EXHIBIT 10.2
AMENDMENT NO. 1
TO
CREDIT AGREEMENT
THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT ("Amendment") is
entered into as of December 17, 2003 by and among G&K Services Inc. (the
"Domestic Borrower"), G&K Services Canada Inc. (the "Canadian Borrower", and
together with the Domestic Borrower, the "Borrowers"), the financial
institutions party to the below-defined "Credit Agreement" as lenders (the
"Lenders"), Wachovia Bank, National Association, as Syndication Agent (the
"Syndication Agent"), and Bank One, NA (Main Office Chicago), as Administrative
Agent (the "Administrative Agent"). Each capitalized term used herein and not
defined herein shall have the meaning ascribed thereto in the below-defined
Credit Agreement.
WITNESSETH
WHEREAS, the Borrowers, the Lenders, the Syndication Agent and
the Administrative Agent are parties to a Credit Agreement dated as of June 25,
2002 (as the same may be amended, restated, supplemented or otherwise modified
from time to time, the "Credit Agreement"); and
WHEREAS, the Borrowers wish to amend the Credit Agreement in
certain respects and the Lenders and the Administrative Agent are willing to
amend the Credit Agreement pursuant to the terms of this Amendment;
NOW, THEREFORE, in consideration of the premises set forth
above, the terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Borrowers, the Lenders and the Administrative Agent agree as follows.
1. Amendments to Credit Agreement. Subject to the
satisfaction of the conditions precedent set forth in Section 2 below, the
Borrowers, the Lenders and the Administrative Agent agree that the Credit
Agreement is hereby amended as follows:
1.1 Clause (j) of the definition of "Debt" set forth in
Section 1.1 of the Credit Agreement is hereby amended to insert immediately at
the end thereof the following: "and all then outstanding Receivables Transaction
Attributed Indebtedness."
1.2 The definition of "L/C Commitment" set forth in Section
1.1 of the Credit Agreement is hereby amended in its entirety as follows:
"L/C Commitment" means the lesser of (a) Thirty Million
Dollars ($30,000,000) and (b) the Revolving Credit
Commitment.
1.3 Section 1.1 of the Credit Agreement is hereby amended to
insert alphabetically therein the following defined terms:
"Acquisition Period" means a period beginning with the month
in which the first Leverage Ratio Acquisition to occur after
December 17, 2003 is consummated and ending with the last
calendar day of the calendar month to occur eighteen months
after the month in which the Leverage Ratio Acquisition
occurred.
"Leverage Ratio Acquisition" means any acquisition of property
or other assets by either Borrower or any of their respective
Subsidiaries that is permitted under this Agreement and which,
after giving effect thereto, causes the Leverage Ratio, on a
pro forma basis on the date such acquisition is consummated,
to equal or exceed 3.00 to 1.00. In order for an acquisition
to constitute a Leverage Ratio Acquisition, the Borrowers
shall deliver to the Administrative Agent, prior to the
consummation of such acquisition, written evidence in form and
substance acceptable to the Administrative Agent supporting
the above-described pro forma calculation.
"Qualified Receivables Transaction" means any transaction or
series of transactions that may be entered into by the
Domestic Borrower or any Subsidiary pursuant to which the
Domestic Borrower or any Subsidiary may sell, convey or
otherwise transfer to a newly-formed Subsidiary or other
special-purpose entity, or any other Person, any accounts or
notes receivable and rights related thereto, provided that all
of the terms and conditions of such transaction or series of
transactions, including without limitation the amount and type
of any recourse to the Domestic Borrower or any Subsidiary
with respect to the assets transferred, are reasonably
acceptable to the Administrative Agent.
"Receivables Transaction Attributed Indebtedness" means the
amount of obligations outstanding under the legal documents
entered into as part of any Qualified Receivables Transaction
on any date of determination that would be characterized as
principal if such Qualified Receivables Transaction were
structured as a secured lending transaction rather than as a
purchase.
1.4 Each of Section 4.4(b)(i)(A), Section 4.4(b)(i)(B), and
Section 4.4(b)(ii) of the Credit Agreement is hereby amended in its entirety as
follows: "Intentionally Omitted".
