June 21, 1994
G&K Services, Inc.
G&K Services, Co.
Waterford Park
505 Highway 169N
Suite 455
Minneapolis, Minnesota 55441-6446
Attention: Stephen LaBelle
Secretary and Treasurer
Re: Loan Agreement dated as of September 28, 1990
Dear Sirs:
We are the holder of the 10.62% Senior Notes (the "Notes") issued by G&K
Services, Inc. (the "Company") in the original aggregate principal amount of
$40,000,000 pursuant to the Loan Agreement dated as of September 28, 1990,
between the Company and us (the "Agreement"). The Notes were amended pursuant to
an amendment agreement dated January 28, 1993 (the "First Amendment") and are
entitled to the benefit of a Guaranty dated as of September 28, 1990 issued by
G&K Services, Co. (the "G&K Co. Guaranty").
As the holder of the Notes and as a party to the Agreement, we hereby
agree that the Agreement and the Notes shall be amended by this amendment (the
"Second Amendment") as follows:
1. The first paragraph of the Notes shall be amended by deleting all
references therein to "Overdue Interest Rate" and substituting in lieu thereof
"Default Rate".
2. Section 2.03 of the Notes shall be deleted in its entirety and the
following substituted therefor:
"2.03. Default Rate.
From and after the occurrence of an Event of Default
and continuing thereafter until such Event of Default shall be
remedied to the written satisfaction of the Holders of the
Notes, the outstanding principal balance of this Note and, so
far as may be lawful, any overdue installment of interest,
shall bear interest, until paid in full, at the Default Rate."
3. Section 4.01 of the Notes shall be deleted in its entirety and the
following substituted therefor:
"4.01. Limitation on Indebtedness.
The Company will not, and will not permit any
Restricted Subsidiary to create, assume, incur or otherwise
become liable, in each case contingently or otherwise, in
respect of any Indebtedness, whether secured or unsecured,
other than:
A. Indebtedness evidenced by the Notes;
B. Indebtedness of the Company incurred pursuant to
the Credit Agreement not exceeding at any time
U.S.$25,000,000;
C. Indebtedness of Work Wear incurred pursuant to the
Credit Agreement not exceeding at any time the lesser of (i)
Canadian $30,000,000 and (ii) twenty-five percent (25%) of
Consolidated Stockholders' Equity as set forth in the most
recently available financial statements of the Company,
(quarterly or annual, as the case may be), with conversion to
Canadian dollars to be made as of the date of delivery of such
financial statements in accordance with Section 1.2 of the
Credit Agreement;
D. Indebtedness of the Company or any Restricted
Subsidiary in existence on September 28, 1990 and listed in
Exhibit B to the Note, but not including any extensions or
renewals thereof;
E. Indebtedness of a Restricted Subsidiary to the
Company or another Restricted Subsidiary on account of
borrowings, or Indebtedness of the Company to a Restricted
Subsidiary on account of borrowings from that Restricted
Subsidiary;
F. Subordinated Debt of the Company, or renewals
thereof, provided it is subordinated to the prior payment of
principal of and interest on the Notes on terms and conditions
approved in writing by the Holders of the Notes; and
G. Indebtedness of the Company secured by Liens
permitted by Section 4.03."
4. Section 4.02 of the Notes shall be deleted in its entirety and the
following substituted therefor:
"4.02. Guaranties.
The Company will not, and will not permit any
Restricted Subsidiary to, assume, guarantee, endorse or
otherwise become directly or contingently liable in connection
with any obligations of any other Person, except:
A. the G&K Co. Guaranty;
B. the Company Guaranty;
C. the endorsement of negotiable instruments by the
Company or any Restricted Subsidiary for deposit or collection
or similar transactions in the ordinary course of business;
and
D. guaranties, endorsements and other direct or
contingent liabilities in connection with the obligations of
other Persons in existence on September 28, 1990 and listed in
Exhibit B to the Note."
5. Section 4.03 of the Notes shall be deleted in its entirety and the
following substituted therefor:
"4.03. Limitation on Liens.
