has taken physical possession of the Premises, except for possession solely for the purpose of disposing of the assets of Assignor), and it shall not operate to make Collateral Agent responsible or liable for any waste committed on any of the Premises by Assignor or any of the Premises or for any negligence in the management, upkeep, repair or control of any of the Premises, resulting in loss, injury or death to any lessee, sublessee, invitee, licensee, employee, stranger or any other Person. 7. Remedies Cumulative. No right or remedy of Collateral Agent ------------------- hereunder is exclusive of any other right or remedy hereunder or now or hereafter existing at law or in equity or under the Credit Agreement, the Notes or the other Credit Documents, but is cumulative and in addition thereto and Collateral Agent may recover judgment thereon, issue execution therefor, and resort to every other right or remedy available at law or in equity or under the Credit Agreement, the Notes or the other Credit Documents, without first exhausting or affecting or impairing the security or any right or remedy afforded under this Assignment. No delay in exercising, or omission to exercise, any such right or remedy will impair any such right or remedy or will be construed to be a waiver of any default by Assignor hereunder, or acquiescence therein, nor will it affect any subsequent default hereunder by Assignor of the same or different nature. Every such right or remedy may be exercised independently or concurrently, and when and so often as may be deemed expedient by Collateral Agent. No term or condition contained in this Assignment may be waived, altered or changed except as evidenced in writing signed by Assignor and Collateral Agent. In case Collateral Agent shall have proceeded to enforce any right under this Assignment and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely to Collateral Agent then, and in every such case, Assignor and Collateral Agent shall be restored to their former positions with respect to the Leases, and all rights, remedies, and powers of Collateral Agent shall continue as though no such proceedings had been taken. 8. Costs and Expenses. Assignor hereby agrees to pay all reasonable ------------------ costs and expenses (including, without limitation, reasonable attorney's fees and expenses) which Collateral Agent or the Secured Creditors may incur in exercising and enforcing any of their rights and remedies under this Assignment after the occurrence and during the continuance of an Event of Default. -7- 9. Successors and Assigns. Subject to the limitations on further ---------------------- assignment of the Leases by Assignor contained herein, this Assignment shall be binding upon Assignor and its successors and assigns, and shall inure to the benefit of Collateral Agent and its successors and assigns. Collateral Agent may assign its right, title and interest in the Leases upon notice to the Assignor, but without any requirements for the consent of Assignor. 10. Amendment. This Assignment can be waived, modified, amended, --------- terminated or discharged only explicitly in a writing signed by Collateral Agent. A waiver signed by Collateral Agent shall be effective only in the specific instance and for the specific purpose given. 11. Termination. This Assignment shall terminate and be of no ----------- further force and effect as of the date upon which the Commitments of the Banks and all Interest Rate Protection and Other Hedging Agreements have been terminated, no Note under the Credit Agreement is outstanding (and all Loans have been repaid in full), all Letters of Credit have been terminated and all Secured Obligations then owing have been paid in full. Upon such termination, at the request of Assignor, Collateral Agent shall provide written confirmation of such termination to Assignor in form reasonably requested by Assignor, at Assignor's cost and expense. 12. Governing Law. This Assignment shall be governed by, and shall ------------- be construed and enforced in accordance with the laws of the State of New York, without regard to principles of conflicts of law. 13. Notices. Any notice delivered by Assignor or Collateral Agent ------- hereunder shall be delivered in the manner provided in the Credit Agreement. -8- IN WITNESS WHEREOF, Assignor and Collateral Agent have executed this Assignment as of the date first set forth above. COINMACH CORPORATION, as Assignor By: /s/ Robert M. Doyle ------------------------------- Name: Robert M. Doyle Title: Senior Vice President BANKERS TRUST COMPANY, as Collateral Agent, By: /s/ Patricia Hogan ------------------------------- Name: Patricia Hogan Title: Vice President EX-10.69 19 AMENDMENT TO INVESTOR PURCHASE AGREEMENTS EXHIBIT 10.69 TCC AMENDMENT TO INVESTOR PURCHASE AGREEMENTS THIS AMENDMENT TO INVESTOR PURCHASE AGREEMENTS (the "Amendment") is made as of January __, 1997 by and among Coinmach Laundry Corporation ("CLC"), a Delaware corporation, formerly known as SAS Acquisitions, Inc., Golder, Thoma, Cressey, Rauner Fund IV, L.P. ("GTCR"), Coinmach Corporation ("Coinmach"), a Delaware corporation, formerly known as Solon Automated Services, Inc. and successor by merger with The Coinmach Corporation, Heller Financial, Inc. ("Heller"), Jackson National Life Insurance Company ("JNL"), individually and as successor by merger with Jackson National Life Insurance Company of Michigan, President and Fellows of Harvard College ("Harvard"), James N. Chapman ("Chapman") and Michael E. Marrus ("Marrus"). R E C I T A L S WHEREAS, CLC, Coinmach, GTCR and each of Heller, JNL (individually and as successor by merger with Jackson National Life Insurance Company of Michigan), Harvard, Chapman and Marrus are parties to Investor Purchase Agreements, each dated as of January 31, 1995, as amended by that certain Omnibus Agreement, dated as of November 30, 1995 (as amended, collectively, the "Investor Purchase Agreements"); WHEREAS, the parties hereto desire to amend each of the Investor Purchase Agreements on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Amendment agree as follows: 1. Amendment. Effective as of July 18, 1996 and without further action by --------- the parties hereto, (a) each of the Investor Purchase Agreements is hereby amended by deleting Sections 3B and 3C in their entirety, and (b) each of the Investor Purchase Agreements to which Harvard, Chapman or Marrus is a party is hereby amended by deleting Section 3D in its entirety. 2. Counterparts. This Amendment may be executed in multiple counterparts, ------------ each of which shall be an original and all of which taken together shall constitute one and the same agreement. 3. Successors and Assigns. This Amendment shall bind each of the parties ---------------------- hereto and their respective successors and permitted assigns and inure to the benefit of and be enforceable by each of the parties hereto and their respective successors and permitted assigns. 4. Amendment and Waiver. The provisions of this Amendment may be amended -------------------- or modified only by written agreement of the parties hereto. No course of dealing between the parties or third party beneficiaries hereof or any delay in exercising any rights hereunder shall operate as a waiver of any rights of any such person. 5. Descriptive Headings. The descriptive headings of this Amendment are -------------------- inserted for convenience only and do not constitute a part of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the date first written above. COINMACH LAUNDRY CORPORATION (formerly known as SAS Acquisitions, Inc.) By: /s/ Robert M. Doyle ------------------------------------ Robert M. Doyle Senior Vice President COINMACH CORPORATION (formerly known as Solon Automated Services, Inc.) By: /s/ Robert M. Doyle ------------------------------------ Robert M. Doyle Senior Vice President GOLDER, THOMA, CRESSEY, RAUNER FUND IV, L.P. By: GTCR, L.P., its General Partner By: Golder, Thoma, Cressey, Rauner, Inc., its General Partner By: /s/ Bruce V. Rauner ------------------------------------ Bruce V. Rauner Principal HELLER FINANCIAL, INC. By: /s/ Ellen T. Cook ------------------------------------ Name: Ellen T. Cook Title: Assistant Vice President 2 JACKSON NATIONAL LIFE INSURANCE COMPANY (individually and as successor by merger to Jackson National Life Insurance Company of Michigan) By: PPM America, Inc., its agent By: /s/ William T. Considine -------------------------------------- Name: William T. Considine Title: Vice President PRESIDENT AND FELLOWS OF HARVARD COLLEGE By: Harvard Management Company, Inc. By: Timothy Peterson -------------------------------------- Name: Timothy Peterson Authorized Signatory By: /s/ Jack R. Meyer -------------------------------------- Name: Jack R. Meyer Authorized Signatory /s/ James N. Chapman __________________________________________ James N. Chapman /s/ Michael E. Marrus __________________________________________ Michael E. Marrus 3 EX-10.70 20 AMENDMENT TO INVESTOR PURCHASE AGREEMENT EXHIBIT 10.70 SAS AMENDMENT TO INVESTOR PURCHASE AGREEMENT THIS AMENDMENT TO INVESTOR PURCHASE AGREEMENT (the "Amendment") is made as of January __, 1997 by and among Coinmach Laundry Corporation ("CLC"), a Delaware corporation, formerly known as SAS Acquisitions, Inc., Golder, Thoma, Cressey, Rauner Fund IV, L.P. ("GTCR") and the persons listed on the signature pages hereto (each a "Purchaser" and collectively the "Purchasers"). R E C I T A L S WHEREAS, CLC, GTCR and the Purchasers are parties to an Investor Purchase Agreement, dated as of July 26, 1995, as amended by that certain Omnibus Agreement, dated as of November 30, 1995 (as amended, the "Investor Purchase Agreement"); WHEREAS, the parties hereto desire to amend the Investor Purchase Agreement on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Amendment agree as follows: 1. Amendment. Effective as of July 18, 1996, and without further action --------- by the parties hereto, the Investor Purchase Agreement is hereby amended by inserting directly after Section 3D on page 8 a new Section 3E, which shall read as follows: "3E. Limitation on Restrictions. Notwithstanding any term or -------------------------- provision to the contrary in this Section 3, the terms and provisions of Sections 3B, 3C and 3D hereof shall not apply in any respect and shall have no force and effect on or against James N. Chapman, Michael E. Marrus, Heller Financial, Inc., Jackson National Life Insurance Company, Jackson National Life Insurance Company of Michigan or President and Fellows of Harvard College." 2. Counterparts. This Amendment may be executed in multiple ------------ counterparts, each of which shall be an original and all of which taken together shall constitute one and the same agreement. 3. Successors and Assigns. This Amendment shall bind each of the parties ---------------------- hereto and their respective successors and permitted assigns and inure to the benefit of and be enforceable by each of the parties hereto and their respective successors and permitted assigns. 4. Amendment and Waiver. The provisions of this Amendment may be amended -------------------- or modified only by written agreement of the parties hereto. No course of dealing between the parties or third party beneficiaries hereof or any delay in exercising any rights hereunder shall operate as a waiver of any rights of any such person. 5. Descriptive Headings. The descriptive headings of this Amendment are -------------------- inserted for convenience only and do not constitute a part of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the date first written above. COINMACH LAUNDRY CORPORATION (formerly known as SAS Acquisitions, Inc.) By: /s/ Robert M. Doyle ---------------------------------------- Name: Robert M. Doyle Title: Senior Vice President GOLDER, THOMA, CRESSEY, RAUNER FUND IV, L.P. By: GTCR, L.P., its General Partner By: Golder, Thoma, Cressey, Rauner, Inc., its General Partner By: /s/ Bruce V. Rauner ---------------------------------------- Name: Bruce V. Rauner Principal HELLER FINANCIAL, INC. By: /s/ Ellen T. Cook ---------------------------------------- Name: Ellen T. Cook Title: Assistant Vice President JACKSON NATIONAL LIFE INSURANCE COMPANY (individually and as successor by merger to Jackson National Life Insurance Company of Michigan) By: PPM America, Inc., its agent By: /s/ William T. Considine ---------------------------------------- Name: William T. Considine Title: Vice President 2 PRESIDENT AND FELLOWS OF HARVARD COLLEGE By: Harvard Management Company, Inc. By: /s/ Timothy Peterson ------------------------------------- Name: Timothy Peterson Authorized Signatory By: /s/ Jack R. Meyer ------------------------------------- Name: Jack R. Meyer Authorized Signatory MCS CAPITAL, INC. By: /s/ Stephen R. Kerrigan ------------------------------------- Stephen R. Kerrigan President /s/ James N. Chapman ----------------------------------------- James N. Chapman /s/ Michael E. Marrus ___________________________________________ Michael E. Marrus /s/ Mitchell Blatt ___________________________________________ Mitchell Blatt /s/ Michael Stanky ___________________________________________ Michael Stanky 3 EX-10.71 21 DEMAND PROMISSORY NOTE EXHIBIT 10.71 DEMAND PROMISSORY NOTE ---------------------- $80,000 March 24, 1997 For value received, John E. Denson ("Maker"), promises to pay on demand at any time on or after March 25, 1997 to the order of Coinmach Corporation, a Delaware corporation, the aggregate principal amount of $80,000. No interest shall accrue on the outstanding principal amount of this promissory note (the "Note"). This Note is secured by certain real property owned by Maker and located at 111 Cove Lane, Media, Pennsylvania 19063. In the event Maker fails to pay any amounts due hereunder when due (an "Event of Default"), Maker shall pay to the holder hereof, in addition to such amounts due, all costs of collection, including reasonable attorneys' fees and court costs. Maker or his successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non- payment of this Note, and expressly agrees that this Note, or any payment hereunder, may be extended from time to time and that the holder hereof may accept security for this Note or release security for this Note, all without in any way affecting the liability of Maker hereunder. Maker also waives all rights to notice and hearing of any kind upon the occurence of an Event of Default and prior to the exercise by the holder of this Note of its rights to repossess the Collateral without judicial process or to replevy, attach or levy upon the Collateral without notice or hearing. This Note shall be governed by and construed in all respects according to the internal laws of the State of New York without regard to conflicts of law provisions. By: /s/ John E. Denson ------------------------ John E. Denson EX-10.72 22 DEED OF TRUST, SECURITY AGREEMENT EXHIBIT 10.72 DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF LEASES, RENTS AND PROFITS, FINANCING STATEMENT AND FIXTURE FILING made by COINMACH CORPORATION, as Grantor, to CHICAGO TITLE INSURANCE COMPANY, as Trustee, for the benefit of BANKERS TRUST COMPANY, as Collateral Agent, as Beneficiary THIS DEED OF TRUST SECURES FUTURE ADVANCES PREPARED BY AND WHEN RECORDED RETURN TO: CHICAGO TITLE INSURANCE CO. 350 N. St. Paul Ste. 250 Main Office Dallas, Texas 75201 214/720-4000 TABLE OF CONTENTS ----------------- Page ---- RECITALS................................................. 1 GRANTING CLAUSES......................................... 2 ARTICLE I CERTAIN DEFINITIONS........................... 4 ARTICLE II PARTICULAR COVENANTS OF THE GRANTOR.......... 