<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)........ July 14, 1997
G&K SERVICES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
MINNESOTA 0-4063 41-0449530
- --------------- ------------------------ --------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification Number)
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5995 Opus Parkway, Suite 500
Minnetonka, MN 55343
(Address of principal executive offices)
Registrant's telephone number, including area code ....... (612) 912-5500
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 14, 1997, the Registrant, G&K Services, Inc., a Minnesota
corporation ("G&K"), directly and through certain of its wholly owned
subsidiaries, consummated its previously announced agreement to acquire the
uniform rental assets, plus selected linen rental assets ("Acquired Facilities")
of National Linen Services, a division of National Service Industries, Inc.
("Seller"). Seller conducts, among other things, the business of supplying and
cleaning linen wares and uniforms at various locations in the United States.
G&K intends to continue the business of Seller at such Acquired Facilities.
G&K paid approximately $280 million in payment of the purchase price for
the assets acquired, subject to certain post-closing purchase price adjustments.
The aggregate consideration consisted of approximately $280 million in cash and
G&K's assumption of certain of Seller's liabilities. The terms of the sale are
more fully described in the asset purchase agreement by and among the parties
which is filed as an exhibit herewith.
In connection with this transaction, G&K entered into a bank credit
facility with a syndicate of financial institutions, with Norwest Bank
Minnesota, National Association ("Norwest") and First Chicago NBD Bank Canada
("First Chicago"), acting as agents, providing for loans and other extensions
of credit up to $425 million (the "Credit Facility"). The initial net proceeds
of the Credit Facility were used to refinance existing bank and other
indebtedness of G&K, finance the acquisition, and pay related fees and expenses.
The terms of the Credit Facility are more fully described in the Credit
Agreement by and among the parties which is filed as an Exhibit herewith.
On July 14, 1997, G&K issued a Press Release relating to this transaction,
the text of which is filed as Exhibit 99.1 to this current report on Form 8-K
and incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
It is impracticable to provide the required financial statements at
this time. Such financial statements will be filed as soon as
practicable, but not later than 60 days after July 29, 1997, the
latest date on which this Form 8-K may be filed.
(b) PRO FORMA FINANCIAL INFORMATION.
It is impracticable to provide pro forma financial information at this
time. Such information will be filed as soon as practicable, but not
later than 60 days after July 29, 1997, the latest date on which this
Form 8-K may be filed.
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<PAGE>
(c) EXHIBITS. The following documents are filed as an exhibit to this Form
8-K and is incorporated herein by reference:
EXHIBIT NO. DESCRIPTION
2.1 Asset Purchase Agreement, dated as of May 30, 1997, by and among
National Service Industries, Inc., a Delaware corporation;
National Service Industries, Inc., a Georgia corporation; NSI
Enterprises, Inc., a California corporation and G&K Services,
Inc.
2.2 Side Letter dated as of July 14, 1997 by and among National
Service Industries, Inc., a Delaware corporation; National
Service Industries, Inc., a Georgia corporation; NSI Enterprises,
Inc., a California corporation and G&K Services, Inc.
10.1 Credit Agreement, dated as of July 14, 1997, by and among G&K
Services, Inc., Work Wear Corporation of Canada, Ltd., Norwest
Bank Minnesota, National Association, a national banking
association, and First Chicago NBD Bank Canada, a Canadian
chartered bank, as agents and NBD Bank, a Michigan chartered bank.
99.1 Press Release
Certain related transaction documents and exhibits (the "Exhibits") and the
Schedules (the "Schedules") to the Asset Purchase Agreement are not being
filed herewith. The Registrant undertakes to furnish a copy of any omitted
Exhibit or Schedule to the Commission upon request. Pursuant to Item 601(b)(2)
of Regulation S-K, the following is a list of the omitted Exhibits and
Schedules.
Exhibit A - Acquired Facilities
Contains a listing of acquired facilities
Exhibit B - Subcontract Agreement
Contains a Form of Subcontract Agreement
Exhibit C - Term Sheet
Contains a Term Sheet for the Revolving Credit and Term Loan
Facility Agreement, dated May 14, 1997
Exhibit D - Opinion of Counsel to Seller
Contains Form of Seller's Counsel Opinion
Exhibit E - Opinion of Counsel to Purchaser
Contains Form of Purchaser's Counsel Opinion
-3-
<PAGE>
Exhibit F - Assignment and Assumption of Leases
Contains Form of Assignment and Assumption of Lease and
Consent
Exhibit G - Bill of Sale and General Assignment
Contains Form of General Bill of Sale for Certain Assets
Exhibit H - Assumption Agreement
Contains Form of Assumption Agreement
Exhibit I - Transition Services Agreement
Contains Form of Transitional Services Terms Sheet
Schedule 1.1(b) List of Owned Real Estate
Schedule 1.1(h) List of Vehicles
Schedule 1.1(i)(2) Non-Proprietary Software Packages and Related License
Agreements
Schedule 1.1(i)(3) Owned Properties Leased to Others
Schedule 1.1(i)(4) Leased Real Estate
Schedule 1.1(i)(5) Personal Property Leases
Schedule 1.1(i)(6) Collective Bargaining Agreements
Schedule 1.1(l) Description of Prepaid line Items and Detailed Balance
Sheet
Schedule 1.1(m) Intellectual Property
Schedule 1.5 National Accounts
Schedule 2(b) Schedule of Active Remedial Sites and Active Compliance
Orders
Schedule 2(e) Contribution Ogligations
Schedule 2.1(f) Excluded Employees
Schedule 2.2(c) Group Insurance Plan
Schedule 3.1 Allocation
Schedule 3.7 Gain and Sharing/Revenue Adjustment
Schedule 4.1 Seller's Foreign Qualifications
Schedule 4.2 Financial Statements
Schedule 4.2(b) Interim Statements
Schedule 4.4(a) Permitted Encumbrances
Schedule 4.4(d) Shared Assets
Schedule 4.5 Real Property
Schedule 4.8 Litigation
Schedule 4.9 Court Orders, Decrees and Laws
Schedule 4.10 Labor and Employment Agreement
Schedule 4.11 Welfare Plans and Retirement Plans
Schedule 4.12 Environmental Matters
Schedule 4.15 Certain Customer Terms
Schedule 4.17 Consent Exceptions
Schedule 4.18 Changes in Conduct of Business Since 1/31/97
Schedule 4.20 Other Contracts
Schedule 4.21 Restrictive Covenants from Divestitures Affecting the
Business
Schedule 4.22 Certain Matters Relating to Licenses and Permits
Schedule 4.23(c) Branch Inventory Reports
Schedule 4.25 Seller's Brokers
Schedule 6.3 List of Consents under the Contracts Submitted by Purchaser
Schedule 6.4 Exchange of Data Processing Information
Schedule 6.5 Restricted Territory
Schedule 6.9 Environmental Remediation
Schedule 6.11 Zoning Assurances
Schedule 7.2 Severance Benefits
Schedule 8.6 Financial Statements to be Provided
Schedule 14.7 Knowledge of Seller
Certain related transaction documents and exhibits (the "Exhibits") and the
schedules to the Credit Agreement (the "Schedules") are not being filed
herewith. The Registrant undertakes to furnish a copy of any omitted Exhibit or
Schedule to the Commission upon request. Pursuant to Item 601(b)(2) of
Regulation S-K, the following is a list of the omitted Exhibits and Schedules.
Exhibits
Exhibit A - Form of US Revolving Note
Exhibit B - Form of Canadian Revolving Note
Exhibit C - Form of Term Note
Exhibit D - Form of Notice of Borrowing - US Facility
Exhibit E - Form of Notice of Conversion - US Facility
Exhibit F - Form of Notice to Continue Eurodollar Funding
Exhibit G - Form of Notice of Borrowing - Canadian Facility
Exhibit H - Form of Notice of Conversion - Canadian Facility
Exhibit I - Form of Notice to Renew Acceptance
Exhibit J - Form of Year-End Compliance Certificate
Exhibit K - Form of Quarterly Compliance Certificate
-4-
<PAGE>
Exhibit L - Form of Assignment Certificate
Schedules
Schedule 4.1 - Assets Held for Sale
Schedule 6.1 - Names; Chief Executive Offices
Schedule 6.4 - Subsidiaries; Organization Chart
Schedule 6.5 - Projected Opening Balance Sheet and Related Projections
Schedule 6.6 - Litigation
Schedule 6.10 - Plans
Schedule 6.12 - Environmental Disclosures
Schedule 8.1 - Existing Liens
Schedule 8.2 - Permitted Indebtedness and Guaranties
Schedule 8.4 - Existing Investments
-5-
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: July 25, 1997 G&K SERVICES, INC.
By /s/ Timothy Kuck
-----------------------------------
Its Chief Financial Officer
---------------------------------
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<PAGE>
EXHIBIT INDEX
PAGE
EXHIBIT NO. DESCRIPTION NUMBER
2.1 Asset Purchase Agreement, dated as of May 30, 1997, by
and among National Service Industries, Inc., a Delaware
corporation; National Service Industries, Inc., a
Georgia corporation; NSI Enterprises, Inc., a
California corporation and G&K Services, Inc.
2.2 Side Letter dated as of July 14, 1997 by and among
National Service Industries, Inc., a Delaware
corporation; National Service Industries, Inc., a
Georgia corporation; NSI Enterprises, Inc., a
California corporation and G&K Services, Inc.
10.1 Credit Agreement dated as of July 14, 1997 among G&K
Services, Inc., Work Wear Corporation of Canada Ltd.,
as Borrowers, Various Banks, and Norwest Bank
Minnesota, National Association, and NBD Bank and First
Chicago NBD Bank, Canada
99.1 Press Release
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<PAGE>
ASSET PURCHASE AGREEMENT
by and among
NATIONAL SERVICE INDUSTRIES, INC.,
a Delaware corporation
NATIONAL SERVICE INDUSTRIES, INC.,
a Georgia corporation
NSI ENTERPRISES, INC.,
a California corporation
and
G&K SERVICES, INC.
Dated as of May 30, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 - PURCHASE AND SALE OF ASSETS.......................................1
1.1 Purchased Assets.....................................................1
1.2 Excluded Assets......................................................4
1.3 Certain Intellectual Property Rights of Seller and the Affiliates....5
1.4 Nonassignable Contracts or Permits...................................6
1.5 Subcontract Agreement................................................8
ARTICLE 2 - ASSUMPTION OF LIABILITIES........................................10
ARTICLE 3 - PURCHASE PRICE...................................................11
3.1 Purchase Price......................................................11
3.2 Payment of Purchase Price...........................................12
3.3 Rental Revenue Adjustment...........................................12
3.4 New Inventory Procedures............................................16
3.5 Closing Schedules...................................................16
3.6 Dispute Resolution..................................................17
3.7 Gain Sharing on Subsequent Disposition of Linen Plants; Payment of
Linen Shortfall.....................................................17
3.8 Method of Payment...................................................20
3.9 Exclusive Remedy....................................................20
3.10 Allocation of Purchase Price........................................20
3.11 Sales Taxes; Property Taxes; Expenses...............................21
3.12 Treatment of Hold Tickets. ........................................22
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES ..................................22
4.1 Organization and Authority..........................................22
4.2 Financial Information...............................................23
4.3 Compliance with Other Instruments...................................23
4.4 Title to Assets.....................................................24
4.5 Real Property.......................................................24
4.6 Personal Property Leases............................................25
4.7 Intellectual Property...............................................25
4.8 Litigation..........................................................26
4.9 Court Orders, Decrees and Laws......................................26
4.10 Labor and Employment Agreements.....................................26
4.11 Pension and Welfare Plans...........................................27
4.12 Environmental Matters...............................................28
4.13 Rental Invoices and List of Sale Accounts...........................29
4.14 Customer Contracts..................................................29
4.15 Customer Prices and Terms...........................................29
(i)
<PAGE>
4.16 Covered Accounts....................................................29
4.17 Consents............................................................29
4.18 Conduct of Business.................................................30
4.19 Business Organization...............................................31
4.20 Other Contracts.....................................................31
4.21 Restrictive Covenants...............................................32
4.22 Licenses and Permits................................................32
4.23 Inventory...........................................................32
4.24 Accounts Receivable.................................................33
4.25 Brokers.............................................................33
4.26 General Warranties..................................................33
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF PURCHASER......................33
5.1 Organization and Authority...........................................33
5.2 Compliance with Other Instruments...................................33
5.3 Brokers.............................................................34
ARTICLE 6 - COVENANTS OF SELLER..............................................34
6.1 Conduct of Business; Performance....................................34
6.2 HSR Act Filing......................................................34
6.3 Consents............................................................34
6.4 Access and Information..............................................36
6.5 Noncompetition; Nonsolicitation; and Confidentiality................36
6.6 Monthly Financial Statements........................................39
6.7 Notification of Certain Matters.....................................39
6.8 Continuation Obligations............................................40
6.9 Environmental Remediation Obligations of Seller. ..................40
6.10 Subsequent Assignment of the Transition Services Agreement..........41
6.11 Zoning Assurances...................................................41
6.12 Permitted Encumbrances..............................................42
6.13 Real Property.......................................................42
6.14 Supply Contracts....................................................42
ARTICLE 7 - COVENANTS OF PURCHASER...........................................43
7.1 HSR Act Filings.....................................................43
7.2 Employee Matters....................................................43
7.3 Financing...........................................................45
7.4 Other Matters.......................................................45
7.5 Title Policy........................................................45
ARTICLE 8 - CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS..................45
8.1 Representations and Warranties......................................46
8.2 Absence of Litigation...............................................46
(ii)
<PAGE>
8.3 Consents and Approvals..............................................46
8.4 Opinion of Counsel to Seller........................................46
8.5 Absence of Changes..................................................46
8.6 Delivery of Financials..............................................47
8.7 Real Estate.........................................................47
8.8 Financing...........................................................47
ARTICLE 9 - CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS.....................47
9.1 Representations and Warranties......................................47
9.2 Absence of Litigation...............................................48
9.3 Consents and Approvals..............................................48
9.4 Opinion of Counsel to Purchaser.....................................48
ARTICLE 10 - CLOSING.........................................................48
10.1 Closing.............................................................48
10.2 Deliveries by Seller................................................48
10.3 Deliveries by Purchaser.............................................49
ARTICLE 11 - TERMINATION PRIOR TO CLOSING....................................49
11.1 Termination of Agreement............................................49
11.2 Termination of Obligations..........................................50
ARTICLE 12 - TRANSITION SERVICES AGREEMENT...................................50
ARTICLE 13 - INDEMNIFICATION.................................................50
13.1 Indemnification by Seller...........................................50
13.2 Indemnification by Purchaser........................................51
13.3 Definitions.........................................................51
13.4 Third Party Claims..................................................51
13.5 Deductible for Seller's Obligations; Maximum Liability..............53
13.6 Claims Period.......................................................53
ARTICLE 14 - MISCELLANEOUS...................................................53
14.1 Publicity...........................................................53
14.2 Bulk Sales Laws.....................................................54
14.3 Best Efforts........................................................54
14.4 Further Acts and Assurances.........................................54
14.5 Notices.............................................................54
14.6 Construction........................................................55
14.7 Knowledge...........................................................56
14.8 Attachments.........................................................56
14.9 Dispute Resolution..................................................56
14.10 No Reliance........................................................57
(iii)
<PAGE>
14.11 Saturdays, Sundays and Legal Holidays..............................58
14.12 Confidentiality....................................................58
14.13 Parties Bound by Agreement.........................................58
14.14 Counterparts.......................................................58
14.15 Headings...........................................................58
14.16 Modification and Waiver............................................58
14.17 Severability.......................................................58
14.18 Agreement as to Certain Matters....................................59
14.19 Access to Records..................................................59
14.20 Entire Agreement...................................................59
14.21 No Express or Implied Warranties...................................60
(iv)
<PAGE>
LIST 1
EXHIBITS
Exhibit A - Acquired Facilities
Exhibit B - Subcontract Agreement
Exhibit C - Term Sheet
Exhibit D - Opinion of Counsel to Seller
Exhibit E - Opinion of Counsel to Purchaser
Exhibit F - Assignment and Assumption of Leases
Exhibit G - Bill of Sale and General Assignment
Exhibit H - Assumption Agreement
Exhibit I - Transition Services Agreement
SCHEDULES
Schedule Description Schedule Number
- -------------------- ---------------
Owned Real Property. . . . . . . . . . . . . . . . . . . . . 1.1(b)
Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(h)
Purchase Orders, etc.. . . . . . . . . . . . . . . . . . . . 1.1(i)(ii)
Certain Lease Agreements . . . . . . . . . . . . . . . . . . 1.1(i)(iii)
Real Property Leases . . . . . . . . . . . . . . . . . . . . 1.1(i)(iv)
Leases for Personal Property . . . . . . . . . . . . . . . . 1.1(i)(v)
Collective Bargaining Agreements . . . . . . . . . . . . . . 1.1(i)(vi)
Prepaid Items. . . . . . . . . . . . . . . . . . . . . . . . 1.1(l)
Licenses, Trademarks and Tradenames. . . . . . . . . . . . . 1.1(m)
National Accounts. . . . . . . . . . . . . . . . . . . . . . 1.5
Contribution Obligations . . . . . . . . . . . . . . . . . . 2(e)
Gain Sharing; Revenue Adjustment . . . . . . . . . . . . . . 3.7
Foreign Qualifications of Seller . . . . . . . . . . . . . . 4.1
Financial Statements . . . . . . . . . . . . . . . . . . . . 4.2
Real Property. . . . . . . . . . . . . . . . . . . . . . . . 4.5
Intellectual Property. . . . . . . . . . . . . . . . . . . . 4.7
Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 4.8
Court Orders, Decrees, Laws. . . . . . . . . . . . . . . . . 4.9
Labor Relations. . . . . . . . . . . . . . . . . . . . . . . 4.10
Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . 4.11
Environmental Matters. . . . . . . . . . . . . . . . . . . . 4.12
Customer Prices & Terms. . . . . . . . . . . . . . . . . . . 4.15
Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 4.17
(v)
<PAGE>
Conduct of Business. . . . . . . . . . . . . . . . . . . . . 4.18
Other Contracts. . . . . . . . . . . . . . . . . . . . . . . 4.20
Restrictive Covenants. . . . . . . . . . . . . . . . . . . . 4.21
Licenses & Permits . . . . . . . . . . . . . . . . . . . . . 4.22
Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . 4.23
Seller Brokers . . . . . . . . . . . . . . . . . . . . . . . 4.25
Buyer Brokers. . . . . . . . . . . . . . . . . . . . . . . . 5.3
Certain Consents . . . . . . . . . . . . . . . . . . . . . . 6.3
Access and Information . . . . . . . . . . . . . . . . . . . 6.4
Environmental Remediation. . . . . . . . . . . . . . . . . . 6.9
Zoning . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
Certain Employees. . . . . . . . . . . . . . . . . . . . . . 7.2(a)
Severance Benefits . . . . . . . . . . . . . . . . . . . . . 7.2(c)
Delivery of Financials . . . . . . . . . . . . . . . . . . . 8.6(a)
Knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . 14.7
(vi)
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), is made and entered
into as of this 30th day of May, 1997, by and among each of NATIONAL SERVICE
INDUSTRIES, INC., a Delaware corporation ("Parent"), NATIONAL SERVICE
INDUSTRIES, INC., a Georgia corporation ("Seller"), NSI ENTERPRISES, INC., a
California corporation ("Enterprises") (but only with respect to Article 4 and
Section 6.5 hereof) and G&K SERVICES, INC., a Minnesota corporation
("Purchaser");
RECITALS:
1. Seller is a direct, wholly owned subsidiary of Parent and conducts,
among other things, the businesses of the supply for hire of clean, laundered,
continuous towel, table linen, napkins, bar wipes, bed linen, aprons, chef coats
and pants, lab coats and other flat linens and kindred items, uniforms, rest
room service, dust control supply, commercial laundry and facility-based direct
sales in each case at the facilities listed on Exhibit A (the "Acquired
Facilities") (the foregoing businesses, exclusive of the sterile healthcare
supply and laundry businesses conducted through Seller's NPAC division (the
"NPAC Business"), are hereinafter referred to collectively as the "Business");
2. Purchaser desires to purchase from Seller and certain other direct or
indirect subsidiaries of Parent and other entities controlled by or under common
control with Parent (each an "Affiliate"), and Seller and each such Affiliate
desire to sell to Purchaser, the Business as a going concern and certain assets
and rights owned and/or used by Seller or the Affiliates in the Business, upon
the terms and conditions set forth in this Agreement; and
3. Purchaser also desires to assume from Seller and the Affiliates, and
Seller and the Affiliates desire to assign to Purchaser, certain liabilities and
obligations of Seller and such Affiliates relating to the Business, upon the
terms and conditions set forth in Article 2 of this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements contained herein, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 PURCHASED ASSETS. Except as otherwise specifically provided in
Section 1.2 hereof, subject to the terms and conditions hereof, Seller agrees to
sell, assign, transfer and deliver, and Parent agrees to cause any Affiliate to
sell, assign, transfer and deliver, to Purchaser, and Purchaser agrees to
purchase and accept from Seller or any such Affiliate, as applicable, at and as
of the Closing Date (as hereinafter defined), all of Seller's or such
Affiliate's right, title and
<PAGE>
interest in and to the Business as a going concern and all of the following
properties, assets and rights, relating exclusively to the Business and existing
as of the Closing Date (collectively, the "Purchased Assets"):
(a) all customer lists, customer files and route books relating to
customers of the Business (the accounts of such customers as related solely
to the Business, in addition to the customer accounts representing the
Jacksonville Volume (as defined below), are referred to hereinafter as the
"Covered Accounts");
(b) all Owned Real Property (as defined below) described on
Schedule 1.1(b), which Schedule shall be revised on or prior to the Closing
Date to reflect the legal descriptions of each parcel of Owned Real
Property set forth on the respective Title Commitment (as defined below)
relating thereto;
(c) all linens, garments, mats, mops, towels and other rental items,
along with laundry bags and tie covers which are in used condition and
located at either (i) an Acquired Facility; (ii) any customer location
associated with a Covered Account; (iii) on any vehicle listed on Schedule
1.1(h) hereof or that are leased by Seller or an Affiliate pursuant to that
certain Lease by and between Rollins Leasing Corp. and Parent, dated
December 13, 1982 (collectively, the "Leased Vehicles"); or (iv) on the
premises of a third party processor of such items (a "Processor's
Premises") (collectively, the "In-Service Inventory");
(d) subject to the inventory guidelines set forth in Section 3.4
hereof, all new, never processed linens, garments, mats, mops, towels and
other rental items, laundry bags and tie covers, and all new, unopened
paper products located at an Acquired Facility (collectively, the "New
Inventory"). Together, the New Inventory and the In-Service Inventory are
referred to herein as the "Inventory;"
(e) all CRT cabinets, mop handles and frames, paper towel cabinets,
bag racks, air freshener dispensers and soap and tissue dispensers located
at either (i) an Acquired Facility; (ii) any customer location associated
with a Covered Account; or (iii) on any vehicle listed on Schedule 1.1(h)
hereof or on any Leased Vehicle (collectively, the "Restroom Service
Products");
(f) all machinery, fixtures, furniture, equipment, materials, parts,
supplies, tools and other tangible property owned by Seller and which are
located at either (i) an Acquired Facility; (ii) any customer location
associated with a Covered Account; (iii) on any vehicle listed on Schedule
1.1(h) hereof or on any Leased Vehicle; (iv) on a Processor's Premises; or
(v) in any third party repair shop;
(g) all rolling stock (exclusive of vehicles) used or held for use,
including, without limitation, delivery carts, hampers and buggies located
at either (i) an Acquired
2
<PAGE>
Facility; (ii) any customer location associated with a Covered Account;
(iii) on any vehicle listed on Schedule 1.1(h) hereof or on any Leased
Vehicle; or (iv) on a Processor's Premises;
(h) all vehicles listed in Schedule 1.1(h) hereto;
(i) all rights under all contracts and agreements, oral or written,
used by Seller or any Affiliate in the conduct of the Business which are in
effect as of the Closing Date (all of such contracts and agreements being
hereinafter referred to collectively as the "Contracts"), including,
without limitation, (i) subject to the provisions of Section 1.5 hereof,
all customer contracts pertinent to the Covered Accounts; (ii) all purchase
orders, nonproprietary software license agreements listed on Schedule
1.1(i)(ii), and other license agreements, service agreements and
maintenance agreements; (iii) all lease agreements listed on Schedule
1.1(i)(iii) under which Seller is lessor of portions of the Owned Real
Property; (iv) all Real Property Leases (as defined below) listed on
Schedule 1.1(i)(iv); (v) all lease and sublease agreements for tangible
personal property located at the Acquired Facilities, including without
limitation, the Personal Property Leases (as defined below) listed on
Schedule 1.1(i)(v); and (vi) the Collective Bargaining Agreements (as
defined below) listed on Schedule 1.1(i)(vi);
(j) to the extent transferable, all permits, authorizations and
licenses used by Seller or an Affiliate in the conduct of the Business
(collectively, the "Transferable Permits");
(k) all accounts receivable relating to the Covered Accounts and
other receivables relating exclusively to the Business which are
outstanding as of the Closing Date, without regard to whether or not such
accounts receivable have been fully reserved for as uncollected accounts
receivable or written off as uncollectible accounts, but exclusive of any
Hold Tickets (as defined below) (the "Accounts Receivable");
(l) all prepaid items that are listed in Schedule 1.1(l) to the
extent Purchaser is able to use such prepaid items in the ordinary course
of the Business following consummation of the transactions contemplated by
this Agreement (the "Prepaid Items");
(m) the intellectual property listed on Schedule 1.1(m) (the
"Intellectual Property"), and any federal and state registrations or
applications for registration relating thereto; and
(n) all of Seller's rights under all manufacturing warranties from
third parties relating solely to the Purchased Assets.
3
<PAGE>
1.2 EXCLUDED ASSETS. Notwithstanding the provisions of Section 1.1, the
following properties, assets and rights (the "Excluded Assets") shall not be
transferred to Purchaser and therefore are not a part of the Purchased Assets:
(a) all cash (whether positive or negative), marketable securities
and other cash equivalents of Seller as of the Closing Date, inclusive of
any unbooked accounts receivable represented by uncollected C.O.D. accounts
outstanding as of the Closing Date (collectively, the "Hold Tickets"),
which Hold Tickets will be treated in the manner contemplated by Section
3.12 hereof;
(b) all rights under contracts relating to the NPAC Business (and,
accordingly, the term "Covered Accounts" shall not include any accounts of
Seller to the extent related to the NPAC Business);
(c) all trademarks, service marks, trade names, service names, logos
and other like proprietary rights of Seller or any Affiliates, except for
those set forth on Schedule 1.1(m);
(d) all rights of Seller or any Affiliate to tax refunds, however
arising, relating to the Purchased Assets and the Business for taxable
periods prior to and including the Closing Date;
(e) all rights of Seller to any reimbursements from governmental
entities for environmental remediation or condemnation relating to any
period prior to and including the Closing Date, as well as all rights of
Seller to reimbursement from governmental entities for environmental
remediation relating to payments actually made subsequent to the Closing
Date, except as otherwise contemplated by Section 6.9(c);
(f) all rights of Seller or its Affiliates in and to all of its
proprietary software (except to the extent such software is listed on
Schedule 1.1m), Seller's LinenHelper and LinenKeeper software package,
training and technical manuals and aids, handbooks, videos, sales training
materials, other proprietary materials relating generally to Seller or its
company-wide operations, and those items or instructional aids constituting
Seller's Smith System driver training module;
(g) all rights of Seller or its Affiliates in and to (i) the Contract
relating to Cleveland Mills Company and identified on Schedule 4.20 as item
no. 1 thereon; and (ii) the Real Estate Leases relating to the property
located at Route 3, Box 4, Headland, Alabama and Route 22 West, Ebensburg,
Pennsylvania; except in the event Purchaser provides written notice to
Seller, on or prior to the Closing Date, of Purchaser's intention to
include such Contract or Real Estate Lease(s) in the definition of
Purchased Asset hereunder (to the extent such Real Estate Lease(s) are
excluded hereunder, such Real Estate Lease(s) shall be hereinafter referred
to as the "Excluded Leases");
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(h) all rights of Seller or its Affiliates in and to (i) any and all
contracts with American Print Towel, (ii) the Supply Agreement dated June
21, 1996 between Seller and Standard Textile Co., Inc. ("Standard
Agreement"), (iii) the Supply Agreement dated June 28, 1996 between Seller
and Artex International, Inc. ("Artex Agreement"), and (iv) the Agreement
to provide Wastewater treatment Services, dated June 28, 1996 between AO
Services, Fernandian Beach, FL and National Uniform Services Opa Locka, FL;
(i) all rights of Seller or its Affiliates in and to any and all
employment agreements for Employees of the Business including without
limitation those employment agreements identified on Schedule 4.10 hereto
and any and all severance agreements with Employees of the Business
including without limitation those severance agreements identified on
Schedule 4.10 hereto;
(j) all rights of Seller under this Agreement;
(k) any assets which are excluded prior to the Closing in accordance
with Section 1.5(c)(ii)(3); and
(l) any and all other properties, assets and rights of Seller or an
Affiliate which are not expressly listed or referred to in Section 1.1.
1.3 CERTAIN INTELLECTUAL PROPERTY RIGHTS OF SELLER AND THE AFFILIATES.
(a) As noted in Section 1.2, except as set forth on Schedule 1.1(m),
Seller and its Affiliates are not selling pursuant to this Agreement, and
expressly reserve for their own exclusive use and benefit, all right, title
and interest in and to all trademarks, service marks, trade names, service
names, logos and other like proprietary rights of Seller and the
Affiliates. Notwithstanding the foregoing, as soon as practicable after the
Closing Date, Purchaser shall take, with respect to the plants identified
on Exhibit A as industrial plants (each an "Industrial Plant"), all
reasonably necessary and prompt action, including repainting the delivery
trucks utilized by the Industrial Plants and which are being conveyed
hereunder, to ensure that such marks, names, logos and other rights shall
no longer be used in connection with or be associated with the Business
conducted by the Industrial Plants; provided, that Seller hereby grants a
nonexclusive license (the "Industrial Plants License") to Purchaser to use
such marks, names, logos or other rights during a period which shall in no
event exceed nine (9) months from the Closing Date as to such delivery
trucks and sixty (60) days from the Closing Date as to all other Purchased
Assets utilized by the Industrial Plants, if Purchaser is diligently
proceeding to remove such association and undertakes reasonably necessary
and prompt efforts to inform the public that Purchaser is not affiliated
with Seller; and provided, further, that Purchaser shall be permitted to
use tools, Inventory, Restroom Service Products and other items to which
names other than those set forth on Schedule 1.1(m) and derivations thereof
are affixed (and cannot be removed practicably) for the remaining lives of
such items. Except as
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hereinafter provided, the license granted herein shall apply only to the
Business conducted by the Industrial Plants and only to the extent and in
the manner that such rights were used in the Business conducted by the
Industrial Plants prior to the Closing Date.
(b) Notwithstanding the foregoing, for the one (1) year period
following the Closing Date (except in the case of Ft. Myers' Branch #196,
in which case the applicable period will be nine (9) months from the
Closing Date), Seller hereby grants a nonexclusive license (the "Linen
Plants License") to Purchaser to use such marks, names, logos or other
rights of Seller or an Affiliate to the extent such marks, names, logos or
other rights appear on any Purchased Asset utilized by the plants
identified on Exhibit A as linen plants (each a "Linen Plant"), and
Purchaser shall not be required to take any affirmative steps whatsoever to
ensure that such marks, names, logos and other rights not conveyed
hereunder are not being used in connection with or associated with the
Business conducted by the Linen Plants. Upon expiration of the term of the
Linen Plants License, to the extent Purchaser has not entered into any
binding purchase agreement with respect to the sale of all or substantially
all of the assets and/or revenue base attributable to a Linen Plant (each,
a "Linen Plant Sale"), Purchaser shall thereafter diligently proceed to
take all reasonably necessary and prompt action, including repainting the
delivery trucks utilized by such Linen Plant and that are conveyed hereby,
so that such marks, names, logos and other rights shall not thereafter be
used in connection with or be associated with the Business conducted by
such Linen Plant. Purchaser shall further undertake such additional
reasonably necessary and prompt efforts to inform the public that Purchaser
is not affiliated with Seller; provided that Purchaser shall be permitted
to use tools, Inventory, Restroom Service Products and other items to which
names other than those set forth on Schedule 1.1(m) and derivations thereof
are affixed (and cannot be removed practicably) for the remaining lives of
such items. Except as hereinafter provided, the Linen Plants License
granted herein shall apply only to the Business conducted by the Linen
Plants and only to the extent and in the manner that such rights were used
in the Business conducted by the Linen Plants prior to the Closing Date.
Notwithstanding the foregoing, to the extent Purchaser has entered into any
binding purchase agreement with respect to a Linen Plant Sale during the
term of the Linen Plants License, Purchaser may sublicense its Linen Plants
License to any buyer in a Linen Plant Sale, to the extent, and on the same
terms as, the Industrial Plants License, provided that the term of such
sublicense shall not commence until the effective time of the Linen Plant
Sale pursuant to which such assets are conveyed to the buyer thereof.
1.4 NONASSIGNABLE CONTRACTS OR PERMITS. Except as otherwise provided in
Section 6.3 hereof:
(a) To the extent that assignment hereunder by Seller or any
Affiliate to Purchaser of any Contract is not permitted or is not permitted
without the consent of a third party, this Agreement shall not be deemed to
constitute an undertaking to assign the same if such consent is not given
or if such an undertaking otherwise would constitute a breach of or cause a
loss of benefits thereunder. Notwithstanding the foregoing, this
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Section 1.4(a) shall not be read in derogation of Seller's or any
Affiliate's obligation to undertake all reasonable efforts to obtain such
consents in accordance with Section 6.3 hereof.
(b) If and to the extent that Seller or any Affiliate is unable to
obtain any third party consent required for assignment of a Contract prior
to Closing, Seller or such Affiliate shall continue to be bound by any such
Contract until such time as it is able to obtain such third party consent
(the "Non-Assigned Contract"). In such event, to the maximum extent
permitted by law or the terms of the Non-Assigned Contract, (i) Seller or
such Affiliate shall make the benefit of such Non-Assigned Contract
available to Purchaser, and (ii) the assignment provisions of this
Agreement shall operate to the extent permitted by law or the applicable
Non-Assigned Contract to create a subcontract, sublease or sublicense with
Purchaser to perform such Non-Assigned Contract at a fee equal to the
monies, rights and other consideration receivable or payable by Seller or
such Affiliate with respect to the performance by or enjoyment of Purchaser
under such subcontract, sublease or sublicense. To the extent such benefit
is made available, and/or such subcontract, sublease or sublicense is
created, (i) Purchaser shall pay, perform and discharge fully all
obligations of Seller or any Affiliate under any such Non-Assigned Contract
after the Closing Date, (ii) Seller or such Affiliate shall, without
further consideration therefor, pay and remit to Purchaser promptly any
monies, rights and other consideration received in respect of such
Non-Assigned Contract performance, and (iii) Seller or such Affiliate shall
exercise or exploit its rights and options under all such Non-Assigned
Contracts only as directed by Purchaser and at Purchaser's expense.
(c) In the event Seller or such Affiliate cannot subcontract,
sublease or sublicense such performance pursuant to the terms of such
Non-Assigned Contract, then Purchaser shall loan the necessary employees,
assets and property, including, without limitation, use of appropriate
corporate or trade names, to permit timely performance by Seller or such
Affiliate of such Non-Assigned Contract as provided therein. To the extent
such employees, assets and property are made available, (i) Seller or an
Affiliate shall pay, perform and discharge fully all obligations under any
such Non-Assigned Contract after the Closing Date, (ii) Seller or such
Affiliate shall, without further consideration therefor, pay and remit to
Purchaser promptly any monies, rights and other consideration received in
respect of such Non-Assigned Contract performance, and (iii) Seller or such
Affiliate shall exercise or exploit their rights and options under all such
Non-Assigned Contracts only as directed by Purchaser and at Purchaser's
expense.
(d) Purchaser agrees to indemnify and hold Seller or any Affiliate
harmless from and against any liabilities or damages (including personal
injury or property damage) incurred by them as a result of or in connection
with any performance or nonperformance of any Non-Assigned Contract by
Purchaser after the Closing Date under this Section 1.4, and Purchaser
shall reimburse Seller or any Affiliate for all costs and expenses
reasonably incurred after the Closing Date in connection with the
performance by Seller or any
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Affiliate of their respective obligations under this Section 1.4, but shall
not be obligated to reimburse Seller for any costs or expenses incurred in
connection with Seller or such Affiliate's seeking and or obtaining any
such third party consents.
(e) If and when any third party consent to a Non-Assigned Contract
shall be obtained or any such Non-Assigned Contract shall otherwise become
assignable, Seller or any Affiliate shall promptly assign all of its rights
and obligations thereunder or in connection therewith to Purchaser without
payment of further consideration therefor, and Purchaser shall assume such
rights and obligations.
(f) To the extent any Permit is not assignable, either by its terms
or as a matter of law, Seller or any Affiliate shall use all reasonable
efforts to cooperate with and assist Purchaser in preparing and submitting
any information or filings required in connection with the reissuance to
Purchaser of any such Permit.
1.5 SUBCONTRACT AGREEMENT.
(a) Notwithstanding anything contained in this Agreement to the
contrary, with respect to those Covered Accounts that are governed by a
multilocation or national account agreement between Seller and the owners
of such accounts and which are set forth on Schedule 1.5 (the
"Multilocation Linen Accounts"), Seller shall not assign any of its right,
title, and interest in and to such agreements to Purchaser, but, instead,
Purchaser and Seller will, at the Closing, enter into Subcontract
Agreements (each, a "Subcontract Agreement"), substantially in the form
attached hereto as Exhibit B, pursuant to which Purchaser shall provide
service to such accounts to the extent that service to such accounts
constituted a part of the Business. Notwithstanding the foregoing, in the
event any multilocation or national account relates exclusively to any
Covered Account(s) serviced solely by the Acquired Facilities, Seller or an
Affiliate shall assign all of their respective right, title, and interest
in and to such agreements to Purchaser in such multilocation or national
account pursuant to the terms of this Agreement.
(b) Any provision to the contrary notwithstanding, specifically
including Section 14.13 hereof, Seller and each Affiliate hereby
irrevocably consent to the assignment by Purchaser of all or a portion of
Purchaser's rights under this Section 1.5 or any Subcontract Agreement to
any other person or entity in connection with Purchaser's sale of all or
substantially all of the assets and/or any relevant portion of the revenue
base attributable to any Acquired Facility and such transferee shall
thereafter have all of Purchaser's rights and obligations hereunder for the
duration of the Subcontract Agreement.
(c) Notwithstanding anything in this Agreement to the contrary, it is
understood that the following provisions shall be applicable with respect
to Covered
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Accounts for Industrial Items (as hereinafter defined) which are governed
by multilocation or national accounts ("Multilocation Industrial
Accounts"):
(i) In the case of Multilocation Industrial Accounts which
relate exclusively to Covered Accounts serviced solely by the Acquired
Facilities, Seller or an Affiliate shall assign all of their
respective right, title and interest in and to the agreements relating
to such Accounts pursuant to the terms of this Agreement.
(ii) Multilocation Industrial Accounts not otherwise covered by
Section 2.5(c)(i) (the "Special Industrial Accounts") shall be subject
to the following provisions:
(1) On or before June 12, 1997, Seller will furnish
Purchaser with two schedules, one of which (which will be
designated as Schedule 1.5(c) - Assignable Special Industrial
Accounts) will set forth those Special Industrial Accounts with
respect to which Seller is willing to assign all of its rights
with respect to the agreements relating thereto (subject to the
provisions hereof) (the "Assignable Special Industrial
Accounts"), and one of which (which will be designated as
Schedule 1.5(c) - Non-Assignable Special Industrial Accounts)
will set forth those Special Industrial Accounts with respect to
which Seller is unwilling to assign all of its rights with
respect to the agreements relating thereto (the "Non-Assignable
Special Industrial Accounts").
(2) On the Closing Date, Seller or an Affiliate will assign
all of its rights to the agreements relating to the Assignable
Special Industrial Accounts to Purchaser. All Assignable Special
Industrial Accounts will be considered Covered Accounts (and,
except to the extent subcontracted to Seller by Purchaser in
accordance with this paragraph (2), all revenue attributable
thereto during the Industrial Measuring Period will be included
as a part of the Average Weekly Industrial Revenue). To the
extent Purchaser elects not to service any such Accounts or
portions thereof included within the Assignable Special
Industrial Accounts then Seller will enter into a subcontract
agreement with Purchaser (on substantially the same terms as are
set forth in the Subcontract Agreement, except that the
respective roles of Seller and Purchaser shall be reversed),
pursuant to which Seller will provide service to such Accounts or
portions thereof.
(3) Prior to the Closing Date, Seller and Purchaser will
mutually determine to what extent, if any, and upon what terms,
the Non-Assignable Special Industrial Accounts will be considered
as a part of the
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Business. Absent a mutual written agreement to the contrary with
respect to the Non-Assignable Special Industrial Accounts, those
Accounts will be excluded from the Covered Accounts (and will be
retained by Seller as Excluded Assets) and there shall be a
reduction in the Base Price equal to the Average Weekly
Industrial Revenue attributable to such Non-Assignable Special
Industrial Accounts multiplied by 70 (and there shall be an
appropriate corresponding reduction in each of the Total Base
Revenue Amount and the Base Amount definitions).
(d) Seller shall hold Purchaser harmless with respect to the
subsequent resale of the Multilocation Linen Accounts in accordance with
Section 3.7(e) hereto.
ARTICLE 2
ASSUMPTION OF LIABILITIES
Subject to the terms and conditions hereof, Purchaser shall assume and
agree to perform the obligations of Seller set forth in clauses (a) through (g)
below of this Article 2, relating to the Business and which are to be performed
from and after the Closing Date (the "Assumed Liabilities"); provided that
Purchaser shall not assume any other obligation or liability of Seller or any
Affiliate that relates to or arises out of ownership of the Business prior to
the Closing Date, whether absolute or contingent, known or unknown, contractual
or otherwise (the "Excluded Liabilities"):
(a) the performance obligations of Seller, any Affiliate or the
Business under the Contracts, except that Purchaser is not assuming, and
Seller shall retain each and every restoration obligation, if any, related
to or arising out of (i) Seller's restoration obligations under that
certain Lease Agreement dated January 15, 1990, by and between Clark Road,
Inc. and Seller related to the Acquired Facility identified on Exhibit A as
Portland Branch #133, or otherwise with respect to such Acquired Facility,
and (ii) Seller's or any Affiliate's restoration obligations under that
certain Agreement of Lease dated November 15, 1983, by and among L.B.
Jackson, Jr., R.H. Edney, Jr. and Parent related to the Acquired Facility
identified on Exhibit A as Corpus Christi Branch #424, or otherwise with
respect to such Acquired Facility, but only to the extent, in either case,
with respect to conditions that exist on the Closing Date;
(b) subject to the provisions of Section 6.9(b), all obligations of
Seller to conduct the Business in accordance with the compliance orders
described in Schedule 2(b);
(c) all obligations of Seller relating to the Hired Employees (as
hereinafter defined) for the Accrued Employee Credit (as hereinafter
defined), in addition to all
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performance obligations of Seller to withhold wages from any Hired Employee
in satisfaction of any child support order or garnishment obligation;
(d) with respect to the Employees of the Business only, all
liabilities and obligations of Seller under the Collective Bargaining
Agreements (and, in connection therewith, Purchaser hereby agrees to
recognize the labor organizations set forth in Schedule 1.1(i)(vi) as the
exclusive bargaining representatives of the Employees of the Business
covered by the Collective Bargaining Agreements), except in the case of
those employee benefit plans which by their terms Purchaser cannot assume;
(e) all liabilities for contributions with respect to the Hired
Employees for periods after the Closing Date, pursuant to the Collective
Bargaining Agreements described herein and payable to the "multiemployer
plans" (as defined under Section 4001(a)(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) described on
Schedule 2(e) to which the Seller makes contributions on behalf of the
Employees of the Business; PROVIDED, HOWEVER, that such liabilities do not
include any currently existing "withdrawal liability" (as described in
Section 4201 of ERISA) of Seller or any Affiliate that is owing to any of
such plans as a result of events occurring prior to the Closing Date;
(f) all purchase orders to the extent related to the Business for
goods not delivered or services not provided on or prior to the Closing
Date; and
(g) from and after the fourth anniversary of the Closing Date, but
subject to the provisions of Section 6.9 hereof, all liabilities and
obligations of Seller for environmental liabilities related to activities
that precede the Closing Date and which are unknown as of the fourth
anniversary of the Closing Date, to the extent they occur within the legal
property boundaries of an Acquired Facility. Notwithstanding the foregoing
limited assumption of Seller's environmental liabilities, or anything
contained in this Agreement to the contrary, Seller shall at all times
remain liable for any environmental liability that both (i) arises out of
or relates to Seller or an Affiliate's ownership of the Business prior to
the Closing Date and (ii) relates to off-site remediation obligations,
"superfund" or similar type liability, whether or not such liability is
known or unknown, contingent or otherwise.
ARTICLE 3
PURCHASE PRICE
3.1 PURCHASE PRICE. Subject to the terms and conditions contained herein,
in addition to Purchaser's assumption of the Assumed Liabilities, Purchaser
agrees to pay a purchase price (the "Purchase Price") for the Purchased Assets
in an amount equal to the total of: (a) Two Hundred Sixty-Three Million Five
Hundred Thousand Dollars ($263,500,000) (the "Base Price"),
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subject to adjustment as provided in Sections 3.3 and 6.3(b), if applicable,
below, plus (b) an amount equal to ninety-seven percent (97%) of the face amount
of the Accounts Receivable that are less than 91 days past due as of the Closing
Date; plus (c) Seller's cost of the New Inventory, determined in accordance with
Section 3.4 below; plus (d) the book value of the Prepaid Items; minus (e) the
accrued wages, bonuses and commissions, earned and accrued vacation and vested
sick pay for the Hired Employees as of the Closing Date (the "Accrued Employee
Credit").
3.2 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid to Seller
as follows:
(a) At the Closing, Purchaser shall assume the Assumed Liabilities
pursuant to Article 2 above and shall pay Seller an amount (the "Cash
Purchase Price") equal to the total of: (i) the Base Price, as adjusted
pursuant to Sections 3.3 and 6.3(b), if applicable, below, plus (ii)
ninety-seven percent (97%) of the estimated amount of the face amount of
the Accounts Receivable that are less than 91 days past due as of the
Closing Date, plus (iii) the estimated value of the New Inventory, plus
(iv) the estimated book value of the Prepaid Items, minus (v) the estimated
amount of the Accrued Employee Credit. In the case of items (ii) through
(iv), such estimated amounts shall be determined based on the respective
amounts thereof reflected on the Monthly Statement (as defined below) for
the month immediately preceding the month in which the Closing occurs.
With respect to the Accrued Employee Credit, Seller and Purchaser agree to
jointly estimate at least one week prior to the anticipated Closing Date a
reasonable amount to be credited against the Base Price at Closing.
(b) Within fifteen (15) days after the Closing Schedules and the
Adjustment Schedule (as such terms are defined below) become final in
accordance with Section 3.6 below, (i) if the net amount payable for the
New Inventory, the Accounts Receivable and the Prepaid Items, less the
Accrued Employee Credit, as reflected on the Closing Schedules, plus or
minus (as appropriate) the final value of the Disputed Adjustment Amount
(as defined below) as resolved pursuant to Section 3.6 hereof, exceeds the
net amount paid (or credited) for such items in the Cash Purchase Price,
then Purchaser shall pay Seller the difference between such amounts, or
(ii) if the net amount payable for the New Inventory, the Accounts
Receivable and the Prepaid Items, less the Accrued Employee Credit, as
reflected on the Closing Schedules, plus or minus (as appropriate) the
final value of the Disputed Adjustment Amount as resolved pursuant to
Section 3.6 hereof, is less than the net amount paid (or credited ) for
such items in the Cash Purchase Price, then Seller shall pay Purchaser the
difference between such amounts.
3.3 RENTAL REVENUE ADJUSTMENT.
(a) Subject to the terms of this Section 3.3, if the Total Actual
Revenue Value (as defined below) varies from the Total Base Revenue Value
(as defined below), the Base Price (and, therefore, the Purchase Price) and
the Deductible described in Section 13.5 below shall be adjusted as
provided herein. If the variance between the Total Actual
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Revenue Value and the Total Base Revenue Value is less than one percent of
the Total Base Revenue Value then no adjustment to the Base Price or the
Deductible shall be made. If the Total Actual Revenue Value exceeds the
Total Base Revenue Value by one percent or more of the Total Base Revenue
Value, then the Deductible shall be increased by an amount equal to one
percent of the Total Base Revenue Value and the Base Price shall be
increased by the amount of the excess of such variance over such one
percent figure. If the Total Base Revenue Value exceeds the Total Actual
Revenue Value by at least one percent of the Total Base Revenue Value, then
the Deductible shall be decreased by one percent of the Total Base Revenue
Value, and the Base Price shall be decreased by the amount of excess of
such variance over such one percent figure.