The Company will not, and will not permit any
Restricted Subsidiary to, (i) create, assume, incur or suffer
to exist any Lien upon any property or assets (real or
personal, tangible or intangible) of the Company or any
Restricted Subsidiary, whether now owned or hereafter
acquired, or any income or profits therefrom, (ii) own or
acquire or agree to acquire any property or assets (real or
personal, tangible or intangible) subject to any Lien, (iii)
suffer to exist any Indebtedness of the Company or any
Restricted Subsidiary or claims or demands against the Company
or any Restricted Subsidiary, which Indebtedness, claims or
demands, if unpaid, might (in the hands of the holder or
anyone who shall have guaranteed the same or who has any right
or obligation to purchase the same), by law or upon bankruptcy
or insolvency or otherwise, be given any priority whatsoever
over its general creditors or (iv) give its consent to the
subordination of any right or claim of the Company or any
Restricted Subsidiary to any right or claim of any other
Person, excluding, however, from the operation of the
foregoing:
A. Liens for taxes or assessments or other
governmental charges to the extent not required to be paid by
Section 3.03A;
B. Materialmen's, merchants', carriers', workers',
repairers' or other like liens arising in the ordinary course
of business to the extent not required to be paid by Section
3.03A;
C. Pledges or deposits to secure obligations under
worker's compensation laws, unemployment insurance and social
security laws, or to secure the performance of bids, tenders,
contracts (other than for the repayment of borrowed money) or
leases or to secure statutory obligations or surety or appeal
bonds, or to secure indemnity, performance or other similar
bonds in the ordinary course of business;
D. Zoning restrictions, easements, licenses,
restrictions on the use of real property or minor
irregularities in title thereto, which do not in the aggregate
have a material adverse effect on the business of the Company
or any Restricted Subsidiary;
E. Purchase money Liens upon or in property acquired
by the Company or any Restricted Subsidiary after the date
hereof, or mortgages, liens or security interests existing
upon or in such property at the time of acquisition thereof by
the Company or any Restricted Subsidiary, provided that:
(1) no such Lien extends or shall extend to or cover
any property of the Company or any Restricted
Subsidiary, as the case may be, other than the
property then being acquired and fixed improvements
then or thereafter erected thereon;
(2) the aggregate principal amount of all
Indebtedness of the Company and each Restricted
Subsidiary secured by all Liens described in this
subsection shall not exceed $1,000,000 at any one
time outstanding; and
(3) the aggregate principal amount of Indebtedness
secured by Liens described in this Subsection E at
the time of acquisition of the property subject
thereto shall not exceed 100% of the cost of such
property or of the then fair market value of such
property as determine by the Board of Directors of
the Company, whichever shall be less, and the
aggregate amount of payments made thereunder in any
period of 12 consecutive months will not result in a
violation of any other restriction contained in this
Agreement;
F. Liens on any property of the Company or any
Restricted Subsidiary (other than those described in
Subsection E) securing any Indebtedness for borrowed money in
existence on September 28, 1990 and listed in Exhibit B to the
Notes; and
G. Liens arising out of a judgment against the
Company or any Restricted Subsidiary for the payment of money
not exceeding $500,000 with respect to which an appeal is
being prosecuted and a stay of execution pending such appeal
has been secured and for which adequate reserves have been
established.
Without limiting the foregoing, the Company agrees that the Company
will not, and will not permit any Restricted Subsidiary to, agree with any other
Person not to grant any Lien in its or such Restricted Subsidiary's assets
except with the Banks who are parties to the Credit Agreement."
6. Section 4.04 of the Notes shall be deleted in its entirety and the
following substituted therefor:
"4.04. Intentionally Omitted."
7. Section 4.05 of the Notes shall be deleted in its entirety and the
following substituted therefor:
"4.05. Capitalization Ratio.
The Company will maintain as at the end of each of
the Company's fiscal quarters, on a consolidated basis, the
ratio of (i) all Indebtedness of the Company and its
Restricted Subsidiaries arising from borrowed money (including
all such Indebtedness created, assumed or guaranteed either
directly or indirectly and all obligations secured by Liens
upon property on which the Company or a Restricted Subsidiary
customarily pays interest), including Consolidated Current
Indebtedness, Consolidated Funded Indebtedness and the Current
Portion of Consolidated Funded Indebtedness to (ii) the sum of
(A) all Indebtedness of the Company and its Restricted
Subsidiaries arising from borrowed money (including all such
Indebtedness created, assumed or guaranteed either directly or
indirectly and all obligations secured by Liens upon property
on which the Company or a Restricted Subsidiary customarily
pays interest), including Consolidated Current Indebtedness,
Consolidated Funded Indebtedness and the Current Portion of
Consolidated Funded Indebtedness and (B) the total
stockholders' equity of the Company and its Restricted
Subsidiaries, determined in accordance with GAAP (as shown and
described on its most recently delivered balance sheet), at
not more than 0.5 to 1.00."
8. Section 4.07 of the Notes shall be deleted in its entirety and the
following substituted therefor:
"4.07. Minimum Total Stockholders Equity.