6 2.1 Payment of Obligations......................... 6 2.2 Warranty of Title.............................. 6 2.3 Due Authorization and Binding Effect........... 7 2.4 To Pay Impositions............................. 7 2.5 To Insure...................................... 11 2.6 To Comply with Laws............................ 12 2.7 Limitation on Disposition of the Mortgaged Premises....................................... 13 2.8 To Maintain Priority of Liens.................. 13 2.9 Maintenance of Mortgaged Premises; Covenant Against Waste......................... 14 2.10 After-Acquired Property........................ 14 2.11 Further Assurances............................. 14 2.12 Recorded Instruments........................... 15 2.13 Hazardous Material............................. 15 2.14 Asbestos....................................... 17 ARTICLE III LEASES; ASSIGNMENT AS FURTHER SECURITY, ETC. 18 3.1 Assignment of Leases, Rents, Issues and Profits........................................ 18 3.2 Entry upon Default............................. 18 3.3 The Grantor's Covenants Regarding Leases....... 19 ARTICLE IV SECURITY AGREEMENT UNDER THE UNIFORM COMMERCIAL CODE.............................. 20 4.1 Security Agreement............................. 20 4.2 Assignment of Non-Code Collateral.............. 22 4.3 Conflict with the Security Agreement........... 22 4.4 Termination.................................... 22 ARTICLE V EVENTS OF DEFAULT AND REMEDIES 22 5.1 "Events of Default"............................ 22 5.2 Remedies....................................... 22 5.3 Sale; No Marshalling of Assets; Appointment of Receiver........................ 25 - i - Page ---- 5.4 Indemnification by the Grantor................. 27 5.5 Remedies Cumulative; No Waiver; Etc............ 28 5.6 No Merger...................................... 28 ARTICLE VI PROVISIONS OF GENERAL APPLICATION 29 6.1 Waiver; Amendment.............................. 29 6.2 Notices........................................ 29 6.3 Additional Sums Payable by the Grantor......... 30 6.4 Captions....................................... 30 6.5 Successors and Assigns......................... 30 6.6 Gender and Number.............................. 30 6.7 Severability................................... 30 6.8 Subrogation.................................... 30 6.9 Usury.......................................... 31 6.10 Counterparts................................... 31 6.11 Controlling Law................................ 31 6.12 Entire Agreement............................... 31 6.13 Release........................................ 31 6.14 Additional Advances............................ 32 6.15 Fixture Filing................................. 32 6.16 Financing Statement............................ 32 6.17 Actions of Beneficiary......................... 33 6.18 Deed of Trust Secures Line of Credit........... 33 6.19 Date and Maturity of Obligations............... 33 6.20 Concerning Trustee............................. 33 6.21 Beneficiary's Authority........................ 33 Schedule I - Permitted Encumbrances Exhibit A - Description of Premises - ii - DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF LEASES, RENTS AND PROFITS, FINANCING STATEMENT AND FIXTURE FILING ----------------------------------------- THIS DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF LEASES, RENTS AND PROFITS, FINANCING STATEMENT AND FIXTURE FILING (this "Deed of Trust"), made as of this ____ day of _________, 1997 by COINMACH CORPORATION, a corporation organized and existing under the laws of the State of Delaware and having an office at 55 Lumber Road, Roslyn, New York 11576, as grantor (the "Grantor"), in favor of CHICAGO TITLE INSURANCE COMPANY (the "Trustee"), having an address at 350 N. St. Paul, Suite 250, Dallas, Texas 75201, for the use and benefit of BANKERS TRUST COMPANY, having an office and post office address at 130 Liberty Street, New York City, New York County, New York 10006, as beneficiary, in its capacity as Collateral Agent (the "Beneficiary") for its benefit and the benefit of the Secured Creditors (as defined below). Except as otherwise defined herein, terms used herein and defined in the Credit Agreement (as defined below) shall be used herein as therein defined. R E C I T A L S : - - - - - - - - 1. Coinmach Laundry Corporation, the Grantor and various financial institutions listed in Annex I attached thereto (the "Banks") , Bankers Trust Company, as Administrative Agent (together with any successors, the "Administrative Agent"), First Union National Bank of North Carolina, as Syndication Agent (together with any successors, the "Syndication Agent") and Lehman Commercial Paper, Inc., as Documentation Agent (together with any successors, the "Documentation Agent") have entered into a Credit Agreement, dated as of the date hereof providing for the making of Loans and the issuance of, and participation in, Letters of Credit, as contemplated therein (such agreement, as amended, modified, extended, renewed, replaced, restated or supplemented from time to time, and including any agreement extending the maturity of, or restructuring all or any portion of the Indebtedness under such agreement or any successor agreement, the "Credit Agreement"). 2. The Grantor may from time to time be party to one or more interest rate agreements, interest rate cap agreements, interest rate collar agreements or other similar agreements or arrangements (each such agreement or arrangement with an Interest Rate Protection Creditor (as hereinafter defined), an "Interest Rate Protection Agreement"), with a Bank or an affiliate of a Bank (each such Bank or affiliate, even if the respective Bank subsequently ceases to be a Bank under the Credit Agreement for any reason, together with such Bank's or affiliate's successors and assigns, collectively, the "Interest Rate Protection Creditors", and the Interest Rate Protection Creditors together with the Bank Creditors, hereinafter collectively being called the "Secured Creditors"). 3. The Grantor is the owner of the fee simple interest in and to the Premises and the Improvements (each as hereinafter defined). 4. It is a condition precedent to each of the above-described extensions of credit that the Grantor shall have executed and delivered this Deed of Trust to the Beneficiary. 5. The Grantor desires to execute this Deed of Trust to satisfy the conditions described in the preceding paragraph. 6. This Deed of Trust is given pursuant to the Credit Agreement. A G R E E M E N T : ----------------- NOW, THEREFORE, in consideration of the benefits accruing to the Grantor, the receipt and sufficiency of which are hereby acknowledged, and to secure the prompt and complete payment and performance when due of all of the Obligations (as hereinafter defined), THE GRANTOR HEREBY GIVES, GRANTS, BARGAINS, SELLS, TRANSFERS, CONVEYS AND ASSIGNS TO THE TRUSTEE, in trust, with powers of sale, for the use and benefit of beneficiary IN FEE SIMPLE all of its right, title and interest, whether now owned or hereafter acquired, in the hereinafter described property, whether now owned or hereafter acquired, and, insofar as such property consists of equipment, accounts, accounts receivable, contract rights, general intangibles, inventory, fixtures, proceeds of collateral or any other personal property of a kind or character defined in or subject to the applicable provisions of the Uniform Commercial Code (as in effect in the State of Texas), the Grantor hereby grants to the Beneficiary a security interest in all of the Grantor's right, title and interest therein, namely: I. All those certain lots, pieces or parcels of land described in Exhibit A annexed hereto and hereby made a part hereof, including all and - --------- singular easements, rights, privileges, tenements, hereditaments and appurtenances thereunto belonging or in any way appertaining thereto, and the reversion and remainder thereof (herein collectively called the "Land"); and all of the estate, right, title, interest, claim or demand whatsoever of the Grantor therein and in and to any land lying in the bed of any street, road or avenue, open or proposed, in front of or adjoining or adjacent to the Land, to the center line thereof, either in law or in possession or expectancy, now or hereafter acquired (all of the foregoing collectively herein called the "Premises"); - 2 - II. All right, title and interest of the Grantor in and to (i) all buildings and other improvements and additions thereto now erected or hereafter constructed or placed upon the Premises or any part thereof, including but not limited to site improvements and infrastructure improvements (collectively, the "Improvements"); (ii) except as otherwise provided herein or in the Credit Agreement, all machinery, devices, fixtures, apparatus, interior improvements, appurtenances and equipment of every kind and nature whatsoever (other than rolling stock and motor vehicles) owned by the Grantor and now or hereafter attached to or placed in or upon the Premises or the Improvements, or any part thereof, and used or procured for use in connection with the operation of the Premises or any business conducted thereon (collectively, the "Equipment"); III. All right, title and interest of the Grantor in and to all insurance or other proceeds for damage done to the Improvements or the Equipment and all awards hereafter to be made to or for the account of the Grantor for the permanent or temporary taking by eminent domain of the whole or any part of the Premises, the Improvements or the Equipment, or any lesser estate therein, or easement appurtenant thereto (including, without limitation, any awards for change of grade of streets), all of which proceeds and awards are hereby assigned to the Beneficiary, subject to the further provisions of this Deed of Trust; IV. Except as otherwise provided herein or in the Credit Agreement, all right, title and interest of the Grantor in and to all of the rents, income, receipts, revenues, issues, benefits and profits of the Premises, including all Leases (as hereinafter defined) now or hereafter entered into covering any part of the Premises, all renewals, extensions, subleases or assignments thereof, all other occupancy agreements, by concession, license or otherwise, all guaranties of the obligations of any tenant thereunder and all amendments, extensions, renewals and modifications of the foregoing, including all interest of the Grantor as landlord in and to the same, all of which are hereby assigned to the Beneficiary, subject, however, to the right of the Grantor to receive and use the same to the extent hereinafter set forth; and V. All right, title and interest of the Grantor in and to all water, water rights, mineral rights, oil, gas, ditches, ditch rights, reservoirs and reservoir rights, if any, appurtenant to, located on or used in connection with the Premises or the Improvements, whether existing now or hereafter acquired (all of the foregoing Premises, Improvements, Equipment, appurtenances, estates, rights, privileges, interests and franchises hereby mortgaged, or intended so to be, being hereinafter collectively referred to as the "Mortgaged Premises"). TO HAVE AND TO HOLD the Mortgaged Premises now or hereafter owned by the Grantor, unto (i) the Trustee, his - 3 - substitutes or successors, forever, to the extent the same constitutes real property or an interest therein and (ii) Beneficiary, to the extent the same does not constitute real property or an interest therein, in either case for the benefit of Beneficiary and Beneficiary's successors and assigns forever, for the purposes set forth herein. ARTICLE I CERTAIN DEFINITIONS ------------------- In addition to other definitions contained herein, the following terms shall have the meanings set forth below, unless the context of this Deed of Trust otherwise requires. 1.1 "due and payable" when used with reference to any and all sums secured by this Deed of Trust shall mean due and payable, whether at the date of payment or at the date of maturity specified in the Credit Agreement or other Credit Documents after giving effect in all cases to applicable grace periods; or by acceleration or call for payment as provided in the Credit Agreement or other Credit Documents or this Deed of Trust; or, in the case of Impositions, the last day upon which any charge may be paid without penalty and/or interest. 1.2 "Events of Default" shall mean any Event of Default under, and as defined in, the Credit Agreement, and in any event shall include any payment default on any of the Obligations after the expiration of any applicable grace period provided in the Credit Agreement. 1.3 "Governmental Authorities" shall mean all federal, state, county, municipal and local governments and all departments, commissions, boards, bureaus and offices thereof, having or claiming jurisdiction over the Mortgaged Premises or any part thereof. 1.4 "Impositions" shall mean all duties, taxes, water and sewer rents, rates and charges, assessments (including, but not limited to, all assessments for public improvements or benefits), charges for public utilities, excises, levies, license and permit fees and other charges, ordinary or extraordinary, whether foreseen or unforeseen, of any kind and nature whatsoever, which prior to or during the term of this Deed of Trust will have been or may be laid, levied, assessed or imposed upon or become due and payable out of or in respect of, or become a lien on the Premises, the Improvements, the Equipment or any other property or rights included in the Mortgaged Premises, or any part thereof or appurtenances thereto, or which are levied or assessed against the rent and income received by the Grantor therefrom, by virtue of any present or future law, order or ordinance of the United States of - 4 - America or of any state, county or local government or of any department, office or bureau thereof or of any other Governmental Authority, but shall expressly not include income or franchise taxes or similar taxes based upon or measured by income, assessed by any Governmental Authority and imposed on the Trustee, Beneficiary or their respective successors or assigns by reason of the ownership of this Deed of Trust or the obligations or the receipt of interest. 1.5 "Involuntary Rate" shall mean the rate of interest described in Section 1.08(c) of the Credit Agreement. 1.6 "Legal Requirements" shall mean all present and future laws, ordinances, rules, regulations and requirements of all Governmental Authorities, and all orders, rules and regulations of any national or local board of fire underwriters or other body exercising similar functions, foreseen or unforeseen, ordinary or extraordinary, which are applicable to the Mortgaged Premises or any part thereof, or to the sidewalks, alleyways, passageways, curbs and vaults adjoining the same, or to the use or manner of use of any of the foregoing, or to the owners, tenants, or occupants thereof, whether or not any such law, ordinance, rule, regulation or requirement shall necessitate structural changes or improvements or shall interfere with the use or enjoyment of any of the foregoing, and shall also mean and include all requirements of the policies of public liability, fire and all other insurance at any time in force with respect to any of the foregoing. 1.7 "Deed of Trust" shall mean this instrument as originally executed or, if hereafter amended, modified or supplemented, as so amended, modified or supplemented. 1.8 "Beneficiary" shall mean at any given time the Beneficiary herein named and its successors and assigns. 