Exhibit 10.2
FIRST AMENDMENT
TO
CREDIT AGREEMENT
This First Amendment is made as of the 30th day of December, 1998, by and
among G&K SERVICES, INC., a Minnesota corporation ("G&K Inc.") and WORK WEAR
CORPORATION OF CANADA LTD., an Ontario corporation ("Work Wear;" G&K Inc. and
Work Wear sometimes individually referred to as a "Borrower" and collectively
referred to as the "Borrowers"), NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a
national banking association ("Norwest;" and, in its separate capacity as
administrative agent for certain Banks (defined below), the "US Agent"), NBD
BANK, a bank chartered under the laws of the State of Michigan ("NBD"), FIRST
CHICAGO NBD BANK, CANADA, a bank chartered under the laws of Canada ("FCNBD,"
and, in its separate capacity as administrative agent for certain Banks, the
"Canadian Agent") and each of the Banks appearing on the signature pages hereof
(collectively the "Banks" and individually each a "Bank").
RECITALS
The Borrowers, Norwest, NBD and FCNBD entered into a Credit Agreement dated
as of July 14, 1997, (the "Credit Agreement") and the Banks (other than Norwest,
NBD and FCNBD) were added as additional "Banks" thereunder pursuant to
Assignment Certificates executed thereafter, under which the Banks agreed to
make certain revolving credit and term loans available to the Borrowers.
The Banks have agreed to make certain amendments to the Credit Agreement,
as requested by the Borrowers.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, it is agreed as follows:
1. DEFINED TERMS. Capitalized terms used in this First Amendment which
are defined in the Credit Agreement shall have the same meanings specified
therein, unless otherwise defined herein.
2. AMENDED DEFINITIONS. SECTION 1.1 of the Credit Agreement is hereby
amended by deleting the definition "Debt Service Coverage Ratio" as it appears
therein and by adding, or amending and restating in their entirety, as the case
may be, the following definitions:
"First Amendment" means the First Amendment to Credit Agreement dated
as of December 30, 1998.
"Interest Coverage Ratio" of the G&K Group means, with respect to the
applicable Covenant Computation Period, the ratio of (a) the G&K Group's
Pre-Tax Earnings PLUS Interest Expense to (b) the G&K Group's Interest
Expense.
"Permitted Business Acquisition" means the acquisition by a G&K
Enterprise of (a) not less than fifty-one percent (51%) (in the aggregate)
of those classes of securities having ordinary voting power in the acquired
Person; provided that the Person acquired is immediately merged into the
acquiring G&K Enterprise or becomes a Guarantor hereunder by executing and
delivering to the Agent a Guaranty or (b) assets owned by another Person,
provided such assets constitute an operating business unit, and, in the
case of either (a) or (b) above, the aggregate consideration paid by such
G&K Enterprise, in connection with such acquisition, does not exceed
$75,000,000.
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3. COMMITMENT TO ISSUE LETTERS OF CREDIT. SECTION 2.7 of the Credit
Agreement is amended by adding the word "Revolving" immediately before the word
"Commitment" as it appears in the second line of such Section 2.7.
4. ADJUSTMENT OF MARGINS. The period appearing at the end of SECTION 4.3
of the Credit Agreement is hereby deleted and is replaced with "; and" and new
SUBSECTIONS (f) and (g) are hereby added to such SECTION 4.3 which read as
follows:
"(f) subject to SUBSECTION (g) below, in the event the audited
financial statements of the G&K Group delivered under SECTION 7.1(a) result
in calculation of different Margins than the Margins calculated upon
delivery of the quarterly certificate under SECTION 7.1(b) for the fiscal
year then ended, the Margins calculated in reliance on the audited
financial statements of the G&K Group shall control and the Margins
calculated in reliance thereon shall be effective retroactive to the date
of any adjustment of Margins made in reliance upon such quarterly
certificate and appropriate payments will be made by (or to) the Borrowers
to account for such adjustments; and"
"(g) in the event audited financial statements of the G&K Group
delivered under SECTION 7.1(a) or the quarterly certificate delivered under
SECTION 7.1(b) are restated retroactively as a result of a pooling of
interests accounting treatment utilized by a G&K Enterprise in connection
with a Permitted Business Acquisition, the Margins calculated in reliance
on such audited financial statements or quarterly certificates previously
delivered shall not be adjusted retroactively as a result of such
restatement."
5. REPORTING REQUIREMENTS. SECTION 7.1(d) of the Credit Agreement is
hereby amended by deleting each reference to "month" as it appears therein, and
inserting in place thereof the phrase "fiscal quarter".
6. MINIMUM EBITDA. SECTION 7.8 of the Credit Agreement is hereby deleted
in its entirety.
7. DEBT SERVICE COVERAGE RATIO. The obligation of the G&K Group to
comply with the Debt Service Coverage Ratio as set forth and described in
SECTION 7.9 of the Credit Agreement is hereby eliminated.
8. MINIMUM INTEREST COVERAGE RATIO. SECTION 7.9 of the Credit Agreement
is hereby amended in its entirety to read as follows:
"Section 7.9 MINIMUM INTEREST COVERAGE RATIO. As of each Covenant
Computation Date, the G&K Group (on a consolidated basis) will maintain its
Interest Coverage Ratio as of each Covenant Computation Date at not less
than the ratio set forth opposite such date below:
MINIMUM
COVENANT COMPUTATION DATE INTEREST COVERAGE RATIO
December 26, 1998 2.75 to 1.00
March 27, 1999 2.75 to 1.00
June 26, 1999 2.75 to 1.00
September 25, 1999 and thereafter 3.00 to 1.00"
9. MAXIMUM LEVERAGE RATIO. SECTION 7.11 of the Credit Agreement is
hereby amended in its entirety to read as follows:
"Section 7.11 MAXIMUM LEVERAGE RATIO. As of each Covenant
Computation Date, the G&K Group (on a consolidated basis) will maintain its
Leverage Ratio at not more than 3.00 to 1.00; PROVIDED that in computing
EBITDA for purposes of this SECTION 7.11, EBITDA of the G&K Group shall be
adjusted, on a pro forma basis, to include for the applicable Covenant
Computation Period any historical EBITDA attributable to a Person or assets
acquired by a G&K Enterprise as a Permitted Business Acquisition during
such Covenant Computation Period."
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10. INDEBTEDNESS. SECTION 8.2(d) of the Credit Agreement is hereby
amended in its entirety to read as follows:
"(d) other unsecured indebtedness not permitted in this SECTION 8.2
not to exceed $150,000,000 in the aggregate at any time outstanding for the
entire G&K Group;"
11. INVESTMENTS. SECTION 8.4(h) of the Credit Agreement is hereby amended
in its entirety to read as follows:
"(h) investments (i) to purchase assets, stock or other securities
of, or to make any investment or acquire any interest whatsoever in, any
other Person, not to exceed five percent (5%) of the book value (as
reported in the recently delivered quarterly report) of all assets of the
G&K Group in the aggregate during any fiscal year of the G&K Group and (ii)
to make Permitted Business Acquisitions; PROVIDED, that (A) the aggregate
of all such investments made in reliance on this SECTION 8.4(h) during any
fiscal year of the G&K Group shall not exceed $100,000,000 and (B) after
giving effect to any investment made in reliance on this SECTION 8.4(h),
the aggregate unfunded availability under the Revolving Commitments is not
less than $25,000,000; and"
12. RENTAL PAYMENTS. SECTION 8.13 of the Credit Agreement is hereby
amended by deleting the number "$7,000,000" as it appears therein and inserting
in place thereof the number "$15,000,000."
13. EVENTS OF DEFAULT. SECTIONS 9.1(i) AND (j) of the Credit Agreement
are hereby amended by adding the phrase "or Guarantor" after each reference to
"Borrower" as it appears therein.
14. AMENDMENT FEE. To induce the Banks to enter into this First
Amendment, the Borrowers hereby agree to pay to the US Agent, for the account of
such Banks entitled thereto, a non-refundable fee of $2,500 for each Bank
executing this First Amendment with Commitments equal to or less than
$15,000,000 in the aggregate and $4,000 for each Bank executing this First
Amendment with Commitments greater than $15,000,000 in the aggregate, payable on
December 29, 1998.
15. CONDITIONS PRECEDENT. This First Amendment shall become effective on
the business day on which the US Agent shall have received the following, each
in form and substance satisfactory to the US Agent:
(a) This First Amendment, duly executed on behalf of each Borrower,
each Agent and not less than the Required Banks.
(b) An opinion of the Borrowers' counsel as to the due authorization,
execution, delivery and enforceability of this First Amendment by
Borrowers.
(c) An Acknowledgment and Agreement of Guarantors, duly executed by
each Guarantor.
(d) Evidence satisfactory to the US Agent of payment by the Borrowers
of all fees contemplated in paragraph 14 above.
16. REPRESENTATIONS AND WARRANTIES. To induce the Banks to enter into
this First Amendment, the Borrowers hereby represent and warrant to the Banks as
follows:
(a) Each Borrower has all requisite power and authority to execute
this First Amendment and to perform all of its obligations hereunder.
(b) The execution, delivery and performance by each Borrower of this
First Amendment has been duly authorized by all necessary corporate action
and does not (i) require any authorization, consent or approval by any
governmental department, commissions, board, bureau, agency or
instrumentality, domestic or foreign (ii) violate (A) any provision of any
law, rule or regulation or of any order, writ, injunction or decree
presently in effect, having applicability to such Borrower or (B) the
articles of
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incorporation or by-laws of such Borrower, or (ii) result in the
breach or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which such
Borrower is a party or by which it or its properties may be bound or
affected.