(b) As soon as possible after the end of the Linen Measuring Period
and the Industrial Measuring Period (as defined below), but in no event
less than five (5) days after the end of such periods, Seller shall deliver
to Purchaser a schedule showing those former customers of either an
Industrial Plant or Linen Plant who quit service with Seller at any time
between April 2, 1997, but prior to the normal contract maturity date of
such customer, and who Seller reasonably believes began service with
Purchaser thereafter. Upon receipt of such customer list, Purchaser shall
promptly attempt to identify any existing customer of Purchaser who was so
listed by Seller, and shall thereafter provide Seller with such supporting
invoice and revenue detail as shall enable Seller to calculate the revenue
amounts to be attributed to Migrated Linen Revenue and Migrated Industrial
Revenue (as defined below). In connection therewith, Seller shall have the
right to inspect all invoices and any of Purchaser's internal work papers
relating to the determination and preparation of such customer detail.
(c) As soon as possible after the end of the Linen Measuring Period
and the Industrial Measuring Period, but in no event less than five (5)
days before Closing, Seller shall deliver to Purchaser a schedule showing
Seller's calculation of any rental revenue adjustment hereunder, with
appropriate supporting back-up detail (the "Adjustment Schedule") and
Purchaser shall have the right to inspect all invoices and any of Seller's
internal work papers relating to the determination and preparation of the
Adjustment Schedule; PROVIDED HOWEVER, in the event Purchaser disputes, in
good faith, the amount of any rental revenue adjustment as calculated by
Seller pursuant to this Section 3.3, Purchaser shall pay Seller at Closing
only that portion of the rental revenue adjustment as to which both Seller
and Purchaser agree, with any remaining differences with respect to such
adjustment (the "Disputed Adjustment Amount") being settled pursuant to the
provisions of Section 3.6.
(d) For purposes of this Section 3.3, the following definitions
apply:
(i) "Total Base Revenue Value" means the amount equal to (1) the
sum of the weekly volume of each Linen Plant identified on Schedule
3.7 (after giving effect to the inclusion or exclusion of the Acquired
Facilities identified on
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Schedule 3.7 as Corpus Christi and Portland, as contemplated by
Section 6.3(b) hereof), multiplied by 25, plus (2) $140,293,200 which
is the sum of the weekly volume for the Acquired Facilities not
identified on Schedule 3.7 (together with the Acquired Facility
identified on Schedule 3.7 as Huntington), multiplied by 60. If each
Acquired Facility identified on Schedule 3.7 (excluding the Acquired
Facility identified on Schedule 3.7 as Huntington) is included in the
calculation of Total Base Revenue Value, the parties hereto agree that
the sum of the weekly volume to be used for the purpose of clause (1)
of the immediately preceding sentence shall be $1,600,692 with the
corresponding product of that amount multiplied by 25 being
$40,017,300, and, therefore, the Total Base Revenue Value shall be
$180,310,500;
(ii) "Total Actual Revenue Value" means the amount equal to (1)
the Average Weekly Linen Revenue multiplied by 25, plus (2) the
Average Weekly Industrial Revenue multiplied by 60;
(iii) "Average Weekly Linen Revenue" means the sum of gross
sales volume for service to customers of the Business of the Linen
Plants during the Linen Measuring Period (exclusive of the Excluded
Amounts) plus the Migrated Linen Revenue (as defined below) divided by
the number of calendar weeks that comprise the Linen Measuring Period.
(iv) "Average Weekly Industrial Revenue" means the sum of gross
sales volume for service to customers of the Business of the
Industrial Plants, the gross sales volume for service to customers
representing the Jacksonville Volume, plus the Migrated Industrial
Revenue (as defined below), in each case during the Industrial
Measuring Period (exclusive of the Excluded Amounts) divided by four
(4);
(v) "Migrated Linen Revenue" means the gross sales volume, if
any, for service by Purchaser to former customers of the Business of
the Linen Plants who, at any time from and after April 2, 1997 and
prior to the end of the Linen Measuring Period, have quit service with
Seller prior to the normal contract maturity date of such customers
and who have actually begun service with Purchaser, as determined
pursuant to Section 3.3(b) hereof (each, a "Converted Linen
Customer"); PROVIDED, HOWEVER, in connection with the calculation of
Migrated Linen Revenue, only the actual invoiced amount attributable
to a Converted Linen Customer from and after the date such Converted
Linen Customer begins service with Purchaser through the end of the
Linen Measuring Period (in each case, exclusive of any corresponding
Excluded Amounts) shall be used.
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(vi) "Migrated Industrial Revenue" means the gross sales volume,
if any, for service by Purchaser to former customers of the Business
of the Industrial Plants who, at any time from and after April 2,
1997, and prior to the end of the Industrial Measuring Period, have
quit service with Seller prior to the normal contract maturity date of
such customers and who have actually begun service with Purchaser, as
determined pursuant to Section 3.3(b) hereof (each, a "Converted
Industrial Customer"); PROVIDED, HOWEVER, in connection with the
calculation of Migrated Industrial Revenue, only the actual invoiced
amount attributable to a Converted Industrial Customer from and after
the date such Converted Industrial Customer begins service with
Purchaser through the end of the Industrial Measuring Period (in each
case, exclusive of any corresponding Excluded Amounts) shall be used.
(vii) "Excluded Amounts" means with respect to any sales to
customers of the Business during either the Linen Measuring Period or
the Industrial Measuring Period, amounts derived from (1) discounts,
allowances and other miscellaneous amounts; (2) taxes; (3) preparation
charges; (4) rag sales; (5) linen replacement charges; (6) industrial
replacement charges; and (7) other replacement charges;
(viii) "Linen Measuring Period" means the period of
consecutive calendar weeks, exclusive of any weeks in which a Holiday
occurs, commencing on the opening of business on February 3, 1997 and
ending at the close of business on the Friday that is at least two (2)
weeks prior to the Closing Date (so long as such week is a week that
contains no Holidays), but in no event later than June 15, 1997;
PROVIDED, HOWEVER, in the event all of the Schedule 8.6 Statements (as
defined on Schedule 8.6) have not been finalized or if the parties
have not received clearance under the HSR Act prior to July 3, 1997,
or both, such end date shall be automatically extended to the earlier
of (1) the Friday of the week as of which both the Schedule 8.6
Statements have been finalized and the parties hereto have received
clearance under the HSR Act or (2) the Friday that is at least two
weeks prior to the Closing Date;
(ix) "Industrial Measuring Period" means the period of four (4)
consecutive calendar weeks, exclusive of any weeks in which a Holiday
occurs, ending at the close of business on the Friday that is at least
two (2) weeks prior to the Closing Date (so long as such week is a
week that contains no Holidays), but in no event later than June 15,
1997; PROVIDED, HOWEVER, in the event the Schedule 8.6 Statements have
not been finalized or if the parties have not received clearance under
the HSR Act prior to July 3, 1997, or both, such end date shall be
automatically extended to the earlier of (1) the Friday of the week as
of which both the Schedule 8.6 Statements have been finalized and the
parties
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hereto have received clearance under the HSR Act or (2) the Friday
that is at least two weeks prior to the Closing Date; and
(x) "Holiday" means the following holidays: President's Day,
Memorial Day, the Fourth of July and any other legal bank holiday in
the City of New York, as the exclusive holidays within either
measuring period .
(xi) Notwithstanding anything in this Section 3.3(d) to the
contrary, (1) to the extent any sales volume has been transferred by
Seller on or after February 3, 1997 from any Acquired Facility and
such sales volume is not based at an Acquired Facility as of the
Closing Date, then such sales volume shall be excluded from the
Average Weekly Linen Revenue and the Average Weekly Industrial
Revenue, and (2) to the extent any sales volume has been transferred
by Seller on or after February 3, 1997 to an Acquired Facility and
such sales volume is based at an Acquired Facility as of the Closing
Date, the average weekly revenue related to such sales volume during
the Linen Measuring Period and the Industrial Measuring Period, as
applicable, shall be included in the calculation of the Average Weekly
Linen Revenue and the Average Weekly Industrial Revenue, as
applicable.
3.4 NEW INVENTORY PROCEDURES. Representatives of Seller and Purchaser
shall take a physical inventory of the New Inventory as of the Closing Date.
Such physical inventory will be recorded in duplicate books, each of which the
representatives of Seller and Purchaser shall sign. The New Inventory shall be
valued at Seller's latest invoice cost, net of discounts but inclusive of
freight, based on Seller's most recent invoices. Any dispute as to the grade or
value of New Inventory items, or as to whether such items of New Inventory shall
be unusable (which items Purchaser shall not be acquiring) shall be determined
by Seller and Purchaser; provided, that in making such determination, any amount
of New Inventory with quantities in excess of a six (6) months supply, as
measured by each of Purchaser's and the Business' combined usage history with
respect to such SKU, shall be deemed unusable with respect to such excess
quantities, and shall not constitute a Purchased Asset, except that Purchaser
shall have the option, but not the obligation, to acquire any such unusable item
of New Inventory at a price and on terms that Seller and Purchaser may mutually
agree to.
3.5 CLOSING SCHEDULES. Within forty-five (45) days after the Closing
Date, Seller shall deliver to Purchaser the following schedules (the "Closing
Schedules"), in each case as of the Closing Date: (i) a schedule of New
Inventory and Seller's latest invoice cost therefor, net of discounts, but
inclusive of freight; (ii) a schedule of the Accounts Receivable; (iii) a
schedule of the Prepaid Items; and (iv) a schedule of the Accrued Employee
Credit. Except as otherwise provided in Section 3.4 for the New Inventory, the
Closing Schedules shall be prepared by Seller in accordance with generally
accepted accounting principles on a basis consistent with the Financial
Statements.
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3.6 DISPUTE RESOLUTION.
(a) Purchaser and its representatives and accountants, at Purchaser's
expense, shall have the right to review Seller's complete internal audit
work papers or other back-up detail and substantiation relating to the
Closing Schedules and the Adjustment Schedule until such time as the
Closing Schedules and the Adjustment Schedule become final as provided
herein.
(b) Purchaser shall notify Seller in writing of any disputes to the
Closing Schedules and the Adjustment Schedule within thirty (30) calendar
days following Purchaser's receipt of all of the Closing Schedules (the
"Review Period"). The parties shall attempt to resolve any such disputes
through good faith negotiations within thirty (30) calendar days following
the delivery of Purchaser's written notice thereof to Seller. If any
differences are not resolved by agreement of representatives of Seller and
Purchaser during the Review Period, such differences shall be submitted by
any affected party for resolution to the Chicago, Illinois office of Ernst
& Young. The determination of such independent accounting firm shall be
set forth in a written report delivered to the parties and shall be final
and binding upon all parties. Seller and Purchaser shall each be
responsible for one-half of the fees of any such independent accounting
firm employed pursuant to this paragraph.
3.7 GAIN SHARING ON SUBSEQUENT DISPOSITION OF LINEN PLANTS; PAYMENT OF
LINEN SHORTFALL.
(a) Seller shall be entitled to additional Purchase Price (the "Gain
Sharing Payment"), in an amount equal to the lesser of (i) one-half of the
Linen Surplus (as defined below) or (ii) Two Million Five Hundred Thousand
Dollars ($2,500,000), if, and to the extent, the Aggregate Value (as
hereinafter defined) exceeds the Base Amount (as hereinafter defined) (such
excess, if any, is hereinafter referred to as the "Linen Surplus.") The
Gain Sharing Payment, if any, shall be in addition to the Cash Purchase
Payment and shall be payable by Purchaser as promptly as possible after the
first anniversary of the Closing Date (the "First Anniversary") (and, in
any event, within ten (10) business days after its final determination
pursuant to this Section 3.7).
(b) As used in this Section 3.7, the following terms shall have the
following respective meanings:
(i) Aggregate Value shall mean (1) the sum of (A) the Sales
Proceeds plus (B) the Remaining Value less (2) Capital Investment.
(ii) Sales Proceeds shall mean, with respect to each Linen Plant
Sale that occurs on or prior to the First Anniversary, the sum of all
consideration payable to Purchaser, or any subsidiary or affiliate
thereof (including, without
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limitation, any assumption of liabilities in connection therewith),
all as determined pursuant to the terms of the contract governing such
Linen Plant Sale, including the net amount of any monies received or
to be received by Purchaser or any subsidiary or affiliate of
Purchaser that represent either condemnation or insurance proceeds
with respect to a Linen Plant and that relate to events that precede
the First Anniversary, reduced by (i) the value of any accounts
receivable, all new, never processed inventory, prepaid assets and any
other current assets attributable to such Linen Plant(s), in each case
as of the closing date of the transaction; (ii) the actual out of
pocket costs incurred by Purchaser in connection with or in
anticipation of such Linen Plant Sale, including by way of
illustration, and not limitation, legal, accounting, environmental
assessment report, appraisal, real estate brokerage, investment
banking or finder's fees; and (iii) the cost of any Withdrawal
Liability (as defined in Section 7.2) that Purchaser becomes liable
for with respect to such Linen Plant Sale. For purposes of
calculating Sales Proceeds, any financing provided by Purchaser in
connection with a Linen Plant Sale shall be valued at ninety-two
percent (92%) of the face amount of such indebtedness as of the
closing date of such Linen Plant Sale. In the event Seller elects to
re-purchase any remaining Linen Plants from Purchaser, the parties
agree to calculate the net proceeds to be received by Purchaser as a
result of such sale in the manner set forth in the calculation of
Sales Proceeds.
(iii) Remaining Value shall mean, subject to the terms of
this Section 3.7(b)(iii), the aggregate value of any and all Linen
Plants that were included in the calculation of the Base Amount and
which are not sold by Purchaser on or prior to the First Anniversary,
as determined by Purchaser in its reasonable discretion with due
regard to all then existing facts and circumstances, including without
limitation, any sale of rental revenue volume at such remaining Linen
Plants, separate and apart from any corresponding sale of such Linen
Plant's property, plant or equipment. Purchaser shall calculate its
good faith estimate of the Remaining Value and shall deliver the same
to Seller in writing within 45 days of the First Anniversary. With
respect to those Linen Plants identified by Purchaser in its
calculation of Remaining Value as Linen Plants that Purchaser intends
to retain and operate from and after the First Anniversary, the value
of such Linen Plant(s) for purposes of the Remaining Value calculation
shall equal such Linen Plant'(s) total value, as set forth on Schedule
3.7 hereto.
(iv) Capital Investment shall mean the amount that is equal to
the aggregate amount of any capital expenditures made by Purchaser (or
any subsidiary or affiliate thereof) with respect to any Linen Plant
that is disposed of prior to the First Anniversary or that Purchaser
is attempting to sell as of the First Anniversary. Any capital
expenditures made by Purchaser (or any subsidiary or affiliate
thereof) with respect to any Linen Plant that Purchaser elects to
retain
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and not sell will not be a Capital Investment for purposes of the
calculation of Aggregate Value.
(v) Base Amount shall mean the sum of the total values of each
Linen Plant listed on Schedule 3.7 together with the Industrial Plant
identified on Schedule 3.7 as Huntington (after giving effect to the
inclusion or exclusion of the Acquired Facilities identified on
Schedule 3.7 as Corpus Christi and Portland, as contemplated by
Section 6.3(b) hereof ), as such total values are reflected on
Schedule 3.7 hereto, and reduced by the total value attributable to
the Acquired Facility identified on Schedule 3.7 as Huntington in the
event the assets or revenue attributable to such branch are not sold
on or prior to the First Anniversary.
(c) Within forty-five (45) days after the First Anniversary,
Purchaser shall deliver to Seller a schedule showing Purchaser's
calculation of the Gain Sharing Payment (if any) (the "Gain Sharing
Schedule"), together with appropriate supporting back-up detail, and Seller
shall have the right to inspect any of Purchaser's internal work papers
relating to the determination and preparation of the Gain Sharing Schedule.
In the event Seller disputes Purchaser's calculation of the Gain Sharing
Payment or the Total Linen Proceeds (as defined below), Seller shall notify
Purchaser in writing within thirty (30) calendar days following Purchaser's
receipt of the same (the "Gain Sharing Review Period"). The parties shall
attempt to resolve any such disputes through good faith negotiations within
thirty (30) calendar days following the delivery of Seller's written notice
thereof to Purchaser. If any differences are not resolved by agreement of
representatives of Seller and Purchaser during the Gain Sharing Review
Period, such differences shall be submitted by any affected party for
resolution to the Chicago, Illinois office of Ernst & Young. The
determination of such independent accounting firm shall be set forth in a
written report delivered to the parties and shall be final and binding upon
all parties. Seller and Purchaser shall each be responsible for one-half
of the fees of any such independent accounting firm employed pursuant to
this paragraph.
As a part of the Gain Sharing Schedule, Purchaser shall separately set
forth the Total Linen Proceeds attributable to the Multilocation Linen
Accounts. "Individual Linen Proceeds" shall mean with respect to each Linen
Plant Sale an amount equal to the Average Weekly Linen Revenue attributable
to the Multilocation Linen Accounts sold in connection with such Linen
Plant Sale multiplied by the multiplier generally applicable to the sale of
revenue in connection with such Linen Plant Sale (as determined in good
faith by Purchaser). "Total Linen Proceeds" shall mean the sum of all
Individual Linen Proceeds.
(d) Upon receipt of Purchaser's calculation of the Remaining Value,
as contemplated by Section 3.7(b)(iii) hereof, with respect to those Linen
Plants identified by Purchaser in its calculation as Linen Plants that
remain available for purchase as of the First Anniversary, Seller shall
have the option, and shall notify Purchaser in writing within twenty days
of receipt of Purchaser's calculation, if it so elects, to re-purchase the
Linen
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Plant(s) indicated in the notice at a price that is equal to Purchaser's
valuation of such Linen Plant. In any event, Seller shall be deemed to
have accepted Purchaser's valuation of each such Linen Plant for purposes
of calculating the Remaining Value. With respect to any Linen Plant that
Seller elects to purchase, Seller and Purchaser agree that the transfer of
such Linen Plant shall be by the same type of deed, assignment of lease
and/or bill of sale pursuant to which Purchaser acquired such Linen Plant
in the first instance.
(e) If the Total Linen Proceeds are less than the "Minimum Sales
Price" (as hereinafter defined), then Seller shall pay to Purchaser an
amount (the "Linen Shortfall") equal to (i) the Minimum Sales Price less
(ii) the Total Linen Proceeds. As used herein, the term "Minimum Sales
Price" shall mean an amount equal to (1) the aggregate total of the Average
Weekly Linen Revenue attributable to the Multilocation Linen Accounts times
(2) thirty (30). The Linen Shortfall, if any, shall be payable by Seller
as promptly as possible after the First Anniversary (and, in any event
within ten (10) business days after its final determination pursuant to
this Section 3.7). Simultaneously with the payment of the Linen Shortfall,
Purchaser shall (at Seller's election) transfer to Seller all of the
Multilocation Linen Accounts which were not sold prior to the First
Anniversary together with all In-Service Inventory related thereto.
3.8 METHOD OF PAYMENT. Any amounts payable hereunder shall be paid by
wire transfer of immediately available funds to an account designated by the
intended recipient or otherwise as indicated. Any amounts payable under Sections
3.2 or 6.3 shall include interest on such amounts from the Closing Date to the
date of such payment at a rate per annum equal to eight percent (8%) and any
amounts payable under Section 3.7 shall include interest on such amounts from
the First Anniversary to the date of such payment at a rate per annum equal to
eight percent (8%).
3.9 EXCLUSIVE REMEDY. Notwithstanding anything in this Agreement to the
contrary, the dispute resolution and remedy provisions set forth in this Article
3 shall constitute the sole and exclusive remedy of the parties hereto with
respect to the matters covered by this Article 3. Changes in rental revenues
shall not be considered in determining whether the conditions precedent set
forth in Article 8 have been satisfied (unless such change in rental revenue is
the result of any change in the Business that would have a material adverse
effect on the Business).
3.10 ALLOCATION OF PURCHASE PRICE. Each party hereto agrees to report to
the Internal Revenue Service such information concerning the allocation of
Purchase Price as may be required by Section 1060 of the Internal Revenue Code
of 1986, as amended (the "Code"). The Purchase Price, together with an amount
attributable to the Assumed Liabilities, shall be allocated among the Purchased
Assets based on the fair market values for the Purchased Assets in amount to be
agreed upon by Purchaser and Seller and each party agrees that it will adopt and
utilize such agreed values for purposes of completing and filing Form 8594 for
federal income tax purposes. Neither Purchaser, nor Seller will voluntarily
take any position inconsistent therewith upon examination of their respective
federal tax return, in any claim, in any litigation or otherwise with
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respect to such tax return. Purchaser and Seller each agree to use their
reasonable best efforts to mutually agree to the allocation contemplated by this
Section 3.10 on or prior to the Closing Date.
3.11 SALES TAXES; PROPERTY TAXES; EXPENSES.
(a) Notwithstanding anything in this Agreement to the contrary,
Purchaser shall pay all state and local sales and use taxes (if any),
transfer taxes and documentary stamp taxes associated with the sale and
conveyance of the Purchased Assets pursuant to this Agreement.
(b) Subject to the terms of the Transition Services Agreement (as
defined below), state and local real and personal property taxes, including
any utility, water and sewer charges at the Acquired Facilities shall be
prorated between Seller and Purchaser as of the Closing Date on the basis
of the tax bills payable during the year of the Closing or, as applicable,
utility bills for the billing period including the Closing Date.
Purchaser shall pay the full amount of such taxes and utility charges upon
receipt of any such bills after the Closing Date, and Seller, within 30
days of notice from Purchaser, will reimburse Purchaser for the amount of
Seller or an Affiliate's pro rata share of such taxes and utility charges.
(c) Seller will pay the fees and expenses incurred with respect to
obtaining the Phase I Reports (as defined herein) for the Real Property,
surveys and title work on the Owned Real Property performed in connection
with the transactions contemplated hereunder, including, but not limited
to, recording fees (exclusive of transfer taxes and documentary stamp
taxes, if any), special assessments associated with the Purchased Assets or
the Business, and any title insurance premiums due in connection with the
Title Policy (as defined below) and any costs associated with the Title
Endorsements (as defined below). The title insurance premiums due in
connection with the Title Policy shall be based on a schedule of values for
the Owned Real Estate prepared by Purchaser, a copy of which shall be
delivered to Seller within five days prior to the Closing. To the extent
that in the aggregate title insurance premiums are increased as a result of
completion by Purchaser of appraisals of the Owned Real Property undertaken
within a reasonable period of time following the Closing Date, then Seller
shall reimburse Purchaser for any such additional costs and subject to the
"tie-in" endorsement requested by Purchaser from the Title Company, Seller
shall receive a credit for any decrease in such costs.
(d) All filing fees payable with respect to the filings to be made by
Purchaser and Seller under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act") shall be paid by Purchaser.
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(e) Seller and Purchaser agree to share equally the cost of preparing
and delivering the Schedule 8.6 Statements, provided that Purchaser's
obligation under this Section 3.11(e) shall not exceed $60,000.
(f) Except as otherwise expressly provided in this Agreement, Seller
and Purchaser shall each pay their own respective costs and expenses in
connection with this Agreement and the transactions contemplated by this
Agreement, including any finder's fees or brokerage or other commission
arising by reason of any services rendered or alleged to have been rendered
to such party in connection with this Agreement or the transactions
contemplated herein.
3.12 TREATMENT OF HOLD TICKETS. At or as soon as practicable after the
Closing, Seller will provide Purchaser with a statement of Hold Tickets
outstanding as of the Closing Date. Purchaser agrees that for a period of 120
days after the Closing Date (the "Collection Period"), Purchaser will use
reasonable efforts to collect the Hold Tickets. All payments received from
customers having a Hold Ticket shall be applied to the invoice identified by
such customer with its payment and all collected amounts shall thereafter be
remitted to Seller by the fifteenth day of each month, until such Hold Tickets
have been collected in full or otherwise written off by Seller as uncollectible.
Notwithstanding the foregoing, Purchaser shall have no obligation to seek to
collect any Hold Tickets beyond the Collection Period.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Parent, Seller and Enterprises, hereby represent and warrant to Purchaser,
with respect to themselves only, as follows:
4.1 ORGANIZATION AND AUTHORITY.
(a) Parent, Seller and each Affiliate are corporations or
partnerships, duly organized, validly existing and in good standing under
the laws of their respective jurisdictions of incorporation or formation;
and Seller and each Affiliate has the corporate or partnership power to
own, operate, use or lease the Purchased Assets and to conduct the
operations of the Business as presently being conducted. Seller and each
Affiliate is qualified or otherwise authorized to transact business as a
foreign corporation or partnership in each jurisdiction listed in Schedule
4.1 which constitute all jurisdictions in which the nature of the Business
requires such qualification.
(b) Each of Parent, Seller and Enterprises has all requisite
corporate power and authority to execute and deliver this Agreement and
perform their respective obligations hereunder. The execution and delivery
of this Agreement by each of Parent, Seller and Enterprises and the
performance by them of their respective covenants and
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agreements hereunder have been duly authorized by all necessary corporate
or partnership action on their part. This Agreement has been duly executed
and delivered by each of Parent, Seller and Enterprises and constitutes the
valid and binding obligation of each, enforceable against them in
accordance with its terms.
4.2 FINANCIAL INFORMATION. Schedule 4.2(a) attached hereto contains the
unaudited statements of assets and selected liabilities of the Business as of
August 31, 1996, and August 31, 1995 and the related unaudited statements of
revenues and operating expenses for each of the fiscal years ended August 31,
1996, August 31, 1995 and August 31, 1994 (the "Financial Statements").
Schedule 4.2(b) attached hereto contains the unaudited statements of assets and
selected liabilities of the Business as of January 31, 1997 and January 31, 1996
and the related unaudited statements of revenues and operating expenses for the
five-month period ended on each of such dates (the "Interim Statements"). The
Financial Statements and the Interim Statements (i) are correct and complete in
all material respects, (ii) have been prepared from the books and records of
Seller with respect to the Business, (iii) have been prepared in accordance with
generally accepted accounting principles consistently applied, except (A) as
otherwise set forth on Schedule 4.18, (B) that in the case of the statements of
revenues and operating expenses, there has been no allocation of the charges
outlined on Schedule 4.2(c) hereof, (C) the Financial Statements and the Interim
Statements have no footnotes, (D) with respect to the statements of assets and
selected liabilities as of August 31, 1996, and August 31, 1995 and January 31,
1996 the balances reflected in the line item for Assumed Liabilities are not
complete, and (E) in the case of the Interim Statements such statements are
subject to normal year-end adjustments consistent with those normal year-end
adjustments contained within the Financial Statements; and (iv) fairly present
in all material respects the Purchased Assets and Assumed Liabilities of the
Business on the dates indicated and the revenues and operating expenses of the
Business for the periods then ended. For purposes of this Agreement, "Latest
Balance Sheet" means the statement of assets and selected liabilities as of
January 31, 1997.
In addition to, and not in lieu of, the foregoing, upon delivery of the
Schedule 8.6 Statements, Seller shall be deemed to represent and warrant that
such Schedule 8.6 Statements (i) are correct and complete in all material
respects, (ii) have been prepared from the books and records of Seller with
respect to the Business, (iii) have been prepared in accordance with generally
accepted accounting principles consistently applied, and (iv) fairly present in
all material respects the Purchased Assets and Assumed Liabilities of the
Business on the dates indicated and the revenues and operating expenses of the
Business for the periods then ended.
4.3 COMPLIANCE WITH OTHER INSTRUMENTS. The execution and delivery of this
Agreement by Seller and the performance by Seller of its obligations hereunder
will not: (a) conflict with or result in any violation of the charter documents
or partnership agreement or bylaws of Parent, Seller or any Affiliate,
(b) conflict with or result in (i) a breach of any agreement or instrument to
which Seller or such Affiliate is a party and which is required to be identified
on any Schedule delivered by Seller pursuant to this Agreement (except with
respect to any requirement for consent to the assignment of any such agreement
or instrument) or (ii) result in
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any violation of any federal, state or local law, regulation, ordinance or
administrative order or any judgment or decree, applicable to Seller or any
Affiliate and affecting the operation of the Business or the Purchased Assets
(except with respect to the filing and expiration of the waiting period under
the HSR Act); or (c) result in the creation of any material lien, charge or
encumbrance of any kind or nature upon any of the Purchased Assets.
4.4 TITLE TO ASSETS.
(a) Seller or an Affiliate has good and marketable title to each
parcel of Owned Real Property and has good and valid title to each other
asset constituting the Purchased Assets, free and clear of any security
interest, mortgage, pledge, lien, charge, encumbrance, right of way,
easement or adverse claim of any kind or nature, except (i) liens for
current taxes not yet due and payable; and (ii) the imperfections of title,
restrictions, easements, encroachments or encumbrances described in
Schedule 4.4 (collectively, the "Permitted Encumbrances").
(b) As of the Closing Date, Parent will cause Seller and each
Affiliate to transfer good and marketable title to each parcel of Owned
Real Property and good and valid title to each other asset constituting the
Purchased Assets to Purchaser, free and clear of all liens and encumbrances
of any kind or nature, except for the Permitted Encumbrances. The
Purchased Assets, together with the assets described in the Transition
Services Agreement and the assets described in Sections 1.2(g) and 1.2(h),
include all assets necessary for the operation of the Business as it is
currently being operated by Seller, and all such Purchased Assets are owned
by either Seller, Enterprises or NSI Realty, L.P.
(c) The vehicles listed on Schedule 1.1(h) hereof, together with the
Leased Vehicles represent all of the vehicles that are used exclusively in
the Business. Neither Seller, nor an Affiliate owns any other machinery,
fixtures, furniture, equipment, materials, parts, supplies, tools or other
tangible property that are used exclusively in the Business except to the
extent such items are located at either (i) an Acquired Facility; (ii) any
customer location associated with a Covered Account; (iii) on any vehicle
listed on Schedule 1.1(h) hereof or on any Leased Vehicle; (iv) on a
Processor's Premises; or (v) in any third party repair shop.
(d) Schedule 4.4(d) identifies each asset of Seller or an Affiliate
that is used in the Business but that is not used exclusively in the
Business.
4.5 REAL PROPERTY. There is listed on Schedule 4.5 (i) a description of
all real property owned by Seller or an Affiliate and used exclusively in the
Business (the "Owned Real Property"), (ii) a description of all lease agreements
under which Seller is lessor of portions of the Owned Real Property, and (iii) a
description of all lease and sublease agreements (other than the Excluded
Leases, the "Real Property Leases") for real property used by Seller in the
Business (the
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"Leased Real Property") (the Leased Real Property and the Owned Real Property
are referred to herein collectively as the "Real Property"). True and complete
copies of the Real Property Leases have been delivered to Purchaser, including
all amendments, supplements and modifications thereof. Except as indicated in
Schedule 4.5:
(a) All Real Property Leases are valid, binding and enforceable
against Seller in accordance with their respective terms and there does not
exist under any such Real Property Lease any material default or any event
which with notice or the lapse of time or both would constitute a material
default thereunder against Seller, and to Seller's knowledge, against the
other parties thereto;
(b) None of the structures or improvements on the Owned Real Property
encroaches upon real property of another person, and no structure or
improvement of any other person substantially encroaches upon any of the
Real Property, except those encroachments identified as a Permitted
Encumbrance;
(c) There are no other matters affecting the Owned Real Property
pending, or, to the knowledge of Seller (i) there are no other matters
affecting the Leased Real Property pending or (ii) with respect to the Real
Property, threatened, which, either individually or in the aggregate, could
have a material adverse effect on any Acquired Facility or the Business or
the Purchased Assets taken as a whole (collectively, a "Material Adverse
Effect"); and
(d) All Real Property Leases are assignable to Purchaser without such
assignment constituting an event of default thereunder.
4.6 PERSONAL PROPERTY LEASES. There is listed in Schedule 1.1(i)(v) a
description of any leases relating to each item of tangible personal property
leased by Seller or any Affiliate for use exclusively in the operation of the
business and having rental payments in excess of $25,000 annually (the "Personal
Property Leases"). All Personal Property Leases are valid, binding and
enforceable against Seller, and to Seller's knowledge, against the other parties
thereto, in accordance with their respective terms and there does not exist
under any such Personal Property Lease any material default or any event which
with notice or the lapse of time or both would constitute a material default
thereunder against Seller, and to Seller's knowledge, against the other parties
thereto. True and complete copies of the Personal Property Leases have been
made available to Purchaser, including all amendments supplements and
modifications thereof.
4.7 INTELLECTUAL PROPERTY. With respect to the Intellectual Property and
the license agreements listed on Schedule 1.1(i)(ii) and except as indicated on
Schedule 4.7:
(a) No interference actions or other judicial or adversary
proceedings concerning the Intellectual Property is pending, and to
Seller's knowledge, no such action or proceeding is threatened and to
Seller's knowledge, there is no reasonable basis for any
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action or proceeding, which if adversely determined, would have a Material
Adverse Effect;
(b) Seller has the right and authority to use the Intellectual
Property in connection with the conduct of the Business in the manner
presently conducted, and Seller has not received written notice that such
use conflicts with, infringes upon or violates any rights of any other
person, firm or corporation; and
(c) There are no outstanding, nor to Seller's knowledge, any
threatened disputes involving Seller or an Affiliate with respect to any
licenses or similar agreements or arrangements described in Schedule
1.1(i)(ii).
4.8 LITIGATION. Except as set forth on Schedule 4.8, with respect to the
Business or the Purchased Assets, no suit, action, cause of action, claim for
relief, complaint, proceeding, hearing, governmental investigation,
administrative claim or charge is pending or, to the knowledge of Seller,
threatened in writing against Seller or any Affiliate and which could have a
Material Adverse Effect.
4.9 COURT ORDERS, DECREES AND LAWS. Except as disclosed in Schedule 4.9,
with respect to the Business or the Purchased Assets: (a) there is no
outstanding nor, to the knowledge of Seller, any threatened, order, writ,
judgment, injunction or decree of any court or governmental agency against or
involving Seller or any Affiliate which could have a Material Adverse Effect;
(b) Seller is not operating under or subject to, or in default with respect to,
any order, writ, judgment, injunction or decree of any court or federal, state,
municipal or other governmental department, commission, board, agency, or
instrumentality, domestic or foreign which could have a Material Adverse Effect;
(c) Seller is not in violation of or in noncompliance with any statute, law,
ordinance or regulation of any government or department or agency thereof in the
conduct of the Business which could have a Material Adverse Effect; and (d)
Seller is not in violation of any applicable zoning regulation, ordinance or
other law, order, regulation or requirement relating to the Business or the
Purchased Assets which could have a Material Adverse Effect.
4.10 LABOR AND EMPLOYMENT AGREEMENTS. Schedule 4.10 identifies (i) each
collective bargaining agreement and other labor agreement to which Seller is a
party or by which it is bound with respect to the Business (the "Collective
Bargaining Agreements"); and (ii) each written or, to Seller's knowledge,
material oral agreement, providing a management-level Employee of the Business
with rights to employment, compensation or benefits related thereto (other than
benefits under Welfare Plans or Retirement Plans as defined in Section 4.11
hereof). Seller is not, and to Seller's knowledge, no other party to any such
agreement is in default with respect to any material term or condition thereof,
nor, to Seller's knowledge, has any event occurred which through the passage of
time or notice, or both, would constitute a material default thereunder by
Seller or any other party to such agreement, or would cause the acceleration of
any material obligation of Seller or any other party to such agreement. Seller
has delivered to Purchaser true and complete copies of all written agreements
identified in Schedule 4.10. Except as set forth in Schedule 4.10:
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(a) Since January 1, 1995, no unfair labor practice complaint has
been brought or, to Seller's knowledge, threatened, against Seller with
respect to any Hired Employees, former employees of the Business or labor
organization with respect to the Business, before any federal, state or
local agency, no labor strike affecting Seller has been brought nor, to
Seller's knowledge, is threatened, and no grievance has been brought since
January 1, 1997 that rises to step 3 or 4 of the relevant grievance
procedure, and to Seller's knowledge no basis for any such unfair labor
practice complaint exists which, if adversely determined, could have a
Material Adverse Effect;
(b) Since January 1, 1995, no organization or representation petition
has been filed or, to Seller's knowledge, threatened, respecting the
Employees of the Business, and no such proceeding has been brought since
January 1, 1995.
(c) Since January 1, 1995, no arbitration proceeding arising out of
or under any Collective Bargaining Agreement has been brought or, to
Seller's knowledge, is threatened with respect to the Employees of the
Business, and no basis for any such proceeding exists which, if adversely
determined, could have a Material Adverse Effect; and
(d) With respect to any Employee of the Business covered by a
Collective Bargaining Agreement, Seller has not engaged in any course of
conduct or otherwise pursued any practice of bestowing any benefits upon
such Employees of the Business which would be enforceable against Purchaser
and which are not required pursuant to any Collective Bargaining Agreement.
4.11 PENSION AND WELFARE PLANS.
(a) Attached hereto as Schedule 4.11(a) is a list of each group life
insurance, disability, medical, dental, severance pay and other plan that
is an "employee welfare benefit plan" (as defined in Section 3(1) of ERISA)
currently maintained or contributed to by Seller for the Employees of the
Business (each a "Welfare Plan").
(b) Schedule 4.11(b) lists each deferred profit sharing, deferred
compensation and pension plan (including without limitation each
multiemployer plan defined under Section 4001(a)(3) of ERISA) that is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA)
currently maintained or contributed to by Seller for the Employees of the
Business (each a "Retirement Plan").
(c) Seller has delivered to Purchaser true and complete copies of the
plan documents for each Welfare Plan and each Retirement Plan, as amended
to date (other than with respect to plan documents for a multiemployer plan
defined in Section 4001(a)(3) of ERISA).
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4.12 ENVIRONMENTAL MATTERS. Except as disclosed on Schedule 4.12:
(a) With respect to each Acquired Facility, (i) Seller is not aware
of any citation, inquiry, notice or request by any governmental authority
indicating that Seller is in violation or that alleges any violation of any
applicable Environmental Laws (as defined below) in any material respect;
(ii) Seller is in material compliance with all other applicable
limitations, restrictions, conditions and prohibitions contained in any
Environmental Laws; (iii) Seller is not subject to or bound by any consent
decree or order concerning the operation of the Business or any of the
Purchased Assets with respect to environmental matters or the cleanup of
hazardous materials under any applicable Environmental Law; and (iv) Seller
is in compliance, in all material respects, with the compliance orders
described in Schedule 2(b).
(b) No hazardous materials have been generated, treated, stored,
released or disposed of, or otherwise placed, deposited in or located on
the Real Property by Seller, or to Seller's knowledge, any prior owner or
occupier of the Real Property, nor has any activity been undertaken on the
Real Property by Seller, or to Seller's knowledge, any prior owner or
occupier of the Real Property, that has caused any of the following: (i)
the Real Property to become a permitted treatment, storage or disposal
facility within the meaning of the Resource Conservation and Recovery Act
of 1976 ("RCRA"), 42 U.S.C. Section 6901 ET SEQ., or any similar state law
or local ordinance, (ii) a release or threatened release of toxic or
hazardous wastes or substances, pollutants or contaminants from the Real
Property within the ambit of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C.
Section 9601-9657, as amended) or any similar state law or local ordinance,
or (iii) the discharge of pollutants or effluents into any water source or
system, the dredging or filling of any waters or the discharge into the air
of any emissions, that would require a permit under the Federal Water Act,
33 U.S.C. Section 1251 ET SEQ., or the Clean Air Act, 42 U.S.C. Section
7401 ET SEQ., or any similar state law or local ordinance.
(c) To Seller's knowledge, with respect to each Acquired Facility,
there currently are no above ground or underground tanks located under, in
or about the Real Property. The storage tanks listed on Schedule 4.12 have
been duly registered with all appropriate regulatory and governmental
bodies and are each otherwise in compliance in all material respects with
applicable Environmental Laws.
(d) As used in this Agreement, "Environmental Laws" means any
federal, state or local statute, law, code, ordinance, rule or regulation
relating to: (i) the emission of pollutants into the atmosphere, (ii) the
discharge of pollutants into the water or the ground water, (iii) the
disposal of solid or hazardous waste, or (iv) the release of hazardous
materials into the environment (the term "release" meaning any spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping or disposing into the environment and the term
"environment" meaning any surface or
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ground water, drinking water supply, soil, surface or subsurface strata or
medium or the ambient air.") As used in this Agreement "hazardous
materials" means any waste, pollutant, substance, by-product or other
material regulated under the CERCLA, RCRA or other federal environmental
law, rule or regulation (or similar state or local law, rule or regulation)
as well as any petroleum or petroleum-derived substance or waste.
4.13 RENTAL INVOICES AND LIST OF SALE ACCOUNTS. Seller has heretofore made
available to Purchaser copies of all of Seller's customer invoices for the
Business for customers whose average weekly revenues exceed $500 for a one (1)
week period preceding April 18, 1997. Such customer invoices are correct in all
material respects (except that the identity and addresses of customers have been
deleted), are based upon actual delivery of services at prices agreed upon by
the respective customers and stated therein, any applicable discounts are stated
therein and such invoices fairly present in all material respects the weekly
billings to such customers for the period indicated.
4.14 CUSTOMER CONTRACTS. At least 90% of the customers of the Business
whose average weekly revenues exceed $500 during the period from and after
February 3, 1997 are being serviced under written customer service agreements or
purchase orders, which are valid, binding, and in full force and effect. In
connection with any Covered Account that is to be governed by the terms of any
Subcontract Agreement, as contemplated by Section 1.5 hereof, Seller represents
and warrants that the provision of services to be made by Purchaser to any such
Covered Accounts shall not conflict with or result in a breach of any service
agreement to which Seller or such Affiliate is a party and which governs such
Covered Account.
4.15 CUSTOMER PRICES AND TERMS. With respect to the customers of the
Business whose average weekly revenues exceed $500 during the period from and
after February 3, 1997, except as set forth in Schedule 4.15 (which shall
identify customer names and approximate weekly revenues with respect to each
exception), since January 1, 1997, no such customer has quit and Seller has
received no written notice, or to Seller's knowledge, verbal notice, from any
such customer of its intention to quit service with Seller; and there are no
customer accounts which have made deposits or prepayments which remain as
liabilities of Seller.
4.16 COVERED ACCOUNTS. The Covered Accounts to be sold to Purchaser
hereunder will represent each and every customer agreement, whether oral or
written, arising out of the Business conducted at each Acquired Facility as of
the Closing Date, in addition to that number of customer agreements, whether
oral or written, representing not less than $27,000 in weekly revenue as of the
week ending May 2, 1997, and that arise out of Seller's Jacksonville Branch #336
(the "Jacksonville Volume"). Notwithstanding the foregoing, except as
contemplated by Section 3.3 hereof, Seller shall not be deemed to be making any
representation or warranty with respect to any minimum sales volume represented
by the Jacksonville Volume.
4.17 CONSENTS. Except as disclosed in Schedule 4.17, there are no
consents, approvals or other authorizations of, orders or notifications of,
registrations, declarations or filings with, any
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governmental or judicial authority (other than as required pursuant to the HSR
Act), or consents, approvals, authorizations or notifications of any other third
party pursuant to (i) the Real Property Leases, (ii) the Personal Property
Leases; (iii) the Other Contracts; (iv) customer service agreements or purchase
orders with any customer of the Business whose average weekly revenues exceed
$500 during the period from and after February 3, 1997; or (v) the Collective
Bargaining Agreements (collectively, the "Material Contracts") which are
required in connection with the valid execution, delivery or performance of this
Agreement by Seller and the consummation by Seller of the transactions
contemplated hereby, other than those consents, approvals, authorizations,
orders, notifications, registrations, declarations or filings the failure to
obtain or make which could have a Material Adverse Effect.
4.18 CONDUCT OF BUSINESS. Except as set forth on Schedule 4.18, since
January 31, 1997 there has not been:
(a) Any increase in encumbrance against the Owned Real Property, or
change in the condition (financial or other), properties, assets or
liabilities of the Business, except changes in the ordinary course of
business, none of which has had or will have a Material Adverse Effect;
(b) Any change in the billing or pricing methods or practices
followed by Seller in the Business or any change in depreciation or
amortization policies or rates theretofore adopted, except changes in the
ordinary course of business;
(c) Any sale, transfer, lease, abandonment or other disposition by
Seller, other than in the ordinary course of the Business, of any
inventory, supplies, vehicles, machinery, equipment or other operating
properties or other assets included among the Purchased Assets, including
any relocation or transfer of any Purchased Assets from an Acquired
Facility to any other facility of Seller or an Affiliate;
(d) Any change by Seller in its methods of accounting with respect to
the Business;
(e) Any change by Seller in its policies for timing and recognition
of allowances, rebates, concessions from vendors and similar items with
respect to the Business;
(f) Any business interruption, damage, loss or other occurrence
having a Material Adverse Effect, whether or not covered by insurance, as a
result of any accident, fire, casualty, act of God or the public enemy, or
any labor dispute or disturbance;
(g) Any conduct of the Business other than in the ordinary course (or
otherwise contemplated hereunder), including without limitation any change
in or implementation of severance compensation benefits for any Employee of
the Business, any
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material change in the prices charged by Seller in the Business, any
material deviation from past standards of quality of products and services
or any material reduction in efforts or funds expended by Seller to (i)
repair and maintain vehicles and other equipment to be sold to Purchaser
hereunder, (ii) replace inventories of merchandise held for sale to
customers, (iii) promote and sell new items and accounts, (iv) purchase and
maintain inventories of supplies and repair parts, and (v) perform all
other activities required to maintain the long-term viability and quality
of the Business;
(h) Any terminations, changes or violations by Seller of any of the
leases, including without limitation, the Real Property Leases, Material
Contracts, commitments, licenses or other arrangements of the Business,
except as required hereunder or as such changes or terminations occur in
the ordinary course of business, none of which terminations, changes or
violations shall have had a Material Adverse Effect;
(i) Any violations by Seller of any permits, licenses, restrictive
covenants, laws or regulations binding on Seller which could have a
Material Adverse Effect; and
(j) Any other occurrence, event or condition with respect to Seller
or otherwise to Seller's knowledge which could have a Material Adverse
Effect.
4.19 BUSINESS ORGANIZATION. During the period beginning on the date of the
Latest Balance Sheet and continuing up to and including the Closing Date, Seller
has used and will use its best efforts to preserve the Business intact, and to
keep available to Purchaser the services of the present Employees of the
Business, to the extent that Purchaser may retain such services pursuant to this
Agreement.
4.20 OTHER CONTRACTS. Attached hereto as Schedule 4.20 is a true and
complete list of the Contracts (other than the Real Property Leases, Contracts
with customers of the Business, the Personal Property Leases, employment
agreements, purchase orders issued in the ordinary course of the Business and
the Collective Bargaining Agreements) which require a payment to or a payment
from Seller of $50,000 per year or more (collectively, the "Other Contracts").
Except as set forth on Schedule 4.20:
(a) With respect to Other Contracts with Seller's suppliers no such
supplier has given Seller any written notice of intent to cancel any such
contract.
(b) (i) all of the Other Contracts are in full force and effect;
(ii) Seller has performed in all material respects all of the obligations
required to be performed by it under the Other Contracts; (iii) neither
Seller nor, to Seller's knowledge, any of the other parties to the Other
Contracts are in default in any material respect which, under the terms of
such Other Contracts, constitutes an event of default; (iv) to Seller's
knowledge, there is no existing state of facts that would give rise, by the
passage of time or the giving of
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notice, to an event of default thereunder; and (v) the Other Contracts are
assignable to Purchaser without such assignment constituting an event of
default thereunder, except where such event of default would not have a
Material Adverse Effect.
True and complete copies of the Other Contracts have been made available,
or prior to the Closing Date, will be made available to Purchaser, including
all amendments supplements and modifications thereof.
4.21 RESTRICTIVE COVENANTS. Except as disclosed on Schedule 4.21, Seller
is not a party to any written contract, license agreement or restriction which
limits the scope of Seller's operation of the Business or the sale or use of the
Purchased Assets and which has a material adverse effect on the Business or the
Purchased Assets.
4.22 LICENSES AND PERMITS. Seller or an Affiliate has obtained all
material licenses, permits, franchises, approvals and governmental
authorizations (collectively the "Licenses and Permits") required in the
operation of the Business. Except for such Licenses and Permits, no other
material licenses, permits, franchises, approvals or governmental authorizations
are required for Seller or the operation of the Business. Except as set forth
on Schedule 4.22, (i) all Licenses and Permits are in full force and effect;
(ii) Seller is performing in all material respects all obligations required to
be performed by it to date under any Licenses and Permits; (iii) Seller is not
in default in any material respect under any Licenses or Permits or the laws,
regulations and requirements of the licensing and permit authorities; and
(iv) all such Transferable Permits, to the extent assignable, will be assigned
to Purchaser on the Closing Date.
4.23 INVENTORY.
(a) Except as disclosed in Schedule 4.23, the New Inventory included
among the Purchased Assets is new, good and merchantable, has never been
laundered or used in any manner whatsoever and is useable or saleable, as
the case may be, in the ordinary course of business, and the quantities of
all Inventory are reasonable and warranted in the present circumstances of
the Business.
(b) The In-Service Inventory is sufficient in quantity to provide
timely and adequate service to the customers of the Business in accordance
with Seller's historic methods and practices. The amounts of consumable
supplies (including without limitation hangers and washroom chemicals,
packaging and other production supplies) included in the Purchased Assets
shall be in amounts equal to the amounts of such consumable supplies held
in accordance with Seller's past practices for use in the Business.
(c) The branch inventory reports to be delivered by Seller to
Purchaser at Closing and to be identified as Schedule 4.23(c) will be true,
correct and a complete list of all of Seller's New Inventory by each stock
keeping unit (SKU) as of the date indicated on such report.
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(d) All Inventory that is owned either by Seller or an Affiliate and
that is used exclusively in the Business as of the Closing Date will be
located at either (i) an Acquired Facility; (ii) a customer location
associated with a Covered Account; (iii) on any vehicle listed on Schedule
1.1(h) hereof or on a Leased Vehicle or (iv) on a Processor's Premises.