1.9 "Grantor" shall mean at any given time the Grantor herein named and any subsequent owner or owners of the Mortgaged Premises, and its or their respective heirs, executors, administrators, successors and assigns. 1.10 "Obligations" shall mean (a) (x) the principal of and interest on the Notes issued, including all renewals and extensions thereof, and Loans made to the Grantor under the Credit Agreement, and (y) all other obligations and indebtedness (including, without limitation, Indemnities, fees and interest thereon) of the Grantor to the Bank Creditors now existing or hereafter incurred under or arising out of or in connection with the Credit Agreement, the other Credit Documents and the due performance and compliance by the Grantor with all of the terms, conditions and agreements contained in the Credit Agreement and the other Credit Documents (all such principal, interest, obligations and liabilities being herein collectively called the "Credit Agreement Obligations"); (b) - 5 - all obligations and liabilities owing by the Grantor to the Interest Rate Protection Creditors under, or with respect to, any Interest Rate Protection or Other Hedging Agreement, whether such Interest Rate Protection or Other Hedging Agreement is now in existence or hereafter arising, and the due performance and compliance by the Grantor with all of the terms, conditions and agreements contained therein (all such obligations and liabilities described in this clause (b) being herein collectively called the "Interest Rate Protection Agreement Obligations"); (c) any and all sums reasonably advanced by the Beneficiary in order to preserve the Mortgaged Premises or preserve its security interest or priority thereof in the Mortgaged Premises pursuant to the terms and provisions of this Deed of Trust; (d) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities referred to in clauses (a) and (b) after an Event of Default shall have occurred and be continuing, the reasonable expenses of re-taking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Mortgaged Premises, or of any exercise by the Beneficiary of its rights hereunder, together with reasonable attorneys' fees and court costs; and (e) all amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement under Section 5.4 of this Deed of Trust. It is acknowledged and agreed that the "Obligations" shall include extensions of credit of the types described above, whether outstanding on the date of this Deed of Trust or extended from time to time after the date of this Deed of Trust. 1.11 "State" shall mean the State of Texas. 1.12 "Trustee shall mean at any given time the Trustee herein named and its successors and assigns. ARTICLE II PARTICULAR COVENANTS OF THE GRANTOR ----------------------------------- The Grantor represents, warrants, covenants and agrees as follows: 2.1 Payment of Obligations. The Grantor shall pay and perform all of the ---------------------- Obligations as and when due and payable and without offset or counterclaim, and shall observe and comply (including, where applicable, after notice and the expiration of any grace period) in all respects with all of the terms, provisions, conditions, covenants and agreements to be observed and performed by it under this Deed of Trust and any other Credit Document to which it is a party. 2.2 Warranty of Title. The Grantor warrants that as of the date hereof ----------------- (a) (i) it is the lawful owner of and has fee simple - 6 - title to the Land and the Improvements and (ii) it is the lawful owner of and has good and merchantable title to all of the Equipment, except that Equipment which is leased by the Grantor, in which instance it is the lawful owner of a valid leasehold interest in such Equipment, in each instance subject only to Permitted Encumbrances and Permitted Liens; (b) the Mortgaged Premises are as of the date hereof free and clear of all liens and encumbrances other than Permitted Encumbrances and, with respect to the Equipment, Permitted Liens; (c) this Deed of Trust is and will remain a valid and enforceable first mortgage lien on the Mortgaged Premises, subject only to Permitted Encumbrances; (d) the Grantor has all necessary right, power and lawful authority to mortgage and convey the Mortgaged Premises in the manner and form herein provided; (e) there are no defenses or offsets to this Deed of Trust or to the Obligations which it secures; and (f) the Grantor does now and will forever warrant and defend unto the Trustee and Beneficiary the title to the Mortgaged Premises and the validity and priority of the lien hereof thereon against all claims and demands whatsoever other than Permitted Encumbrances and Permitted Liens. 2.3 Due Authorization and Binding Effect. The execution and delivery by ------------------------------------ the Grantor of this Deed of Trust and its performance hereunder have been duly authorized by all necessary legal action and will not, to Grantor's knowledge, (a) require any consent or approval of any other party which has not already been obtained; (b) violate any applicable provision of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to the Grantor; or (c) result in a breach of or constitute a default under any material indenture, mortgage, deed of trust, credit agreement, loan agreement or any other material agreement or instrument to which the Grantor is a party or by which it or its properties (including, without limitation, the Mortgaged Premises) may be bound or affected. This Deed of Trust constitutes the legal, valid and binding obligations of the Grantor, enforceable against the Grantor in accordance with its terms, except as the enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether the issue of enforceability is considered in a proceeding in equity or at law). 2.4 To Pay Impositions. ------------------ 2.4.1 The Grantor will pay or cause to be paid, as and when due and payable, all Impositions levied upon the Mortgaged Premises or any part thereof. Notwithstanding the foregoing, if any Imposition may at the option of the payer be paid in installments (whether or not interest shall accrue on the unpaid balance thereof), the Grantor shall have the right, provided that no Event of Default shall have occurred and be continuing, to exercise such option and to cause to be paid or to pay the same - 7 - (and any accrued interest on the unpaid balance of such Imposition) in installments prior to the imposition of any fine, penalty or cost. The Grantor will not claim any deduction from the Obligations nor shall any deduction be made from the Obligations secured hereby by reason of the payment of taxes assessed against the Mortgaged Premises. 2.4.2 Upon the occurrence and during the continuance of an Event of Default upon demand of the Beneficiary, the Grantor shall deposit with the Beneficiary a sum which bears the same relation to the insurance premiums for all insurance required by the terms hereof in respect of the Mortgaged Premises and/or real estate taxes and assessments assessed against the Mortgaged Premises for the insurance period or tax year then in effect, as the case may be, as the number of months elapsed as of the date of such demand since the last preceding installment of said premiums or taxes or assessments shall have become due and payable bears to 12. For the purpose of this computation, the month in which such last preceding installment of premiums or real estate taxes or assessments became due and payable and the month in which such demand is given shall be included and deemed to have elapsed. On the first day of the month next succeeding the month in which such demand is given, and thereafter on the first day of each and every month during the term of this Deed of Trust, at Beneficiary's option after the occurrence and during the continuance of an Event of Default, the Grantor shall deposit with the Beneficiary a sum equal to one- twelfth of such insurance premiums and/or such taxes and assessments for the then-current insurance period and tax year, so that as each installment of such premiums and taxes and assessments shall become due and payable, the Grantor shall have deposited with the Beneficiary a sum sufficient to pay the same. All such deposits shall be received and held by the Beneficiary in good faith, and shall be applied to the payment of each installment of such premiums and taxes and assessments as the same shall become due and payable. The Beneficiary shall promptly furnish evidence of the making of each such payment to the Grantor. If the amount of such premiums and taxes and assessments has not been definitely ascertained at the time when any such monthly deposits are herein required to be made, the Grantor shall make such deposits based upon the amount of such premiums and taxes and assessments for the preceding year, subject to adjustment as and when the amount of such premiums and taxes and assessments is ascertained. If at any time when any installment of such premiums and such taxes and assessments becomes due and payable the Grantor shall not have deposited a sum sufficient to pay the same, the Grantor shall, within fifteen (15) days after demand, deposit any deficiency with the Beneficiary and if the Grantor shall have deposited a sum at least sufficient to pay such installment, such excess shall be applied toward the deposits next required to be made hereunder. After the Termination Date (as hereinafter defined), any amount on deposit with the Beneficiary shall be promptly repaid to the Grantor. Upon request of the Beneficiary, the Grantor shall - 8 - deliver to the Beneficiary all insurance and tax bills promptly upon receipt during any period when such monthly deposits are made with the depository. 2.4.3 The Grantor will pay the whole of any tax imposed directly or indirectly on this Deed of Trust in lieu of a tax on the Mortgaged Premises or any part thereof, whether by reason of (a) the passage after the date of this Deed of Trust of any law of the State deducting from the value of real property for the purposes of taxation any lien thereon; (b) any change in the laws for the taxation of mortgages, deeds of trust or debts secured by mortgages or deeds of trust for state or local purposes; or (c) a change in the means of collection of any such tax or otherwise, unless such payment would result in the imposition of interest beyond the maximum amount permitted by law. Within a reasonable time after payment of any Imposition, tax or governmental charge, the Grantor will, upon request of the Beneficiary, deliver to the Beneficiary reasonably satisfactory proof of payment thereof, subject, however, to the right of the Grantor to contest Impositions as set forth in Section 2.4.4 below. 2.4.4 The Grantor shall have the right to contest the amount or validity, in whole or in part, of any Imposition, or to seek a reduction in the valuation of the Mortgaged Premises or any part thereof, as assessed for real estate or personal property tax purposes by appropriate proceedings diligently conducted in good faith, and upon request by the Grantor, the Beneficiary shall postpone or defer payment of such Imposition if: (a) neither the Mortgaged Premises nor any part thereof would by reason of such postponement or deferment be in imminent danger of being forfeited or lost; (b) neither the Trustee nor the Beneficiary shall be in danger of being subjected to civil or criminal liability or penalty by reason of such postponement or deferment; (c) the Grantor, at the Grantor's option, shall either have deposited with the Beneficiary the amount so contested and unpaid (unless the amount being contested was previously paid under protest), together with all interest and penalties in connection therewith and all charges that may or might be assessed against or become a charge on the Mortgaged Premises, or any part thereof, in such proceeding or in lieu thereof, or the Grantor shall have posted with the Beneficiary a bond by a surety company licensed to do business in the State selected by Grantor and reasonably acceptable to Beneficiary, whereby such surety undertakes to pay such Imposition, interest, penalties and charges in the event that the Grantor shall fail to pay the same upon the final disposition of the contest (including appeals) or in the event that the Mortgaged Premises or any part thereof is in imminent - 9 - danger of being forfeited or lost during the pendency of such contest or if the Grantor fails to increase the amount of such bond as hereinafter provided. The initial deposit or bond shall be in an amount equal to 100% of the amount so contested and unpaid. In determining the amount of such deposit or bond, the Grantor shall be credited with any amounts theretofore deposited with the Beneficiary in respect of the Imposition being contested. Any deposit made by the Grantor under the provisions of this subsection 2.4.4(c), together with any additions thereto made pursuant to this Section 2.4 earned thereon, shall be held in trust in an interest bearing account and disposed of as hereinafter provided. Upon the termination of any such proceeding (including appeals), or, if the Grantor should so elect, at any time prior thereto, the Grantor shall pay the amount of such Imposition or part thereof as finally determined in such proceeding (or appeal), the payment of which may have been deferred during the prosecution of such proceeding (or appeal), together with any costs, fees, interest, penalties or other liabilities in connection therewith. Upon such payment the Beneficiary shall return any amount deposited with it together with all interest earned thereon (and not previously applied by it as hereinafter provided) with respect to such Imposition. Such payment, at the request of the Grantor, shall be made by the Beneficiary out of the amount deposited with it with respect to such Imposition, to the extent that such amount is sufficient therefor, and any balance due shall be paid by the Grantor. If, at any time during the continuance of such proceeding, the Beneficiary shall reasonably and in good faith deem the amount deposited with it or provided by bond insufficient, the Grantor shall, within 15 days of demand, make an additional deposit of, or increase the amount of its bond by, such additional amount as the Beneficiary may reasonably request to cover payment of the items set forth in this subsection 2.4.4(c). If at any time during the continuance of such proceeding the Mortgaged Premises or any part thereof is, in the reasonable judgment of the Beneficiary, in substantial danger of being forfeited or lost, the Beneficiary may, upon prior written notice to Grantor, apply the amount theretofore deposited with it to the payment of such Imposition (or the Beneficiary may require application of the bonded amount by the surety company, if a bond has been furnished) in the manner provided in the preceding sentence. Notwithstanding anything contained herein to the contrary, no such deposit held by the Beneficiary, or any part thereof, shall be returned to the Grantor so long as any Event of Default shall occur and be continuing; and (d) such postponement shall not affect the Gran tor's obligation to make required deposits pursuant to subsection 2.4.2 or the Beneficiary's right to require the same if such escrows are not then being maintained. - 10 - 2.4.5 The certificate or bill of the appropriate official designated by law to make or issue the same or to receive payment of any imposition indicating the nonpayment of such Imposition shall be prima facie evidence of the amount of the Imposition payable. 