Management Contribution Agreement

EXHIBIT 10.23


COINMACH HOLDINGS, LLC
MANAGEMENT CONTRIBUTION AGREEMENT


THIS CONTRIBUTION AGREEMENT (this "Agreement") is made as of March 5, 2003, by and between Coinmach Holdings, LLC, a Delaware limited liability company (the "Company"), and James N. Chapman ("Management Stockholder"). Except as otherwise indicated herein, capitalized terms used herein are defined in Section 7 hereof.


WHEREAS, Coinmach Laundry Corporation, a Delaware corporation ("Coinmach Laundry"), will be a wholly-owned subsidiary of the Company on the Closing Date;


WHEREAS, Coinmach Corporation, a Delaware corporation ("Coinmach Corporation"), is a wholly-owned subsidiary of Coinmach Laundry;


WHEREAS, Appliance Warehouse of America, Inc., a Delaware corporation ("Appliance Warehouse"), was formed as a wholly-owned subsidiary of Coinmach Corporation;


WHEREAS, Management Stockholder acquired shares of common stock, par value $.01 per share, of Coinmach Laundry (the "Non-EPP Common Stock") in connection with Coinmach Laundry's going-private transaction in July of 2000;


WHEREAS, Management Stockholder also acquired shares of Class B2 Preferred Stock, par value $.01 per share, of Coinmach Laundry (the "CLC Preferred Stock") in connection with Coinmach Laundry's going-private transaction in July of 2000;


WHEREAS, in connection with Coinmach Laundry's equity participation program (the "CLC Equity Participation Program"), Management Stockholder also acquired shares of common stock, par value $.01 per share, of Coinmach Laundry (the "EPP Common Stock" and, together with the Non-EPP Common Stock, the "CLC Common Stock") pursuant to the Coinmach Laundry Corporation Equity Participation Program Restricted Common Stock Purchase Agreement, dated as of December 17, 2000, by and between Management Stockholder and Coinmach Laundry (the "CLC Equity Purchase Agreement");


WHEREAS, Management Stockholder and Coinmach Laundry desire to terminate the CLC Equity Purchase Agreement and enter into this Agreement, which shall contain substantially similar terms as the CLC Equity Purchase Agreement;


WHEREAS, in connection with the CLC Equity Participation Program, Management Stockholder agreed to assign all of the issued and outstanding shares of EPP Common Stock owned by Management Stockholder to Coinmach Laundry pursuant to the Management Stock Assignment, dated as of December 17, 2000 (the "CLC Stock Assignment");


WHEREAS, Management Stockholder desires to replace such CLC Stock Assignment with an undated instrument of transfer containing customary terms and conditions of transfer in respect of the securities of the Company received in exchange for the Contributed Stock (the "Instrument of Transfer");


WHEREAS, in connection with the purchase of EPP Common Stock under the CLC Equity Participation Program, Management Stockholder entered into the Management Promissory Note, dated as of December 17, 2000 (the "CLC Promissory Note"), in favor of Coinmach Laundry;


WHEREAS, Management Stockholder desires to amend and restate the CLC Promissory Note as set forth in the Amended and Restated Promissory Note, dated as of the Closing Date (the "Amended CLC Promissory Note"), with substantially similar terms as the CLC Promissory Note;


WHEREAS, in connection with the CLC Equity Participation Program, Management Stockholder entered into the Management Security Agreement, dated as of December 17, 2000, by and among Management Stockholder, Coinmach Laundry and the secretary of Coinmach Laundry (the "CLC Security Agreement");


WHEREAS, Management Stockholder desires to amend and restate the CLC Security Agreement as set forth in the Amended and Restated Security Agreement, dated as of the Closing Date (the "Amended CLC Security Agreement," and together with the Instrument of Transfer and the Amended CLC Promissory Note, the "Amended EPP Documents");


WHEREAS, on or prior to the date hereof, (i) Coinmach Corporation declared and paid a dividend on its issued and outstanding shares of common stock, par value $.01 per share, payable in shares of common stock, par value $.01 per share, of Appliance Warehouse (the "AWA Common Stock"), and (ii) Coinmach Laundry authorized the declaration of a dividend (the "AWA Common Stock Dividend") on its issued and outstanding shares of CLC Common Stock in shares of AWA Common Stock;


