EXHIBIT 10(m)
March 25, 1999
G&K Services, Inc.
0000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Dear Xx. Xxxxxx:
Norwest Bank Minnesota, National Association (the "Bank") is
pleased to offer G&K Services, Inc., a Minnesota corporation (the
"Borrower"), a $10,000,000 discretionary credit facility, under which the
Bank may (in its sole discretion) make loans on a revolving basis not to
exceed $10,000,000 at any one time outstanding. This letter (the "Letter
Agreement") outlines the terms and conditions upon which the Bank may extend
credit to the Borrower.
1. DEFINITIONS. As used herein, "Multibank Credit Agreement" means
the Credit Agreement dated July 14, 1997 among the Borrower, Work Wear
Corporation of Canada Ltd., the Bank, as US Agent and as a Bank, and various
other financial institutions, together with all amendments, modifications and
restatements thereof, but without regard to whether such Credit Agreement has
been terminated or the obligations arising thereunder have been paid.
Capitalized terms defined in the Multibank Credit Agreement and not otherwise
defined herein shall have the meanings given them in the Multibank Credit
Agreement.
2. DIRECT ADVANCES. The Bank shall consider making advances (each,
an "Advance") to the Borrower from the date hereof through March 23, 2000
(the "Facility Termination Date") in an amount at any time outstanding not to
exceed $10,000,000. Each advance shall be in an amount equal to an integral
multiple of $100,000 greater than or equal to $1,000,000. The Borrower may
borrow such amount, repay and reborrow, always in the Bank's discretion, so
long as no Advance causes that dollar limit to be exceeded. Each individual
Advance hereunder will always be at the sole discretion of the Bank. Nothing
herein should be interpreted as a promise to make any one or more Advances.
The proceeds of each Advance shall be used by the Borrower for the Borrower's
general corporate purposes. The Borrower's obligation to repay Advances will
be evidenced by and payable on demand with interest in accordance with the
Borrower's promissory note in the form of Exhibit A hereto (the "Note").
3. PAYMENT. All payments of principal and interest under the Note
shall be made in immediately available funds. The Borrower authorizes the
Bank at any time and from time to time to charge against the Borrower's
deposit accounts with the Bank any amount due and payable under the Note or
this Letter Agreement.
4. DETERMINATION OF MARGIN. As used in the Note, "Margin" means an
incremental amount used in determining certain interest rates under the Note.
The initial Margin shall be 77.5 basis points. The Margin shall be adjusted
each fiscal quarter of the Borrower on the basis of the Leverage Ratio of the
G&K Group as at the end of the previous fiscal quarter, in accordance with
the following table:
Leverage Ratio Margin (basis points)
-------------- ---------------------
3.50 to 1 or more 127.5
3.00 to 1 or more, but less than 3.50 to 1 110
2.50 to 1 or more, but less than 3.00 to 1 90
2.00 to 1 or more, but less than 2.50 to 1 77.5
Less than 2.00 to 1 65
Reductions and increases in the Margin will be made quarterly within five
business days following receipt of the Borrower's financial statements and
quarterly certificates required under the Multibank Credit Agreement.
Notwithstanding the foregoing, (i) if the Borrower fails to deliver any such
financial statements or certificates when required under the Multibank Credit
Agreement, the Bank may, by notice to the Borrower, increase the Margin to
the highest rates set forth above until such time as the Bank has received
all such financial statements and certificates, and (ii) no reduction in the
Margin will be made if a Default or Event of Default has occurred and is
continuing at the time that such reduction would otherwise be made.
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5. ADDITIONAL COVENANTS. The Borrower shall at all times abide by
each covenant set forth in the Multibank Credit Agreement, the provisions of
which are hereby incorporated by reference as fully as if set forth at length
herein. For purposes of this Agreement, such covenants shall survive
termination of the Multibank Credit Agreement and payment of the obligations
described therein.
6. COSTS AND EXPENSES. The Borrower shall pay on demand all
reasonable costs and expenses incurred by the Bank in connection with the
preparation, execution, administration and enforcement of this Letter
Agreement, the Note and the other instruments and documents delivered in
connection herewith, including the reasonable fees and out-of-pocket expenses
of counsel for the Bank with respect thereto.