2.5 To Insure. --------- 2.5.1 The Grantor shall at its own expense at all times maintain or cause to be maintained on all of the Premises, Improvements and Equipment policies of property, hazard and liability insurance which provide at least the coverage required by the Credit Agreement, together with statutory workers' compensation insurance or other statutory program with respect to any work to be performed on or about the Mortgaged Premises; and such other insurance against loss or damage with respect to the Mortgaged Premises and the Equipment incorporated therein of the kinds from time to time as is consistent and in accordance with the Credit Agreement. 2.5.2 All insurance required in subsection 2.5.1 above shall be evidenced by valid and enforceable policies, in form and substance satisfactory to the Beneficiary, and issued by and distributed among insurers of recognized responsibility having a Best's rating of "A-1" or better, a financial size category of Class 12 or above (or having a comparable rating pursuant to some other commonly accepted insurance company rating system). Such insurers shall be authorized to do business in the State. Upon request made by the Beneficiary, the Grantor shall also deliver to Beneficiary, concurrently with the execution and delivery hereof, a letter from the Grantor's insurance broker outlining the terms of all insurance policies relating to the Mortgaged Premises or, in lieu thereof, a certificate of insurance describing such coverages. Thereafter, all renewal or replacement policies, or duplicate copies or certificates thereof, shall, upon request, be so delivered to the Beneficiary not less than ten (10) Business Days prior to the expiration date of the policy or policies to be renewed or replaced, in each case accompanied by evidence satisfactory to the Beneficiary that all premiums currently payable with respect to such policies have been paid in full by or at the direction of the Grantor. 2.5.3 All such insurance policies shall (a) except for any liability and workmen's compensation policy required hereunder, contain a standard noncontributory form of mortgagee clause (in favor of and entitling the Beneficiary to collect proceeds payable under such insurance as and to the extent provided in the Credit Agreement) as well as a standard waiver of subrogation endorsement, all to be in form and substance reasonably satisfactory to the Beneficiary; (b) provide that such policies may not be canceled or amended without at least thirty (30) days' prior written notice to the Beneficiary; and (c) provide that no act, omission or - 11 - negligence of the Grantor, except for gross negligence or willful misconduct of the Grantor, or its agents, servants or employees, or of any tenant under any lease which might otherwise result in a forfeiture of such insurance or any part thereof shall in any way affect the validity or enforceability of such insurance insofar as the Beneficiary is concerned; and (d) not be subject to a deductible in excess of $100,000. Each liability policy required hereunder shall name the Beneficiary as an additional insured on the liability policy. Notwithstanding anything to the contrary in any such insurance policies or endorsements thereto, the conditions and circumstances under which the proceeds of any such insurance are payable to the Beneficiary shall be governed by this Deed of Trust and the Credit Agreement. The Grantor shall not carry separate insurance, concurrent in form or kind or contributory in the event of loss with any insurance required under this Section 2.5. The Grantor may, however, provide any of the insurance coverage required hereunder through blanket policies carried by the Grantor and covering more than one (1) location and if such coverage is provided under such a blanket policy, the Grantor shall furnish the Beneficiary with a certificate of insurance on the date hereof setting forth the coverage as to the Mortgaged Premises, the limits of liability as to the Mortgaged Premises, the name of the carrier, the policy number and the expiration date. 2.5.4 If the Beneficiary shall by any manner acquire the title or estate of the Grantor in or to any portion of the Mortgaged Premises, it shall thereupon become the sole and absolute owner of all insurance policies affecting the Mortgaged Premises and to the extent applicable to such portion held by or required hereunder to be delivered to the Beneficiary, with the sole right to collect and retain all unearned premiums thereon, provided that any excess after satisfaction of the Obligations shall be promptly returned to the Grantor to the extent provided in the Security Agreement. The Grantor agrees, immediately upon demand, to execute and deliver such assignments or other authorizations or instruments as may be necessary or desirable to effectuate the foregoing. 2.5.5 If any of the Improvements or Equipment shall be materially damaged or destroyed, in whole or a material part thereof, by fire or other casualty, or any part of the Mortgaged Premises shall be taken as a result of any condemnation proceeding or by the exercise of the power of eminent domain, the Grantor shall give prompt notice thereof to the Beneficiary, and shall take all actions required by the terms of the Credit Agreement in respect of the net insurance proceeds from such Recovery Event. 2.6 To Comply with Laws. ------------------- 2.6.1 The Grantor, at its own expense, will promptly cure all material violations of law affecting the Mortgaged Premises and the use and operation thereof and will comply with, or cause to be complied with, in all material respects all present and - 12 - future Legal Requirements, all to the extent required by the Credit Agreement. 2.6.2 The Grantor will use and permit the use of the Mortgaged Premises only in accordance with any applicable licenses and permits issued by Governmental Authorities, all to the extent required by the Credit Agreement. 2.6.3 The Grantor will procure, pay for and maintain all material permits, licenses and other authorizations required to be procured and/or maintained by the owners and/or operators of the Mortgaged Premises for any use of the Mortgaged Premises, or any part thereof, then being made and for the lawful and proper operation and maintenance thereof, all to the extent required by the Credit Agreement. 2.7 Limitation on Disposition of the Mortgaged Premises. Except as --------------------------------------------------- otherwise permitted in the Credit Agreement, the Grantor shall not, during the term hereof, sell, assign, mortgage, pledge, encumber, or hypothecate or otherwise transfer or dispose of the Mortgaged Premises or any part thereof or any interest therein, or any of the rents, profits and income to be generated thereby without the Beneficiary's prior written consent. 2.8 To Maintain Priority of Lien. ---------------------------- 2.8.1 The Grantor will keep and maintain the Mortgaged Premises, and every part thereof, free from all liens of persons supplying labor and materials in connection with the construction, alteration, repair, improvement or replacement of the Improvements or of the Equipment except Permitted Liens. If any such liens shall be filed against the Mortgaged Premises, or any part thereof, the Grantor agrees that, within thirty (30) days after the Grantor receives notice of the filing thereof, it shall either (i) discharge the same of record or (ii) post with the Beneficiary a bond by a surety company licensed to do business in the State selected by Grantor and reasonably acceptable to Beneficiary whereby such surety undertakes to pay such lien in the event the Grantor fails to pay and discharge the same, such bond to be in an amount equal to 100% of the lien. The Grantor shall exhibit to the Beneficiary, upon request, all receipts or other reasonably satisfactory evidence of the payment of taxes, assessments, charges, claims, liens or any other item which may cause any such lien to be filed against the Mortgaged Premises. 2.8.2 In no event shall the Grantor do or permit to be done, or omit to do or permit the omission of, any act or thing the doing or omission of which would materially adversely impair the security of this Deed of Trust. - 13 - 2.9 Maintenance of Mortgaged Premises; Covenant Against Waste. The --------------------------------------------------------- Grantor will not commit or permit waste on the Mortgaged Premises and will keep and maintain at its own expense the Improvements and the Equipment in working condition and repair. The Grantor will neither do nor permit to be done anything to the Mortgaged Premises that materially adversely impairs the value thereof or which may violate any material covenant, condition or restriction affecting the same, or any part thereof, or any material change therein or in the condition thereof which will increase materially the danger of fire or other hazard arising out of the operation thereof. 2.10 After-Acquired Property. All right, title and interest of the ----------------------- Grantor in and to all improvements, betterments, renewals, substitutes and replacements of, and all additions and appurtenances to, the Mortgaged Premises hereafter acquired, constructed, assembled or placed by the Grantor on the Premises, and all conversions of the security constituted thereby, immediately upon such acquisition, construction, assembly, placement or conversion, as the case may be, and in each such case without any further mortgage, conveyance or assignment or other act of the Grantor, shall become subject to the lien of this Deed of Trust as fully and completely, and with the same effect, as though now owned by the Grantor and specifically described in the granting clauses hereof, but at any time and all times the Grantor, on demand, will execute, acknowledge and deliver to the Beneficiary any and all such further assurances, deeds, conveyances or assignments thereof as the Beneficiary may reasonably require for the purpose of expressly and specifically subjecting the same to the lien of this Deed of Trust. 2.11 Further Assurances. The Grantor shall, at its sole cost and ------------------ without expense to the Beneficiary, on demand, do, execute, acknowledge and deliver all and every such further acts, and all documents necessary to continue or perfect the lien of this Deed of Trust, including, without limitation, mortgages, as the Beneficiary shall from time to time reasonably require for better assuring, conveying, assigning, transferring, confirming and perfecting unto the Beneficiary the property and rights hereby mortgaged or assigned or intended now or hereafter so to be, or which the Grantor may be or may hereafter become bound to mortgage or assign to the Beneficiary, or for carrying out the intention or facilitating the performance of the terms of this Deed of Trust, or for filing, registering or recording this Deed of Trust. In addition, the Grantor shall make, execute and deliver or cause to be made, executed and delivered to the Beneficiary and, where appropriate, shall cause to be recorded or filed and from time to time thereafter re-recorded or refiled at such time and in such offices and places as shall be deemed reasonably necessary by the Beneficiary, all acts and instruments set forth in this section, together with all security agreements and financing statements as the Beneficiary may consider reasonably necessary or desirable in - 14 - order to effectuate, complete, create, or perfect, or to continue and preserve unto the Beneficiary, the property and rights hereby mortgaged or assigned or intended now or hereafter so to be. Upon any failure by the Grantor to do so within 15 days of Beneficiary's request, the Beneficiary may make, execute, record, file, re-record or refile any and all such instruments and take such acts, for and in the name of the Grantor, and the Grantor hereby irrevocably appoints the Beneficiary the agent and the attorney-in-fact of the Grantor to do so. Beneficiary shall provide Grantor with a copy of all such documents. This power of attorney is coupled with an interest and is irrevocable. 2.12 Recorded Instruments. The Grantor will promptly perform and -------------------- observe, or cause to be performed and observed, all of the terms, covenants and conditions of all instruments of record affecting the Mortgaged Premises. The Grantor shall do or cause to be done all things reasonably required to preserve intact and unimpaired and to renew any and all rights-of-way, easements, grants, appurtenances, privileges, licenses, franchises and other interests and rights in favor of or constituting any material portion of the Mortgaged Premises. The Grantor will not, without the prior written consent of the Beneficiary, which shall not be unreasonably withheld or delayed, initiate, join in or consent to any private restrictive covenant or other public or private restriction as to the use of the Mortgaged Premises, except for such covenants or restrictions entered into in the ordinary course of business which do not materially impair the value of the Mortgaged Premises or have a material adverse effect on the Grantor's use and occupancy of the Mortgaged Premises or where such covenants or restrictions are necessary for the continued operation of the Mortgaged Premises. The Grantor shall, however, comply with all lawful restrictive covenants and zoning ordinances and shall remain in compliance with other public or private restrictions affecting the Mortgaged Premises to the extent required by the Credit Agreement. 2.13 Hazardous Material. ------------------ 2.13.1 Grantor represents and warrants that (i) it is in compliance in all material respects with all Environmental Laws and with all material terms and conditions of the permits, licenses and authorizations required under any Environmental Laws, including, without limitation, all other material limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in the Environmental Laws in connection with its business at, and the use and occupancy of, the Mortgaged Premises, (ii) there is no civil, criminal or administrative action, suit, demand, claim, hearing, notice of violation, investigation, proceeding, notice or demand letter pending or threatened against it or any subsidiary under the Environmental Laws in connection with its business at, and the use and occupancy of, the Mortgaged Premises which could reasonably be - 15 - expected to result in a material fine, penalty or other cost or expense and (iii) there are no events, conditions, circumstances, activities, practices, incidents, actions or plans which may interfere with or prevent compliance in all material respects with the Environmental Laws, or which may give rise to any common law or legal liability, including, without limitation, liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or any other Environmental Law or related common law theory or which otherwise form the basis of any claim, action, demand, suit, proceeding, hearing or notice of violation, study or investigation, based on or related to the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport or handling, or the emission, discharge, release or threatened release into the environment, of any Hazardous Materials which could result in a fine, penalty or other cost or expense except for such events, conditions, circumstances, activities, practices, incidents, actions or plans which, individually or in the aggregate, could not reasonably be expected to result in a material adverse effect on Grantor or the Mortgaged Premises. 