WHEREAS, the AWA Common Stock Dividend is payable on the Closing Date to holders of record of CLC Common Stock as of the Closing Date;


WHEREAS, Management Stockholder desires to contribute to the Company, and the Company desires to acquire from Management Stockholder, all of (i) the CLC Common Stock, (ii) the AWA Common Stock (by Management Stockholder's assignment of its right to receive the AWA Common Stock Dividend), and (iii) the CLC Preferred Stock (the CLC Preferred Stock, the CLC Common Stock and the AWA Common Stock being referred to collectively herein as the "Contributed Stock"), owned (or with respect to which Management Stockholder has the right to receive), directly or indirectly, by Management Stockholder and listed on Schedule A attached hereto, in exchange for Common Units and Class C Preferred Units of the Company in the amounts set forth on Schedule A attached hereto.


NOW THEREFORE, the parties hereto hereby agree as follows:


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Section 1. Contribution; Issuance and Vesting of Common Units and Issuance of Class C Preferred Units; Consent to Dividend.


1.1 Authorization of Common Units and Preferred Units. The Company hereby authorizes the issuance to Management Stockholder of 756,436 Common Units and 109.79 Class C Preferred Units.


1.2 Contribution of Contributed Stock and Issuance of Common Units and Class C Preferred Units. At the Closing (as defined in Section 1.5 below), subject to the terms and conditions set forth herein, Management Stockholder shall contribute the CLC Common Stock and the CLC Preferred Stock and assign all of its right, title and interest in and to the AWA Common Stock Dividend, to the Company (the "Management Stock Contribution"), and the Company shall issue to Management Stockholder the number of Common Units and Class C Preferred Units listed on Schedule A attached hereto in exchange therefor. The Company and Management Stockholder agree that (i) the fair value of the Common Units received in exchange for the contributed CLC Common Stock and the AWA Common Stock is equal to the fair value of the CLC Common Stock and the AWA Common Stock contributed by Management Stockholder for the Common Units as set forth on Schedule A, (ii) the fair value of the Class C Preferred Units received in exchange for the contributed CLC Preferred Stock is equal to the fair value of the CLC Preferred Stock contributed by Management Stockholder for the Class C Preferred Units as set forth on Schedule A, (iii) the consideration given by Management Stockholder is a tax free contribution of property to a partnership pursuant to Code Section 721, and (iv) each party shall prepare or cause to be prepared their tax returns in accordance with clauses (i) through (iii) above. The parties hereto hereby acknowledge and agree that upon delivery of the Dividend Payment Notice to Coinmach Laundry pursuant to Section 2.5 hereof, the Company shall be entitled to receive all of the AWA Common Stock to which Management Stockholder is entitled pursuant to the AWA Common Stock Dividend without any further action required to be taken by any party hereto or otherwise (except as otherwise provided in this Section 1.2).


1.3 Vesting of Common Units. The Management Stock Contribution shall include both the Vested Shares and Unvested Shares of EPP Common Stock held by Management Stockholder under the CLC Equity Purchase Agreement. Management Stockholder shall receive from the Company at the Closing a number of Common Units representing the number of Vested Shares of EPP Common Stock held by Management Stockholder under the CLC Equity Purchase Agreement on the date of the Closing (together with the other Common Units, the "Vested Common Units") and a number of Common Units representing the number of Unvested Shares of EPP Common Stock held by Management Stockholder under the CLC Equity Purchase Agreement on the date of the Closing (the "Unvested Common Units"). 634,442 of the Common Units held by Management Stockholder set forth on Schedule A shall be subject to the following vesting schedule (expressed as a percentage of 634,442 Common Units):


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INSTALLMENT VESTING DATE APPLICABLE TO INSTALLMENT ---------- --------------------------------------
20% December 17, 2000
20% December 17, 2001
20% December 17, 2002
20% December 17, 2003
20% December 17, 2004


1.4 No Voting Rights. Except as otherwise provided for in the LLC Agreement, Management Stockholder shall have no voting rights with respect to the Unvested Common Units.


1.5 Closing. The closing of the Management Stock Contribution and the issuance of the Common Units and Class C Preferred Units (the "Closing") shall take place at the offices of Mayer, Brown, Rowe & Maw, 1675 Broadway, New York, NY 10019 at 10:00 a.m. on the Closing Date, or at such other place designated by the Company.