1.5 Section 4.4(b)(iii) of the Credit Agreement is hereby
amended to delete therefrom the last sentence thereof and to substitute therefor
the following: "Notwithstanding the foregoing or anything to the contrary set
forth herein, (i) accounts or notes receivable sold by the Domestic Borrower in
connection with Qualified Receivables Transactions permitted under this
Agreement, including, without limitation, the requirements of Section 11.1(g),
shall not be subject to this Section 4.4(b)(iii) and no mandatory prepayment
shall be required in connection therewith, and (ii) upon and during the
continuance of a Default or an Event of Default, and upon notice from the
Administrative Agent, all Asset Sale Proceeds received by the Domestic Borrower
or any of its Subsidiaries shall be applied to make mandatory principal
prepayments of
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the Term Loans, such mandatory principal repayments to be made within three (3)
Business Days after the date of receipt of such Asset Sale Proceeds."
1.6 Section 5.1(c) of the Credit Agreement is hereby amended
to delete therefrom the pricing grid set forth therein and to substitute
therefor the following:
-----------------------------------
Applicable Margin
- ------------------ --------------------------------------------------------------- --------------- -----------------
Pricing Level Leverage Ratio LIBOR Rate Base Rate and
and Canadian Base
Acceptance Fee Rate
================== =============================================================== =============== =================
I Greater than 3.00 to 1.00 2.000% 0.750%
- ------------------ --------------------------------------------------------------- --------------- -----------------
II Greater than or equal to 2.75 to 1.00 but less than or equal 1.750% 0.500%
to 3.00 to 1.00
- ------------------ --------------------------------------------------------------- --------------- -----------------
III Greater than or equal to 2.25 to 1.00 but less than 2.75 to 1.500% 0.250%
1.00
- ------------------ --------------------------------------------------------------- --------------- -----------------
IV Greater than or equal to 1.75 to 1.00 but less than 2.25 to 1.250% 0.000%
1.00
- ------------------ --------------------------------------------------------------- --------------- -----------------
V Less than 1.75 to 1.00 1.000% 0.000%
- ------------------ --------------------------------------------------------------- --------------- -----------------
1.7 Section 5.3(a) of the Credit Agreement is hereby amended
to delete therefrom the pricing grid set forth therein and to substitute
therefor the following:
- --------------------- ---------------------------------------------------------------- -----------------------------
Pricing Level Leverage Ratio Commitment Fee Rate
===================== ================================================================ =============================
I Greater than 3.00 to 1.00 0.375%
- --------------------- ---------------------------------------------------------------- -----------------------------
II Greater than or equal to 2.75 to 1.00 but less than or equal 0.300%
to 3.00 to 1.00
- --------------------- ---------------------------------------------------------------- -----------------------------
III Greater than or equal to 2.25 to 1.00 but less than 2.75 to 0.275%
1.00
- --------------------- ---------------------------------------------------------------- -----------------------------
IV Greater than or equal to 1.75 to 1.00 but less than 2.25 to 0.250%
1.00
- --------------------- ---------------------------------------------------------------- -----------------------------
V Less than 1.75 to 1.00 0.225%
- --------------------- ---------------------------------------------------------------- -----------------------------
1.8 Section 10.1 of the Credit Agreement is hereby amended in
its entirety as follows:
Section 10.1 Leverage Ratio. As of any fiscal quarter end,
permit the ratio of (a) Total Debt on such date to (b) EBITDA
for the period of four (4) consecutive fiscal quarters ending
on or immediately prior to such quarter end to be greater than
(1) 3.25 to 1.00 if such fiscal quarter ends at any time other
than during the Acquisition Period and (2) 3.50 to 1.00 if
such fiscal quarter ends during the Acquisition Period.
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1.9 Sections 11.1(f) and (g) of the Credit Agreement are
hereby amended in their entirety as follows:
(f) Guaranty Obligations in favor of the Administrative Agent,
for the benefit of the Agents and the Lenders, and Guaranty
Obligations with respect to Debt permitted pursuant to
subsections (b) through (e) of this Section 11.1;
(g) Receivables Transaction Attributed Indebtedness incurred
by the Domestic Borrower or for which the Domestic Borrower is
otherwise obligated pursuant to Qualified Receivables
Transactions in an aggregate amount not to exceed $60,000,000
at any time;
1.10 Section 11.1(j) of the Credit Agreement is hereby
amended in its entirety as follows:
(j) Debt not otherwise permitted by this Section 11.1 in an
aggregate amount not to exceed the greater of:
(1) ten percent (10%) of Net Worth on any date of
determination; and
(2) $100,000,000.
1.11 Section 11.2 of the Credit Agreement is hereby amended to
insert immediately at the end thereof the following clause (i): "(i) Liens in
connection with Receivables Transaction Attributed Indebtedness incurred by the
Domestic Borrower or for which the Domestic Borrower is otherwise obligated
pursuant to Qualified Receivables Transactions that are permitted under Section
11.1(g)."