2.13.2 Grantor shall (i) comply in all material respects with any and all present and future Environmental Laws applicable to the Mortgaged Premises, (ii) not release, store, treat, handle, generate, discharge or dispose of any Hazardous Materials on, under or from the Mortgaged Premises in violation of or in a manner that could result in any material liability under any present and future Environmental Law and (iii) take all necessary steps to initiate and expeditiously complete all legally required remedial, corrective and other action to eliminate any such effect. In the event Grantor fails to comply with the covenants in the preceding sentence, Beneficiary may, in addition to any other remedies set forth herein, as agent for and at Grantor's sole cost and expense, upon 30 days written notice to Grantor, cause any legally required remediation, removal or response action relating to Hazardous Materials to be taken and Grantor shall provide to Beneficiary and its agents and employees access upon reasonable notice and during business hours to the Mortgaged Premises for such purpose. Any reasonable costs or expenses incurred by Beneficiary for such purpose shall be immediately due and payable by Grantor and, if not paid within 15 days after demand, shall bear interest at the Involuntary Rate. Beneficiary shall have the right at any time that the Obligations are outstanding but only after a default by Grantor in the performance of any of its obligations contained in this Section 2.13, which Grantor has not remedied within 30 days after notice, at the sole cost and expense of Grantor, to conduct an environmental audit of the Mortgaged Property by such persons or firms appointed by Beneficiary, and Grantor shall cooperate in all respects in the conduct of such environmental audit, including, without limitation, upon reasonable notice and during business hours by providing access to the Mortgaged Premises and to all records relating thereto. To the extent that any environmental - 16 - audit identifies conditions which violate in any material respect, or could be expected to give rise to any material liability or obligations under Environmental Laws, Grantor agrees to expeditiously correct any such violation or respond to conditions giving rise to such liability or obligations in a manner which complies with Environmental Laws and mitigates associated health and environmental risks consistent with legal requirements. Grantor shall indemnify and hold Trustee, Beneficiary and each Bank harmless from and against all loss, cost, damage (including, without limitation, consequential damages) or expense (including, without limitation, reasonable attorneys' and consultants' fees and disbursements and the allocated costs of staff counsel) that Trustee, Beneficiary or such Bank may sustain by reason of the assertion against Trustee, Beneficiary or such Bank by any party of any claim relating to such Hazardous Materials on, under or from the Mortgaged Premises or actions taken with respect thereto as authorized hereunder except those finally judicially determined to have been incurred by reason of the willful misconduct or gross negligence of Trustee, Beneficiary or such Lender. The foregoing indemnification shall survive repayment of all Obligations and any release or assignment of this Deed of Trust. 2.14 Asbestos. Grantor shall not install nor permit to be installed -------- in or removed from the Mortgaged Premises, asbestos or any asbestos-containing material (collectively, "ACM") except in compliance in all material respects with all Environmental Laws, and with respect to any ACM currently present in the Mortgaged Premises, Grantor shall promptly either (i) remove or encapsulate any ACM which such Environmental Laws require to be removed or encapsulated or (ii) otherwise comply in all material respects with such Environmental Laws with respect to such ACM, all at Grantor's sole cost and expense. If Grantor shall fail to so remove or encapsulate any ACM or otherwise comply in all material respects with such Environmental Laws, Beneficiary may, upon 30 days notice to Grantor in addition to any other remedies set forth herein, take whatever steps it deems reasonably necessary to eliminate or encapsulate any ACM from the Mortgaged Premises or otherwise comply in all material respects with Environmental Laws and Grantor shall provide to Beneficiary and its agents and employees access upon reasonable notice and during business hours to the Mortgaged Premises for such purpose. Any reasonable costs or expenses incurred by Beneficiary for such purpose shall be immediately due and payable by Grantor and if not paid within 15 days after demand, shall bear interest at the Involuntary Rate. Grantor shall indemnify and hold Trustee, Beneficiary and each Bank harmless from and against all loss, cost, damage (including, without limitation, consequential damages) and expense (including, without limitation, reasonable attorneys' and consultants' fees and disbursements and the allocated costs of staff counsel) that Trustee, Beneficiary or such Bank may sustain, as a result of the presence of any ACM in or upon the Mortgaged Premises and any removal thereof or compliance in all material respects with all Environmental Laws relating to - 17 - ACM in or upon the Mortgaged Premises except those finally judicially determined to have been incurred by reason of the willful misconduct or gross negligence of Trustee, Beneficiary or such Bank. The foregoing indemnification shall survive repayment of all Obligations and any release or assignment of this Deed of Trust. ARTICLE III LEASES; ASSIGNMENT AS FURTHER SECURITY, ETC. ------------------------------------------- 3.1 Assignment of Leases, Rents, Issues and Profits. As further ----------------------------------------------- security for the payment and performance of the Obligations secured hereby, the Grantor hereby transfers, assigns and sets over unto the Beneficiary all leases, if any, now or hereafter entered into by the Grantor with respect to all or any part of the Mortgaged Premises, and all renewals, extensions, subleases or assignments thereof, and all other occupancy agreements (written or oral), by concession, license or otherwise (individually, a "Lease" and collectively, the "Leases"), together with all of the Grantor's right, title and interest in and to all of the following (collectively, the "Rents"): the rents, income, receipts, revenues, issues and profits arising therefrom, such assignment of Rents to be absolute and not only collateral, subject to the license to collect, use and enjoy such Rents granted pursuant to subsection 3.2.1 hereof. This assignment shall automatically terminate upon the release of the lien of this Deed of Trust; provided, however, that if requested by the Grantor, the -------- ------- Beneficiary, at Grantor's cost and expense, shall promptly execute and deliver to Grantor a termination or release of mortgage in recordable form. 3.2 Entry upon Default. ------------------ 3.2.1 So long as no Event of Default shall have occurred and be continuing, the Grantor shall have the license to collect (but not more than one month in advance (except for any security deposit)) all of the Rents and other payments, if any, from the Leases and from the Mortgaged Premises generally and to use and enjoy the same in the manner provided herein. 3.2.2 If an Event of Default shall have occurred and be continuing, after the expiration of the applicable cure period, if any, in addition to its rights and remedies set forth in Article V, the Beneficiary may, as attorney-in- fact of the Grantor, make, enforce, or modify any of the Leases; obtain tenants for and evict tenants from the Mortgaged Premises; demand, fix and modify the Rents from the Mortgaged Premises; institute all legal proceedings (including summary proceedings) for collection of all Rents; obtain possession of the Mortgaged Premises or any part thereof, or enforce any other rights theretofore exercisable by the Grantor; do - 18 - any and all other acts which the Beneficiary, in its sole and absolute discretion, deems proper to protect the security hereof; and, with or without taking possession of the Mortgaged Premises, in the Grantor's own name, sue for or otherwise collect and receive all Rents, including those past due and unpaid, and apply the same, less the costs and expenses of operation and collection, including reasonable attorneys' fees, to the Obligations secured hereby, whether then matured or not, until the same shall have been paid in full; provided, -------- however, that any balance remaining after the indebtedness secured hereby shall - ------- have been paid in full shall be turned over to the Grantor or such other person as may lawfully be entitled thereto. Neither the entry upon and taking possession of the Mortgaged Premises, nor the collection and application of the Rents or other charges thereof as aforesaid, nor any other action taken by the Beneficiary in connection therewith, shall cure or waive any default hereunder or waive or modify any notice thereof or notice of acceleration of the Obligations theretofore given by the Beneficiary. 3.2.3 If an Event of Default shall have occurred and be continuing, notice in writing by the Beneficiary to the tenants under the Leases advising them that the Grantor has defaulted hereunder and requesting that all future Rents under the Leases be made to the Beneficiary (or its agent) shall be construed as conclusive authority to such tenants that such payments are to be made to the Beneficiary (or its agent). Such tenants shall be fully protected in making such payments to the Beneficiary (or its agent); and the Grantor hereby irrevocably constitutes and appoints the Beneficiary the attorney-in-fact and agent of the Grantor, coupled with an interest, for the purpose of endorsing the consent of the Grantor on any such notice and for taking any actions provided for in subsection 3.2.2. 3.3 The Grantor's Covenants Regarding Leases. ---------------------------------------- 3.3.1 The Grantor will use reasonable efforts to enforce the terms, covenants and conditions to be performed by all tenants and other parties to any Lease or other agreement pertaining to the Mortgaged Premises and will not, without the prior written consent of the Beneficiary, receive or collect rent from any tenant for a period of more than one month in advance other than a security deposit. 3.3.2 At any reasonable time, and from time to time (but not more often than once each year), on notice from the Beneficiary, the Grantor shall deliver within 15 days to the Beneficiary a schedule of all Leases then in effect, which schedule shall include the following: (a) the name of the tenant; (b) a description of the location of the leased space including but not limited to the approximate number of square feet so leased and the type of activity performed under such lease; (c) the rental rate, including escalations, if any; (d) the term of the Lease; and (e) - 19 - such other information as the Beneficiary may reasonably request. If requested by the Beneficiary (but not more than once each year), the Grantor shall also deliver photocopies of all Leases accompanied by the certificate of the Grantor that such copies are true, complete and accurate. 3.3.3 Upon the occurrence and during the continuance of an Event of Default, in the event of enforcement by the Beneficiary of the remedies provided for by law or by this Deed of Trust, each tenant shall, at the option of the Beneficiary, attorn to any Person succeeding to the interest of the Grantor as a result of such enforcement and shall recognize such successor in interest as landlord (or sub-landlord, as the case may be) under such Lease without change in the terms or other provision thereof (or with respect to Leases in effect as of the date hereof the Grantor shall use its reasonable efforts to cause the tenants thereunder to so attorn and recognize such successor); provided, -------- however, that such successor shall not be bound by any payment of rent or - ------- additional rent for more than one month in advance (other than any security deposit received by the Grantor, possession of which was actually transferred to such successor) or any material amendment or material modification of any such Lease made without the Beneficiary's consent or that of such successor in interest. Each such tenant shall, upon request of such successor in interest, execute and deliver instrument(s) confirming such attornment. 3.3.4 Upon the occurrence and during the continuance of an Event of Default, the Beneficiary, at its option, is authorized to foreclose or cause the foreclosure of this Deed of Trust in accordance with the provisions of Article V hereof, such foreclosure to be subject to the rights of any tenants, and the failure to make any such tenants parties defendant in any such foreclosure proceedings and to foreclose their rights will not be, nor be asserted by the Grantor to be, a defense to any proceedings instituted by the Beneficiary to collect the sums secured hereby or to collect any deficiency remaining unpaid after the foreclosure sale of the Mortgaged Premises. ARTICLE IV SECURITY AGREEMENT UNDER THE UNIFORM COMMERCIAL CODE ---------------------------------------------------- 4.1 Security Agreement. It is the intent of the parties hereto that ------------------ this Deed of Trust shall constitute a Security Agreement within the meaning of the Uniform Commercial Code of the State (the "Code") and the Grantor hereby transfers, assigns, delivers and grants unto the Beneficiary a security interest in, to and with respect to (a) the leases and rents assigned by the Grantor to the Beneficiary hereunder; (b) except as otherwise provided herein or in the Credit Agreement, so much of the Equipment as is considered or as shall be determined to be personal - 20 - property or "fixtures" (as defined in the Code), together with all replacements thereof, substitutions therefor or additions thereto; (c) all casualty insurance policies required to be maintained by Grantor hereunder, together with all general intangibles, contract rights and accounts arising therefrom; (d) all Proceeds in any Condemnation, together with all general intangibles, contract rights and accounts arising therefrom; (e) all cash and non-cash proceeds of the above-mentioned items; and (f) all right, title and interest in and to so much of the remainder of the Mortgaged Premises as is considered or shall be determined to be personal property other than records, documents and other items owned by customers of the Grantor and stored on the Mortgaged Premises (said property described in clauses (a) through (f) above being sometimes hereinafter referred to as the "Collateral"), and the Grantor further agrees that a security interest shall attach thereto for the benefit of the Beneficiary to secure the Obligations. Such security interest shall extend to all collateral of the kind which is the subject of this Article IV which the Grantor may acquire at any time during the continuation of this Deed of Trust. Upon the occurrence of and during the continuance of an Event of Default, after the expiration of the applicable cure period, if any, the Beneficiary may elect to treat the fixtures constituting a part of the Mortgaged Premises as either real property collateral or Collateral and then proceed to exercise such rights as apply to such type of collateral. The Grantor hereby authorizes the Beneficiary to file financing and continuation statements with respect to the Collateral without the signature of the Grantor, if same is lawful; otherwise the Grantor agrees to execute such financing and continuation statements as the Beneficiary may reasonably request. If there shall exist and be continuing an Event of Default under this Deed of Trust, the Beneficiary, pursuant to the appropriate