1.6 Consent to Dividend. Management Stockholder hereby consents and agrees to the declaration and payment of the AWA Common Stock Dividend by Coinmach Laundry prior to the payment of any dividend or other distribution on such Management Stockholder's CLC Preferred Stock to which such Management Stockholder may be entitled and expressly agrees, solely in his capacity as a holder of CLC Preferred Stock, that such Management Stockholder shall not be entitled to be paid any dividends on its CLC Preferred Stock, including the AWA Common Stock Dividend, as a condition to the payment of such AWA Common Stock Dividend.


Section 2. Conditions to Closing. The Company's obligation to issue the Common Units and Class C Preferred Units to Management Stockholder in connection with the Management Stock Contribution is subject to the satisfaction as of the Closing of the following conditions:


2.1 Limited Liability Company Agreement. Management Stockholder shall have entered into the LLC Agreement on the Closing Date and shall have executed and delivered a counterpart signature page thereto. The LLC Agreement shall be in full force and effect as of the Closing, and the parties to the LLC Agreement shall not be in breach of any of the terms thereof.


2.2 Registration Agreement. Management Stockholder shall have entered into the Company's registration agreement (the "LLC Registration Agreement") on the Closing Date and shall have executed and delivered to the Company a counterpart signature page thereto. The LLC Registration Agreement shall be in full force and effect as of the Closing, and the parties to the LLC Registration Agreement shall not be in breach of any of the terms thereof.


2.3 Securityholders Agreement. Management Stockholder shall have entered into the Company's securityholders agreement (the "LLC Securityholders Agreement") on the Closing Date and shall have executed and delivered to the Company a counterpart signature page thereto. The LLC Securityholders Agreement shall be in full force and effect as of the Closing, and the parties to the LLC Securityholders Agreement shall not be in breach of any of the terms thereof.


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2.4 Amended EPP Documents. Management Stockholder shall have entered into each of the Amended EPP Documents on the Closing Date and shall have executed and delivered to the Company a counterpart signature page thereto.


2.5 Delivery of Dividend Payment Notice. Management Stockholder shall have delivered to Coinmach Laundry written notice substantially in the form attached hereto as Exhibit A (the "Dividend Payment Notice"), directing and authorizing Coinmach Laundry to pay to the Company on the Closing Date all of the AWA Common Stock to which Management Stockholder is entitled pursuant to the AWA Common Stock Dividend. The Dividend Payment Notice is hereby deemed to evidence the assignment by Management Stockholder of its right to receive the AWA Common Stock Dividend pursuant to Section 1.2 hereof.


Section 3. Restrictions on Transfer.


3.1 Transfer of Restricted Securities. Management Stockholder shall not, directly or indirectly, transfer, sell, assign, pledge, offer or otherwise dispose of any interest in any Restricted Securities (a "Transfer") except pursuant to (i) Section 3.3 or Section 3.4 hereof, (ii) Section 3(a) (participation rights), Section 3(c) (permitted transfers) and Section 5 (sale of the company) of the LLC Securityholders Agreement, or (iii) a Public Sale (clauses (i) through (iii) collectively referred to herein as "Exempt Transfers"). Prior to effecting any Transfer of Restricted Securities (other than (y) to the Company, to any Other Senior Managers or to the Investors or (z) in connection with a Public Sale or Sale of the Company), Management Stockholder shall obtain from each transferee their written agreement to be bound by the provisions of Section 3 of this Agreement for the benefit of the Company, the Other Senior Managers and the Investors.


3.2 Sale Notice. Prior to making any Transfer (other than an Exempt Transfer), Management Stockholder will give written notice (the "Sale Notice") to the Company, the Other Senior Managers and the Investors. The Sale Notice will disclose in reasonable detail the number of Units to be transferred and the terms and conditions of the proposed Transfer and, if known, the identity of the prospective transferee(s). Management Stockholder will not consummate any such Transfer until 90 days after the Sale Notice has been given to the Company, the Other Senior Managers and the Investors, unless the parties to the Transfer have been fully determined pursuant to this Section 3.2 and Section 3.3 prior to the expiration of such 90-day period. (The date of the first to occur of such events is referred to herein as the "Authorization Date").