1.12 Section 11.3(c)(viii) of the Credit Agreement is hereby
amended in its entirety as follows: "Intentionally Omitted".
1.13 Section 11.3(c)(ix) of the Credit Agreement is hereby
amended in its entirety as follows: "Intentionally Omitted".
1.14 Section 11.3 of the Credit Agreement is hereby amended to
insert immediately at the end thereof the following clause (h): "(h) investments
comprised of capital contributions (whether in the form of cash, a note, or
other assets) to a Subsidiary or other special-purpose entity created solely to
engage in a Qualified Receivables Transaction permitted hereunder or otherwise
resulting from transfers of assets permitted under this Agreement to such a
special-purpose entity."
1.15 Section 11.5(d) of the Credit Agreement is hereby
amended in its entirety as follows:
(d) the sale or discount without recourse to:
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(1) the Domestic Borrower, or
(2) any Subsidiary of the Domestic Borrower other
than a special-purpose entity created solely to engage in a
Qualified Receivables Transaction permitted hereunder,
of accounts receivable arising in the ordinary course of
business in connection with the compromise or collection
thereof, or any sale or contribution of accounts or notes
receivable pursuant to a Qualified Receivables Transaction
permitted under this Agreement; provided, however, that the
foregoing shall not apply to recourse to the Domestic Borrower
or any non-special-purpose entity Subsidiary resulting from
(x) the breach of any customary representation or warranty
made by the Domestic Borrower or such Subsidiary in the
ordinary course of establishing and maintaining such Qualified
Receivables Transaction and transferring assets as
contemplated thereby or (y) returns, allowances, net credits
and other non-cash reductions related to accounts or notes
receivable subject to such Qualified Receivables Transaction,
including, without limitation, the goods or services the sale
of which gave rise to such accounts or notes receivable;
1.16 Section 15.10(d) of the Credit Agreement is hereby
amended to insert immediately at the end thereof the following: "Notwithstanding
anything herein to the contrary, confidential information shall not include, and
each party hereto (and each employee, representative or other agent of any party
hereto) may disclose to any and all Persons, without limitation of any kind, the
U.S. federal income tax treatment and U.S. federal income tax structure of the
transactions contemplated hereby and all materials of any kind (including
opinions or other tax analyses) that are or have been provided to such party
relating to such tax treatment or tax structure, and it is hereby confirmed that
each party hereto has been authorized to make such disclosures since the
commencement of discussions regarding the transactions contemplated hereby."
2. Conditions to Effectiveness. This Amendment shall not
become effective unless:
2.1 the Administrative Agent shall have received counterparts
of this Amendment executed by each Borrower, the Administrative Agent and the
Required Lenders;
2.2 the Administrative Agent shall have received from the
Borrowers for the ratable benefit of the Lenders who deliver their executed
signature pages to this Amendment to the Administrative Agent by 5:00 p.m.
Chicago time on December 12, 2003 a non-refundable amendment fee in immediately
available funds equal to 0.05% times the aggregate amount of the Revolving
Credit Commitments of such Lenders as in effect on such date. The Administrative
Agent's receipt of any signature page by such 5:00 p.m. Chicago time deadline
shall be determined by the Administrative Agent in its sole reasonable judgment;
and
2.3 the Administrative Agent shall have received a
Reaffirmation of Guaranty in substantially the form attached hereto as Exhibit
A.
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3. Representations and Warranties of Each Borrower. Each
Borrower represents and warrants as follows:
3.1 Such Borrower has the legal power and authority to
execute and deliver this Amendment and the officers of such Borrower executing
this Amendment have been duly authorized to execute and deliver the same and
bind such Borrower with respect to the provisions hereof.
3.2 This Amendment and the Credit Agreement as previously
executed and as amended hereby constitute legal, valid and binding obligations
of such Borrower, enforceable against it in accordance with their terms (except
as enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditor's rights generally).
3.3 Such Borrower hereby reaffirms all covenants,
representations and warranties made in the Credit Agreement and the other Loan
Documents and agrees and confirms that all such representations and warranties
are true and correct in all material respects as of the date of this Amendment
except for changes thereto reflecting events, conditions or transactions
permitted or not prohibited by the Credit Agreement or the other Loan Documents;
provided, that the words "in all material respects" in this clause (c) shall, as
to any representation or warranty that contains a materiality standard, operate
without duplication of such standard.