provisions of the Code and to the extent permitted by applicable law, shall have all remedies available to it under the Code and shall have the option of proceeding as to both real and personal property in accordance with its rights and remedies in respect of the real property, in which event the default provisions of the Code shall not apply. Upon the occurrence and during the continuance of any Event of Default, the Beneficiary will have all rights and remedies granted by law, and particularly by the Code, including, without limitation, the right to take possession of all personal property constituting a part of the Mortgaged Premises, and for this purpose the Beneficiary may enter upon any premises on which any or all of such personal property is situated and take possession of and operate such personal property (or any portion thereof) or remove it therefrom. The Beneficiary may require the Grantor to assemble such personal property and make it available to the Beneficiary at a place to be designated by the Beneficiary which is reasonably convenient to all parties. The Beneficiary will give the Grantor reasonable notice of the time and place of any public sale or of the time after which any private sale or other disposition of such Collateral is to be made and, in any event, as required by law. This requirement of - 21 - sending reasonable notice will be met, and the Grantor and the Beneficiary acknowledge that such notice will be commercially reasonable within the meaning of the Code if not otherwise defined in the Uniform Commercial Code as in effect in the State of Texas, if the notice is given to the Grantor as herein provided at least ten (10) days before the time of the sale or disposition. The expenses of retaking, holding, preparing for sale, selling and the like incurred by the Beneficiary shall be assessed against the Grantor and shall include but not be limited to the reasonable legal expenses incurred by the Beneficiary. The Grantor agrees that it will not remove or permit to be removed from the Mortgaged Premises any of the Collateral except as permitted by the Security Agreement and/or the Credit Agreement. All replacements, renewals, substitutions and additions to the Collateral shall be and become immediately subject to the security interest of this Deed of Trust and the provisions of this Article IV. 4.2 Assignment of Non-Code Collateral. To the extent that any of the --------------------------------- Collateral is not subject to the Code, the Grantor hereby collaterally assigns to the Beneficiary all of the Grantor's right, title and interest in and to the Collateral to secure the Obligations secured hereby, together with the right of set-off with regard to such Collateral (or any part thereof). Release of the lien of this Deed of Trust shall automatically terminate this assignment. 4.3 Conflict with the Security Agreement. Not withstanding anything ------------------------------------ to the contrary contained herein, if any provision of this Deed of Trust relating to the Collateral conflicts with the provisions of the Security Agreement, the terms of the Security Agreement shall control. 4.4 Termination. If requested by Grantor, Beneficiary shall execute ----------- UCC-3 termination statements upon release of the lien of this Deed of Trust or as otherwise provided in the Credit Agreement or the Security Agreement. ARTICLE V EVENTS OF DEFAULT AND REMEDIES ------------------------------ 5.1 "Events of Default". Subject to the provisions of Section 5.2 ----------------- below, all of the Obligations shall become due, at the option of the Beneficiary, upon the occurrence of any Event of Default (as defined in the Credit Agreement). 5.2 Remedies. During the continuance of any Event of Default, after -------- the expiration of the applicable cure period, if any, the Beneficiary (acting at the direction of (x) the Required Banks pursuant to the terms of the Credit Agreement or (y) after all Credit Agreement Obligations have been paid, the holders of at - 22 - least a majority of all obligations outstanding from time to time under the Interest Rate Protection Agreements), at its option, may: 5.2.1 by notice to the Grantor, but without the requirement of any formal demand, presentment, notice of intention to accelerate or of acceleration, protest or notice of protest, all of which are hereby waived by the Grantor, declare all of the Obligations secured hereby to be immediately due and payable, and upon such declaration all of such Obligations shall become and be immediately due and payable; 5.2.2 after such proceedings as may be required by any applicable law or ordinance, either in person, or by its agents or attorneys, or by a court- appointed receiver, as permitted by applicable laws, enter into and upon all or any part of the Mortgaged Premises and each and every part thereof and exclude the Grantor, its agents and servants wholly therefrom; and having and holding the same, use, operate, manage and control the Mortgaged Premises and conduct the business thereof, either personally or by its superintendents, managers, agents, servants, attorneys or the receiver; and upon every such entry, at the expense of the Grantor, from time to time, either by purchase, repairs or construction, maintain and restore the Mortgaged Premises and, likewise make all necessary or proper repairs, renewals and replacements and such alterations, betterments, additions and improvements thereto and thereon as to it may seem reasonably advisable; and in every such case the Beneficiary shall have the right to manage and operate the Mortgaged Premises and to carry on the business thereof and exercise all rights and powers of the Grantor as its attorney-in- fact, or otherwise, as it shall deem best; and the Beneficiary shall be entitled to collect and receive all Rents of the Mortgaged Premises; and, after deducting the expenses of conducting the business thereof and all maintenance, repairs, renewals, replacements, alterations, additions, betterments and improvements and amounts necessary to pay for taxes, assessments, insurance and prior or other proper charges upon the Mortgaged Premises or any part thereof, as well as just and reasonable compensation for the services of the Beneficiary and Trustee and for all attorneys, counsel, agents, clerks, servants and other employees engaged or employed by it, the Beneficiary shall apply the monies arising as aforesaid in the manner specified in the Security Agreement; 5.2.3 with or without entry, personally or by its agents or attorneys insofar as applicable: (a) proceed at law or in equity to foreclose fully or partially this Deed of Trust, any statute or rule of law at any time existing to the contrary notwithstanding. The Beneficiary may sell the Mortgaged Premises either as a whole or in separate parcels, as Beneficiary may reasonably determine, and shall have the right to direct the order in which separate parcels shall be sold to the extent permitted - 23 - by the law of the State. The Beneficiary may postpone sale of all or any portion of the Mortgaged Premises by public announcement at such time and place of sale, and from time to time thereafter may postpone such sale by public announcement at the time fixed by the preceding postponement. The recitals in such deed of any matters or facts shall be conclusive proof of the truthfulness thereof. The Beneficiary may purchase the Mortgaged Premises or any part thereof at such sale in accordance with the laws of the State and the provisions hereof (including, without limitation, any power of sale or foreclosure procedure contained herein or allowed by the Code), for the Obligations secured hereby or for any portion thereof or any other sums secured hereby which are then due and payable, subject to the continuing lien of this Deed of Trust for the balance of the Obligations not then due; or (b) take such reasonable steps to protect and enforce its rights whether by action, suit or proceeding in equity or at law for the specific performance of any covenant, condition or agreement in the Security Agreement or in this Deed of Trust, or in aid of the execution of any power herein granted, or for any foreclosure hereunder, or for the enforcement of any other appropriate legal or equitable remedy or otherwise as the Beneficiary shall elect; 5.2.4 To the extent permitted by law, proceed with foreclosure in satisfaction of any part of the Obligations without declaring the whole of the Obligations as immediately matured, and such foreclosure may be made subject to the unmatured part of the Obligations, and it is agreed that such foreclosure, if so made, shall not in any manner affect the unmatured part of the Obligations, but as to such unmatured part this Deed of Trust, as well as the other related loan documents, shall remain in full force and effect just as though no foreclosure had been made. To the extent permitted by law, several foreclosures may be made without exhausting the right of foreclosures of any unmatured part of the Obligations, it being the purpose to provide for a foreclosure of the security for any matured portion of the Obligations without exhausting the power of foreclosure respecting the Mortgaged Premises for any other part of the Obligations; or 5.2.5 Upon ten (10) days' written notice after the expiration of any applicable notice period as provided in Section 5.1 hereof to the Grantor (or without prior notice in case of emergency) the Beneficiary (or any receiver of the Mortgaged Premises) shall have the right, but not the obligation, to make any payment, or to perform any other act or take any appropriate action, including, without limitation, entry on the Mortgaged Premises and performance of work thereat, as it, in its sole discretion, may deem necessary to cause such other term, covenant, condition or obligation to be promptly performed or observed on behalf of the Grantor or to protect the security of this Deed of - 24 - Trust. All monies reasonably expended by the Beneficiary in exercising its rights under this Section 5.2.5 (including, but not limited to, reasonable legal expenses and disbursements), together with interest thereon at the Involuntary Rate from the date of each such expenditures shall be paid by the Grantor to the Beneficiary forthwith upon demand by the Beneficiary and shall be secured by this Deed of Trust. 5.3 Sale; No Marshalling of Assets; Appointment of ---------------------------------------------- Receiver. - -------- 5.3.1 In case of a foreclosure, all of the Mortgaged Premises may be sold in one parcel notwithstanding that the proceeds of such sale exceed or may exceed the total amount of the Obligations. Moreover, the Beneficiary shall not be required to proceed hereunder before proceeding against any other security, shall not be required to proceed against other security before proceeding hereunder, and shall not be precluded from proceeding against any or all of any security in any order or at the same time. The sale of a part of the Mortgaged Premises shall not exhaust the power of sale, but sale may be made from time to time until the Obligations secured hereby are paid and performed in full. 5.3.2 The Beneficiary, in any action to foreclose this Deed of Trust, shall be entitled as a matter of strict right (and, to the extent permitted under the laws of the State, without notice, without regard to the adequacy of any security for the obligations and without regard to the solvency of any person, partnership or entity liable for the payment thereof) to the appointment of a receiver for the Mortgaged Premises and of the Rents thereof, and the Grantor hereby expressly consents to any such appointment provided that Beneficiary provides at least 10 days' written notice to the Grantor prior to such appointment. 5.3.3 The Grantor agrees, to the full extent that it may lawfully do so, that in any foreclosure or other action brought by the Beneficiary hereunder, it will not at any time insist upon or plead or in any way take advantage of any appraisement, valuation, stay, marshalling of assets, extension, redemption or moratorium law now or hereafter in force and effect so as to prevent, hinder or delay the enforcement of the provisions of this Deed of Trust or any rights or remedies the Beneficiary may have hereunder or by law and the Grantor hereby expressly waives all rights of the Grantor with respect thereto. 5.3.4 If an Event of Default shall occur and be continuing and the Beneficiary shall, subject to the provisions hereof, elect to accelerate the Obligations secured hereby, the Grantor, within fifteen (15) days after demand, will pay over to the Beneficiary, or any receiver appointed in connection with the foreclosure of this Deed of Trust, any and all amounts then held as - 25 - security deposits under all Leases; provided, however, that the Beneficiary -------- ------- shall thereupon indemnify the Grantor against all claims of tenants for the deposits so paid over. 5.3.5 Upon the occurrence of any Event of Default hereunder and during the continuance thereof, and in addition to all other rights of the Beneficiary provided herein or by law, the Grantor shall, on demand, surrender possession of the Mortgaged Premises to the Beneficiary, and the Grantor hereby consents that the Beneficiary may exercise any or all of the rights specified in Section 5.2 above. In the event that the Grantor is an occupant of the Mortgaged Premises, it agrees to surrender possession of the part of the Mortgaged Premises which it occupies to the Beneficiary immediately upon any acceleration event or Event of Default hereunder, and if the Grantor remains in possession, such possession shall be as tenant of the Beneficiary, and the Grantor agrees to pay monthly in advance to the Beneficiary such rent for the premises so occupied as the Beneficiary may reasonably demand consistent with the fair rental value thereof, and in default of so doing, the Grantor may also be dispossessed by summary proceedings or otherwise. In case of the appointment of a receiver of the rents and profits of the Mortgaged Premises, the covenants of this subsection 5.3.5 may be enforced by such receiver. The Grantor for itself and for all persons claiming under it or who may become holders of liens junior to the lien hereof hereby waives and releases, to the extent permitted by applicable law, all rights to direct the order in which any of the Mortgaged Premises can be sold at any sale or sales pursuant hereto. 5.3.6 Any court-appointed receiver of all or any part of the Mortgaged Premises, to the extent permitted by applicable law, shall be an agent of the court appointing such receiver and not an agent of the Beneficiary, and no acts of such receiver shall be deemed to be acts of the Beneficiary. 5.3.7 Upon any foreclosure sale, the Beneficiary may, after allowing for the portion of the total purchase price to be paid in cash and for the cost and expenses of the sale, compensation and other charges, in paying the purchase price apply any portion of or all sums secured hereby, in lieu of cash, to the amount which shall, upon distribution of the net proceeds of such sale, be payable thereon. All proceeds of any sale pursuant to this Article V shall be applied in the manner specified in the Security Agreement. 5.3.8 The Grantor agrees that the Beneficiary or any court having jurisdiction to foreclose the lien of this Deed of Trust may sell the Mortgaged Premises in part or as an entirety. 