4.24 ACCOUNTS RECEIVABLE. All of the Accounts Receivable of Seller related
to the Business constitute the valid and bona fide claims of Seller against
third parties for sales, services or other charges arising in the ordinary
course of the Business. All Accounts Receivable of Seller which are greater
than ninety days past due as of the Closing Date will have been fully reserved
or written off against the reserve for uncollected accounts.
4.25 BROKERS. Except as disclosed on Schedule 4.25, no finder, broker,
agent or other intermediary has acted for or on behalf of Seller in connection
with the negotiation or consummation of this Agreement or the transactions
contemplated hereby.
4.26 GENERAL WARRANTIES. Neither this Agreement, any of the Exhibits
hereto, any Schedule or any of the other documents delivered by or on behalf of
Parent, Seller or any Affiliate pursuant to Article 10, contain any untrue
statement of a material fact regarding Parent, Seller or any Affiliate, or the
Business or any of the other matters dealt with in this Article IV or omit to
state any material fact necessary to make the statements contained herein or
therein, not misleading.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
5.1 ORGANIZATION AND AUTHORITY.
(a) Purchaser is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Minnesota. Purchaser
has all requisite corporate power and authority to execute and deliver this
Agreement and perform its obligations hereunder.
(b) The execution and delivery of this Agreement by Purchaser, and
the performance of its obligations hereunder, have been duly authorized by
all necessary corporate action on the part of Purchaser. This Agreement
has been duly executed and delivered by Purchaser and constitutes a valid
and binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms.
5.2 COMPLIANCE WITH OTHER INSTRUMENTS. The execution and delivery of this
Agreement by Purchaser and the performance by Purchaser of its obligations
hereunder will not
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(a) conflict with or result in any violation of the articles of incorporation or
bylaws of Purchaser or (b) conflict with or result in a breach of any judgment,
decree, law or order applicable to Purchaser, except that the filing and
expiration of the waiting period is required under the HSR Act.
5.3 BROKERS. Except as disclosed on Schedule 5.3, no finder, broker,
agent or other intermediary has acted for or on behalf of Purchaser in
connection with the negotiation and consummation of this Agreement or the
transactions contemplated hereby.
ARTICLE 6
COVENANTS OF SELLER
Seller covenants and agrees with Purchaser as follows:
6.1 CONDUCT OF BUSINESS; PERFORMANCE. Between the date hereof and the
Closing Date, Seller shall, except as otherwise specifically consented to in
writing by Purchaser conduct the operations of the Business in the manner
required pursuant to Section 4.18 hereof.
6.2 HSR ACT FILING. Seller shall promptly make any filing required under
the HSR Act relating to this transaction and shall use its best efforts to
respond promptly to any request for additional information under the HSR Act.
6.3 CONSENTS. Seller shall use its reasonable efforts (which shall not
require payments of money to third parties in order to obtain waivers or
consents from such third parties (except as otherwise required by the relevant
contract)) to obtain any consents required under the Contracts to be listed on
Schedule 6.3, which is to be prepared and delivered by Purchaser to Seller not
later than two weeks from the date hereof. In addition, Seller agrees that:
(a) With respect to any customer of the Business whose average weekly
revenues exceed $500 during the period from and after February 3, 1997 and
whose customer service contract requires the consent of such customer prior
to its assignment to Purchaser (exclusive, however, of any Multilocation
Linen Accounts), if Seller is unable to obtain such consent on or prior to
the Closing Date, and at any time during the six month period subsequent to
the Closing Date, any such customer terminates such contract prior to its
scheduled expiration date because of Seller's failure to obtain such
customer's consent to the contract assignment (whether or not such
termination is valid under the terms of such customer's contract), Seller
will pay Purchaser, with respect to any such customer of the Linen Plants,
an amount of money equal to the product of (X) the Average Weekly Linen
Revenue of such customer under such customer's service contract during the
Linen Measuring Period and (Y) 25, or, with respect to any such customer of
the Industrial Plants, an amount of money equal to the product of (X) the
Average Weekly Industrial Revenue of such customer under such customer's
service contract
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during the Industrial Measuring Period and (Y) 60. Any amounts that become
owing pursuant to this Section 6.3(a) shall be paid by Seller as promptly
as possible following Seller's receipt of written notice from Purchaser of
any such customer termination, and in any event, not later than thirty (30)
days thereafter.
(b) With respect to the consents to assignment required under each
Real Property Lease covering the Acquired Facilities identified on Exhibit
A as Corpus Christi Branch #424 and Portland Branch #133, in the event
Seller is unable to obtain the respective landlord's consent to Seller's
assignment of any such Real Property Lease on or prior to the Closing Date,
and if Seller is otherwise unable or unwilling to make such Acquired
Facilities available to Purchaser by any other commercially available
means, whether through valid sublease, Seller's acquisition of such
properties and subsequent sale or lease to Purchaser, in any such case,
under terms substantially equivalent to the current Real Property Leases
for such Acquired Facilities, such Acquired Facilities may be excluded from
the transactions contemplated by this Agreement in the sole and absolute
discretion of Purchaser. In the event of any such exclusion, there shall
be a corresponding reduction in each of the Base Price, Total Base Revenue
Value and the Base Amount definitions, in each case, to the full extent of
the related revenue and/or asset values for such Acquired Facilities, as
the same are set forth on Exhibit A hereto.
(c) With respect to the Real Property Lease covering the Acquired
Facility identified on Exhibit A as Orlando Branch #5110, Seller will
undertake to sublease such Acquired Facility to Purchaser, with the
landlord's consent, for the remainder of the lease term. In the event
Seller is unable to obtain the consent to any such sublease on or prior to
the Closing Date, and Seller is otherwise unable or unwilling to make such
Acquired Facility available to Purchaser by any other commercially
available means, whether through Seller's acquisition of such property and
subsequent leasing of it to Purchaser through May 1998 (but not longer),
under terms substantially equivalent to the current Real Property Lease for
such Acquired Facility, Seller will provide Purchaser with such reasonable
assistance as Purchaser may require in connection with locating suitable
alternative facilities, but Seller shall not have any responsibility for
any relocation costs incurred by Purchaser in connection with such
relocation.
(d) With respect to the consent to assignment required under the Real
Property Lease covering the Acquired Facility identified on Exhibit A as
Jonesboro Branch #2810, in the event Seller is unable to obtain the
landlord's consent to Seller's assignment of such Real Property Lease on or
prior to the Closing Date, and Seller is otherwise unable or unwilling to
make such Acquired Facility available to Purchaser under terms
substantially equivalent to the current Real Property Lease for such
Acquired Facility, Seller will provide Purchaser with such reasonable
assistance as Purchaser may require in connection with locating suitable
alternative facilities, and shall also pay Purchaser up to $100,000 to
cover expenses incurred in connection with Purchaser's relocation.
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(e) With respect to the consents to assignment required under each
Real Property Lease covering the Acquired Facilities identified on Exhibit
A as Lakeland Branch #4710 and Portsmouth Branch #560, in the event Seller
is unable to obtain the respective landlord's consent to Seller's
assignment of such Real Property Leases on or prior to the Closing Date,
Seller shall exercise its purchase options with respect to either or both
such Acquired Facilities and shall thereafter either assign its purchase
rights and obligations to Purchaser in a valid assignment or shall
otherwise consummate the purchase of such properties and thereafter,
Purchaser shall be irrevocably obligated to buy such Acquired Facilities
from Seller at the identical purchase price, and otherwise on the same
terms and conditions, as Seller shall have paid for such Acquired
Facilities pursuant to its purchase options.
(f) Seller will comply with all requirements under the National Labor
Relations Act and the Labor Management Relations Act related to sale of the
Business to Purchaser. Seller will notify Purchaser in advance of any
meetings with any union party to the Collective Bargaining Agreements
relating to the transactions contemplated by this Agreement and provide
Purchaser with an opportunity to attend and direct any discussion at such
meetings related to Purchaser's operation of the Business after the
Closing. Seller will inform any union party to the Collective Bargaining
Agreement that it may be necessary for Purchaser to replace certain
employee benefit plans under the Collective Bargaining Agreements. Seller
will use its reasonable best efforts prior to the Closing to obtain
executed successorship agreements from any union party to a Collective
Bargaining Agreement so as to secure such union party's consent to
Purchaser succeeding Seller under such Collective Bargaining Agreement.
6.4 ACCESS AND INFORMATION. Seller shall permit Purchaser and Purchaser's
counsel, accountants and other representatives full access upon reasonable
notice during normal business hours to all the properties, assets, books,
records, agreements, commitments and other documents of Seller concerning the
Business or the Purchased Assets; provided, however, that such access shall not
interfere with the operation of the Business. Seller shall furnish to Purchaser
and its representatives all available information with respect to the Purchased
Assets as Purchaser may reasonably request, and, in connection therewith, shall
specifically cooperate in the exchange of data processing information in the
manner and to the extent contemplated by Schedule 6.4 hereof.
6.5 NONCOMPETITION; NONSOLICITATION; AND CONFIDENTIALITY.
(a) As used in this Section 6.5, the following terms shall have the
following meanings:
(i) "Person" means any individual, firm, partnership,
association, corporation, limited liability entity, trust, venture or
other business organization, entity or enterprise;
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(ii) "Industrial Supply Business" means the supply for hire and
facility-based direct sales of Industrial Items;
(iii) "Industrial Items" means industrial shirts, pants,
coveralls, jumpsuits, shop coats, counter coats, shop towels and
printer towels;
(iv) "Restricted Period" means the period commencing on the
Closing Date and ending on the fifth anniversary of the Closing Date;
provided that, if Seller or Enterprises violate the covenant not to
compete, the Restricted Period shall be extended for an added period
equal to the duration of the period of such violation.
(v) "Restricted Territory" means the geographic service areas
covered by the zip code listings set forth on Schedule 6.5.
(vi) The term "engage or be interested, directly or indirectly"
as used herein, shall include, without limitation, giving advice or
technical or financial assistance by loan, guarantees, stock
transactions or in any other manner to any Person doing or about to
engage in the Industrial Supply Business within the Restricted
Territory.
(b) During the Restricted Period, neither Seller nor Enterprises
will, without Purchaser's prior written consent, (which may be withheld
with or without reason), directly or indirectly, for itself or together or
on behalf of any other Person, engage or be interested in, directly or
indirectly, the Industrial Supply Business, as partner, investor,
shareholder, principal, agent, officer, director, employee, technical
advisor, lender, trustee, beneficiary or otherwise, anywhere within the
Restricted Territory. In connection with the foregoing covenant, Seller
and Enterprises agree that, following the Closing Date, they will not use
any of the trademarks licensed under the Service Mark License Agreement
dated October 1, 1990 from Williamson-Dickie Manufacturing Company in the
Industrial Supply Business or otherwise. Nothing contained in this Section
6.5(b) shall prohibit or be construed as prohibiting Seller from selling or
renting or soliciting the sale or rental of any Industrial Items to any
customer where the net revenue attributable to sales or rental of linen
items, such as bed linens, table linens, bath and hand towels, aprons, chef
coats, cook pants and like items, at any single customer delivery location
represents more than fifty percent (50%) of the net revenue derived by
Seller from such single customer delivery location in any rolling three
month period.
(c) During the Restricted Period, Seller and Enterprises hereby agree
that they shall not, without Purchaser's prior written consent (which may
be withheld with or without reason), either directly or indirectly, for
themselves or on behalf of any other Person, (except Purchaser) (i) sell or
rent or solicit the sale or rental of any items or products or services to
any Covered Account of a Linen Plant which items, products or
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services are similar to those offered for sale or rental by Seller or any
Affiliate in the conduct of the Business at any time within the period of
twelve (12) months preceding the Closing Date or (ii) sell or rent or
solicit the sale or rental of any Industrial Items to any Covered Account
of an Industrial Plant.
(d) Nothing contained in this Agreement shall be construed as
prohibiting (i) the activities of Seller pursuant to the Subcontract
Agreement; (ii) sales and the solicitation of sales by Seller to the
Covered Accounts of chemical products; (iii) direct sales in the normal
course of conducting Seller's national direct sales business; or (iv) the
right of Seller to continue to service any accounts which exist on the
Closing Date and are not being sold to Purchaser pursuant to this
Agreement.
(e) From and after the Closing Date, neither Seller nor Enterprises
shall disclose any confidential information to any Person, (except
Purchaser), which confidential information relates to the Business or the
Purchased Assets, excluding confidential information related to or used in
servicing multilocation or national accounts, but, including, without
limitation, the identity of, prices charged to or business done with any
Covered Account as of the Closing Date, except (i) in response to a request
of a governmental agency, (ii) pursuant to court order, (iii) as otherwise
provided in Section 1.5 hereof, or (iv) as otherwise required by law. In
the event that Seller is requested or required (by oral questions,
interrogatories, requests for information or documents in legal
proceedings, subpoena, civil investigative demand or other similar process)
to disclose any such confidential information, Seller shall provide
Purchaser with prompt written notice of any such request or requirement so
that Purchaser may seek a protective order or other appropriate remedy
and/or waive compliance with the provisions of this Agreement. If, in the
absence of a protective order or other remedy or the receipt of a waiver
from Purchaser, Seller is nonetheless, in the written opinion of outside
counsel, legally compelled to disclose such confidential information,
Seller may, without liability hereunder, disclose such confidential
information.
(f) Seller hereby agrees that for a period of five (5) years from and
after the Closing Date, without Purchaser's prior written consent (which
may be withheld with or without reason), it shall not directly or
indirectly or acting alone or together with or on behalf of or through any
other person, affiliate or entity: (i) hire as employee, consultant or
other independent contractor; (ii) enter into any other business
relationship (including, without limitation, as partners, joint venturers,
guarantors, business associates, investors, financiers, owners of a
corporation or other business organization, entity or enterprise) with; or
(iii) request, induce, advise or encourage a termination of employment by,
any Hired Employee (so long as such Hired Employee continues as an employee
of Purchaser).
(g) Because the breach or anticipated breach of the restrictive
covenants set forth in this Section 6.5 could result in immediate and
irreparable harm and injury to
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Purchaser, for which it will not have an adequate remedy at law, Seller and
Enterprises agree that Purchaser shall be entitled to relief in equity to
enjoin temporarily and/or permanently such breach or anticipated breach and
to seek any and all other legal and equitable remedies to which Purchaser
may be entitled. In the event that the foregoing restrictive covenants are
considered by a court of competent jurisdiction or arbitrator to be
excessive in its duration or scope, it shall be considered modified and
valid for such duration and for such business and area as such court or
arbitrator may determine reasonable under the circumstances.
(h) Any provision to the contrary notwithstanding, specifically
including Section 14.13 hereof, Seller and Enterprises hereby irrevocably
consent to the assignment by Purchaser of all or a portion of Purchaser's
rights under this Section 6.5 to any other person or entity in connection
with Purchaser's sale of all or substantially all of the assets and/or any
portion of the revenue base attributable to any Acquired Facility and such
transferee shall thereafter have all of Purchaser's rights hereunder for
the duration of the Restricted Period.
6.6 MONTHLY FINANCIAL STATEMENTS. From and after the date hereof and
through the end of each month prior to the Closing Date, within twenty days
after the end of each such month, Seller will provide unaudited statements of
net assets (i.e., Purchased Assets and Assumed Liabilities) of the Business as
of the month then ended and the related unaudited statements of revenue and
operating expenses of the Business (which will reflect earnings before interest
and taxes) for the period from February 1, 1997 through the end of such month.
The financial statements delivered pursuant to the preceding sentence (exclusive
of any line items below the line item thereon for adjusted operating income) are
hereinafter referred to as the "Monthly Statements." Upon delivery of each
Monthly Statement, Seller shall be deemed to have made the same representations
and warranties with respect to such Monthly Statements as Seller made about the
Interim Statements, and the definition of Interim Statements for purposes of
this Agreement shall be deemed to include such Monthly Statement.
6.7 NOTIFICATION OF CERTAIN MATTERS.
(a) Seller shall give prompt written notice to Purchaser of (i) the
occurrence, or failure to occur, of any event which occurrence or failure
would be likely to cause a Material Adverse Effect, (ii) any material
claims, actions, proceedings or investigations commenced or, to Seller's
knowledge, threatened, involving or affecting Seller or any Affiliate and
any of the Purchased Assets and which would be likely to cause a Material
Adverse Effect, and (iii) any material adverse change in the condition
(financial or other), properties, assets, or liabilities of the Business,
taken as a whole, which, so far as reasonably can be foreseen at the time
of its occurrence, would be likely to cause a Material Adverse Effect;
provided, however, that no such notification shall affect the
representations or warranties of the parties or the conditions to the
obligations to the parties hereunder.
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(b) In addition to, and not in lieu of, the foregoing, Seller shall
deliver to Purchaser a true and complete schedule of changes (the "Update
Schedule") to any of the information contained in any of the Schedules to
this Agreement (including, without limitation, changes to any other
representations or warranties of Seller in Article 4 hereof as to which no
Schedules have been created as of the date hereof but as to which a
Schedule would have been required hereunder to have been created on or
before the date hereof if such changes had existed on the date hereof) in
writing to Purchaser, dated within five business days of the Closing Date,
with a certificate executed by Seller's Executive Vice President and Chief
Financial Officer, stating that he has supervised or conducted a reasonable
investigation necessary for purposes of this certificate and certifying as
to the accuracy and completeness of such Update Schedule.
6.8 CONTINUATION OBLIGATIONS. Seller shall be solely responsible for
satisfying any employee benefit continuation obligations Seller may have before
or after the Closing Date relating to "qualifying events" (as defined in Section
603 of ERISA) occurring on or prior to the Closing Date with respect to the
Employees of the Business, or former Employees of the Business and their
beneficiaries under its Welfare Plans, Sections 601 through 609 of ERISA and any
applicable state law, as a result of the transactions contemplated by this
Agreement or otherwise.
6.9 ENVIRONMENTAL REMEDIATION OBLIGATIONS OF SELLER.
(a) Seller has heretofore prepared at its own expense and delivered
to Purchaser or will prepare at its own expense and deliver prior to the
Closing Date, full Phase I environmental studies for each of the Acquired
Facilities (collectively, the "Phase I Reports"). Seller agrees that from
and after the date hereof, it will either (i) pay the cost of any
environmental remediation identified on Schedule 6.9, as Schedule 6.9 may
be updated or supplemented pursuant to Schedule 6.9 and/or Section 6.7
hereof (the "Environmental Remediation") or (ii) in Seller's reasonable
discretion, reimburse Purchaser the full cost of completing the
Environmental Remediation, inclusive of any and all direct labor costs
reasonably incurred by Purchaser in effecting any such remediation
obligation, as the same may be reasonably demonstrated by Purchaser.
(b) Notwithstanding Purchaser's assumption of those compliance
obligations pursuant to Section 2(b) hereof, Seller shall be solely liable
for any and all costs and expenses related to any environmental remediation
obligations with respect to those monitoring and compliance obligations
which are reasonably related to conduct, activities or conditions existing
on or prior to the Closing Date. Any such remediation obligations so
identified shall thereafter be treated in the manner contemplated by the
provisions of Section 6.9(a).
(c) From and after the Closing and through the fourth anniversary of
the Closing Date (but subject to Schedule 6.9), Seller and Purchaser agree
to split equally the cost of any other environmental remediation work
required under any then existing
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Environmental Law for unknown and contingent environmental liabilities that
relate to conduct, activities or conditions existing on or prior to the
Closing Date to the extent they occur within the legal property boundaries
of an Acquired Facility and which are not identified or referenced in the
Phase I Reports. Notwithstanding the foregoing, the maximum amount which
Purchaser shall be required to pay pursuant to the foregoing sentence shall
be $250,000, at which time, Seller shall be solely responsible for all
amounts in excess thereof. From and after the fourth anniversary of the
Closing Date, Purchaser shall thereafter have the obligations contemplated
by Section 2(g) hereof. To the extent that Seller receives reimbursement
from governmental entities for environmental remediation contemplated by
this paragraph 6.9(c), and Purchaser has previously made payment for such
remediation as required by this paragraph 6.9(c), Seller will promptly
reimburse Purchaser for any payment so made in an amount equal to (i) the
amount of the reimbursement, multiplied by (ii) a fraction, (x) the
numerator of which is the amount paid by Purchaser with respect to such
remediation, and (y) the denominator of which is the total amount paid by
Seller and Purchaser with respect to such remediation.
(d) Purchaser will allow Seller access to the applicable Real
Property, and will provide any other third parties such additional
reasonable access as may be reasonably necessary to perform remediation
required pursuant to this Agreement, and Seller will use its reasonable
best efforts, and will use such reasonable best efforts to cause any third
parties, not to interfere with the operation of the Business on such Real
Property in connection with the performance of such remediation. In the
event Purchaser sells or transfers any Real Property at any time while
Seller remains liable for remediation pursuant to this Agreement with
respect to such Real Property, Purchaser will ensure in its contract of
sale for any Owned Real Property that Seller or such third parties
continues to have such reasonable access as may be reasonably necessary to
perform remediation required pursuant to this Agreement, and, with respect
to any Leased Real Property, will undertake its reasonable best efforts to
ensure that Seller or such third parties continues to have reasonable
access as may be reasonably necessary to perform remediation required
pursuant to this Agreement.
6.10 SUBSEQUENT ASSIGNMENT OF THE TRANSITION SERVICES AGREEMENT. Seller
shall, at any time and from time to time at and after the Closing, upon request
of Purchaser and without additional consideration, provide those services as
will be provided to Purchaser under the Transition Services Agreement to any
purchaser in any Linen Plant Sale; PROVIDED HOWEVER, Seller shall not be
required to provide any such transition services to any purchaser of a Linen
Plant(s) for a period of time in excess of six (6) months.
6.11 ZONING ASSURANCES. Seller shall use reasonable best efforts to
provide Purchaser at its sole cost and expense with written evidence (in the
form of a zoning endorsement (ALTA Form 3.1) or a letter from the applicable
city) that the parcels of Owned Real Property described in Schedule 6.11 comply
as of the Closing Date with all applicable laws, ordinances, rules and
regulations relating to zoning for such parcel of Owned Real Property. Seller
shall use reasonable
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best efforts to provide such zoning assurances to Purchaser no later than one
hundred twenty (120) days after the Closing Date.
6.12 PERMITTED ENCUMBRANCES. To the extent that Purchaser has not
received the Title Commitment and/or survey or to the extent issues are marked
"open" on Schedule 4.4 for each parcel of Owned Real Property as of the date of
this Agreement, title to each parcel of such Owned Real Property will be good
and marketable, free and clear of any security interest, mortgage, pledge, lien,
charge, encumbrance, right of way, easement or adverse claim of any kind or
nature except (i) liens for current taxes not yet due and payable; and (ii)
those encumbrances, rights of way, easements or adverse claims (collectively,
the "Restrictions") of a type and kind consistent with the Permitted
Encumbrances described on Schedule 4.4 as of the date of this Agreement which
Restrictions shall be added to Schedule 4.4 on or prior to the Closing Date;
PROVIDED, HOWEVER, should Purchaser and Seller be unable to agree whether a
Restriction shall be a Permitted Encumbrance, then such Restriction shall be
deemed a Permitted Encumbrance and Seller shall indemnify and hold a Purchaser
Indemnified Party (as hereinafter defined) harmless from, against and in respect
of any and all loss, liability, and expense (including without limitation,
reasonable expenses and attorney's fees) suffered or incurred by a Purchaser
Indemnified Party by reason of such Restriction (the "Section 6.12 Losses").
Notwithstanding the foregoing, Seller shall have no liability under this Section
6.12 to indemnify a Purchaser Indemnified Party for any Section 6.12 Losses
related to an Acquired Facility until the aggregate costs for such Section 6.12
Losses related to such Acquired Facility exceed $5,000.
6.13 REAL PROPERTY. Seller shall obtain at its own cost and expense a
commitment for an ALTA Owner's policy of title insurance for each parcel of
Owned Real Property dated subsequent to the date hereof (the "Title
Commitments") which shall be issued by Lawyers Title Insurance Corporation (the
"Title Company"), showing all exceptions to title including, but not limited to,
all covenants, conditions, restrictions, reservations, easements, rights and
rights-of-way, liens and other matters of record, in each case, as are
reasonably acceptable to Purchaser, and shall include proper searches for
bankruptcies, judgments and state and federal tax liens affecting such Owned
Real Property or Seller or any Affiliate and shall also include a commitment to
endorse the final policy of title insurance to be issued to Purchaser by the
Title Company (the "Title Policy") so as to (i) delete the standard exceptions
(including exceptions for parties in possession, except for tenants under the
Real Property Leases; unrecorded instruments; survey matters; and mechanic's
liens); (ii) insure that certain parcels of real estate comprising such Owned
Real Property are contiguous, as applicable and available; and (iii) insure that
the Owned Real Property complies with all existing covenants, conditions and
restrictions of record and that the instruments creating any such restrictions
do not contain any forfeiture of title or right of re-entry provisions, as
applicable and available (collectively, the "Title Endorsements"). All such
endorsements and agreements shall be customary and standard and in form and
substance reasonably satisfactory to Purchaser.
6.14 SUPPLY CONTRACTS. Following the Closing, Seller will provide
Purchaser with the opportunity to purchase under the Standard Agreement and
Artex Agreement during the terms
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thereof at the prices thereunder, provided that Purchaser shall have no
obligation to purchase any amounts under either such Agreement.
ARTICLE 7
COVENANTS OF PURCHASER
Purchaser covenants and agrees with Seller as follows:
7.1 HSR ACT FILINGS. Purchaser shall promptly make any filing required
under the HSR Act and shall use its best efforts to promptly respond to any
request for additional information under the HSR Act.
7.2 EMPLOYEE MATTERS.
(a) Purchaser shall offer employment, on an at-will basis (except
that any Employee of the Business covered by any Collective Bargaining
Agreement shall be hired pursuant to the terms and conditions set forth in
that Collective Bargaining Agreement) effective on the Closing Date, to all
regular full-time and part-time employees of the Business who are actively
employed at an Acquired Facility and to those sales representatives who are
assigned to an Acquired Facility in addition to those employees identified
on Schedule 7.2(a), in each case, as of the Closing Date (the "Employees of
the Business"). Purchaser also may interview any of the individuals named
on the list provided by Seller to Purchaser prior to the date hereof (the
"Home Office Employees") and may hire any such Home Office Employees as it
shall determine in its sole discretion. (The Employees of the Business and
those Home Office Employees hired by Purchaser as of the Closing Date are
referred to collectively herein as the "Hired Employees"). Purchaser shall
not be required to assume any compensation, fringe benefit or retirement
plan heretofore provided by Seller or retain for a certain time any
Employees of the Business hired by Purchaser.
(b) With respect to Employees of the Business who are not actively
employed in the Business on the Closing Date for any reason (other than
routine illness, vacation or personal days), Purchaser agrees to hire each
such Employee of the Business at such time as they are medically authorized
to return to full time employment, as evidenced by appropriate physician
authorization or, in the case of any leave of absence unrelated to a
medical condition, upon expiration of such leave of absence. In connection
therewith, from and after the Closing Date, and until such time as any such
Employee of the Business is able to return to full time employment with
Purchaser as contemplated by the preceding sentence, Seller agrees that it
will continue to pay the costs of those fringe benefits as to which such
employee is otherwise entitled as of the Closing Date and with respect to
which Seller is making such payments as of the Closing Date; PROVIDED,
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HOWEVER, with respect to any Employee of the Business who is receiving
workers' compensation benefits as of the Closing Date, Seller shall pay or
reimburse to Purchaser the full cost of any wage differential adjustment
such employee might otherwise be entitled to upon his or her commencement
of employment with Purchaser, if such return is on any restricted status or
modified duty, with Seller's payment or reimbursement obligation to
continue from and after the date that Purchaser hires any such employee
through the date such employee is able to work without any such
restriction.
(c) Purchaser agrees, with respect to the Hired Employees only, to
provide the severance benefits set forth on Schedule 7.2(c) hereto to any
salaried, exempt employees of the Business who are terminated by Purchaser
within the first year following the Closing, except with respect to any
such salaried, exempt employees of the Business who become employed for at
least 180 days by another business entity that has acquired from Purchaser
the Acquired Facility at which such employees worked.
(d) To the extent any "withdrawal liability" (as described in Section
4201 of ERISA) would otherwise be due from Seller as a result of the
purchase and sale of the Business and the Purchased Assets as contemplated
hereby, Purchaser and Seller shall comply with the requirements of
Section 4204 of ERISA, in order that no "complete withdrawal" (as described
in Section 4203 of ERISA) or "partial withdrawal" (as described in
Section 4205 of ERISA) by Seller from any of the "multiemployer plans" (as
defined in Section 4001(a)(3) of ERISA, listed on Schedule 4.12) to which
Seller contributes on behalf of certain of the Employees of the Business
pursuant to the Collective Bargaining Agreements, occurs as a result of
such purchase and sale. After the Closing Date, but only to the extent
required to comply with Section 4204 of ERISA, Purchaser shall incur an
"obligation to contribute" (as described in Section 4212 of ERISA) to each
of such multiemployer plans with respect to the Business and the Purchased
Assets, for substantially the same number of "contribution base units" (as
described in Section 4001(a)(11) of ERISA) for which Seller had such an
obligation to contribute with respect thereto on or before the Closing
Date. If Purchaser decides to obtain from the PBGC and/or any of such
multiemployer plans an exemption or variance from the requirements of
Section 4204(a)(1)(B) of ERISA, Seller shall use reasonable efforts to
assist Purchaser, including the timely delivery to Purchaser of any
information held by or available to Seller and required by PBGC or any such
plan in connection with Purchaser's request for such exemption or variance.
If a satisfactory exemption or variance is not obtained, Purchaser shall
post a bond, establish an escrow or provide other security acceptable to
such multiemployer plans, and the amount and terms and conditions of such
security shall satisfy the requirements of Section 4204 of ERISA. Until
such a satisfactory exemption or variance is obtained, Purchaser shall post
a bond, establish an escrow, or provide other security acceptable to the
multiemployer plans, if required. If Purchaser withdraws from any of such
plans in a complete or partial withdrawal with respect to the Business and
the Purchased Assets during the first five plan years commencing with the
first plan year beginning after the Closing and is required, but fails to
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make a withdrawal liability payment as a result thereof, Seller shall be
secondarily liable to such multiemployer plan, to the extent required by
Section 4204(a)(2) of ERISA, but not to exceed the amount of any withdrawal
liability Seller would have had to such plan with respect to the sale of
the Business, but for Section 4204 of ERISA (the "Withdrawal Liability").
However, as between Purchaser and Seller, Purchaser shall be liable for
such Withdrawal Liability, and Purchaser shall also indemnify and hold
harmless Seller against any payment to any of such multiemployer plans,
either by Seller or through any bond or escrow provided by Seller, of
Seller's secondary withdrawal liability under Section 4204(a)(2) that is
caused by Purchaser's failure to make any withdrawal liability payment to
such a plan when due; PROVIDED, HOWEVER, that the aggregate amount for
which Purchaser shall be required to indemnify Seller under this Section
7.2(d) shall not exceed $5,000,000, and Seller shall be liable for any
Withdrawal Liability in excess of such amount and shall indemnify and hold
harmless Purchaser against liability in excess of $5,000,000.
(e) Effective as of the Closing Date, Purchaser will make available
to the Hired Employees, health insurance coverage that will provide health
insurance to each such Hired Employee and, with respect to their
dependents, if so elected, immediately upon employment with Purchaser,
without regard to any preexisting condition, exclusion or other limitation,
but otherwise subject to the terms and conditions of such plan or policy.
7.3 FINANCING. Purchaser shall use its reasonable best efforts to have
finalized all documentation relating to its financing arrangements (but
excluding actual funding) two weeks prior to the Closing Date, on substantially
the terms and subject to the conditions set forth on Exhibit C hereto.
7.4 OTHER MATTERS. Purchaser agrees to use its reasonable best efforts to
have any purchaser in any Linen Plant Sale assume each and every Real Estate
Lease relating to any Acquired Facility included within such transaction.
7.5 TITLE POLICY. To the extent Purchaser has any claim against Seller
with respect to any parcel of Owned Real Property and such claim may otherwise
be insured against under a Title Policy, Purchaser agrees that it will seek to
recover such claim against Seller only if, and only to the extent that such
claim is denied by the Title Company.
ARTICLE 8
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
The obligations of Purchaser to consummate the transactions contemplated by
this Agreement are subject to the satisfaction of each of the following
conditions prior to or at the Closing, unless specifically waived in writing by
Purchaser in advance:
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8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Seller contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date as though
the Closing Date had been substituted for the date of this Agreement throughout
such representations and warranties, except that any such representation or
warranty made as of a specified date (other than the date hereof) need only be
true as of such date, Seller shall have duly performed and complied in all
material respects with all covenants and agreements and satisfied all conditions
required by this Agreement to be performed, complied with or satisfied by Seller
prior to or at the Closing, including without limitation delivery of the Update
Schedule, and Seller shall have delivered its certificate to Purchaser to such
effect.
8.2 ABSENCE OF LITIGATION. No order, writ, injunction or decree which is
binding on Purchaser and/or Seller or the Real Property and which prohibits
Purchaser and/or Seller from consummating the transactions contemplated hereby
shall be in effect, provided that Purchaser shall have used its reasonable
efforts to have any such order, writ, injunction or decree lifted and the same
shall not have been lifted by any such court or governmental or regulatory
agency. No claim, action, suit or proceeding shall be pending or threatened
against Purchaser or Seller, the Business or the Real Property which, if
adversely determined, would prevent the consummation of the transaction and
other actions contemplated hereby or result in the payment of substantial
damages as a result of such action and for which the other party is not willing
to provide indemnification.
8.3 CONSENTS AND APPROVALS. All governmental and regulatory approvals
requisite or appropriate to the consummation of the transactions contemplated
herein shall have been obtained (or all applicable waiting periods shall have
expired) including, without limitation, those approvals required under HSR, but
excluding any customer Contract with any governmental agency or entity, and
such consents or approvals shall remain in full force and effect.
8.4 OPINION OF COUNSEL TO SELLER. Purchaser shall have received from King
& Spalding, an opinion, dated the Closing Date, substantially in the form of
Exhibit D ("Seller Counsel's Legal Opinion").
8.5 ABSENCE OF CHANGES. During the period from January 31, 1997 to and
including the Closing Date, there will not have been (i) any increase in
encumbrances against the Owned Real Property (which is not an Excluded
Liability) or (ii) subject to Section 3.9, change in the condition (financial or
other), properties, assets, or liabilities representing Assumed Liabilities,
whether or not insured, which increases or changes would have a Material Adverse
Effect. For purposes of the preceding sentence, the parties acknowledge that:
(i) no Material Adverse Effect shall be deemed to have occurred if any Acquired
Facility representing all or part, or otherwise associated with a Linen Plant
shall be damaged or destroyed by fire or other casualty prior to the Closing;
(ii) there shall be no resulting violation of Section 4.18 (a) or (f) hereof by
reason of such fire or casualty; and (iii) with respect to such damage or
destruction only, the condition set forth in this Section 8.5 shall be deemed
satisfied. Notwithstanding the foregoing, in the event of any
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such fire or casualty involving an Acquired Facility representing all or part,
or otherwise associated with a Linen Plant, Purchaser thereafter have the
option, in its sole and absolute discretion, to exclude such Acquired Facilities
from the transactions contemplated by this Agreement with a corresponding
reduction in each of the Base Price, Total Base Revenue Value and the Base
Amount definitions, in each case, to the full extent of the related revenue
and/or total values for such Acquired Facilities, as derived from Schedule 3.7
hereto.
8.6 DELIVERY OF FINANCIALS.
(a) Seller shall have prepared and delivered those financial
statements described on Schedule 8.6(a) hereof, and shall also provide
Purchaser with such additional reasonable detail or supporting information
to support any pro forma adjustments that would be necessary in connection
with the presentation of the Audited Financial Statements and Reviewed
Financial Statements (as such terms are defined on Schedule 8.6(a)) and
would further enable Purchaser to make a reasonable comparison of Seller's
adjusted operating profit as set forth in the Financial Statements and the
Interim Statements.
(b) The Statement of Revenue and Operating Expenses included as a
part of each of the Audited Financial Statements and the Reviewed Financial
Statements shall not reflect any material adjustments, restatements or
reclassifications as compared to the corresponding Financial Statements and
the Interim Statements, except for: accruals for compensation, commission
or bonuses that exceed a twelve month period with respect to any fiscal
year covered by the Audited Financial Statements, but only with respect to
the portion of such accruals in excess of a twelve month period.
8.7 REAL ESTATE. Purchaser shall have received special or limited
warranty deeds conveying the Owned Real Property (collectively, the "Deeds") to
Purchaser and such Deeds shall be customary and standard and in form and
substance reasonably satisfactory to Purchaser.
8.8 FINANCING. Purchaser shall have received financing on substantially
the terms and subject to the conditions set forth on Exhibit C hereto.
ARTICLE 9
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
The obligations of Seller to consummate the transactions contemplated by
this Agreement are subject to the satisfaction prior to or at the Closing of
each of the following conditions, unless specifically waived in writing by
Seller in advance:
9.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Purchaser contained in this Agreement shall be true and complete in all material
respects as of the
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date of this Agreement and as of the Closing Date as though the Closing Date had
been substituted for the date of this Agreement throughout such representations
and warranties, except that any such representation or warranty made as of a
specified date (other than the date hereof) need only be true as of such date,
Purchaser shall have duly performed and complied in all material respects with
all covenants, agreements and satisfied all conditions required by this
Agreement to be performed and complied with or satisfied by it prior to or at
the Closing, and Purchaser shall have delivered its certificate to Seller to
such effects.
9.2 ABSENCE OF LITIGATION. No order, writ, injunction or decree which is
binding on Purchaser and/or Seller and which prohibits Purchaser and/or Seller
from consummating the transactions contemplated hereby shall be in effect;
provided that Seller shall have used its reasonable efforts to have any such
order, writ, injunction or decree lifted and the same shall not have been lifted
by any such court or governmental or regulatory agency. No claim, action, suit
or proceeding shall be pending or threatened against Purchaser or Seller which,
if adversely determined, would prevent the consummation of the transaction and
other actions contemplated hereby or result in the payment of substantial
damages as a result of such action and for which the other party is not willing
to provide indemnification.
9.3 CONSENTS AND APPROVALS. All governmental and regulatory approvals
requisite or appropriate to the consummation of the transactions contemplated
herein shall have been obtained (or all applicable waiting periods shall have
expired) including, without limitation, those approvals required under HSR, and
shall remain in full force and effect.
9.4 OPINION OF COUNSEL TO PURCHASER. Seller shall have received from
Maslon Edelman Borman & Brand, a Professional Limited Liability Partnership,
counsel to Purchaser, an opinion, dated the Closing Date, in the form of
Exhibit E ("Purchaser Counsel's Legal Opinion").
ARTICLE 10
CLOSING
10.1 CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Seller, NSI Center,
1420 Peachtree Street, N.E., Atlanta, Georgia, on July 15, 1997 at 9:00 a.m.,
local time, or at such other location or later date or time as mutually agreed
upon by the parties. The date of the Closing is referred to herein as the
"Closing Date."
10.2 DELIVERIES BY SELLER. At the Closing, provided all conditions
described in Article 9 have been satisfied, Seller shall execute and deliver to
Purchaser the following: (i) the Deeds; (ii) the Title Commitments in the form
previously delivered to Purchaser with respect to the Owned Real Property, with
appropriate changes to conform to the title insurance practices in each state,
as reasonably required by the Title Company; (iii) an Assignment and Assumption
of Leases (the "Assignment and Assumption of Leases") in the form of Exhibit F
with respect to the
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Real Property Leases; (iv) transfer tax forms, withholding forms and similar
documents required to be completed and submitted in connection with the transfer
of the Owned Real Property; (v) a Bill of Sale and General Assignment in the
form of Exhibit G hereto; (vi) the Subcontract Agreements; (vii) the Transition
Services Agreement; (viii) Seller Counsel's Legal Opinion; (ix) the certificate
required by Section 8.1 hereof; (x) consents, approvals and authorizations
obtained by Seller pursuant to Section 6.3 as of the Closing Date; and (xi) such
other instruments of conveyance reasonably requested by Purchaser or the Title
Company.
10.3 DELIVERIES BY PURCHASER. At the Closing, provided all conditions
described in Article 8 have been satisfied, Purchaser shall deliver to Seller a
wire transfer of immediately available federal funds in an aggregate amount
equal to the Cash Purchase Price as calculated pursuant to Section 3.2 and
execute and deliver to Seller (i) an Assumption Agreement in the form attached
hereto as Exhibit H; (ii) the Subcontract Agreements; (iii) the Transition
Services Agreement; (iv) transfer tax forms and similar documents required to be
completed and submitted in connection with the transfer of the Owned Real
Property; (v) Purchaser Counsel's Legal Opinion; (vi) the certificate required
by Section 9.1 hereof; and (vii) such other instruments or documents as may be
reasonably requested by Seller to reflect the assumption of the Assumed
Liabilities and the consummation of the transactions contemplated hereunder.
ARTICLE 11
TERMINATION PRIOR TO CLOSING
11.1 TERMINATION OF AGREEMENT. This Agreement may be terminated at any
time prior to the Closing:
(a) by the mutual written consent of Seller and Purchaser;
(b) by Seller, if the conditions set forth in Article 9 hereof (to
the extent compliance or performance thereunder is not within the control
of Seller) shall not have been complied with or performed and such
noncompliance or nonperformance shall not have been cured or eliminated (or
by its nature cannot be cured or eliminated) by Purchaser on or before
August 31, 1997 (or such later date as may be mutually agreed upon by the
parties);
(c) by Purchaser, if the conditions set forth in Article 8 hereof (to
the extent compliance or performance thereunder is not within the control
of Purchaser) shall not have been complied with or performed and such
noncompliance or nonperformance shall not have been cured or eliminated (or
by its nature cannot be cured or eliminated) by Seller on or before August
31, 1997 (or such later date as may be mutually agreed upon by the
parties);
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(d) by either Seller or Purchaser, if there shall be any order, writ,
injunction or decree of any court or governmental or regulatory agency
binding on Purchaser and/or Seller, which prohibits Purchaser and/or Seller
from consummating the transactions contemplated hereby, provided that
Purchaser and Seller shall have used reasonable efforts to have any such
order, writ, injunction or decree lifted and the same shall not have been
lifted within ninety (90) days after entry, by any such court or
governmental or regulatory agency; or
(e) by either Seller or Purchaser, if the Closing has not occurred on
or prior to August 31, 1997 for any reason other than delay or
nonperformance of the party seeking such termination.
11.2 TERMINATION OF OBLIGATIONS. Termination of this Agreement pursuant to
this Article 11 shall terminate all obligations of the parties hereunder, except
for the obligations under this Section 11.2 and Section 14.1 and except that
such termination shall not constitute a waiver of any rights any party may have
by reason of a breach by the other party of any agreement or covenant in this
Agreement which occurs prior to such termination.
ARTICLE 12
TRANSITION SERVICES AGREEMENT.
Seller and Purchaser shall enter into and execute at and as of the Closing
Date, a Transition Services Agreement substantially in accordance with Exhibit I
(the "Transition Services Agreement"). In connection therewith, and because any
breach or anticipated breach of the Transition Services Agreement, when
executed, could result in immediate and irreparable harm and injury to either
Purchaser or Seller, and for which no adequate remedy at law exists, Seller and
Purchaser agree that the non-breaching party shall be entitled to relief in
equity to enjoin temporarily and/or permanently such breach or anticipated
breach and to seek any and all other legal and equitable remedies to which such
non-breaching party may be entitled.
ARTICLE 13
INDEMNIFICATION
13.1 INDEMNIFICATION BY SELLER. Seller shall indemnify and hold Purchaser
and each of its successors, assigns and affiliates and each officer and director
thereof (a "Purchaser Indemnified Party") harmless from, against and in respect
of any and all loss, liability, expense (including, without limitation,
reasonable expenses of investigation and reasonable attorney's fees and expenses
in connection with any action, suit or proceeding brought against a Purchaser
Indemnified Party) or "Damage" (as hereinafter defined) suffered or incurred by
a Purchaser Indemnified Party ("Purchaser Losses") by reason of (i) any breach
of a representation or warranty by Seller contained herein or in any
certificate, list, Exhibit or Schedule or other
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document delivered to Purchaser under or pursuant to Section 10.2 of this
Agreement; (ii) failure of Seller to fulfill or perform any covenant, agreement
or obligation of Seller contained herein; (iii) any Withdrawal Liability in
excess of the limitations set forth in Section 7.2; or (iv) any Excluded
Liability.
13.2 INDEMNIFICATION BY PURCHASER. Purchaser shall indemnify and hold
Seller and each of its successors, assigns and affiliates and each officer and
director thereof (a "Seller Indemnified Party") harmless from, against and in
respect of any and all loss, liability, expense (including, without limitation,
reasonable expenses of investigation and reasonable attorney's fees and expenses
in connection with any action, suit or proceeding brought against a Seller
Indemnified Party) or Damage suffered or incurred by a Seller Indemnified Party
("Seller Losses") by reason of (i) any material breach of a representation or
warranty by Purchaser contained herein or in any certificate, list, Exhibit or
Schedule or other document delivered to Seller pursuant to Section 10.3 of this
Agreement; (ii) failure of Purchaser to fulfill or perform any covenant,
agreement or obligation of Purchaser contained herein; (iii) any Assumed
Liability; (iv) any Withdrawal Liability, but subject to the limitations set
forth in Section 7.2; or (v) Purchaser's operation of the Business subsequent to
the Closing Date.
13.3 DEFINITIONS. As used in this Article 13, the term "Damages" means all
actual damages suffered or incurred by a Purchaser Indemnified Party or a Seller
Indemnified Party (as applicable) including, without limitation, all
compensatory damages, but excluding any consequential or punitive damages.
13.4 THIRD PARTY CLAIMS.
(a) In order for any Purchaser Indemnified Party or any Seller
Indemnified Party to be entitled to any indemnification provided for under
this Article 13 in respect of, arising out of or involving a claim made by
any person other than Seller or Purchaser or their respective successors,
assigns or affiliates (a "Third Party Claim") against such indemnified
party, such indemnified party must notify the indemnifying party in writing
of the Third Party Claim promptly after receipt by such indemnified party
of written notice of the Third Party Claim; provided, however, that failure
of any indemnified party to give notice as provided in this Section 13.4
shall not relieve an indemnifying party of its obligations hereunder except
to the extent that the indemnifying party actually has been prejudiced by
such failure to give notice. Thereafter, the indemnified party shall
deliver to the indemnifying party, as promptly as practicable and, in any
event, within ten (10) days after such indemnified party's receipt thereof,
copies of all notices and other documents relating to the Third Party
Claim.
(b) If a Third Party Claim is made against an indemnified party, the
indemnifying party shall be entitled to participate in the defense thereof
and, if it so chooses within thirty (30) days after receipt of notice of
the Third Party Claim, to assume or cause the assumption of the defense
thereof with counsel selected by the indemnifying
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party (provided such counsel is not reasonably objected to by the
indemnified party). Should the indemnifying party elect to assume or cause
the assumption of the defense of a Third Party Claim, the indemnifying
party will not be liable to the indemnified party for any legal expenses
subsequently incurred by the indemnified party in connection with the
defense thereof unless the indemnifying party has agreed in writing to pay
such fees and expenses or, in the reasonable judgment of the indemnified
party, a conflict of interest between the indemnified party and the
indemnifying party exists with respect to such claim. If the indemnifying
party elects so to participate in or assume the defense of a Third Party
Claim, the indemnified party will fully cooperate with the indemnifying
party in connection with such defense.
(c) If the indemnifying party assumes the defense of a Third Party
Claim, then, as long as the indemnifying party is reasonably contesting
such claim in good faith, the indemnified party shall not admit any
liability with respect to, or settle, compromise or discharge, any Third
Party Claim without the indemnifying party's prior written consent, and the
indemnified party will agree to any settlement, compromise or discharge of
the Third Party Claim the indemnifying party may recommend which releases
the indemnified party unconditionally and completely in connection with
such Third Party Claim and which does not materially adversely affect the
indemnified party. Notwithstanding the foregoing, the indemnified party
shall have the right to pay or settle any such claim, provided that in such
event it shall waive any right to indemnity therefor by the indemnifying
party. If the indemnifying party assumes the defense of a Third Party
Claim, then the indemnifying party shall not, without the indemnified
party's prior written consent, settle or compromise any Third Party Claim
or consent to the entry of any judgment which does not include as an
unconditional term thereof the delivery by the claimant or plaintiff to the
indemnified party of a written release from all liability in respect of
such Third Party Claim.
(d) If the indemnifying party does not assume the defense of any such
Third Party Claim, the indemnified party may defend the same in such manner
as it may reasonably deem appropriate, including, but not limited to,
settling such claim or litigation after giving five (5) business days'
prior written notice to the indemnifying party setting forth the terms and
conditions of settlement.
(e) The indemnifying party shall in no case settle or compromise any
Third Party Claim or consent to the entry of any judgment, in either case
for other than solely money damages, without the consent of the indemnified
party if such settlement, compromise or judgment would adversely affect the
rights of the indemnified party in any continuing manner.
(f) The amount that an indemnifying party shall be obligated to
reimburse an indemnified party in connection with any Third Party Claim
shall be reduced by the amount of the insurance benefits, if any, obtained
by the indemnified party by reason of the matter giving rise to such claim.
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13.5 DEDUCTIBLE FOR SELLER'S OBLIGATIONS; MAXIMUM LIABILITY. Subject to
adjustment as provided in Section 3.3 hereof, Seller's obligations under
Section 13.1 shall not be payable by Seller unless and until the amount
thereof exceeds $3,000,000 Dollars ($3,000,000) (the "Deductible") in the
aggregate and thereafter only to the extent of such excess, PROVIDED HOWEVER
that there shall be no Deductible and Seller shall be liable in full with
respect to Purchaser Losses as a result of (a) intentional misrepresentation
(b) fraud, (c) any breach of Seller's representation in Section 4.12(a)(iv)
and 4.10(d) hereof, (d) any Withdrawal Liability in excess of the limitations
set forth in Section 7.2(d); (e) Seller's failure to comply with Section
7.2(b); and (e) the Excluded Liabilities. In no event shall the liability of
Seller under Section 13.1 exceed One Hundred Forty-Five Million Dollars
($145,000,000).
13.6 CLAIMS PERIOD. For purposes of this Agreement, a "Claims Period"
shall be the period during which a claim for indemnification may be asserted
under this Agreement by an indemnified party, which period shall (i) begin on
the earlier of the Closing Date or the date of any termination of this Agreement
pursuant to Article 11, and (ii) terminate as follows:
(a) with respect to Purchaser Losses arising under Section 13.1(i) or
13.1(ii), the Claims Period shall terminate on the second anniversary of
the Closing Date;
(b) with respect to Purchaser Losses arising under Section 13.1(iii)
or (iv) or as a result of intentional misrepresentation or fraud by Seller,
the Claims Period shall remain open indefinitely;
(c) with respect to Seller Losses arising under Section 13.2 (i) or
13.2(ii), the Claims Period shall terminate on the second anniversary of
the Closing Date;
(d) with respect to Seller Losses arising under Section 13.2 (iii),
13.2 (iv) or 13.2 (v) or as a result of intentional misrepresentation or
fraud by Purchaser, the Claims Period shall remain open indefinitely.
Any claims for indemnification pursuant to this Article 13 must be made in
writing by the indemnified party to the indemnifying party on or prior to the
termination of the applicable Claims Period. All claims for indemnification for
which proper notification of the indemnifying party shall have been made by the
indemnified party prior to the close of business on the last day of the
applicable Claims Period shall continue to survive and shall remain a basis for
indemnity hereunder until such claim is finally resolved or disposed of in
accordance with the terms hereof.
ARTICLE 14
MISCELLANEOUS
14.1 PUBLICITY. Seller and Purchaser agree that they will not make any
press releases or other announcements prior to or at the time of Closing with
respect to the transactions
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contemplated hereby, except as required by applicable law, without the prior
approval of the other party, which approval will not be unreasonably withheld.
14.2 BULK SALES LAWS. Purchaser hereby waives compliance by Seller with
the provisions of any bulk sales or similar transfer laws, to the extent
applicable.
14.3 BEST EFFORTS. Each party hereto agrees to use best efforts to cause
the conditions to its obligations hereunder to be satisfied on or prior to the
Closing Date and otherwise to consummate the transactions contemplated by the
Agreement.
14.4 FURTHER ACTS AND ASSURANCES. Seller shall, at any time and from time
to time at and after the Closing, upon request of Purchaser and without
additional consideration, take any and all steps reasonably necessary to place
Purchaser in possession and operating control of the Purchased Assets, and
Seller will do, execute, acknowledge and deliver, or will cause to be done,
executed, acknowledged and delivered, all such further acts, deeds, assignments,
transfers, conveyances and assurances as may be reasonably required for (i) the
more effective transferring and confirming to Purchaser or for reducing to its
possession, any or all of the Purchased Assets or (ii) in connection with any
Linen Plant Sale, including by way of illustration, the execution of any
document evidencing any sublicense under Section 1.3, the assignment of
Purchaser's rights under Section 6.5 hereof or any assignment of the Transition
Services Agreement as contemplated under Section 6.10. Purchaser shall, at any
time and from time to time at and after the Closing, upon request of Seller and
without additional consideration, take any and all steps reasonably necessary to
evidence completely the assumption of the Assumed Liabilities and the Withdrawal
Liability, and Purchaser will do, execute, acknowledge and deliver, or will
cause to be done, executed, acknowledged and delivered, all such further
assumption agreements and documents as may be reasonably necessary or desirable
to evidence more effectively the assumption of the Assumed Liabilities and the
Withdrawal Liability by Purchaser. In addition to the foregoing, Seller shall,
without additional consideration, provide access to information and such other
reasonable assistance and cooperation as will assist Purchaser in connection
with any Linen Plant Sale.
Purchaser shall, at any time and from time to time, at and after the
Closing, upon request of Seller and without additional consideration execute and
deliver all such documents as may be reasonably necessary to terminate Seller's
liability for any unemployment compensation payments required to be made to any
state (or a fund maintained by it) after the Closing Date with respect to any
Hired Employees.
14.5 NOTICES. Any notice or other document to be given hereunder by any
party hereto to any other party hereto shall be in writing and delivered by
courier or by facsimile transmission, receipt confirmed, or sent by any express
mail service, postage or fees prepaid,
If to Seller:
National Service Industries, Inc.
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NSI Center
1420 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attention: Brock Hattox
Executive Vice President and Chief Financial Officer
Facsimile No: (404) 853-1272
With a copy to:
National Service Industries, Inc.
NSI Center
1420 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attention: Mr. David Levy
Executive Vice President, Administration and Counsel
Facsimile No: (404) 853-1015
If to Purchaser:
G&K Services, Inc.
5995 Opus Parkway, Suite 500
Minnetonka, Minnesota 55343
Attention: Mr. William Hope,
President and Chief Executive Officer
Facsimile No: (612) 912-5900
With a copy to:
Maslon Edelman Borman & Brand,
a Professional Limited Liability Partnership
3300 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Attention: Neil I. Sell, Esq.
Facsimile No: (612) 672-8397
or at such other address or number for a party as shall be specified by like
notice. Any notice which is delivered in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party or its agent.
14.6 CONSTRUCTION. This Agreement shall be construed in accordance with
and governed by the laws of the State of Minnesota. No provision of this
Agreement shall be construed against or interpreted to the disadvantage of any
party hereto by any court or other
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governmental or judicial authority or by any board of arbitrators by reason of
such party or its counsel having or being deemed to have structured or drafted
such provision. All references in this Agreement to Article(s), Section(s),
Schedule(s) or Exhibit(s) shall refer to Article(s), Section(s), Schedule(s) or
Exhibit(s) of this Agreement. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties, and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
of the provisions of this Agreement.
14.7 KNOWLEDGE. Whenever used herein, the term "knowledge" with respect
to any subject matter shall mean the actual knowledge of any one of the
persons identified on Schedule 14.7, after due and diligent inquiry which
included (i) appropriate review of Seller or an Affiliate's physical
operation and records and (ii) making inquiry of any employees who had or
would have been likely to have information with respect to such subject
matter, including, without limitation, inquiry of regional vice presidents of
Seller and each branch manager of any Acquired Facility.
14.8 ATTACHMENTS. Every Schedule and Exhibit referred to in this Agreement
is incorporated in this Agreement by this reference. List 1 immediately
following the table of contents hereto contains a list of such Schedules and
Exhibits.
14.9 DISPUTE RESOLUTION. Any dispute among the parties hereto before the
Closing, other than any dispute arising under Sections 3.3 (which shall be
resolved in accordance with Section 3.6), may be resolved by application to any
court of competent jurisdiction. Any dispute among the parties hereto arising on
or after the Closing Date, other than any dispute arising under Sections 3.3,
3.5 and 3.7 which shall be resolved in accordance with Section 3.6, shall be
resolved in accordance with the arbitration provisions of this Section 14.9.
(a) The parties shall attempt in good faith to resolve any dispute
arising out of or relating to this Agreement, the breach, termination or
validity thereof promptly by negotiation between executives who have
authority to settle the controversy. Any party may give the other written
notice that a dispute exists (a "Notice of Dispute"). The Notice of
Dispute shall include a statement of such party's position. Within twenty
(20) business days of the delivery of the Notice of Dispute, executives of
both parties shall meet at a mutually acceptable time and place, and
thereafter as long as they both reasonably deem necessary, to exchange
relevant information and attempt to resolve the dispute. If the matter has
not been resolved within 45 days of the disputing party's Notice of
Dispute, or if the parties fail to meet within 20 days, either party may
initiate arbitration of the controversy or claim as provided hereinafter.
If a negotiator intends to be accompanied at a meeting by an attorney,
the other negotiator shall be given at least three working days' notice of
such intention and may also be accompanied by an attorney. All
negotiations pursuant to this clause are confidential
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and shall be treated as compromise and settlement negotiations for purposes
of the Federal Rules of Evidence and state rules of evidence.
(b) Any controversy or claim arising out of or relating to this
Agreement, the breach, termination or validity thereof, or the transactions
contemplated herein, if not settled by negotiation as provided in paragraph
(a) of this Section 14.9, shall be settled by arbitration in Chicago,
Illinois, in accordance with the CPR Rules for Non-Administered Arbitration
of Business Disputes, by three arbitrators. Each party shall choose one
arbitrator and the two arbitrators so chosen shall choose a third
arbitrator who must be a retired judge of a state or federal court of the
United States. The arbitrators shall be appointed as provided by CPR
Rule 5, Selection of Arbitrators by the parties. The arbitration procedure
shall be governed by the United States Arbitration Act, 9 U.S.C. Section
1-16, and the award rendered by the arbitrators shall be final and binding
on the parties and may be entered in any court having jurisdiction thereof.
(c) Each party shall have discovery rights as provided by the Federal
Rules of Civil Procedure within the limits imposed by the arbitrators;
PROVIDED, HOWEVER, that all such discovery shall be commenced and concluded
within ninety (90) days of the selection of the third arbitrator.
(d) It is the intent of the parties that any arbitration shall be
concluded as quickly as reasonably practicable. Unless the parties
otherwise agree, once commenced, the hearing on the disputed matters shall
be held four days a week until concluded, with each hearing date to begin
at 9:00 a.m. and to conclude at 5:00 p.m. The arbitrator shall use all
reasonable efforts to issue the final award or awards within a period of
five (5) business days after closure of the proceedings. Failure of the
arbitrator to meet the time limits of this Section 14.9(d) shall not be a
basis for challenging the award.
(e) The arbitrators shall instruct the non-prevailing parties to pay
all costs of the proceedings, including the fees and expenses of the
arbitrators and the reasonable attorneys' fees and expenses of the
prevailing parties. If the arbitrators determine that there is not a
prevailing party, each party shall be instructed to bear its own costs and
to pay one-half of the fees and expenses of the arbitrators.
14.10 NO RELIANCE. Except for the parties hereto and their assignees
permitted under Section 14.13:
(a) no third party is entitled to rely on any of the representations,
warranties and agreements of Seller contained in this Agreement;
(b) Seller assumes no liability to any third party because of any
reliance on the representations, warranties and agreements of any of the
parties contained in this Agreement; and
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(c) no other person or entity shall acquire any legal or equitable
rights or remedies under this Agreement.
14.11 SATURDAYS, SUNDAYS AND LEGAL HOLIDAYS. If the time period by
which any acts or payments required hereunder must be performed or paid expires
on a Saturday, Sunday or legal holiday, then such time period shall be
automatically extended to the close of business on the next regularly scheduled
business day.
14.12 CONFIDENTIALITY. The provisions of that certain Confidentiality
Agreement between Seller and Purchaser dated January 15, 1997, shall remain in
full force and effect; provided, however, that upon consummation of the Closing,
the Confidentiality Agreement shall be terminated.
14.13 PARTIES BOUND BY AGREEMENT. The terms, conditions and
obligations of this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and assigns. Except as
hereinafter provided, without the prior written consent of the other party, no
party hereto may assign such party's rights, duties or obligations hereunder or
any part thereof to any other person or entity prior to Closing, except that
Purchaser may assign any or all of its rights, duties or obligations hereunder
or any part thereof to any wholly owned subsidiary, including without
limitation, G&K Services Co. Notwithstanding the foregoing, Purchaser shall
continue to be primarily responsible for the performance of any obligations
under this Agreement irrespective of any such permitted assignment.
14.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
14.15 HEADINGS. The headings of the Articles and Sections of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
14.16 MODIFICATION AND WAIVER. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party which is entitled to
the benefits thereof. No waiver of any of the provisions of this Agreement
shall be deemed to or shall constitute a waiver of any other provision hereof.
No delay or failure on the part of any party hereto to exercise any right, power
or privilege hereunder shall operate as a waiver thereof; nor shall any waiver
on the part of any party hereto of any right, power or privilege hereunder
operate as a waiver of any other right, power or privilege hereunder; nor shall
any single or partial exercise of any right, power, or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder.
14.17 SEVERABILITY. Any provision hereof which is prohibited or
unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or
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unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction will not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by law, the parties hereto waive any provision of law which renders
any such provision prohibited or unenforceable in any respect.
14.18 AGREEMENT AS TO CERTAIN MATTERS. The parties understand and
agree that, for purposes of the attorney-client privilege and attorney work
product doctrine, the parties have a common legal interest in the review of the
proposed transaction by the Department of Justice and in matters in which Seller
is involved in litigation or in which Seller anticipates litigation with a third
party. Specifically, each party expects that there will be (A) communications
to or discussions with or under the direction of the attorneys of the other
party in connection with the preparation of material to be submitted to the
Department of Justice or other governmental agency in response to any request
for information by said Department or other governmental agency , which
communications or discussions are for the purpose of obtaining legal advice in
connection therewith, and (B) communications between Seller's attorneys and
Purchaser or its attorneys, concerning matters in which Seller is involved in
litigation or in which Seller anticipates litigation with a third party, in
connection with due diligence investigations conducted by Purchaser's attorneys.
No such activity shall constitute a waiver of the attorney-client privilege or
attorney work product doctrine with respect to information disclosed thereby,
and such information shall not be disclosed to any third party unless authorized
by the parties hereto or required by law.
14.19 ACCESS TO RECORDS. For a period of six (6) years after the
Closing Date, Seller and its attorneys, accountants and representatives shall,
upon reasonable advance notice to Purchaser during normal business hours and
without disruption of the business of Purchaser, have reasonable access to all
books, accounts, records, documents and information relating to Seller for any
periods prior to the Closing Date in the possession or custody of Purchaser (or
Purchaser's agents) for the purpose of examining and making copies of all or any
portion of such properties relating to Seller. In addition, Seller and its
attorneys and representatives shall, upon reasonable advance notice to
Purchaser, during normal business hours and without disruption to the business
of Purchaser, have reasonable access to the Hired Employees with respect to the
defense of any on-going litigation or future claim against Seller. A
representative of Purchaser may be present at all times during such access and
investigation by Seller or its attorneys, accountants and representatives.
14.20 ENTIRE AGREEMENT. This Agreement and the Schedules and Exhibits
hereto, together with the documents and instruments delivered pursuant hereto,
constitute the entire agreement between the parties hereto pertaining to the
subject matter hereof and supersede all prior and contemporaneous agreements,
understandings, negotiations and discussions, whether written or oral, of the
parties hereto; provided, however, that this provision is not intended to
abrogate any other written agreement between the parties executed with or after
this Agreement or any written agreement pertaining to another subject matter.
No supplement, modification or
59
<PAGE>
waiver of the terms or conditions of this Agreement shall be binding unless
executed in writing by authorized representatives of the parties hereto.
14.21 NO EXPRESS OR IMPLIED WARRANTIES. Except for the express
representations or warranties set forth in this Agreement, Purchaser
acknowledges and agrees that the Purchased Assets are being conveyed to
Purchaser hereunder "AS IS, WHERE IS AND WITH ALL FAULTS," without any other
representation or warranty by Seller.
[THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
60
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered, all on and as of the date first written above.
NATIONAL SERVICE INDUSTRIES, INC.
A DELAWARE CORPORATION
By: s/ Brock Hattox
-------------------------------
Brock Hattox
Executive Vice President and
Chief Financial Officer
NATIONAL SERVICE INDUSTRIES, INC.
A GEORGIA CORPORATION
By: s/ Brock Hattox
-------------------------------
Brock Hattox
Executive Vice President and
Chief Financial Officer
NSI ENTERPRISES, INC.
A CALIFORNIA CORPORATION
By: s/ Brock Hattox
-------------------------------
Brock Hattox
Executive Vice President and
Chief Financial Officer
G&K SERVICES, INC.
A MINNESOTA CORPORATION
By: s/ William Hope
---------------------------
Name: William Hope
-------------------------
Title: President
------------------------
<PAGE>
As of July 14, 1997
National Service Industries, Inc.
NSI Center
1420 Peachtree Street, NE
Atlanta, GA 30309
Gentlemen:
Reference is hereby made to the Asset Purchase Agreement by and among
National Service Industries, Inc., a Delaware corporation, National Service
Industries, Inc., a Georgia corporation, NSI Enterprises, Inc., a California
corporation and G&K Services, Inc., dated as of May 30, 1997 (the "Agreement").
Capitalized terms used in this letter without definition shall have the meanings
set forth in the Agreement. The parties hereby agree as follows:
1. REDUCTION OF BASE PRICE. Section 3.1 of the Agreement is hereby
amended to provide that the Base Price shall be reduced from $263,500,000 to
$262,850,000.
2. CERTAIN OBSOLETE INVENTORY. New Inventory in excess of a six (6)
months supply, as measured by the Business' usage history, may be shipped out of
any Acquired Facility by Seller on or prior to the Closing Date to a Seller
distribution center, provided that such New Inventory quantities will not exceed
the quantities identified in Schedule 4.23(c) as obsolete. Purchaser or its
assignee shall have all rights until August 15, 1997 to purchase such New
Inventory as are contemplated by Section 3.4 of the Agreement. Seller will keep
a written record of such obsolete New Inventory and make such record available
to Purchaser for review.
3. CONSENT FOR LAKELAND BRANCH #4710. Seller shall have until July 31,
1997 to obtain the consent of the landlord with respect to assignment of the
Real Property Lease covering the Acquired Facility identified on Exhibit A as
Lakeland Branch #4710 and that assignment of such Real Property Lease under the
Agreement is conditioned on receipt of such consent. In the event Seller does
not obtain the landlord's consent with respect to assignment of such Real
Property Lease by July 31, 1997, then unless otherwise agreed to in writing by
Purchaser in its sole discretion, Seller shall be required to exercise promptly
its purchase option with respect thereto and thereafter, promptly assign its
purchase rights to Purchaser or its designated assignee, as required by Section
6.3(e) of the Agreement.
4. ASSIGNABLE SPECIAL INDUSTRIAL ACCOUNTS. Notwithstanding anything in
the Asset Purchase Agreement to the contrary, all revenue attributed to those
Assignable Special Industrial Accounts or portions thereof to be subcontracted
to Seller by Purchaser pursuant to Section 1.5(c)(ii)(2) of the Purchase
Agreement will be included as part of the Average Weekly
<PAGE>
Industrial Revenue. The subcontract agreement which Seller will enter into with
Purchaser, pursuant to which Seller will provide service to such Assignable
Special Industrial Accounts or portions thereof, will be on substantially the
same terms as are set forth in the Subcontract Agreement attached to the
Purchase Agreement as Exhibit "B", except that the respective roles of Seller
and Purchaser will be reversed and except that Purchaser will have the right to
terminate such subcontract agreement with respect to any such Assignable Special
Industrial Account or portion thereof upon thirty (30) days' prior written
notice to Seller.
5. CLARIFICATION OF SECTION 7.2. Section 7.2 of the Agreement shall be
clarified as follows:
(a) Buyer shall not be required to hire any Employee of the Business
if as a result of such hire Buyer would be in violation of law.
(b) The words "salaried, exempt employees of the Business" as set
forth in Section 7.2(c) shall not include any employee who is
paid in whole or in part on a commission basis (with the
exception of the following employees: regional sales managers;
managers of the service centers located in Utica, NY, Syracuse,
NY, Elmira, NY, Oneonta, NY, and Schenectady, NY; and the
distribution manager and client relations manager of the service
center located in Utica, NY).
6. WAGES, COMMISSIONS AND BONUSES. All wages, sales commission and
bonuses earned by an Employee of the Business prior to the Closing Date will be
an Excluded Liability, the sole responsibility of Seller, and paid directly by
Seller. In addition any sales commission and bonuses relating to a Covered
Account where service was installed by Seller prior to the Closing Date will be
an Excluded Liability, the sole responsibility of Seller, and paid directly by
Seller, except that such commissions and bonuses payable to route sales
representatives and route drivers shall be paid by Purchaser and reimbursed by
Seller to Purchaser.
7. VACATION DAYS. Any vacation days earned by an Employee of the
Business (not covered by a Collective Bargaining Agreement) which have been
carried over by such Employee from any prior period to such Employee's current
employment period (the "CarryOver Days") shall be an Excluded Liability, the
sole responsibility of Seller, not included in the Accrued Employee Credit, and
paid directly by Seller. All earned/vested, or accrued vacation days of an
Employee of the Business relating to such Employee's current employment period
(excluding any CarryOver Days) shall be included in the Accrued Employee Credit.
8. VESTED SICK PAY. All vested sick pay for Employees of the Business
(not covered by a Collective Bargaining Agreement) shall be an Excluded
Liability, the sole responsibility of Seller, not included in the Accrued
Employee Credit, and paid directly by Seller.
9. NO HIRING OR FIRING FREEZE. Seller confirms that since May 30, 1997
Seller has not authorized a hiring or firing freeze with respect to Employees of
the Business.
<PAGE>
10. NON-EXCLUSIVE LICENSE. Section 1.3(b) of the Agreement shall be
amended to add the following sentence: "For the one (1) year period following
the Closing Date, Seller hereby grants Purchaser a non-exclusive license and
right to operate the Business under the names used by Seller to operate the
Business as of the Closing Date and to use the marks, names, logos or other
rights of Seller or an Affiliate in a manner consistent with and to the extent
such marks, names, logos or other rights were used within the last twelve months
in the Business conducted by the Acquired Facilities identified on Exhibit "A"
to the Agreement as Portland #133, Utica #107, Youngstown #3910, Fort Myers
#196, Houston #461, Austin #167 and Corpus Christi #424."
11. RICHMOND VOLUME. The definition of Covered Accounts shall also
include Richmond Volume which shall be defined as all of the industrial volume
which on the Closing Date is delivered out of Seller's facility known as
Richmond #268. Section 3.3(d)(iv) of the Agreement shall be amended to add the
words "and Richmond Volume" immediately after the words "Jacksonville Volume" in
such section. The first sentence of Section 4.16 shall be amended to add the
words "in addition to the Richmond Volume" immediately after the words "as of
the Closing Date" in such sentence.
<PAGE>
Please indicate your acknowledgment and agreement with the foregoing in the
space provided below.
Yours truly,
G&K SERVICES, INC.
/s/ William Hope
William Hope, President and
Chief Executive Officer
Acknowledged and Agreed to:
NATIONAL SERVICE INDUSTRIES, INC.
a Delaware corporation
By: /s/ B. Hattox
--------------------------
Its: E.V.P.
--------------------------
NATIONAL SERVICE INDUSTRIES, INC.
a Georgia corporation
By: /s/ B. Hattox
--------------------------
Its: E.V.P.
-------------------------
NSI ENTERPRISES, INC.
a California corporation
By: /s/ B. Hattox
--------------------------
Its: E.V.P.
--------------------------
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
dated as of July 14, 1997
among
G&K SERVICES, INC.,
WORK WEAR CORPORATION OF CANADA LTD.,
as Borrowers,
VARIOUS BANKS,
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
and
NBD BANK
and
FIRST CHICAGO NBD BANK, CANADA
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II US FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.1 Commitment as to US Revolving Facility. . . . . . . . . . . 23
Section 2.2 Commitment as to Term Facility. . . . . . . . . . . . . . . 23
Section 2.3 Procedures for Borrowing Under the US Facilities. . . . . . 23
Section 2.4 Converting US Floating Rate Fundings to Eurodollar
Fundings; Procedures. . . . . . . . . . . . . . . . . 24
Section 2.5 Procedures at End of a US Interest Period . . . . . . . . . 24
Section 2.6 Setting and Notice of Rates . . . . . . . . . . . . . . . . 25
Section 2.7 Commitment to Issue Letters of Credit . . . . . . . . . . . 25
Section 3.5 Pro Rata Treatment - Canadian Banks . . . . . . . . . . . . 30
Section 2.9 US Revolving Advances and Term Advances Denominated
in US Dollars . . . . . . . . . . . . . . . . . . . . 30
Section 2.10 Guaranties . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 2.11 Exculpation of Canadian G&K Enterprises. . . . . . . . . . 31
ARTICLE III CANADIAN FACILITY. . . . . . . . . . . . . . . . . . . . . . . 31
Section 3.1 Commitment as to Canadian Revolving Facility. . . . . . . . 31
Section 3.2 Procedures for Borrowing Under the Canadian
Revolving Facility. . . . . . . . . . . . . . . . . . 31
Section 3.3 Converting Canadian Floating Rate Fundings to
Acceptances; Procedures . . . . . . . . . . . . . . . 32
Section 3.4 Procedures at End of a Canadian Interest Period . . . . . . 32
Section 3.5 Pro Rata Treatment - Canadian Banks . . . . . . . . . . . . 33
Section 3.6 Bankers' Acceptances. . . . . . . . . . . . . . . . . . . . 33
Section 3.7 Setting and Notice of BA Purchase Price . . . . . . . . . . 35
Section 3.8 Canadian Revolving Advances and Drafts Denominated
in Canadian Dollars . . . . . . . . . . . . . . . . . 35
Section 3.9 Restrictions on Conversion From Acceptances to
Canadian Revolving Advances . . . . . . . . . . . . . 35
Section 3.10 Guaranty by G&K Enterprises. . . . . . . . . . . . . . . . 35
ARTICLE IV NOTES; INTEREST RATES; LOAN PERIODS; COMPUTATION OF
INTEREST AND FEES . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.1 Notes; Amortization . . . . . . . . . . . . . . . . . . . . 36
Section 4.2 Interest on Notes; Default Rate . . . . . . . . . . . . . . 38
Section 4.3 Adjustment of Margins . . . . . . . . . . . . . . . . . . . 39
Section 4.4 Canadian Interest Act . . . . . . . . . . . . . . . . . . . 40
Section 4.5 Obligation to Repay Advances; Representations . . . . . . . 40
Section 4.6 Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.7 Interest Due Dates. . . . . . . . . . . . . . . . . . . . . 41
Section 4.8 Computation of Interest and Fees. . . . . . . . . . . . . . 41
Section 4.9 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 4.10 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . 42
<PAGE>
Section 4.11 Voluntary Reduction or Termination of the
Commitments; Prepayments. . . . . . . . . . . . . . . 42
Section 4.12 Payments . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 4.13 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 4.14 Increased Costs; Capital Adequacy; Funding Exceptions. . . 47
Section 4.15 Funding Losses . . . . . . . . . . . . . . . . . . . . . . 50
Section 4.16 Right of Banks to Fund through Other Offices . . . . . . . 50
Section 4.17 Discretion of Banks as to Manner of Funding. . . . . . . . 51
Section 4.20 Limitation on Availability of Fixed Rate Fundings . . . . 52
ARTICLE V CONDITIONS OF LENDING. . . . . . . . . . . . . . . . . . . . . . 52
Section 5.1 Conditions Precedent to the Initial Advances. . . . . . . . 52
Section 5.2 Conditions Precedent to All Advances. . . . . . . . . . . . 55
ARTICLE VI REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . 55
Section 6.1 Corporate Existence and Power; Names; Chief
Executive Offices . . . . . . . . . . . . . . . . . . 55
Section 6.2 Authorization for Borrowings and Letters of Credit;
No Conflict as to Law or Agreements . . . . . . . . . 55
Section 6.3 Legal Agreements. . . . . . . . . . . . . . . . . . . . . . 56
Section 6.4 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . 56
Section 6.5 Financial Condition; No Adverse Change. . . . . . . . . . . 56
Section 6.6 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 6.7 Regulation U. . . . . . . . . . . . . . . . . . . . . . . . 57
Section 6.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 6.9 Titles and Liens. . . . . . . . . . . . . . . . . . . . . . 57
Section 6.10 Employee Benefit Plans . . . . . . . . . . . . . . . . . . 57
Section 6.11 Default. . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 6.12 Environmental Compliance . . . . . . . . . . . . . . . . . 59
Section 6.13 Submissions to Banks . . . . . . . . . . . . . . . . . . . 59
Section 6.14 Public Utility Holding Company Act; Investment
Company Act . . . . . . . . . . . . . . . . . . . . . 60
Section 6.15 Asset Purchase Documents. . . . . . . . . . . . . . . . . 60
ARTICLE VII AFFIRMATIVE COVENANTS OF THEBORROWERS. . . . . . . . . . . . . 61
Section 7.1 Reporting Requirements. . . . . . . . . . . . . . . . . . . 61
Section 7.2 Books and Records; Inspection and Examination . . . . . . . 64
Section 7.3 Compliance with Laws. . . . . . . . . . . . . . . . . . . . 64
Section 7.4 Payment of Taxes and Other Claims . . . . . . . . . . . . . 64
Section 7.5 Maintenance of Properties . . . . . . . . . . . . . . . . . 65
Section 7.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 7.7 Preservation of Corporate Existence . . . . . . . . . . . . 65
Section 7.8 Minimum EBITDA. . . . . . . . . . . . . . . . . . . . . . . 65
Section 7.9 Minimum Debt Service Coverage Ratio . . . . . . . . . . . . 66
Section 7.10 Minimum Stockholders' Equity . . . . . . . . . . . . . . . 66
Section 7.11 Maximum Leverage Ratio . . . . . . . . . . . . . . . . . . 67
Section 7.12 Interest Rate Protection . . . . . . . . . . . . . . . . . 67
-ii-
<PAGE>
ARTICLE VIII NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . 67
Section 8.1 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 8.2 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . 68
Section 8.3 Guaranties. . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 8.4 Investments . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 8.6 Sale or Transfer of Assets; Suspension of
Business Operations . . . . . . . . . . . . . . . . . 71
Section 8.7 Merger and Consolidation; Change of Control . . . . . . . . 71
Section 8.8 Sale and Leaseback. . . . . . . . . . . . . . . . . . . . . 72
Section 8.9 Restrictions on Nature of Business. . . . . . . . . . . . . 72
Section 8.10 Accounting . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 8.11 Hazardous Substances . . . . . . . . . . . . . . . . . . . 72
Section 8.12 Capital Expenditures . . . . . . . . . . . . . . . . . . . 73
Section 8.13 Rental Payments. . . . . . . . . . . . . . . . . . . . . . 73
ARTICLE IX EVENTS OF DEFAULT; RIGHTS AND REMEDIES. . . . . . . . . . . . . 73
Section 9.1 Events of Default . . . . . . . . . . . . . . . . . . . . . 73
Section 9.2 Rights and Remedies . . . . . . . . . . . . . . . . . . . . 75
ARTICLE X AGREEMENT AMONG BANKS AND AGENTS . . . . . . . . . . . . . . . . 76
Section 10.1 Authorization; Powers; Agent for Collateral Purposes . . . 76
Section 10.2 Actions on Default; Application of Proceeds. . . . . . . . 77
Section 10.3 Exculpation. . . . . . . . . . . . . . . . . . . . . . . . 78
Section 10.4 Use of the Term "Agent". . . . . . . . . . . . . . . . . . 79
Section 10.5 Reimbursement for Costs and Expenses . . . . . . . . . . . 79
Section 10.6 Payments Received Directly by Banks. . . . . . . . . . . . 79
Section 10.7 Indemnification. . . . . . . . . . . . . . . . . . . . . . 80
Section 10.8 Agent and Affiliates . . . . . . . . . . . . . . . . . . . 80
Section 10.9 Credit Investigation . . . . . . . . . . . . . . . . . . . 80
Section 10.10 Defaults. . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 10.11 Obligations Several . . . . . . . . . . . . . . . . . . . 81
Section 10.12 Sale or Assignment; Addition of Banks . . . . . . . . . . 81
Section 10.13 Participation . . . . . . . . . . . . . . . . . . . . . . 82
Section 10.14 Borrower not a Beneficiary or Party . . . . . . . . . . . 83
Section 10.15 Withholding Tax Exemption . . . . . . . . . . . . . . . . 83
ARTICLE XI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 11.1 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . 84
Section 11.2 Amendments, Requested Waivers, Etc.. . . . . . . . . . . . 84
Section 11.3 Addresses for Notices, Etc . . . . . . . . . . . . . . . . 84
Section 11.4 Costs and Expenses . . . . . . . . . . . . . . . . . . . . 85
Section 11.5 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 11.6 Execution in Counterparts. . . . . . . . . . . . . . . . . 86
Section 11.7 Integration; Inconsistency . . . . . . . . . . . . . . . . 86
Section 11.8 Agreement Effectiveness. . . . . . . . . . . . . . . . . . 86
-iii-
<PAGE>
Section 11.9 Advice from Independent Counsel. . . . . . . . . . . . . . 86
Section 11.10 Judicial Interpretation . . . . . . . . . . . . . . . . . 86
Section 11.11 Binding Effect; No Assignment by Borrower . . . . . . . . 87
Section 11.12 Severability of Provisions. . . . . . . . . . . . . . . . 87
Section 11.13 Headings. . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 11.14 Governing Law; Jurisdiction; Waiver of Jury Trial . . . . 87
-iv-
<PAGE>
CREDIT AGREEMENT
This Agreement, dated July 14, 1997, is by and among G&K SERVICES,
INC., a Minnesota corporation ("G&K INC."), 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"; in its separate capacity as administrative agent for
certain Banks, 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"; in its separate capacity as administrative
agent for certain Banks, the "Canadian Agent") and each of the banks appearing
on the signature pages hereof, together with such other banks as may from time
to time become a party to this Agreement pursuant to the terms and conditions of
ARTICLE X hereof (collectively the "Banks" and individually each called a
"Bank").
RECITALS
The Borrowers have requested that the Banks extend certain revolving
and term credit facilities to the Borrowers in the aggregate principal amount of
Four Hundred Twenty-Five Million Dollars ($425,000,000) to refinance the
existing credit facilities of the Borrowers and to provide financing for the
acquisition of certain assets pursuant to the asset purchase agreement described
below.
The Borrowers have offered to secure all such credit facilities by
granting to the Banks security interests in certain personal property assets
owned by the Borrowers and by causing certain affiliated companies to grant
security interests and guaranties to the Banks.
The Banks are willing to extend the requested credit facilities to the
Borrowers pursuant to the terms and subject to the conditions set forth in this
Agreement.
ACCORDINGLY, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrowers, the Agents and the Banks hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in the PREAMBLE have the meanings therein
assigned to them;
<PAGE>
(b) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular; and
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP.
"Acceptance" means a Draft duly stamped and accepted by a Canadian
Bank in accordance with SECTIONS 3.1 and 3.6.
"Acceptance Amount" means the sum of (a) the aggregate face amount of
all issued and outstanding Acceptances and (b) amounts paid under an
Acceptance for which the Canadian Banks have neither been reimbursed nor
made an Advance.
"Acceptance Fee" has the meaning specified in SECTION 3.6(d).
"Adjustment Date" has the meaning specified in SECTION 10.12.
"Advance" or "Advances" means a US Revolving Advance or a Canadian
Revolving Advance, individually, or US Revolving Advances and Canadian
Revolving Advances, collectively.
"Agent" or "Agents" means individually, the US Agent or the Canadian
Agent and, collectively, the US Agent and the Canadian Agent.
"Aggregate Revolving Commitment Amount" means the sum of the US
Revolving Commitment Amount and the Canadian Revolving Commitment Amount.
"Agreement" means this Credit Agreement and all exhibits, amendments
and supplements hereto.
"Applicant" has the meaning specified in SECTION 10.12.
"Asset Purchase" means the purchase of certain assets by G&K Inc., G&K
Co. and G&K Linen from the Sellers pursuant to the Asset Purchase
Agreement.
"Asset Purchase Agreement" means the Asset Purchase Agreement dated as
of May 30, 1997, by and among G&K Inc. and the Sellers.
"Asset Purchase Documents" means the Asset Purchase Agreement and all
other documents executed in connection with the Asset Purchase.
"Assets Held for Sale" means the assets identified on SCHEDULE 4.1.
"Assignment Certificate" has the meaning specified in
SECTION 10.12(a).
-2-
<PAGE>
"BA Purchase Price" shall mean the product of (i) the face amount of
Drafts to be sold in connection with a Borrowing and (ii) the applicable
Discount, as determined by the Canadian Agent in accordance with
SECTION 3.2, less the Acceptance Fee retained by each Canadian Bank in
consideration for the acceptance of such Drafts.
"Bank" or "Banks" has the meaning specified in the PREAMBLE.
"Borrower" and "Borrowers" have the meanings specified in the
PREAMBLE.
"Borrowing" means the funding of Advances or the discounting of
Acceptances under a particular Facility concurrently by the Banks of that
Facility.
"Borrowing Date" means the date on which a Borrowing is funded to a
Borrower by the applicable Banks.
"Business Day" means a Canadian Business Day or a US Business Day, as
the context requires.
"Canadian Administrative Fee" has the meaning specified in
SECTION 4.9 (b).
"Canadian Agent" means FCNBD in its separate capacity as
administrative agent to facilitate the funding and repayment of Canadian
Revolving Advances and Acceptances.
"Canadian Bank Rate" means at any time an interest rate per annum
equal to the minimum rate at which the Bank of Canada makes short-term
advances to chartered banks.
"Canadian Banks" means those Banks which, from time to time, shall
have Commitments to make Canadian Revolving Advances to Work Wear.
"Canadian Business Day" means any day other than a Saturday or Sunday
on which Canadian banks are open for business in Toronto, Ontario.
"Canadian Commitment Fee" has the meaning specified in
SECTION 4.9(a)(ii).
"Canadian Dollar" and the sign "C$" means the lawful currency of
Canada.
"Canadian Dollar Equivalent" means for an amount of US Dollars, the
amount in freely-transferable Canadian Dollars that the Canadian Agent may
purchase for the given amount of such US Dollars on the spot market on the
day of determination. Where possible, such spot rate shall be determined by
reference to the Bank of Canada noon exchange rate on the dealing screen as
of 12:00 Noon, Toronto, Ontario time on the day of determination.
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<PAGE>
"Canadian Floating Rate" means an annual rate at all times equal to
the sum of (a) the Canadian Reference Rate and (b) the applicable Margin,
which annual rate shall change when and as the Canadian Reference Rate
changes.
"Canadian Floating Rate Advance" means any Canadian Revolving Advance
which bears interest at a rate determined by reference to the Canadian
Reference Rate.
"Canadian Floating Rate Funding" means any Funding which bears
interest at a rate determined by reference to the Canadian Reference Rate,
including Canadian Floating Rate Advances.
"Canadian G&K Enterprises" means Work Wear, Work Wear-Quebec and NRO
and any other wholly-owned Subsidiary of either Borrower formed after the
Closing Date (i) which has its primary place of business in Canada, (ii)
which executes a Guaranty and, if prior to the Collateral Release Date, a
Guarantor Security Agreement, for the benefit of the Canadian Banks
guarantying the due and prompt payment by Work Wear of all Canadian
Obligations, and (iii) if prior to the Collateral Release Date, whose stock
is pledged to the Canadian Banks pursuant to a Collateral Pledge Agreement.
"Canadian Interest Period" means, relative to any Acceptance, a period
of 30, 60, 90 or 180 days after the date of issuance, rollover or
conversion, as the case may be, as Work Wear may select in its relevant
notice pursuant to SECTIONS 3.2, 3.3 or 3.4; PROVIDED, HOWEVER, that:
(a) no more than five (5) different Canadian Interest Periods
may be outstanding at any one time with respect to a Facility;
(b) if a Canadian Interest Period would otherwise end on a day
which is not a Canadian Business Day, such Canadian Interest Period
shall end on the next following Canadian Business Day (unless such
next following Canadian Business Day is the first Canadian Business
Day of a month, in which case such Canadian Interest Period shall end
on the next preceding Canadian Business Day); and
(c) no Canadian Interest Period may end later than the
applicable Maturity Date for the Canadian Revolving Facility.
"Canadian Obligations" means each and every debt, liability and
obligation of every type and description arising under or in connection
with any of the Loan Documents, or under any interest rate swap or
protection agreement entered into by Work Wear with a Bank in order to
hedge its interest rate risk under the Canadian Revolving Facility, which
Work Wear may now or at any time hereafter owe to a Bank, whether such
debt, liability or obligation now exists or is hereafter created or
incurred, whether it is direct or indirect, due or to become due, absolute
or contingent,
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<PAGE>
primary or secondary, liquidated or unliquidated, or sole, joint, several
or joint and several, and including specifically, but not limited to all
indebtedness, liabilities and obligations of Work Wear arising under or
evidenced by Canadian Revolving Notes and the Acceptances; EXCLUDING
HOWEVER, all US Obligations.
"Canadian Reference Rate" means the rate of interest publicly
announced from time to time by the Canadian Agent as its "base rate" or
"prime rate", or, if the Canadian Agent ceases to announce a rate so
designated, any similar successor rate designated by the Canadian Agent.
The Canadian Reference Rate is not necessarily the most favored rate of the
Canadian Agent and the Canadian Agent may lend to its customers at rates
that are at, above or below the Canadian Reference Rate.
"Canadian Revolving Advance" means a loan of funds by a Canadian Bank
to Work Wear under the Canadian Revolving Facility, including Canadian
Floating Rate Advances made thereunder.
"Canadian Revolving Commitment" means, with respect to each Canadian
Bank, the amount of the Canadian Revolving Commitment set forth opposite
such Canadian Bank's name on the execution pages hereof, or below such
Canadian Bank's signature on an Assignment Certificate executed by such
Canadian Bank, unless such amount is reduced pursuant to SECTION 4.11, in
which event it means the amount to which said amount is reduced pursuant
thereto, or as the context may require, the obligation of such Canadian
Bank to make Canadian Revolving Advances and to create Acceptances, as
contemplated in SECTION 3.1.
"Canadian Revolving Commitment Amount" means the Canadian Dollar
Equivalent on the Closing Date of Twenty-Five Million US Dollars
($25,000,000), being the maximum amount of the Canadian Revolving
Commitments of all Canadian Banks, in the aggregate, to make Canadian
Revolving Advances to Work Wear pursuant to SECTION 3.1, subject to
reduction in accordance with SECTION 4.11; such amount to be adjusted to
the Canadian Dollar Equivalent of Twenty-Five Million US Dollars
($25,000,000) on each anniversary of the Closing Date.
"Canadian Revolving Facility" means the revolving credit facility made
available to Work Wear pursuant to SECTION 3.1.
"Canadian Revolving Facility Outstanding Amount" means, as of the date
of determination, the sum of (a) the aggregate principal amount of all
outstanding Canadian Revolving Advances and (b) the Acceptance Amount.
"Canadian Revolving Note" means a promissory note of Work Wear payable
to a Canadian Bank in the amount of such Canadian Bank's Canadian Revolving
Commitment, in substantially the form of EXHIBIT B (as such promissory note
may be amended, extended or otherwise modified from time to time),
evidencing Work
-5-
<PAGE>
Wear's obligation to pay all indebtedness to such Canadian Bank resulting
from such Canadian Bank's Percentage of each Borrowing under the Canadian
Revolving Facility, and also means each promissory note accepted by such
Canadian Bank from time to time in substitution therefor or in renewal
thereof.
"Capital Adequacy Rule" has the meaning specified in \
SECTION 4.14(b)(ii).
"Capital Adequacy Rule Change" has the meaning specified in
SECTION 4.14(b)(iii).
"Capital Expenditures" of the G&K Group means, with respect to the
applicable Covenant Computation Period, the sum of:
(a) the aggregate amount of all expenditures of the G&K Group for
fixed or capital assets made during such period which, in accordance
with GAAP, would be classified as capital expenditures; and (without
duplication)
(b) the aggregate amount of all Capitalized Lease Liabilities of
the G&K Group incurred during such Covenant Computation Period.
"Capitalized Lease Expenditures" of the G&K Group means, with respect
to the applicable Covenant Computation Period, the total expenditures made
by the G&K Group on account of its Capitalized Lease Liabilities,
determined in accordance with GAAP.
"Capitalized Lease Liabilities" of the G&K Group means, with respect
to the applicable Covenant Computation Period, all monetary obligations of
the G&K Group under any leasing or similar arrangement which, in accordance
with GAAP, would be classified as capitalized leases, and, for purposes of
this Agreement, the amount of such obligations shall be the capitalized
amount thereof, determined in accordance with GAAP.
"Cash Flow Available for Debt Service" of the G&K Group means, with
respect to the applicable Covenant Computation Period, the G&K Group's
EBITDA MINUS Cash Tax Expense, Dividends and Capital Expenditures.
"Cash Tax Expense" of the G&K Group means Tax Expense less any
provision for deferred taxes and PLUS any prepaid Tax Expense.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means all personal property of a G&K Enterprise in which
any Bank has been granted a security interest pursuant to any Security
Document, together
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<PAGE>
with all substitutions and replacements for, products of and proceeds from
any of the foregoing.
"Collateral Pledge Agreements" means (a) the Collateral Pledge
Agreement of even date herewith by G&K Inc., granting the Banks a security
interest in (i) all stock of G&K Inc.'s presently existing Subsidiaries
(other than Work Wear, Work Wear-Quebec and NRO) and of any US G&K
Enterprise formed after the Closing Date and owned directly by G&K Inc.,
together with all options to purchase such stock, and (ii) 65% of the
shares of NRO and any Canadian G&K Enterprise formed after the Closing Date
and owned directly by G&K Inc., to secure payment of all Obligations, (b)
the Collateral Pledge Agreement of even date herewith by G&K Co. granting
the Banks a security interest in 65% of the shares of Work Wear to secure
payment of all Obligations and (c) the Collateral Pledge Agreement of even
date herewith by Work Wear, granting the Canadian Banks a security interest
in all stock of Work Wear-Quebec and of any Canadian G&K Enterprise formed
after the Closing Date and owned directly by Work Wear, together with all
options to purchase such stock, to secure the Canadian Obligations.
"Collateral Release Date" means the date on which all Collateral is
released by the Banks in accordance with SECTION 4.19.
"Commitment" means, with respect to a Bank, such Bank's Revolving
Commitment or Term Commitment, as the context requires.
"Commitment Fee" means the Canadian Commitment Fee or the US
Commitment Fee.
"Covenant Computation Date" means the last day of each Fiscal Quarter
of G&K Inc., commencing on September 30, 1997.
"Covenant Computation Period" means the four (4) consecutive Fiscal
Quarters of the G&K Group immediately preceding and ending on a Covenant
Computation Date; PROVIDED, HOWEVER, that with respect to the Covenant
Computation Dates September 27, 1997, December 27, 1997 and March 28, 1998,
(a) for purposes of computing the Leverage Ratio used in determining Level
I Status, Level II Status, Level III Status, Level IV Status and Level V
Status, the procedures set forth in SECTION 4.3(b) shall apply, (b) for
purposes of computing the Debt Service Coverage Ratio (SECTION 7.9) and
minimum EBITDA (SECTION 7.8), the applicable Covenant Computation Period
shall commence on June 28, 1997 and shall end on such Covenant Computation
Date, without annualization, and (c) for purposes of computing the maximum
Leverage Ratio under SECTION 7.11, the applicable Covenant Computation
Period shall commence on June 28,1997 and shall end on such Covenant
Computation Date, and shall be annualized based on such period.
-7-
<PAGE>
"Current Assets" shall mean the aggregate amount of assets of the G&K
Group which in accordance with GAAP may be properly classified as current
assets, after deducting adequate reserves where proper, but in no event
including any Assets Held for Sale, cash, marketable securities or real
estate.
"Current Liabilities" shall mean (i) all Debt of the G&K Group due on
demand or within one year from the date of determination and (ii) all other
liabilities of the G&K Group (including taxes accrued as estimated) which
in accordance with generally accepted accounting principles, may be
properly classified as current liabilities; EXCLUDING, HOWEVER, (a) the
Revolving Facility Outstanding Amount and (b) all scheduled installments of
principal due on Funded Debt of the G&K Group payable during the period of
determination.
"Debt" of the G&K Group means, without duplication (a) all obligations
of the G&K Group for borrowed money, (b) all obligations of a member of the
G&K Group evidenced by bonds, debentures, notes or other similar
instruments, (c) all obligations of a member of the G&K Group to pay the
deferred purchase price of property or services, except trade accounts
payable arising in the ordinary course of business, (d) all Capitalized
Lease Liabilities of a member of the G&K Group, (e) all debt of others
secured by a lien on any asset of a member of the G&K Group, whether or not
such debt is assumed by a member of the G&K Group, (f) all debt of others
guaranteed by such other Person, (g) all obligations of a member of the G&K
Group to pay a specified purchase price for goods or services, whether or
not delivered or accepted (i.e., take-or-pay and similar obligations), (h)
all obligations of a member of the G&K Group under any interest rate swap
program or any similar agreement, arrangement or undertaking relating to
fluctuations in interest rates and (i) all obligations of a member of the
G&K Group to advance funds to, or purchase assets, property or services
from, any other Person in order to maintain the financial condition of a
member of the G&K Group.
"Debt Service 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 Cash Flow Available for Debt Service to (b) the G&K Group's Debt
Service Requirements.
"Debt Service Requirements" of the G&K Group means, with respect
to the applicable Covenant Computation Period, the aggregate, without
duplication, of (a) Interest Expense of the G&K Group (b) all scheduled
installments of principal on Funded Debt of the G&K Group (including
scheduled principal payments made, or to be made, under the Term Notes and
excluding (i) Excess Cash Flow Payments, (ii) voluntary prepayments of
principal made, or to be made, under the Term Notes and (iii) any principal
payments made under a Revolving Facility), which are due on demand or during
such Covenant Computation Period, and (c) all Capitalized Lease Expenditures
(less Interest Expense included therein) of the G&K Group which are due on
demand or during such Covenant Computation Period.
-8-
<PAGE>
"Default" means an event that, with nothing more than the giving of
notice or passage of time or both, would constitute an Event of Default.
"Default Percentage" means, as to any Bank, a fraction determined as
of the date of any distribution or contribution occurring after an Event of
Default, the numerator of which equals the principal amount of all
Obligations then owed to such Bank (expressed in its U.S. Dollar
Equivalent) on such date and the denominator of which equals the principal
amount of all Outstanding Obligations owed to all Banks (expressed in its
U.S. Dollar Equivalent) on such date.
"Default Rate" shall have the meaning specified in SECTION 4.2(d).
"Default Share" means, as to any Bank, that Bank's appropriate share
of any payments, collections and proceeds received by an Agent after the
occurrence of an Event of Default, as provided in SECTION 10.2.
"Discount" means the bid rate established by the Canadian Agent as the
average of the bid rates quoted by each Canadian Bank for the sale of its
banker's acceptances in an amount and bearing a maturity approximately
equal to such Canadian Bank's Percentage of a proposed Borrowing, rollover
or conversion of Acceptances at approximately 10:00 a.m., Toronto, Ontario
time, on the date of such proposed Borrowing, rollover or conversion of
Acceptances, which bid rate shall be conclusive and binding on Work Wear
absent manifest error.
"Dividends" means dividends, distributions and other payments, however
described, payable by a member of the G&K Group on any shares of any class
of its stock, and the amount of any other redemption, retirement, purchase
or acquisition by a member of the G&K Group of any shares of any class of
its stock; excluding, however, any (i) distributions to the extent
consisting exclusively of shares of stock of G&K Inc. and (ii)
distributions paid by any wholly-owned Subsidiary of a Borrower.
"Dollar" shall mean lawful currency of the United States of America or
Canada, as the context requires.
"Draft" shall mean a draft of Work Wear denominated in Canadian
Dollars, duly executed and delivered to a Canadian Bank in accordance with
SECTION 3.6(a).
"EBITDA" of the G&K Group means, with respect to the applicable
Covenant Computation Period, the G&K Group's Pre-Tax Earnings, PLUS
Interest Expense and Non-Cash Charges.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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<PAGE>
"ERISA Affiliate" means any corporation, trade or business that, along
with a US G&K Enterprise, is a member of a controlled group of
corporations, controlled group of trades or businesses or affiliated
service group, as described in Sections 414(b), 414(c) and 414(m),
respectively, of the Code.
"ERISA Plan" means any of the following employee benefit plans (each
of which shall also be defined terms for purposes of this Agreement), but
only to the extent any of them is subject to regulation under ERISA:
(i) Pension Plan as defined in ERISA Section 3(2);
(ii) Defined Benefit Plan means a Pension Plan of the type defined
in ERISA Section 3(35);
(iii) Multi-Employer Plan means a Pension Plan of the type defined in
ERISA Section 3(37); and
(iv) Welfare Plan as defined in ERISA Section 3(1).
"Environmental Laws" has the meaning specified in SECTION 6.12.
"Eurocurrency Reserve Percentage" means the then applicable percentage
relating to the US Agent (expressed as a decimal) prescribed by the Board
of Governors of the Federal Reserve System (or any successor) for
determining reserve requirements applicable to "Eurocurrency Liabilities"
pursuant to Regulation D or any other then applicable regulation of the
Board of Governors which prescribes reserve requirements applicable to
"Eurocurrency Liabilities" as presently defined in Regulation D.
"Eurodollar Advance" means any Advance which bears interest at a rate
determined by reference to a Eurodollar Rate.
"Eurodollar Base Rate" means, with respect to a US Interest Period,
the rate per annum equal to the rate (rounded up to the nearest
one-sixteenth of one percent (1/16%)) determined by the US Agent in
accordance with SECTION 2.6 to be a rate at which US Dollar deposits are
offered to major banks in the London interbank eurodollar market for funds
to be made available on the first day of such US Interest Period and
maturing at the end of such US Interest Period.
"Eurodollar Funding" means any Funding which bears interest at a rate
determined by reference to the Eurodollar Rate, including Eurodollar
Advances.
"Eurodollar Rate" means, with respect to a US Interest Period, the
rate obtained by adding (a) the applicable Margin to (b) the rate obtained
by dividing (i) the applicable Eurodollar Base Rate by (ii) a percentage
equal to one (1.00) MINUS the
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<PAGE>
applicable percentage (expressed as a decimal) prescribed by the Board of
Governors of the Federal Reserve System (or any successor thereto) for
determining the maximum reserve requirements applicable to eurodollar
fundings (currently referred to as "Eurocurrency Liabilities" in Regulation
D) or any other maximum reserve requirements applicable to a member bank of
the Federal Reserve System with respect to such eurodollar fundings.
"Event of Default" has the meaning specified in SECTION 9.1.
"Excess Cash Flow" means, with respect to the G&K Group, Net Income,
PLUS Non-Cash Charges and deferred taxes, MINUS scheduled maturities of
long term Debt, MINUS Capital Expenditures and PLUS or MINUS, as the case
may be, changes in Working Capital, but in no event to include any gain
from the sale of Assets Held for Sale.
"Excess Cash Flow Payments" has the meaning specified in
SECTION 4.1(e)(i).
"FCNBD" has the meaning specified in the PREAMBLE.
"Facility" means the Canadian Revolving Facility, US Revolving
Facility or the Term Facility, as the context requires.
"Federal Funds Rate" means at any time an interest rate per annum
equal to the weighted average of the rates for overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a Business
Day, the average of the quotations for such day for such transactions
received by the US Agent from three Federal funds brokers of recognized
standing selected by it; it being understood that the Federal Funds Rate
for any day which is not a Business Day shall be the Federal Funds Rate for
the next preceding Business Day.
"Fiscal Quarter" means a 13-week accounting period, each ending on a
Saturday, with one such 13-week period ending on June 28, 1997 and with
each prior 13-week period, and each subsequent 13-week period, constituting
additional Fiscal Quarters hereunder.
"Floating Rate" means the Canadian Floating Rate or the US Floating
Rate, as the context requires.
"Funded Debt" of the G&K Group means, without duplication, all
interest-bearing Debt of the G&K Group, and shall include all
interest-bearing Debt created, assumed or guaranteed by the G&K Group
either directly or indirectly, including obligations secured by liens upon
property of any member of the G&K Group and upon which any member of the
G&K Group customarily pays the interest, and all Capitalized Lease
Liabilities.
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<PAGE>
"Funding" means a designated portion of outstanding principal of a
Facility which bears interest at a rate determined by reference to a
particular Eurodollar Rate or Floating Rate, as the case may be.
"GAAP" means generally accepted accounting principles, as amended from
time to time, applied to the extent possible on a basis consistent with the
accounting practices reflected in the annual financial statements referred
to in SECTION 6.5.
"G&K Co." means G&K Services Co., a Minnesota corporation and a
wholly-owned Subsidiary of G&K Inc.
"G&K Enterprise" means G&K Inc., G&K Co., G&K Linen, Work Wear,
TeamWear, Work Wear-Quebec, NRO, and each other wholly-owned Subsidiary of
any such companies formed after the Closing Date, individually, or all of
them collectively.
"G&K Group" means G&K Inc. and (i) all direct or indirect Subsidiaries
of G&K Inc. that are reported under GAAP on a consolidated basis and (ii)
each G&K Enterprise (including specifically G&K Linen), whether or not
reported on a consolidated basis.
"G&K Inc." has the meaning specified in the PREAMBLE.
"G&K Inc. Security Agreement" means the security agreement of G&K Inc.
of even date herewith pursuant to which G&K Inc. grants the Banks a
security interest in all personal property assets of G&K Inc. to secure
payment of all Obligations.
"G&K Linen" means G&K Services Linen Company, a Minnesota corporation
and a wholly-owned subsidiary of G&K Inc.
"Guaranties" means (i) those certain guaranty agreements of even date
herewith executed and delivered to all Banks by those US G&K Enterprises
existing before the Closing Date guarantying the due and prompt payment by
the Borrowers of all Obligations, (ii) those certain guaranty agreements of
even date herewith executed and delivered to the Canadian Banks by those
Canadian G&K Enterprises (except Work Wear) existing before the Closing
Date guarantying the due and prompt payment by Work Wear of all Canadian
Obligations, and (iii) such other guaranties as may be executed from time
to time by a G&K Enterprise formed after the Closing Date.
"Guarantors" means (i) the US G&K Enterprises with respect to all
Obligations and (ii) the Canadian G&K Enterprises (except Work Wear) with
respect to all Canadian Obligations.
"Guarantor Security Agreement" means the separate security agreement
of a Guarantor pursuant to which that Guarantor grants a security interest
in all its personal
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<PAGE>
property assets to secure payment of either (i) all Obligations or (ii) the
Canadian Obligations, as the case may be.
"Hazardous Substance" means any substance listed or identified in, or
regulated by, any Environmental Laws.
"Indemnities" has the meaning specified in SECTION 11.5.
"Interest Expense" of the G&K Group means, with respect to the
applicable Covenant Computation Period, the total gross interest expense on
all Debt of the G&K Group during such period, and shall in any event
include, without limitation and without duplication, (a) accrued interest
(whether or not paid) on all Debt of the G&K Group and (b) the interest
portion of any Capitalized Lease Expenditure of the G&K Group (determined
in accordance with GAAP).
"Interest Period" means a US Interest Period or a Canadian Interest
Period, as the context requires.
"Letter of Credit" means a Participated Letter of Credit or a
Swingline Letter of Credit, or both, as the context may require.
"Letter of Credit Amount" means the sum of (a) the aggregate face
amount of all issued and outstanding Letters of Credit and (b) amounts
drawn under Letters of Credit for which the US Banks have neither been
reimbursed nor made Advances, including (without limitation) the Swingline
Letter of Credit Amount.
"Letter of Credit Bank" means Norwest, in its separate capacity as
issuer of Letters of Credit pursuant to SECTION 2.7.
"Letter of Credit Fees" has the meaning specified in SECTION 2.7(c).
"Level I Status" means that period (or periods) of time during which
the Leverage Ratio is less than 2.00 to 1.00.
"Level II Status" means that period (or periods) of time during which
the Leverage Ratio is greater than or equal to 2.00 to 1.00 but less than
2.50 to 1.00.
"Level III Status" means that period (or periods) of time during which
the Leverage Ratio is greater than or equal to 2.50 to 1.00 but less than
3.00 to 1.00.
"Level IV Status" means that period (or periods) of time during which
the Leverage Ratio is greater than or equal to 3.00 to 1.00 but less than
3.50 to 1.00.
"Level V Status" means that period (or periods) of time during which
the Leverage Ratio is greater than or equal to 3.50 to 1.00.
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<PAGE>
"Leverage Ratio" of the G&K Group means, with respect to the
applicable Covenant Computation Date, the ratio of (a) the G&K Group's
Funded Debt to (b) the G&K Group's EBITDA.
"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 a member of the G&K Group or any of their respective
businesses or operations.
"Loan Documents" means this Agreement, Acceptances (as and when
created), the Notes, the Guaranties, each and every application or other
agreement pursuant to which a Letter of Credit is issued and the Security
Documents.
"Margin" means, with respect to computation of (a) an interest rate on
Fundings under a Facility, (b) an Acceptance Fee, (c) a Commitment Fee or
(d) a Letter of Credit Fee, the applicable increment (expressed in basis
points) set forth and described in the table below, established as of the
last day of each Fiscal Quarter according to the then applicable Status
determined in accordance with SECTION 4.3:
<TABLE>
<CAPTION>
Level I Level II Level III Level IV Level V
Status Status Status Status Status
<S> <C> <C> <C> <C> <C>
Leverage Ratio less than greater than greater than greater than greater than
2.00 or equal to or equal to or equal to or equal to
2.00 2.50 3.00 3.50
less than 2.50 less than 3.00 less than 3.50
Commitment Fee on 15.0 bp 20.0 bp 25.0 bp 30.0 bp 35.0 bp
Unused Daily
Balance of Revolving
Facilities
Eurodollar Margin, 50.0 bp 62.5 bp 75.0 bp 95.0 bp 112.5 bp
Acceptance Fee and
Letter of Credit Fee
US Reference Rate 0 bp 0 bp 0 bp 0 bp 0 bp
Margin and Canadian
Reference Rate
Margin
</TABLE>
"Material Adverse Effect" means, with respect to any event or
circumstance, a material adverse effect on:
(a) the business, financial condition, operations or prospects of the
G&K Group, taken as a whole;
(b) the ability of a Borrower or Guarantor to perform its obligations
under any Loan Document to which it is a party;
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<PAGE>
(c) the validity, enforceability or collectibility of any Loan
Document; or
(d) the status, existence, perfection, priority (subject to Permitted
Liens) or enforceability of any lien or security interest granted to the
Banks pursuant to the Security Documents .
"Material Litigation" or "Material Litigation Development" means any
Litigation or any development in any Litigation (i) which involves this
Agreement or any of the transactions contemplated hereby or thereby
(including, without limitation, any judgment, order, injunction or other
restraint prohibiting or imposing materially adverse conditions upon the
performance by a member of the G&K Group or any Subsidiary of its
obligations under or in connection with this Agreement or any Loan Document
to which it is a party), (ii) involving uninsured liabilities which could
individually or in the aggregate exceed $10,000,000, (iii) which could
individually or in the aggregate otherwise impair the validity or
enforceability of or the ability of a member of the G&K Group to perform
any of its obligations under this Agreement or any Loan Document,
(iv) which could individually or in the aggregate materially impair the
ability of a member of the G&K Group to conduct business substantially as
now conducted, or (v) which could individually or in the aggregate
materially and adversely affect the consolidated business, operations,
prospects or financial condition of a member of the G&K Group taken as a
whole.
"Maturity Date" means (a) June 30, 2002 with respect to the Revolving
Facilities and (b) June 30, 2004 with respect to the Term Facility.
"Net Income" of the G&K Group means, with respect to the applicable
Covenant Computation Period, the after-tax net income of the G&K Group as
determined in accordance with GAAP.
"Non-Cash Charges" of the G&K Group means, with respect to the
applicable Covenant Computation Period, the G&K Group's depreciation,
amortization (excluding merchandise amortization) and other non-cash
charges which have the effect of reducing Pre-Tax Earnings or Net Income,
as the case may be, all as determined in accordance with GAAP.
"Norwest" has the meaning specified in the PREAMBLE.
"Note" or "Notes" means a US Note or a Canadian Revolving Note, or all
such Notes collectively, as the context requires.
"NRO" means 912489 Ontario Limited, an Ontario corporation and a
wholly-owned Subsidiary of G&K Inc.
"Obligations" means each and every debt, liability and obligation of
every type and description arising under or in connection with any of the
Loan Documents, or
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under any interest rate swap or protection agreement entered into by a
Borrower with a Bank in order to hedge its interest rate risk under the
Facilities, which either Borrower may now or at any time hereafter owe to a
Bank, whether such debt, liability or obligation now exists or is hereafter
created or incurred, whether it is direct or indirect, due or to become
due, absolute or contingent, primary or secondary, liquidated or
unliquidated, or sole, joint, several or joint and several, and including
specifically, but not limited to, the Letter of Credit Amount, Acceptance
Amount and all indebtedness, liabilities and obligations of the Borrowers
arising under or evidenced by the Notes and the Drafts.
"Outstanding Canadian Obligations" means that portion of the
Outstanding Obligations arising from or relating to the Canadian Revolving
Facility.
"Outstanding Obligations" means, as of the date of determination, the
outstanding principal amount (including the Letter of Credit Amount) of all
Obligations.
"Outstanding US Obligations" means that portion of the Outstanding
Obligations arising from or relating to the US Facilities.
"Payee" has the meaning specified in SECTION 4.13.
"Payment Date" means the last day of each Fiscal Quarter of the G&K
Group, commencing on September 27, 1997.
"PBGC" means the Pension Benefit Guaranty Corporation, organized under
Title IV of ERISA.
"Percentage" means, with respect to a Facility and as to any Bank, the
percentage set forth opposite such Bank's signature on the execution pages
hereof, or below such Bank's signature on any Assignment Certificate
executed by such Bank, in relation to such Facility, representing the ratio
of such Bank's Revolving Commitment or Term Commitment, as the case may be,
to the applicable Revolving Commitment Amount or Term Commitment Amount.
"Permitted Liens" has the meaning specified in SECTION 8.1.
"Person" means any individual, corporation, partnership, limited
liability Borrower, joint venture, association, joint-stock Borrower,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Plan" means a Defined Benefit Plan as defined in and as covered by
Title IV of ERISA that is maintained by or contributed to by any US G&K
Enterprise for its employees.
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"PPSA" means the Personal Property Security Act , as amended from time
to time, as in effect in any particular province of Canada, or with respect
to any province where the Personal Property Security Act has not been
adopted, any other such statute or act governing, in such province,
creation and perfection of security interests in tangible personal
property, as amended from time to time, including the Civil Code in effect
from time to time in the Province of Quebec.
"Pre-Tax Earnings" of the G&K Group means, with respect to the
applicable Covenant Computation Period, the G&K Group's Net Income, PLUS
any provision for Tax Expense, LESS any extraordinary, non-operating or
non-cash income claimed or earned by the G&K Group, all as determined in
accordance with GAAP.
"Pricing Differential" has the meaning specified in SECTION 3.9.
"Purchased Assets" has the meaning specified in SECTION 4.10(a).
"Registered Pension Plan" means a pension plan with defined benefit
provisions that is registered under the Canada Income Tax Act and is
maintained or contributed to by any Canadian G&K Enterprise for its
employees.
"Reportable Event" has the meaning assigned to that term in Title IV
of ERISA.
"Required Banks" means, at any time, one or more of the Banks holding
at least fifty-one percent (51%) of the Commitments (expressed in their US
Dollar Equivalent) or, if the Commitments have terminated one or more of
the Banks holding at least fifty-one percent (51%) of the Outstanding
Obligations (expressed in their US Dollar Equivalent).
"Required Payment" has the meaning specified in SECTION 4.12(c).
"Return" has the meaning specified in SECTION 4.14(b)(i).
"Revolving Advance" means a loan of funds by a Bank to a Borrower
under a Revolving Facility.
"Revolving Commitment" means the US Revolving Commitment of a US Bank
or the Canadian Revolving Commitment of a Canadian Bank, or both, as the
context requires.
"Revolving Commitment Amount" means the US Revolving Commitment Amount
or the Canadian Revolving Commitment Amount, as the context requires.
"Revolving Commitment Termination Date" means the earlier of (a) the
Maturity Date with respect to a Revolving Facility or (b) the date on which
a
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Revolving Commitment is terminated pursuant to SECTION 9.2 or reduced to
zero pursuant to SECTION 4.11(a).
"Revolving Facility" means the US Revolving Facility or the Canadian
Revolving Facility and "Revolving Facilities" means the US Revolving
Facility and the Canadian Revolving Facility, as the context requires.
"Revolving Facility Outstanding Amount" means the US Revolving
Facility Outstanding Amount and the Canadian Revolving Facility Outstanding
Amount, or either of them, as the context requires.
"Security Documents" means the G&K Inc. Security Agreement, the Work
Wear Security Agreement, the Collateral Pledge Agreements, the Guarantor
Security Agreements and each and every additional agreement entered into by
a Borrower or Guarantor for the benefit of an Agent or Bank to secure
payment of any of the Obligations, as such agreements may hereafter be
amended, supplemented or restated from time to time.
"Sellers" means National Service Industries, Inc., a Delaware
corporation, National Service Industries, Inc., a Georgia corporation and
NSI Enterprises, Inc., a California corporation.
"Status" means the financial condition of the G&K Group determined in
accordance with the definitions of "Level I Status", "Level II Status",
"Level III Status", "Level IV Status" and "Level V Status."
"Stockholders' Equity" of the G&K Group means, with respect to the
applicable Covenant Computation Period, the aggregate capital and retained
earnings of the G&K Group, as determined in accordance with GAAP, as set
forth and described in the G&K Group's financial statements of the G&K
Group, prepared on a consistent basis; adjusted, however, for any gain or
loss on the ultimate disposition of the Assets Held for Sale that has been
treated as an adjustment of the original purchase price allocation of such
Assets Held for Sale.
"Subsidiary" means any corporation of which more than fifty percent
(50%) of the outstanding shares of capital stock having general voting
power under ordinary circumstances to elect a majority of the board of
directors of such corporation, (irrespective of whether or not at the time
stock of any other class or classes shall have or might have voting power
by reason of the happening of any contingency) is at the time directly or
indirectly owned by a Person, by such Person and one or more Subsidiaries
of such Person, or by one or more other Subsidiaries of such Person.
"Swingline Letter of Credit" has the meaning specified in SECTION
2.7(b).
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"Swingline Letter of Credit Amount" means the sum of (a) the aggregate
face amount of all issued and outstanding Swingline Letters of Credit and
(b) amounts drawn under Swingline Letters of Credit for which the Letter of
Credit Bank has neither been reimbursed nor made advances.
"Tax Expense" means the amount of any current and deferred income,
excise and other taxes incurred by any member of the G&K Group to any
governmental or other authority as a result of income earned by that Person
during the applicable period of determination.
"Taxes" has the meaning specified in SECTION 4.13.
"TeamWear" means G&K TeamWear, Inc., a Minnesota corporation and a
wholly-owned Subsidiary of G&K, Inc.
"Term Advance" means a loan of funds by a US Bank to G&K Inc. under
the Term Facility.
"Term Commitment" means, with respect to each US Bank, the amount of
the Term Commitment set forth opposite such US Bank's name on the execution
pages hereof, or below such US Bank's signature on an Assignment
Certificate, or as the context may require, the obligation of such US Bank
to make Term Advances to G&K Inc. under SECTION 2.2 hereof.
"Term Commitment Amount" shall mean Three Hundred Million Dollars
($300,000,000), being the maximum amount of the Term Commitments of all US
Banks.
"Term Facility" means the term loan facility being made available to
G&K Inc. by the US Banks pursuant to SECTION 2.2.
"Term Note" means a promissory note of G&K Inc. payable to a US Bank
in the amount of such US Bank's Term Commitment, in substantially the form
of EXHIBIT C (as such promissory note may be amended, extended or otherwise
modified from time to time), evidencing the obligation of G&K Inc. to pay
all indebtedness to such US Bank resulting from such US Bank's Percentage
of the Term Facility, and also means each other promissory note accepted
from time to time in substitution therefor or in renewal thereof.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the state designated in SECTION 11.14(a) as the state whose laws shall
govern this Agreement, or in any other state whose laws are held to govern
this Agreement or any portion hereof.
"US Administrative Fee" has the meaning specified in SECTION 4.9(b).
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"US Agent" means Norwest in its separate capacity as administrative
agent hereunder.
"US Banks" means those Banks which, from time to time, shall have
Commitments to make US Revolving Advances and Term Advances to G&K Inc.
"US Business Day" shall mean any day other than a Saturday or Sunday
on which national banks are open for business in Minnesota, Michigan and
New York and, if such day relates to a Eurodollar Advance, a day on which
dealings are carried on in the London interbank Eurodollar market.
"US Commitment Fee" has the meaning specified in SECTION 4.9(a)(i).
"US Dollar" and the sign "$" and "US$" shall mean lawful currency of
the United States of America.
"US Dollar Equivalent" means for an amount of Canadian Dollars, the
amount in freely-transferable US Dollars that the Canadian Agent may
purchase for the given amount of such Canadian Dollars on the spot market
on the day of determination. Where possible, such spot rate shall be
determined by reference to the Bank of Canada noon exchange rate on the
dealing screen as of 12:00 Noon, Toronto, Ontario time, on the date of
determination.
"US Facilities" means the US Revolving Facility and the Term Facility
collectively, and "US Facility" means the US Revolving Facility or the Term
Facility, as the context requires.
"US Floating Rate" means an annual rate at all times equal to the sum
of (a) the US Reference Rate and (b) the applicable Margin, which annual
rate shall change when and as the US Reference Rate changes.
"US Floating Rate Advance" means any US Advance which bears interest
at a rate determined by reference to the US Reference Rate.
"US G&K Enterprises" means G&K Inc., G&K Co., G&K Linen, TeamWear and
any other wholly-owned Subsidiary of either Borrower formed after the
Closing Date (i) which has its primary place of business in the United
States of America, (ii) which executes a Guaranty and, if prior to the
Collateral Release Date, a Guarantor Security Agreement, for the benefit of
all Banks guarantying the due and prompt payment of all Obligations and
(iii) if prior to the Collateral Release Date, whose stock is pledged to
the Banks pursuant to a Collateral Pledge Agreement.
"US Interest Period" means, relative to any Eurodollar Funding, the
period beginning on (and including) the date on which such Eurodollar
Funding is made, or continued as, or converted into, a Eurodollar Funding
pursuant to SECTIONS 2.3, 2.4 or
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2.5 and shall end on (but exclude) the day which numerically corresponds to
such date one (1), two (2), three (3) or six (6) months thereafter (or, if
such month has no numerically corresponding day, on the last US Business
Day of such month), as G&K Inc. may select in its relevant notice pursuant
to SECTIONS 2.3, 2.4, or 2.5; PROVIDED, HOWEVER, that:
(a) no more than five (5) different US Interest Periods may be
outstanding at any one time with respect to a US Facility;
(b) if a US Interest Period would otherwise end on a day which
is not a US Business Day, such US Interest Period shall end on the
next following US Business Day (unless such next following US Business
Day is the first US Business Day of a month, in which case such US
Interest Period shall end on the next preceding US Business Day);
(c) no US Interest Period applicable to a Funding for a US
Facility may end later than the applicable Maturity Date for such US
Facility; and
(d) in no event shall G&K Inc. select US Interest Periods with
respect to Fundings under the Term Facility which, in the aggregate,
would require payment of funding losses under SECTION 4.15 in order to
make payments of principal as required under SECTION 4.1.
"US Note" means a US Revolving Note or a Term Note, and "US Notes"
means the US Revolving Notes and the Term Notes, collectively.
"US Obligations" means each and every debt, liability and obligation
of every type and description arising under or in connection with any of
the Loan Documents, or under any interest rate swap or protection agreement
entered by G&K Inc. with a Bank in order to hedge its interest rate risk
under the Facilities, into which G&K Inc. may now or at any time hereafter
owe to a Bank, whether such debt, liability or obligation now exists or is
hereafter created or incurred, whether it is direct or indirect, due or to
become due, absolute or contingent, primary or secondary, liquidated or
unliquidated, or sole, joint, several or joint and several, and including
specifically, but not limited to, the Letter of Credit Amount and all
indebtedness, liabilities and obligations of G&K Inc. arising under or
evidenced by the Notes executed by G&K Inc.
"US Reference Rate" means the rate of interest publicly announced from
time to time by the US Agent as its "base rate" or "prime rate", or, if the
US Agent ceases to announce a rate so designated, any similar successor
rate designated by the US Agent; such rate is not necessarily the most
favored rate of the US Agent and the US Agent may lend to its customers at
rates that are at, above or below such rate.
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"US Revolving Advance" means a loan of funds by a US Bank to G&K Inc.
under the US Revolving Facility, including both US Floating Rate Advances
and Eurodollar Advances made thereunder.
"US Revolving Commitment" means, with respect to each US Bank, the
amount of the US Revolving Commitment set forth opposite such US Bank's
name on the execution pages hereof, or below such US Bank's signature on an
Assignment Certificate executed by such US Bank, unless such amount is
reduced pursuant to SECTION 4.11(a) hereof, in which event it means the
amount to which said amount is reduced pursuant thereto, or as the context
may require, the obligation of such US Bank to make US Revolving Advances,
as contemplated in SECTION 2.1.
"US Revolving Commitment Amount" means One Hundred Million Dollars
($100,000,000), being the maximum amount of the US Revolving Commitments of
all US Banks, in the aggregate, to make US Revolving Advances to G&K Inc.
pursuant to SECTION 2.1, subject to reduction in accordance with
SECTION 4.11(a).
"US Revolving Facility" means the revolving credit facility being made
available to G&K Inc. by the US Banks pursuant to SECTION 2.1.
"US Revolving Facility Outstanding Amount" means, as of the date of
determination, the sum of (a) the aggregate principal amount of all
outstanding US Revolving Advances and (b) the Letter of Credit Amount.
"US Revolving Note" means a promissory note of G&K Inc. payable to a
US Bank in amount of such US Bank's US Revolving Commitment, in
substantially the form of EXHIBIT A (as such promissory note may be
amended, extended or otherwise modified from time to time), evidencing the
obligation of G&K Inc. to pay its indebtedness to such US Bank resulting
from such US Bank's Percentage of each Borrowing under the US Revolving
Facility, and also means each promissory note accepted by such US Bank from
time to time in substitution therefor or in renewal thereof.
"US Revolving Facility" means the revolving credit facility described
in SECTION 2.1.
"Working Capital" of the G&K Group means the G&K Group's Current
Assets minus its Current Liabilities.
"Work Wear" has the meaning specified in the PREAMBLE, which is a
wholly-owned Subsidiary of G&K Co.
"Work Wear Security Agreement" means the Security Agreement of Work
Wear of even date herewith pursuant to which Work Wear grants the Canadian
Banks
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a security interest in all personal property assets of Work Wear to secure
payment of the Canadian Obligations.
"Work Wear-Quebec" means LA CORPORATION WORK WEAR (DU) QUEBEC, also
known as Work Wear Corporation of Quebec, a Quebec corporation and a
wholly-owned Subsidiary of Work Wear.
ARTICLE II
US FACILITY
Section 2.1 COMMITMENT AS TO US REVOLVING FACILITY. Each US Bank, severally
and for itself alone, agrees, on the terms and subject to the conditions herein
set forth, to make US Revolving Advances to G&K Inc. from time to time during
the period from the date hereof to and including the Revolving Commitment
Termination Date in an aggregate amount at any time outstanding not to exceed
such US Bank's Percentage of such US Revolving Advances; PROVIDED, HOWEVER, that
(a) the US Revolving Facility Outstanding Amount shall not at any time exceed
the US Revolving Commitment Amount, (b) on the Closing Date the sum of the US
Revolving Facility Outstanding Amount and the US Dollar Equivalent of the
Canadian Revolving Facility Outstanding Amount shall not exceed $85,000,000 and
(c) no US Bank's Percentage of the US Revolving Facility Outstanding Amount
shall at any time exceed its US Revolving Commitment. Within the above limits,
G&K Inc. may obtain US Revolving Advances, repay US Revolving Advances in
accordance with the terms hereof and reborrow US Revolving Advances in
accordance with the applicable terms and conditions of this ARTICLE II.
Section 2.2 COMMITMENT AS TO TERM FACILITY. Each US Bank hereby
agrees, on the terms and subject to the conditions herein set forth, to make a
single Term Advance to G&K Inc. on the Closing Date in an amount equal to such
US Bank's Term Commitment. The Term Facility is not a revolving facility and,
once the initial Term Advance is made by a US Bank, such US Bank shall have no
further obligation to make any additional Term Advances to G&K Inc. under the
Term Facility, whether or not any amounts are repaid thereunder.
Section 2.3 PROCEDURES FOR BORROWING UNDER THE US FACILITIES. G&K Inc.
may request not more than one Borrowing each week except as allowed in the US
Agent's discretion. Each Borrowing under the US Facilities shall be funded by
the US Banks as either US Floating Rate Advances or Eurodollar Advances, as G&K
Inc. shall specify in the related notice of Borrowing or notice of conversion
pursuant to this SECTION 2.3 or SECTION 2.4. Except as set forth in the
preceding sentence, US Floating Rate Advances and Eurodollar Advances may be
outstanding at the same time. It is understood, however, that (a) in the case of
a Borrowing which is to bear interest at a US Floating Rate, the principal
amount of the Borrowing shall be in an amount equal to or greater than
$5,000,000 and (b) in the case of a Borrowing which is to bear interest at a
Eurodollar Rate, the principal amount of the
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Borrowing shall be in an amount equal to $5,000,000 or a higher integral
multiple of $1,000,000. G&K Inc. shall give notice to the US Agent of each
proposed Borrowing not later than 10:30 a.m., Minneapolis, Minnesota time, on a
US Business Day which, in the case of a Borrowing that is to bear interest
initially at a US Floating Rate, is the Borrowing Date, or, in the case of a
Borrowing that is to bear interest initially at a Eurodollar Rate, is at least
three (3) US Business Days prior to the Borrowing Date. Each such notice shall
be effective upon receipt by the US Agent, shall be in writing or by telephone
or telecopy transmission, to be confirmed in writing by G&K Inc. if so requested
by the US Agent (in the form of EXHIBIT D), and shall specify whether the
Borrowing is to bear interest initially at a US Floating Rate or a Eurodollar
Rate, and in the case of a Borrowing that is to bear interest initially at a
Eurodollar Rate, shall specify the US Interest Period to be applicable thereto.
Promptly upon receipt of such notice (but in no event later than 12:00 Noon,
Minneapolis, Minnesota time, with respect to a US Floating Rate Advance, and the
close of business, with respect to a Eurodollar Advance, in each case on the US
Business Day of receipt of such notice), the US Agent shall advise each US Bank
of the proposed Borrowing. At or before 2:00 p.m., Minneapolis, Minnesota time,
on the requested Borrowing Date, each US Bank shall provide the US Agent at the
principal office of the US Agent in Minneapolis, Minnesota with immediately
available funds covering such US Bank's Percentage of such Borrowing. Subject to
satisfaction of the conditions precedent set forth in ARTICLE V with respect to
such Borrowing, the US Agent shall pay over such funds to G&K Inc. prior to the
close of business on the Borrowing Date.
Section 2.4 CONVERTING US FLOATING RATE FUNDINGS TO EURODOLLAR
FUNDINGS; PROCEDURES. So long as no Default or Event of Default shall exist, G&K
Inc. may convert all or any part of any outstanding US Floating Rate Funding
into a Eurodollar Funding by giving notice to the US Agent of such conversion
not later than 10:30 a.m., Minneapolis, Minnesota time, on a US Business Day
which is at least three (3) US Business Days prior to the date of the requested
conversion. Each such notice shall be effective upon receipt by the US Agent,
shall be in writing or by telephone or telecopy transmission, to be confirmed in
writing by G&K Inc. if so requested by the US Agent (in the form of EXHIBIT E),
shall specify the date and amount of such conversion, the total amount of the
Funding to be so converted and the US Interest Period therefor. Each conversion
of a Funding shall be on a US Business Day, and the aggregate amount of each
such conversion of a US Floating Rate Funding to a Eurodollar Funding shall be
in an amount equal to $5,000,000 or a higher integral multiple of $1,000,000.
Section 2.5 PROCEDURES AT END OF A US INTEREST PERIOD. Unless G&K Inc.
requests a new Eurodollar Funding in accordance with the procedures set forth
below, or prepays the principal of an outstanding Eurodollar Funding at the
expiration of a US Interest Period, each US Bank shall automatically and without
request of G&K Inc. convert each Eurodollar Funding to a Floating Rate Funding
on the last day of the relevant US Interest Period. So long as no Default or
Event of Default shall exist, G&K Inc. may cause all or any part of any
outstanding Eurodollar Funding to continue to bear interest at a Eurodollar Rate
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after the end of the then applicable US Interest Period by notifying the US
Agent not later than 10:30 a.m., Minneapolis, Minnesota time, on a US Business
Day which is at least three (3) US Business Days prior to the first day of the
new US Interest Period. Each such notice shall be in writing or by telephone or
telecopy transmission, to be confirmed in writing by G&K Inc. if so requested by
the US Agent (in the form of EXHIBIT F), shall be effective when received by the
US Agent, and shall specify the first day of the applicable US Interest Period,
the amount of the expiring Eurodollar Funding to be continued and the US
Interest Period therefor. Promptly upon receipt of such notice, the US Agent
shall advise each US Bank thereof. Each new US Interest Period shall begin on a
US Business Day and the amount of each Funding bearing a new Eurodollar Rate
shall be in an amount equal to $5,000,000 or a higher integral multiple of
$1,000,000.
Section 2.6 SETTING AND NOTICE OF RATES. The applicable Eurodollar
Rate for each US Interest Period shall be determined by the US Agent between the
opening of business and 12:00 Noon, Minneapolis, Minnesota time, on the second
US Business Day prior to the beginning of such US Interest Period, whereupon
notice thereof (which may be by telephone) shall be given by the US Agent to G&K
Inc. and each US Bank. Each such determination of the applicable Eurodollar Rate
shall be conclusive and binding upon the parties hereto, in the absence of
demonstrable error. The US Agent, upon written request of G&K Inc. or any US
Bank, shall deliver to G&K Inc. or such requesting US Bank a statement showing
the computations used by the US Agent in determining the applicable Eurodollar
Rate hereunder.
Section 2.7 COMMITMENT TO ISSUE LETTERS OF CREDIT. The Letter of
Credit Bank agrees, from the date hereof to and including the Commitment
Termination Date, to issue one or more letters of credit for the account of a
G&K Enterprise (if such account party is not G&K Inc., to be guaranteed by G&K
Inc.); some of which the US Banks will participate in the risk (herein each a
"Participated Letter of Credit") some of which the Letter of Credit Bank shall
retain all risk (herein each a "Swingline Letter of Credit"), on the terms and
subject to the conditions set forth below:
(a) GENERAL TERMS. The Letter of Credit Amount shall at no time
exceed $10,000,000 and no Letter of Credit shall be issued by the Letter of
Credit Bank if, after giving effect to the issuance of such Letter of
Credit, the US Revolving Facility Outstanding Amount would exceed the US
Revolving Commitment Amount. The expiration date of any Letter of Credit
shall not be later than fifteen (15) days prior to the Maturity Date for
the US Revolving Facility. Each Letter of Credit will be issued upon no
less than three (3) US Business Days' prior written application from G&K
Inc. to the Letter of Credit Bank. The application requesting issuance of a
Letter of Credit shall be on the Letter of Credit Bank's standard form or
such other form as may be agreed to by the Letter of Credit Bank and G&K
Inc. If any of the terms of such application are inconsistent with the
terms and provisions of this Agreement, the terms and provisions of this
Agreement shall govern. The Letter of Credit Bank shall not be obligated to
issue a Letter of Credit unless on the date of issuance all of the
conditions precedent specified in SECTION 5.2 shall have been satisfied as
fully as if the issuance of
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such Letter of Credit were an Advance. Promptly after issuance of a Letter
of Credit that is a Participated Letter of Credit, the US Agent shall so
advise each US Bank of all relevant information with respect thereto.
(b) SWINGLINE LETTER OF CREDIT FACILITY. The Letter of Credit Bank,
in its discretion, may from time to time issue Swingline Letters of Credit
pursuant to the general terms set forth in SUBSECTION (a) above, and within
the limitations set forth therein and herein; PROVIDED that no Swingline
Letter of Credit may be made after the occurrence and during the
continuance of an Event of Default. With respect to each Swingline Letter
of Credit so issued by the Letter of Credit Bank, no other US Bank shall
participate in the risk and obligation under such Letter of Credit pursuant
to SUBSECTION (d) hereof, nor shall any such US Bank be entitled to a
commission with respect thereto, until any such Swingline Letter of Credit
is converted to a Participated Letter of Credit as hereinafter provided.
The Swingline Letter of Credit Amount shall at no time exceed $500,000 and
no Swingline Letter of Credit shall be issued by the Letter of Credit Bank
if, after giving effect to the issuance of such Swingline Letter of Credit,
(i) the US Revolving Facility Outstanding Amount would exceed the US
Revolving Commitment Amount, (ii) the sum of the requested Swingline Letter
of Credit and the Letter of Credit Bank's Percentage of the US Revolving
Facility Outstanding Amount would exceed the Letter of Credit Bank's US
Revolving Commitment. The Swingline Letter of Credit Amount shall
constitute a part of, and shall not be in addition to, the Letter of Credit
Bank's US Revolving Commitment. The Letter of Credit Bank, at any time and
from time to time in its sole and absolute discretion, may notify each US
Bank that a Swingline Letter of Credit shall thereafter constitute a
Participated Letter of Credit, whereupon each US Bank shall be deemed to,
and hereby irrevocably and unconditionally agrees to, purchase from the
Letter of Credit Bank an undivided participating interest in the Letter of
Credit Bank's risk and obligation under such Swingline Letter of Credit.
Upon receipt of such notice of conversion of a Swingline Letter of Credit
to a Participated Letter of Credit, the specified Swingline Letter of
Credit shall for all purposes of this SECTION 2.7 constitute a Participated
Letter of Credit and each US Bank shall be entitled to payment of its pro
rata share of the Letter of Credit Fee paid and to be paid by G&K Inc.
upon issuance of such Swingline Letter of Credit. The obligation of the US
Banks to purchase their undivided participating interest in any such
Swingline Letter of Credit shall exist whether or not any Default or Event
of Default shall have occurred or shall then be existing.
(c) LETTER OF CREDIT FEES. G&K Inc. shall pay to the US Banks a
commission with respect to each Participated Letter of Credit at an annual
rate equal to the applicable Margin in effect from time to time, payable
annually in advance and upon such others terms as may be agreed upon by G&K
Inc. and the Required Banks at the time of issuance of any such
Participated Letter of Credit. Such fees arising with respect to a
Participated Letter of Credit, which shall not include fees payable to the
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Letter of Credit Bank pursuant to SECTION 2.7(j), shall be shared among the
US Banks pro rata in accordance with their respective Percentages. G&K
Inc. shall pay to the Letter of Credit Bank a commission with respect to
each Swingline Letter of Credit at an annual rate equal to the applicable
Margin in effect from time to time, payable annually in advance and upon
such other terms as may be agreed upon by G&K Inc. and the Letter of Credit
Bank at the time of issuance of such Swingline Letter of Credit. Each such
annual commission payable by G & K, Inc. on account of the issuance of a
Letter of Credit shall hereafter be referred to as a "Letter of Credit
Fee."
(d) PARTICIPATIONS IN LETTER OF CREDIT RISK. Upon issuance of a
Participated Letter of Credit hereunder or upon conversion of a Swingline
Letter of Credit to a Letter of Credit as contemplated in SUBSECTION (b)
above, and without any further notice to any US Bank, each US Bank shall be
deemed to, and hereby irrevocably and unconditionally agrees to, purchase
from the Letter of Credit Bank an undivided participating interest in the
Letter of Credit Bank's risk and obligation under such Letter of Credit and
in the obligation of the Letter of Credit Bank to honor drafts thereunder,
and in the amount of any drawing thereunder, and in all rights of the
Letter of Credit Bank to obtain reimbursement from G&K Inc. in the amount
of such drawing, and all other rights of the Letter of Credit Bank with
respect thereto, in an amount equal to the product of (i) the maximum
amount available to be drawn under such Letter of Credit and the amount of
any drawing thereunder, respectively and (ii) the Percentage of such US
Bank. Whenever a draft submitted under a Letter of Credit is paid by the
Letter of Credit Bank (whether a Swingline Letter of Credit or a
Participated Letter of Credit), the Letter of Credit Bank shall so notify
the US Agent, the US Agent shall so notify each US Bank and shall request
immediate reimbursement from G&K Inc. for the amount of the draft. If
sufficient funds are not immediately paid to the US Agent by G&K Inc., G&K
Inc. shall be deemed to have requested a Borrowing pursuant to SECTION 2.3
and the US Banks shall be notified of such request in accordance with
SECTION 2.3 and shall fund such request for a Borrowing as US Floating Rate
Advances (in accordance with their respective Percentages) for purposes of
reimbursing the Letter of Credit Bank for the amount of such draft so paid
by the Letter of Credit Bank (less any amounts realized by the Letter of
Credit Bank pursuant to the second sentence of this SECTION 2.7(d)). If for
any reason or under any circumstance (including, without limitation, the
occurrence of a Default or Event of Default or the failure to satisfy any
of the conditions presently set forth in SECTION 5.2) the US Banks do not
make such US Floating Rate Advances as contemplated above and G&K Inc. does
not otherwise reimburse the Letter of Credit Bank for the amount of the
draft so paid by the Letter of Credit Bank, G&K Inc. shall nonetheless be
obligated to reimburse the amount of the draft to the Letter of Credit
Bank, with interest upon such amount at the US Floating Rate from and after
the date such draft is paid by the Letter of Credit Bank until the amount
thereof is repaid to the Letter of Credit Bank in full. If the Letter of
Credit Bank shall not have obtained reimbursement for any drawing under a
Letter of Credit (whether from G&K Inc. or as
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proceeds of a Borrowing), upon demand of the US Agent each US Bank shall
immediately advance the amount of its participation in such drawing to the
Letter of Credit Bank and shall be entitled to interest on such
participating interest at the Default Rate until reimbursed in full by G&K
Inc.
(e) EXCULPATION OF LETTER OF CREDIT BANK. Each US Bank and G&K Inc.
agree that, in paying any drawing under a Letter of Credit, the Letter of
Credit Bank shall not have any responsibility to obtain any document (other
than any sight draft and certificates expressly required by the Letter of
Credit) or to ascertain or inquire as to the validity or accuracy of any
such document or the authority of the Person executing or delivering any
such document. The Letter of Credit Bank shall not be liable to any
Borrower or US Bank for: (i) any action taken or omitted in connection
herewith at the request or with the approval of the US Banks (including the
Required Banks, as applicable); (ii) any action taken or omitted in the
absence of gross negligence or willful misconduct; or (iii) the due
execution, effectiveness, validity or enforceability of any document
executed in connection with a Letter of Credit.
(f) ASSUMPTION OF RISK. G&K Inc. hereby assumes all risks of the acts
or omissions of any beneficiary or transferee with respect to its use of
any Letter of Credit; PROVIDED that this assumption is not intended to, and
shall not, preclude G&K Inc.'s pursuing such rights and remedies as it may
have against the beneficiary or transferee at law or under any other
agreement. The Letter of Credit Bank shall not be liable or responsible for
any of the matters described in clauses (i) through (vii) of SUBSECTION (g)
below. In furtherance and not in limitation of the foregoing: (i) the
Letter of Credit Bank may accept documents that appear on their face to be
in order, without responsibility for further investigation, regardless of
any notice or information to the contrary; and (ii) the Letter of Credit
Bank shall not be responsible for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign a
Letter of Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part, which may prove to be invalid or ineffective for any
reason.
(g) UNCONDITIONAL OBLIGATION OF REIMBURSEMENT. The obligation of G&K
Inc. under this Agreement to reimburse the Letter of Credit Bank for a
drawing under a Letter of Credit shall be unconditional and irrevocable,
and shall be paid strictly in accordance with the terms of this Agreement
under all circumstances, including the following:
(i) any lack of validity or enforceability of this Agreement
or any letter of credit application;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the obligations of G&K Inc. in
respect of any Letter of Credit or any other amendment or waiver of or
any consent to departure from any letter of credit application;
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(iii) the existence of any claim, set-off, defense or other
right that G&K Inc. may have at any time against any beneficiary or
any transferee of any Letter of Credit (or any Person for whom any
such beneficiary or any such transferee may be acting), the Letter of
Credit Bank or any other Person, whether in connection with this
Agreement, the transactions contemplated hereby any unrelated
transaction;
(iv) any draft, demand, certificate or other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue
or inaccurate in any respect; or any loss or delay in the transmission
or otherwise of any document required in order to make a drawing under
any Letter of Credit;
(v) any payment by the Letter of Credit Bank under any Letter
of Credit against presentation of a draft or certificate that does not
strictly comply with the terms of any Letter of Credit; or any payment
made by the Letter of Credit Bank under any Letter of Credit to any
Person purporting to be a trustee in bankruptcy, debtor-in-possession,
assignee for the benefit of creditors, liquidator, receiver or other
representative of or successor to any beneficiary or any transferee of
any Letter of Credit, including any arising in connection with any
insolvency proceeding;
(vi) any exchange, release or non-perfection of any collateral,
or any release or amendment or waiver of or consent to departure from
any other guarantee, for all or any of the obligations of G&K Inc. in
respect of any Letter of Credit; or
(vii) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing, including any other circumstance
that might otherwise constitute a defense available to, or a discharge
of, G&K Inc. or a guarantor.
(h) LIABILITY OF LETTER OF CREDIT BANK. Notwithstanding anything in
this SECTION 2.7 to the contrary, including particularly
SUBSECTION (f) and (g) above, G&K Inc. may have a claim against the Letter
of Credit Bank and the Letter of Credit Bank may be liable to G&K Inc., to
the extent, but only to the extent, of any direct, as opposed to
consequential or exemplary, damages suffered by G&K Inc. which G&K Inc.
proves were caused by the Letter of Credit Bank's willful misconduct or
gross negligence or the willful failure to pay under any Letter of Credit
after the presentation to the Letter of Credit Bank by the beneficiary of a
sight draft and certificate strictly complying with the terms and
conditions of a Letter of Credit.
(i) INDEMNIFICATION BY G&K INC. G&K Inc. shall indemnify, protect,
defend and hold harmless each Indemnitee from and against all losses,
liabilities, claims, damages, judgments, costs and expenses, including but
not limited to all reasonable attorneys' fees and legal expenses, incurred
by the Indemnitees or imposed
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upon the Indemnitees at any time by reason of the issuance, demand for
honor or honor of any Letter of Credit or the enforcement, protection or
collection of the US Bank's claims against G&K Inc. under this SECTION 2.7
or by reason of any act or omission of any Indemnitee in connection with
any of the foregoing; PROVIDED, HOWEVER, that such indemnification shall
not extend to losses, liabilities, claims, damages, judgments, costs and
expenses to the extent arising from any act or omission of an Indemnitee
which constitutes gross negligence or willful misconduct.
(j) ADMINISTRATIVE FEES. G&K Inc. hereby agrees to pay to the Letter
of Credit Bank (A) a fronting fee equal to one quarter of one percent
(0.25%) of the face amount of each Participated Letter of Credit, payable
upon issuance of such Participated Letter of Credit and (B) all
administrative fees charged by the Letter of Credit Bank in the ordinary
course of business in connection with the issuance of Letters of Credit,
honoring of drafts under Letters of Credit, amendments thereto, transfers
thereof and all other activity with respect to Letters of Credit, at the
then current rates established by the Letter of Credit Bank from time to
time for such services rendered on behalf of customers of the Letter of
Credit Bank generally, payable on demand of the Letter of Credit Bank.
Section 2.8 PRO RATA TREATMENT - US BANKS. All US Revolving Advances
and Term Advances, conversions and repayments shall be effected so that after
giving effect thereto all US Revolving Advances and Term Advances shall be pro
rata among the US Banks according to their respective Percentages.
Section 2.9 US REVOLVING ADVANCES AND TERM ADVANCES DENOMINATED IN US
DOLLARS. All US Revolving Advances and Term Advances shall be made to G&K Inc.
in US Dollars and shall be repaid by G&K Inc. in US Dollars. All interest
accruing on outstanding US Revolving Advances and Term Advances, all commissions
payable with respect to Letters of Credit and all fees payable in connection
with or determined in relation to a US Facility shall be computed, and paid, in
US Dollars.
Section 2.10 GUARANTIES. Pursuant to the terms and conditions of the
Guaranties executed by each US G&K Enterprise, such US G&K Enterprise shall
guarantee to each Bank the due and prompt payment of all Obligations.
Section 2.11 EXCULPATION OF CANADIAN G&K ENTERPRISES .
Notwithstanding anything in this Agreement to the contrary, no Canadian G&K
Enterprise shall be liable for any US Obligations, whether arising under or
evidenced by any Loan Documents, including the US Notes.
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ARTICLE III
CANADIAN FACILITY
Section 3.1 COMMITMENT AS TO CANADIAN REVOLVING FACILITY. Each
Canadian Bank, severally and for itself alone, agrees, on the terms and subject
to the conditions herein set forth, to (a) make Canadian Revolving Advances to
Work Wear and (b) to create and discount Acceptances on behalf of Work Wear from
time to time during the period from the date hereof to and including the
Revolving Commitment Termination Date in an aggregate amount at any time
outstanding not to exceed such Canadian Bank's Percentage of the Canadian
Revolving Advances or Acceptances from time to time requested by Work Wear;
PROVIDED, HOWEVER, that (i) the Canadian Revolving Facility Outstanding Amount
shall not at any time exceed the lesser of (A) the Canadian Revolving Commitment
Amount or (B) the Canadian Dollar Equivalent of US$25,000,000, (ii) on the
Closing Date the sum of the US Revolving Facility Outstanding Amount and the US
Dollar Equivalent of the Canadian Revolving Facility Outstanding Amount shall
not exceed US $85,000,000 and (iii) no Canadian Bank's Percentage of the
Canadian Revolving Facility Outstanding Amount shall at any time exceed its
Canadian Revolving Commitment. Within the above limits, Work Wear may obtain
Canadian Revolving Advances and cause the Canadian Banks to create and discount
Acceptances, repay Canadian Revolving Advances and Acceptances in accordance
with the terms hereof and reborrow Canadian Revolving Advances and cause the
Canadian Banks to create and discount new Acceptances in accordance with the
applicable terms and conditions of this ARTICLE III.
Section 3.2 PROCEDURES FOR BORROWING UNDER THE CANADIAN REVOLVING
FACILITY. Work Wear may request Borrowings daily. Each Borrowing under the
Canadian Revolving Facility shall be funded by the Canadian Banks as either
Canadian Floating Rate Advances or the creation and discounting of Acceptances,
as Work Wear shall specify in the related notice of Borrowing or notice of
conversion pursuant to this SECTION 3.2 or SECTION 3.3. Canadian Floating Rate
Advances and Acceptances may be outstanding at the same time. It is understood,
however, that (a) in the case of a Borrowing which is to bear interest at the
Canadian Floating Rate, the principal amount of the Borrowing shall be in an
amount equal to or greater than C$500,000, and (b) in the case of the creation
and discounting of Acceptances, the principal amount of the Borrowing shall be
in an amount equal to C$1,500,000 or a higher integral multiple of C$500,000.
Work Wear shall give notice to the Canadian Agent of each proposed Borrowing not
later than 12:00 Noon, Toronto, Ontario time, at least one (1) Canadian Business
Day prior to a Borrowing which will be funded as a Canadian Floating Rate
Advance and at least three (3) Canadian Business Days prior to a Borrowing which
will be funded through the discounting of Acceptances. Each such notice shall be
effective upon receipt by the Canadian Agent, shall be in writing or by
telephone or telecopy transmission, to be confirmed in writing by Work Wear if
so requested by the Canadian Agent (in the form of EXHIBIT G), shall specify
whether the Borrowing is to bear interest initially at a Canadian Floating Rate
or is to be funded as a discounting of Acceptances and, in the case of a
Borrowing that is to be funded as a discounting of Acceptances, shall specify
the date and
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amount of the Acceptances and the Canadian Interest Period to be applicable
thereto. Promptly upon receipt of such notice (but in no event later than the
end of the Canadian Business Day of receipt of such notice), the Canadian Agent
shall advise each Canadian Bank of the proposed Borrowing. At or before 12:00
Noon, Toronto, Ontario time, on the requested Borrowing Date, each Canadian Bank
shall provide the Canadian Agent at the principal office of the Canadian Agent
in Toronto, Ontario (unless any such Bank and the Canadian Agent shall otherwise
agree) with immediately available funds covering such Canadian Bank's Percentage
of such Borrowing (constituting either proceeds of a Canadian Floating Rate
Advance or the BA Purchase Price with respect to the discounting of
Acceptances). Subject to satisfaction of the conditions precedent set forth in
ARTICLE V with respect to such Borrowing, the Canadian Agent shall pay over such
funds to Work Wear prior to the close of business on the Borrowing Date.
Section 3.3 CONVERTING CANADIAN FLOATING RATE FUNDINGS TO ACCEPTANCES;
PROCEDURES. So long as no Default or Event of Default shall exist, Work Wear may
convert all or any part of any outstanding Canadian Floating Rate Advances into
Acceptances by giving notice to the Canadian Agent of such conversion not later
than 12:00 Noon, Toronto, Ontario time, on a Canadian Business Day which is at
least three (3) Canadian Business Days prior to the date of the requested
conversion. Each such notice shall be effective upon receipt by the Canadian
Agent, shall be in writing or by telephone or telecopy transmission, to be
confirmed in writing by Work Wear if so requested by the Canadian Agent (in the
form of EXHIBIT H), shall specify the date and amount of such conversion, the
total amount of Canadian Revolving Advances to be so converted and the Canadian
Interest Period therefor. Promptly upon receipt of such notice, the Canadian
Agent shall advise each Canadian Bank thereof. Each conversion of Canadian
Floating Rate Advances to Acceptances shall be on a Canadian Business Day, and
the aggregate amount of each such conversion shall be at least C$1,500,000 or a
higher integral multiple of C$500,000.
Section 3.4 PROCEDURES AT END OF A CANADIAN INTEREST PERIOD. Unless
Work Wear requests creation and discounting of new Acceptances in accordance
with the procedures set forth below, each Canadian Bank shall automatically and
without request by Work Wear, make a Canadian Floating Rate Advance on the last
day of the relevant Canadian Interest Period in an amount sufficient to pay in
full all Acceptances maturing on such day. So long as no Default or Event of
Default shall exist, Work Wear may cause the creation and discounting of new
Acceptances at the end of the then applicable Canadian Interest Period by
notifying the Canadian Agent not later than 12:00 Noon, Toronto, Ontario time,
on a Canadian Business Day which is at least three (3) Canadian Business Days
prior to the first day of the new Canadian Interest Period. Each such notice
shall be in writing or by telephone or telecopy transmission, to be confirmed in
writing by Work Wear if so requested by the Canadian Agent (in the form of
EXHIBIT I), shall be effective when received by the Canadian Agent, and shall
specify the first day of the applicable Canadian Interest Period, the amount of
the new Acceptances to be created and the Canadian Interest Period therefor.
Promptly upon receipt of such notice, the Canadian Agent shall advise each
Canadian Bank thereof. Each
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new Canadian Interest Period shall begin on a Canadian Business Day and the
aggregate amount of the new Acceptances being created shall be in an amount
equal to C$1,500,000 or a higher integral multiple of C$500,000.
Section 3.5 PRO RATA TREATMENT - CANADIAN BANKS. All Canadian
Revolving Advances, Acceptances, conversions and repayments shall be effected so
that after giving effect thereto all Canadian Revolving Advances and Acceptances
shall be pro rata among the Canadian Banks according to their respective
Percentages.
Section 3.6 BANKERS' ACCEPTANCES. Acceptances shall be created,
purchased and repaid in accordance with the following:
(a) WORK WEAR DRAFTS. To enable the Canadian Banks to create
Acceptances in the manner specified in this SECTION 3.6, Work Wear shall
supply the Canadian Banks with such number of Drafts as they may reasonably
request, duly endorsed and executed on behalf of Work Wear by any one or
more of its officers. Each Canadian Bank shall exercise such care in the
custody and safekeeping of Drafts as it would exercise in the custody and
safekeeping of similar property owned by it. Each Canadian Bank, upon
request of Work Wear, will promptly advise Work Wear of the number and
designations, if any, of the uncompleted Drafts then held by it. The
signatures of such officers may be mechanically reproduced in facsimile and
Drafts and Acceptances bearing such facsimile signatures shall be binding
upon Work Wear as if they had been manually signed by such officers.
Notwithstanding that any of the individuals whose manual or facsimile
signatures appear on any draft as one of such officers may no longer hold
office as of the date thereof or as of the date of acceptance of a Draft by
a Canadian Bank or at any time hereafter, any Draft so signed shall be
valid and binding on Work Wear.
(b) FORM OF DRAFTS. Drafts tendered by Work Wear for acceptance by a
Canadian Bank shall be in the form provided by such Canadian Bank to Work
Wear and shall (i) be in the amount of C$100,000, C$500,000 or C$1,000,000,
individually and shall total such Canadian Bank's Percentage of a
Borrowing, (ii) be dated the date of the Borrowing, (iii) mature and be
payable by Work Wear on the last day of the Canadian Interest Period
designated by Work Wear with respect to such Drafts. Work Wear hereby
renounces, and shall not claim, any days of grace for payment of any
Acceptances.
(c) PROCEDURES ON BORROWING DATE. Not later than 12:00 Noon, Toronto,
Ontario time, on any Borrowing Date, each Canadian Bank shall (i) complete
one or more Drafts dated the date of such Borrowing, in an aggregate amount
designated by the Canadian Agent as being such Canadian Bank's proportion
of a requested Borrowing, (ii) stamp such Drafts as accepted by such
Canadian Bank and (iii) provide for the discounting of such Acceptances in
accordance with this SECTION 3.6.
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(d) ACCEPTANCE FEE. On the proposed Borrowing Date, Work Wear shall
pay to the Canadian Agent for the account of each Canadian Bank accepting a
Draft or Drafts, a stamping fee computed at an annual rate on the basis of
(i) the applicable Margin, (ii) the face amount of the Draft being accepted
and (iii) the term thereof (the "Acceptance Fee"); provided, however, that
if an Event of Default shall exist, (i) with respect to currently
outstanding Acceptances, Work Wear shall pay to the Canadian Agent for the
account of each Canadian Bank, an additional stamping fee for the unexpired
term of such Acceptances computed at a rate of two percent (2%) per annum
of the face amount of such Acceptances and (ii) with respect to new
Acceptances created thereafter, the applicable Margin shall be increased by
two percent (2%).
(e) BA PURCHASE PRICE. On the Borrowing Date, each Canadian Bank
shall deliver to the Canadian Agent the applicable BA Purchase Price for
the Acceptances created in accordance with notices received from the
Canadian Agent under SECTIONS 3.2, 3.3 or 3.4. Acceptances purchased by a
Canadian Bank may be held by it for its own account until maturity or sold
by it at any time prior thereto in any relevant market, in such Canadian
Bank's sole discretion.
(f) MATURITY DATE FOR ACCEPTANCES. Work Wear shall pay to the
Canadian Agent, and there shall become due and payable, at 12:00 Noon
Toronto, Ontario time, on the maturity date of each Acceptance, an amount
in Canadian Dollars in immediately available funds equal to the face amount
of such Acceptance so maturing. Work Wear shall make each payment of a
maturing Acceptance by deposit of the required funds to the Canadian Agent
or by requesting the Canadian Agent to debit Work Wear's demand deposit
account for the amount of such funds. If Work Wear fails to pay the face
amount of any Acceptance when and as the same shall become due, or cause
the creation and discounting of new Acceptances pursuant to SECTION 3.4,
the unpaid amount thereof shall automatically be converted to Canadian
Floating Rate Advances in accordance with SECTION 3.4, with the proceeds of
such Canadian Revolving Advances being used to pay in full each maturing
Acceptance.
Section 3.7 SETTING AND NOTICE OF BA PURCHASE PRICE. The applicable BA
Purchase Price for each Canadian Interest Period shall be determined by the
Canadian Agent between the opening of business and 12:00 Noon, Toronto, Ontario
time, on the first Canadian Business Day of such Canadian Interest Period,
whereupon notice thereof (which may be by telephone) shall be given by the
Canadian Agent to Work Wear and each Canadian Bank. Each such determination of
the applicable BA Purchase Price shall be conclusive and binding upon the
parties hereto, in the absence of demonstrable error. The Canadian Agent, upon
written request of Work Wear or any Canadian Bank, shall deliver to Work Wear or
such requesting Canadian Bank a statement showing the computations used by the
Canadian Agent in determining the applicable BA Purchase Price hereunder.
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Section 3.8 CANADIAN REVOLVING ADVANCES AND DRAFTS DENOMINATED IN
CANADIAN DOLLARS. All Canadian Revolving Advances shall be made to Work Wear and
all Drafts shall be payable in Canadian Dollars and shall be repaid by Work Wear
in Canadian Dollars. All interest accruing on outstanding Canadian Revolving
Advances and all Acceptance Fees and other fees payable in connection with or
determined in relation to the Canadian Revolving Facility shall be computed, and
paid, in Canadian Dollars.
Section 3.9 RESTRICTIONS ON CONVERSION FROM ACCEPTANCES TO CANADIAN
REVOLVING ADVANCES. If at any time the annual interest rate which would be
applicable to a Borrowing funded with Canadian Floating Rate Advances is less
than the annual effective interest rate on Acceptances (determined by applying
the applicable Discount and Acceptance Fees to a Borrowing funded by the
creation of Acceptances) (herein the "Pricing Differential"), the Canadian
Agent, in its discretion, by notice in writing to Work Wear, may require, and if
the Pricing Differential equals or exceeds one percent (1%), the Canadian Agent
shall require, that Work Wear cause all or a portion of maturing Acceptances to
be replaced with new Acceptances created and discounted in accordance with
SECTION 3.4.
Section 3.10 GUARANTY BY G&K ENTERPRISES. Pursuant to the terms and
conditions of the Guaranties executed by each G&K Enterprise, such G&K
Enterprise (other than Work Wear) shall guaranty to each Canadian Bank the due
and prompt payment of all Canadian Obligations.
ARTICLE IV
NOTES; INTEREST RATES; LOAN PERIODS; COMPUTATION OF INTEREST AND FEES
Section 4.1 NOTES; AMORTIZATION.
(a) US REVOLVING FACILITY. G&K Inc.'s obligation to pay all US
Revolving Advances made by a US Bank hereunder shall be evidenced by and
repayable in accordance with a US Revolving Note issued by G&K Inc. to such
US Bank. The aggregate unpaid principal amount of each US Revolving Note
shall bear interest at the applicable US Floating Rate unless a Eurodollar
Rate shall become applicable thereto pursuant to SECTIONS 2.3, 2.4 or 2.5,
and shall be payable on the applicable Maturity Date with respect thereto
or earlier in accordance with SECTION 9.2.
(b) CANADIAN REVOLVING FACILITY. Work Wear's obligation to pay all
Canadian Revolving Advances made by a Canadian Bank hereunder shall be
evidenced by and repayable in accordance with a Canadian Revolving Note
issued by Work Wear to such Canadian Bank. The aggregate unpaid principal
amount of each Canadian Revolving Note shall bear interest at the
applicable Canadian Floating Rate unless converted to an Acceptance
pursuant to SECTIONS 3.2, 3.3 or 3.4, and shall be
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payable on the applicable Maturity Date with respect thereto or earlier in
accordance with SECTION 9.2.
(c) TERM FACILITY. G&K Inc.'s obligation to pay all Term Advances
made by a US Bank hereunder shall be evidenced by and repayable with
interest in accordance with a Term Note issued by G&K Inc. to such US Bank.
The aggregate unpaid principal amount of each Term Note shall bear interest
at the applicable US Floating Rate unless a Eurodollar Rate shall become
applicable thereto pursuant to SECTIONS 2.3, 2.4 or 2.5.
(d) REGULAR AMORTIZATION OF TERM FACILITY. The Term Facility shall be
payable in quarterly installments, commencing on December 27, 1997, and
continuing on each Payment Date thereafter until the Maturity Date, when
all unpaid principal thereof shall be finally due and payable. Principal
due with respect to the Term Facility on each such Payment Date is set
forth below:
INSTALLMENT DUE DATES AMOUNT OF INSTALLMENT
December 27, 1997 through June 27, 1998 $3,333,333
September 26, 1998 through June 26, 1999 $3,750,000
September 25, 1999 through June 24, 2000 $8,750,000
September 30, 2000 through June 30, 2001 $13,750,000
September 29, 2001 through June 29, 2002 $15,000,000
September 28, 2002 through June 28, 2003 $15,000,000
September 27, 2003 through March 27, 2004 $16,250,000
June 30, 2004 entire unpaid balance
(e) ADDITIONAL AMORTIZATION OF TERM FACILITY. In addition to the
installments payable on the Term Facility pursuant to SUBSECTION(d), G&K
Inc. shall make the following additional payments, in each case to be
applied pro rata against each installment described under SUBSECTION(d) as
being scheduled for payment in the period September 25, 1999 through June
30, 2004, with such pro rata application being computed as a fraction, the
numerator of which is the amount of such installment and the denominator is
the aggregate amount of all such remaining unpaid installments (commencing
not earlier than September 25, 1999) as of the date of determination:
(i) EXCESS CASH FLOW PAYMENTS. For the fiscal year ending
June 27, 1998, an amount equal to seventy-five percent (75%) of the
Excess Cash Flow. For each subsequent fiscal year, an amount equal to
the product of the applicable percentage set forth below and the
Excess Cash Flow of the G&K Group as determined from its audited
financial statements for the immediately preceding fiscal year (herein
the "Excess Cash Flow Payments"), due and payable on the Fiscal
Quarter ending in September of each year:
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PERCENTAGE OF
FINANCIAL CONDITION EXCESS CASH FLOW
Level I Status 0%
Level II Status 50%
Level III Status 50%
Level IV Status 75%
Level V Status 75%
(ii) ASSETS HELD FOR SALE. An amount equal to the entire
consideration payable to a G&K Enterprise in connection with the sale
(or collection as to related assets not included in such sale) of any
Assets Held for Sale, including any portion of such consideration
which is deferred or payable over time, LESS all "Permitted
Deductions," shall be due and payable on the first Payment Date
occurring ten (10) days after closing of the sale of any such Assets
Held for Sale; provided, that collection of accounts receivable
relating to any Assets Held for Sale prior to closing of the sale of
such Assets Held for Sale shall not constitute a portion of the
consideration received by a G&K Enterprise for purposes of computing
the required prepayment due under this SUBSECTION (e)(ii). "Permitted
Deductions" as used in this SUBSECTION (e)(ii) shall mean (A) G&K
Inc.'s good faith estimate of the amount due and payable to the
Sellers under the Asset Purchase Agreement on account of any such
sale, (B) reasonable out-of-pocket costs and expenses actually
incurred by a G&K Enterprise in connection with the preparation or
sale of such Assets Held for Sale including (without limitation)
legal, accounting, environmental, appraisal, real estate brokerage,
investment banking and finders fees, costs and expenses actually
incurred on account of such preparation or sale of such Assets Held
for Sale, (C) the amount of any Withdrawal Liability (as defined in
SECTION 7.2 of the Asset Purchase Agreement) for which any G&K
Enterprise becomes liable in respect of any such sale, not exceeding,
however, $5,000,000 in the aggregate with respect to all Assets Held
for Sale and (D) the amount of any lease liabilities and purchase
money indebtedness incurred after the Closing Date with respect to new
assets being conveyed with such Assets Held for Sale, trade accounts
payable and other similar liabilities which have the effect of
reducing the amount of the purchase price received upon sale of such
Assets Held for Sale.
(iii) ASSETS SOLD IN THE ORDINARY COURSE. An amount equal to
that portion of the net proceeds received by any G&K Enterprise from
sales of assets (other than sales of inventory in the ordinary course
of business and Assets Held for Sale) which in any fiscal year exceeds
$10,000,000, due and payable on the first Payment Date after receipt
of more than $10,000,000 in any fiscal year; excluding, however,
intercompany sales of assets by and among the Canadian G&K
Enterprises, as to assets originally held by a Canadian G&K
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Enterprise, and sales of assets by and among the US G&K Enterprises,
as to assets originally held by a US G&K Enterprise.
(iv) PROCEEDS OF ADDITIONAL DEBT. An amount equal to 100% of
the proceeds of additional Debt incurred by a G&K Enterprise, due and
payable on the first Payment Date after receipt; PROVIDED, HOWEVER,
that if (A) any such Debt (other than subordinated debt) is permitted
pursuant to SECTION 8.2 or (B) the G&K Group shall have achieved Level
III Status, Level II Status or Level I Status for the two preceding
Fiscal Quarters, then no proceeds of any such additional Debt (other
than subordinated debt) need be applied to payment of the Term
Facility.
Section 4.2 INTEREST ON NOTES; DEFAULT RATE. The Borrowers shall pay
interest on the unpaid principal amount of each Funding for the period
commencing on the date of this Agreement until the unpaid principal amount of
each Funding is paid in full, in accordance with the following:
(a) US FLOATING RATE FUNDINGS. Subject to SUBSECTION(d) below, while
any outstanding principal of a US Note constitutes a US Floating Rate
Funding, the outstanding principal balance thereof shall bear interest at
an annual rate at all times equal to the US Floating Rate.
(b) CANADIAN FLOATING RATE FUNDINGS. Subject to SUBSECTION(d) below,
while any outstanding principal of a Canadian Note constitutes a Canadian
Floating Rate Funding, the outstanding principal balance thereof shall bear
interest at an annual rate at all times equal to the Canadian Floating
Rate.
(c) EURODOLLAR FUNDINGS. Subject to SUBSECTION(d) below, while any
outstanding principal of a US Note constitutes a Eurodollar Funding, the
outstanding principal balance thereof shall bear interest for the
applicable US Interest Period at an annual rate equal to the Eurodollar
Rate established with respect to such Eurodollar Funding in accordance with
SECTIONS 2.3, 2.4 or 2.5.
(d) DEFAULT RATE. From and after the occurrence of an Event of
Default and continuing thereafter until such Event of Default shall be
remedied or waived in writing by the Required Banks, the outstanding
principal balance of each Funding shall bear interest, until paid in full,
at a rate equal to the sum of (i) the interest rate otherwise in effect
with respect to such outstanding principal and (ii) two percent (2.0%) (the
"Default Rate").
(e) PAYMENT OF INTEREST. Interest accrued on all US Revolving
Advances shall be payable by G&K Inc. in US Dollars, in immediately
available funds, to the US Agent for the pro rata account of all US Banks,
based on their respective Percentages. Interest accrued on all Canadian
Revolving Advances shall be payable by Work Wear
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in Canadian Dollars, in immediately available funds, to the Canadian Agent
for the pro rata account of all Canadian Banks, based on their respective
Percentages.
Section 4.3 ADJUSTMENT OF MARGINS. Reductions and increases in the
Margins shall be made in accordance with the following:
(a) until the one hundred and eightieth (180th) day after the Closing
Date, all Margins shall be determined as if Level V Status were in effect
(regardless of actual financial performance);
(b) the immediately preceding four (4) Fiscal Quarters shall be used
in determining the Leverage Ratio to establish the Margin hereunder, except
that prior to the first anniversary of the Closing Date, (i) financial
results shall be annualized based upon only those Fiscal Quarters which
occurred after the Closing Date and (ii) the first Fiscal Quarter ending
after the Closing Date shall be deemed to be that period of time commencing
on June 28, 1997 and ending on September 27, 1997;
(c) adjustments will be made quarterly effective as of the fifth
(5th) US Business Day following receipt of the financial statements of the
G&K Group and quarterly certificates delivered under SECTION 7.1(b);
provided, however, that any adjustment to be made during the Fiscal Quarter
in which the 180-day period described in SUBSECTION(a) ends shall become
effective on the later to occur of (i) the fifth (5th) U.S. Business day
following receipt of the financial statements of the G&K Group as described
above or (ii) the first day immediately following the expiration of such
180-day period;
(d) if G&K Inc. fails to deliver any financial statements or
certificates when required under SECTION 7.1(b), the applicable Margin
shall be determined as if a Level V Status were in effect and such Level V
Status shall remain in effect until such time as the required financial
statements and certificates are received showing a different status to
exist subject however to SUBSECTION(c) above; and
(e) no reduction in the Margins will be made so long as there
continues to exist a Default or an Event of Default.
Section 4.4 CANADIAN INTEREST ACT. Work Wear and the Canadian Banks
agree that for purposes of the Interest Act (Canada) (a) the principle of
"deemed reinvestment of interest" shall not apply to any calculation of interest
under this Agreement and (b) the rates of interest applicable to outstanding
Canadian Floating Rate Advances or otherwise specified in this Agreement are
intended to be nominal rates and not effective rates or yields.
Section 4.5 OBLIGATION TO REPAY ADVANCES; REPRESENTATIONS. Each
Borrower shall be obligated to repay all Advances and Acceptances
notwithstanding the failure of an Agent to receive any written request therefor
or written confirmation thereof and notwithstanding the fact that the person
requesting the same was not in fact authorized to do
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so. Any request for a Borrowing under SECTION 2.3 or SECTION 3.2 or the issuance
of a Letter of Credit under SECTION 2.7, whether written, telephonic, telecopy
or otherwise, shall be deemed to be a representation by the Borrowers that
(a) the amount of the requested Borrowing (or the face amount of the Letter of
Credit), when added to the applicable Revolving Facility Outstanding Amount
would not exceed the applicable Revolving Commitment Amount and (b) the
statements set forth in SECTION 5.2 are correct as of the time of the request.
Section 4.6 RECORDKEEPING. Each Bank shall record in its records or,
at its option, on schedules retained with its Notes, the date and amount of each
Advance made by such Bank, and each repayment thereof. The Letter of Credit Bank
shall record in its records all pertinent information concerning each Letter of
Credit. Each Canadian Bank shall record in its records all pertinent information
concerning each Acceptance. The failure so to record any such amount or any
error in so recording any such amount shall not, however, limit or otherwise
affect the obligations of the Borrowers hereunder or under any Note to repay the
principal amount of the Advances, the Acceptance Amount or the Letter of Credit
Amount, together with all interest accrued thereon.
Section 4.7 INTEREST DUE DATES.
(a) US INTEREST DUE DATES. Accrued interest on each Eurodollar
Funding shall be due and payable on the last day of the US Interest Period
relating to such Eurodollar Funding; PROVIDED, HOWEVER, that if any US
Interest Period is longer than three (3) months, interest shall be due and
payable monthly in arrears on the last day of the third month occurring
after commencement of such US Interest Period, on the last day of each
three month period thereafter (if any) and on the last day of such US
Interest Period. Accrued interest on each US Floating Rate Funding shall be
due and payable in arrears on the each Payment Date and at maturity.
(b) CANADIAN INTEREST DUE DATES. Accrued interest on each Canadian
Floating Rate Advance shall be due and payable in arrears on each Payment
Date and at maturity.
Section 4.8 COMPUTATION OF INTEREST AND FEES. Interest accruing on the
US Notes and on the unreimbursed portion of any Letter of Credit Amount, all
Letter of Credit Fees and all other fees described in SECTION 4.9 shall be
computed on the basis of actual number of days elapsed in a year of three
hundred sixty (360) days. Interest on all Canadian Revolving Advances and all
Acceptance Fees shall be computed on the basis of the actual number of days
elapsed in a year of 365 or 366 days, as the case may be.
Section 4.9 FEES. The Borrowers shall pay fees to the Agents and the
Banks, commencing on the date hereof and continuing until all Obligations are
paid in full, in accordance with the following:
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(a) COMMITMENT FEES.
(i) G&K Inc. shall pay to the US Agent for the pro rata
account of the US Banks a commitment fee (the "US Commitment Fee")
equal to the applicable Margin in effect from time to time on the
daily average amount by which the US Revolving Commitment Amount
exceeds the US Revolving Facility Outstanding Amount, from the Closing
Date to and including the Revolving Commitment Termination Date,
payable quarterly in arrears on each Payment Date. Any such US
Commitment Fee remaining unpaid on the Revolving Commitment
Termination Date shall be due and payable on such date. The US
Commitment Fee shall be shared by the US Banks on the basis of their
respective Percentages of the US Revolving Facility.
(ii) Work Wear shall pay to the Canadian Agent for the pro rata
account of the Canadian Banks a commitment fee (the "Canadian
Commitment Fee") equal to the applicable Margin in effect from time to
time on the daily average amount by which the Canadian Revolving
Commitment Amount exceeds the Canadian Revolving Facility Outstanding
Amount, from the Closing Date to and including the Revolving
Commitment Termination Date, payable quarterly in arrears each Payment
Date. Any such Canadian Commitment Fee remaining unpaid on the
Revolving Commitment Termination Date shall be due and payable on such
date. The Canadian Commitment Fee shall be shared by the Canadian
Banks on the basis of their respective Percentages of the Canadian
Revolving Facility.
(b) ADMINISTRATIVE FEES. G&K Inc. shall pay to the US Agent and Work
Wear shall pay to the Canadian Agent the administrative fees described in
the commitment letter dated as of May 14, 1997.
(c) PAYMENT OF FEES. Fees accrued on account of the US Facilities
shall be payable by G&K Inc. in US Dollars, in immediately available funds,
to the US Agent for itself and for the account of those US Banks entitled
thereto. Fees accrued on account of the Canadian Revolving Facility shall
be payable by Work Wear in Canadian Dollars, in immediately available
funds, to the Canadian Agent for itself and for the account of the Canadian
Banks entitled thereto.
Section 4.10 USE OF PROCEEDS.
(a) TERM FACILITY. G&K Inc. shall use the proceeds of the Term
Facility (i) to fund the purchase of those assets from the Sellers as
specified in the Asset Purchase Agreement (the "Purchased Assets"), (ii) to
fund closing costs and (iii) to refinance existing Borrower indebtedness.
(b) REVOLVING FACILITIES. The Borrowers shall use the proceeds of the
initial Borrowings under the Revolving Facilities (i) to fund the purchase
of the Purchased
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Assets, (ii) to fund closing costs, (iii) to refinance existing
indebtedness of the Borrowers and (iv) for working capital purposes. The
proceeds of each subsequent Borrowing shall be used by the Borrowers for
their working capital purposes.
Section 4.11 VOLUNTARY REDUCTION OR TERMINATION OF THE COMMITMENTS;
PREPAYMENTS.
(a) REDUCTION OR TERMINATION OF REVOLVING COMMITMENTS.
(i) Each Borrower, from time to time upon not less than three
(3) Business Days' prior written notice to the appropriate Agent, may
permanently reduce its applicable Revolving Commitment Amount;
PROVIDED, HOWEVER, that no such reduction shall reduce its Revolving
Commitment Amount to an amount less than the corresponding Revolving
Facility Outstanding Amount. Any such voluntary reduction shall be pro
rata as to such Revolving Commitments according to a Bank's Percentage
of the applicable Revolving Facility and shall be in an amount equal
to $5,000,000 or C$1,000,000, as the case may be, or a higher integral
multiple of $1,000,000 or C$500,000, as the case may be.
(ii) Each Borrower at any time prior to the Revolving
Commitment Termination Date may terminate its applicable Commitment by
(A) providing to the appropriate Agent not less than three (3)
Business Days' prior written notice of its intention to so terminate
the such Revolving Commitment and (B) satisfying all related Revolving
Notes, Acceptances and all other monetary Obligations and returning,
or making a cash deposit with respect to, all outstanding Letters of
Credit.
(b) PREPAYMENTS. Each Borrower from time to time, but not more
frequently than once per week, with respect to the US Facilities, and
daily, with respect to the Canadian Facilities, except as permitted by the
appropriate Agent, may voluntarily prepay any Note or Acceptance in whole
or in part. In the event of either mandatory prepayment or voluntary
prepayment hereunder:
(i) any prepayment of a Facility shall be applied against
outstanding Fundings of each Bank under that Facility pro rata
according to each Bank's Percentage of that Facility;
(ii) each prepayment of the US Notes shall be made to the US
Agent not later than 12:00 Noon, Minneapolis, Minnesota time, on a US
Business Day, and funds received after that hour shall be deemed to
have been received by the US Agent on the next following US Business
Day;
(iii) each prepayment of the Canadian Notes shall be made to the
Canadian Agent not later than 12:00 Noon, Toronto, Ontario time, on a
Canadian Business Day, and funds received after that hour shall be
deemed to
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have been received by the Canadian Agent on the next following
Canadian Business Day;
(iv) each partial prepayment of Fundings which, at the time of
such prepayment, bear interest at a Eurodollar Rate (A) shall be
accompanied by accrued interest on such partial prepayment through the
date of prepayment and additional compensation calculated in
accordance with SECTION 4.15 and (B) shall be in an aggregate amount
equal to the applicable minimum Funding amount specified in
SECTION 2.5 for the applicable Facility and, after application of any
such prepayment, shall not result in a Eurodollar Funding remaining
outstanding in an amount less than such minimum Funding amount;
(v) each partial prepayment of Fundings with respect to a US
Facility which, at the time of such prepayment, bear interest at a US
Floating Rate, shall be in an aggregate amount equal to $5,000,000 or
a higher integral multiple of $1,000,000, unless (in either case) the
aggregate outstanding balance of all US Notes under the US Facility
being prepaid is less than such minimum Funding amount, in which event
any such prepayment may be in such lesser amount;
(vi) each partial prepayment of Acceptances (A) shall be
accompanied by accrued interest on such partial prepayment through the
date of prepayment and additional compensation calculated in
accordance with SECTION 4.15 and (B) shall be in an aggregate amount
equal to the applicable minimum amount specified in SECTION 3.4 and,
after application of any such prepayment, shall not result in an
Acceptance remaining outstanding in an amount less than such minimum
amount;
(vii) each partial prepayment of Fundings with respect to the
Canadian Revolving Facility which, at the time of such prepayment,
bear interest at a Canadian Floating Rate, shall be in an aggregate
amount equal to C$100,000 or a higher integral multiple of C$100,000
unless (in either case) the aggregate outstanding balance of all
Canadian Revolving Notes under the Canadian Revolving Facility is less
than such minimum Funding amount, in which event any such prepayment
may be in such lesser amount;
(viii) unless notified by G&K Inc. in writing to the contrary,
the US Agent shall apply all partial prepayments received on account
of the US Facilities to outstanding US Revolving Advances and, if no
US Revolving Advances are then outstanding, to outstanding Term
Advances; and
(ix) except as otherwise provided in SECTION 4.1, each partial
prepayment of the Term Facility shall be applied to principal
installments becoming due under the Term Facility in accordance with
SECTION 4.1(e).
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Section 4.12 PAYMENTS.
(a) MAKING OF PAYMENTS.
(i) All payments of principal and interest due with respect to
a Facility shall be made to that Facility's Agent for the account of
that Facility's Banks pro rata according to their Percentages;
PROVIDED, that any such payments so received by an Agent while an
Event of Default shall exist shall be allocated to the Banks in
accordance with SECTION 10.2.
(ii) All payments of Commitment Fees pursuant to
SECTION 4.9 (a) shall be made to the appropriate Agent for the account
of that Facility's Banks pro rata according to their Percentages of
that Facility. All payments of administrative fees pursuant to
SECTION 4.9(b) shall be made to the appropriate Agent for the
exclusive account of that Agent.
(iii) All such payments shall be made to the appropriate Agent
at its office, not later than 12:00 Noon, Minneapolis, Minnesota time
or Toronto Ontario time, as the case may be, on the date due, in
immediately available funds, and funds received after that hour shall
be deemed to have been received on the next following Business Day.
(iv) Each Borrower hereby authorizes the Agents to charge such
Borrower's demand deposit account(s) maintained with an Agent for the
amount of any such payment on its due date, but an Agent's failure to
so charge such account shall in no way affect the obligation of that
Borrower to make any such payment.
(v) Each Agent shall remit to each Bank in immediately
available funds on the same Business Day as received by the Agent its
share of all such payments received by the Agent for the account of
such Bank. If an Agent fails to remit any payment to any Bank when
required hereby, that Agent shall pay interest on demand to that Bank
for each day during the period commencing on the date such remittance
was due until the date such remittance is made at an annual rate equal
to the Federal Funds Rate or the Canadian Bank Rate, as the case may
be, for such day.
(vi) All payments under SECTIONS 4.13, 4.14 or 4.15 shall be
made by the Borrowers directly to the Bank entitled thereto.
(b) EFFECT OF PAYMENTS. Each payment by a Borrower to an Agent for
the account of any Bank pursuant to SECTION 4.12(a) shall be deemed to
constitute payment by that Borrower directly to such Bank, PROVIDED,
HOWEVER, that if any such payment by that Borrower to that Agent is
required to be returned to that Borrower for any reason whatsoever, then
that Borrower's obligation to such Bank with respect to such payment shall
be deemed to be automatically reinstated.
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(c) DISTRIBUTIONS BY AGENT. Unless an Agent shall have been notified
by a Bank or a Borrower prior to the date on which such Bank or such
Borrower is scheduled to make payment to such Agent of (in the case of a
Bank) the proceeds of an Advance or an Acceptance to be made by it
hereunder or (in the case of a Borrower) a payment to such Agent for the
account of one or more of the Banks hereunder (such payment by a Bank or a
Borrower (as the case may be) being herein called a "Required Payment"),
which notice shall be effective upon receipt, that it does not intend to
make the Required Payment to such Agent, such Agent may assume that the
Required Payment has been made and may, in reliance upon such assumption
(but shall not be required to), make the amount thereof available to the
intended recipient(s) on such date and, if such Bank or such Borrower (as
the case may be) has not in fact made the Required Payment to the Agent,
the recipient(s) of such payment shall, on demand, repay to the Agent the
amount so made available together with interest thereon for each day during
the period commencing on the date such amount was so made available by the
Agent until the date the Agent recovers such amount at a rate (i) equal to
the Federal Funds Rate or Canadian Bank Rate (as the case may be) for such
day, in the case of a Required Payment owing by a Bank, or (ii) equal to
the applicable rate of interest as provided in this Agreement, in the case
of a Required Payment owing by a Borrower.
(d) SETOFF. Each Borrower agrees that each Bank, subject to such
Bank's sharing obligations set forth in SECTION 10.6, shall have all rights
of setoff and bankers' lien provided by applicable law, and in addition
thereto, each Borrower agrees that if at any time any amount is due and
owing by a Borrower under this Agreement to any Bank at a time when an
Event of Default shall exist, any Bank may apply any and all balances,
credits, and deposits, accounts or moneys of the Borrowers then or
thereafter in the possession of such Bank (excluding, however, any trust or
escrow accounts held by a Borrower for the benefit of any third party) to
the payment thereof.
(e) DUE DATE NOT ON BUSINESS DAY. If any payment of principal of or
interest on any Floating Rate Funding or any fees payable hereunder falls
due on a day which is not a Business Day, then such due date shall be
deemed to be the immediately preceding Business Day.
(f) APPLICATION OF PAYMENTS. Except as otherwise provided herein, so
long as no Default or Event of Default shall exist, each payment received
from a Borrower shall be applied to such Facility or other Obligations as
that Borrower shall specify by notice to be received by the appropriate
Agent on or before the date of such payment, or in the absence of such
notice, as such Agent shall determine in its discretion. Concurrently with
each remittance to any Bank of its appropriate share of any such payment
(based upon such Bank's Percentage of the Facility to which such payment
relates), such Agent shall advise such Bank as to the application of such
payment. Except as otherwise provided herein, while any Default or Event of
Default shall exist,
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each Bank shall have the right to apply all payments received by it from a
Borrower as such Bank may determine in its discretion.
Section 4.13 TAXES. Subject to SECTION 4.16 hereof, all payments made
by a Borrower to an Agent or a Bank (herein a "Payee") under or in connection
with this Agreement, the Notes or the Acceptances shall be made without any
setoff or other counterclaim, and shall be free and clear of and without
deduction for or on account of any present or future taxes now or hereafter
imposed by any governmental or other authority, except to the extent that any
such deduction or withholding is compelled by law. As used herein, the term
"Taxes" shall include all income, excise and other taxes of whatever nature
(other than taxes generally assessed on the overall net income of a Payee by the
government or other authority of the country, state, province or political
subdivision in which such Payee is incorporated or in which the office through
which such Payee is acting is located) as well as all levies, imposts, duties,
charges, or fees of whatever nature. "Taxes" shall not include, however, any
foreign withholding taxes or similar deductions imposed solely as a result of a
Bank's election to make a Funding through a foreign office of such Bank. If a
Borrower is compelled by law to make any deductions or withholdings on account
of any Taxes (including any foreign withholding) it will:
(a) pay to the relevant authorities the full amount required to be so
withheld or deducted;
(b) pay such additional amounts (including, without limitation, any
penalties, interest or expenses) as may be necessary in order that the net
amount received by the Payee after such deductions or withholdings
(including any required deduction or withholding on such additional
amounts) shall equal the amount the Payee would have received had no such
deductions or withholdings been made; and
(c) promptly forward to the Agent (for delivery to the appropriate
Payee) an official receipt or other documentation satisfactory to the Agent
evidencing such payment to such authorities.
The amount that a Borrower shall be required to pay to a Payee pursuant to the
foregoing clause (b) shall be reduced, to the extent permitted by applicable
law, by the amount of any offsetting tax benefit which such Payee receives as
the result of such Borrower's payment to the relevant authorities as reasonably
determined by such Payee; PROVIDED, HOWEVER, that if such Payee shall
subsequently determine that it has lost the benefit of all or a portion of such
tax benefit, such Borrower shall promptly remit to such Payee the amount
certified by such Payee to be the amount necessary to restore such Payee to the
position it would have been in if no payment had been made pursuant to this
sentence. If any Taxes otherwise payable by a Borrower pursuant to the foregoing
are directly asserted against a Payee, such Payee may pay such taxes and such
Borrower promptly shall reimburse such Payee to the full extent otherwise
required under this SECTION 4.13. The obligations of the Borrowers under this
SECTION 4.13 shall survive any termination of this Agreement.
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Section 4.14 INCREASED COSTS; CAPITAL ADEQUACY; FUNDING EXCEPTIONS.
(a) INCREASED COSTS ON EURODOLLAR ADVANCES. If Regulation D of the
Board of Governors of the Federal Reserve System or after the date of this
Agreement the adoption of any applicable law, rule or regulation, or any
change in any existing law, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration
thereof, or compliance by a US Bank with any request or directive (whether
or not having the force of law) of any such authority, central bank or
comparable agency, shall:
(i) subject a US Bank to or cause the withdrawal or
termination of any exemption previously granted to a US Bank with
respect to, any tax, duty or other charge with respect to its
Eurodollar Fundings or its obligation to make Eurodollar Fundings, or
shall change the basis of taxation of payments to a US Bank of the
principal of or interest under this Agreement in respect of its
Eurodollar Fundings or its obligation to make Eurodollar Fundings
(except for changes in the rate of tax on the overall net income of a
US Bank imposed by the jurisdictions in which a US Bank's principal
executive office is located); or
(ii) impose, modify or deem applicable any reserve (including,
without limitation, any reserve imposed by the Board of Governors of
the Federal Reserve System, but excluding any reserve included in the
determination of interest rates pursuant to SECTION 4.2), special
deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended by, a US Bank; or
(iii) impose on a US Bank any other condition affecting its
making, maintaining or funding of its Eurodollar Fundings or its
obligation to make Eurodollar Fundings;
and the result of any of the foregoing is to increase the cost to an
affected US Bank of making or maintaining any Eurodollar Funding, or to
reduce the amount of any sum received or receivable by such US Bank under
this Agreement or under its Notes with respect to a Eurodollar Funding,
then the affected US Bank will notify G&K Inc. and the US Agent of such
increased cost and within fifteen (15) days after demand by such US Bank
(which demand shall be accompanied by a statement setting forth the basis
of such demand) G&K Inc. shall pay to such US Bank such additional amount
or amounts as will compensate such US Bank for such increased cost or such
reduction; provided, however, that no such increased cost or such reduction
shall be payable by G&K Inc. for any period longer than ninety (90) days
prior to the date on which notice thereof is delivered to G&K Inc. Each US
Bank will promptly notify G&K Inc. of any event of which it has knowledge,
occurring after the date hereof, which will entitle such US Bank to
compensation pursuant to this SECTION 4.14. If G&K Inc. receives notice
from a US Bank of any event which will entitle such US Bank to compensation
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pursuant to this SECTION 4.14, G&K Inc. may prepay any then outstanding
Eurodollar Fundings or notify the affected US Bank that any pending request
for a Eurodollar Funding shall be deemed to be a request for a Floating
Rate Funding, in each case subject to the provisions of SECTION 4.15.
(b) CAPITAL ADEQUACY. If a Bank determines at any time that such
Bank's Return has been reduced as a result of any Capital Adequacy Rule
Change, such Bank may require the appropriate Borrower to pay to such Bank
the amount necessary to restore such Bank's Return to what it would have
been had there been no Capital Adequacy Rule Change. For purposes of this
SECTION 4.14(b), the following definitions shall apply:
(i) "Return", for any calendar quarter or shorter period,
means the percentage determined by dividing (A) the sum of interest
and ongoing fees earned by a Bank under this Agreement during such
period by (B) the average capital such Bank is required to maintain
during such period as a result of its being a party to this Agreement,
as determined by such Bank based upon its total capital requirements
and a reasonable attribution formula that takes account of the Capital
Adequacy Rules then in effect. Return may be calculated for a Bank for
each calendar quarter and for the shorter period between the end of a
calendar quarter and the date of termination in whole of this
Agreement.
(ii) "Capital Adequacy Rule" means any law, rule, regulation or
guideline regarding capital adequacy that applies to a Bank, or the
interpretation thereof by any governmental or regulatory authority.
Capital Adequacy Rules include rules requiring financial institutions
to maintain total capital in amounts based upon percentages of
outstanding loans, binding loan commitments and letters of credit.
(iii) "Capital Adequacy Rule Change" means any change in any
Capital Adequacy Rule occurring after the date of this Agreement, but
does not include any changes in applicable requirements that at the
date hereof are scheduled to take place under the existing Capital
Adequacy Rules or any increases in the capital that a Bank is required
to maintain to the extent that the increases are required due to a
regulatory authority's assessment of such Bank's financial condition.
The initial notice sent by a Bank shall be sent as promptly as practicable
after such Bank learns that its Return has been reduced, shall include a
demand for payment of the amount necessary to restore such Bank's Return
for the quarter in which the notice is sent, and shall state in reasonable
detail the cause for the reduction in such Bank's Return and such Bank's
calculation of the amount of such reduction. Thereafter, a Bank may send a
new notice during each calendar quarter setting forth the calculation of
the reduced Return for that quarter and including a demand for payment of
the
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amount necessary to restore such Bank's Return for that quarter. A Bank's
calculation in any such notice shall be conclusive and binding absent
demonstrable error.
(c) BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR. If with
respect to any Interest Period:
(i) the US Agent determines that, or the Required US Banks
determine and advise the US Agent that, deposits in US dollars (in the
applicable amounts) are not being offered in the London interbank
eurodollar market for such US Interest Period; or
(ii) the US Agent otherwise determines, or the Required US
Banks determine and advise the US Agent (which determination shall be
binding and conclusive on all parties), that by reason of
circumstances affecting the London interbank eurodollar market
adequate and reasonable means do not exist for ascertaining the
applicable Eurodollar Rate; or
(iii) the Canadian Agent determines, or the Required Canadian
Banks determine and advise the Canadian Agent (which determination
shall be binding and conclusive on all parties), that by reason of
circumstances affecting the market for bankers' acceptances
denominated in Canadian Dollars there is no market in Canada for such
bankers' acceptances or that the demand therefor is insufficient to
justify the Canadian Banks continuing to create and sell (or purchase)
bankers' acceptances in such market; or
(iv) the Required US Banks or the Required Canadian Banks, as
the case may be, advise the appropriate Agent that the Eurodollar Rate
(Reserve Adjusted), the BA Purchase Price or the Acceptance Fee, as
determined by such Agent, will not adequately and fairly reflect the
cost to such Banks of funding or maintaining (as the case may be) any
Funding or Borrowing for such Interest Period, or that the funding or
making (as the case may be) of Eurodollar Advances or Acceptances has
become impracticable as a result of an event occurring after the date
of this Agreement which in the opinion of such Banks materially
affects such Eurodollar Advances or Acceptances;
THEN the appropriate Agent shall promptly notify the affected parties and
(A) in the event of any occurrence described in the foregoing clauses (i)
and (ii), G&K Inc. shall enter into good faith negotiations with each
affected Bank in order to determine an alternate method to determine the
Eurodollar Rate for such Bank, and during the pendency of such negotiations
with any Bank, such Bank shall be under no obligation to make any new
Eurodollar Fundings and (B) in the event of any occurrence described in the
foregoing clauses (iii) or (iv), for so long as such circumstances shall
continue, no Bank shall be under any obligation to make any new Eurodollar
Fundings or create any Acceptances.
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(d) ILLEGALITY. If any change in (including the adoption of any new)
applicable laws or regulations, or any change in the interpretation of
applicable laws or regulations by any governmental authority, central bank,
comparable agency or any other regulatory body charged with the
interpretation, implementation or administration thereof, or compliance by
a Bank with any request or directive (whether or not having the force of
law) of any such authority, central bank, comparable agency or other
regulatory body, should make it or, in the good faith judgment of the
affected Bank, shall raise a substantial question as to whether it is
unlawful for such Bank to make, create, maintain or fund Eurodollar
Fundings or Acceptances, then (i) the affected Bank shall promptly notify
the affected Borrower and the appropriate Agent, (ii) the obligation of the
affected Bank to make, maintain or convert into Eurodollar Fundings or
Acceptances shall, upon the effectiveness of such event, be suspended for
the duration of such unlawfulness, and (iii) for the duration of such
unlawfulness, any notice by a Borrower pursuant to
SECTIONS 2.3, 2.4 or 2.5 or 3.2, 3.3 or 3.4 requesting the affected Bank
to make, continue making or convert into Eurodollar Fundings or Acceptances
shall be construed as a request to make or to continue making Floating Rate
Fundings.
Section 4.15 FUNDING LOSSES. Each Borrower hereby agrees that upon
demand by a Bank (which demand shall be accompanied by a statement setting forth
the basis for the calculations of the amount being claimed) such Borrower will
indemnify such Bank against any loss or expense which such Bank may have
sustained or incurred (including, without limitation, any net loss or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such Bank to fund or maintain Eurodollar Fundings or Acceptances) or
which such Bank may be deemed to have sustained or incurred, as reasonably
determined by such Bank, (i) as a consequence of any failure by such Borrower to
make any payment when due of any amount due hereunder in connection with any
Eurodollar Fundings or Acceptances, (ii) due to any failure of a Borrower to
borrow or convert any Eurodollar Fundings or Acceptances on a date specified
therefor in a notice thereof or (iii) due to any payment or prepayment of any
Eurodollar Funding or Acceptance on a date other than the last day of the
applicable Interest Period for such Eurodollar Funding or Acceptance. For this
purpose, all notices under SECTIONS 2.3, 2.4 and 2.5 shall be deemed to be
irrevocable.
Section 4.16 RIGHT OF BANKS TO FUND THROUGH OTHER OFFICES. Each Bank,
if it so elects, may fulfill its agreements hereunder with respect to any
Funding or the creation and discounting of any Acceptance by causing a foreign
branch or affiliate of such Bank to make such Funding or create and discount any
Acceptance; PROVIDED, that the obligation of a Borrower to repay such Funding or
Acceptance shall nevertheless be to such Bank, and such Funding or Acceptance
shall be deemed held by such Bank for the account of such branch or affiliate.
If either Borrower is required to pay additional amounts to or for the account
of any Bank as a result of an election by such Bank pursuant to this
SECTION 4.16 to fund through an office which is not located in the United
States, with respect to US Banks, or which is not
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located in Canada, with respect to Canadian Banks, then (i) such Bank will
change the jurisdiction of such funding office if, in the reasonable judgment of
such Bank, such change (x) will eliminate or reduce any such additional payment
which may hereafter accrue and (y) it is not otherwise disadvantageous to such
Bank or (ii) if such Bank does not change the jurisdiction of its funding office
established pursuant to this SECTION 4.16, the Borrower shall have the right to
require that such Bank assign its Commitments and Notes to a substitute Bank
pursuant to the terms and conditions, and subject to the approvals required, in
SECTION 10.2.
Section 4.17 DISCRETION OF BANKS AS TO MANNER OF FUNDING.
Notwithstanding any provision of this Agreement to the contrary, each Bank shall
be entitled to fund and maintain all or any part of its Eurodollar Fundings in
any manner it deems fit, it being understood, however, that for the purposes of
this Agreement (specifically including, without limitation, SECTION 4.15 hereof)
all determinations hereunder shall be made as if each Bank had actually funded
and maintained each Eurodollar Funding during each US Interest Period for such
Eurodollar Funding through the purchase of deposits having a maturity
corresponding to such US Interest Period and bearing an interest rate equal to
the appropriate Eurodollar Rate for such US Interest Period.
Section 4.18 AVERAGING AND ATTRIBUTION; SURVIVAL OF PROVISIONS. Each
Bank may use reasonable averaging and attribution methods in determining
compensation pursuant to such SECTIONS 4.13, 4.14 or 4.15 and the provisions of
SECTIONS 4.13, 4.14 and 4.15 shall survive termination of this Agreement.
Section 4.19 RELEASE OF COLLATERAL. The Banks hereby agree to release
Collateral, and the Agents are hereby authorized and directed to execute and
deliver to the Borrowers and Guarantors such UCC and PPSA termination statements
and other instruments of termination, satisfaction and release as the Borrowers
may request, at the sole cost and expense of the Borrowers, as may be
appropriate in accordance with the following:
(a) Upon the later of (i) the date of delivery of the annual audit
report of the G&K Group for the fiscal year ended June 27, 1998 or (ii) the
date on which the G&K Group shall have achieved Level III Status for two
consecutive Fiscal Quarters, the Agents shall release any and all
Collateral and all Obligations shall thereafter constitute unsecured
Obligations; subject, however, to confirmation by the Agents that, upon
release of such Collateral (i) no Default or Event of Default will then
exist and (ii) no liens (except Permitted Liens) will remain outstanding
against any Collateral.
(b) Upon request of a Borrower, and provided that no Default or Event
of Default shall then exist hereunder, the appropriate Agent shall release
a specified item of Collateral upon receiving from G & K, Inc. a written
certification that (i) such item of Collateral constitutes an Asset Held
for Sale and has been sold by a G&K Enterprise and that the proceeds
thereof will be paid to the US Agent for application to outstanding
Obligations in accordance with SECTION 4.1(e)(ii) or (ii) such item of
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Collateral has been sold by a G&K Enterprise in accordance with the
restrictions set forth in SECTION 8.6 and that, when added to the book
value of all other assets sold by any G&K Enterprise during that fiscal
year, the aggregate book value of all such sales does not exceed
$15,000,000 as provided therein.
Section 4.20 LIMITATION ON AVAILABILITY OF FIXED RATE FUNDINGS.
Notwithstanding anything in ARTICLES II or III to the contrary, neither
Eurodollar Fundings nor Acceptances will be available to either Borrower until
the earlier to occur of (i) thirty (30) US Business Days after the Closing Date
or (ii) the date on which the Borrowers receive written notice from the Agents
advising that the restriction set forth in this SECTION 4.20 is terminated.
ARTICLE V
CONDITIONS OF LENDING
Section 5.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCES. The
obligation of the Banks to fund the initial Advances or issue any Letter of
Credit is subject to the condition precedent that the US Agent shall have
received the following, each in form and substance satisfactory to the Required
Banks:
(a) The Notes, properly executed on behalf of the Borrowers.
(b) Drafts, in blank, in sufficient numbers as may be required by the
Canadian Banks, properly executed on behalf of Work Wear.
(c) The Guaranties, properly executed on behalf of the appropriate
Guarantors.
(d) The Security Documents, properly executed on behalf of the
appropriate G&K Enterprise.
(e) The Collateral Pledge Agreements, duly executed by G&K Inc., G&K
Co. and Work Wear, together with the original certificates evidencing the
stock covered thereby and blank assignments of that stock duly executed by
G&K Inc., G&K Co. and Work Wear.
(f) Current searches of appropriate filing offices (including,
without limitation, patent and trademark offices, secretaries of state and
county recorders) showing (i) that no state or federal tax liens have been
filed and remain in effect against any Borrower, any Guarantor or any of
the Purchased Assets, (ii) that no financing statements or other
notifications or filings have been filed and remain in effect against any
Borrower, any Guarantor or any of the Purchased Assets, other than those
constituting Permitted Liens or for which the US Agent has received an
appropriate release, termination or satisfaction, and (iii) that the Agents
have duly filed all financing statements necessary to perfect the security
interests granted to the Agents
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and the Banks, to the extent such security interests are capable of being
perfected by filing.
(g) A certified copy of the resolutions of the board of directors of
the Borrowers and Guarantors evidencing approval of all Loan Documents and
the other matters contemplated hereby.
(h) Copies of the Articles of Incorporation and Bylaws of the
Borrowers and Guarantors, certified by the Secretary or Assistant Secretary
of the Borrowers and Guarantors as being true and correct copies thereof.
(i) Certificates of good standing of the Borrowers and Guarantors,
dated not more than sixty (60) days prior to the date hereof, and evidence
satisfactory to the US Agent that each of the Borrowers and Guarantors is
qualified to conduct its business in each state where it presently conducts
such business if failure to obtain any such qualification or licensing
would have a Material Adverse Effect.
(j) A signed copy of a certificate of the Secretary or an Assistant
Secretary of the Borrowers and Guarantors which shall certify the names of
the officers of the Borrowers and Guarantors authorized to sign the Loan
Documents and the other documents or certificates to be delivered pursuant
to this Agreement, including requests for Advances, Eurodollar Fundings and
Acceptances, together with the true signatures of such officers. The Agents
and each Bank may conclusively rely on such certificates until they shall
receive a further certificate of the Secretary or an Assistant Secretary of
the Borrowers or Guarantors, as the case may be, canceling or amending the
prior certificate and submitting the signatures of the officers named in
such further certificate.
(k) Certificates of the insurance required under the Security
Agreements, naming the appropriate Agent, as collateral agent for all
appropriate Banks, as lender's loss payee thereunder, together with an
acceptable lender's loss payable endorsement.
(l) Collateral examination reports for such Collateral as may be
required by the Agents.
(m) Audited financial statements for the period ended June 29, 1996,
together with (i) forecasted financial statements for the G&K Group giving
effect to acquisition of the Purchased Assets in the form attached hereto
as SCHEDULE 6.5 and (ii) such information as the Agents may reasonably
request to confirm the tax, legal and business assumptions relied upon in
such pro forma financial statements.
(n) A signed copy of an opinion of counsel for each of the Borrowers
and Guarantors, addressed to the Banks.
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(o) Copies of the Asset Purchase Documents, properly executed on
behalf of the parties thereto, certified by the Secretary or Assistant
Secretary of G&K Inc. as being true and correct copies thereof.
(p) A certificate of G&K Inc.'s chief financial officer setting forth
the calculation of the purchase price for the Purchased Assets showing all
pre-closing and post-closing adjustments (as estimated by G&K Inc. on the
Closing Date), and stating that such fully adjusted purchase price shall
not exceed $300,000,000, together with such supporting evidence as the
Agents may reasonably require.
(q) Evidence that simultaneously with the initial Advance, all
conditions precedent to effectiveness of the Asset Purchase Documents shall
have been satisfied or waived and that the Asset Purchase shall have been
consummated substantially in accordance with the Asset Purchase Agreement.
(r) A financial analysis of the Purchased Assets and such other
audits completed by Arthur Andersen and all other due diligence items with
respect thereto that the Agents have reasonably requested.
(s) A copy of a fairness opinion from G&K Inc.'s investment banker
addressed to G&K Inc.'s board of directors as to the terms of the purchase
of the Purchased Assets.
(t) Environmental audits and other information regarding the
condition of real estate owned and to be owned by any G&K Enterprise,
whether constituting Purchased Assets or otherwise, together with copies of
all real estate appraisals obtained by any G&K Enterprise as to any such
real estate and, if requested by the Required Banks, appropriate estimates
of any remediation exposure, clean up costs or other potential liability
known by any officer of a G&K Enterprise for the past or present violation
of any Environmental Law.
(u) Evidence satisfactory to the Agents of the satisfaction and
payment in full of all outstanding credit facilities of any G&K Enterprise.
(v) Evidence of satisfactory compliance with all requirements of the
Hart Scott Rodino Act.
(w) Payment of all fees and expenses then due and payable pursuant to
the commitment letter dated as of May 14, 1997 or otherwise pursuant to
SECTIONS 4.9 and 11.4.
(x) Such other documents as any Bank may reasonably request.
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Section 5.2 CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation of
the Banks to fund any Borrowing or issue a Letter of Credit shall be subject to
the further conditions precedent that on such date:
(a) the representations and warranties contained in ARTICLE VI hereof
are correct in all material respects on and as of the date of such
Borrowing or Letter of Credit as though made on and as of such date, except
to the extent that such representations and warranties relate solely to an
earlier date; and
(b) no event has occurred and is continuing, or would result from
such Borrowing or Letter of Credit, which constitutes a Default or an Event
of Default.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Borrowers represent and warrant to the Banks as follows:
Section 6.1 CORPORATE EXISTENCE AND POWER; NAMES; CHIEF EXECUTIVE
OFFICES. Each G&K Enterprise is a corporation duly incorporated, validly
existing and in good standing under the laws of its respective state of
incorporation, and is duly licensed or qualified to transact business in all
jurisdictions where the character of the property owned or leased or the nature
of the business transacted by it makes such licensing or qualification necessary
and where failure to obtain such licensing or qualification would have a
Material Adverse Effect on that G&K Enterprise. Each G&K Enterprise has all
requisite power and authority, corporate or otherwise, to conduct its business,
to own its properties and to execute and deliver, and to perform all of its
obligations under, the Loan Documents. Within the last twelve (12) months, the
G&K Group has done business solely under the names set forth in SCHEDULE 6.1
hereto. The chief executive offices and principal places of business of each G&K
Enterprise are located at the addresses set forth in SCHEDULE 6.1, and all
material records relating to each G&K Enterprise's business are kept at that
location.
Section 6.2 AUTHORIZATION FOR BORROWINGS AND LETTERS OF CREDIT; NO
CONFLICT AS TO LAW OR AGREEMENTS. The execution, delivery and performance by the
Borrowers and Guarantors of the Loan Documents, and the Letters of Credit and
Borrowings from time to time obtained hereunder, have been duly authorized by
all necessary corporate action and do not and will not (i) require any consent
or approval which has not been obtained prior to the date hereof, (ii) require
any authorization, consent or approval by, or registration, declaration or
filing (other than filing of financing statements as contemplated hereunder)
with, or notice to, any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any third party, except such
authorization, consent, approval, registration, declaration, filing or notice as
has been obtained, accomplished or given prior to the date hereof, (iii) violate
any provision of any law, rule or regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System) or of any
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order, writ, injunction or decree presently in effect having applicability to
any G&K Enterprise or of the Articles of Incorporation or Bylaws of any G&K
Enterprise, (iv) result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other material agreement, lease or
instrument to which any G&K Enterprise is a party or by which it or its
properties may be bound or affected, or (v) result in, or require, the creation
or imposition of any mortgage, deed of trust, pledge, lien, security interest or
other charge or encumbrance of any nature upon or with respect to any of the
properties now owned or hereafter acquired by any G&K Enterprise (other than as
required hereunder in favor of the Agents).
Section 6.3 LEGAL AGREEMENTS. Each of the Loan Documents constitutes
the legal, valid and binding obligations and agreements of the applicable
Borrower or Guarantor, enforceable against them in accordance with its terms,
except to the extent that enforcement thereof may be limited by applicable
bankruptcy, insolvency or similar laws now or hereafter in effect affecting
creditors' rights generally and by general principles of equity.
Section 6.4 SUBSIDIARIES. Each member of the G&K Group and all
Subsidiaries thereof are set forth and described in the organizational chart
attached hereto as SCHEDULE 6.4, as amended from time to time as any new
Subsidiaries are created. As to each entity shown in such organizational chart
which does not constitute a Borrower or a Guarantor hereunder, the book value of
all assets of such entity is less than US$100,000.
Section 6.5 FINANCIAL CONDITION; NO ADVERSE CHANGE.
(a) G&K Inc. has furnished to the Agents audited consolidated
financial statements of the G&K Group for its fiscal year ended June 29,
1996, and unaudited financial statements of the G&K Group for the third
Fiscal Quarter ended March 29, 1997, and those statements fairly present
the financial condition of the G&K Group on the dates thereof and the
results of operations and cash flows for the periods then ended (subject to
year-end audit adjustments) and were prepared in accordance with GAAP.
(b) G&K Inc. has furnished to the Agents the projected opening
balance sheet reflecting the Asset Purchase and projections for the fiscal
years of the G&K Group through June of 2002, in the form attached hereto as
SCHEDULE 6.5. These documents were prepared in accordance with GAAP, are
the most accurate projected opening balance sheet and projections available
and are identical to those used by the Borrowers for internal planning
purposes.
(c) Since the date of the most recent financial statements, there has
not occurred any event or circumstance that would have a Material Adverse
Effect.
Section 6.6 LITIGATION. There is no Material Litigation pending or, to
the knowledge of any officer of a G&K Enterprise, threatened against or
affecting any officer of a
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G&K Enterprise or the properties of any G&K Enterprise before any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, except as set forth and described in SCHEDULE 6.6.
Section 6.7 REGULATION U. No G&K Enterprise has engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of any Borrowing will be
used to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock.
Section 6.8 TAXES. Except as disclosed in SECTION 8.1, each G&K
Enterprise has paid or caused to be paid to the proper authorities when due all
federal, state and local taxes required to be withheld by it, except for any
such taxes subject to state withholding liability which do not constitute a
material liability and are not known by any officer of a G&K Enterprise, or, if
known, such G&K Enterprise is diligently proceeding in good faith to resolve
and, if required, pay all such amounts and, with respect to which, such G&K
Enterprise shall have set aside adequate reserves. Except as disclosed in
SCHEDULE 8.1, each G&K Enterprise has filed all federal, national, state,
provincial and local tax returns which to the knowledge of the officers of the
G&K Group, are required to be filed, and each G&K Enterprise has paid or caused
to be paid to the respective taxing authorities all taxes as shown on said
returns or on any assessment received by it to the extent such taxes have become
due, except for any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested by that G&K Enterprise in good
faith and by proper proceedings and for which that G&K Enterprise shall have set
aside adequate reserves.
Section 6.9 TITLES AND LIENS. Each G&K Enterprise has good title to
all properties and assets reflected in the latest balance sheet referred to in
SECTION 6.5 (including without limitation all Collateral), free and clear of all
mortgages, security interests, liens and encumbrances, except for Permitted
Liens. In addition, no financing statement naming any G&K Enterprise as debtor
is on file in any jurisdiction except to perfect only security interests
permitted by SECTION 8.1.
Section 6.10 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth and described in SCHEDULE 6.10, no US G&K
Enterprise maintains and none has in the past maintained any Plan. No fact
or circumstance that is reasonably expected to have a material adverse
effect on a Plan's qualification under Code Section 401(a) exists in
connection with any Plan sponsored by a US G&K Enterprise. No US G&K
Enterprise:
(i) sponsors any Defined Benefit Plan other than any
Multi-Employer Plan that has any accumulated funding deficiency within
the meaning of ERISA Section 302(a)(2); or
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(ii) has any material liability, or knows of any fact or
circumstance that could reasonably be expected to result in any
material liability to the PBGC, the Internal Revenue Service, the US
Department of Labor or any participant, or class of participants, in
connection with any Plan (other than the funding or payment of
benefits that are or may become payable to participants or
beneficiaries of any such Plan).
No US G&K Enterprise has received any notice that it is not in full
compliance, or has any knowledge to the effect that it is not in compliance
in all material respects with the requirements of ERISA in connection with
an ERISA Plan that it sponsors or to which it contributes. Each ERISA Plan
(other than any Multi-Employer Plan) as to which any US G&K Enterprise or
any ERISA Affiliate may reasonably be expected to have any material
liability complies in all material respects with ERISA and the Code and the
regulations issued thereunder and (A) no Reportable Event has occurred with
respect to any Plan sponsored by any US G&K Enterprise or any ERISA
Affiliate which will have the effect of creating a liability of any US G&K
Enterprise or any ERISA Affiliate which will have a Material Adverse
Effect; (B) no US G&K Enterprise nor any ERISA Affiliate has withdrawn from
any Multi-Employer Plan or initiated steps to do so, except in accordance
with all applicable requirements of ERISA and in a manner which will not
create a material liability of any US G&K Enterprise or any ERISA Affiliate
which will have a Material Adverse Effect; (C) no steps have been taken to
terminate any Pension Plan except in accordance with all applicable
requirements of ERISA and the Code in a manner which will not create a
material liability of a US G&K Enterprise or any ERISA Affiliate which will
have a Material Adverse Effect; and (D) during the twelve consecutive
months prior to any date on which this representation may be made or
re-made, no contribution failure has occurred with respect to any Plan
sufficient to give rise to a lien under SECTION 302(f)(1) of ERISA. No US
G&K Enterprise has a contingent liability with respect to any
post-retirement benefit under a Welfare Plan, other than (x) liability for
continuation coverage described in Part 6 of Title I of ERISA or any
similar state law or (z) as set forth on SCHEDULE 6.10.
(b) Except as set forth and described in SCHEDULE 6.10, no Canadian
G&K Enterprise maintains and none has maintained any Registered Pension
Plan. No fact or circumstance that is reasonably expected to have a
material adverse effect on a registration under the Canada Income Tax Act
exists in connection with any Registered Pension Plan. No Canadian G&K
Enterprise has any material liability, or knows of any fact or circumstance
that could reasonably be expected to result in any material liability, to
Revenue Canada, the Office of the Superintendent of Financial Institutions
or the pension authority of any Province, or any member or class of members
in connection with any Registered Pension Plan or other employee benefit
plan (other than the funding or payment of benefits that are or may become
payable to participants or beneficiaries of any such plan). No Canadian
G&K Enterprise has received any notice that it is not in full compliance,
or has any knowledge to the effect
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that it is not in compliance in all material respects, with the
requirements of the Income Tax Act, the Pension Benefits Standards Act or
the pension laws of any Province, to the extent applicable, in connection
with any Registered Pension Plan that it sponsors or to which it
contributes. Each Registered Pension Plan and other employee benefit plan
as to which a Canadian G&K Enterprise may reasonably be expected to have
any material liability complies in all material respects with the Income
Tax Act, the Pension Benefits Standards Act and the pension or employee
benefit laws of the Provinces, to the extent applicable. No Canadian G&K
Enterprise has taken any steps to wind-up any Registered Pension Plan,
except in accordance with the applicable requirements of the Income Tax Act
and the Pension Benefit Standards Act or applicable pension law of the
Province or registration, and in a manner that will not create a material
liability of any Canadian G&K Company.
Section 6.11 DEFAULT. Each G&K Enterprise is in compliance with all
provisions of all agreements, instruments, decrees and orders to which it is a
party or by which it or its property is bound or affected, the breach or default
of which could have a Material Adverse Effect on the G&K Group.
Section 6.12 ENVIRONMENTAL COMPLIANCE. Except as disclosed in
SCHEDULE 6.12, each G&K Enterprise has obtained all permits, licenses and other
authorizations which are required under United States federal, state and local
laws and regulations and Canadian national and provincial laws and regulations
relating to emissions, discharges, releases of pollutants, contaminants,
hazardous or toxic materials, or wastes into ambient air, surface water, ground
water or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants or hazardous or toxic materials or wastes
("Environmental Laws") at its facilities or in connection with the operation of
its facilities. Except as disclosed in SCHEDULE 6.12, each G&K Enterprise and
all its activities at its facilities comply in all material respects with all
Environmental Laws and with all applicable terms and conditions of all permits,
licenses and authorizations required by any Environmental Law. Except as
disclosed in SCHEDULE 6.12, each G&K Enterprise is in compliance in all material
respects with all limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
Environmental Laws or contained in any plan, order, decree, judgment or notice
of which it is aware and with respect to which noncompliance would have a
Material Adverse Effect on the G&K Group. Except as disclosed in SCHEDULE 6.12,
no officer of a G&K Enterprise is aware of, or has received notice of, any
events, conditions, circumstances, activities, practices, incidents, actions or
plans which may interfere with or prevent continued compliance with, or which
may give rise to any liability under, any Environmental Laws.
Section 6.13 SUBMISSIONS TO BANKS. All financial and other information
provided to an Agent or a Bank by or on behalf of the Borrowers in connection
with the Borrowers' request for the credit facilities contemplated hereby is
true and correct in all material respects and, as to projections, valuations or
pro forma financial statements, present a
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good faith opinion as of the date made as to such projections, valuations and
pro forma condition and results.
Section 6.14 PUBLIC UTILITY HOLDING COMPANY ACT; INVESTMENT COMPANY
ACT. No G&K Enterprise is a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended. No G&K Enterprise is an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
Section 6.15 ASSET PURCHASE DOCUMENTS. The Asset Purchase Documents
provide, among other things, for the purchase by the US G&K Enterprises of the
Purchased Assets. G&K Inc. has furnished to the Agents true, complete and
correct copies of all Asset Purchase Documents. The Asset Purchase Documents
have not subsequently been amended, supplemented or modified, and constitute the
complete understanding among the parties thereto in respect of the matters and
transactions covered thereby. The Asset Purchase Documents have been duly
executed and delivered by the parties thereto and are in full force and effect.
All representations and warranties made by the Borrowers in the Asset Purchase
Documents, and, to the best knowledge of the Borrowers after reasonable inquiry,
all representations and warranties made by the Sellers and other parties to the
Asset Purchase Documents, are true and correct in all material respects.
Section 6.16. FINANCIAL SOLVENCY. Both before and after giving effect
to the Asset Purchase and all of the transactions contemplated in the Loan
Documents, the Borrowers and Guarantors:
(a) were and will not be insolvent, as that term is used and defined
in Section 101(32) of the United States Bankruptcy Code, Section 2 of the
Uniform Fraudulent Transfer Act, and Section 2 of the Bankruptcy and
Insolvency Act of Canada;
(b) do not have unreasonably small capital and are not engaged or
about to engage in a business or a transaction for which any remaining
assets of the Borrowers or Guarantors are unreasonably small;
(c) do not, by executing, delivering or performing their obligations
under the Loan Documents or by taking any action with respect thereto,
intend to, nor believe that it will, incur debts beyond their ability to
pay them as they mature;
(d) do not, by executing, delivering or performing their obligations
under the Loan Documents or by taking any action with respect thereto,
intend to hinder, delay or defraud either their present or future
creditors; and
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(e) do not contemplate filing a petition in bankruptcy or for an
arrangement or reorganization or similar proceeding under any law any
jurisdiction or country, and, to the best knowledge of the Borrowers, is
not the subject of any bankruptcy or insolvency proceedings or similar
proceedings under any law of any jurisdiction or country threatened or
pending against any Borrower or Guarantor.
ARTICLE VII
AFFIRMATIVE COVENANTS OF THE BORROWERS
So long as any Note, Acceptance or Letter of Credit shall remain
unpaid or outstanding or any Commitment shall be outstanding, the Borrowers
shall comply with the following requirements, unless the Required Banks shall
otherwise consent in writing:
Section 7.1 REPORTING REQUIREMENTS. The Borrowers will deliver, or
cause to be delivered, to each Bank each of the following, which shall be in
form and detail reasonably acceptable to the Required Banks:
(a) as soon as available, and in any event within ninety (90) days
after the end of each fiscal year of the G&K Group, audited annual
financial statements of the G&K Group with the unqualified opinion of
independent certified public accountants selected by G&K Inc. and
acceptable to the Required Banks, which annual financial statements shall
include the balance sheets of the G&K Group as at the end of such fiscal
year and the related statements of income, retained earnings and cash flows
of the G&K Group for the fiscal year then ended, prepared on a consolidated
basis, all in reasonable detail and prepared in accordance with GAAP,
together with (i) copies of all management letters prepared by such
accountants; (ii) a report signed by such accountants stating that in
making the investigations necessary for said opinion they obtained no
knowledge, except as specifically stated, of any Default or Event of
Default and all relevant facts in reasonable detail to evidence, and the
computations as to, whether or not G&K Inc. is in compliance with the
requirements set forth in SECTIONS 7.8 - 7.11 and 8.12; and (iii) a
certificate of the chief financial officer of G&K Inc., substantially in
the form of EXHIBIT J, stating (A) that such financial statements have been
prepared in accordance with GAAP and fairly represent the financial
condition and results of operations of the G&K Group and (B) whether or not
such officer has knowledge of the occurrence of any Default or Event of
Default and, if so, stating in reasonable detail the facts with respect
thereto and the steps, if any, being taken to cure it;
(b) as soon as available and in any event within forty-five (45) days
after the end of each Fiscal Quarter, an unaudited/internal balance sheet
and statement of income, cash flow and retained earnings of the G&K Group
as at the end of and for such Fiscal Quarter and for the year-to-date
period then ended, prepared on a consolidating and consolidated basis, in
reasonable detail and stating in comparative
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form the budget of the G&K Group for such month and for the year-to-date
period then ended (as described in SECTION 7.1(d) and the figures for the
corresponding date and periods in the previous year, all prepared in
accordance with GAAP subject to year-end audit adjustments; and accompanied
by a certificate of the chief financial officer of G&K Inc., substantially
in the form of EXHIBIT K, stating (i) that such financial statements have
been prepared in accordance with GAAP (subject to the foregoing exceptions)
and fairly represent the financial condition and results of operations of
the G&K Group, (ii) whether or not such officer has knowledge of the
occurrence of any Default or Event of Default not theretofore reported and
remedied and, if so, stating in reasonable detail the facts with respect
thereto and the steps, if any, being taken to cure it, and (iii) all
relevant facts in reasonable detail to evidence, and the computations as to
(A) the Status of the G&K Group for purposes of establishing the
appropriate Margins, (B) whether or not the G&K Group is in compliance with
the requirements set forth in SECTIONS 7.8 - 7.11 and 8.12, (C) all sales
of Assets Held for Sale and sales of all other assets during such Fiscal
Quarter and the net proceeds received therefrom and (D) the Canadian Dollar
Equivalent of US$25,000,000 and the US Dollar Equivalent of the Canadian
Revolving Facility Outstanding Amount as at the end of such Fiscal Quarter;
(c) as soon as possible and in any event within forty-five (45) days
after the last day of each Fiscal Quarter, an unaudited/internal balance
sheet and statement of income, cash flow and retained earnings of Work Wear
as at the end of such Fiscal Quarter and for the year-to-date period then
ended and the figures for the corresponding date and periods in the
previous year, prepared in accordance with GAAP, subject to year-end
adjustments, and accompanied by a certificate of the chief financial
officer of Work Wear substantially in the form of EXHIBIT K, stating that
such financial statements have been prepared in accordance with GAAP
(subject to the foregoing exceptions) and fairly represent the financial
condition and results of operation of Work Wear;
(d) at least thirty (30) days before the beginning of each fiscal
year of the G&K Group, the projected balance sheets, income statements,
Capital Expenditures budget, and cash flow statements for the G&K Group for
each month of such year, each in reasonable detail, representing the good
faith projections of G&K Inc. for each such month, and certified by G&K
Inc.'s chief financial officer as being the most accurate projections
available and identical to the projections used by G&K Inc. for internal
planning purposes, together with such supporting schedules and information
as any Bank from time to time may reasonably request;
(e) immediately after the commencement thereof, notice in writing of
all Material Litigation and of all proceedings before any governmental or
regulatory agency affecting any G&K Enterprise of the type described in
SECTION 6.6;
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(f) as promptly as practicable (but in any event not later than five
(5) business days) after an officer of a Borrower obtains knowledge of the
occurrence of a Default or Event of Default hereunder, notice of such
occurrence, together with a detailed statement by a responsible officer of
that Borrower setting forth the steps being taken by that Borrower to cure
the effect of such Default or Event of Default;
(g) as soon as possible and in any event within thirty (30) days
after any US G&K Enterprise knows or has reason to know that any Reportable
Event with respect to any Plan has occurred that is reasonably expected to
have a Material Adverse Effect, the statement of the chief financial
officer of G&K Inc. setting forth details as to such Reportable Event and
the action which the affected US G&K Enterprise proposes to take with
respect thereto; and a copy of any notice of such Reportable Event that is
required to be given to the PBGC on or prior to the date such notice must
be delivered to the PBGC;
(h) as soon as possible, and in any event within ten (10) days after
any US G&K Enterprise fails to make any quarterly contribution it is
required to make under Code Section 4.12(m) with respect to any Plan (other
than a Multi-Employer Plan) the statement of the chief financial officer of
G&K Inc. setting forth details as to such failure and the action which the
affected US G&K Enterprise proposes to take with respect thereto; and a
copy of any notice of such failure that is required to be given to the PBGC
on or prior to the date such notice must be delivered to the PBGC;
(i) as soon as possible and in any event within ten (10) days after
any Canadian G&K Enterprise files any notice of wind-up with Revenue
Canada, the Office of the Superintendent of Financial Institutions or the
pension authority of the Province in which a Registered Pension Plan is
registered that is reasonably expected to have a Material Adverse Effect,
the statement of the chief financial officer of G&K Inc. setting forth the
details as to such wind-up and the action that the Canadian G&K Enterprise
proposes to take with respect thereto; and a copy of the notice of wind-up
filed with any government authority on or prior to the date such notice
must be delivered to the appropriate government authority;
(i) promptly upon obtaining knowledge thereof, notice of the
violation by any G&K Enterprise of any law, rule or regulation, the
non-compliance with which could have a Material Adverse Effect;
(j) promptly upon their distribution, copies of all financial
statements, reports, proxy statements and other communications which G&K
Inc. shall have sent to its stockholders;
(k) promptly after the sending or filing thereof, copies of all
regular and periodic financial reports which G&K Inc. shall file with the
Securities and Exchange Commission or any national securities exchange; and
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(l) from time to time, with reasonable promptness, such other
material, reports, records or information as an Agent may reasonably
request.
(m) sixty (60) days after expiration of the "Review Period" described
in SECTION 3.6 of the Asset Purchase Agreement, a certification of the
final purchase price (subject to such adjustments as may then be pending)
for the assets acquired pursuant to the Asset Purchase Agreement setting
forth all adjustments to such purchase price in comparative form against
the estimates thereof provided to the Agents pursuant to SECTION 5.1(p).
Section 7.2 BOOKS AND RECORDS; INSPECTION AND EXAMINATION. Each
Borrower will, and will cause each G&K Enterprise to, keep accurate books of
record and account for itself pertaining its business and financial condition
and such other matters as the Agents may from time to time request in which true
and complete entries will be made in accordance with GAAP and, upon request of
and reasonable notice by an Agent, will permit any officer, employee, attorney
or accountant for any Bank to audit, review, make extracts from or copy any and
all corporate and financial books and records of any G&K Enterprise at all
reasonable times during ordinary business hours, to send and discuss with
account debtors and other obligors requests for verification of amounts owed to
a G&K Enterprise, and to discuss the affairs of such G&K Enterprise with any of
its directors, officers, employees or agents. Each Borrower will, and will cause
each G&K Enterprise to, permit any Bank or its employees, accountants, attorneys
or agents, to examine and inspect any of its property at any time during
ordinary business hours; provided, that each Bank will use reasonable efforts to
conduct (or have conducted) any such examination or inspection so as to minimize
disruptions to operations.
Section 7.3 COMPLIANCE WITH LAWS. Each Borrower will, and will cause
each G&K Enterprise to, (a) comply with the requirements of applicable laws and
regulations, the noncompliance with which would have a Material Adverse Effect,
(b) comply with all applicable Environmental Laws and obtain any permits,
licenses or similar approvals required by any such Environmental Laws, the
noncompliance with which would have a Material Adverse Effect, and (c) use and
keep its assets, and will require that others use and keep its assets, only for
lawful purposes, without violation of any federal, national, state, provincial
or local law, statute or ordinance, the noncompliance with which would have a
Material Adverse Effect.
Section 7.4 PAYMENT OF TAXES AND OTHER CLAIMS. Each Borrower will, and
will cause each G&K Enterprise to, pay or discharge, when due, (a) all taxes,
assessments and governmental charges levied or imposed upon it or upon its
income or profits, upon any properties belonging to it prior to the date on
which penalties attach thereto, (b) all federal, national, state, provincial and
local taxes required to be withheld by it, and (c) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien or charge
upon any properties of any G&K Enterprise; PROVIDED, that no G&K Enterprise
shall be required to pay or withhold any such tax, assessment, charge or claim
(i) whose amount,
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applicability or validity is being contested in good faith by appropriate
proceedings and for which proper reserves have been made or (ii) which is a
state (and not federal) obligation not known to the officers of any G&K
Enterprise, which is not material and, when a G&K Enterprise becomes aware
thereof, such tax, assessment, charge or claim is properly paid.
Section 7.5 MAINTENANCE OF PROPERTIES. Each Borrower will, and will
cause each G&K Enterprise to, keep and maintain all of its properties necessary
or useful in its business in good condition, repair and working order (normal
wear and tear excepted); PROVIDED, HOWEVER, that nothing in this SECTION 7.5
shall prevent a G&K Enterprise from discontinuing the operation or maintenance
of any of its properties if such discontinuance of operation or maintenance, in
the judgment of the officers of such G&K Enterprise, constitutes a reasonable
and prudent business decision as to such properties and is not disadvantageous
in any material respect to the Banks.
Section 7.6 INSURANCE. Each Borrower will, and will cause each G&K
Enterprise to, obtain and at all times maintain insurance with insurers believed
by it to be responsible and reputable in such amounts and against such risks as
is usually carried by companies engaged in similar business and owning similar
properties in the same general areas in which it operates. Without limiting the
foregoing, at all times each Borrower will, and will cause each G&K Enterprise
to maintain business interruption insurance including coverage for force majeure
and, keep all tangible Collateral insured against risks of fire (including
so-called extended coverage), theft, collision (in case of Collateral consisting
of motor vehicles) and such other risks and in such amounts as the Required
Banks may reasonably request, with lender's loss payable clauses or endorsements
in favor of the appropriate Agent as collateral agent on behalf of the Banks, in
form reasonably acceptable to such Agent (including, without limitation a
provision requiring at least thirty (30) days prior written notice to such Agent
of any cancellation or modification of such insurance) and, upon request of an
Agent, deliver policies or certificates of such insurance to such Agent.
Section 7.7 PRESERVATION OF CORPORATE EXISTENCE. Each Borrower will,
and will cause each G&K Enterprise to, preserve and maintain its legal existence
and all of its rights, privileges and franchises necessary or desirable in the
normal conduct of its business and shall conduct its business in an orderly,
efficient and regular manner; provided, however, that any Canadian G&K
Enterprise may merge into any other Canadian G&K Enterprise and any US G&K
Enterprise may merge into any other US G&K Enterprise, provided that G&K Inc. or
Work Wear, as the case may be, shall remain a continuing and surviving
corporation.
Section 7.8 MINIMUM EBITDA. As of each Covenant Computation Date, the
G&K Group (on a consolidated basis) will maintain its EBITDA for the applicable
Covenant Computation Period at not less than the amount set forth opposite the
applicable period below:
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COVENANT COMPUTATION DATE MINIMUM EBITDA
September 27, 1997 $ 22,000,000
December 27, 1997 $ 47,000,000
March 28, 1998 $ 75,000,000
June 27, 1998 $104,000,000
September 26, 1998 $109,000,000
December 26, 1998 $113,000,000
March 27, 1999 $118,000,000
June 26, 1999 $121,000,000
September 25, 1999
and thereafter $125,000,000
Section 7.9 MINIMUM DEBT SERVICE COVERAGE RATIO. As of each Covenant
Computation Date, the G&K Group (on a consolidated basis) will maintain its Debt
Service Coverage Ratio for the applicable Covenant Computation Period at not
less than the ratio set forth opposite the applicable period below:
COVENANT COMPUTATION DATE MINIMUM DEBT SERVICE COVERAGE
RATIO
September 27, 1997 No Requirement
December 27, 1997 1.10 to 1.00
March 28, 1998 1.10 to 1.00
June 27, 1998 1.15 to 1.00
September 26, 1998 1.20 to 1.00
December 26, 1998 and thereafter 1.25 to 1.00
Section 7.10 MINIMUM STOCKHOLDERS' EQUITY. G&K Inc. (on a
consolidated basis) will maintain its Stockholders' Equity at not less than
$145,000,000 on September 27, 1997 and, on each Covenant Computation Date
thereafter, at not less than the sum of (a) the minimum required Stockholders'
Equity for G&K Inc., on a consolidated basis, for the immediately preceding
Covenant Computation Date (determined in accordance herewith) and (b) fifty
percent (50%) of the Net Income (positive only) for G&K Inc., on a consolidated
basis, for the immediately preceding Covenant Computation Period.
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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 the ratio set forth opposite the applicable period below:
COVENANT COMPUTATION DATE MAXIMUM LEVERAGE RATIO
September 27, 1997 4.25 to 1.00
December 27, 1997 4.00 to 1.00
March 28, 1998 3.50 to 1.00
June 27, 1998 3.00 to 1.00
September 26, 1998 3.00 to 1.00
December 26, 1998 3.00 to 1.00
March 27, 1999 2.75 to 1.00
June 26, 1999 2.75 to 1.00
September 25, 1999 and thereafter 2.50 to 1.00
Section 7.12 INTEREST RATE PROTECTION. Within sixty (60) days after
the Closing Date, G&K Inc. shall enter into interest rate protection agreements
acceptable to the Agents with respect to not less than $110,000,000 of the Term
Facility, for a minimum term of not less than two (2) years and under which the
Borrowers are protected against the risk of LIBOR rates increasing by more than
three (3) percent over the 90-day LIBOR rate as of the Closing Date.
ARTICLE VIII
NEGATIVE COVENANTS
So long as any Note, Acceptance or Letter of Credit shall remain
unpaid or outstanding or any Commitment shall be outstanding, the Borrowers will
comply with the following requirements, unless the Required Banks shall
otherwise consent in writing:
Section 8.1 LIENS. No Borrower will, nor will it permit any other G&K
Enterprise to, create, incur or suffer to exist any mortgage, deed of trust,
pledge, lien, security interest, assignment or transfer upon or of any its
assets, now owned or hereafter acquired, to secure any indebtedness; EXCLUDING,
HOWEVER, the following (collectively "Permitted Liens"):
(a) mortgages, deeds of trust, pledges, liens, security interests and
assignments in existence on the date hereof and listed in SCHEDULE 8.1;
(b) liens for taxes or assessments or other governmental charges to
the extent not required to be paid by SECTION 7.4;
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(c) materialmen's, merchants', carriers', worker's, repairer's, or
other like liens arising in the ordinary course of business to the extent
not required to be paid by SECTION 7.4;
(d) 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;
(e) zoning restrictions, easements, licenses, restrictions on the use
of real property or minor irregularities in title thereto, which do not
materially impair the use of such property in the operation of the business
of a G&K Enterprise or the value of such property for the purpose of such
business;
(f) liens and security interests granted to the Banks pursuant to any
of the Security Documents;
(g) purchase money mortgages, liens or security interests, including
conditional sale agreements or other title retention agreements and leases
which are in the nature of title retention agreements, upon or in property
acquired after the Closing Date, or mortgages, liens or security interests
existing in such property at the time of the acquisition thereof, PROVIDED
THAT:
(i) no such mortgage, lien or security interest extends or
shall extend to or cover any property of a G&K Enterprise other than
the property then being acquired; and
(ii) the aggregate principal amount of the indebtedness secured
by any such mortgage, lien or security interest shall not exceed the
cost of such property so acquired in connection therewith; and
(h) covenants, restrictions, rights, easements, encumbrances (which
do not secure the payment of money) and minor irregularities in title which
do not materially interfere with the business or operations of a G&K
Enterprise as presently conducted; and
(i) other liens securing indebtedness permitted under SECTION 8.2 in
the aggregate principal amount not exceeding $5,000,000 before the
Collateral Release Date or $10,000,000 thereafter, provided that in no
event shall any such lien cover any accounts receivable or inventory of any
G&K Enterprise.
Section 8.2 INDEBTEDNESS. No Borrower will, nor will it permit any
other G&K Enterprise to, incur, create, assume, permit or suffer to exist, any
indebtedness or liability on account of deposits or advances or any indebtedness
for borrowed money, or any other indebtedness or liability evidenced by notes,
bonds, debentures or similar obligations, except:
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(a) Obligations arising hereunder;
(b) indebtedness in existence on the date hereof and listed in
SCHEDULE 8.2;
(c) Capitalized Lease Liabilities and indebtedness of a G&K
Enterprise secured by security interests permitted by SECTION 8.1(g) and
other indebtedness of a G&K Enterprise incurred to finance the purchase of
property after the Closing Date, not to exceed $15,000,000 in the aggregate
for the entire G&K Group at any time outstanding;
(d) other indebtedness not otherwise permitted in this SECTION 8.2
not to exceed $10,000,000 in the aggregate at any time outstanding for the
entire G&K Group before the Collateral Release Date or $15,000,000
thereafter;
(e) subordinated indebtedness, which has been subordinated to all
Obligations under terms and conditions satisfactory to the Required Banks,
in their sole discretion, provided that 100% of the proceeds of any such
subordinated indebtedness is applied to the mandatory prepayment of the
Term Facility pursuant to SECTION 4.1(e)(iv) notwithstanding clause (A) or
(B) thereof; and
(f) indebtedness for borrowed money or any other indebtedness or
liability incurred by a US G&K Enterprise from another US G&K Enterprise or
by a Canadian G&K Enterprise from another Canadian G&K Enterprise.
Section 8.3 GUARANTIES. No Borrower will, nor will it permit any other
G&K Enterprise to, assume, guarantee, endorse or otherwise become directly or
contingently liable in connection with any obligations of any other Person,
except:
(a) the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
(b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons in
existence on the date hereof and listed in SCHEDULE 8.2;
(c) guaranties, endorsements and other liabilities incurred in the
ordinary course of business with respect to obligations that are not Funded
Debt obligations, not to exceed $10,000,000 in the aggregate at any time
outstanding;
(d) guaranties, endorsements and other liabilities incurred by a US
G&K Enterprise for the benefit of another US G&K Enterprise or by a
Canadian G&K Enterprise for the benefit of another Canadian G&K Enterprise,
provided that the indebtedness so guaranteed is otherwise permitted under
SECTION 8.2; and
(e) the Guaranties.
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Section 8.4 INVESTMENTS. No Borrower will, nor will it permit any
other G&K Enterprise to, purchase or hold beneficially any stock or other
securities or evidences of indebtedness of, make or permit to exist any loans or
advances to, or create or acquire any Subsidiary or make any investment or
acquire any interest whatsoever in, any other Person, except:
(a) investments in direct obligations of the United States of America
or any agency or instrumentality thereof whose obligations constitute the
full faith and credit obligations of the United States of America having a
maturity of one (1) year or less, commercial paper issued by a US
corporation rated "A-1" or "A-2" by Standard & Poors Corporation or "P-1"
or "P-2" by Moody's Investors Service, investments in money market mutual
funds whose underlying assets are exclusively investments which would
otherwise be permitted investments under this SECTION 8.4(a), or repurchase
agreements, certificates of deposit or bankers' acceptances having a
maturity of one (1) year or less issued by members of the Federal Reserve
System having deposits in excess of $500,000,000 (which certificates of
deposit or bankers' acceptances are fully insured by the Federal Deposit
Insurance Corporation);
(b) travel advances or loans to officers and employees of the G&K
Companies;
(c) advances in the form of progress payments, prepaid rent or
security deposits;
(d) purchases of a G&K Enterprise's stock in accordance with an
employee benefit plan not exceeding $2,500,000 in the aggregate for all G&K
Enterprises per fiscal year before the Collateral Release Date or
$5,000,000 thereafter;
(e) investments by a G&K Enterprise in another G&K Enterprise
including intercompany transfers, advances, loans, guarantees or other
financial accommodations, not permitted under SUBSECTION (f) below, as set
forth and described in SCHEDULE 8.4, together with readvances of any such
loans and other financial accommodations extended by G&K Inc. to Work Wear,
so long as the aggregate amount of any such loans and other financial
accommodations extended by G&K Inc. to Work Wear shall not exceed
$20,000,000 at any time outstanding;
(f) investments, including intercompany transfers, advances, loans,
guarantees or other financial accommodations by a US G&K Enterprise in
another US G&K Enterprise or by a Canadian G&K Enterprise in another
Canadian G & K Enterprise;
(g) investments constituting loans, advances or other financial
accommodations to, or the acceptance of promissory notes or other evidences
of indebtedness or agreements as to the deferred payment of any amount owed
to a G&K
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Enterprise from, any Person not to exceed a principal amount of $10,000,000
in the aggregate for the entire G&K Group at any time outstanding; and
(h) investments to purchase assets, stock or other securities of, or
to make any investment or acquire any interest whatsoever in, any other
Person, whether in connection with acquisition of a business or otherwise,
not to exceed $10,000,000 prior to the Collateral Release Date and
$25,000,000 after the Collateral Release Date, in the aggregate for the
entire G&K Group invested during any fiscal year of the G&K Group; and
(i) purchases by G&K Inc. of its own issued and outstanding capital
stock, provided that prior to the Collateral Release Date such purchases
shall not exceed $5,000,000 in the aggregate.
Section 8.5 RESTRICTED PAYMENTS. Unless otherwise permitted under
SECTION 8.4(d) or (i), G&K Inc. will not declare or pay, or make expenditures on
account of any Dividends if, after giving effect to such payment, distribution
or application, the aggregate amount of such Dividends paid or made during such
fiscal year would exceed $3,000,000 for the fiscal year immediately preceding
the year in which any such Dividends are paid, and the right to make such
Dividends as herein described shall be non-cumulative from fiscal year to fiscal
year.
Section 8.6 SALE OR TRANSFER OF ASSETS; SUSPENSION OF BUSINESS
OPERATIONS. No Borrower will, nor will it permit any other G&K Enterprise to,
sell, lease, assign, transfer or otherwise dispose of all or a substantial part
of its assets (whether in one transaction or in a series of transactions) to any
other Person (except another G&K Enterprise), other than the sale of the Assets
Held For Sale and inventory in the ordinary course of business, and will not
liquidate, dissolve or suspend its business operations; provided, however, that
any proceeds of any such sale of assets shall be applied to the Term Facility to
the extent required under SECTION 4.1(e). For purposes of the foregoing, a
"substantial part" of a G&K Enterprise assets shall mean assets with a book
value in excess of $15,000,000 during any fiscal year.
Section 8.7 MERGER AND CONSOLIDATION; CHANGE OF CONTROL. G&K Inc. will
not consolidate with or merge into any Person, or permit any Person to merge
into it, or transfer or sell, (in any transaction analogous in purpose or effect
to a consolidation or merger) all or substantially all of its assets to any
other Person if, as a result thereof G&K Inc. shall not be the continuing or
surviving corporation. In addition, whether or not occurring as the result of
any such merger or consolidation, the Borrowers shall not suffer to occur or
exist a material change in the ownership or control of any G&K Enterprise except
as otherwise permitted in SECTION 7.7 . For purposes hereof, a "material change"
shall mean (a) the acquisition after the Closing Date by any individual or
control group of more than a 20% voting interest in the capital stock of G&K
Inc., (b) the disposition by Richard M. Fink (together with any control group of
which he is a member) of more than 50% of the number of shares of capital stock
of G&K Inc., owned or controlled as of the Closing Date or (c) with respect to
G&K Inc.'s
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Board of Directors, a change in the majority of such directors occurring during
any six month period; provided however, that, nothing hereunder shall limit or
restrict Richard M. Fink (together with any control group of which he is a
member) from disposing of any capital stock of G&K Inc. (y) at any time that G&K
Inc., shall be in Level I Status or Level II Status so long as (i) the purchaser
of such capital stock shall not thereafter constitute a control group holding
20% voting interest in the capital stock by G&K Inc. and (ii) any redemption of
such stock by G&K would not cause the Status to change and (z) at any time after
the date which is two (2) years from the Closing Date. For purposes of this
SECTION 8.7, a control group of which Richard M. Fink is a member shall include
his spouse, direct or indirect lineal descendants and any trusts created for the
benefit of any such persons.
Section 8.8 SALE AND LEASEBACK. No Borrower will, nor will it permit
any other G&K Enterprise to, enter into any arrangement, directly or indirectly,
with any other Person whereby a G&K Enterprise shall sell or transfer a
substantial part of any real or personal property of the G&K Group, whether now
owned or hereafter acquired, and then or thereafter rent or lease as lessee such
property or any part thereof or any other property which a G&K Enterprise
intends to use for substantially the same purpose or purposes as the property
being sold or transferred. For purposes of the foregoing, a "substantial part"
of the G&K Group's assets shall mean assets with a book value in excess of
$10,000,000.
Section 8.9 RESTRICTIONS ON NATURE OF BUSINESS. No Borrower will, nor
will it permit any other G&K Enterprise to, engage in business in any industry
materially different from that presently engaged in by it and will not purchase,
lease or otherwise acquire assets not related to its businesses, provided that
nothing in the foregoing shall limit or restrict the ability of any G&K
Enterprise to sell any related products to customers of a G&K Enterprise.
Section 8.10 ACCOUNTING. No Borrower will, nor will it permit any
other G&K Enterprise to, adopt any material change in accounting principles,
other than as required by GAAP, or adopt, permit or consent to any change in its
fiscal year. If GAAP shall change in a manner that materially affects the
computation of any financial covenants set forth in SECTIONS 7.8- 7.12, the
Required Banks may, with the Borrowers' consent (which will not be unreasonably
withheld), adjust such financial covenants as may be necessary to account for
such change.
Section 8.11 HAZARDOUS SUBSTANCES. No Borrower will, nor will it
permit any other G&K Enterprise to, cause or permit any Hazardous Substances to
be disposed of in any manner which reasonably may be expected to result in any
Material Adverse Effect, on, under or at any real property which is operated by
a G&K Enterprise or in which a G&K Enterprise has any interest.
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Section 8.12 CAPITAL EXPENDITURES. No Borrower will, nor will it
permit any other G&K Enterprise to, make Capital Expenditures during any fiscal
year, in an aggregate amount in excess of the amount for the entire G&K Group
set forth opposite the applicable period below:
FISCAL YEAR-END AMOUNT
June 27, 1998 $60,000,000
June 26, 1999 60,000,000
June 24, 2000 70,000,000
June 30, 2001 65,000,000
and thereafter;
PROVIDED, HOWEVER, that to the extent the aggregate amount of Capital
Expenditures for the G&K Group for any fiscal year is less than the maximum
permitted Capital Expenditures for such fiscal year as provided above, the
amount of any such excess may be carried over to the next fiscal year, but if
not utilized during such immediately succeeding fiscal year, any such excess may
not be carried over to a subsequent fiscal year; PROVIDED FURTHER, HOWEVER, that
the limitations set forth in this SECTION 8.12 shall not limit the Borrowers'
ability to make investments permitted under SECTION 8.4(h).
Section 8.13 RENTAL PAYMENTS. No Borrower will, nor will it permit any
other G&K Enterprise to, become or be a party as lessee to any lease with
respect to real or personal property if, after giving effect to such lease, the
aggregate amount of rent for any such leases with a remaining term of longer
than one year from the applicable Covenant Computation Date for any period of
twelve consecutive months payable by the G&K Group with respect to all such
leases (after deducting the aggregate amount of rent receivable by the G&K Group
under any sublease of any such lease to any Person) will exceed $7,000,000. For
purposes of this SECTION 8.13, "rent", with respect to any lease or sublease and
for any period, means the aggregate minimum amount payable by the lessee or
sublessee to the lessor or sublessor for such period.
ARTICLE IX
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
Section 9.1 EVENTS OF DEFAULT. "Event of Default", wherever used
herein, means any one of the following events:
(a) default in the payment of any principal of any Note or Acceptance
when it becomes due and payable; or
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(b) default in the payment of any interest on any Note or Acceptance
or any fees, costs or expenses required to be paid by a Borrower under this
Agreement or any other Loan Document and the continuation of such default
for more than three (3) Business Days; or
(c) default in the performance, or breach, of any covenant or
agreement on the part of a Borrower contained in SECTIONS 7.8 - 7.11
or 8.12; or
(d) default in the performance, or breach, of any covenant or
agreement of a Borrower in this Agreement (other than a covenant or
agreement a default in whose performance or whose breach is elsewhere in
this SECTION 9.1 specifically dealt with) or in any other Loan Document and
the continuance of such default or breach for a period of thirty (30)
calendar days after there has been given a written notice from an Agent
specifying such default or breach and requiring it to be remedied; or
(e) a Borrower or Guarantor shall be or become insolvent, or admit in
writing its inability to pay its debts as they mature, or make an
assignment for the benefit of creditors; or a Borrower or Guarantor shall
apply for or consent to the appointment of any receiver, trustee, or
similar officer for it or for all or any substantial part of its property;
or such receiver, trustee or similar officer shall be appointed without the
application or consent of that Borrower or Guarantor; or a Borrower or
Guarantor shall institute (by petition, application, answer, consent or
otherwise) any insolvency, reorganization, arrangement, readjustment of
debt, dissolution, liquidation or similar proceeding relating to it under
the laws of any jurisdiction; or any such proceeding shall be instituted
(by petition, application or otherwise) against a Borrower or Guarantor; or
any judgment, writ, warrant of attachment or execution or similar process
shall be issued or levied against a substantial part of the property of a
Borrower or Guarantor and such judgment, writ, or similar process shall not
be released, vacated or fully bonded within sixty (60) calendar days after
its issue or levy; or
(f) any Guarantor shall repudiate or purport to revoke its Guaranty;
or
(g) a petition naming a Borrower or Guarantor as debtor shall be
filed under the United States Bankruptcy Code, the Bankruptcy and
Insolvency Act of Canada or the Companies Creditors' Arrangement Act of
Canada; or
(h) any representation or warranty made by a Borrower or Guarantor in
any Loan Document or by a Borrower (or any of its officers) in any request
for a Borrowing, or in any other certificate, instrument, or statement
contemplated by or made or delivered pursuant to or in connection with any
Loan Document, shall prove to have been incorrect in any material respect
when made; or
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(i) the rendering against a Borrower of a final judgment, decree or
order for the payment of money in excess of $5,000,000 (unless the payment
of such judgment is fully insured) and the continuance of such judgment,
decree or order unsatisfied and in effect for any period of thirty (30)
consecutive calendar days without a stay of execution; or
(j) a default under any bond, debenture, note, securitization
agreement or other evidence of indebtedness or similar obligation of a
Borrower relating to Funded Debt with an outstanding principal balance of
$250,000 or more or under any indenture or other instrument under which any
such evidence of indebtedness or similar obligation has been issued or by
which it is governed and the expiration of the later of (i) five (5)
Business Days after such default has occurred or (ii) the applicable period
of grace, if any, specified in such evidence of indebtedness, indenture or
other instrument; or
(k) any Reportable Event, which the US Agent determines in good faith
constitutes grounds for the termination by the PBGC of any Plan that is
material to any G&K Enterprise (other than a Multi-Employer Plan) sponsored
by a US G&K Enterprise or for the appointment by the appropriate United
States District Court of a trustee to administer any such Plan, shall have
occurred and be continuing thirty (30) days after written notice to such
effect shall have been given to the Borrowers by the US Agent; or any such
Plan shall have been terminated, or a trustee shall have been appointed by
an appropriate United States District Court to administer any such Plan, or
the PBGC shall have instituted proceedings to terminate any such Plan or to
appoint a trustee to administer any such Plan; or
(l) a Borrower or Guarantor shall liquidate, dissolve, terminate or
suspend its business operations or otherwise fail to operate its business
in the ordinary course, or shall sell all or substantially all of its
assets other than in accordance with SECTION 8.6.
Section 9.2 RIGHTS AND REMEDIES. Upon the occurrence of an Event of
Default or at any time thereafter until such Event of Default is cured or waived
to the written satisfaction of the Required Banks, the Agents or the Required
Banks may (and, upon written request of the Required Banks the appropriate Agent
shall) exercise any or all of the following rights and remedies:
(a) by notice to the Borrowers, declare the Commitments to be
terminated, whereupon the same shall forthwith terminate;
(b) by notice to the Borrowers, declare all Obligations to be
forthwith due and payable, whereupon all Obligations shall become and be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the
Borrowers;
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(c) by notice to the Borrowers, demand payment by the Borrowers of
funds with respect to each outstanding Letter of Credit and Acceptance in
an amount sufficient to fund a cash escrow equal to the sum of the Letter
of Credit Amount and Acceptance Amount, which cash escrow will be held by
the Agents, without interest, in special cash collateral accounts and
applied to payment of maturing Acceptances and to reimbursement of all
drafts submitted under outstanding Letters of Credit;
(d) without notice to the Borrowers and without further action, apply
any and all monies owing by any Bank to the Borrowers to the payment of the
Obligations;
(e) exercise and enforce the rights and remedies available to the
Banks under any Loan Document; and
(f) exercise any other rights and remedies available to any Bank by
law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in SECTION 9.1(g), all Obligations shall be immediately due and
payable without presentment, demand, protest or notice of any kind.
ARTICLE X
AGREEMENT AMONG BANKS AND AGENTS
Section 10.1 AUTHORIZATION; POWERS; AGENT FOR COLLATERAL PURPOSES.
Each Bank irrevocably appoints and authorizes each Agent to act as
administrative agent for and on behalf of such Bank to the extent provided
herein, in any Loan Documents or in any other document or instrument delivered
hereunder or in connection herewith, and to take such other actions as may be
reasonably incidental thereto. Each Agent agrees to act as administrative agent
for each Bank upon the express conditions contained in this ARTICLE X, but in no
event shall an Agent constitute a fiduciary of any Bank, nor shall an Agent have
any fiduciary responsibilities in respect of any Bank. In furtherance of the
foregoing, and not in limitation thereof, each Bank irrevocably (a) authorizes
each Agent to execute and deliver and perform those obligations under this
Agreement and each of the Loan Documents to which the Agent is a party as are
specifically delegated to the Agent, and to exercise all rights, powers and
remedies as may be specifically delegated hereunder or thereunder, together with
such additional powers as may be reasonably incidental thereto, (b) appoints
each Agent as nominal beneficiary or nominal secured party, as the case may be,
under the Loan Documents and all related UCC and PPSA financing statements, and
(c) authorizes each Agent to act as agent of and for such Bank for purposes of
holding, perfecting and disposing of Collateral under the Loan Documents. As to
any matters not expressly provided for by this Agreement or the Loan Documents,
neither Agent shall be required to exercise any discretion or take any action,
but shall be required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the instructions of the
Required Banks or, if so required
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pursuant to SECTION 11.2, upon the instructions of all Banks; PROVIDED, HOWEVER,
that except for action expressly required of an Agent hereunder, each Agent
shall in all cases be fully justified in failing or refusing to act hereunder
unless it shall be indemnified to its satisfaction by all Banks against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action, and neither Agent shall in any event be
required to take any action which is contrary to this Agreement, the Loan
Documents or applicable law.
Section 10.2 ACTIONS ON DEFAULT; APPLICATION OF PROCEEDS. Prior to the
occurrence of an Event of Default, each Agent, after deduction of any costs of
collection, as provided in SECTION 10.5, shall remit to each Bank (to the
extent a Bank is to share therein) that Bank's pro rata share of all payments
of principal, interest and fees payable hereunder in accordance with such Bank's
Percentage with respect to the Facility under which such payments are received.
After the occurrence of an Event of Default, the Agents shall coordinate all
administration and collection activities against the G&K Enterprises and all
Collateral and shall advise all Banks, on a periodic basis, with respect to the
contemplated actions to be taken with respect thereto, subject, in any event, to
the direction of the Required Banks. In addition, the Canadian Agent, for and
on behalf of the Canadian Banks, shall make every effort to satisfy and pay in
full all Outstanding Canadian Obligations from payments made by a Canadian G&K
Enterprise and from all proceeds and collections obtained on account of actions
against a Canadian G&K Enterprise or any Collateral owned or pledged by a
Canadian G&K Enterprise before seeking to apply to any such Outstanding Canadian
Obligations any payments, proceeds or collections from or relating to a US G&K
Enterprise. After the occurrence of an Event of Default, each Agent, after
deduction of any costs of collection, as provided in SECTION 10.5, shall remit
to each Bank (to the extent a Bank is to share therein), such Bank's appropriate
share of all principal, interest and fees and all other collections and
recoveries on account of any G&K Enterprise or any Collateral in accordance with
the following (as to each Bank its "Default Share"):
(a) Payments made by a Canadian G&K Enterprise and all proceeds and
collections obtained on account of any collection activity against, or any
Collateral owned or pledged by, a Canadian G&K Enterprise shall be remitted
by the Canadian Agent to each Canadian Bank in an amount equal to such
Canadian Bank's Percentage of such payments, proceeds and collections;
(b) Prior to payment in full of all Outstanding Canadian Obligations,
payments made by a US G&K Enterprise and all proceeds and collections
obtained on account of any collection activity against, or any Collateral
owned or pledged by, a US G&K Enterprise shall be remitted by the US Agent
(i) to each US Bank, in an amount equal to such US Bank's Default
Percentage of such payments, proceeds and collections and (ii) to a special
escrow account established by the US Agent for the benefit of the Canadian
Banks, in an amount equal to such Canadian Banks' Default Percentage of
such payments, proceeds and collections. After the Canadian Agent shall
have confirmed to the US Agent that, to the extent practicable, the
Canadian
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Agent has exhausted its remedies against the Canadian G&K Enterprises and
the Collateral owned or pledged by a Canadian G&K Enterprise, the US Agent
shall release to the Canadian Agent that portion of the proceeds in such
escrow account as may be necessary to satisfy all remaining Outstanding
Canadian Obligations, the Canadian Agent shall distribute such amounts in
accordance with SUBSECTION (a) above and the US Agent shall distribute any
remaining funds in such escrow account to the US Banks in accordance with
SUBSECTION (c) below;
(c) After payment in full of all Outstanding Canadian Obligations,
payments made by a US G&K Enterprise and all proceeds and collections
obtained on account of any collection activity against, or any Collateral
owned or pledged by, a US G&K Enterprise shall be remitted by the US Agent
to each US Bank in an amount equal to such US Bank's Default Percentage of
such payments, proceeds and collections.
Each Bank's interest under the Loan Documents shall be payable solely from
payments, collections and proceeds actually received by the appropriate Agent
under the Loan Documents; and each Agent's only liability to a Bank with respect
to any such payments, collections and proceeds shall be to account for such
Bank's Percentage (or Default Share, as the case may be) of such payments,
collections and proceeds in accordance with this Agreement. If the Agent is
required for any reason to refund any such payments, collections or proceeds,
each Bank will refund to the Agent, upon demand, its Percentage (or Default
Share, as the case may be) of such payments, collections or proceeds, together
with its Percentage (or Default Share, as the case may be) of interest or
penalties, if any, payable by the Agent in connection with such refund. If any
Bank has wrongfully refused to fund its Percentage of any Borrowing, or if the
outstanding principal balance of the Advances and Acceptances made by any Bank
under a Facility is for any other reason less than its Percentage of the
aggregate principal balance of all Advances and Acceptances under that Facility,
the appropriate Agent may remit payments received by it to the other Banks
sharing in that Facility until such payments have reduced the aggregate amounts
owed by the applicable Borrower to the extent that the aggregate amount of the
Advances and Acceptances owing to such Bank hereunder are equal to its
Percentage of the aggregate amounts of the Advances and Acceptances owing under
the applicable Facility to all of the Banks hereunder. The foregoing provision
is intended only to set forth certain rules for the application of payments,
proceeds and collections in the event that a Bank has breached its obligations
hereunder and shall not be deemed to excuse any Bank from such obligations.
Section 10.3 EXCULPATION. No Agent shall be liable for any action
taken or omitted to be taken by the Agent in connection with this Agreement or
the Loan Documents, except for its own gross negligence or willful misconduct.
Each Agent shall be entitled to rely upon advice of counsel concerning legal
matters, the advice of independent public accountants with respect to accounting
matters and advice of other experts as to any other matters and upon this
Agreement, any Loan Documents and any schedule, certificate, statement, report,
notice or other writing which it reasonably believes to be genuine or to have
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been presented by a proper Person. Neither of the Agents nor any of its
directors, officers, employees or agents shall be responsible or in any way
liable for (a) any recitals, representations or warranties contained in, or for
the execution, validity, genuineness, effectiveness or enforceability of this
Agreement, any Loan Document, or any other instrument or document delivered
hereunder or in connection herewith, (b) the validity, genuineness, perfection,
effectiveness, enforceability, existence or value of any Collateral or (c) any
action taken or omitted by a Borrower or the other Agent. The designation of
Norwest and FCNBD as Agents hereunder shall in no way impair or affect any of
the rights and powers of, or impose any duties or obligations upon, Norwest or
FCNBD in its individual capacity as Bank hereunder.
Section 10.4 USE OF THE TERM "AGENT". The term "Agent" is used herein
in reference to an Agent merely as a matter of custom. It is intended to reflect
only an administrative relationship between each Agent and the Banks, in each
case as independent contracting parties. However, the obligations of an Agent
shall be limited to those expressly set forth herein and in no event shall the
use of such term create or imply any fiduciary relationship or any other
obligation arising under the general law of agency.
Section 10.5 REIMBURSEMENT FOR COSTS AND EXPENSES. All payments,
collections and proceeds received or effected by an Agent may be applied first
to pay or reimburse the Agent for all reasonable costs and expenses at any time
incurred by or imposed upon the Agent in connection with this Agreement or any
other Loan Document (including but not limited to all reasonable attorney's
fees, foreclosure expenses and advances made to protect the security of any
Collateral, but excluding any costs, expenses, damages or liabilities arising
from the gross negligence or willful misconduct of the Agent). If an Agent does
not receive payments, collections or proceeds sufficient to cover any such costs
and expenses within five (5) days after their incurrence or imposition, each
Bank shall, upon demand of the US Agent, with respect to collection activities
against US G&K Enterprises and Collateral owned by US G&K Enterprise, each
Canadian Bank shall remit to the US Agent such Bank's Default Percentage, and,
upon demand of the Canadian Agent with respect to collection activities against
the Canadian G&K Enterprises and Collateral owned by any Canadian G&K
Enterprise, each Canadian Bank shall remit to the Canadian Agent such Canadian
Bank's Percentage of the difference between (i) such costs and expenses and (ii)
such payments, collections and proceeds, together with interest on such amount
for each day following the thirtieth day after demand therefor until so remitted
at a rate equal to the Federal Funds Rate or the Canadian Bank Rate (as the case
may be) for each such day.
Section 10.6 PAYMENTS RECEIVED DIRECTLY BY BANKS. If any Bank shall
obtain any payment or other recovery (whether voluntary, involuntary, by
application of offset or otherwise) on account of any Facility or on account of
any fees under this Agreement (other than through distributions made in
accordance with SECTION 10.2 hereof) in excess of such Bank's applicable
Percentage with respect to such Facility (or such Bank's Default Percentage, if
applicable), such Bank shall promptly give notice of such fact to the
appropriate Agent and shall promptly remit to such Agent such amount as shall be
necessary to cause the
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remitting Bank to share such excess payment or other recovery ratably with each
of the Banks in the affected Facility in accordance with their respective
Percentages or Default Percentages, if applicable, together with interest for
each day on such amount until so remitted at a rate equal to the Federal Funds
Rate or Canadian Bank Rate (as the case may be) for each such day; PROVIDED,
HOWEVER, that if all or any portion of the excess payment or other recovery is
thereafter recovered from such remitting Bank or holder, the remittance shall be
restored to the extent of such recovery.
Section 10.7 INDEMNIFICATION. Each Bank severally (but not jointly)
hereby agrees to indemnify and hold harmless each Agent, as well as such Agent's
agents, employees, officers and directors, ratably according to their respective
Default Percentages from and against any and all losses, liabilities (including
liabilities for penalties), actions, suits, judgment, demands, damages, costs,
disbursements, or expenses (including attorneys' fees and expenses) of any kind
or nature whatsoever, which are imposed on, incurred by, or asserted against the
Agent or its agents, employees, officers or directors in any way relating to or
arising out of this Agreement or the Loan Documents, or as a result of any
action taken or omitted to be taken by the Agent; PROVIDED, HOWEVER, that no
Bank shall be liable for any portion of any such losses, liabilities (including
liabilities for penalties), actions, suits, judgments, demands, damages, costs
disbursements, or expenses resulting from the gross negligence or willful
misconduct of an Agent. Notwithstanding any other provision of the Loan
Documents, each Agent shall in all cases be fully justified in failing or
refusing to act hereunder unless it shall be indemnified to its satisfaction by
the Banks against any and all liability and expense that may be incurred by it
by reason of taking or continuing to take any such action.
Section 10.8 AGENT AND AFFILIATES. Norwest and FCNBD shall have the
same rights and powers in its capacity as a Bank hereunder as any other Bank,
and may exercise or refrain from exercising the same as though it were not an
Agent, and Norwest and FCNBD and their affiliates may accept deposits from and
generally engage in any kind of business with each G&K Enterprise as fully as if
Norwest and FCNBD were not the Agents hereunder.
Section 10.9 CREDIT INVESTIGATION. Each Bank acknowledges that it has
made such inquiries and taken such care on its own behalf as would have been the
case had its Commitments been granted and its Advances or Acceptances made
directly by such Bank to a Borrower without the intervention of an Agent or any
other Bank. Each Bank agrees and acknowledges that no Agent makes any
representations or warranties about the creditworthiness of the Borrowers or any
other party to this Agreement (including the other Agent) or with respect to the
legality, validity, sufficiency or enforceability of this Agreement, any Loan
Document, any Collateral or any other instrument or document delivered hereunder
or in connection herewith.
Section 10.10 DEFAULTS. No Agent shall have a duty to inquire into any
performance or failure to perform by a Borrower and shall not be deemed to have
knowledge of the occurrence of a Default or an Event of Default (other than
under SECTIONS 9.1(a) or
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9.1(b)) hereof unless the Agent has received notice from a Bank or a Borrower
specifying the occurrence of such Default or Event of Default. In the event that
an Agent receives such a notice of the occurrence of a Default or an Event of
Default, such Agent shall give prompt notice thereof to the Banks. In the event
of any Default, the appropriate Agent shall (subject to SECTION 10.7 hereof)
(a) in the case of a Default that constitutes an Event of Default, not take any
the actions referred to in SECTION 9.2(b) hereof unless so directed by the
Required Banks, and (b) in the case of any Default, take such actions with
respect to such Default as shall be directed by the Required Banks; PROVIDED
that, unless and until an Agent shall have received such directions, an Agent
may take any action, or refrain from taking any action, with respect to such
Default as it shall deem advisable in the best interest of the Banks.
Section 10.11 OBLIGATIONS SEVERAL. The obligations of each Bank
hereunder are the several obligations of such Bank, and neither any Bank nor an
Agent shall be responsible for the obligations of any other Bank hereunder, nor
will the failure by an Agent or any Bank to perform any of its obligations
hereunder relieve an Agent or any other Bank from the performance of its
respective obligations hereunder. Notwithstanding the forgoing, each Bank
acknowledges and agrees that the failure of any Bank to honor any of its
obligations hereunder shall not relieve any other Bank of its own several
obligations hereunder. Nothing contained in this Agreement, and no action taken
by any Bank or an Agent pursuant hereto or in connection herewith or pursuant to
or in connection with the Loan Documents shall be deemed to constitute the
Banks, together or with or without the Agents, as a partnership, association,
joint venture, or other entity.
Section 10.12 SALE OR ASSIGNMENT; ADDITION OF BANKS. Except as
permitted under the terms and conditions of this SECTION 10.12 or, with respect
to participations, under SECTION 10.13, no Bank may sell, assign or transfer its
rights or obligations under this Agreement or its interest in any Note. Any
Bank, at any time upon at least ten (10) Business Days' prior written notice to
the US Agent (and the Canadian Agent if the sale relates to the Canadian
Revolving Facility) and the Borrowers (unless the affected Agents and the
Borrowers consent to a shorter period of time), may assign all of such Bank's
Notes, Advances, Acceptances and Commitments, or a portion thereof (so long as
any such portion is not less then $10,000,000 and is in equal percentages of
such assigning Bank's Commitments), to a domestic or foreign bank (having a
branch office in the United States), an insurance company or other financial
institution (an "Applicant") on any date (the "Adjustment Date") selected by
such Bank, but only so long as the Borrowers and the US Agent (and the Canadian
Agent if the sale relates to the Canadian Revolving Facility) shall have
provided their prior written approval of such proposed Applicant, which prior
written approval will not be unreasonably withheld. Notwithstanding the
foregoing, (x) assignments may be made by a Bank to The First National Bank of
Chicago or to another Bank already a party to this Agreement in an amount not
less than $1,000,000 and (y) no such consent of the Borrowers shall be required
to sale of an interest to an affiliate of a Bank or, in any event, if an Event
of Default shall exist. Upon receipt of such approval and to confirm the status
of
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each additional Bank as a party to this Agreement and to evidence the assignment
in accordance herewith:
(a) the Agents, the Borrowers, the assigning Bank and such Applicant
shall, on or before the Adjustment Date, execute and deliver to the Agent
an Assignment Certificate in substantially the form of EXHIBIT L (an
"Assignment Certificate");
(b) the affected Borrower will execute and deliver to the Agent, for
delivery by the Agent in accordance with the terms of the Assignment
Certificate, (i) new Notes payable to the order of the Applicant in amounts
corresponding to the applicable Commitments acquired by such Applicant and
(ii) new Notes payable to the order of the assigning Bank in amounts
corresponding to the retained Commitments. Such new Notes shall be in an
aggregate principal amount equal to the aggregate principal amount of the
Notes to be replaced by such new Notes, shall be dated the effective date
of such assignment and shall otherwise be in the form of the Notes to be
replaced thereby. Such new Notes shall be issued in substitution for, but
not in satisfaction or payment of, the Notes being replaced thereby and
such new Notes shall be treated as Notes for purposes of this Agreement;
and
(c) the assigning Bank shall pay to the applicable Agent an
administrative fee of $3,000.
Upon the execution and delivery of such Assignment Certificate and such new
Notes, and effective as of the effective date thereof (i) this Agreement shall
be deemed to be amended to the extent, and only to the extent, necessary to
reflect the addition of such additional Bank and the resulting adjustment of the
Percentages arising therefrom, (ii) the assigning Bank shall be relieved of all
obligations hereunder to the extent of the reduction of the assigning Bank's
Percentage, and (iii) the Applicant shall become a party hereto and shall be
entitled to all rights, benefits and privileges accorded to a Bank herein and in
each other Loan Document or other document or instrument executed pursuant
hereto and subject to all obligations of a Bank hereunder, including, without
limitation, the right to approve or disapprove actions which, in accordance with
the terms hereof, require the approval of the Required Banks or all Banks.
Promptly after the execution of any Assignment Certificate, a copy thereof shall
be delivered by the US Agent to each Bank and to the Borrowers. In order to
facilitate the addition of additional Banks hereto, the Borrowers and the Banks
shall cooperate fully with the Agents in connection therewith and shall provide
all reasonable assistance requested by the Agents relating thereto, including,
without limitation, the furnishing of such written materials and financial
information regarding the Borrowers as either Agent may reasonably request, the
execution of such documents as either Agent may reasonably request with respect
thereto, and the participation by officers of the Borrowers, and the Banks in a
meeting or teleconference call with any Applicant upon the request of either
Agent.
Section 10.13 PARTICIPATION. In addition to the rights granted in
SECTION 10.12, each Bank may grant participations in all or a portion of its
Notes, Advances, Acceptances
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and Commitments to any domestic or foreign commercial bank (having a branch
office in the United States), insurance company, financial institution or an
affiliate of such Bank. No holder of any such participation, however, shall be
entitled to require any Bank to take or omit to take any action hereunder except
those actions described in Section 11.2 requiring consent of all Banks. The
Banks shall not, as among the Borrowers, the Agents and the Banks, be relieved
of any of their respective obligations hereunder as a result of any such
granting of a participation. The Borrowers hereby acknowledge and agree that any
participation described in this SECTION 10.13 may rely upon, and possess all
rights under, any opinions, certificates, or other instruments or documents
delivered under or in connection with any Loan Document. Except as set forth in
this SECTION 10.13, no Bank may grant any participation in the Notes, Advances,
Acceptances or Commitments.
Section 10.14 BORROWER NOT A BENEFICIARY OR PARTY. Except with respect
to the limitation of liability applicable to the Banks under SECTION 10.11 and
the Borrowers' right to approve additional Banks in accordance with
SECTION 10.12, the provisions and agreements in this ARTICLE X are solely among
the Banks and the Agents and the Borrowers shall not be considered a party
thereto or a beneficiary thereof.
Section 10.15 WITHHOLDING TAX EXEMPTION. At least five (5) US Business
Days prior to the first date on which interest or fees are payable hereunder for
the account of any Bank, each Bank that is not incorporated under the laws of
the United States of America, or a state thereof, agrees that it will deliver to
each of the Borrowers and the US Agent two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224, certifying in either case
that such Bank is entitled to receive payments under this Agreement and the
Notes without deduction or withholding of any United States federal income
taxes. Each Bank which so delivers a Form 1001 or 4224 further undertakes to
deliver to each of the Borrowers and the US Agent two additional copies of such
form (or a successor form) on or before the date that such form expires
(currently, three successive calendar years for Form 1001 and one calendar year
for Form 4224) or becomes obsolete or after the occurrence of any event
requiring a change in the most recent forms so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Borrowers or the US Agent, in each case certifying that such
Bank is entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal income taxes, unless an
event (including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Bank from duly completing and delivering any such form with respect to it and
such Bank advises the Borrowers and the US Agent that it is not capable of
receiving payments without any deduction or withholding of United States federal
income tax.
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ARTICLE XI
MISCELLANEOUS
Section 11.1 NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on
the part of an Agent or any Bank in exercising any right, power or remedy under
the Loan Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
under the Loan Documents. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law.
Section 11.2 AMENDMENTS, REQUESTED WAIVERS, ETC. No amendment,
modification, termination or waiver of any provision of any Loan Document or
consent to any departure by a Borrower therefrom shall be effective unless the
same shall be in writing and signed by the Required Banks and, if the rights or
duties of an Agent are affected thereby, by such Agent; provided that no
amendment, modification, termination, waiver or consent shall do any of the
following unless the same shall be in writing and signed by all Banks:
(a) change the amount of any Commitment (except as permitted in accordance with
SECTION 10.12), (b) increase the Term Commitment Amount or any Revolving
Commitment Amount, (c) modify any Margin or reduce the amount of any principal
of or interest due on any Advance, (d) change the amount or calculation of the
Acceptance Fee, any Commitment Fee or any other fee payable hereunder (except
those payable solely to an Agent), (e) change the amount of, or payment date
with respect to, any principal of, interest on or fees payable in connection
with any Outstanding Obligations, (f) change the definition of "Required Banks,"
(g) amend SECTION 10.2 as to the application of payments and collections,
(h) amend this SECTION 11.2 or any other provision of this Agreement requiring
the consent or other action of the Required Banks or all Banks, (i) release any
Guaranty or (i) except for releases of Collateral contemplated in SECTION 4.19,
release, subordinate or terminate any security interest in any Collateral. Any
waiver or consent given hereunder shall be effective only in the specific
instance and for the specific purpose for which given. No notice to or demand on
the Borrowers in any case shall entitle the Borrowers to any other or further
notice or demand in similar or other circumstances.
Section 11.3 ADDRESSES FOR NOTICES, ETC. Except as otherwise expressly
provided herein, all notices, requests, demands and other communications
provided for under the Loan Documents shall be in writing and mailed, telecopied
or delivered to the applicable parties at their respective addresses or telecopy
numbers set forth on the execution pages hereto, or, as to each party, at such
other address or telecopy number as shall be designated by such party in a
written notice to the other party complying as to delivery with the terms of
this SECTION 11.3. All such notices, requests, demands and other communications
(a) when delivered, shall be effective upon actual delivery, (b) when
telecopied, shall be effective upon receipt, (c) and when mailed, shall be
effective when sent by nationally recognized overnight mail courier or delivery
service, addressed as aforesaid, except that notices or requests to an
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Agent or any Bank pursuant to any of the provisions of ARTICLES II or III shall
not be effective until received by the Agents or such Bank.
Section 11.4 COSTS AND EXPENSES. The Borrowers will reimburse the
Agents for (a) any and all reasonable out-of-pocket costs and reasonable
expenses, including without limitation reasonable attorneys' fees and expenses,
lien and UCC and PPSA searches, title and recording expenses and other similar
expenses, paid or incurred by an Agent in connection with the preparation,
filing or recording of the Loan Documents and any other document or agreement
related hereto or thereto, and the transactions contemplated hereby (which
amount shall be paid on the Closing Date or as soon thereafter as demand is made
therefor) and the negotiation of any amendments, modifications or extensions to
or of any of the foregoing documents, instruments or agreements and the
preparation of any and all documents necessary or desirable to effect such
amendments, modifications or extensions, (b) customary transaction fees of an
Agent incurred in connection with the loans contemplated hereby, (c) fees in
connection with any audits or inspections by an Agent of any Collateral or the
operations or business of a Borrower or Guarantor, whether conducted at the
premises of a Borrower or Guarantor or at an Agent's premises, provided that the
cost thereof shall not exceed $10,000 during any period of twelve consecutive
months, unless an Event of Default shall have occurred and is continuing during
the period, in which event the foregoing limit shall no longer apply, and (d)
any and all other reasonable out-of-pocket costs and expenses incurred by an
Agent in connection with any of the transactions contemplated hereby. The
Borrowers will reimburse each Agent and each Bank for any and all reasonable
costs and expenses incurred by an Agent or any Bank in connection with the
enforcement of any of the rights or remedies of the Agents or the Banks under
any of the Loan Documents or under applicable law, whether or not suit is filed
with respect thereto.
Section 11.5 INDEMNITY. In addition to the payment of expenses
pursuant to SECTION 11.4, the Borrowers agree to indemnify, defend and hold
harmless each Agent, the Letter of Credit Bank and each Bank and each of their
respective participants, parent corporations, subsidiary corporations,
affiliated corporations, successor corporations, and all present and future
officers, directors, employees and agents (the "Indemnitees"), from and against
(i) any claim, loss or damage to which any Indemnitee may be subjected as a
result of any past, present or future existence, use, handling, storage,
transportation or disposal of any Hazardous Substance by any G&K Enterprise or
with respect to any property owned, leased or controlled by any G&K Enterprise,
(ii) any and all transfer taxes, documentary taxes, assessments or charges made
by any governmental authority (excluding income taxes) by reason of the
execution and delivery of this Agreement and the other Loan Documents or the
making of any Advances and (iii) any and all liabilities, losses, damages,
penalties, judgments, suits, claims, costs and expenses of any kind or nature
whatsoever (including, without limitation, the reasonable fees and disbursements
of counsel) in connection with any investigative, administrative or judicial
proceedings, whether or not such Indemnitee shall be designated a party thereto,
which may be imposed on, incurred by or asserted against such Indemnitee, in any
manner relating to or arising out of or in connection with, the making of
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any Advances, discounting of any Acceptances or issuing any Letters of Credit or
entering into this Agreement or any other Loan Documents or the use or intended
use of the proceeds of the proceeds of the Facilities, excepting, however, from
the foregoing any such liabilities, losses, damages, penalties, judgments,
suits, claims, costs and expenses resulting from the willful misconduct or gross
negligence of any Indemnitee. If any investigative, judicial or administrative
proceeding arising from any of the foregoing is brought against any Indemnitee,
upon request of such Indemnitee, the Borrowers, or counsel designated by the
Borrowers and satisfactory to the Indemnitee, will resist and defend such
action, suit or proceeding to the extent and in the manner directed by the
Indemnitee, at the Borrowers' sole cost and expense. Each Indemnitee will use
its best efforts to cooperate in the defense of any such action, suit or
proceeding. If the foregoing undertaking to indemnify, defend and hold harmless
may be held to be unenforceable because it violates any law or public policy,
the Borrowers shall nevertheless make the maximum contribution to the payment
and satisfaction of each of the indemnified liabilities contemplated hereby
which is permissible under applicable law. The obligations of the Borrowers
under this SECTION 11.5 shall survive termination of this Agreement and the
discharge of the Obligations.
Section 11.6 EXECUTION IN COUNTERPARTS. This Agreement and other Loan
Documents 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 and the same instrument.
Section 11.7 INTEGRATION; INCONSISTENCY. This Agreement, together with
the Loan Documents, comprise the final and complete integration of all prior
expressions by the parties hereto with respect to the subject matter hereof and
shall constitute the entire agreement among the parties hereto with respect to
such subject matter, superseding all prior oral or written understandings. If
any provision of a Loan Document is inconsistent with or conflicts with a
comparable or similar provision appearing in this Agreement, the comparable or
similar provision in this Agreement shall govern.
Section 11.8 AGREEMENT EFFECTIVENESS. This Agreement shall become
effective upon delivery of fully executed counterparts hereof to each of the
parties hereto.
Section 11.9 ADVICE FROM INDEPENDENT COUNSEL. The parties hereto
understand that this Agreement is a legally binding agreement that may affect
such party's rights. Each party hereto represents to the other that it has
received legal advice from counsel of its choice regarding the meaning and legal
significance of this Agreement and that it is satisfied with its legal counsel
and the advice received from it.
Section 11.10 JUDICIAL INTERPRETATION. Should any provision of this
Agreement require judicial interpretation, it is agreed that a court
interpreting or construing the same shall not apply a presumption that the terms
hereof shall be more strictly construed against any person by reason of the rule
of construction that a document is to be construed more strictly
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against the person who itself through its agent prepared the same, it being
agreed that all parties hereto have participated in the preparation of this
Agreement.
Section 11.11 BINDING EFFECT; NO ASSIGNMENT BY BORROWER. This
Agreement shall be binding upon and inure to the benefit of the Borrowers, the
Banks, the Agents and their respective successors and assigns; PROVIDED, except
that no Borrower may assign any or all of its rights or obligations hereunder or
any of its interest herein without the prior written consent of all Banks.
Section 11.12 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
Section 11.13 HEADINGS. Article and SECTION headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
Section 11.14 GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL.
(a) GOVERNING LAW. The Loan Documents shall be governed by, and
construed in accordance with, the laws of the State of Minnesota, except to
the extent expressly provided to the contrary in any such Loan Document.
(b) JURISDICTION. Each Borrower hereby irrevocably submits to the
jurisdiction of any state or federal court sitting in St. Paul or
Minneapolis, Minnesota, in any action or proceeding arising out of or
relating to this Agreement or any of the other Loan Documents, and each
Borrower hereby irrevocably agrees that all claims in respect of such
action or proceeding may be heard and determined in such Minnesota state or
federal court. Each Borrower hereby irrevocably waives, to the fullest
extent they may effectively do so, the defense of an inconvenient forum to
the maintenance of such action or proceeding. Each Borrower irrevocably
consents to the service of copies of the summons and complaint and any
other process which may be served in any such action or proceeding by the
mailing of copies of such process to each Borrower at its addresses
specified in SECTION 11.3. Each Borrower agrees that a final judgment in
any such action or proceeding may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in
this SECTION 11.14(b) shall affect the right of an Agent or any Bank to
serve legal process in any other manner permitted by law or affect the
right of an Agent or any Bank to bring any action or proceeding against a
Borrower or its property in the courts of other jurisdictions.
(C) WAIVER OF JURY TRIAL. EACH BORROWER AND THE BANKS HEREBY
IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING
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<PAGE>
OUT OF OR RELATING TO ANY LOAN DOCUMENT OR ANY INSTRUMENT OR DOCUMENT
DELIVERED THEREUNDER.
[SIGNATURE PAGES FOLLOW]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BORROWERS
505 North Highway 169, Suite 455 G&K SERVICES, INC.
Minneapolis, Minnesota 55441
Attn: Timothy W. Kuck
Phone: (612) 912-5772 By /s/ Timothy W. Kuck
Fax: (612) 912-5900 --------------------------------
Timothy W. Kuck
Its Chief Financial Officer
6299 Airport Road, Suite 101 WORK WEAR CORPORATION OF
Mississauga, Ontario CANADA LTD.
Attn: Robert Wood
Phone: (905) 677-6161 By /s/ Timothy W. Kuck
Fax: (905) 677-6289 --------------------------------
Timothy W. Kuck
Its Chief Financial Officer
BANKS AND AGENTS
Norwest Center, 5th Floor NORWEST BANK MINNESOTA,
Sixth and Marquette NATIONAL ASSOCIATION
Minneapolis, Minnesota 55479-0089 as US Bank, Letter of Credit Bank
Attn: Daniel P. Weiler and US Agent
Phone: (612) 667-2318
Fax: (612) 667-7266
By
--------------------------------
Daniel P. Weiler
Its Vice President
Dollar Amount
Facility of Commitment Percentage
-------- ------------- ----------
US Revolving $25,000,000 25%
Term $75,000,000 25%
[Signature Page to Credit Agreement]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BORROWERS
505 North Highway 169, Suite 455 G&K SERVICES, INC.
Minneapolis, Minnesota 55441
Attn: Timothy W. Kuck
Phone: (612) 912-5772 By
Fax: (612) 912-5900 --------------------------------
Timothy W. Kuck
Its Chief Financial Officer
6299 Airport Road, Suite 101 WORK WEAR CORPORATION OF
Mississauga, Ontario CANADA LTD.
Attn: Robert Wood
Phone: (905) 677-6161 By
Fax: (905) 677-6289 --------------------------------
Timothy W. Kuck
Its Chief Financial Officer
BANKS AND AGENTS
Norwest Center, 5th Floor NORWEST BANK MINNESOTA,
Sixth and Marquette NATIONAL ASSOCIATION
Minneapolis, Minnesota 55479-0089 as US Bank, Letter of Credit Bank
Attn: Daniel P. Weiler and US Agent
Phone: (612) 667-2318
Fax: (612) 667-7266
By /s/ Daniel P. Weiler
--------------------------------
Daniel P. Weiler
Its Vice President
Dollar Amount
Facility of Commitment Percentage
-------- ------------- ----------
US Revolving $25,000,000 25%
Term $75,000,000 25%
[Signature Page to Credit Agreement]
<PAGE>
611 Woodward Avenue NBD BANK
Detroit, Michigan 48226 as US Bank
Attn: Marguerite C. Mullins
Phone: (313) 225-2873 By /s/ Marguerite C. Mullins
Fax: (313) 225-3269 --------------------------------
Marguerite C. Mullins
Its Vice President
Dollar Amount
Facility of Commitment Percentage
-------- ------------- ----------
US Revolving $ 75,000,000 75%
Term $225,000,000 75%
FIRST CHICAGO NBD BANK, CANADA
Suite 4240 as Canadian Bank and Canadian Agent
BCE Place
162 Bay Street By /s/ Kelly Cotton
Toronto, Ontario CANADA M5J 2S1 ---------------------------
Attn: Janet Beadle Kelly Cotton
Phone: (416) 365-5261 Its First Vice President
Fax: (416) 363-7574
Canadian
Dollar Amount
Facility of Commitment Percentage
-------- ------------- ----------
Canadian
Revolving C$34,325,875 100%
[Signature Page to Credit Agreement]
<PAGE>
TABLE OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A Form of US Revolving Note
Exhibit B Form of Canadian Revolving Note
Exhibit C Form of Term Note
Exhibit D Form of Notice of Borrowing-US Facility
Exhibit E Form of Notice of Conversion-US Facility
Exhibit F Form of Notice to Continue Eurodollar Funding
Exhibit G Form of Notice of Borrowing-Canadian Facility
Exhibit H Form of Notice of Conversion-Canadian Facility
Exhibit I Form Of Notice to Renew Acceptance
Exhibit J Form of Year-End Compliance Certificate
Exhibit K Form of Quarterly Compliance Certificate
Exhibit L Form of Assignment Certificate
SCHEDULES
Schedule 4.1 Assets Held for Sale
Schedule 6.1 Names; Chief Executive Offices
Schedule 6.4 Subsidiaries; Organizational Chart
Schedule 6.5 Projected Opening Balance Sheet and Related
Projections
Schedule 6.6 Litigation
Schedule 6.10 Plans
Schedule 6.12 Environmental Disclosures
<PAGE>
Schedule 8.1 Existing Liens
Schedule 8.2 Permitted Indebtedness and Guaranties
Schedule 8.4 Existing Investments
2
<PAGE>
G&K SERVICES, INC.
5995 Opus Parkway, Suite 500
Minnetonka, MN 55343
TRADED: NASDAQ (GKSRA)
AT THE COMPANY: AT THE FINANCIAL RELATIONS BOARD:
Timothy Kuck, CFO Michael Rosenbaum or Leslie Hunziker (General Info)
612/912-5500 312/266-7800
Richard Fink, Chairman Suzy Lynde (Analysts) 312/266-7800
612/912-5500
FOR IMMEDIATE RELEASE
MONDAY, JULY 14, 1997
G&K SERVICES COMPLETES ACQUISITION OF UNIFORM RENTAL ASSETS OF
NATIONAL LINEN SERVICE
MINNEAPOLIS, MN, JULY 14, 1997 -- G&K SERVICES, INC. (NASDAQ:GKSRA), a leading
supplier of corporate work uniform programs, today announced the closing of its
previously announced acquisition of the uniform rental assets, plus selected
linen rental assets, of National Linen Services, a division of National Service
Industries, Inc. (NYSE:NSI).
The acquisition of the 29 National Linen Services facilities greatly strengthens
G&K's position in the Southeastern United States. The cash purchase price was
approximately $280 million, subject to adjustment after post-closing audit. The
acquired facilities make G&K the third largest supplier in the uniform leasing
industry, with anticipated revenues in excess of $500 million for G&K's fiscal
year ending June 27, 1998.
"As we move forward to make the new business a part of G&K, we are excited by
the opportunities ahead of us," said Richard Fink, Chairman of G&K Services.
"This transaction continues our long-standing growth strategy of combining solid
internal growth with strategic acquisitions."
Statements in this press release which are not strictly historical are
"forward-looking" statements that are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve known and unknown risks, which may cause the
company's actual results in the future to differ materially from expected
results. Expectations related to the acquisition of the NLS facilities are, of
course, contingent upon the closing of the transaction; the successful
integration of the NLS operations; the company's ability to retain the
<PAGE>
NLS customer base, unforeseen operating risks; the availability of capital to
finance planned growth; competition within the uniform leasing industry; and the
effects of economic conditions.
G&K Services is one of North America's largest suppliers of uniform programs to
the business industry. The company provides services throughout the United
States and Canada.
TO RECEIVE THE LATEST INFORMATION ABOUT G&K SERVICES, INC. BY FAX,
AT NO COST, DIAL 1-800-PRO-INFO, CODE GKSRA