7. OTHER AGREEMENTS. This Letter Agreement and the Note set forth
the entire agreement of the Bank and the Borrower with respect to the matters
treated herein and therein. This Letter Agreement cannot be modified except
by a future amendment in writing. This Letter Agreement takes the place of
any preliminary discussions between the Bank and the Borrower and supersedes
any previous written agreements or understandings between the Bank and the
Borrower with respect to the credit facility established hereunder.
8. DISCRETION OF BANK. THE BORROWER ACKNOWLEDGES THAT THE BANK IS
NOT OBLIGATED HEREUNDER TO MAKE ANY ADVANCE, AND THAT THE BANK MAY REFUSE TO
MAKE ANY ADVANCE REQUESTED BY THE BORROWER, AND MAY DEMAND PAYMENT OF THE
NOTE IN FULL, AT ANY TIME AND FOR ANY REASON, WHETHER ARISING BEFORE, ON OR
AFTER THE DATE HEREOF AND WHETHER OR NOT THE BORROWER IS IN COMPLIANCE WITH
THE OTHER TERMS OF THIS LETTER AGREEMENT AND THE MULTIBANK CREDIT AGREEMENT,
OR FOR NO REASON AT ALL.
The Borrower's signature below indicates its approval of all of the
terms of this Letter Agreement and its agreement to abide by those terms.
Very truly yours,
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
By /s/ Xxxx X. Xxxxxxxxxx
----------------------------------
Its Vice President
------------------------------
Accepted and agreed to as of the 25th day of March, 1999
G&K SERVICES, INC.
By /s/ Xxxxxxx X. Xxxxxx
----------------------------------
Its Chief Financial Officer
-----------------------------
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EXHIBIT A
PROMISSORY NOTE
$10,000,000 Minneapolis, Minnesota
March 25, 1999
For value received, G&K Services, Inc., a Minnesota corporation
(the "Borrower"), promises to pay to the order of Norwest Bank Minnesota,
National Association, a national banking association (the "Bank"), at its
main office in Minneapolis, Minnesota, or at such other place as the holder
hereof may hereafter from time to time designate in writing, ON DEMAND, or,
if demand is not sooner made, on the Facility Termination Date (as defined in
the Letter Agreement described below), in lawful money of the United States
of America, the principal sum of Ten Million Dollars ($10,000,000), or, if
less, the aggregate unpaid principal amount of all advances made by the Bank
to the Borrower pursuant to the letter agreement of even date herewith
between the Borrower and the Bank (the "Letter Agreement"), and to pay
interest on the principal balance of this Note outstanding from time to time
(computed on the basis of the actual number of days elapsed in a 360-day
year) from the date hereof until this Note is fully paid, at the Floating
Rate, as defined below; provided, however, that any Eurodollar Rate Amount
selected by the Borrower in accordance with the following paragraph shall
bear interest at the applicable Eurodollar Rate for the Interest Period
determined pursuant to the following paragraph, subject to fluctuations in
the Margin, but after the Interest Period such Eurodollar Rate Amount shall
bear interest at the Floating Rate.
On any bank business day before 1:00 p.m., the Borrower may request
telephonically that the Bank quote the Eurodollar Rate that would be
applicable to the Eurodollar Rate Amount and for the Interest Period
specified in such request. Immediately upon receipt of such quotation from
the Bank, the Borrower may telephonically accept the Eurodollar Rate,
whereupon the Eurodollar Rate Amount shall from the date the quotation is
made bear interest at the Eurodollar Rate so selected. Acceptance of any
Eurodollar Rate quotation shall be irrevocable. Failure immediately to accept
such a quotation shall be deemed to be a rejection of such quotation. Absent
manifest error, the records of the Bank shall be conclusive as to any
Eurodollar Rate Amount and the Eurodollar Rate and Interest Period applicable
thereto.