The Company will maintain on a consolidated basis, in
each period designated below, its Consolidated Stockholders'
Equity, determined in accordance with GAAP (as shown and
described on the Company's balance sheet) at an amount not
less than the amount set forth opposite such period:
Period Amount
Date hereof through March 31, 1995 $ 95,000,000
April 1, 1995 through March 31, 1996 $105,000,000
April 1, 1996 through March 31, 1997 $120,000,000
April 1, 1997 through September 28, 1997" $135,000,000
9. Section 4.08 of the Notes shall be deleted in its entirety and the
following substituted therefor:
"4.08. Interest Coverage Ratio.
The Company will maintain as at the end of each of
the Company's fiscal quarters, on a consolidated basis, the
ratio of (i) Consolidated Earnings Before Interest Expense and
Taxes for such quarter and each of the immediately preceding
three fiscal quarters to (ii) Consolidated Interest Expense
(without deduction of any interest income) for such quarter
and each of the immediately preceding three fiscal quarters,
at not less than 3.00 to 1.00."
10. Section 4.09 of the Notes shall be deleted in its entirety and the
following substituted therefor:
"4.09. Funds Flow Coverage Ratio.
The Company will maintain as at the end of each of
the Company's fiscal quarters (based upon such quarter and
each of the immediately preceding three fiscal quarters), on a
consolidated basis, the ratio of (i) the net income of the
Company and its Restricted Subsidiaries, plus depreciation,
amortization, non-current deferred income taxes and other
non-cash charges for the immediately preceding four fiscal
quarters (determined in accordance with GAAP) to (ii) all
Indebtedness of the Company and its Restricted Subsidiaries
arising from borrowed money (including all such Indebtedness
created, assumed or guaranteed either directly or indirectly
and obligations secured by Liens upon property upon which the
Company or a Restricted Subsidiary customarily pays interest),
including Consolidated Current Indebtedness, Consolidated
Funded Indebtedness and the Current Portion of Consolidated
Funded Indebtedness, for such quarter and each of the
immediately preceding three fiscal quarters, at not less than
0.28 to 1.00."
11. Subsection E of Section 4.10 of the Notes shall be amended by
deleting the word "Guarantor" in the first line thereof and inserting "G&K Co."
in lieu thereof.
12. Section 4.11 of the Notes shall be deleted in its entirety and the
following substituted therefor:
"4.11. Dividends.
The Company will not declare or pay any dividends
(other than dividends payable solely in its own stock) on any
class of its stock or make any payment on account of its
purchase, redemption, or other retirement of any shares of
such stock, or make any distribution in respect thereof,
either directly or indirectly during any fiscal year if, after
giving effect to such payment, distribution or application,
the aggregate amount of such dividends, distributions and
application of assets paid or made during such fiscal year
would exceed twenty-five percent (25%) of the Net Income of
the Company and its Restricted Subsidiaries for the fiscal
year immediately preceding the year in which such dividend is
paid, or any such distribution or application of assets is
made, and the right to make any such payments, distributions
and application of assets as herein described shall be non-
cumulative from fiscal year to fiscal year."
13. Section 4.16 of the Notes shall be deleted in its entirety and the
following substituted therefor:
"4.16. Expenditures for Fixed Assets.
The Company will not, and will not permit any
Restricted Subsidiary to, make any Capital Expenditure if,
after giving effect to such Capital Expenditure, the aggregate
amount of Consolidated Capital Expenditures made by the
Company and its Restricted Subsidiaries for any fiscal year
will exceed the amount set forth below:
Fiscal Year Limitation
1994 U.S. $33,000,000
1995 U.S. $40,000,000
1996 U.S. $33,000,000
1997 U.S. $35,000,000
provided, however, that the restrictions contained in this
Section are subject to the further limitations imposed by
Section 4.03E if any fixed asset is acquired under a purchase
money Lien referred to in that Section."
14. Section 4.23 of the Notes shall be deleted in its entirety and the
following substituted therefor:
"4.23. Account Payable.
The Company will not permit G&K Co. to order goods or
services in the name of G&K Co., or pay any trade accounts
payable."
15. (A) The following Definitions set forth in Section 6 of the Notes
shall be deleted in their entirety and the following substituted therefor:
"Agreement" means the Loan Agreement dated September
28, 1990 between the Company and Metropolitan Life Insurance
Company entered into in connection with the issuance of the
Notes, as amended by the First Amendment and the Second
Amendment, and as the same may be further amended from time to
time.
"Credit Agreement" means the Credit Agreement dated
as of June 21, 1994 between the Company, Work Wear, the U.S.
Banks and the Canadian Banks specified therein and Norwest
Bank Minnesota National Association, as Agent for the Banks,
as the same may be amended from time to time with the consent
of Metropolitan.
"Guarantor" means G&K Co.
"Guaranty" means the G&K Co. Guaranty.