3.4 Such Borrower has caused to be conducted a thorough
review of the terms of the Credit Agreement and the other Loan Documents and
such Borrower's and its Subsidiaries' operations since the Closing Date and, as
of the date hereof, there are no Defaults or Events of Default thereunder.
4. Reference to the Effect on the Credit Agreement.
4.1 Upon the effectiveness of this Amendment pursuant to
Section 2 above, on and after the date hereof, each reference in the Credit
Agreement to "this Credit Agreement," "hereunder," "hereof," "herein" or words
of like import shall mean and be a reference to the Credit Agreement as modified
hereby.
4.2 Except as specifically waived or modified above, the
Credit Agreement and all other documents, instruments and agreements executed
and/or delivered in connection therewith, shall remain in full force and effect,
and are hereby ratified and confirmed.
4.3 The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power of remedy of the Administrative Agent or the Lenders, nor
constitute a waiver of any provision of the Credit Agreement or any other
documents, instruments and agreements executed and/or delivered in connection
therewith.
5. Costs and Expenses. The Borrowers jointly and severally
agree to pay all reasonable costs, fees and out-of-pocket expenses (including
attorneys' fees and expenses charged to the Administrative Agent) incurred by
the Administrative Agent in connection with the preparation, arrangement,
execution and enforcement of this Amendment.
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6. Governing Law. THIS AMENDMENT SHALL BE GOVERNED IN
ACCORDANCE WITH THE INTERNAL LAWS, AS OPPOSED TO THE CONFLICTS OF LAW
PROVISIONS, OF THE STATE OF NORTH CAROLINA.
7. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
8. Counterparts. This Amendment may be executed in any number
of counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Agreement by signing any such
counterpart. A facsimile signature page hereto sent to the Administrative Agent
or the Administrative Agent's counsel shall be effective as a counterpart
signature provided each party executing such a facsimile counterpart agrees, if
requested, to deliver originals thereof to the Administrative Agent.
9. No Strict Construction. The parties hereto have
participated jointly in the negotiation and drafting of this Amendment, the
Credit Agreement and the other Loan Documents. In the event an ambiguity or
question of intent or interpretation arises, this Amendment, the Credit
Agreement and the other Loan Documents shall be construed as if drafted jointly
by the parties hereto and no presumption or burden of proof shall arise favoring
or disfavoring any party by virtue of the authorship of any provisions of this
Amendment, the Credit Agreement or any of the other Loan Documents.
The remainder of this page is intentionally blank.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed under seal by their duly authorized officers, all as of
the day and year first written above.
DOMESTIC BORROWER:
G&K SERVICES INC., as Domestic Borrower
By ____________________________
Name:
Title:
CANADIAN BORROWER:
G&K SERVICES CANADA INC., as Canadian
Borrower
By ____________________________
Name:
Title:
BANK ONE, NA (MAIN OFFICE CHICAGO),
as Administrative Agent and Lender
By ____________________________
Name:
Title:
WACHOVIA BANK, NATIONAL
ASSOCIATION, as Syndication Agent
and Lender
By _________________________
Name:
Title:
HARRIS TRUST AND SAVINGS BANK,
as Lender
By _________________________
Name:
Title:
WELLS FARGO BANK, N.A., as Lender
By ____________________________
Name:
Title:
SUNTRUST BANK, as Lender
By ____________________________
Name:
Title:
BANK OF TOKYO-MITSUBISHI, LTD.,
Chicago Branch, as Lender
By ____________________________
Name:
Title:
THE ROYAL BANK OF SCOTLAND PLC,
as Lender
By ____________________________
Name:
Title:
COMERICA BANK, as Lender
By ____________________________
Name:
Title:
REGIONS BANK, as Lender
By ____________________________
Name:
Title:
U.S. BANK NATIONAL ASSOCIATION,
as Lender
By ____________________________
Name:
Title:
BANK OF AMERICA, N.A., as Lender
By: ____________________________
Name:
Title:
ALLIED IRISH BANKS, PLC, as Lender
By: ____________________________
Name:
Title:
By: ____________________________
Name:
Title:
THE NORINCHUKIN BANK, NEW YORK
BRANCH, as Lender
By: _____________________________
Name:________________________
Title:_______________________
THE NORTHERN TRUST COMPANY, as Lender
By:____________________________
Name:_______________________
Title:______________________
BANK HAPOALIM B.M., as Lender
By:_____________________________
Name:________________________
Title:_______________________
By:_____________________________
Name:________________________
Title:_______________________
EXHIBIT A
REAFFIRMATION OF GUARANTY
ATTACHED