5.3.9 Upon the occurrence and during the continuance of any Event of Default, and to the extent permitted by applicable law, the Beneficiary may proceed to sell the Mortgaged Premises and - 26 - any and every part thereof, at public venue, to the highest bidder at the customary place of sale in the county in which such Mortgaged Premises are located, for cash, first giving notice as required by law of the time, terms and place of sale, and of the property to be sold, by advertisement made as required by law, and upon such sale shall execute and deliver a deed of conveyance of the property sold to the purchaser or purchasers thereof, and any statement or recital of fact in such deed shall be prima facie evidence of the truth of such ----- ----- statement or recital; and the Beneficiary shall receive the proceeds of such sale, out of which it shall pay: first, the cost and expense of executing such sale, including publication fees, mailing charges, title charges and reasonable attorneys' fees of the Beneficiary; next to the payment of the Obligations as provided in the Security Agreement; and the remainder, if any, shall be paid to the Grantor or such other parties as maybe entitled thereto. 5.4 Indemnification by the Grantor. ------------------------------ 5.4.1 The Grantor will pay to the Beneficiary on demand all reasonable costs, charges and expenses (including, without limitation, reasonable attorneys' fees) incurred or paid at any time by the Beneficiary because of the failure of the Grantor to perform, comply with or abide by any of the stipulations, agreements, conditions or covenants contained herein or in the Obligations secured hereby, together with interest on each such payment made by the Beneficiary at the Involuntary Rate from the date each such payment is made. 5.4.2 If any action or proceeding be commenced in which the Beneficiary, the Trustee, any Secured Creditor or any of their respective successors, assigns, employees, agents and servants (each, an "Indemnitee", collectively, the "Indemnitees") is made a party, or in which it becomes necessary to defend or uphold the lien of this Deed of Trust, or the construction, operation or occupancy of the Improvements by the Grantor or anyone else, the Grantor shall indemnify, defend and hold such Indemnitees harmless from all liability by reason of said litigation, including reasonable attorneys' fees and expenses incurred by such Indemnitees in any such litigation, whether or not any such litigation is prosecuted to judgment, and all sums paid by the Trustee or Beneficiary for the expense of any litigation to prosecute or defend the title, rights and lien created by this Deed of Trust (including, without limitation, reasonable attorneys' fees) shall be paid by the Grantor to the Trustee or Beneficiary on demand, together with interest thereon at the Involuntary Rate from the date each such payment is made, and all such sums and the interest thereon shall be a lien on the Mortgaged Premises, prior to any right, title or interest in or claim upon the Mortgaged Premises attaching or accruing subsequent to the lien of this Deed of Trust, and shall be deemed to be secured by this Deed of Trust. In any action or proceeding to foreclose this Deed of Trust, or to - 27 - recover or collect the Obligations, the provisions of law respecting the recovery of costs, disbursements and allowances, if inconsistent with the foregoing, shall prevail unaffected by this covenant; provided, however, that the Grantor shall not be responsible for any such liability resulting from the Indemnitees' gross negligence or willful misconduct. 5.5 Remedies Cumulative; No Waiver; Etc. ----------------------------------- 5.5.1 No remedy herein conferred upon or reserved to the Beneficiary is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative, and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. No delay or omission of the Beneficiary or Trustee to exercise any right or power accruing upon any Event of Default shall impair any such right or power, or shall be construed to be a waiver of any such Event of Default or any acquiescence therein; and every power and remedy given by this Deed of Trust to the Beneficiary or Trustee may be exercised from time to time as often as may be deemed expedient by the Beneficiary or Trustee. 5.5.2 A waiver in one or more instances of any of the terms, covenants, conditions or provisions hereof or of the Security Agreement shall apply to the particular instance or instances and at the particular time or times only, and no such waiver shall be deemed a continuing waiver, but all of the terms, covenants, conditions and other provisions of this Deed of Trust and of the Security Agreement shall survive and continue to remain in full force and effect; and no waiver shall be cumulative unless in writing, dated and signed by the Beneficiary. 5.5.3 To the extent permitted by applicable law, the Grantor hereby waives and renounces all homestead and similar exemption rights with respect to the Mortgaged Premises provided for by the Constitution and Laws of the United States and/or the State as against the collection of any of the Obligations; and the Grantor agrees that where, by the terms of this Deed of Trust or the Security Agreement secured hereby, a day is named or a time fixed for the payment of any sum of money or the performance of any agreement, the day and time stated enters into the consideration and is of the essence of the whole agreement between the Grantor and the Beneficiary. This Section 5.5.3 shall not limit, however, the applicability of grace periods provided for herein. 5.6 No Merger. It is the intention of the parties hereto that if the --------- Beneficiary or Trustee shall at any time hereafter acquire title to all or any portion of the Mortgaged Premises, then, and until the indebtedness secured hereby has been paid in full, the interest of the Beneficiary hereunder and the lien of this Deed of Trust shall not merge or become merged in or with the estate and interest of the Beneficiary or Trustee as the - 28 - holder and owner of title to all or any portion of the Mortgaged Premises and that, until such payment, the estate of the Beneficiary or Trustee in the Mortgaged Premises and the lien of this Deed of Trust and the interest of the Beneficiary and Trustee hereunder shall continue in full force and effect to the same extent as if the Beneficiary and Trustee had not acquired title to all or any portion of the Mortgaged Premises. ARTICLE VI PROVISIONS OF GENERAL APPLICATION --------------------------------- 6.1 Waiver; Amendment. (a) None of the terms and conditions of this ----------------- Deed of Trust may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by the Grantor and the Beneficiary (with the consent of either (x) the Required Banks or, to the extent required by Section 13.12 of the Credit Agreement, all of the Banks or (y) after all Obligations (as defined in the Credit Agreement) have been paid in full, the holders of at least a majority of all obligations outstanding from time to time under the Interest Rate Protection Agreements); provided that any change, -------- waiver, modification or variance affecting the rights and benefits of a single Class (as defined below) of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall require the written consent of the Requisite Creditors (as defined below) of such Class of Secured Creditors. For the purpose of this Deed of Trust the term "Class" shall mean each class of Secured Creditors, i.e., whether (x) the Bank Creditors as holders of the Credit --- Agreement Obligations or (y) the Interest Rate Protection Creditors as the holders of the Interest Rate Protection Obligations. For the purpose of this Deed of Trust, the term "Requisite Creditors" of any Class shall mean each of (x) with respect to the Credit Agreement Obligations, the Required Banks and (y) with respect to the Interest Rate Protection Obligations, the holders of at least a majority of all obligations outstanding from time to time under the Interest Rate Protection Agreements. (b) No delay on the part of the Beneficiary or Trustee in exercising any of its rights, remedies, powers and privileges hereunder or partial or single exercise thereof shall constitute a waiver thereof. No notice to or demand on the Grantor in any case shall entitle it to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Beneficiary or Trustee to any other or further action in any circumstances without notice or demand. 6.2 Notices. Except as otherwise specified herein, all notices, ------- requests, demands or other communications hereunder shall be deemed to have been duly given or made when delivered in the manner provided in Section 13.03 of the Credit Agreement, addressed - 29 - to such party at its address hereinabove set forth and any other copies required pursuant to the Credit Agreement, or at such other address as such party may hereafter notify the other in writing. 6.3 Additional Sums Payable by the Grantor. All sums which, by the -------------------------------------- terms of this Deed of Trust, are payable by the Grantor to the Beneficiary or Trustee shall, together with the interest thereon provided for herein, be secured by this Deed of Trust and added to and deemed part of the Obligations secured hereby whether or not the provision which obligates the Grantor to make any such payment to the Beneficiary or Trustee specifically so states. 6.4 Captions. The captions herein are inserted only as a matter of -------- convenience and for reference, and in no way define, limit, enlarge or describe the scope or intent of this Deed of Trust nor in any way shall affect this Deed of Trust or the con struction of any provision hereof. 6.5 Successors and Assigns. The covenants and agreements contained ---------------------- in this Deed of Trust shall run with the land and bind the Grantor, the heirs, executors, administrators, principals, legal representatives, successors and assigns of the Grantor and each person constituting the Grantor and all subsequent owners, encumbrancers and tenants of the Mortgaged Premises, or any part thereof, and shall inure to the benefit of and bind the Beneficiary, its successors and assigns and all subsequent beneficial owners of this Deed of Trust. 6.6 Gender and Number. Wherever the context of this Deed of Trust so ----------------- requires, the neuter gender includes the masculine and/or feminine gender and the singular number includes the plural. 6.7 Severability. In case any one or more of the provisions ------------ contained in this instrument shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions hereof, but this Deed of Trust shall be construed as if such invalid, illegal or unenforceable provision had never been included. 6.8 Subrogation. It is understood and agreed that any proceeds of ----------- the Obligations, to the extent that the same are utilized to pay or renew or extend any indebtedness of the Grantor, or any other indebtedness, or take up or release any outstanding liens against the Mortgaged Premises, or any portion thereof, have been advanced by the Beneficiary or Trustee at the Grantor's request. The Beneficiary or Trustee, as the case may be, shall be subrogated to any and all rights and liens owned or claimed by any owner or mortgagee of said outstanding rights and liens, however, remote, regardless of whether said rights and liens are acquired by assignment or are released by the beneficiary thereof upon payment. - 30 - 6.9 Usury. Notwithstanding anything contained in this Deed of Trust ----- to the contrary, the Beneficiary shall never be deemed to have contracted for or be entitled to receive, collect or apply as interest on the Obligations secured hereby, any amount in excess of the amount permitted and calculated at the highest lawful rate, and, in the event the Beneficiary ever receives, collects or applies as interest any amount in excess of the amount permitted and calculated at the highest lawful rate, such amount which would be excessive interest shall be applied to the reduction of the unpaid principal balance of the Obligations secured hereby, and, if the principal balance of the Obligations secured hereby is paid in full, any remaining excess shall forthwith be paid to the Grantor, together with all interest earned thereon. In determining whether or not the interest paid or payable under any specific contingency exceeds the amount of interest permitted and calculated at the highest lawful rate, the Grantor and the Beneficiary shall, to the maximum extent permitted under applicable law, (i) characterize any non-principal payment (other than payments which are expressly designated as interest payments hereunder) as an expense, fee or premium, rather than as interest, and (ii) spread the total amount of interest throughout the entire contemplated term of the indebtedness secured hereby. 6.10 Counterparts. This Deed of Trust may be simulta neously ------------ executed in a number of identical counterparts, each of which, for all purposes, shall be deemed an original. 6.11 Controlling Law. THIS DEED OF TRUST AND THE RIGHTS AND --------------- OBLIGATIONS OF THE PARTIES UNDER THIS DEED OF TRUST SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE. 6.12 Entire Agreement. This Deed of Trust along with the Credit ---------------- Documents embodies the entire agreement and understanding between the parties relating to the subject matter hereof. 6.13 Release. (a) After the Termination Date (as defined below), ------- this Deed of Trust shall be discharged and satisfied or assigned at the Grantor's option by the Beneficiary (without recourse and without any representation or warranty) at the expense of the Beneficiary upon Grantor's written request (provided that all indemnities set forth herein, which are expressly agreed to survive, shall survive such discharge and satisfaction). Concurrently with such satisfaction and discharge or assignment of this Deed of Trust, the Beneficiary, on written request and at the expense of the Grantor, will execute and deliver such proper instruments of release and satisfaction or assignment as may reasonably be requested to evidence such release or assignment and any such instrument when duly executed by the Beneficiary and duly recorded by the Grantor in the places where this Deed of Trust is recorded shall conclusively evidence the - 31 - release or assignment of this Deed of Trust. As used in this Deed of Trust, "Termination Date" shall mean the date upon which the Commitments and all Interest Rate Protection Agreements are terminated, no Note or Letter of Credit is outstanding (and all Loans have been repaid in full), all Letters of Credit have been terminated and all Obligations then owing have been paid in full. (b) The Beneficiary shall, at the request of the Gran tor, release (without recourse and without any representation or warranty) the Mortgaged Premises, or any part thereof, provided that (x) either the sale of all or part -------- of the Mortgaged Premises is permitted under Section 9.02 of the Credit Agreement or such release has been approved in writing by the Required Banks and (y) the proceeds of such sale of the Mortgaged Premises or portion thereof are applied as, and to the extent, required pursuant to the Credit Agreement. 6.14 Additional Advances. This Deed of Trust shall secure not only ------------------- the Obligations but also any and all other Obligations now owing or which may hereafter be owing by the Grantor to the Secured Creditors pursuant to the Borrower Security Agreement. The lien of this Deed of Trust shall be valid as to all Obligations secured hereby, including future advances made by the Beneficiary to or on behalf of or for the benefit of the Grantor and future obligations, from the time of its filing for record in the office of the county clerk of the county in which the Mortgaged Premises are located. The total principal amount of the Obligations secured hereby may increase or decrease from time to time, but the total unpaid balance of Obligations secured hereby at any one time outstanding shall not exceed $200,000,000, including interest thereon and any disbursements which the Beneficiary may make under this Deed of Trust, the Credit Documents and the Interest Rate Protection Agreements, or any other document with respect hereto (e.g., for payment of Impositions or insurance on --- this Property) and interest on such disbursements (all such indebtedness being hereinafter referred to as the "maximum amount secured hereby"). This Deed of Trust is intended to and shall, to the extent permitted by law, be valid and have priority over all subsequent liens and encumbrances, including statutory liens, to the extent of the maximum amount secured hereby. 6.15 Fixture Filing. This Deed of Trust shall also con stitute a -------------- "fixture filing" for purposes of the Code. Portions of the Collateral are or may become fixtures. 6.16 Financing Statement. The Beneficiary shall have the right at ------------------- any time to file this Deed of Trust as a financing statement, but the failure to do so shall not impair the validity and enforceability of this Deed of Trust in any respect whatsoever. A carbon, photographic or other reproduction of this Deed of Trust, or any financing statement relating to this Deed of Trust, shall be sufficient as a financing statement. - 32 - 6.17 Actions of Beneficiary. It is expressly understood and agreed ---------------------- that the obligations of the Beneficiary with respect to the Mortgaged Premises and all interests therein and with respect to the disposition thereof, and otherwise under this Deed of Trust, are only those expressly set forth in this Deed of Trust. The Beneficiary shall act hereunder on the terms and conditions set forth in Article 12 of the Credit Agreement. Neither the Beneficiary nor any of its officers, directors, employees or agents shall be liable for any action taken or omitted by it or them in respect of this Deed of Trust or the Mortgaged Premises unless caused by its or their gross negligence or willful misconduct, and the Beneficiary, its officers, directors and employees shall be entitled to refrain from acting in accordance with this Deed of Trust unless it has, or they have, received from the Required Banks written instructions and if requested, appropriate indemnification, in respect of actions to be taken. In no event shall the Beneficiary be required to take any action in contravention of applicable law or any of the Credit Documents. The actions of the Beneficiary with respect to the Mortgaged Premises shall be mechanical and administrative in nature and the Beneficiary shall not have, by reason of this Deed of Trust, any fiduciary relationship with respect to any Secured Creditor. 6.18 Deed of Trust Secures Line of Credit. The Grantor and the ------------------------------------ Beneficiary intend that this Deed of Trust shall secure the line of credit established under the Credit Agreement. The maximum principal amount of credit which may be extended under such line of credit, which may be outstanding at any one time or times and which shall be secured by this Deed of Trust, is $70,000,000. 6.19 Date and Maturity of Obligations. The date and maturity date of -------------------------------- the Obligations secured hereby is June 30, 2004. 6.20 Concerning Trustee. Trustee may resign by an instrument in ------------------ writing addressed to Beneficiary or be removed at any time with or without cause by instrument in writing duly executed by Beneficiary. In case of the death, resignation or removal of Trustee, a successor (each, a "Successor Trustee") may be appointed by Beneficiary by instrument of substitution complying with any applicable requirements of law, and in the absence of any such requirement without other formality than appointment and designation in writing. Such appointment and designation shall be full evidence of the right and authority to make the same and of all facts therein recited, and upon the making of any such appointment and designation this conveyance shall vest in the Successor Trustee all the estate and title of its predecessor in all the Mortgage Property, and such Successor Trustee shall thereupon succeed to all the rights, powers, privileges, immunities and duties hereby conferred upon the prior Trustee. Except for gross negligence or willful misconduct, Trustee shall not be liable for any act or omission or error of judgment. Trustee may rely on any document believed by him in good faith to be genuine. All - 33 - money received by Trustee shall, until used or applied as herein provided, be held in trust. Section 6.21 Beneficiary's Authority. Notwithstanding anything to ----------------------- the contrary contained in this Deed of Trust, Grantor may rely on and/or comply with any writing or notice executed by the Beneficiary. Grantor may assume the genuineness and due authorization of any such writing or notice and shall have no obligation to confirm the genuineness or due authorization of any such writing, including, without limitation, the receipt by Beneficiary of the consent or approval of any of the Banks. IN WITNESS WHEREOF, the Grantor has duly executed this Deed of Trust as of the day and year first above written. [Seal] COINMACH CORPORATION By: /s/ ROBERT M. DOYLE ------------------------- Name: Robert M. Doyle Title: Senior Vice President - 34 - STATE OF NEW YORK ) ------------- : ss.: COUNTY OF WESTCHESTER ) ------------ On this 27 day of March, 1997 before me appeared Robert M. Doyle, to ---- ----- --------------- me personally known, who being by me duly sworn, did say that he is the Senior ------ V.P. of Coinmach Corporation, a Delaware corporation, and that the seal affixed - ---- to the foregoing instrument is the corporate seal of said corporation and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and said Robert M. Doyle acknowledged said instrument --------------- to be the free act and deed of said corporation. IN WITNESS WHEREOF, I have hereunder set my hand and affixed my notarial seal at my office in New York County, New York, the day and year last above written. [NOTARY SEAL] /s/ Vincent Paciariello ------------------------ Notary Public in and for The State of New York and -------- County of Westchester ----------- My Comission Expires: Notary's Printed Name: 12-31-97 ------------------------------ Vincent Paciariello Notary Public, State of New York No. 4700973 Qualified in Westchester County Commission Expires Dec. 31, 1997 SCHEDULE I -------- - Permitted Encumbrances ----------------------- 1. The following restrictive covenants of record: Volume 421, page 842, Deed Records, Dallas County, Texas (Tracts 1 and 2), and Volume 67167, page 2511, Deed Records, Dallas County, Texas (Tract 2). 2. Any discrepancies, conflicts, or shortages in area or boundary lines of any encroachments, or protrusions, or any overlapping of improvements. 3. Standby fees, taxes and assessments by any taxing authority for the year 1997 and subsequent years, a lien not yet due and payable, and subsequent taxes and assessments by any taxing authority for prior years due to change in land usage or ownership. 4. Thirty five foot building setback line over the front of subject property, as shown on the plat recorded in Volume 354, page 1722, Map Records, Dallas County, Texas. (Tracts 1 and 2) 5. Easement granted by Red Bird Industrial Park Inc., a Texas corporation to Gulf, Colorado & Santa Fe Railway Company, dated August 21, 1964, filed for record on October 12, 1964 and recorded in Volume 419, Page 954, Deed Records, Dallas County, Texas and as shown on plat recorded in Volume 354, Page 1722, Map Records, Dallas County, Texas. (Tracts 1 and 2) 6. Easement granted by Paul B. Merrifield, et al. to Texas Power & Light Company, dated September 16, 1947, filed for record on January 20, 1948 and recorded in Volume 2934, Page 580, Deed Records, Dallas County, Texas. (Tract 1) 7. Easement granted by W. J. Merrifield, et al. to Texas Power & Light Company, dated April 17, 1945, filed for record on January 22, 1946 and recorded in Volume 2608, Page 560, Deed Records, Dallas County, Texas. (Tract 1) - 2 - 8. Easement granted by Richard F. Ford, et al. to Dallas Power & Light Company, dated August 18, 1980, filed for record on September 8, 1980 and recorded in Volume 80177, Page 0934. Deed Records, Dallas County, Texas. (Tract 1) 9. Easement granted by Red Bird Industrial Park, Inc., to Dallas Power & Light Company, dated June 8, 1966, filed for record on June 21, 1966 and recorded in Volume 848, page 0286, Deed Records, Dallas County, Texas. (Tract 2) 10. Easement granted by Trammell Crow & George A. Shutt to Dallas Power & Light Company and Southwestern Bell Telephone Company, dated May 15, 1967, filed for record on May 31, 1967 and recorded in Volume 67108, page 0069, Deed Records, Dallas County, Texas. (Tract 2) 11. Easement granted by Trammell Crow & George A. Shutt to Dallas Power & Light Company and Southwestern Bell Telephone Company, dated November 1, 1968, filed for record on December 5, 1968 and recorded in Volume 68237, Page 2855, Deed Records, Dallas County, Texas. (Tract 2) 12. Thirty five foot building setback line over the West of subject property, as shown on the plat recorded in Volume 354, Page 1722, Map Records, Dallas County, Texas. (Tract 2) EXHIBIT "A" Legal Description GF# 478693 Commitment No.44-903-80-478693 DESCRIPTION Tract 1: All that certain lot, tract or parcel of land lying and being situated in the County of Dallas, the State of Texas, to-wit: BEING located in City Block 6953, First Section Red Bird Industrial Park, as recorded in Volume 354, Page 1722 of the Deed Records of Dallas County, Texas, and being more particularly described as follows: BEGINNING at a point IN THE South line of Bronze Way, said point being 392.32 feet East of the East line of Cockrell Hill Road; THENCE North 89 degrees 52 minutes 50 seconds East along the South line of Bronze Way, 400.0 feet to corner; THENCE South 0 degrees 07 minutes 10 seconds East along the West line of the A.H. Robins Tract, 250.0 feet to corner; THENCE South 89 degrees 52 minutes 50 seconds West along the North line of the 34 foot railroad easement, 400.0 feet to corner; THENCE North 0 degrees 07 minutes 10 seconds West, 250.0 feet to the PLACE OF BEGINNING. Tract 2: Part of City Block 6953, First Section Red Bird Industrial Park, an addition to the City of Dallas, Texas, according to the plat thereof recorded in Volume 354, at Page 1722 of the Deed Records of Dallas county, Texas, and being more particularly described as follows: Beginning at the intersection of the South line of Bronze Way with the new East line of Cockrell Hill Road; Thence North 89 degrees 52 minutes 50 seconds East along the South line of Bronze Way 392.32 feet to corner; Thence South 0 degrees 07 minutes 10 seconds East 250.0 feet to corner; Thence South 89 degrees 52 minutes 50 seconds West along the North line of the 34 foot easement conveyed to the Atchison Topeka & Santa Fe Railway Company 392.85 feet to corner; Thence North along the new East line of Cockrell Hill Road 250.0 feet to place of beginning. EX-11.1 23 COMPUTATION OF LOSS PER SHARE EXHIBIT 11.1 COINMACH LAUNDRY CORPORATION COMPUTATION OF LOSS PER SHARE (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
SIX-MONTH TRANSITION YEAR ENDED PERIOD ENDED APRIL 5, 1995 TO MARCH 28, MARCH 29, SEPTEMBER 29, 1997 1996 1995 ---------- ------------ ---------------- LOSS AVAILABLE TO STOCKHOLDERS: Loss before extraordinary items.... $ (10,227) $ (2,523) $ (6,116) Extraordinary items, net........... (296) (8,925) ---------- ---------- ---------- Net loss........................... $ (10,523) $ (11,448) $ (6,116) ========== ========== ========== WEIGHTED AVERAGE SHARES OUTSTANDING: Common shares...................... 9,232,530 7,774,017 7,774,017 EARNINGS PER COMMON SHARE: Loss before extraordinary items.... $ (1.11) Extraordinary items, net........... (0.03) ---------- Net loss........................... $ (1.14) ========== PRO FORMA EARNINGS PER COMMON SHARE: Loss before extraordinary items.... $ (0.32) $ (0.79) Extraordinary items, net........... (1.15) -- ---------- ---------- Net loss........................... $ (1.47) $ (0.79) ========== ==========
EX-21.1 24 LIST OF SUBSIDIARIES EXHIBIT 21.1 LIST OF SUBSIDIARIES
NAME JURISDICTION ---- ------------ Coinmach Corporation............................................ Delaware Grand Wash & Dry Launderette, Inc. ............................. New York Super Laundry Equipment Corp. .................................. New York Coinmach Laundromat GP Corp. ................................... New York Coinmach Laundromat LP Corp. ................................... New York Coinmach Laundromat Holding, LP................................. New York Maquilados Automaticos SA de CV................................. Mexico Automatica SA de CV............................................. Mexico
EX-27.1 25 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS 6-MOS MAR-28-1997 MAR-29-1996 MAR-30-1996 SEP-30-1995 MAR-28-1997 MAR-29-1996 14,729 19,858 0 0 6,894 5,260 0 0 7,959 4,443 0 0 154,133 102,208 42,017 19,509 472,921 249,148 0 0 341,655 201,655 0 0 0 0 53,265 17,903 (29,702) (19,211) 472,921 249,148 0 0 206,852 89,070 0 0 139,446 60,536 53,081 20,056 0 0 26,859 11,999 (12,534) (3,521) (2,307) (998) (10,227) (2,523) 0 0 (296) (8,925) 0 0 (10,523) (11,448) (1.14) (1.47) 0 0 Total Assets: Includes Advance Rental Payments of $38,472 and $20,320, Contract Rights of $180,557 and $59,745 and Goodwill of $95,771 and $44,071 each net of accumulated amortization, for the year ended March 28, 1997 and the six months ended March 29, 1996, respectively. Bonds: Includes $195,655 of 11 3/4% senior notes for the year ended March 28, 1997 and the six months ended March 29, 1996 as well as debt outstanding under a credit facility of $130,000, and a promissary note of $15,000 for the year ended March 28, 1997. Total Liabilities: Includes Accrued Commissions of $10,573 and $7,380 and Accrued Interest of $9,712 and $7,745, for the period ended March 28, 1997 and the six months ended March 29, 1996, respectively. Total Revenue: Total Revenues include Sales of laundromats and equipment of $20,712 and $8,625 for the year ended March 28, 1997 and the six months ended March 29, 1996, respectively. Total Costs: Total Costs include Cost of Goods Sold of $14,766 and $6,011, for the year ended March 28, 1997 and the six months ended March 29, 1996, respectively. Other Expenses: Other Expenses include stock based compensation charges of $2,152 for the year ended March 28, 1997. Income Tax: The provision (benefit) for income taxes consists of $200 and $50 currently payable and ($2,507) and ($1,048) deferred, for the year ended March 28, 1997 and the six months ended March 29,1996, respectively. Net Income: In addition, EBITDA (earnings before interest, income taxes, depreciation and amortization) of $62,793 (before the deduction for the stock-based compensation charge) and $26,690 (before restructuring expenses) was generated for the reported periods. EBITDA is a meaningful measure of a company's ability to service debt. EPS: The components are EPS before extraordinary items of ($1.11) and ($.32) and EPS of extraordinary items of ($.03) and ($1.15) for the year ended March 28, 1997 and the six months ended March 29, 1996, respectively.
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