EXHIBIT 10(k)
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
$20,000,000 discretionary credit facility, under which the Bank may (in its sole
discretion) make loans on a revolving basis not to exceed $20,000,000 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 27, 2001 (the
"Facility Termination Date") in an amount at any time outstanding not to exceed
$20,000,000. 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 65 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.
22
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/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Its Vice President
------------------------------
Accepted and agreed to as of the 28th day of March, 2000
G&K SERVICES, INC.
By /s/ Xxxxxxx X. Xxxxxx
-------------------------------
Its Chief Financial Officer
-------------------------
M1:603547.01
23
EXHIBIT A
PROMISSORY NOTE
$20,000,000 Minneapolis, Minnesota
March 28, 2000
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 Twenty Million Dollars ($20,000,000), 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 1 day 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.
24
This Note is issued pursuant to, and is subject to, the Letter
Agreement.
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
---------------------------------
Its
----------------------------
M1:603547.01
25