As used herein, the following terms have the meaning set forth
below:
"Eurodollar Rate" means the annual rate equal to the sum of (i) the
rate obtained by dividing (a) the rate (rounded up to the nearest 1/8 of
1%) determined by the Bank to be the average rate at which U.S. dollar
deposits are offered to the Bank by major banks in the London interbank
market for funds to be made available on the first day of any Interest
Period in an amount approximately equal to the amount for which a
Eurodollar Rate quotation has been requested and maturing at the end of
such Interest Period, by (b) a percentage equal to 100% minus the Federal
Reserve System requirement (expressed as a percentage) applicable to such
deposits, and (ii) the then-applicable Margin.
"Eurodollar Rate Amount" means any portion of the principal balance
of this Note bearing interest at a Eurodollar Rate. Each Eurodollar Rate
Amount must be equal to an integral multiple of $100,000 greater than or
equal to $1,000,000.
"Floating Rate" means, at any time, the rate of interest publicly
announced from time to time by the Bank as its "prime" or "base" rate or,
if the Bank ceases to announce a rate so designated, any similar successor
rate designated by the Bank. The Floating Rate shall change when and as
such prime, base or successor rate changes.
"Interest Period" means a period of not less than 5 days and not more
than 30 days that corresponds to the maturity of U.S. dollar deposits then
offered to the Bank by major banks in the London interbank market.
"Margin" has the meaning set forth in the Letter Agreement.
Interest accruing on the principal balance of this Note each month
at the Floating Rate shall be due and payable on the last day of that month,
commencing on the last day of the month hereof, and on demand. Interest
accruing on any Eurodollar Rate Amount shall be due and payable on the last
day of the Interest Period applicable thereto.
This Note is issued pursuant to, and is subject to, the Letter
Agreement.
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This Note may be prepaid at any time and from time without penalty
or premium; provided, however, that the Borrower may not prepay any
Eurodollar Rate Amount except upon payment of any compensation as required by
the following paragraph.
In addition to any interest payable hereunder and any fees or other
amounts payable under this Note or the Letter Agreement, the Borrower shall
compensate the Bank, upon written request by the Bank (which request shall
set forth the basis for requesting such amounts), for all losses and expenses
in respect of any interest or other consideration paid by the Bank to lenders
of funds borrowed by it or deposited with it to maintain any Eurodollar Rate
Amount at a Eurodollar Rate which the Bank may sustain to the extent not
otherwise compensated for hereunder and not mitigated by the reemployment of
such funds if any prepayment of any such Eurodollar Rate Amount occurs on a
date that is not the expiration date of the applicable Interest Period. A
certificate as to any such loss or expense (including calculations, in
reasonable detail, showing how the Bank computed such loss or expense) shall
be promptly submitted by the Bank to the Borrower and shall, in the absence
of manifest error, be conclusive and binding as to the amount thereof. Any
determination under this paragraph may be made as if the Bank had actually
funded and maintained each Eurodollar Rate Amount during the Interest Period
for such Eurodollar Rate Amount through the purchase of deposits having a
maturity corresponding to such Interest Period and bearing an interest rate
equal to the appropriate Eurodollar Rate for such Interest Period, whether or
not the Bank in fact purchased such deposits.
The Borrower shall pay all costs of collection, including
reasonable attorneys' fees and legal expenses, if this Note is not paid on
demand, whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and
protest are expressly waived.
THE BORROWER ACKNOWLEDGES THAT IN ACCEPTING THIS NOTE THE BANK HAS
NOT UNDERTAKEN ANY OBLIGATION TO MAKE ANY ADVANCE TO THE BORROWER AND THAT
THE BANK MAY REFUSE TO MAKE ANY ADVANCE REQUESTED BY THE BORROWER AND MAY
DEMAND PAYMENT OF ADVANCES THAT IT HAS MADE UNDER THIS NOTE AT ANY TIME, WITH
OR WITHOUT NOTICE AND FOR ANY REASON, WHETHER ARISING BEFORE, ON OR AFTER THE
DATE HEREOF, WHETHER OR NOT THE BORROWER IS IN COMPLIANCE WITH THE TERMS OF
THIS NOTE AND THE LETTER AGREEMENT, OR FOR NO REASON AT ALL.
This Note has been executed as of the date and year first
above-written, but actually on the date set forth under the Borrower's
signatures below.
G&K SERVICES, INC.
By /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Its Chief Financial Officer
-------------------------------
(THIS SPACE INTENTIONALLY LEFT BLANK)
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