3.3 First Refusal Rights. The Company may elect to purchase all (but not less than all) of the Restricted Securities to be Transferred upon the same terms and conditions as those set forth in the Sale Notice by delivering a written notice of such election to Management Stockholder, each Other Senior Manager and each Investor within 30 days after the Sale Notice has been given to the Company. If the Company has not elected to purchase all of the Restricted Securities to be Transferred, the Other Senior Managers may elect to purchase all (but not less than all) of the Restricted Securities to be Transferred upon the same terms and conditions as those set forth in the Sale Notice by giving written notice of such election to Management Stockholder, the Company and the Investors within 60 days after the Sale Notice has been given to the Other Senior Managers. The Other Senior Managers' rights hereunder shall be allocated


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among the Other Senior Managers pro rata based on the number of Common Units owned by each Other Senior Manager on a Fully Diluted Basis. If the Company and the Other Senior Managers have not elected to purchase all of the Restricted Securities to be Transferred, the Investors may elect to purchase all (but not less than all) of the Restricted Securities to be Transferred upon the same terms and conditions as those set forth in the Sale Notice by giving written notice of such election to Management Stockholder, the Company and each Other Senior Manager within 90 days after the Sale Notice has been given to the Investors. If the Company, the Other Senior Managers or the Investors do not elect to purchase all of the Restricted Securities specified in the Sale Notice, Management Stockholder may Transfer the Restricted Securities specified in the Sale Notice at a price and on terms no more favorable to the transferee(s) thereof than specified in the Sale Notice during the 30-day period immediately following the Authorization Date. Any Restricted Securities not Transferred within such 30-day period will be subject to the provisions of this Section 3.3 upon subsequent Transfer.


3.4 Permitted Transfers. The restrictions contained in this Section 3 shall not apply with respect to any Transfer of Restricted Securities pursuant to applicable laws of descent and distribution or among such Management Stockholder and such Management Stockholder's Family Members; provided that such restrictions will continue to be applicable to the Restricted Securities after any such Transfer and the transferees of such Restricted Securities have agreed in writing to be bound by the provisions of this Agreement.


3.5 Legend. The certificates representing the Restricted Securities will bear a legend in substantially the following form:


"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER AND CERTAIN OTHER AGREEMENTS SET FORTH IN A
MANAGEMENT CONTRIBUTION AGREEMENT BETWEEN COINMACH HOLDINGS, LLC
("COINMACH") AND JAMES N. CHAPMAN, DATED AS OF MARCH 5, 2003. COINMACH MAY
REQUEST A WRITTEN OPINION OF COUNSEL (FROM COUNSEL ACCEPTABLE TO COINMACH)
SATISFACTORY TO COINMACH, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED
IN CONNECTION WITH SUCH SALE, PLEDGE OR HYPOTHECATION, OR OTHER TRANSFER.
A COPY OF SUCH AGREEMENT MAY BE OBTAINED AT COINMACH'S PRINCIPAL PLACE OF
BUSINESS WITHOUT CHARGE."


3.6 Payments. Notwithstanding any other provision to the contrary contained in this Agreement, payments (including, but not limited to, in the form of securities) to be made to Management Stockholder pursuant to this Agreement shall be made only to the extent permitted by the financing arrangements of the Company and its Subsidiaries in effect at the time such payments are required to be made; provided, however, such payments shall be made at such time that they are permitted to be made by such financing arrangements.


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3.7 Opinion. In connection with the Transfer of any Restricted Securities (other than an Exempt Transfer or in connection with a Sale of the Company), the holder thereof shall deliver written notice to the Company describing in reasonable detail the Transfer or proposed Transfer, which, if requested by the Company, shall be accompanied by an opinion of counsel which (to the Company's reasonable satisfaction) is knowledgeable in securities law matters to the effect that such Transfer of Restricted Securities may be effected without registration of such Restricted Securities under the Securities Act. In addition, if the holder of the Restricted Securities delivers to the Company an opinion of counsel that no subsequent Transfer of such Restricted Securities shall require registration under the Securities Act, the Company shall promptly upon such contemplated Transfer deliver new certificates for such Restricted Securities which do not bear the Se ...