(c) The representations and warranties contained in ARTICLE VI of the
Credit Agreement are true and correct as of the date hereof as though made
on and as of this date, except to the extent that such representations and
warranties relate solely to an earlier date.
(d) No event has occurred and is continuing which constitutes a
Default or an Event of Default under the Credit Agreement.
17. NO WAIVER. The execution of this First Amendment shall not be deemed
to be a waiver of any Default or Event of Default or breach, default or event of
default under any other Loan Document, whether or not known to any Agent or Bank
and whether or not existing on the date of this First Amendment.
18. COSTS AND EXPENSES. Each Borrower hereby reaffirms its agreement
under SECTION 11.4 of the Credit Agreement to pay or reimburse the Agents, among
other costs and expenses, all expenses incurred by the Agents in connection with
the negotiation, preparation and execution of this First Amendment, including
without limitation, all reasonable fees and disbursements of legal counsel to
the Agents.
19. REFERENCES. Except as expressly amended hereby, all provisions of the
Loan Documents shall remain in full force and effect. After the effective date
hereof, each reference appearing in any Loan Document or any other document
executed in connection with the Credit Agreement to the "Credit Agreement" or to
"this Agreement", "hereunder" or "hereof" or words of like import referring to
the Credit Agreement shall be deemed to refer to the Credit Agreement as amended
hereby.
20. EXECUTION IN COUNTERPARTS. This First Amendment may be executed in
any number of counterparts, each of which when so executed and delivered shall
be deemed to be an original and all of which counterparts, taken together, shall
constitute but one in the same instrument. So long as this First Amendment has
been executed by the Required Banks, it shall become effective notwithstanding
that it has not been executed by all Banks.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
G&K SERVICES, INC.
By s/Xxxxxxx X. Xxxx
-----------------------------
Its CFO
---------------------------
WORK WEAR CORPORATION OF
CANADA LTD.
By s/Xxxxxxx X. Xxxx
-----------------------------
Its CFO
---------------------------
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as US Agent
By s/Xxxxxxx X. XxXxxxxxx
-----------------------------
Its Vice President
---------------------------
FIRST CHICAGO NBD BANK,
CANADA, as Canadian Agent
By s/Xxxx X. Xxxxxx
-----------------------------
Its First Vice President
---------------------------
AMSOUTH BANK
By
-----------------------------
Its
---------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By s/R. Xxx Xxxxxxxxx
-----------------------------
Its Managing Director
---------------------------
BANQUE PARIBAS
By s/Xxxxx X. Xxxxx
-----------------------------
Its Vice President
---------------------------
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THE BANK OF TOKYO-MITSUBISHI, LTD.
By
-----------------------------
Its
---------------------------
COMERICA BANK
By s/Xxxxxxx X. X'Xxxxxx
-----------------------------
Its Vice Predsident
---------------------------
CORESTATES BANK, N.A.
By s/Xxxxx X. Xxxxxxx
-----------------------------
Its Vice President
---------------------------
CAISSE NATIONALE DE
CREDIT AGRICOLE
By
-----------------------------
Its
---------------------------
DG BANK DEUTSCHE
GENOSSENSCHAFTSBANK, NEW
YORK BRANCH
By s/Xxxxx X. X'Xxxxxxx
-----------------------------
Its Vice President
---------------------------
FIRST AMERICAN NATIONAL BANK
By s/ Illegible
-----------------------------
Its Bank Officer
---------------------------
FIRST UNION NATIONAL BANK
By s/Xxxxx X. Xxxxxxx
-----------------------------
Its Vice President
---------------------------
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FLEET NATIONAL BANK
By
-----------------------------
Its
---------------------------
XXXXXX TRUST AND SAVINGS BANK
By s/Illegible
-----------------------------
Its Vice President
---------------------------
HIBERNIA NATIONAL BANK
By s/Illegible
-----------------------------
Its Portfolio Manager
---------------------------
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD.
By s/Xxxxxx X. Xxxxxx, Xx.
-----------------------------
Its Senior Vice President
---------------------------
M&I XXXXXXXX AND XXXXXX BANK
By s/Illegible
-----------------------------
Its Assistant Vice President
---------------------------
THE MITSUBISHI TRUST AND
BANKING CORPORATION
By
-----------------------------
Its
---------------------------
NATIONAL CITY BANK
By s/Xxxxx Xxxxx
-----------------------------
Its Vice President
---------------------------
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NBD BANK
By s/Xxxxxxxxxx X. Xxxxx
-----------------------------
Its Vice President
---------------------------
REGIONS BANK
By s/Xxxxx X. Xxxxxxx
-----------------------------
Its Vice President
---------------------------
THE SANWA BANK, LIMITED
By s/Xxxxxx X. Xxxxxx
-----------------------------
Its Vice President & Manager
---------------------------
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION
By s/Illegible
-----------------------------
Its Vice President
---------------------------
WACHOVIA BANK, N.A.
By s/Illegible
-----------------------------
Its Vice President
---------------------------
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