"Overdue Interest Rate" Intentionally omitted.
"Restricted Subsidiary" means each and every
Subsidiary of the Company and its Subsidiaries.
"Unrestricted Subsidiary" Intentionally omitted.
(B) The following definitions shall be added to Section 6 of the Notes:
"Banks" means the U.S. Banks and the Canadian Banks
specified in the Credit Agreement.
"Canadian Banks" means the Banks, organized under the
laws of Canada or any province or territory thereof, specified
in the Credit Agreement as committed to make loans to Work
Wear.
"Company Guaranty" means the Guaranty, dated as of
the dated hereof, issued by the Company to the Canadian Banks
guaranteeing the Indebtedness of Work Wear to the Canadian
Banks under the Credit Agreement.
"Consolidated Stockholders' Equity" means the
Company's consolidated stockholders' equity as shown and
described as such on the Company's consolidated financial
statements delivered to you in accordance with Section 5.1 of
the Agreement.
"Default Rate" means a per annum rate equal to the
sum of (i) the interest rate otherwise in effect with respect
to this Note and (ii) two percent (2%)."
"First Amendment" means the amendment to the Notes
dated January 28, 1993.
"G&K Co. Guaranty" has the meaning specified in the
first paragraph of this Second Amendment.
"Litigation" means any litigation, proceeding
(including without limitation any governmental, administrative
or arbitration proceeding), claim, lawsuit and/or
investigation or inquiry pending or threatened against or
involving the Company or any Restricted Subsidiary or any of
their respective businesses or operations.
"Second Amendment" means this amendment to the
Agreement, as defined in the second paragraph hereof.
"U.S. Banks" means the Banks, organized under the
laws of the United States of America or any state thereof,
specified in the Credit Agreement as committed to make loans
to the Company.
16. Section 8.01 shall be amended by adding the following sentence at
the end of such Section:
"In addition, the Company hereby agrees to indemnify
each Holder and each officer, director, employee and agent
thereof (herein individually each called an "Indemnitee" and
collectively called the "Indemnitees") from and against any
and all losses, claims, damages, reasonable expenses
(including, without limitation, reasonable attorneys' fees)
and liabilities (all of the foregoing being herein called the
"Indemnified Liabilities") incurred by an Indemnitee in
connection with any Litigation arising out of, or relating to,
the financing provided herein or any Litigation in which it is
alleged that any Environmental Law has been breached, except
for any portion of such losses, claims, damages, expenses or
liabilities incurred solely as a result of the gross
negligence or willful misconduct of the applicable Indemnitee
or as a result of a breach of the Agreement by the applicable
Indemnitee. If and to the extent that the foregoing indemnity
may be unenforceable for any reason, the Company hereby agrees
to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. All obligations provided for
in this Section 8.01 shall survive any termination of the
Agreement and payment in full of this Note.
17. Section 8.04 of the Notes shall be deleted in its entirety and the
following substituted therefor:
"8.04. Governing Law.
This Note shall be construed in accordance with and
governed by the substantive and procedural laws of the State
of Minnesota."
18. The first sentence of Section 6.7 of the Agreement shall be deleted
in its entirety and the following substituted therefor:
"This Agreement shall be construed in accordance with and
governed by the substantive and procedural laws of the State
of Minnesota."
19. The effectiveness of this Second Amendment shall be subject to the
satisfaction of the following conditions:
19.1 Opinion of Company Counsel. You shall have received from
Maslon Edelman Borman & Brand, counsel to the Company and G&K Co., a
favorable opinion, dated the date hereof in the form set forth in
Exhibit A hereto.
19.2 Fee. You shall have received a fee of $75,985.
19.3 Bank Documents. You shall have received final executed
copies of each of the Credit Agreement and the Company Guaranty, in
form and substance satisfactory to you and your counsel.
20. Except as so amended by this Second Amendment and the First
Amendment, the Notes and the Agreement are in all respects ratified and
confirmed and all provisions thereof shall be given full force and effect as if
they were set forth herein in their entirety; and all references in the
Agreement to the Notes shall mean the Notes as so amended by this Second
Amendment and the First Amendment.
[Remainder of page intentionally left blank]
This Second Amendment shall be of no force or effect unless and until
you have satisfied all of the conditions precedent specified herein and return
to the undersigned a counterpart hereof executed by you at the foot hereof.
Very truly yours,
METROPOLITAN LIFE INSURANCE COMPANY
By:________________________________
Name:
Title:
AGREED TO AND ACCEPTED:
G&K SERVICES, INC.
By:________________________________
Name:
Title:
G&K SERVICES, CO.
By:________________________________
Name:
Title: