GSK Annual Report or PPT 2005

FORM 10-K
G&K SERVICES INC - GKSR

Filed: September 15, 2005 (period: July 02, 2005)
Annual report which provides a comprehensive overview of the company for the past year
Table of Contents

10-K - FORM 10-K

PART I

ITEM 1. BUSINESS

ITEM 2. PROPERTIES

ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

PART II

ITEM 5. MARKET FOR REGISTRANT S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS

ITEM 6. SELECTED FINANCIAL DATA
ITEM 7. MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

ITEM
7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM
9A.
CONTROLS AND PROCEDURES

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K

SIGNATURES

EX-10.(T) (LOAN AGREEMENT)

EX-21 (SUBSIDIARIES)

EX-23 (CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM)

EX-24 (POWER OF ATTORNEY)

EX-31.1 (CERTIFICATION OF CEO PURSUANT TO SECTION 302)

EX-31.2 (CERTIFICATION OF CFO PURSUANT TO SECTION 302)

EX-32.1 (CERTIFICATION OF CEO PURSUANT TO SECTION 906)

EX-32.2 (CERTIFICATION OF CFO PURSUANT TO SECTION 906)

EX-99.1 (REPORT OF ERNST YOUNG LLP)
Source: G&K SERVICES INC, 10-K, September 15, 2005
Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended July 2, 2005

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission file number 0-4063
G&K SERVICES, INC.
(Exact name of registrant as specified in its charter)

MINNESOTA 41-0449530

(State of incorporation) (I.R.S. Employer Identification No.)
5995 OPUS PARKWAY
MINNETONKA, MINNESOTA 55343
(Address of principal executive offices)
Registrants telephone number, including area code (952) 912-5500
Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Name of Each Exchange on which Registered
None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock (par value $0.50 per share)
Class B Common Stock (par value $0.50 per share)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(b) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes No
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No
The aggregate market value of the voting stock of registrant held by non-affiliates of the registrant on August 29, 2005, computed by
reference to the closing sale price of such shares on such date, was approximately $880,221,787. The aggregate market value of the
voting stock of registrant held by non-affiliates of the registrant on January 1, 2005 (the last business day of the registrants most
recently completed second fiscal quarter), computed by reference to the closing sale price of such shares on such date, was
approximately $913,521,109.
On August 29, 2005, there were outstanding 19,648,637 and 1,474,996 shares of the registrants Class A and Class B Common Stock,
respectively.
DOCUMENTS INCORPORATED BY REFERENCE

DOCUMENT DOCUMENT IS INCORPORATED
Portions of proxy statement for the annual meeting of stockholders Part III

G&K Services, Inc.
Form 10-K
For the fiscal year ended July 2, 2005
Table of Contents

PAGE
PART I
Item 1. Business 3
Item 2. Properties 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6

PART II
Item 5. Market for Registrants Common Stock and Related Security Holder Matters 7
Item 6. Selected Financial Data 8
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations 9
Item 7A. Quantitative and Qualitative Disclosure About Market Risk 17
Item 8. Financial Statements and Supplementary Data 19
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 42
Item 9A. Controls and Procedures 42

PART III
Item 10. Directors and Executive Officers of the Registrant 43
Item 11. Executive Compensation 43
Item 12. Security Ownership of Certain Beneficial Owners and Management 43
Item 13. Certain Relationships and Related Transactions 43
Item 14. Principal Accounting Fees and Services 43

PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K 44
Signatures 47
Loan Agreement
Subsidiaries
Consent of Independent Registered Public Accounting Firm
Power of Attorney
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906
Report of Ernst & Young LLP
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PART I
ITEM 1. BUSINESS
G&K Services, Inc., founded in 1902 and headquartered in Minnetonka, Minnesota, is a market leader in providing branded identity
apparel and facility services programs that enhance image and safety in the workplace. We serve a wide variety of North American
industrial, service and high-technology companies providing them with rented uniforms and facility services products such as floor
mats, dust mops, wiping towels, restroom supplies and selected linen items. We also sell uniforms and other apparel items to
customers in our direct sale programs. The North American rental market is approximately $6.5-$7.0 billion, while the portion of the
direct sale market targeted by us is approximately $4.5-$5.0 billion in size.
Through internal growth and acquisitions, we have steadily expanded our operations into additional geographic markets. We operate
over 140 locations in North America. These locations service customers in 86 of the top 100 markets, including all 30 of the top 100
markets in the United States and Canada.
We target our marketing efforts on customers, industries and geographic locations that are expanding and are in need of a
quality-oriented corporate identity or facility services program that provides high levels of product quality, consistent customer-centric
service levels, multi-channel sales, service, reporting and outsourced program management. Our experience with both existing and
potential customers, large and small, confirms that a large segment of the market is willing to pay a premium price to a vendor that can
consistently supply these features.
Customers, Products and Services
We serve over 160,000 customers, from Fortune 100 companies to fast-growing small and midsize firms. No single customer
represents more than 1.0% of our total revenues. We serve customers in virtually all industries including automotive, warehousing,
distribution, transportation, energy, manufacturing, food processing, pharmaceutical, semi-conductor, restaurants and hospitality, and
many others. Over one million people wear our uniforms every day.
Our full-service business apparel and facility services programs provide rental-lease or purchase options to meet varied customer
needs including heavy-industrial, light-manufacturing, service businesses, corporate casual and executive apparel markets. In addition,
we offer cleanroom garments and process control services to meet the needs of high-technology customers.
We believe that customers use business apparel programs to meet a variety of critical business needs that enhance image and safety in
the workplace, including:
Company safety and security uniforms help identify employees working for a particular company or department.

Brand awareness uniforms promote a companys brand identity and employees serve as walking billboards.

Image uniforms help companies project a professional image through their employees and frame the perception
of credibility, knowledge, trust and a commitment to quality to their customers. Uniformed employees are
perceived as trained, competent and dependable.

Employee retention uniforms enhance worker morale and help build a teamwork attitude in addition to being an
employee benefit.

Worker protection uniforms help protect workers from difficult environments such as heavy soils, heat, flame or
chemicals.

Product protection uniforms and facility services help protect products against contamination in the food,
pharmaceutical, electronics and health care industries.
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We provide our apparel-rental customers with a full range of services and solutions. A consultative approach is used to advise and
assist our customers in creating specialized solutions including determining garment application and choosing the appropriate fabrics,
styles and colors to meet their branding, identity and safety needs. We have a large stock of new and used garments to provide rapid
response as customer needs change due to increases, decreases or turnover in their work force. Professional cleaning, finishing, repair
and replacement of uniforms in use is a normal part of the rental service. Soiled uniforms are picked up at the customers location and
returned clean and in good condition on a weekly cycle.
Uniform rental programs can provide significant advantages over ownership. Renting eliminates investment in uniforms; offers
flexibility in styles, colors and quantities as customer requirements change; assures consistent professional cleaning, finishing, repair
and replacement of items in use; and provides freedom from the expense and management time necessary to administer a uniform
program.
Our facility services programs provide a wide range of dust control, maintenance and hygiene products and services. They include
several floor mat offerings (traction control, logo, message, scraper and anti-fatigue), dust and wet mops, wiping towels, fender
covers, selected linen items and several restroom hygiene products. These products support customers efforts in maintaining a clean,
safe and attractive environment within their facilities.
We also offer direct sale and custom-embroidered logo apparel programs to meet customer identity needs. The direct sale programs
can be used for departments and/or customers that require highly customized and branded apparel or for workers who dont start at the
same location each day and need uniform apparel they can care for themselves. It can be a more economical approach for high
turnover positions and can be used for employee rewards and recognition or customer and vendor appreciation programs.
We also offer comprehensive direct sale uniform programs to large national account customers through Lion Uniform Group. Lion
serves many different industries and specializes in serving the security, airline and convenience store/retail industries. They handle all
aspects of the uniform program including design, sourcing, distribution, information reporting and program management.
Acquisitions
Our industry is consolidating from many family owned and small local providers to several large providers. We are participating in
this industry consolidation. Our goal is to build a national footprint and, accordingly, place strategic value on acquisitions which
expand our geographic presence.
We made several small acquisitions in each of the past three fiscal years. The pro forma effects of these acquisitions, had they been
acquired at the beginning of each fiscal year, were not material, either individually or in the aggregate, to the Company. The total
purchase consideration, including related acquisition costs of these transactions, was $86.8 million, $24.9 million and $88.7 million in
fiscal 2005, 2004 and 2003, respectively. The fiscal 2005 purchase consideration includes $11.9 million of debt issued. The total
purchase price exceeded the estimated fair values of assets acquired and liabilities assumed by $50.6 million in fiscal 2005,
$19.3 million in fiscal 2004 and $63.2 million in fiscal 2003.
Competition
Customers in the corporate identity apparel and facility services industry choose suppliers primarily based upon the quality, price and
breadth of products offered and the comprehensive nature of the services provided. While we rank among the nations largest garment
rental suppliers, we encounter competition from a number of companies in the geographic areas we serve. Major competitors include
publicly held companies such as ARAMARK Work Apparel and Uniform Services (a division of ARAMARK Corporation), Cintas
Corporation and UniFirst Corporation. We also compete with a multitude of regional and local competitors that vary by market. We
believe that we compete effectively in our line of business because of the quality and breadth of our product line, the comprehensive
customer service levels we provide and our proven ability as an outsource partner. In addition, our competitors generally compete with
us for acquisition candidates, which can reduce the number of acquisition candidates available to us.
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Manufacturing and Suppliers
We manufactured approximately one-half of the uniform garments that we placed into service in fiscal 2005. These garments are
manufactured primarily at a Company owned facility located in the Dominican Republic and, to a lesser degree, at two Company
owned facilities in the United States. Various outside vendors are used to supplement our additional rental needs, including garments,
floor mats, dust mops, wiping towels, linens and related products. We are not aware of any circumstances that would limit our ability
to obtain raw materials to support the manufacturing process or to obtain garments or other rental items to meet our customers needs.
Environmental Matters
Our operations are subject to various federal, state and/or local laws regulating the discharge of materials into the environment. This
includes discharges into wastewater and air, and the generation, handling, storage, transportation and disposal of waste and hazardous
substances. We generate modest amounts of waste in connection with our laundry operations, specifically detergent wastewater,
wastewater sludge, waste oil and other residues. Some of these wastes are classified as hazardous wastes under these laws. We have
continued to make significant investments in properly handling and disposing of these wastes.
We have been identified as a potentially responsible party (PRP) under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended (CERCLA), or similar state laws, at certain waste disposal sites; however, there has been no
activity or further notifications in connection with these waste disposal sites for a period of years. Under such laws, PRPs typically
are jointly and severally liable for any investigation and remediation costs incurred with respect to such sites. Therefore, there can be
no assurance that we will not have to contribute material amounts for future remediation that could be greater than the share of waste
contributed by us would otherwise indicate. Additionally, environmental laws may impose liability for cost of removal or remediation
of certain hazardous wastes located on or in or emanating from owned or leased real estate, whether or not we knew of or were
responsible for the presence of such wastes. While we take appropriate steps when acquiring or leasing new properties, there can be no
assurance that this risk has been eliminated.
Although any ultimate liability arising from environmental related matters described herein could result in significant expenditures
that, if aggregated and assumed to occur within a single fiscal year, could be material to our results of operations or financial position,
the likelihood of such occurrence is considered remote. Based on information currently available and our best assessment of the
ultimate amount and timing of environmental-related events, we believe that the cost of these environmental-related matters are not
reasonably likely to have a material adverse effect on our results of operations or financial position.
Employees
Our U.S. operations had a total of 7,743 employees as of July 2, 2005, consisting of 3,942 production employees and 3,801 sales,
office, route and management personnel. Unions represent approximately 14.2% of our U.S. employees. Management believes its
domestic employee relations are satisfactory.
Our Canadian operations had a total of 1,776 employees as of July 2, 2005, consisting of 1,152 production employees and 624 sales,
office, route and management personnel. Unions represent approximately 45.9% of our Canadian employees. Management believes
Canadian employee relations are satisfactory.
Foreign and Domestic Operations
Financial information relating to foreign and domestic operations is set forth in Note 10 of our consolidated financial statements
included in Item 8 of this Form 10-K.
Additional Information
We own a portfolio of registered trademarks, trade names and licenses, and certain U.S. and foreign process and manufacturing
patents relating to our business as we currently conduct it. These proprietary properties, in the aggregate, constitute a valuable asset.
Among these are the trademarks and trade names G&K Services, G&K TeamWear, G&K First Step Facility Services and G&K
Food Safety Solutions brands, various logos and marketing themes and collateral. We do not believe, however, that
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our business is dependent upon any single proprietary property or any particular group of proprietary properties. We do not consider
our business to be seasonal to any extent or subject to any unusual working capital requirements.
Available Information
We make available free of charge our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and
any amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the
Securities and Exchange Commission. These reports are available on our website at http://www.gkservices.com. In addition, you may
request a copy of these filings, excluding exhibits, by contacting our Investor Relations group at (952) 912-5500 or at G&K Services,
Inc., 5995 Opus Parkway, Minnetonka, Minnesota 55343. Information included on our website is not deemed to be incorporated into
this Annual Report on Form 10-K.
ITEM 2. PROPERTIES
We occupy 167 facilities located in the United States and Canada. These facilities include our processing, branch, garment
manufacturing, distribution and administrative support locations. We clean and supply rental items principally from 63 industrial
garment, cleanroom garment, dust control and linen supply plants located in 50 cities in the United States and 10 cities in Canada. We
own approximately 80.0% of our processing facilities, each of which average over 43,000 square feet in size.
ITEM 3. LEGAL PROCEEDINGS
We are involved in a variety of legal actions relating to personal injury, employment, environmental and other legal matters that arise
in the normal course of business. These legal actions include but are not limited to those items set forth in Item 1. Business
Environmental Matters and lawsuits that challenge the practice of charging for certain environmental services on invoices. None of
these legal actions are expected to have a material adverse effect on our results of operations, financial position or cash flow.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of our security holders during the fourth quarter of fiscal 2005.
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PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON STOCK AND RELATED SECURITY HOLDER MATTERS
Our Class A Common Stock is quoted on the Nasdaq National Market under the symbol GKSRA. Our Class B Common Stock is
not registered and no active trading market exists for the Class B Common Stock. The following table sets forth the high and low
reported sales prices for the Class A Common Stock as quoted on the Nasdaq National Market for the periods indicated.

High Low
Fiscal 2005
1st Quarter $40.80 $35.97
2nd Quarter 44.06 37.90
3rd Quarter 45.25 37.65
4th Quarter 41.08 36.85
Fiscal 2004
1st Quarter $36.12 $28.26
2nd Quarter 37.25 30.28
3rd Quarter 39.75 34.51
4th Quarter 40.96 35.08
As of August 29, 2005, we had approximately 510 registered holders of record of our common stock.
We have declared cash dividends of $0.0175 per share in each of the quarters for the fiscal years ended July 2, 2005 and July 3, 2004.
Our debt agreements contain various restrictive covenants, which, among other things, limit the payment of cash dividends we declare
during any fiscal year.
The following table sets forth certain information as of July 2, 2005 with respect to equity compensation plans under which securities
are authorized for issuance:

Number of
Securities
Number of Remaining Available
Securities to be for Future Issuance
Issued Upon Weighted-Average Under Equity
Exercise of Exercise Price of Compensation Plans
Outstanding Outstanding (Excluding
Options Options Securities Reflected
Plan category (A) (B) in Column (A))
Equity compensation plans approved by security holders:
Employee Plans (1) 1,161,547 $ 34.23 1,343,366
1996 Directors Stock Option Plan 55,000 33.81 37,000
Total: 1,216,547 $ 34.21 1,380,366

Equity compensation plans not approved by stockholders:
None

Total 1,216,547 $ 34.21 1,380,366
(1) Includes our 1989 Stock Option and Compensation Plan and 1998 Stock Option and Compensation Plan.
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There were no share repurchases for the quarter ended July 2, 2005.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain selected financial data. All amounts are in thousands, except per share data.

2005 2004 2003 2002 2001
Revenues $ 788,775 $ 733,447 $ 705,588 $ 677,591 $ 656,381
Net Income 39,927 35,384 33,689 38,267 33,783
Per Share Data:
Basic earnings per share 1.91 1.71 1.64 1.87 1.65
Diluted earnings per share 1.88 1.69 1.63 1.85 1.65
Dividends per share 0.07 0.07 0.07 0.07 0.07
Total Assets 903,169 802,747 778,806 681,699 619,963
Long-Term Debt 210,462 184,305 236,731 214,977 148,951
Stockholders Equity 475,430 425,423 380,269 340,158 301,267
See Note 1 of our consolidated financial statements included in Item 8 of this Form 10-K for an explanation of the method employed
to determine the number of shares used to compute per share amounts. We utilize a 52-53 week fiscal year ending on the Saturday
nearest June 30. Fiscal 2004 was a 53-week year.
The fiscal 2002 results include the impact of the adoption of Statement of Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets, under which goodwill and intangible assets with indefinite lives are no longer amortized. See Note 3 of the
consolidated financial statements included in Item 8 of this Form 10-K.
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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes
thereto which are included herein. We utilize a 52-53 week fiscal year ending on the Saturday nearest June 30. The fiscal year ended
July 3, 2004 was a 53-week year with the extra week reported in the fourth quarter.
Overview
G&K Services, Inc., founded in 1902 and headquartered in Minnetonka, Minnesota, is a market leader in providing branded identity
apparel and facility services programs that enhance image and safety in the workplace. We serve a wide variety of North American
industrial, service and high-technology companies providing them with rented uniforms and facility services products such as floor
mats, dust mops, wiping towels, restroom supplies and selected linen items. We also sell uniforms and other apparel items to
customers in our direct sale programs. The North American rental market is approximately $6.5-$7.0 billion, while the portion of the
direct sale market targeted by us is approximately $4.5-$5.0 billion in size.
In fiscal 2005, revenue grew to $788.8 million, up 7.5% over the prior year. Excluding the impact of the 53
rd
week in fiscal 2004, full
year revenues were up 9.5%. Revenue growth continued to be negatively impacted by lost uniform wearers due to reduced
employment levels within our existing customer base, largely offset by an improved pricing environment and new account sales.
Our primary focus in fiscal 2005 was to improve top-line growth while delivering year-over-year earnings improvement. Fiscal 2005
net income grew by 12.8% to $39.9 million. This improvement in earnings was the result of operational initiatives including a focus
on lower merchandise costs. These improvements were partially offset by higher energy and production costs.
Our industry is consolidating from many family owned and small local providers to several large providers. We are participating in
this industry consolidation. Our goal is to build a national footprint and, accordingly, place strategic value on acquisitions which
expand our geographic presence.
We made several small acquisitions during fiscal 2005. In August 2004, we acquired Keefer Laundry Ltd., a textile laundry company
serving the Vancouver and Whistler areas of British Columbia. The acquisition extends our uniform and textile rental service area to
Western Canada. Nettoyeur Shefford Inc., a uniform and textile service company serving Granby and Montreal, Quebec was
purchased in October 2004. This acquisition enhances our market position serving customers in the province of Quebec. Also in
October 2004, we purchased certain industrial rental assets and customers of Marathon Linen, Inc., a uniform and textile service
company serving the Detroit metro area. This acquisition expands our geographic coverage to a major North American market. In
December 2004, we acquired the direct sale uniform group and related assets from Lion Apparel, Inc., a Dayton, Ohio based designer,
marketer and distributor of customized uniform programs. This acquisition expands our direct sale business and positions us to pursue
greater direct sale growth. Custom Linen Systems, Ltd. was acquired in February 2005. Custom Linen Systems is a textile laundry
company serving Calgary and Edmonton, Alberta. This acquisition expands our uniform and textile rental service presence in western
Canada. In March 2005, we acquired certain assets from Coyne Textile Services. We acquired two processing facilities serving
customers in Connecticut, New York, Pennsylvania and New Jersey, and also acquired certain customer assets in Maryland and
Florida. This purchase expands and enhances our uniform and textile rental business in North America.
The pro forma effect of the acquisitions listed above and those made in the last two fiscal years, had they been acquired at the
beginning of each fiscal year, were not material, either individually or in the aggregate. The total purchase consideration, including
related acquisition costs of these transactions, was $86.8 million, $24.9 million and $88.7 million in fiscal 2005, 2004 and 2003,
respectively. The fiscal 2005 purchase consideration includes $11.9 million of debt issued. The total purchase price exceeded the
estimated fair values of assets acquired and liabilities assumed by $50.6 million in fiscal 2005, $19.3 million in fiscal 2004 and
$63.2 million in fiscal 2003.
Critical Accounting Policies
The discussion of the financial condition and results of operations are based upon the consolidated financial statements, which have
been prepared in conformity with accounting principles generally accepted in the United States. As such, management is required to
make certain estimates, judgments and assumptions that are believed to be reasonable based on the information available. These
estimates and assumptions affect the reported amount of assets and liabilities, revenues and expenses, and
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disclosure of contingent assets and liabilities at the date of the financial statements. Actual results may differ from these estimates
under different assumptions or conditions.
Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially
result in materially different results under different assumptions and conditions. See Note 1 to the consolidated financial statements for
additional discussion of the application of these and other accounting policies.
Revenue Recognition and Allowance for Doubtful Accounts
Our rental operations business is largely based on written service agreements whereby we agree to collect, launder and deliver
uniforms and other related products. The service agreements provide for weekly billing upon completion of the laundering process and
delivery to the customer. Accordingly, we recognize revenue from rental operations in the period in which the services are provided.
Revenue from rental operations also includes billings to customers for lost or abused merchandise. Direct sale revenue is recognized in
the period in which the product is shipped. Estimates are used in determining the collectibility of billed accounts receivable.
Management analyzes specific accounts receivable and historical bad debt experience, customer credit worthiness, current economic
trends and the age of outstanding balances when evaluating the adequacy of the allowance for doubtful accounts. Significant
management judgments and estimates are used in connection with establishing the allowance in any accounting period. While we have
been consistent in applying our judgments and in making our estimates over the past three fiscal years, material differences may result
in the amount and timing of bad debt expense recognition for any given period if management makes different judgments or utilizes
different estimates.
Inventories
Our inventories consist of new goods and rental merchandise in service. Estimates are used in determining the likelihood that new
goods on hand can be sold to customers or used in rental operations. Historical inventory usage and current revenue trends are
considered in estimating both obsolete and excess inventories. New goods are stated at lower of cost or market, net of any reserve for
obsolete or excess inventory. Merchandise placed in service to support rental operations is amortized into cost of rental operations
over the estimated useful lives of the underlying inventory items, primarily on a straight-line basis, which results in a matching of the
cost of the merchandise with the weekly rental revenue generated by merchandise. Estimated lives of rental merchandise in service
range from nine months to three years. In establishing estimated lives for merchandise in service, management considers historical
experience and the intended use of the merchandise. Material differences may result in the amount and timing of operating profit for
any period if management makes different judgments or utilizes different estimates.
Goodwill, Intangibles and Other Long-Lived Assets
As required under Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS 142),
goodwill is separately disclosed from other intangible assets on the balance sheet and no longer amortized. SFAS 142 also requires
that companies test goodwill for impairment on an annual basis and when events occur or circumstances change that would more
likely than not reduce the fair value of the reporting unit to which goodwill is assigned below its carrying amount. Our evaluation
follows the two step impairment test prescribed by SFAS 142. First we assess whether the fair value of the reporting units exceeds the
carrying amount of the unit including goodwill. Our evaluation considers changes in the operating environment, competitive position,
market trends, operating performance, quoted market prices for our equity securities and fair value models and research prepared by
independent analysts. If the carrying amount of a reporting unit exceeded its fair value, we would perform a second test to measure the
amount of impairment loss, if any. Management completes its annual impairment tests in the fourth quarter of each fiscal year. There
have been no impairments of goodwill in fiscal 2005, 2004 or 2003. Future events could cause management to conclude that
impairment indicators exist and that goodwill and other intangibles associated with acquired businesses are impaired. Any resulting
impairment loss could have a material impact on our financial condition and results of operations.
Property, plant and equipment and definite-lived intangible assets are depreciated or amortized over their useful lives. Useful lives are
based on management estimates of the period that the assets will add value. Long-lived assets and definite-lived intangible assets are
evaluated for impairment whenever events and circumstances indicate an asset may be impaired. There have been no write-downs of
any long-lived assets or definite-lived intangible assets in fiscal 2005, 2004 or 2003.
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Insurance
We self-insure for certain obligations related to health, workers compensation and auto and general liability programs. We purchase
stop-loss insurance policies to protect us from catastrophic losses. Estimates are used in determining the potential liability associated
with reported claims and for losses that have occurred, but have not been reported. Management estimates consider historical claims
experience, escalating medical cost trends, expected timing of claim payments and an actuarial analysis provided by a third party.
Changes in the cost of medical care, our ability to settle claims and the estimates and judgments used by management could have a
material impact on the amount and timing of expense for any period.
Income Taxes
In the normal course of business, we are subject to audits from federal, state, Canadian provincial and other tax authorities regarding
various tax liabilities. These audits may alter the timing or amount of taxable income or deductions, or the allocation of income among
tax jurisdictions. The amount ultimately paid upon resolution of issues raised may differ from the amount accrued. We believe that
taxes accrued on our consolidated balance sheets fairly represent the amount of future tax liability due.
We utilize income tax planning to reduce our overall cost of income taxes. Upon audit, it is possible that certain strategies might be
disallowed resulting in an increased liability for income taxes. We believe that the provision for liabilities resulting from the
implementation of income tax planning is appropriate. To date, we have not experienced an examination by governmental revenue
authorities that would lead management to believe that our past provisions for exposures related to income tax planning are not
appropriate.
Deferred income taxes are determined in accordance with SFAS No. 109, Accounting for Income Taxes. Deferred tax assets and
liabilities are recorded for temporary differences between the tax basis of assets and liabilities and their reported amounts in the
financial statements, using statutory rates in effect for the year in which the differences are expected to reverse. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment
date. We record valuation allowances to reduce deferred tax assets when it is more likely than not that some portion of the asset may
not be realized. We evaluate our deferred tax assets and liabilities on a periodic basis. We believe that we have adequately provided
for our future tax consequences based upon current facts, circumstances and tax law.
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Results of Operations
The percentage relationships to revenues of certain income and expense items for the three fiscal years ended July 2, 2005, July 3,
2004 and June 28, 2003, and the percentage changes in these income and expense items between years are presented in the following
table:

Percentage of Revenues Percentage Change
Years Ended Between Years
FY 2005 vs. FY 2004 vs.
Fiscal 2005 Fiscal 2004 Fiscal 2003 FY 2004 FY 2003
Revenues:
Rental operations 93.9% 96.6% 96.6% 4.5% 4.0%
Direct sales 6.1 3.4 3.4 94.3 3.5
Total revenues 100.0 100.0 100.0 7.5 3.9

Operating expenses:
Cost of rental operations 63.5 63.2 62.6 4.9 5.1
Cost of direct sales 74.5 76.4 75.1 89.6 5.4
Total cost of sales 64.1 63.7 63.0 8.3 5.1

Selling and administrative 21.0 21.5 21.9 4.9 2.3
Depreciation 4.1 4.3 4.3 1.8 3.3
Amortization of intangibles 1.2 1.1 1.0 20.6 8.8
Income from operations 9.6 9.4 9.8 9.3 0.2

Interest expense 1.5 1.6 2.0 (5.2) (12.6)
Income before income taxes 8.1 7.8 7.8 12.4 3.3

Provision for income taxes 3.0 3.0 3.0 11.6 0.7

Net income 5.1% 4.8% 4.8% 12.8% 5.0%
Fiscal 2005 Compared to Fiscal 2004
Fiscal Years. We operate on a fiscal year ending on the Saturday closest to June 30. As a result, periodically we will have a fiscal year
with 53 weeks of results. Fiscal 2004 was a 53-week year. We estimate that the extra week of operation generated incremental
earnings of approximately $0.07-$0.08 per share in fiscal 2004.
Revenues. Total revenues in fiscal 2005 rose 7.5% to $788.8 million from $733.4 million in fiscal 2004. Excluding the extra week,
revenues were up 9.5% over fiscal 2004. Rental revenue was up $32.0 million in fiscal 2005, a 4.5% increase over fiscal 2004. Rental
revenue increased 6.4% when excluding the impact of the extra week recorded in fiscal 2004. The organic industrial rental growth rate
was approximately 0.5%, an improvement from negative 2.0% in the same period of fiscal 2004. Improvements in customer retention
and a better pricing environment continues to be negatively impacted by lost uniform wearers due to reduced employment levels
within our existing customer base.
Direct sale revenue was $48.1 million in fiscal 2005, a 94.3% increase over $24.7 million in fiscal 2004, largely due to the impact of
the Lion Uniform Group. The organic direct sale growth rate was approximately 29.5%. The increase in the organic direct sale growth
rate was largely due to garment sales through our rental operation including our annual outerwear promotion and large shipments at
our direct sale unit to one customer.
Organic growth rates are calculated using industrial rental and direct sale revenue, respectively, adjusted for foreign currency
exchange rate differences, revenue from newly acquired business and the impact of the extra week recorded in the prior year. We
believe that the organic growth rates better reflect the growth of our existing industrial rental and direct sale business and are therefore
useful in analyzing our financial condition and results of operations.
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Cost of Rental and Direct Sale. Cost of rental operations increased 4.9% to $470.1 million in fiscal 2005 from $448.1 million in fiscal
2004. Gross margin from rental sales decreased to 36.5% in fiscal 2005 from 36.8% in the prior year. The decrease in gross margins
was due to the positive fixed cost leverage from an extra week of revenue in the prior year, as well as higher energy and acquisition
integration costs in the current year. These were largely offset by the benefit of numerous operational initiatives focused on lower
merchandise and production costs.
Cost of direct sales increased to $35.8 million in fiscal 2005 from $18.9 million in fiscal 2004. Gross margin from direct sales
increased in fiscal 2005 to 25.5% from 23.6% in fiscal 2004. The increase in gross margin was largely due to improved cost leverage
resulting from greater sales volume.
Selling and Administrative. Selling and administrative expenses increased 4.9% to $165.8 million in fiscal 2005 from $158.0 million
in fiscal 2004. As a percentage of total revenues, selling and administrative expenses decreased to 21.0% in fiscal 2005 from 21.5% in
fiscal 2004. The improvement as a percent of revenue was due to a prior-year charge of approximately $1.25 million for a legal
settlement and leverage on incremental revenue growth, partially offset by continued investment in growth initiatives.
Depreciation. Depreciation expense increased 1.8% to $32.0 million in fiscal 2005 from $31.4 million in fiscal 2004. As a percentage
of total revenues, depreciation expense decreased to 4.1% in fiscal 2005 from 4.3% in fiscal 2004. Capital expenditures for fiscal
2005, excluding acquisition of businesses, were $19.4 million compared to $17.3 million in fiscal 2004.
Amortization. Amortization expense increased to $9.6 million in fiscal 2005 from $7.9 million in fiscal 2004. As a percentage of total
revenues, amortization expense increased to 1.2% in fiscal 2005 compared to 1.1% in fiscal 2004.
Interest Expense. Interest expense was $11.3 million in fiscal 2005 as compared to $12.0 million in fiscal 2004. The decrease was due
primarily to lower average debt levels associated with strong operating cash flow and slightly lower interest rates.
Provision for Income Taxes. Our effective tax rate for fiscal 2005 decreased to 37.7% from 38.0% in fiscal 2004 largely due to
decreases in Canadian statutory income tax rates.
Fiscal 2004 Compared to Fiscal 2003
Revenues. Total revenues in fiscal 2004 rose 3.9% to $733.4 million from $705.6 million in fiscal 2003. Excluding the extra week,
revenues were up 2.0% over fiscal 2003. Rental revenue was up $27.0 million in fiscal 2004, a 4.0% increase over fiscal 2003. Rental
revenue increased 2.1% when excluding the impact of the extra week recorded in fiscal 2004. The organic industrial rental growth rate
was approximately negative 2.0%. Organic industrial rental revenue continues to be negatively impacted by lost uniform wearers due
to reduced employment levels within our existing customer base.
Direct sale revenue was $24.7 million in fiscal 2004, a 3.5% increase over $23.9 million in fiscal 2003. The increase in direct sale
revenue was driven by a focused effort to provide direct sale garments to our existing rental customers.
Cost of Rental and Direct Sale. Cost of rental operations increased 5.1% to $448.1 million in fiscal 2004 from $426.6 million in fiscal
2003. Gross margin from rental sales decreased to 36.8% in fiscal 2004 from 37.4% in the prior year. The decrease in rental gross
margins was due to employee benefit costs (including pension), higher energy costs and lost margin from lower employment levels
within our existing customer base.
Cost of direct sales increased to $18.9 million in fiscal 2004 from $17.9 million in fiscal 2003. Gross margin from direct sales
decreased in fiscal 2004 to 23.6% from 24.9% in fiscal 2003. The decrease in gross margin was due primarily to product mix and
merchandise cost increases.
Selling and Administrative. Selling and administrative expenses increased 2.3% to $158.0 million in fiscal 2004 from $154.5 million
in fiscal 2003. As a percentage of total revenues, selling and administrative expenses decreased to 21.5% in fiscal 2004 from 21.9% in
fiscal 2003. The decrease as a percent of revenue was due to reduced expenses related to uncollectible accounts receivable and
reduced selling expenses, which were partially offset by increased employee benefit costs. Also offsetting this improvement was the
tentative settlement of a wage and hour dispute in California, which represented one-time costs of $1.25 million in fiscal 2004.
Depreciation. Depreciation expense increased 3.3% to $31.4 million in fiscal 2004 from $30.4 million in fiscal 2003. As a percentage
of total revenues, depreciation expense remained constant at 4.3% in both fiscal 2004 and fiscal 2003. Capital
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expenditures for fiscal 2004, excluding acquisition of businesses, were $17.3 million compared to $31.4 million in fiscal 2003 as we
continued to prudently manage our strategic investments.
Amortization. Amortization expense increased to $7.9 million in fiscal 2004 from $7.3 million in fiscal 2003. As a percentage of total
revenues, amortization expense increased to 1.1% in fiscal 2004 compared to 1.0% in fiscal 2003.
Interest Expense. Interest expense was $12.0 million in fiscal 2004 as compared to $13.7 million in fiscal 2003. The decrease was due
primarily to lower debt levels associated with significant levels of cash flow.
Provision for Income Taxes. Our effective tax rate for fiscal 2004 decreased to 38.0% from 39.0% in fiscal 2003 largely due to
decreases in Canadian statutory income tax rates.
Liquidity, Capital Resources and Financial Condition
Our primary sources of cash are net cash flows from operations and borrowings under our debt arrangements. Primary uses of cash are
interest payments on indebtedness, capital expenditures, acquisitions and general corporate purposes.
Operating Activities. Net cash provided by operating activities was $63.5 million in fiscal 2005, $96.3 million in fiscal 2004 and
$96.9 million in fiscal 2003. In fiscal 2005, cash provided by operations was negatively impacted by the timing of payments of taxes
as well as growth in new inventories in connection with the expansion of our manufacturing operation. These uses of cash were
partially offset by continued emphasis to control in-service inventory expenditures. Fiscal 2004 cash provided by operations was
positively impacted by one-time improvements related to a focus on timely collection of accounts receivable as well as several
initiatives focused on controlling the usage of in-service inventory.
Working capital at July 2, 2005 was $93.8 million, a $14.8 million increase from $79.0 million at July 3, 2004. This increase was due
to increases in accounts receivable and inventory levels associated with acquisitions and expansion of our off-shore manufacturing.
Investing Activities. Net cash used for investing activities was $95.9 million in fiscal 2005, $43.9 million in fiscal 2004 and
$121.5 million in fiscal 2003. In fiscal 2005, 2004 and 2003 cash was largely used for acquisitions and property, plant and equipment
additions.
Financing Activities. Financing activities provided cash of $19.2 million in fiscal 2005, used cash of $37.3 million in fiscal 2004 and
provided cash of $26.0 million in fiscal 2003. Cash provided in both fiscal 2005 and 2003 was from debt proceeds used primarily for
acquisitions of businesses. Cash used in fiscal 2004 was primarily related to the repayment of long-term debt. We paid dividends of
$1.5 million in each of fiscal 2005, 2004 and 2003.
We maintain a $325.0 million unsecured term loan and revolving credit facility expiring July 2, 2007. The facility provides for a
$75.0 million term loan and a $250.0 million revolving credit facility. As of July 2, 2005, borrowings outstanding under the term loan
and revolving credit facility were $41.3 million and $15.0 million, respectively, at rates ranging from 4.35% to 4.40%. Borrowings
under this facility are unsecured. The unused portion of the revolver may be used for general corporate purposes, acquisitions,
working capital needs and to provide up to $30.0 million in letters of credit. As of July 2, 2005, letters of credit outstanding against the
revolving credit facility were $28.6 million.
We have $50.0 million, 8.4% unsecured private placement notes with certain institutional investors. The 10-year notes have a
seven-year average life with a final maturity on July 20, 2010. Beginning on July 20, 2004, and annually thereafter to maturity, we
will repay $7.1 million of the principal amount at par. As of July 2, 2005, there was $42.9 million outstanding under the notes.
On November 17, 2004, we entered into a loan agreement expiring on October 23, 2007. Under the loan agreement, the lender will
make loans to us on a revolving basis up to $50.0 million. We will be required to pay interest on outstanding loan balances at a rate
per annum of one month London Interbank Offered Rate (LIBOR) plus a margin or, if the lender is funding the loan through the
issuance of commercial paper to third parties, at a rate per annum equal to a margin plus the average annual interest rate for such
commercial paper. In connection with the loan agreement, we granted a first priority security interest in certain of our U.S. based
receivables. The amount of funds available under the loan agreement will be based on the amount of eligible receivables less various
reserve requirements. We used the net proceeds of this loan to reduce indebtedness under our unsecured credit facilities. At July 2,
2005, there was $50.0 million outstanding under the agreement.
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On June 30, 2005, we issued $75.0 million of floating rate unsecured private placement notes. The notes are priced at 0.60% over
LIBOR. The $75.0 million floating rate notes are scheduled to mature on June 30, 2015. The notes do not require principal payments
until maturity. Interest payments are reset and paid on a quarterly basis. As of July 2, 2005, the outstanding balance of the notes was
$75.0 million at a current rate of 4.08%.
The credit facilities, loan agreements, fixed rate notes and variable rate notes contain various restrictive covenants that among other
matters require us to maintain a minimum fixed charge coverage ratio, minimum stockholders equity and a maximum leverage ratio,
all as defined. These debt arrangements also contain customary representations, warranties, covenants and indemnifications. At July 2,
2005, we were in compliance with all debt covenants and only a material adverse change in our financial performance and condition
could result in a potential event of default. In the unlikely event that an event of default would be imminent, management believes that
we would be able to successfully negotiate amended covenants or obtain waivers; however, certain financial concessions might be
required. Our results of operations and financial condition could be adversely affected if amended covenants or waivers in acceptable
terms could not be successfully negotiated.
Cash Obligations. Under various agreements, we are obligated to make future cash payments in fixed amounts. These include
payments under the variable rate term loan and revolving credit facility, the fixed rate term loan, capital lease obligations and rent
payments required under non-cancelable operating leases with initial or remaining terms in excess of one year.
The following table summarizes our fixed cash obligations as of July 2, 2005 for the next five fiscal years and thereafter (in
thousands):

2011 and
There-
2006 2007 2008 2009 2010 after Total
Variable rate term loan and
revolving credit facility $ 18,750 $ 22,500 $ 15,000 $ $ $ $ 56,250
Variable rate notes 75,000 75,000
Variable rate loan 50,000 50,000
Fixed rate notes 7,143 7,143 7,143 7,143 7,143 7,142 42,857
Other debt arrangements,
including capital leases 644 12,094 114 40 12,892
Operating leases 16,138 13,219 10,373 6,997 4,845 3,562 55,134
Total contractual cash obligations $ 42,675 $ 54,956 $ 82,630 $ 14,180 $ 11,988 $ 85,704 $ 292,133
Also, at July 2, 2005, we had stand-by letters of credit totaling $28.6 million issued and outstanding, primarily in connection with our
property and casualty insurance programs. No amounts have been drawn upon these letters of credit.
At July 2, 2005, we had available cash on hand of $15.3 million and approximately $206.4 million of available capacity under our
revolving credit facility. We anticipate that we will generate sufficient cash flows from operations to satisfy our cash commitments
and capital requirements for fiscal 2006 and to reduce the amounts outstanding under the revolving credit facility; however, we may
utilize borrowings under the revolving credit facility to supplement our cash requirements from time to time. We estimate that capital
expenditures in fiscal 2006 will be approximately $25.0 million to $30.0 million.
The amount of cash flow generated from operations is subject to a number of risks and uncertainties. In fiscal 2006, we may actively
seek and consider acquisitions of business assets; the consummation of any acquisition could affect our liquidity profile and level of
outstanding debt. We believe that our earnings and cash flow from operations, existing credit facilities and our ability to obtain
additional debt or equity capital, if necessary, will be adequate to finance acquisition opportunities.
Pension Obligations
We account for our defined benefit pension plan using SFAS No. 87 Employers Accounting for Pensions (SFAS 87). Under
SFAS 87, pension expense is recognized on an accrual basis over employees approximate service periods. Pension expense calculated
under SFAS 87 is generally independent of funding decisions or requirements. We recognized expense for our defined benefit pension
plan of $4.9 million, $6.1 million and $3.1 million in fiscal 2005, 2004 and 2003, respectively. At July 2, 2005, the fair value of our
pension plan assets totaled $29.1 million. We anticipate making a cash contribution of approximately $3.7 million in fiscal 2006.
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The calculation of pension expense and the corresponding liability requires the use of a number of critical assumptions, including the
expected long-term rate of return on plan assets and the assumed discount rate. Changes in these assumptions can result in different
expense and liability amounts, and future actual experience can differ from these assumptions. Pension expense increases as the
expected rate of return on pension plan assets decreases. At July 2, 2005, we estimate that the pension plan assets will generate a
long-term rate of return of 8.0%. This rate is consistent with the assumed rate used at both July 3, 2004 and June 28, 2003 and was
developed by evaluating input from our actuary as well as long-term inflation assumptions. The expected long-term rate of return on
plan assets at July 2, 2005 is based on an allocation of U.S. equities and U.S. fixed income securities. Decreasing the expected
long-term rate of return by 0.5% (from 8.0% to 7.5%) would increase our estimated 2006 pension expense by approximately
$0.1 million. Pension liability and future pension expense increase as the discount rate is reduced. We discounted future pension
obligations using a rate of 5.50% at July 2, 2005, 6.25% at July 3, 2004 and 6.0% at June 28, 2003. The discount rate is determined
based on the current rates earned on high quality long-term bonds. Decreasing the discount rate by 0.5% (from 5.50% to 5.00%)
would increase our accumulated benefit obligation at July 2, 2005 by approximately $4.1 million and increase the estimated fiscal
2006 pension expense by approximately $1.1 million.
Future changes in plan asset returns, assumed discount rates and various other factors related to the participants in our pension plan
will impact our future pension expense and liabilities. We cannot predict with certainty what these factors will be in the future.
Impact of Inflation
In general, management believes that our results of operations are not dependent on moderate changes in the inflation rate.
Historically, we have been able to manage the impacts of more significant changes in inflation rates through our customer
relationships, customer agreements that generally provide for price increases consistent with the rate of inflation or 5.0%, whichever is
greater, and continued focus on improvements of operational productivity.
Significant increases in energy costs, specifically natural gas and gasoline, can materially affect our results of operations and financial
condition. Currently, energy costs represent approximately 4% of our total revenue.
Litigation
We are involved in a variety of legal actions relating to personal injury, employment, environmental and other legal matters that arise
in the normal course of business. These legal actions include lawsuits that challenge the practice of charging for certain environmental
services on invoices, and being named, along with other defendants, as a potentially responsible party at certain waste disposal sites
where ground water contamination has been detected or is suspected; however, there has been no activity or further notifications in
connection with these waste disposal sites for a period of years. None of these legal actions are expected to have a material adverse
effect on our results of operations or financial position.
Recent Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (revised
2004) Share-Based Payment (SFAS 123(R)), which is a revision of SFAS 123, Accounting for Stock-Based Compensation.
Generally, the approach in SFAS 123(R) is similar to the approach described in Statement 123 for determining the fair value of a
share-based payment. However, SFAS 123(R) requires the fair value of all share-based payments to employees, including grants of
employee stock options, to be recognized in the income statement. Pro forma disclosure is no longer an alternative. The new standard
will be effective for public entities (excluding small business issuers) in the first interim or annual reporting period beginning after
June 15, 2005. We plan to adopt this Statement in the first quarter of fiscal 2006. We are currently evaluating the impact of this
standard on our consolidated financial statements.
Cautionary Statement Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 (the Act) provides companies with a safe harbor when making
forward-looking statements as a way of encouraging them to furnish their shareholders with information regarding expected trends in
their operating results, anticipated business developments and other prospective information. Statements made in this report
concerning our intentions, expectations or predictions about future results or events are forward-looking statements within the
meaning of the Act. These statements reflect our current expectations or beliefs, and are subject to risks and uncertainties that could
cause actual results or events to vary from stated expectations, which could be material and adverse. Given that circumstances may
change, and new risks to the business may emerge from time to time, having the potential to
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negatively impact our business in ways we could not anticipate at the time of making a forward-looking statement, you are cautioned
not to place undue reliance on these statements, and we undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
Some of the factors that could cause actual results or events to vary from stated expectations include, but are not limited to, the
following: unforeseen operating risks; the effects of overall economic conditions and employment levels; fluctuations in costs of
insurance and energy; acquisition integration costs; the performance of acquired businesses; preservation of positive labor
relationships; competition, including pricing, within the branded identity apparel and facility services industry; unplanned litigation or
regulatory proceedings; and the availability of capital to finance planned growth.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We are exposed to market risks. Market risk is the potential loss arising from adverse changes in interest rates and foreign currency
exchange rates. We do not enter into derivative or other financial instruments for speculative purposes.
Interest Rate Risk
We are subject to market risk exposure related to changes in interest rates. We use financial instruments, including fixed and variable
rate debt, as well as interest rate swaps to manage interest rate risk. Interest rate swap agreements are entered into for periods
consistent with related underlying exposures and do not constitute positions independent of those exposures. Assuming the current
level of borrowings, a one percentage point increase in interest rates under these borrowings would have increased our interest
expense for fiscal 2005 by approximately $1.1 million. This estimated exposure considers the mitigating effects of interest rate swap
agreements outstanding at July 2, 2005 on the change in the cost of variable rate debt.
The following table provides information about our derivative financial instruments and other financial instruments that are sensitive
to changes in interest rates. The fair values were estimated by discounting the projected cash flows using the current rate applicable to
similar transactions. For debt obligations, the following table presents principal cash flow and related weighted average interest rates
by expected maturity dates by fiscal year.

Fixed Rate Variable Rate
Maturity Date Amount Rate Amount Rate
2006 $ 7,143 8.40% $ 18,750 5.37%
2007 7,143 8.40 22,500 5.57
2008 7,143 8.40 65,000 5.61
2009 7,143 8.40
2010 7,143 8.40
Thereafter 7,142 8.40 75,000 5.30
Total $ 42,857 8.40% $ 181,250 5.45%
Fair Value $ 46,342 $ 181,250
For interest rate swaps, the following table presents notional amounts and weighted average interest rates by expected
(contractual) maturity dates by fiscal year. Notional amounts are used to calculate the contractual payments to be exchanged under the
contract.

Notional Principal Average Interest Average Interest
Maturity Date Amount Pay Rate Receive Rate
2006 $ 30,000 3.21% 4.13%
2007 30,000 4.04 4.32
2008 20,000 4.27 4.37
2009 30,000 4.30 4.47
2010 20,000 4.27 4.60
Total $ 130,000 3.98% 4.36%
Fair Value $ 130,357
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Energy Cost Risk
We use derivative financial instruments to manage the risk that changes in gasoline cost will affect the future financial results of the
Company. We purchase gasoline futures contracts to effectively hedge a portion of anticipated actual gasoline purchases. The gasoline
futures contracts are reflected at fair value in the consolidated balance sheet and the related gains or losses on these contracts are
deferred in stockholders equity (as a component of other comprehensive income) or in the statements of operations depending on the
effectiveness of the hedge. Upon settlement of each contract, the actual gain or loss is reflected in gasoline expense. The current fair
market value of all outstanding contracts at July 2, 2005 is $0.3 million.
Foreign Currency Exchange Risk
We have a significant foreign subsidiary located in Canada. The assets and liabilities of this subsidiary are denominated in the
Canadian dollar and as such are translated into U.S. dollars at the exchange rate in effect at the balance sheet date. Results of
operations are translated using the average exchange rates throughout the period. The effect of exchange rate fluctuations on
translation of assets and liabilities are recorded as a component of stockholders equity. Gains and losses from foreign currency
transactions are included in results of operations.
We may periodically hedge firm commitments with our foreign subsidiary, generally with foreign currency contracts. These
agreements are recorded at current market values and the gains and losses are included in earnings. Gains and losses on such
transactions were not significant in fiscal 2005. Notional amounts outstanding under foreign currency contracts at July 2, 2005 were
$0.4 million, all of which will mature during fiscal 2006. Notional amounts outstanding under foreign currency contracts at July 3,
2004 were $0.4 million, all of which matured during fiscal 2005. Notional amounts outstanding under foreign currency contracts at
June 28, 2003 were $2.7 million, all of which matured during fiscal 2004. Foreign currency contracts were recorded at fair value as of
July 2, 2005.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Following is a summary of the results of operations for each of the quarters within fiscal years ended July 2, 2005 and July 3, 2004.
All amounts are in thousands, except per share data.
QUARTERLY FINANCIAL DATA
G&K Services, Inc. and Subsidiaries

(Unaudited) First Second Third Fourth
2005
Revenues $ 182,432 $ 195,135 $ 203,810 $ 207,398
Gross Profit 66,527 70,279 72,660 73,363
Income from Operations 17,750 18,892 19,735 19,095
Net Income 9,500 10,197 10,426 9,804
Basic Earnings per Share 0.46 0.49 0.50 0.47
Diluted Earnings per Share 0.45 0.48 0.49 0.46
Dividends per Share 0.0175 0.0175 0.0175 0.0175
2004
Revenues $ 178,603 $ 182,539 $ 179,025 $ 193,280
Gross Profit 64,457 65,694 64,582 71,684
Income from Operations 16,234 17,130 17,364 18,309
Net Income 8,109 8,802 9,014 9,459
Basic Earnings per Share 0.39 0.43 0.43 0.45
Diluted Earnings per Share 0.39 0.42 0.43 0.45
Dividends per Share 0.0175 0.0175 0.0175 0.0175
We utilize a 52-53 week fiscal year ending on the Saturday nearest June 30. The fiscal year ended July 3, 2004 was 53-week year with
the extra week reported in the fourth quarter.
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Managements Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for G&K Services,
Inc. (the Company) as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. Our internal control over financial
reporting was designed under the supervision of the Companys principal executive officer, principal financial officer, principal
accounting officer and other members of management, and effected by the Companys Board of Directors, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation and presentation of financial statements for external
purposes in accordance with generally accepted accounting principles.
Our management completed an assessment of the Companys internal control over financial reporting. This assessment was based on
the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control-Integrated Framework. Based on this assessment, management has concluded that our internal control over financial reporting
was effective as of July 2, 2005.
Ernst & Young LLP, the Companys independent registered public accounting firm that audited the consolidated financial statements
and notes thereto and managements assessment of the effectiveness of the Companys internal control over financial reporting, has
issued an unqualified attestation report on managements assessment of internal control over financial reporting, as stated in their
report which is included herein.
Any internal control system over financial reporting, no matter how well conceived and operated, has inherent limitations. As a result,
even those systems determined to be effective can provide only reasonable, not absolute, assurance that the control objectives over the
reliability of financial reporting and preparation and presentation of financial statements for external purposes in accordance with
generally accepted accounting principles are met.

/s/ Richard L. Marcantonio

Richard L. Marcantonio
President and Chief Executive Officer
(Principal Executive Officer)

/s/ Jeffrey L. Wright

Jeffrey L. Wright
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)

/s/ Michael F. Woodard

Michael F. Woodard
Vice President and Controller
(Principal Accounting Officer)

September 7, 2005
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
G&K Services, Inc.
We have audited the accompanying consolidated balance sheets of G&K Services, Inc. as of July 2, 2005, and July 3, 2004, and the
related consolidated statements of operations, stockholders equity and comprehensive income, and cash flows for each of the three
years in the period ended July 2, 2005. These financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial
position of G&K Services, Inc. as of July 2, 2005, and July 3, 2004, and the results of its operations and its cash flows for each of the
three fiscal years in the period ended July 2, 2005, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
effectiveness of G&K Services, Inc.s internal control over financial reporting as of July 2, 2005, based on criteria established in
Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and
our report dated September 7, 2005, expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Ernst & Young LLP

Minneapolis, Minnesota
September 7, 2005

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Report of Independent Registered Public Accounting Firm
G&K Services, Inc.
We have audited managements assessment, included in the accompanying Managements Report on Internal Control over Financial
Reporting, that G&K Services, Inc. maintained effective internal control over financial reporting as of July 2, 2005, based on criteria
established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria). G&K Services, Inc.s management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to
express an opinion on managements assessment and an opinion on the effectiveness of the companys internal control over financial
reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating managements assessment, testing and evaluating the design and operating effectiveness of internal
control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, managements assessment that G&K Services, Inc. maintained effective internal control over financial reporting as of
July 2, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, G&K Services, Inc. maintained,
in all material respects, effective internal control over financial reporting as of July 2, 2005, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets as of July 2, 2005, and July 3, 2004, and the related consolidated statements of operations, stockholders
equity and comprehensive income, and cash flows for each of the three years in the period ended July 2, 2005, of G&K Services, Inc.,
and our report dated September 7, 2005, expressed an unqualified opinion thereon.


Ernst & Young LLP

September 7, 2005

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CONSOLIDATED STATEMENTS OF OPERATIONS

For the Fiscal Years Ended
July 2, July 3, June 28,
2005 2004 2003
(In thousands, except per share data) (52 weeks) (53 weeks) (52 weeks)
Revenues
Rental operations $ 740,708 $ 708,708 $ 681,693
Direct sales 48,067 24,739 23,895
Total revenues 788,775 733,447 705,588
Operating Expenses
Cost of rental operations 470,116 448,131 426,564
Cost of direct sales 35,830 18,899 17,939
Selling and administrative 165,814 158,034 154,471
Depreciation 31,981 31,417 30,406
Amortization of intangibles 9,562 7,929 7,289
Total operating expenses 713,303 664,410 636,669
Income from Operations 75,472 69,037 68,919
Interest expense 11,338 11,966 13,691
Income before Income Taxes 64,134 57,071 55,228
Provision for income taxes 24,207 21,687 21,539
Net Income $ 39,927 $ 35,384 $ 33,689
Basic weighted average number of shares outstanding 20,942 20,710 20,585
Basic Earnings per Common Share $ 1.91 $ 1.71 $ 1.64
Diluted weighted average number of shares outstanding 21,199 20,900 20,691
Diluted Earnings per Common Share $ 1.88 $ 1.69 $ 1.63

Dividends per Share $ 0.07 $ 0.07 $ 0.07
The accompanying notes are an integral part of these consolidated financial statements.
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CONSOLIDATED BALANCE SHEETS

July 2, July 3,
(In thousands, except share data) 2005 2004
ASSETS

Current Assets
Cash and cash equivalents $ 15,345 $ 26,931
Accounts receivable, less allowance for doubtful accounts of $2,890 and $2,603 83,459 71,058
Inventories 121,120 94,476
Prepaid expenses 16,587 14,902
Total current assets 236,511 207,367
Property, Plant and Equipment
Land 35,650 35,789
Buildings and improvements 141,205 140,290
Machinery and equipment 273,044 257,266
Automobiles and trucks 38,948 39,300
Less accumulated depreciation (245,540) (232,036)
Total property, plant and equipment 243,307 240,609
Other Assets
Goodwill, net 338,701 285,892
Customer contracts, net 54,200 41,151
Non-competition agreements, net 3,590 3,809
Other, principally retirement plan assets 26,860 23,919
Total other assets 423,351 354,771
$ 903,169 $ 802,747

LIABILITIES AND STOCKHOLDERS EQUITY

Current Liabilities
Accounts payable $ 25,695 $ 20,511
Accrued expenses
Salaries and employee benefits 38,684 32,953
Other 36,216 32,743
Current income taxes payable 6,623 10,774
Deferred income taxes 8,971 7,395
Current maturities of long-term debt 26,537 24,018
Total current liabilities 142,726 128,394
Long-Term Debt, net of Current Maturities 210,462 184,305
Deferred Income Taxes 36,900 38,256
Other Noncurrent Liabilities 37,651 26,369
Commitments and Contingencies (Notes 8 and 9)
Stockholders Equity
Common stock, $0.50 par value
Class A, 400,000,000 shares authorized, 19,638,224 and 19,432,106 shares issued
and outstanding 9,819 9,716
Class B, 30,000,000 shares authorized, 1,474,996 and 1,474,996 shares issued and
outstanding 738 738
Additional paid-in capital 44,051 37,370
Retained earnings 420,412 381,953
Deferred compensation (1,482) (2,270)
Accumulated other comprehensive gain (loss) 1,892 (2,084)
Total stockholders equity 475,430 425,423
$ 903,169 $ 802,747
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME

Accumulated Other
Comprehensive Income (Loss)
Net
Unrealized
Class A Class B Additional Gain/(Loss) Minimum Cumulative
Common Common Paid-In Retained Deferred on Financial Pension Translation Stockholders
(In thousands, except per share data) Stock Stock Capital Earnings Compensation Instruments Liability Adjustments Equity
Balance June 29, 2002 $ 9,616 $ 738 $ 31,120 $ 315,794 $ (4,272) $ (1,265) $ $ (11,573) $ 340,158
Net income 33,689 33,689
Foreign currency translation 9,368 9,368
Unrealized holding gains, net of
income tax 34 34
Minimum pension liability, net
of income tax (3,230) (3,230)

Comprehensive income 39,861
Issuance of common stock
under stock plans, net (22
shares) 11 588 56 655
Tax benefit of employee stock
options 60 60
Amortization of deferred
compensation 990 990
Cash dividends ($0.07 per
share) (1,455) (1,455)
Balance June 28, 2003 9,627 738 31,768 348,028 (3,226) (1,231) (3,230) (2,205) 380,269
Net income 35,384 35,384
income tax 1,121 1,121
of income tax 1,867 1,867

shares) 89 5,110 19 5,218
options 492 492
share) (1,459) (1,459)
Balance July 3, 2004 9,716 738 37,370 381,953 (2,270) (110) (1,363) (611) 425,423
Net income 39,927 39,927
income tax 544 544
of income tax (4,765) (4,765)

shares) 103 5,914 (64) 5,953
options 767 767
share) (1,468) (1,468)
Balance July 2, 2005 $ 9,819 $ 738 $ 44,051 $ 420,412 $ (1,482) $ 434 $ (6,128) $ 7,586 $ 475,430
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CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Fiscal Years Ended
July 2, July 3, June 28,
2005 2004 2003
(In thousands) (52 weeks) (53 weeks) (52 weeks)
Operating Activities:
Net income $ 39,927 $ 35,384 $ 33,689
Adjustments to reconcile net income to net cash provided by
operating activities -
Depreciation and amortization 41,543 39,346 37,695
Deferred income taxes 76 1,300 4,636
Amortization of deferred compensation restricted stock 852 937 990
Changes in current operating items, exclusive of acquisitions -
Accounts receivable and prepaid expenses (5,116) 129 4,105
Inventories (11,164) 2,474 1,692
Accounts payable and other accrued expenses (5,537) 11,640 10,838
Other assets and liabilities 2,953 5,057 3,268
Net cash provided by operating activities 63,534 96,267 96,913
Investing Activities:
Property, plant and equipment additions, net (19,408) (17,349) (31,403)
Acquisition of business assets, net of cash (74,871) (24,940) (88,744)
Purchases of investments, net (1,595) (1,587) (1,395)
Net cash used for investing activities (95,874) (43,876) (121,542)
Financing Activities:
Proceeds from issuance of long-term debt 1,345
Repayments of long-term debt (25,729) (12,874) (9,503)
Proceeds from (repayments of) short-term borrowings, net 40,400 (29,500) 36,300
Cash dividends paid (1,468) (1,459) (1,455)
Sale of common stock 5,953 5,218 655
Net cash provided by (used for) financing activities 19,156 (37,270) 25,997
(Decrease) Increase in Cash and Cash Equivalents (13,184) 15,121 1,368
Effect of Exchange Rates on Cash 1,598 306 150

Cash and Cash Equivalents:
Beginning of year 26,931 11,504 9,986
End of year $ 15,345 $ 26,931 $ 11,504

Supplemental Cash Flow Information:
Cash paid for -
Interest $ 10,800 $ 11,825 $ 12,641
Income taxes $ 28,975 $ 9,619 $ 15,267

Non-Cash Transactions:
Notes payable issued to sellers in business acquisitions $ 11,890 $ $
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
1. Summary of Significant Accounting Policies
Nature of Business
G&K Services, Inc. (the Company) is a market leader in providing branded identity apparel and facility services programs that
enhance image and safety in the workplace. The Company serves a wide variety of industrial, service and high-technology companies
providing them with rented uniforms or purchase options as well as facility services products such as floor mats, dust mops, wiping
towels, selected linen items and several restroom products. The Company also manufactures certain uniform garments that it uses to
support its garment rental programs. The Company has two operating segments, United States and Canada, which have been identified
as components of the Company that are reviewed by the Companys Chief Executive Officer to determine resource allocation and
evaluate performance.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly
owned. Significant intercompany balances and transactions have been eliminated in consolidation.
Fiscal Year
The Company operates on a fiscal year ending on the Saturday closest to June 30. Fiscal years for the consolidated financial
statements included herein ended on July 2, 2005 (52 weeks), July 3, 2004 (53 weeks) and June 28, 2003 (52 weeks).
Cash and Cash Equivalents
The Company considers all short-term, highly liquid investments with a maturity of three months or less, at the date of acquisition, to
be cash equivalents.
Accounts Receivable
Accounts receivable is recorded net of an allowance for expected losses. The allowance, recognized as an amount equal to the
anticipated future write-offs, is based on age of outstanding balances, analysis of specific accounts and historical bad debt expense and
current economic trends.
Inventories
Inventories consist of new goods and rental merchandise in service. Estimates are used in determining the likelihood that new goods
on hand can be sold to customers or used in rental operations. Historical inventory usage and current revenue trends are considered in
estimating both obsolete and excess inventories. New goods are stated at lower of first-in, first-out (FIFO) cost or market, net of any
reserve for obsolete or excess inventory. Merchandise placed in service to support rental operations is amortized into cost of rental
operations over the estimated useful lives of the underlying inventory items, primarily on a straight-line basis, which results in a
matching of the cost of the merchandise with the weekly rental revenue generated by merchandise. Estimated lives of rental
merchandise in service range from nine months to three years. In establishing estimated lives for merchandise in service, management
considers historical experience and the intended use of the merchandise. The components of inventories as of July 2, 2005 and July 3,
2004 are as follows:

2005 2004
New goods $ 50,661 $ 28,092
Rental merchandise in service 70,459 66,384
$ 121,120 $ 94,476
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Property, Plant and Equipment
Property, plant and equipment are stated at cost and depreciated for financial reporting purposes generally using the straight-line
method over the estimated useful lives as follows:

Life
(Years)
Automobiles and trucks 3 to 8
Machinery and equipment 3 to 10
Buildings 20 to 33
Building improvements 10
Costs of significant additions, renewals and betterments, including external and certain internal computer software development costs,
are capitalized. When an asset is sold or otherwise disposed of, the related cost and accumulated depreciation are removed from the
respective accounts and the gain or loss on disposition is reflected in earnings. Maintenance and repairs are charged to expense when
incurred.
Goodwill, Intangible and Long-Lived Assets
The cost of acquisitions in excess of the fair value of the underlying net assets is recorded as goodwill. Non-competition agreements
that limit the seller from competing with the Company for a fixed period of time and acquired customer contracts are stated at cost less
accumulated amortization and are amortized over the terms of the respective agreements or estimated average life of an account,
primarily five to 11 years.
The carrying value of goodwill is evaluated on an annual basis and when events occur or circumstances change that would more likely
than not reduce the fair value of the reporting unit to which goodwill is assigned below its carrying amount. When evaluating whether
goodwill is impaired, the fair value of the reporting unit to which goodwill is assigned is compared to its carrying amount, including
goodwill. If the carrying amount of a reporting unit exceeds its fair value, then the amount of the impairment loss must be measured.
The impairment loss would be calculated by comparing the implied fair value of the goodwill with its carrying amount. In calculating
the implied fair value of goodwill, the fair value of the reporting unit is allocated to all of the other assets and liabilities of that unit
based on their fair values. The excess of the fair value of a reporting unit over the amount assigned to its other assets and liabilities is
the implied fair value of goodwill. Management completes its annual goodwill impairment test in the fourth quarter of each fiscal year
and there have been no impairments of goodwill in fiscal 2005, 2004 or 2003.
The Company reviews all other long-lived assets, including definite-lived intangible assets, for impairment in accordance with
Statement of Financial Accounting Standards No. 144, Accounting for the Impairment and Disposal of Long-Lived Assets (SFAS
144). Under SFAS 144, impairment losses are recorded on long-lived assets used in operations when events and circumstances
indicate the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the
carrying amounts of those assets. The Company also performs a periodic assessment of the useful lives assigned to intangible assets.
All of the Companys intangibles are subject to amortization.
Retirement Plan Assets
Retirement plan assets consist primarily of mutual funds and cash equivalents, which are stated at their fair value as determined by
quoted market prices and the cash surrender values of life insurance policies.
Foreign Currency
Foreign currency denominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at the balance
sheet date. Results of operations are translated using the average exchange rates throughout the period. The effect of exchange rate
fluctuations on translation of assets and liabilities are recorded as a component of stockholders equity. Gains and losses from foreign
currency transactions are included in results of operations and were not material in fiscal 2005, 2004 or 2003.
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Revenue Recognition
The Companys rental operations business is largely based on written service agreements whereby it agrees to collect, launder and
deliver uniforms and other related products. The service agreements provide for weekly billing upon completion of the laundering
process and delivery to the customer. Accordingly, the Company recognizes revenue from rental operations in the period in which the
services are provided. Revenue from rental operations also includes billings to customers for lost or abused merchandise. Direct sale
revenue is recognized in the period in which the product is shipped.
Insurance
The Company self-insures for certain obligations related to health and workers compensation programs. The Company purchases
stop-loss insurance policies to protect it from catastrophic losses. The Company periodically evaluates its liabilities under such
programs based on a third party actuarial analysis. Managements estimates consider historical claims experience, escalating medical
cost trends and the expected timing of claim payments.
Income Taxes
Deferred income taxes are determined in accordance with SFAS No. 109, Accounting for Income Taxes. Deferred tax assets and
liabilities are recorded for temporary differences between the tax basis of assets and liabilities and their reported amounts in the
financial statements, using statutory rates in effect for the year in which the differences are expected to reverse. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment
date. The Company records valuation allowances to reduce deferred tax assets when it is more likely than not that some portion of the
asset may not be realized.
Per Share Data
Basic earnings per common share was computed by dividing net income by the weighted average number of shares of common stock
outstanding during the year. Diluted earnings per common share was computed similarly to the computation of basic earnings per
share, except that the denominator is increased for the assumed exercise of dilutive options and other dilutive securities, including
nonvested restricted stock, using the treasury stock method.

For the Fiscal Years Ended July 2, July 3, June 28,
(In thousands) 2005 2004 2003
Weighted average number of common shares outstanding used in
computation of basic earnings per share 20,942 20,710 20,585

Weighted average effect of nonvested restricted stock grants and assumed
exercise of options 257 190 106

Shares used in computation of diluted earnings per share 21,199 20,900 20,691
Potential common shares of 146,000, 335,000 and 562,000 related to the Companys outstanding stock options and restricted stock
grants were excluded from the computation of diluted earnings per share for fiscal 2005, 2004 and 2003, respectively. Inclusion of
these shares would have been anti-dilutive as the exercise price of these shares exceeded market value.
Stock-Based Compensation
The Company maintains Stock Option and Compensation Plans (the Employee Plans), which are more fully described in Note 6.
The Company applies Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25), and
related interpretations in accounting for its stock option plans. Accordingly, only compensation cost related to restricted stock issued
under the Employee Plans has been recognized in the accompanying consolidated statements of operations. Compensation cost related
to the restricted shares was $852, $937 and $990 in fiscal 2005, 2004 and 2003, respectively. Had compensation cost been recognized
based on the fair values of options at the grant dates consistent with the provisions of SFAS No. 123, Accounting for Stock-Based
Compensation (SFAS 123), the Companys net income and net income per common share would have been adjusted as follows:
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Fiscal Years 2005 2004 2003
Net income, as reported $ 39,927 $ 35,384 $ 33,689
Deduct: Total stock-based compensation expense determined under
fair value based method for all awards, net of related tax effects (1,748) (1,746) (1,843)
Pro forma net income $ 38,179 $ 33,638 $ 31,846

Basic net income per share:
As reported $ 1.91 $ 1.71 $ 1.64
Pro forma 1.82 1.62 1.55
Diluted net income per share:
As reported $ 1.88 $ 1.69 $ 1.63
Pro forma 1.78 1.61 1.54
The weighted average fair value of options granted in fiscal 2005, 2004 and 2003 was $10.84, $10.83 and $12.28, respectively. The
weighted average exercise price was $36.97, $32.81 and $33.66 for fiscal 2005, 2004 and 2003, respectively.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following
weighted average assumptions used: risk-free interest rates of 3.38% for fiscal 2005, 3.48% for fiscal 2004 and 3.27% for fiscal 2003;
expected dividends of $0.07 per share; expected lives of five years; and expected volatility of 26.42% for fiscal 2005 grants, 30.93%
for fiscal 2004 grants and 36.56% for fiscal 2003 grants.
Comprehensive Income
The Company has chosen to disclose comprehensive income, which consists of net income, foreign currency translation adjustment,
unrealized gains/losses on derivative financial instruments and minimum pension liability adjustments, in the consolidated statements
of stockholders equity and comprehensive income.
Financial Instruments
The Company accounts for financial instruments in accordance with SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities (SFAS 133) and related authoritative guidance. The statement requires that all derivative financial instruments
that qualify for hedge accounting, such as interest rate swap contracts, be recognized in the financial statements and measured at fair
value regardless of the purpose or intent for holding them. Changes in the fair value of derivative financial instruments are recognized
periodically in income or stockholders equity (as a component of other comprehensive income).
Recent Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (revised
2004) Share-Based Payment (SFAS 123(R)), which is a revision of SFAS 123, Accounting for Stock-Based Compensation.
Generally, the approach in SFAS 123(R) is similar to the approach described in Statement 123 for determining the fair value of a
share-based payment. However, SFAS 123(R) requires the fair value of all share-based payments to employees, including grants of
employee stock options, to be recognized in the income statement. Pro forma disclosure is no longer an alternative. The new standard
will be effective for public entities (excluding small business issuers) in the first interim or annual reporting period beginning after
June 15, 2005. G&K plans to adopt this Statement in the first quarter of fiscal 2006. The Company is currently evaluating the impact
of this standard on its consolidated financial statements.
Reclassifications
Certain prior period amounts have been reclassified to conform with the current year presentation. These reclassifications did not
impact current or historical net income or stockholders equity.
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Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
2. Acquisitions
During each of fiscal 2005, 2004 and 2003, the Company made several small acquisitions. The total purchase consideration, including
related acquisition costs, as well as the amounts exceeding the estimated fair values of assets acquired and liabilities assumed were as
follows:

Total purchase price and related acquisition costs $ 86,761 $ 24,940 $ 88,744
Goodwill 50,641 19,304 63,206
Total purchase consideration for fiscal 2005 includes $11,890 of debt issued. The pro forma effects of these acquisitions, had they
been acquired at the beginning of the fiscal year, were not material, either individually or in the aggregate, to the Company.
3. Goodwill and Intangible Assets
The changes in the carrying amount of goodwill for the fiscal years ended July 2, 2005 and July 3, 2004, by operating segment, are as
follows:

United States Canada Total
Balance as of July 3, 2004 $ 254,998 $ 30,894 $ 285,892
Goodwill acquired during the period 31,315 19,326 50,641
Other, primarily foreign currency translation 2,168 2,168

United States Canada Total
Balance as of June 28, 2003 $ 236,913 $ 29,227 $ 266,140
Goodwill acquired during the period 18,085 1,219 19,304
Other, primarily foreign currency translation 448 448
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Information regarding the Companys other intangible assets is as follows:

Carrying Accumulated
As of July 2, 2005 Amount Amortization Net
Customer contracts $ 102,021 $ 47,821 $ 54,200
Non-competition agreements 10,829 7,239 3,590
Total $ 112,850 $ 55,060 $ 57,790

Carrying Accumulated
As of July 3, 2004 Amount Amortization Net
Customer contracts $ 80,142 $ 38,991 $ 41,151
Non-competition agreements 9,822 6,013 3,809
Total $ 89,964 $ 45,004 $ 44,960
The customer contracts include the combined value of the written service agreements and the related customer relationship. It has been
determined that there is no significant separate value in any customer relationships.
Total amortization expense was $9,562 in fiscal 2005, $7,929 in fiscal 2004 and $7,289 in fiscal 2003. Estimated amortization expense
for each of the five succeeding fiscal years based on intangible assets as of July 2, 2005 is as follows:

2006 $ 10,741
2007 10,539
2008 9,962
2009 6,254
2010 6,008
4. Long-Term Debt
Debt as of July 2, 2005 and July 3, 2004 includes the following:

2005 2004
Borrowings under unsecured variable rate term loan and unsecured revolving credit facility
at rates ranging from 4.35% to 4.40% at July 2, 2005 and from 2.40% to 2.86% at
July 3, 2004 $ 56,250 $ 155,850
Borrowings under unsecured variable rate notes at 4.08% 75,000
Borrowings under secured variable rate loans at 3.33% to 3.45% 50,000
Borrowings under unsecured fixed rate notes at 8.40% 42,857 50,000
Other debt arrangements including capital leases 12,892 2,473
236,999 208,323
Less current maturities (26,537) (24,018)
Total long-term debt $ 210,462 $ 184,305
The Company maintains a $325,000 unsecured term loan and revolving credit facility. The credit facility includes (i) a $75,000 term
loan facility with maturities of the remaining balance in fiscal years 2006 through 2007 of $18,750 and $22,500, respectively, and
(ii) a $250,000 revolving credit facility expiring on July 2, 2007. As of July 2, 2005, borrowings outstanding under the term loan were
$41,250 and under the revolving credit facility were $15,000. The unused portion of the revolver may be used for general corporate
purposes, acquisitions, working capital needs and to provide up to $30,000 in letters of credit. As of July 2, 2005, letters of credit
outstanding against the revolver were $28,600.
Borrowings under the term loan and revolving credit facility bear interest at 1.00% to 1.75% over the London Interbank Offered Rate
(LIBOR), or the Canadian prime rate for Canadian borrowings, based on a leverage ratio calculated on a quarterly basis. Advances
outstanding as of July 2, 2005 bear interest at LIBOR plus 1.25%. The Company also pays a fee on the unused daily balance of the
revolver based on a leverage ratio calculated on a quarterly basis.
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The Company has $50,000, 8.4% unsecured private placement notes with certain institutional investors. The 10-year notes have a
seven-year average life with a final maturity on July 20, 2010. Beginning on July 20, 2004, and annually thereafter to maturity, the
Company will repay $7,143 of the principal amount at par. As of July 2, 2005, the outstanding balance was $42,857.
On November 17, 2004, the Company entered into a loan agreement expiring on October 23, 2007. Under the loan agreement, the
lender will make loans to the Company on a revolving basis up to $50,000. The Company will be required to pay interest on
outstanding loan balances at a rate per annum of one month LIBOR plus a margin or, if the lender is funding the loan through the
issuance of commercial paper to third parties, at a rate per annum equal to a margin plus the average annual interest rate for such
commercial paper. In connection with the loan agreement, the Company granted a first priority security interest in certain of its U.S.
based receivables. The amount of funds available under the loan agreement will be based on the amount of eligible receivables less
various reserve requirements. The Company used the net proceeds of this loan to reduce indebtedness under its unsecured credit
facilities. At July 2, 2005, there was $50,000 outstanding under the agreement.
On June 30, 2005, the Company issued $75,000 of floating rate unsecured private placement notes. The notes are priced at 0.60% over
LIBOR. The $75,000 floating rate notes are scheduled to mature on June 30, 2015. The notes do not require principal payments until
maturity. Interest payments are reset and paid on a quarterly basis. As of July 2, 2005, the outstanding balance of the notes was
$75,000 at a current rate of 4.08%.
The credit facilities, loan agreements, fixed rate notes and variable rate notes contain various restrictive covenants that among other
matters require the Company to maintain a minimum fixed charge coverage ratio, minimum stockholders equity and a maximum
leverage ratio, all as defined. These debt arrangements also contain customary representations, warranties, covenants and
indemnifications. As of July 2, 2005, the Company was in compliance with all financial debt covenants.
The fair value of the Companys long-term debt is determined using quoted market prices for the same or similar issues or on the
current rates offered to the Company for debt of the same remaining maturities. The fair value of the long-term debt under the term
loan, revolving credit facility, floating rate notes and loan agreements approximates the carrying value as of July 2, 2005 and July 3,
2004. The fair value of the fixed rate term loan is $46,342 as of July 2, 2005.
The Company issued a $11,890 promissory note in connection with the Lion Uniform Group acquisition. The note bears interest at
2.35% and matures on January 1, 2007. As of July 2, 2005, the outstanding balance of the note was $11,890 and is included in other
debt arrangements in the table above.
The following table summarizes payments due on long-term debt, including capital leases, as of July 2, 2005 for the next five fiscal
years and thereafter:

2006 $ 26,537
2007 41,737
2008 72,257
2009 7,183
2010 7,143
2011 and thereafter 82,142
5. Derivative Financial Instruments
The Company uses derivative financial instruments principally to manage the risk that changes in interest rates will affect the amount
of its future interest payments. Interest rate swap contracts are used to balance the proportion of total debt that is subject to variable
and fixed interest rates. The interest rate swap contracts are reflected at fair value in the consolidated balance sheets and the related
gains or losses on these contracts are deferred in stockholders equity (as a component of other comprehensive income). Amounts to
be paid or received under the contracts are accrued as interest rates change and are recognized over the life of the contracts as an
adjustment to interest expense. The net effect of this accounting is that interest expense on the portion of variable rate debt being
hedged is generally recorded based on fixed interest rates.
At July 2, 2005, the Company had interest rate swap contracts to pay fixed rates of interest (average rate of 3.73%) and receive
variable rates of interest based on three-month LIBOR on $130,000 notional amount of indebtedness. The $130,000 notional amount
of outstanding contracts will mature $30,000 during fiscal 2006 and $100,000 thereafter. These swap contracts have been designated
as highly effective cash flow hedges and accordingly, gains or losses on any ineffectiveness was not material to
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any period. If these swap agreements were to be terminated, the Company would have incurred an after-tax gain on the contracts of
$222 on July 2, 2005 and an after-tax loss of $110 at July 3, 2004.
The Company also uses derivative financial instruments to manage the risk that changes in gasoline cost will affect the future financial
results of the Company. The Company purchases gasoline futures contracts to effectively hedge a portion of anticipated actual
gasoline purchases. The gasoline futures contracts are reflected at fair value in the consolidated balance sheet and the related gains or
losses on these contracts are deferred in stockholders equity (as a component of other comprehensive income) or in the statements of
operations depending on the effectiveness of the hedge. Upon settlement of each contract, the actual gain or loss is reflected in
gasoline expense. If these contracts were to be terminated, the Company would have incurred an after-tax gain on the contracts of
$213 on July 2, 2005.
The Company may periodically hedge firm commitments with its foreign subsidiary, generally with foreign currency contracts. These
agreements are recorded at current market values and the gains and losses are included in earnings. Gains and losses on such
transactions were not significant in fiscal 2005 or 2004. Notional amounts outstanding under foreign currency contracts at July 2, 2005
were $446, all of which will mature during fiscal 2006. Notional amounts outstanding under foreign currency contracts at July 3, 2004
were $409, all of which matured during fiscal 2005. Foreign currency contracts were recorded at fair value as of July 2, 2005.
6. Stockholders Equity
Each share of Class A common stock is entitled to one vote and is freely transferable. Each share of Class B is entitled to 10 votes and
can be converted to Class A common stock on a share-for-share basis. Until converted to Class A common stock, however, Class B
shares are not freely transferable. No cash dividends can be paid on Class B common stock unless dividends of at least an equal
amount per share are paid on Class A shares. A majority of the Class B shares are held by an officer of the Company. The officer
holding the Class B shares has announced his retirement from the Company effective December 31, 2005, at which time all Class B
shares will be converted on a share-for-share basis to Class A shares.
Stock Award Plans
The Company maintains Stock Option and Compensation Plans (the Employee Plans) to grant certain stock awards, including stock
options at fair market value and restricted shares, to key employees of the Company. Exercise periods for stock options are limited to a
maximum of 10 years and a minimum of one year. A maximum of 3,000,000 stock awards can be granted under the Employee Plans
and 1,343,366 awards were available for grant as of July 2, 2005.
The Company also maintains the 1996 Director Stock Option Plan (the Directors Plan). The Directors Plan provides for automatic
grants of three 3,000 nonqualified stock options (initial grants) to nonemployee directors of the Company as of the later of
August 1996 or the date such individuals became directors of the Company and 1,000 nonqualified stock options on each subsequent
annual shareholder meeting date. The Company has reserved 100,000 shares of Class A common stock for issuance under the
Directors Plan. These options expire within 10 years of grant and are exercisable one year from the date of grant, except for the initial
grants, of which, one-third of the total options are exercisable each year beginning with the first anniversary of the date of grant. The
option price will be the average market price of the Class A common stock during the 10 business days preceding the date of grant.
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The following schedule summarizes activity in the plans:

Stock Options
Weighted
Employee Directors Grant Average
Plans Plan Price Exercise Price
Outstanding at June 29, 2002 1,131,920 39,000 $ 16.50 53.34 $ 31.98
Granted 364,308 7,000 29.23 35.69 33.49
Exercised (26,700) 16.50 28.06 24.64
Canceled (184,032) (2,000) 25.00 46.00 32.07

Outstanding at June 28, 2003 1,285,496 44,000 $ 16.50 53.34 $ 32.53
Granted 303,629 11,000 31.18 39.19 32.78
Exercised (178,191) (3,000) 25.00 35.69 28.85
Canceled (230,989) 27.95 46.00 32.30

Outstanding at July 3, 2004 1,179,945 52,000 $ 16.50 53.34 $ 33.18
Granted 240,553 9,000 36.41 42.79 36.93
Exercised (206,987) 16.50 41.88 28.82
Canceled (51,964) (6,000) 16.50 46.00 43.27

Outstanding at July 2, 2005 1,161,547 55,000 $ 25.00 53.34 $ 34.21

Exercisable at July 2, 2005 701,666 42,000 $ 25.00 53.34 $ 33.75
The following schedule summarizes the information related to stock options outstanding at July 2, 2005:

Options Outstanding Options Exercisable
Average
Remaining Weighted Weighted
Range of Exercise Number Option Life Average Number Average
Price Outstanding (Years) Exercise Price Exercisable Exercise Price
$16.50 25.00 49,000 4.9 $ 25.00 49,000 $ 25.00
25.01 37.00 944,300 7.5 32.50 496,419 30.63
37.01 53.34 223,247 5.1 43.50 198,247 43.71
1,216,547 6.9 $ 34.21 743,666 $ 33.75
Under the Employee Plans, the Company grants restricted stock to key employees for nominal consideration. The restrictions lapse
over periods up to seven years. During fiscal 2005, 2004 and 2003 the Company granted 12,250, 5,000 and 25,000 shares of restricted
stock, respectively. The weighted average grant date fair value per share of restricted stock granted during fiscal 2005, 2004 and 2003
was $36.41, $31.18 and $33.07, respectively. The Company records deferred compensation to stockholders equity at the time of grant
for the difference between the par value and fair market value as of the grant date. Compensation expense is recognized as the
restrictions are removed from the stock for the difference between the par value and fair market value as of the grant date. Total
compensation expense related to restricted stock was $852, $937 and $990 in fiscal 2005, 2004 and 2003, respectively.
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7. Income Taxes
The components of the provision for income taxes are as follows:

Current:
Federal $ 15,640 $ 15,794 $ 10,668
State and local 1,695 1,897 1,396
Foreign 5,116 4,581 6,025
22,451 22,272 18,089
Deferred 1,756 (585) 3,450
$ 24,207 $ 21,687 $ 21,539
The reconciliation between income taxes using the statutory federal income tax rate and the recorded income tax provision is as
follows:

Federal taxes at the statutory rate $ 22,447 $ 19,975 $ 19,330
State taxes, net of federal tax benefit 1,478 1,514 1,447
Foreign taxes (210) (838) (15)
Permanent differences and other, net 492 1,036 777
Total provision $ 24,207 $ 21,687 $ 21,539
Effective rate 37.7% 38.0% 39.0%
Significant components of the Companys deferred tax assets and deferred tax liabilities as of July 2, 2005 and July 3, 2004 are as
follows:

2005 2004
Deferred tax liabilities:
Inventory $ (22,086) $ (21,027)
Depreciation (25,697) (28,821)
Intangibles (26,341) (21,275)
Other (78)
Total deferred tax liabilities (74,202) (71,123)
Deferred tax assets:
Accruals, reserves and other 28,331 25,472
Net deferred tax liabilities $ (45,871) $ (45,651)
The Company has foreign tax credit carryforwards of $2,159, which expire in fiscal years 2012 through 2015. The Company had a
valuation allowance of $1.4 million as of July 3, 2004, due to the uncertainty of the use of the tax benefits in future periods. There was
no valuation allowance at July 2, 2005.
As of July 2, 2005, the Company has not provided U.S. income taxes and foreign withholding taxes on undistributed earnings of
approximately $18.8 million from its foreign subsidiaries. These earnings are considered to be indefinitely reinvested in the operations
of such subsidiaries. Determination of the net amount of unrecognized U.S. income tax with respect to these earnings is not
practicable.
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8. Employee Benefit Plans
Pension Plan
The Company has a noncontributory defined benefit pension plan (the Plan) covering substantially all employees, except certain
employees who are covered by union-administered plans. Benefits are based on the number of years of service and each employees
compensation near retirement. The Company makes annual contributions to the Plan consistent with federal funding requirements.
Supplemental Executive Retirement Plan
Annual benefits under the Supplemental Executive Retirement Plan (SERP) are based on years of service and individual
compensation near retirement. The Company has purchased life insurance contracts that may be used to fund the retirement benefits.
The net cash surrender value of the contracts as of July 2, 2005 and July 3, 2004 was $12,777 and $10,603, respectively, and is
included in other assets in the accompanying consolidated balance sheets.
Obligations and Funded Status at July 2, 2005 and July 3, 2004

Supplemental Executive
Pension Plan Retirement Plan
2005 2004 2005 2004
Change in benefit obligation:
Projected benefit obligation, beginning of year $ 43,899 $ 40,629 $ 11,159 $ 10,066
Service cost 3,793 3,949 792 857
Interest cost 2,720 2,514 685 671
Plan amendments (80)
Actuarial (gain) loss 10,224 (1,957) 1,632 (90)
Benefits paid (1,340) (1,236) (307) (265)
Projected benefit obligation, end of year $ 59,296 $ 43,899 $ 13,961 $ 11,159

Change in plan assets:
Fair value of plan assets, beginning of year $ 26,674 $ 16,839 $ $
Actual return on plan assets 1,892 3,303
Employer contributions 1,832 7,768 307 265
Benefits paid (1,340) (1,236) (307) (265)
Fair value of plan assets, end of year $ 29,058 $ 26,674 $ $

Funded status $ (30,238) $ (17,225) $ (13,961) $ (11,159)
Unrecognized prior service cost 221 276 202 245
Unrecognized actuarial loss 19,509 9,516 4,427 2,981
Net amount recognized $ (10,508) $ (7,433) $ (9,332) $ (7,933)
The actuarial loss in fiscal 2005 of $10.2 million was largely driven by a decrease in discount rates in the current year.
Amounts recognized in the consolidated balance sheets consist of:

2005 2004 2005 2004
Accrued benefit liability $ (19,586) $ (9,820) $ (10,305) $ (7,933)
Intangible assets 221 276 202
Accumulated other comprehensive income 8,857 2,111 771
Net amount recognized $ (10,508) $ (7,433) $ (9,332) $ (7,933)
The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the pension plans with an
accumulated benefit obligation in excess of plans assets were $59,296, $48,644 and $29,058, respectively, as of July 2, 2005 and
$43,899, $36,494 and $26,674, respectively as of July 3, 2004. No pension plans had plan assets in excess of accumulated benefit
obligations at July 2, 2005 or July 3, 2004.
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Components of Net Periodic Benefit Cost

2005 2004 2003 2005 2004 2003
Service cost $ 3,793 $ 3,949 $ 2,541 $ 792 $ 857 $ 369
Interest cost 2,720 2,514 1,962 685 671 531
Expected return on assets (2,175) (1,514) (1,468)
Prior service cost 55 55 55 43 43 65
Loss 514 1,053 187 369 63
Net periodic benefit cost $ 4,907 $ 6,057 $ 3,090 $ 1,707 $ 1,940 $ 1,028
Assumptions
The following weighted average assumptions were used to determine benefit obligations for the plans at July 2, 2005 and July 3, 2004:

2005 2004 2005 2004
Discount rate 5.50% 6.25% 5.50% 6.25%
Rate of compensation increase 4.25 4.25 5.00 5.00
The following weighted average assumptions were used to determine net periodic benefit cost for the plans for the years ended July 2,
2005 and July 3, 2004:

2005 2004 2005 2004
Discount rate 6.25% 6.00% 6.25% 6.00%
Expected return on plan assets 8.00 8.00 N/A N/A
Rate of compensation increase 4.25 5.00 5.00 5.00
To develop the expected long-term rate of return on asset assumptions, the Company considered the historical returns and the future
expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio. This resulted in the selection
of the 8.00% long-term rate of return on assets assumption.
Additional Information
The pension plan weighted average asset allocations at July 2, 2005 and July 3, 2004 are as follows:

Pension Plan
2005 2004
International equity 15% 15%
Value equity 25 25
Small cap equity 10 10
Core growth equity 20 20
Fixed income 30 30
Total 100% 100%
The asset allocation strategy for 2005 targets 25.0%-30.0% in high-quality fixed income instruments with the balance of the portfolio
to be invested in a diversified and complimentary portfolio of equity vehicles. The objective is to achieve a long-term rate of return of
7.0%-9.5%. In determining investment options, all classes or categories of investments allowed by the Employee Retirement Income
Security Act of 1974 (ERISA) are acceptable investment choices. As directed by ERISA, no single investment will comprise more
than 10.0% of assets, except for certain government backed securities.
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Pension assets consist primarily of listed common stocks and U.S. government and corporate obligations. The plan held approximately
67,500 shares of the Companys Class B common stock at July 2, 2005 and July 3, 2004, with market values of $2,561 and $2,697,
respectively. The plan received $5 in dividends on the Companys Class B common stock during each of fiscal 2005 and 2004.
The Company expects to contribute $3,692 to its pension plan and $458 to the SERP in fiscal year 2006.
Estimated Future Benefit Payments
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

Supplemental
Executive Retirement
Pension Plan Plan
2006 $ 885 $ 458
2007 967 448
2008 1,062 429
2009 1,197 414
2010 1,354 391
2011 and thereafter 10,311 2,571
Union Pension Plans
Certain employees of the Company are covered by union-sponsored, collectively bargained, multiemployer pension plans (Union
Plans). The Company contributed and charged to expense $1,555 in fiscal 2005, $1,460 in fiscal 2004 and $1,189 in fiscal 2003 for
such plans. These contributions are determined in accordance with the provisions of negotiated labor contracts and generally are based
on the number of hours worked. The Company may be liable for its share of unfunded vested benefits, if any, related to the Union
Plans. Information from the Union Plans administrators is not available to permit the Company to determine its share, if any, of
unfunded vested benefits.
401(k) Plan
All full-time nonunion employees are eligible to participate in a 401(k) plan. The Company matches a portion of the employees
salary reduction contributions and provides investment choices for the employee. The matching contributions under the 401(k) plan,
which vest over a five-year employment period, were $1,814 in fiscal 2005, $1,712 in fiscal 2004 and $1,663 in fiscal 2003.
Executive Deferred Compensation Plan
Under the Executive Deferred Compensation Plan (DEFCO) plan, the Company matches a portion of the designated employees
contributions. The Companys matching contributions under the DEFCO plan were $464 in fiscal 2005, $528 in fiscal 2004 and $476
in fiscal 2003. The accumulated benefit obligation of $10,731 as of July 2, 2005 and $9,492 as of July 3, 2004 is included in other
noncurrent liabilities in the accompanying consolidated balance sheets. The Company has purchased investments, including stable
income and stock index managed funds, based on investment elections made by the employees, which may be used to fund the
retirement benefits. The investments are recorded at estimated fair value based on quoted market prices and are included in other
assets in the accompanying consolidated balance sheets. Unrealized gains and losses are included in income on a current basis. At
July 2, 2005 and July 3, 2004, the estimated fair value of the investments was $10,731 and $9,492, and the cost of the investments was
$10,246 and $9,305, respectively.
9. Commitments and Contingencies
Litigation
The Company is involved in a variety of legal actions relating to personal injury, employment, environmental and other legal matters
that arise in the normal course of business. These legal actions include lawsuits that challenge the practice of charging for certain
environmental services on invoices, and being named, along with other defendants, as a potentially responsible party at certain waste
disposal sites where ground water contamination has been detected or is suspected;
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however, there has been no activity or further notifications in connection with these waste disposal sites for a period of years. None of
these legal actions are expected to have a material adverse effect on the Companys results of operations or financial position.
Leases
The Company leases certain facilities and equipment for varying periods. Most facility leases contain renewal options from one to five
years. Management expects that in the normal course of business, leases will be renewed or replaced by other leases.
The following is a schedule of future minimum lease payments for operating leases that had initial or remaining non-cancelable lease
terms in excess of one year as of July 2, 2005:

Operating Leases
2006 $ 16,138
2007 13,219
2008 10,373
2009 6,997
2010 4,845
2011 and thereafter 3,562
Total minimum lease payments $ 55,134
Total rent expense for operating leases, including those with terms of less than one year was $20,684 in fiscal 2005, $18,547 in fiscal
2004 and $17,780 in fiscal 2003.
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10. Segment Information
The Company has two operating segments, United States and Canada, which have been identified as components of the Company that
are reviewed by the Companys Chief Executive Officer to determine resource allocation and evaluate performance. Each operating
segment derives revenues from the branded identity apparel and facility services industry, which includes garment rental and
non-apparel items such as floor mats, dust mops, wiping towels, selected linen items and several restroom products. No one
customers transactions account for 1.0% or more of the Companys revenues.
The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note
1). Corporate expenses are allocated to the segments based on segment revenue. The Company evaluates performance based on
income from operations. Financial information by geographic location is as follows:

United
States Canada Elimination Total
2005 (52 weeks):
Revenues $ 663,000 $ 125,775 $ $ 788,775
Income from operations 51,169 24,303 75,472
Interest expense 11,328 10 11,338
Total assets 859,349 147,586 (103,766) 903,169
Capital expenditures 15,698 3,710 19,408
Depreciation and amortization expense 36,064 5,479 41,543
Income tax expense 18,729 5,478 24,207

2004 (53 weeks):
Revenues $ 633,715 $ 99,732 $ $ 733,447
Income from operations 50,282 18,755 69,037
Interest expense 12,029 (63) 11,966
Total assets 771,338 115,167 (83,758) 802,747
2003 (52 weeks):
Revenues $ 618,798 $ 86,790 $ $ 705,588
Income from operations 52,823 16,933 (837) 68,919
Interest expense 13,330 1,198 (837) 13,691
Total assets 752,469 96,706 (70,369) 778,806
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) are our controls and other procedures
that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act
is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules
and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information
required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our
management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding
required disclosure.
Evaluation of Disclosure Controls and Procedures
We have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of July 2, 2005. Based on
that evaluation, the president and chief executive officer, and the chief financial officer concluded that our disclosure controls and
procedures are effective in recording, processing, summarizing and timely reporting information required to be disclosed in the reports
that we file or submit under the Exchange Act.
Managements Annual Report on Internal Control over Financial Reporting
The report of management required under this Item 9A is contained in Item 8 of this Annual Report on Form 10-K under the caption
Managements Report on Internal Control over Financial Reporting.
Attestation Report of Registered Public Accounting Firm
The attestation report required under this Item 9A is contained in Item 8 of this Annual Report on Form 10-K under the caption
Report of Independent Registered Public Accounting Firm.
Changes in Internal Controls
There were no changes in our internal controls over financial reporting during the fourth quarter of fiscal 2005 that have materially
affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to information with respect to the Companys Proxy Statement for the 2005 Annual Meeting of Shareholders to be
filed pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
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PART IV, ITEM 15
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
(1) Financial Statements

The consolidated financial statements of the Registrant are set forth in Item 8 of Part II of this report.

(2) Financial Statement Schedules

All schedules for which provision is made in the applicable accounting regulations of the SEC have been omitted as not
required or not applicable, or the information has been included elsewhere by reference in the financial statements and
related notes, except for Schedule II, which is included as Exhibit 99.1 to this Form 10-K, as filed with the SEC.

(3) Exhibits

The following exhibits, as required by Item 601 of Regulation S-K are filed as a part of this report:
3(a) Articles of Amendment and Restatement of the Registrant, as filed with the Secretary of State of Minnesota
(incorporated herein by reference to Exhibit 3(i) to the Registrants Form 10-Q filed November 13, 2001).
3(b) Amended and Restated Bylaws of the Registrant (incorporated herein by reference to Exhibit 3 (ii) to the Registrants
Form 10-Q filed November 13, 2001).
4(a) Rights Agreement, dated as of September 17, 2001, by and between G&K Services, Inc. and Wells Fargo Bank
Minnesota, National Association (incorporated by reference to the Registrants Form 8-K filing dated September 19, 2001).
10(a) Stockholder Agreement by and among the Registrant, Richard Fink, William Hope, Stephen LaBelle, Daniel Nielsen,
Phillip Oberg and Robert Stotts, dated June 14, 1985 (incorporated herein by reference to the Registrants Schedule 13E-4
filing dated May 13, 1985).
10(b) 1989 Stock Option and Compensation Plan, as amended on October 30, 1997. **
10(c) 1996 Director Stock Option Plan, as amended March 10, 2004. **
10(d) 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. (incorporated herein by reference to the Registrants Form 8-K filing dated July 14, 1997).
10(e) 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. (incorporated herein by reference to the Registrants Form 8-K filing dated July 14, 1997).
10(f) Asset Purchase Agreement, dated as of April 25, 1998, by and among G&K Services Linen Co., G&K Services Co.,
G&K Services, Inc., and TTSI Services Acquisition Sub, Inc. and Tartan Textile Services, Inc. (incorporated herein by
reference to the Registrants Form 8-K filing dated May 14, 1998).
10(g) 1998 Stock Option and Compensation Plan, as amended November 7, 2002. **
10(h) Form of Change of Control Agreement between Registrant and each of Robert G. Wood and Jeffrey L. Wright, dated
February 24, 1999 (incorporated herein by reference to the Registrants Form 10-Q filed May 11, 1999). **
10(i) Note Purchase Agreement dated July 20, 2000 among G&K Services, Inc. and various institutional investors
(incorporated herein by reference to the Registrants Form 10-K filed September 28, 2000).
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10(j) Form of Executive Employment Agreement between Registrant and each of Robert G. Wood and Jeffrey L. Wright,
dated January 1, 2001 (incorporated herein by reference to the Registrants Form 10-K filed September 27, 2001). **
10(k) Credit Agreement, dated June 25, 2002, by and among the Registrant, G&K Services Canada, Inc., Bank One N.A.,
Wachovia Bank, National Association, Wachovia Securities, Inc (f/k/a First Union Securities, Inc.), Banc One Capital
Markets, Inc. and various lenders (incorporated herein by reference to Exhibit 10(m) to the Registrants Form 10-K filed
September 26, 2002).
10(l) Executive Employment Agreement between Registrant and Richard L. Marcantonio, dated June 25, 2002
(incorporated herein by reference to Exhibit 10(n) to the Registrants Form 10-K filed September 26, 2002). **
10(m) Promissory Note of Richard L. Marcantonio dated July 26, 2002 and payable to the Registrant (incorporated herein
by reference to Registrants Form 10-Q filed November 12, 2002). **
10(n) Stock Pledge Agreement dated as of July 26, 2002, by and between the Registrant and Richard L. Marcantonio
(incorporated herein by reference to Registrants Form 10-Q filed November 12, 2002). **
10(o) Change of Control Agreement between Registrant and Richard L. Marcantonio dated November 12, 2002
(incorporated herein by reference to Registrants Form 10-Q filed May 13, 2003). **
10(p) Executive Employment Agreement between Registrant and Jeffrey R. Kiesel, dated July 14, 2003 (incorporated
herein by reference to Registrants Form 10-Q filed February 5, 2004). **
10(q) First Amendment, dated December 17, 2003 to Credit Agreement dated June 25, 2002, among the Registrant, G&K
Services Canada, Inc., Bank One, N.A., Wachovia Bank, National Association, Wachovia Securities, Inc, Banc One Capital
Markets, Inc. and various lenders (incorporated herein by reference to Registrants Form 10-Q filed February 5, 2004).
10(r) Executive Employment Agreement between Registrant and David F. Fisher, dated May 10, 2004 (incorporated herein
by reference to Registrants Form 10-K filed September 16, 2004). **
10(s) Loan Agreement dated November 17, 2004 among G&K Services, Inc., and its subsidiaries, Three Pillars Funding
LLC and Sun Trust Capital Markets, Inc. (incorporated herein by reference to Registrants Form 10-Q filed February 8,
2005).
10(t) Loan Agreement dated June 30, 2005 among G&K Services, Inc. and various institutional investors.*
14 Code of Ethics (incorporated herein by reference to Registrants Form 10-K filed September 16, 2004).

21 Subsidiaries of G&K Services, Inc. *

23 Consent of Independent Registered Public Accounting Firm *

24 Power of Attorney dated as of August 25, 2005 *

31.1 Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-15(e)/15d-15(e) as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2 Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-15(e)/15d-15(e) as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.*

32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.*

99.1 Report of Ernst & Young LLP, Independent Registered Public Accounting Firm and Schedule II *
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Footnotes:

* Filed herewith
** Compensatory plan or arrangement
(b) Exhibits
See exhibits listed under Item 15(a)(3).
(c) Financial Statement Schedules
See the financial statement schedules listed under Item 15(a)(2).
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SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: September 15, 2005 G&K SERVICES, INC.
(Registrant)

By: /s/ Richard L. Marcantonio

Richard L. Marcantonio, President and Chief Executive Officer

By: /s/ Jeffrey L. Wright

Jeffrey L. Wright, Senior Vice President and Chief Financial Officer

By: /s/ Michael F. Woodard

Michael F. Woodard, Vice President and Controller
(Principal Accounting Officer)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report on Form 10-K has been signed below on the 15
th
day
of September 2005, by the following persons in the capacity indicated:

/s/ Richard L. Marcantonio

President and Chief Executive Officer (Principal Executive Officer) and
Director

* Chairman of the Board and Director
Richard M. Fink

* Director
Michael G. Allen

* Director
Paul Baszucki

* Director
John S. Bronson

* Director
J. Patrick Doyle

* Director
Wayne M. Fortun

* Director
Ernest J. Mrozek

* Director
M. Lenny Pippin

* Director
Alice M. Richter

* By: /s/ Richard L. Marcantonio
Attorney-in-fact
48
EXHIBIT 10(t)
EXECUTION COPY
================================================================================
G&K SERVICES, INC.
$75,000,000 Floating Rate Senior Notes
due June 30, 2015
----------------
NOTE PURCHASE AGREEMENT
----------------
Dated as of June 15, 2005
================================================================================
TABLE OF CONTENTS
(not part of the Agreement)
SECTION PAGE
SECTION 1. AUTHORIZATION OF NOTES..................................................... 1
Section 1.1 Description of Notes.................................................. 1
Section 1.2 Interest Rate......................................................... 1
SECTION 2. SALE AND PURCHASE OF NOTES; SUBSIDIARY GUARANTY............................ 2
Section 2.1 Sale and Purchase of Notes............................................ 2
Section 2.2 Subsidiary Guaranty................................................... 2
SECTION 3. CLOSING.................................................................... 3
SECTION 4. CONDITIONS TO CLOSING...................................................... 3
Section 4.1 Representations and Warranties........................................ 3
Section 4.2 Performance; No Default............................................... 3
Section 4.3 Compliance Certificates............................................... 4
Section 4.4 Opinions of Counsel................................................... 4
Section 4.5 Purchase Permitted By Applicable Law, Etc............................. 4
Section 4.6 Sale of Other Notes................................................... 5
Section 4.7 Payment of Special Counsel Fees....................................... 5
Section 4.8 Private Placement Number.............................................. 5
Section 4.9 Changes in Corporate Structure........................................ 5
Section 4.10 Subsidiary Guaranty................................................... 5
Section 4.11 Funding Instructions.................................................. 5
Section 4.12 Proceedings and Documents............................................. 5
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................. 5
Section 5.1 Organization; Power and Authority..................................... 5
Section 5.2 Authorization, Etc.................................................... 6
Section 5.3 Disclosure............................................................ 6
Section 5.4 Organization and Ownership of Shares of Subsidiaries; Affiliates...... 7
Section 5.5 Financial Statements; Material Liabilities............................ 7
Section 5.6 Compliance with Laws, Other Instruments, Etc.......................... 8
Section 5.7 Governmental Authorizations, Etc...................................... 8
Section 5.8 Litigation; Observance of Agreements, Statutes and Orders............. 8
Section 5.9 Taxes................................................................. 8
Section 5.10 Title to Property; Leases............................................. 9
Section 5.11 Licenses,
Permits, Etc................................................ 9
Section 5.12 Compliance with ERISA................................................. 9
</TABLE>
-i-
TABLE OF CONTENTS
SECTION PAGE
Section 5.13 Private Offering by the Company....................................... 10
Section 5.14 Use of Proceeds; Margin Regulations................................... 11
Section 5.15 Existing Debt; Future Liens........................................... 11
Section 5.16 Foreign Assets Control Regulations, Etc............................... 11
Section 5.17 Status under Certain Statutes......................................... 12
Section 5.18 Environmental Matters................................................. 12
Section 5.19 Notes Rank Pari Passu................................................. 13
SECTION 6. REPRESENTATIONS OF THE PURCHASERS.......................................... 13
Section 6.1 Purchase for Investment............................................... 13
Section 6.2 Accredited Investor................................................... 13
Section 6.3 Source of Funds....................................................... 13
SECTION 7. INFORMATION AS TO THE COMPANY.............................................. 15
Section 7.1 Financial and Business Information.................................... 15
Section 7.2 Officer's Certificate................................................. 18
Section 7.3 Visitation............................................................ 18
SECTION 8. PAYMENT OF THE NOTES....................................................... 19
Section 8.1 Required Prepayments.................................................. 19
Section 8.2 Optional Prepayments.................................................. 19
Section 8.3 Allocation of Partial Prepayments..................................... 20
Section 8.4 Maturity; Surrender, Etc.............................................. 20
Section 8.5 Purchase of Notes..................................................... 20
Section 8.6 Change of Control..................................................... 20
SECTION 9. AFFIRMATIVE COVENANTS...................................................... 21
Section 9.1 Compliance with Law................................................... 21
Section 9.2 Insurance............................................................. 21
Section 9.3 Maintenance of Properties............................................. 22
Section 9.4 Payment of Taxes and Claims........................................... 22
Section 9.5 Corporate Existence, Etc.............................................. 22
Section 9.6 Designation of Subsidiaries........................................... 22
Section 9.7 Notes and Subsidiary Guaranty to Rank Pari Passu...................... 23
Section 9.8 Books and Records..................................................... 23
Section 9.9 Line of Business...................................................... 23
Section 9.10 Additional Subsidiary Guarantors...................................... 23
-ii-
TABLE OF CONTENTS
SECTION PAGE
SECTION 10. NEGATIVE COVENANTS......................................................... 24
Section 10.1 Maintenance of Consolidated Net Worth................................. 24
Section 10.2 Consolidated Debt to Consolidated EBITDA Ratio........................ 24
Section 10.3 Limitation on Priority Debt........................................... 24
Section 10.4 Limitation on Liens................................................... 24
Section 10.5 Merger and Consolidation.............................................. 26
Section 10.6 Sales of Assets....................................................... 27
Section 10.7 Transactions with Affiliates.......................................... 28
Section 10.8 Terrorism Sanctions Regulations....................................... 28
SECTION 11. EVENTS OF DEFAULT.......................................................... 28
SECTION 12. REMEDIES ON DEFAULT, ETC................................................... 31
Section 12.1 Acceleration.......................................................... 31
Section 12.2 Other Remedies........................................................ 31
Section 12.3 Rescission............................................................ 32
Section 12.4 No Waivers or Election of Remedies, Expenses, Etc..................... 32
SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.............................. 32
Section 13.1 Registration of Notes................................................. 32
Section 13.2 Transfer and Exchange of Notes........................................ 33
Section 13.3 Replacement of Notes.................................................. 33
SECTION 14. PAYMENTS ON NOTES.......................................................... 34
Section 14.1 Place of Payment...................................................... 34
Section 14.2 Home Office Payment................................................... 34
SECTION 15. EXPENSES, ETC.............................................................. 34
Section 15.1 Transaction Expenses.................................................. 34
Section 15.2 Survival.............................................................. 35
SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT............... 35
SECTION 17. AMENDMENT AND WAIVER....................................................... 35
Section 17.1 Requirements.......................................................... 35
Section 17.2 Solicitation of Holders of Notes...................................... 35
Section 17.3 Binding Effect, Etc................................................... 36
Section 17.4 Notes Held by the Company, Etc........................................ 36
SECTION 18. NOTICES.................................................................... 36
-iii-
TABLE OF CONTENTS
SECTION PAGE
SECTION 19. REPRODUCTION OF DOCUMENTS.................................................. 37
SECTION 20. CONFIDENTIAL INFORMATION................................................... 37
SECTION 21. SUBSTITUTION OF PURCHASER.................................................. 38
SECTION 22. MISCELLANEOUS.............................................................. 38
Section 22.1 Successors and Assigns................................................ 38
Section 22.2 Payments Due on Non-Business Days..................................... 39
Section 22.3 Accounting Terms...................................................... 39
Section 22.4 Severability.......................................................... 39
Section 22.5 Construction.......................................................... 39
Section 22.6 Counterparts.......................................................... 39
Section 22.7 Governing Law......................................................... 39
Section 22.8 Jurisdiction and Process; Waiver of Jury Trial........................ 40
-iv-
ATTACHMENTS TO NOTE PURCHASE AGREEMENT:
SCHEDULE A -- Information Relating to Purchasers
SCHEDULE B -- Defined Terms
SCHEDULE 5.3 -- Disclosure Materials
SCHEDULE 5.4 -- Subsidiaries of the Company, Ownership of Subsidiary Stock
and Affiliates
SCHEDULE 5.5 -- Financial Statements
SCHEDULE 5.15 -- Existing Debt
SCHEDULE 10.4 -- Existing Liens
EXHIBIT 1 -- Form of Floating Rate Senior Note due June 30, 2015
EXHIBIT 2.2 -- Form of Subsidiary Guaranty
EXHIBIT 4.4(a) -- Form of Opinion of Special Counsel to the Company and the
Subsidiary Guarantors
EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel to the Purchasers
-v-
G&K SERVICES, INC.
5995 OPUS PARKWAY, SUITE 500
MINNETONKA, MINNESOTA 55343
$75,000,000 Floating Rate Senior Note due June 30, 2015
Dated as of
June 15, 2005
TO THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
G&K SERVICES, INC., a Minnesota corporation (the "Company"), agrees with
the Purchasers listed in the attached Schedule A (the "Purchasers") to this Note
Purchase Agreement (this "Agreement") as follows:
SECTION 1. AUTHORIZATION OF NOTES.
Section 1.1 Description of Notes. The Company will authorize the issue and
sale of $75,000,000 aggregate principal amount of its Floating Rate Senior Notes
due June 30, 2015 (the "Notes," such term shall also include any such notes
issued in substitution therefor pursuant to Section 13 of this Agreement). The
Notes shall be substantially in the form set out in Exhibit 1. Certain
capitalized terms used in this Agreement are defined in Schedule B; references
to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule
or an Exhibit attached to this Agreement.
Section 1.2 Interest Rate.
(a) The Notes shall bear interest (computed on the basis of a
360-day year and actual days elapsed) on the unpaid principal thereof from
the date of issuance at a floating rate equal to the Adjusted LIBOR Rate
for the Interest Period in effect from time to time, payable quarterly in
arrears on the 30th day of March, June, September and December and at
maturity, commencing on September 30, 2005, until such principal sum shall
have become due and payable (whether at maturity, upon notice of
prepayment or otherwise) (each such date being referred to herein as an
"Interest Payment Date") and interest (so computed) on any overdue
principal, any overdue Prepayment Premium, any overdue LIBOR Breakage
Amount and, to the extent permitted by applicable law, overdue interest
from the due date thereof (whether by acceleration or otherwise) at the
Default Rate until paid.
(b) The Adjusted LIBOR Rate shall be determined by the Company, and
notice thereof shall be given to the holders of the Notes, within three
Business Days after the beginning of each Interest Period, together with a
copy of the relevant screen used for
the determination of LIBOR, a calculation of Adjusted LIBOR Rate for such
Interest Period, the number of days in such Interest Period, the date on
which interest for such Interest Period will be paid and the amount of
interest to be paid to each holder of Notes on such date. In the event
that the Required Holders do not concur with such determination by the
Company, within 10 Business Days after receipt by such holders of the
notice delivered by the Company pursuant to the immediately preceding
sentence, the Required Holders shall provide notice to the Company,
together with a copy of the relevant screen used for the determination of
LIBOR, a calculation of the Adjusted LIBOR Rate for such Interest Period,
the number of days in such Interest Period, the date on which interest for
such Interest Period will be paid and the amount of interest to be paid to
each holder of Notes on such date, and any such determination made in
accordance with the provisions of this Agreement, shall be conclusive
absent manifest error.
SECTION 2. SALE AND PURCHASE OF NOTES; SUBSIDIARY GUARANTY.
Section 2.1 Sale and Purchase of Notes. Subject to the terms and
conditions of this Agreement, the Company will issue and sell to each Purchaser
and each Purchaser will purchase from the Company, at the closing provided for
in Section 3, the Notes in the principal amount specified opposite such
Purchaser's name in Schedule A at the purchase price of 100% of the principal
amount thereof. The obligations of each Purchaser hereunder are several and not
joint obligations and no Purchaser shall have any liability to any Person for
the performance or nonperformance of any obligation by any other Purchaser
hereunder.
Section 2.2 Subsidiary Guaranty.
(a) The payment by the Company of all amounts due with respect to
the Notes and the performance by the Company of its obligations under this
Agreement will be absolutely and unconditionally guaranteed by the
Subsidiary Guarantors pursuant to the Subsidiary Guaranty Agreement dated
as of even date herewith, which shall be substantially in the form of
Exhibit 2.2 attached hereto, and otherwise in accordance with the
provisions of Section 9.10 hereof (the "Subsidiary Guaranty").
(b) The holders of Notes agree to discharge and release any
Subsidiary Guarantor from the Subsidiary Guaranty upon the written request
of the Company, provided that (1) such Subsidiary Guarantor has been
released and discharged (or will be released and discharged concurrently
with the release of such Subsidiary Guarantor under the Subsidiary
Guaranty) as an obligor and guarantor under and in respect of the Bank
Credit Agreement and the Company so certifies to the holders of Notes in a
certificate of a Responsible Officer, (2) at the time of such release and
discharge, the Company shall deliver a certificate of a Responsible
Officer to the holders of Notes stating that no Default or Event of
Default exists or will result from such release and discharge and (3) if
any fee or other form of consideration is given to any party to the Bank
Credit Agreement expressly for the purpose of its release of such
Subsidiary Guarantor, holders of the Notes shall receive equivalent
consideration.
-2-
SECTION 3. CLOSING.
The sale and purchase of the Notes to be purchased by each Purchaser shall
occur at the offices of Schiff Hardin LLP, 623 Fifth Avenue, 28th Floor, New
York, New York 10022 at 11:00 a.m. New York, New York time, at a closing on June
30, 2005 or on such other Business Day thereafter on or prior to July 7, 2005 as
may be agreed upon by the Company and the Purchasers (the "Closing Date"). On
the Closing Date, the Company will deliver to each Purchaser the Notes to be
purchased by such Purchaser in the form of a single Note (or such greater number
of Notes in denominations of at least $100,000 as such Purchaser may request)
dated the Closing Date and registered in such Purchaser's name (or in the name
of its nominee), against delivery by such Purchaser to the Company or its order
of immediately available funds in the amount of the purchase price therefor by
wire transfer of immediately available funds for the account of the Company. If,
on the Closing Date, the Company shall fail to tender such Notes to any
Purchaser as provided above in this Section 3, or any of the conditions
specified in Section 4 shall not have been fulfilled to any Purchaser's
satisfaction, such Purchaser shall, at its election, be relieved of all further
obligations under this Agreement, without thereby waiving any rights such
Purchaser may have by reason of such failure or such nonfulfillment.
SECTION 4. CONDITIONS TO CLOSING.
Each Purchaser's obligation to purchase and pay for the Notes to be sold
to such Purchaser on the Closing Date is subject to the fulfillment to such
Purchaser's satisfaction, prior to or on the Closing Date of the following
conditions:
Section 4.1 Representations and Warranties.
(a) Representations and Warranties of the Company. The
representations and warranties of the Company in this Agreement shall be
correct when made and on the Closing Date.
(b) Representations and Warranties of the Subsidiary Guarantors. The
representations and warranties of the Subsidiary Guarantors in the
Subsidiary Guaranty shall be correct when made and on the Closing Date.
Section 4.2 Performance; No Default. The Company and each Subsidiary
Guarantor shall have performed and complied with all agreements and conditions
contained in this Agreement and the Subsidiary Guaranty required to be performed
or complied with by it prior to or on the Closing Date, and after giving effect
to the issue and sale of the Notes (and the application of the proceeds thereof
as contemplated by Section 5.14), no Default or Event of Default shall have
occurred and be continuing. Neither the Company nor any Subsidiary shall have
entered into any transaction since the date of the Memorandum that would have
been prohibited by Section 10 hereof had such Section applied since such date.
-3-
Section 4.3 Compliance Certificates.
(a) Officer's Certificate of the Company. The Company shall have
delivered to such Purchaser an Officer's Certificate, dated the Closing
Date, certifying that the conditions specified in Sections 4.1, 4.2 and
4.9 have been fulfilled.
(b) Secretary's Certificate of the Company. The Company shall have
delivered to such Purchaser a certificate of its Secretary or an Assistant
Secretary, dated the Closing Date, certifying as to the resolutions
attached thereto and other corporate proceedings relating to the
authorization, execution and delivery of the Notes and this Agreement.
(c) Officer's Certificate of the Subsidiary Guarantors. Each
Subsidiary Guarantor shall have delivered to such Purchaser an Officer's
Certificate, dated the Closing Date, certifying that the conditions
specified in Sections 4.1(b), 4.2 and 4.9 have been fulfilled.
(d) Secretary's Certificate of the Subsidiary Guarantors. Each
Subsidiary Guarantor shall have delivered to such Purchaser a certificate
of its Secretary or an Assistant Secretary, dated the Closing Date,
certifying as to the resolutions attached thereto and other corporate
proceedings relating to the authorization, execution and delivery of the
Subsidiary Guaranty.
Section 4.4 Opinions of Counsel. Such Purchaser shall have received
opinions in form and substance satisfactory to such Purchaser, dated the Closing
Date (a) from Maslon Edelman Borman & Brand, LLP, special counsel to the Company
and the Subsidiary Guarantors, covering the matters set forth in Exhibit 4.4(a)
and covering such other matters incident to the transactions contemplated hereby
as such Purchaser or special counsel to the Purchasers may reasonably request
(and the Company hereby instructs its special counsel to deliver such opinion to
the Purchasers) and (b) from Schiff Hardin LLP, special counsel to the
Purchasers in connection with such transactions, substantially in the form set
forth in Exhibit 4.4(b) and covering such other matters incident to such
transactions as such Purchaser may reasonably request.
Section 4.5 Purchase Permitted By Applicable Law, Etc. On the Closing
Date, such Purchaser's purchase of Notes shall (a) be permitted by the laws and
regulations of each jurisdiction to which such Purchaser is subject, without
recourse to provisions (such as Section 1405(a)(8) of the New York Insurance
Law) permitting limited investments by insurance companies without restriction
as to the character of the particular investment, (b) not violate any applicable
law or regulation (including, without limitation, Regulation T, U or X of the
Board of Governors of the Federal Reserve System) and (c) not subject such
Purchaser to any tax, penalty or liability under or pursuant to any applicable
law or regulation. If requested by such Purchaser, such Purchaser shall have
received from the Company an Officer's Certificate certifying as to such matters
of fact as such Purchaser may reasonably specify to enable such Purchaser to
determine whether such purchase is so permitted.
-4-
Section 4.6 Sale of Other Notes. On the Closing Date, the Company shall
sell to each other Purchaser and each other Purchaser shall purchase the Notes
to be purchased by it on the Closing Date as specified in Schedule A.
Section 4.7 Payment of Special Counsel Fees. Without limiting the
provisions of Section 15.1, the Company shall have paid on or before the Closing
Date, the reasonable fees, reasonable charges and reasonable disbursements of
special counsel to the Purchasers referred to in Section 4.4(b) to the extent
reflected in a statement of such counsel rendered to the Company at least one
Business Day prior to the Closing Date.
Section 4.8 Private Placement Number. A Private Placement Number issued by
Standard & Poor's CUSIP Service Bureau (in cooperation with the SVO of the NAIC)
shall have been obtained for the Notes.
Section 4.9 Changes in Corporate Structure. Neither the Company nor any
Subsidiary Guarantor shall have changed its jurisdiction of organization or been
a party to any merger or consolidation, or shall have succeeded to all or any
substantial part of the liabilities of any other entity, at any time following
the date of the most recent financial statements referred to in Schedule 5.5.
Section 4.10 Subsidiary Guaranty. The Subsidiary Guaranty shall have been
duly authorized, executed and delivered by each Subsidiary Guarantor and shall
constitute the legal, valid and binding contract and agreement of each
Subsidiary Guarantor and such Purchaser shall have received a duly executed copy
thereof.
Section 4.11 Funding Instructions. At least three Business Days prior to
the Closing Date, each Purchaser shall have received written instructions signed
by a Responsible Officer on letterhead of the Company directing the manner of
the payment of funds and setting forth (a) the name and address of the
transferee bank, (b) such transferee bank's ABA number, (c) the account name and
number into which the purchase price for the Notes is to be deposited and (d)
the name and telephone number of the account representative responsible for
verifying receipt of such funds.
Section 4.12 Proceedings and Documents. All corporate and other
organizational proceedings in connection with the transactions contemplated by
this Agreement and the Subsidiary Guaranty and all documents and instruments
incident to such transactions shall be satisfactory to such Purchaser and
special counsel to the Purchasers, and such Purchaser and special counsel to the
Purchasers shall have received all such counterpart originals or certified or
other copies of such documents as such Purchaser or such special counsel may
reasonably request.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Purchaser that:
Section 5.1 Organization; Power and Authority. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of
-5-
incorporation, and is duly qualified as a foreign corporation and is in good
standing in each jurisdiction in which such qualification is required by law,
other than those jurisdictions as to which the failure to be so qualified or in
good standing would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. The Company has the corporate power
and authority to own or hold under lease the properties it purports to own or
hold under lease, to transact the business it transacts and proposes to
transact, to execute and deliver this Agreement and the Notes and to perform the
provisions hereof and thereof.
Section 5.2 Authorization, Etc.
(a) This Agreement and the Notes have been duly authorized by all
necessary corporate action on the part of the Company, and this Agreement
constitutes, and upon execution and delivery thereof each Note will
constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by (1) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and (2) general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(b) The Subsidiary Guaranty has been duly authorized by all
necessary corporate or other action on the part of each Subsidiary
Guarantor and the Subsidiary Guaranty constitutes a legal, valid and
binding obligation of each Subsidiary Guarantor enforceable against each
Subsidiary Guarantor in accordance with its terms, except as such
enforceability may be limited by (1) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement
of creditors' rights generally and (2) general principles of equity
(regardless of whether such enforceability is considered in a proceeding
in equity or at law).
Section 5.3 Disclosure. The Company, through its agent, Banc of America
Securities LLC, has delivered to each Purchaser a copy of a Private Placement
Memorandum, dated April 2005 (the "Memorandum"), relating to the transactions
contemplated hereby. The Memorandum fairly describes, in all material respects,
the general nature of the business and principal properties of the Company and
its Subsidiaries. This Agreement, the Memorandum, the documents, certificates or
other writings identified in Schedule 5.3 and the financial statements listed in
Schedule 5.5, in each case, delivered to the Purchasers prior to May 9, 2005
(this Agreement, the Memorandum and such documents, certificates or other
writings and such financial statements being referred to, collectively, as the
"Disclosure Documents"), taken as a whole, do not contain any untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein not misleading in light of the circumstances under which they
were made. Except as disclosed in the Disclosure Documents, since July 3, 2004,
there has been no change in the financial condition, operations, business or
properties of the Company or any Restricted Subsidiary except changes that
individually or in the aggregate would not reasonably be expected to have a
Material Adverse Effect. There is no fact known to the Company that would
reasonably be expected to have a Material Adverse Effect that has not been set
forth herein or in the Disclosure Documents.
-6-
Section 5.4 Organization and Ownership of Shares of Subsidiaries;
Affiliates.
(a) Schedule 5.4 contains (except as noted therein) complete and
correct lists (1) of the Company's Restricted and Unrestricted
Subsidiaries, showing, as to each Subsidiary, the correct name thereof,
the jurisdiction of its organization, and the percentage of shares of each
class of its capital stock or similar equity interests outstanding owned
by the Company and each other Subsidiary, and all other Investments of the
Company and its Restricted Subsidiaries existing on the Closing Date, (2)
of the Company's Affiliates, other than Subsidiaries and (3) of the
Company's directors and senior officers.
(b) All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in Schedule 5.4 as being owned by the
Company and its Subsidiaries have been validly issued, are fully paid and
nonassessable and are owned by the Company or another Subsidiary free and
clear of any Lien (except as otherwise disclosed in Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a corporation or
other legal entity duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, and is duly qualified
as a foreign corporation or other legal entity and is in good standing in
each jurisdiction in which such qualification is required by law, other
than those jurisdictions as to which the failure to be so qualified or in
expected to have a Material Adverse Effect. Each such Subsidiary has the
corporate or other power and authority to own or hold under lease the
properties it purports to own or hold under lease and to transact the
business it transacts and proposes to transact and, in the case of each
such Subsidiary that is a Subsidiary Guarantor, to execute and deliver the
Subsidiary Guaranty and to perform the provisions thereof.
(d) No Subsidiary is a party to, or otherwise subject to, any legal,
regulatory, contractual or other restriction (other than this Agreement,
the agreements listed on Schedule 5.4 and customary limitations imposed by
corporate or similar law statutes) restricting the ability of such
Subsidiary to pay dividends out of profits or make any other similar
distributions of profits to the Company or any of its Subsidiaries that
owns outstanding shares of capital stock or similar equity interests of
such Subsidiary.
Section 5.5 Financial Statements; Material Liabilities. The Company has
delivered to each Purchaser copies of the financial statements of the Company
and its Subsidiaries listed on Schedule 5.5. All of said financial statements
(including in each case the related schedules and notes) fairly present in all
material respects the consolidated financial position of the Company and its
Subsidiaries as of the respective dates specified in such Schedule and the
consolidated results of their operations and cash flows for the respective
periods so specified and have been prepared in accordance with GAAP consistently
applied throughout the periods involved except as set forth in the notes thereto
(subject, in the case of any interim financial statements, to normal year-end
adjustments). The Company and its Subsidiaries do not have any Material
liabilities
-7-
that are not disclosed on such financial statements or otherwise disclosed in
the Disclosure Documents.
Section 5.6 Compliance with Laws, Other Instruments, Etc. The execution,
delivery and performance by the Company of this Agreement and the Notes and the
execution, delivery and performance by each Subsidiary Guarantor of the
Subsidiary Guaranty will not (a) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien in respect of
any property of the Company or any Subsidiary under, any indenture, mortgage,
deed of trust, loan, purchase or credit agreement, lease, corporate charter or
by-laws, or any other agreement or instrument to which the Company or any
Subsidiary is bound or by which the Company or any Subsidiary or any of their
respective properties may be bound or affected, (b) conflict with or result in a
breach of any of the terms, conditions or provisions of any order, judgment,
decree, or ruling of any court, arbitrator or Governmental Authority applicable
to the Company or any Subsidiary or (c) violate any provision of any statute or
other rule or regulation of any Governmental Authority applicable to the Company
or any Subsidiary.
Section 5.7 Governmental Authorizations, Etc. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery or performance
by (a) the Company of this Agreement or the Notes or (b) any Subsidiary
Guarantor of the Subsidiary Guaranty.
Section 5.8 Litigation; Observance of Agreements, Statutes and Orders.
(a) There are no actions, suits, investigations or proceedings
pending or, to the knowledge of the Company, threatened against or
affecting the Company or any Restricted Subsidiary or any property of the
Company or any Restricted Subsidiary in any court or before any arbitrator
of any kind or before or by any Governmental Authority that, individually
or in the aggregate, would reasonably be expected to have a Material
Adverse Effect.
(b) Neither the Company nor any Restricted Subsidiary is in default
under any term of any agreement or instrument to which it is a party or by
which it is bound, or any order, judgment, decree or ruling of any court,
arbitrator or Governmental Authority or is in violation of any applicable
law, ordinance, rule or regulation (including, without limitation,
Environmental Laws or the USA Patriot Act) of any Governmental Authority,
which default or violation, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.
Section 5.9 Taxes. The Company and its Subsidiaries have filed all tax
returns that are required to have been filed in any jurisdiction, and have paid
all taxes shown to be due and payable on such returns and all other taxes and
assessments levied upon them or their properties, assets, income or franchises,
to the extent such taxes and assessments have become due and payable and before
they have become delinquent, except for any taxes and assessments (a) the amount
of which is not, individually or in the aggregate, Material or (b) the amount,
applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which the Company or a Subsidiary,
as the case may be, has established adequate
-8-
reserves in accordance with GAAP. The Company knows of no basis for any other
tax or assessment that would reasonably be expected to have a Material Adverse
Effect. The charges, accruals and reserves on the books of the Company and its
Subsidiaries in respect of federal, state or other taxes for all fiscal periods
are adequate. The federal income tax liabilities of the Company and its
Subsidiaries have been finally determined (whether by reason of completed audits
or the statute of limitations having run) for all fiscal years up to and
including the fiscal year ended June 29, 1999.
Section 5.10 Title to Property; Leases. The Company and its Restricted
Subsidiaries have good and sufficient title to their respective properties which
the Company and its Restricted Subsidiaries own or purport to own that,
individually or in the aggregate, are Material, including all such properties
reflected in the most recent audited balance sheet referred to in Section 5.5 or
purported to have been acquired by the Company or any Restricted Subsidiary
after said date (except as sold or otherwise disposed of in the ordinary course
of business), in each case free and clear of Liens prohibited by this Agreement.
All leases that, individually or in the aggregate, are Material are valid and
subsisting and are in full force and effect in all material respects.
Section 5.11 Licenses, Permits, Etc.
(a) The Company and its Restricted Subsidiaries own or possess all
licenses, permits, franchises, authorizations, patents, copyrights,
proprietary software, service marks, trademarks, trade names and domain
names, or rights thereto, that, individually or in the aggregate, are
Material, without known conflict with the rights of others.
(b) To the best knowledge of the Company, no product of the Company
or any of its Restricted Subsidiaries infringes in any material respect
any license, permit, franchise, authorization, patent, copyright,
proprietary software, service mark, trademark, trade name, domain name or
other right owned by any other Person.
(c) To the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its
Restricted Subsidiaries with respect to any patent, copyright, proprietary
software, service mark, trademark, trade name, domain name or other right
owned or used by the Company or any of its Restricted Subsidiaries.
Section 5.12 Compliance with ERISA.
(a) The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except for
such instances of noncompliance as have not resulted in and would not
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any ERISA Affiliate has incurred any liability pursuant to
Title I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans (as defined in Section 3 of ERISA), and
no event, transaction or condition has occurred or exists that could
reasonably be expected to result in the incurrence of any such liability
by the Company or any ERISA Affiliate, or in the imposition of any Lien on
any of the rights, properties or assets of the Company or any
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ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to
such penalty or excise tax provisions or to Section 401(a)(29) or 412 of
the Code or Section 4068 of ERISA, other than such liabilities or Liens as
would not be, individually or in the aggregate, Material.
(b) The present value of the aggregate benefit liabilities under
each of the Plans (other than Multiemployer Plans), determined as of the
end of such Plan's most recently ended plan year on the basis of the
actuarial assumptions specified for funding purposes in such Plan's most
recent actuarial valuation report, did not exceed the aggregate current
value of the assets of such Plan allocable to such benefit liabilities.
The term "benefit liabilities" has the meaning specified in Section 4001
of ERISA and the terms "current value" and "present value" have the
meanings specified in Section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred any
withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under Section 4201 or 4204 of ERISA in respect of
Multiemployer Plans that, individually or in the aggregate, are Material.
(d) The expected post-retirement benefit obligation (determined as
of the last day of the Company's most recently ended fiscal year in
accordance with Financial Accounting Standards Board Statement No. 106,
without regard to liabilities attributable to continuation coverage
mandated by Section 4980B of the Code) of the Company and its Subsidiaries
is not Material.
(e) The execution and delivery of this Agreement and the issuance
and sale of the Notes hereunder will not involve any transaction that is
subject to the prohibitions of Section 406 of ERISA or in connection with
which a tax could be imposed pursuant to Section 4975(c)(1)(A)-(D) of the
Code. The representation by the Company to each Purchaser in the first
sentence of this Section 5.12(e) is made in reliance upon and subject to
the accuracy of such Purchaser's representation in Section 6.2 as to the
sources of the funds to be used to pay the purchase price of the Notes to
be purchased by such Purchaser.
Section 5.13 Private Offering by the Company. Neither the Company nor
anyone acting on its behalf has offered the Notes, the Subsidiary Guaranty, or
any similar securities for sale to, or solicited any offer to buy any of the
same from, or otherwise approached or negotiated in respect thereof with, any
Person other than the Purchasers and not more than 25 other Institutional
Investors of the type described in clause (c) of the definition thereof, each of
which has been offered the Notes and the Subsidiary Guaranty in connection with
a private sale for investment. Neither the Company nor anyone acting on its
behalf has taken, or will take, any action that would subject the issuance or
sale of the Notes or the Subsidiary Guaranty to the registration requirements of
Section 5 of the Securities Act or to the registration requirements of any
securities or blue sky laws of any applicable jurisdiction.
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Section 5.14 Use of Proceeds; Margin Regulations. The Company will apply
the proceeds of the sale of the Notes as set forth in the "Summary of Proposed
Terms" of the Memorandum and for other general corporate purposes of the
Company. No part of the proceeds from the sale of the Notes hereunder will be
used, directly or indirectly, for the purpose of buying or carrying any margin
stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or
trading in any securities under such circumstances as to involve the Company in
a violation of Regulation X of said Board (12 CFR 224) or to involve any broker
or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin
stock does not constitute more than 5% of the value of the consolidated total
assets of the Company and its Subsidiaries and the Company does not have any
present intention that margin stock will constitute more than 5% of the value of
such assets. As used in this Section, the terms "margin stock" and "purpose of
buying or carrying" shall have the meanings assigned to them in said Regulation
U.
Section 5.15 Existing Debt; Future Liens.
(a) Except as described therein, Schedule 5.15 sets forth a complete
and correct list of all outstanding Debt of the Company and its Restricted
Subsidiaries as of April 2, 2005 (including a description of the obligors
and obligees, principal amount outstanding and collateral therefor, if
any, and Guaranty thereof, if any), since which date there has been no
Material change in the amounts, interest rates, sinking funds, installment
payments or maturities of the Debt of the Company or its Restricted
Subsidiaries. Neither the Company nor any Restricted Subsidiary is in
default and no waiver of default is currently in effect, in the payment of
any principal or interest on any Debt of the Company or such Restricted
Subsidiary and no event or condition exists with respect to any Debt of
the Company or any Restricted Subsidiary that would permit (or that with
notice or the lapse of time, or both, would permit) one or more Persons to
cause such Debt to become due and payable before its stated maturity or
before its regularly scheduled dates of payment.
(b) Except as disclosed in Schedule 5.15, neither the Company nor
any Restricted Subsidiary has agreed or consented to cause or permit in
the future (upon the happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be subject to a Lien
not permitted by Section 10.4.
(c) Neither the Company nor any Subsidiary is a party to, or
otherwise subject to any provision contained in, any instrument evidencing
Debt of the Company or such Subsidiary, any agreement relating thereto or
any other agreement (including, but not limited to, its charter or other
organizational document) which limits the amount of, or otherwise imposes
restrictions on the incurring of, Debt of the Company or any Subsidiary
Guarantor, except as specifically indicated in Schedule 5.15.
Section 5.16 Foreign Assets Control Regulations, Etc.
(a) Neither the sale of the Notes by the Company hereunder nor its
use of the proceeds thereof will violate the Trading with the Enemy Act,
as amended, or any of the
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foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
(b) Neither the Company nor any Subsidiary (1) is a Person described
or designated in the Specially Designated Nationals and Blocked Persons
List of the Office of Foreign Assets Control or in Section 1 of the
Anti-Terrorism Order or, (2) to the knowledge of the Company, after due
inquiry, engages in any dealings or transactions with any such Person. The
Company and its Subsidiaries are in compliance, in all material respects,
with the USA Patriot Act.
(c) No part of the proceeds from the sale of the Notes hereunder
will be used, directly or indirectly, for any payments to any government
official or employee, political party, official of a political party,
candidate for political office, or anyone else acting in an official
capacity, in order to obtain, retain or direct business or obtain any
improper advantage, in violation of the United States Foreign Corrupt
Practices Act of 1977, as amended, assuming in all cases that such Act
applies to the Company.
Section 5.17 Status under Certain Statutes. Neither the Company nor any
Restricted Subsidiary is an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended, or is subject
to regulation under the Public Utility Holding Company Act of 1935, as amended,
the ICC Termination Act of 1995, as amended, or the Federal Power Act, as
amended.
Section 5.18 Environmental Matters.
(a) Neither the Company nor any Restricted Subsidiary has knowledge
of any liability or has received any notice of any liability, and no
proceeding has been instituted raising any liability against the Company
or any of its Restricted Subsidiaries or any of their respective real
properties now or formerly owned, leased or operated by any of them, or
other assets, alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as would not reasonably be
expected to result in a Material Adverse Effect.
(b) Neither the Company nor any Restricted Subsidiary has knowledge
of any facts which would give rise to any liability, public or private,
violation of Environmental Laws or damage to the environment emanating
from, occurring on or in any way related to real properties now or
formerly owned, leased or operated by any of them or to other assets or
their use, except, in each case, such as would not reasonably be expected
to result in a Material Adverse Effect.
(c) Neither the Company nor any Restricted Subsidiary has stored any
Hazardous Materials on real properties now or formerly owned, leased or
operated by any of them or has disposed of any Hazardous Materials in each
case in a manner contrary to any Environmental Laws in each case in any
manner that would reasonably be expected to result in a Material Adverse
Effect.
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(d) All buildings on all real properties now owned, leased or
operated by the Company or any Restricted Subsidiary are in compliance
with applicable Environmental Laws, except where failure to comply would
not reasonably be expected to result in a Material Adverse Effect.
Section 5.19 Notes Rank Pari Passu.
(a) The obligations of the Company under this Agreement and the
Notes rank pari passu in right of payment with all other senior unsecured
Debt (actual or contingent) of the Company, including, without limitation,
all senior unsecured Debt of the Company described in Schedule 5.15.
(b) The obligations of each Subsidiary Guarantor under the
Subsidiary Guaranty rank pari passu in right of payment with all other
senior unsecured Debt (actual or contingent) of such Subsidiary Guarantor,
including, without limitation, all senior unsecured Debt of such
Subsidiary Guarantor described in Schedule 5.15.
SECTION 6. REPRESENTATIONS OF THE PURCHASERS.
Section 6.1 Purchase for Investment. Each Purchaser severally represents
that it is purchasing the Notes for its own account or for one or more separate
accounts maintained by it or for the account of one or more pension or trust
funds and not with a view to the distribution thereof (other than any Notes
purchased by Banc of America Securities LLC on the Closing Date which are
intended to be resold to a "qualified institutional buyer" pursuant to Rule 144A
of the Securities Act), provided that the disposition of such Purchaser's or
such pension or trust fund's property shall at all times be within such
Purchaser's or such pension or trust fund's control. Each Purchaser understands
that the Notes have not been registered under the Securities Act and may be
resold only if registered pursuant to the provisions of the Securities Act or if
an exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law, and that the
Company is not required to register the Notes.
Section 6.2 Accredited Investor. Each Purchaser severally represents that
it is an "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act acting for its own account (and not for
the account of others) or as a fiduciary or agent for others (which others are
also "accredited investors"). Each Purchaser further severally represents that
such Purchaser has had the opportunity to ask questions of the Company and has
received answers concerning the terms and conditions of the sale of the Notes.
Section 6.3 Source of Funds. Each Purchaser severally represents that at
least one of the following statements is an accurate representation as to each
source of funds (a "Source") to be used by such Purchaser to pay the purchase
price of the Notes to be purchased by such Purchaser hereunder:
(a) the Source is an "insurance company general account" (as the
term is defined in the United States Department of Labor's Prohibited
Transaction Exemption
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("PTE") 95-60) in respect of which the reserves and liabilities (as
defined by the annual statement for life insurance companies approved by
the NAIC (the "NAIC Annual Statement")) for the general account
contract(s) held by or on behalf of any employee benefit plan together
with the amount of the reserves and liabilities for the general account
contract(s) held by or on behalf of any other employee benefit plans
maintained by the same employer (or affiliate thereof as defined in PTE
95-60) or by the same employee organization in the general account do not
exceed 10% of the total reserves and liabilities of the general account
(exclusive of separate account liabilities) plus surplus as set forth in
the NAIC Annual Statement filed with such Purchaser's state of domicile;
or
(b) the Source is a separate account that is maintained solely in
connection with such Purchaser's fixed contractual obligations under which
the amounts payable, or credited, to any employee benefit plan (or its
related trust) that has any interest in such separate account (or to any
participant or beneficiary of such plan (including any annuitant)) are not
affected in any manner by the investment performance of the separate
account; or
(c) the Source is either (1) an insurance company pooled separate
account, within the meaning of PTE 90-1 or (2) a bank collective
investment fund, within the meaning of PTE 91-38 and, except as disclosed
by such Purchaser to the Company in writing pursuant to this clause (c),
no employee benefit plan or group of plans maintained by the same employer
or employee organization beneficially owns more than 10% of all assets
allocated to such pooled separate account or collective investment fund;
or
(d) the Source constitutes assets of an "investment fund" (within
the meaning of Part V of PTE 84-14 (the "QPAM Exemption")) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning of
Part V of the QPAM Exemption), no employee benefit plan's assets that are
included in such investment fund, when combined with the assets of all
other employee benefit plans established or maintained by the same
employer or by an affiliate (within the meaning of Section V(c)(1) of the
QPAM Exemption) of such employer or by the same employee organization and
managed by such QPAM, exceed 20% of the total client assets managed by
such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are
satisfied, neither the QPAM nor a Person controlling or controlled by the
QPAM (applying the definition of "control" in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (1) the identity
of such QPAM and (2) the names of all employee benefit plans whose assets
are included in such investment fund have been disclosed to the Company in
writing pursuant to this clause (d); or
(e) the Source constitutes assets of a "plan(s)" (within the meaning
of Section IV of PTE 96-23 (the "INHAM Exemption")) managed by an
"in-house asset manager" or "INHAM" (within the meaning of Part IV of the
INHAM Exemption), the conditions of Part I(a), (g) and (h) of the INHAM
Exemption are satisfied, neither the INHAM nor a Person controlling or
controlled by the INHAM (applying the definition of "control" in Section
IV(d) of the INHAM Exemption) owns a 5% or more interest in the Company
and (1) the identity of such INHAM and (2) the name(s) of the employee
benefit plan(s)
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whose assets constitute the Source have been disclosed to the Company in
writing pursuant to this clause (e); or
(f) the Source is a governmental plan; or
(g) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans,
each of which has been identified to the Company in writing pursuant to
this clause (g); or
(h) the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA.
As used in this Section 6.3, the terms "employee benefit plan," "governmental
plan," and "separate account" shall have the respective meanings assigned to
such terms in Section 3 of ERISA.
SECTION 7. INFORMATION AS TO THE COMPANY.
Section 7.1 Financial and Business Information. The Company shall deliver
to each holder of Notes that is an Institutional Investor:
(a) Quarterly Statements -- within 60 days after the end of each
quarterly fiscal period in each fiscal year of the Company (other than the
last quarterly fiscal period of each such fiscal year), copies of:
(1) a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarter, and
(2) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries, for such quarter and (in the case of the second and
third quarters) for the portion of the fiscal year ending with such
quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly financial
statements generally, and certified by a Senior Financial Officer as
fairly presenting, in all material respects, the financial position of the
companies being reported on and their results of operations and cash
flows, subject to changes resulting from year-end adjustments, provided
that delivery within the time period specified above of copies of the
Company's Quarterly Report on Form 10-Q prepared in compliance with the
requirements therefor and filed with the SEC shall be deemed to satisfy
the requirements of this Section 7.1(a);
(b) Annual Statements -- within 105 days after the end of each
fiscal year of the Company, copies of:
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(1) a consolidated balance sheet of the Company and its
Subsidiaries, as at the end of such year, and
(2) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied by an opinion thereon of independent certified
public accountants of recognized national standing, which opinion shall
state that such financial statements present fairly, in all material
respects, the financial position of the companies being reported upon and
their results of operations and cash flows and have been prepared in
conformity with GAAP, and that the examination of such accountants in
connection with such financial statements has been made in accordance with
generally accepted auditing standards, and that such audit provides a
reasonable basis for such opinion in the circumstances, provided that
delivery within the time period specified above of copies of the Company's
Annual Report on Form 10-K for such fiscal year (together with the
Company's annual report to shareholders, if any, prepared pursuant to Rule
14a-3 under the Exchange Act) prepared in accordance with the requirements
therefor and filed with the SEC shall be deemed to satisfy the
requirements of this Section 7.1(b);
(c) SEC and Other Reports -- except for filings referred to in
Sections 7.1(a) and (b) above, promptly upon their becoming available one
copy of (1) each financial statement, report, notice or proxy statement
sent by the Company or any Subsidiary to its public securities holders
generally and (2) each regular or periodic report, each registration
statement (without exhibits except as expressly requested by such holder),
and each prospectus and all amendments thereto filed by the Company or any
Subsidiary with the SEC and of all press releases and other statements
made available generally by the Company or any Subsidiary to the public
concerning developments that are Material;
(d) Notice of Default or Event of Default -- promptly, and in any
event within five Business Days after a Responsible Officer becomes aware
of the existence of any Default or Event of Default or that any Person has
given any notice or taken any action with respect to a claimed default
hereunder or that any Person has given any notice or taken any action with
respect to a claimed default of the type referred to in paragraph (g) of
Section 11, a written notice specifying the nature and period of existence
thereof and what action the Company is taking or proposes to take with
respect thereto;
(e) ERISA Matters -- promptly, and in any event within five
Business Days after a Responsible Officer becomes aware of any of the
following, a written notice setting forth the nature thereof and the
action, if any, that the Company or an ERISA Affiliate proposes to take
with respect thereto:
(1) with respect to any Plan, any reportable event, as defined
in Section 4043(c) of ERISA and the regulations thereunder, for
which notice
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thereof has not been waived pursuant to such regulations as in
effect on the date thereof; or
(2) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
Section 4042 of ERISA for the termination of, or the appointment of
a trustee to administer, any Plan, or the receipt by the Company or
any ERISA Affiliate of a notice from a Multiemployer Plan that such
action has been taken by the PBGC with respect to such Multiemployer
Plan; or
(3) any event, transaction or condition that could result in
the incurrence of any liability by the Company or any ERISA
Affiliate pursuant to Title I or IV of ERISA or the imposition of a
penalty or excise tax under the provisions of the Code relating to
employee benefit plans, or the imposition of any Lien on any of the
rights, properties or assets of the Company or any ERISA Affiliate
pursuant to Title I or IV of ERISA or such penalty or excise tax
provisions, if such liability or Lien, taken together with any other
such liabilities or Liens then existing, would reasonably be
expected to have a Material Adverse Effect;
(f) Notices from Governmental Authority -- promptly, and in any
event within 30 days of receipt thereof, copies of any notice to the
Company or any Subsidiary from any federal or state Governmental Authority
relating to any order, ruling, statute or other law or regulation that
would reasonably be expected to have a Material Adverse Effect; and
(g) Requested Information -- with reasonable promptness, such
other data and information relating to the business, operations, affairs,
financial condition, assets or properties of the Company or any of its
Subsidiaries or relating to the ability of the Company or any Subsidiary
Guarantor to perform its obligations hereunder, under the Subsidiary
Guaranty or under the Notes as from time to time may be reasonably
requested by any such holder of Notes or such information regarding the
Company required to satisfy the requirements of 17 C.F.R. Section
230.144A, as amended from time to time, in connection with any
contemplated transfer of the Notes.
Notwithstanding the foregoing, in the event that one or more Unrestricted
Subsidiaries shall either (i) own more than 10% of the consolidated total assets
of the Company and its Subsidiaries or (ii) account for more than 10% of the
consolidated gross revenues of the Company and its Subsidiaries, in each case
determined in accordance with GAAP, then, within the respective periods provided
in Sections 7.1(a) and (b) above, the Company shall deliver to each holder of
Notes that is an Institutional Investor, unaudited financial statements of the
character and for the dates and periods as in said Sections 7.1(a) and (b)
covering such group of Unrestricted Subsidiaries (on a consolidated basis),
together with a consolidating statement reflecting eliminations or adjustments
required in order to reconcile the financial statements of such group of
Unrestricted Subsidiaries to the consolidated financial statements delivered
pursuant to Sections 7.1(a) and (b); provided that for purposes of making the
calculations set
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forth in clauses (i) and (ii) of this paragraph, there shall be excluded from
such calculation the total assets and gross revenues of one or more
Securitization Subsidiaries to the extent that the aggregate amount of Debt of
such Securitization Subsidiaries does not exceed $75,000,000.
Section 7.2 Officer's Certificate. Each set of financial statements
delivered to a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b)
shall be accompanied by a certificate of a Senior Financial Officer setting
forth:
(a) Covenant Compliance -- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Section 10.1 through Section 10.4,
inclusive, and Section 10.6 during the quarterly or annual period covered
by the statements then being furnished (including with respect to each
such Section, where applicable, the calculations of the maximum or minimum
amount, ratio or percentage, as the case may be, permissible under the
terms of such Sections, and the calculation of the amount, ratio or
percentage then in existence); and
(b) Event of Default -- a statement that such officer has reviewed
the relevant terms hereof and has made, or caused to be made, under his or
her supervision, a review of the transactions and conditions of the
Company and its Subsidiaries from the beginning of the quarterly or annual
period covered by the statements then being furnished to the date of the
certificate and that such review shall not have disclosed the existence
during such period of any condition or event that constitutes a Default or
an Event of Default or, if any such condition or event existed or exists
(including, without limitation, any such event or condition resulting,
from the failure of the Company or any Subsidiary to comply with any
Environmental Law) specifying the nature and period of existence thereof
and what action the Company shall have taken or proposes to take with
respect thereto.
Section 7.3 Visitation. The Company shall permit the representatives of
each holder of Notes that is an Institutional Investor:
(a) No Default -- if no Default or Event of Default then exists, at
the expense of such holder and upon reasonable prior notice to the
Company, to visit the principal executive office of the Company, to
discuss the affairs, finances and accounts of the Company and its
Subsidiaries with the Company's officers, and (with the consent of the
Company, which consent will not be unreasonably withheld) its independent
public accountants, and (with the consent of the Company, which consent
will not be unreasonably withheld) to visit the other offices and
properties of the Company and each Restricted Subsidiary, all at such
reasonable times and as often as may be reasonably requested in writing;
and
(b) Default -- if a Default or Event of Default then exists, at the
expense of the Company, to visit and inspect any of the offices or
properties of the Company or any Restricted Subsidiary, to examine all
their respective books of account, records, reports and other papers, to
make copies and extracts therefrom, and to discuss their respective
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affairs, finances and accounts with their respective officers and
independent public accountants (and by this provision the Company
authorizes said accountants to discuss the affairs, finances and accounts
of the Company and its Restricted Subsidiaries), all at such times and as
often as may be requested.
SECTION 8. PAYMENT OF THE NOTES.
Section 8.1 Required Prepayments. The Notes shall not be subject to any
required prepayment and the entire unpaid principal amount of the Notes shall
become due and payable on the stated maturity thereof.
Section 8.2 Optional Prepayments.
(a) The Company may, at its option, upon notice as provided below,
prepay at any time all, or from time to time any part of, the Notes, in an
amount not less than 10% of the original aggregate principal amount of the
Notes to be prepaid in the case of a partial prepayment (or such lesser
amount as shall be required to effect a partial prepayment resulting from
an optional prepayment pursuant to Section 10.6), at 100% of the principal
amount so prepaid, together with interest accrued thereon to the date of
such prepayment, plus the LIBOR Breakage Amount (unless the date specified
for prepayment is an Interest Payment Date) and Prepayment Premium, if
any, determined for the prepayment date with respect to such principal
amount of each Note then outstanding. The Company will give each holder of
Notes written notice of each optional prepayment under this Section 8.2
not less than 30 days and not more than 60 days prior to the date fixed
for such prepayment. Each such notice shall specify such date (which shall
be a Business Day), the aggregate principal amount of the Notes to be
prepaid on such date, the principal amount of each Note held by such
holder to be prepaid (determined in accordance with Section 8.3), and the
interest to be paid on the prepayment date with respect to such principal
amount being prepaid, and shall be accompanied by a certificate of a
Senior Financial Officer as to the Prepayment Premium, if any, due in
connection with such prepayment, setting forth the details of such
computation.
(b) The term "LIBOR Breakage Amount" shall mean any loss, cost or
expense (other than lost profits) actually incurred by any holder of a
Note as a result of any payment or prepayment of any Note on a day other
than a regularly scheduled Interest Payment Date or at the scheduled
maturity (whether voluntary, mandatory, automatic, by reason of
acceleration or otherwise), and any loss or expense arising from the
liquidation or reemployment of funds obtained by such holder or from fees
payable to terminate the deposits from which such funds were obtained;
provided that any such loss, cost or expense shall be limited to the time
period from the date of such prepayment through the earlier of (1) the
next Interest Payment Date or (2) the maturity date of the Notes. Each
holder shall determine the LIBOR Breakage Amount with respect to the
principal amount of its Notes then being paid or prepaid (or required to
be paid or prepaid) by written notice to the Company setting forth such
determination in reasonable detail not less than two Business Days prior
to the date of prepayment in the case of any prepayment pursuant
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to Section 8.2(a) or Section 8.6 and within five Business Days after any
payment required by Section 12.1. Each such determination shall be
conclusive absent manifest error.
Section 8.3 Allocation of Partial Prepayments. In the case of each partial
prepayment of the Notes pursuant to the provisions of Section 8.2(a), the
principal amount of the Notes shall be allocated among all of the Notes at the
time outstanding in proportion, as nearly as practicable, to the respective
unpaid principal amounts thereof not theretofore called for prepayment. Each
purchase made pursuant to Section 8.5 or prepayment made pursuant to Section 8.6
shall be applied only to the Notes of the holders who are participating in such
purchase or prepayment.
Section 8.4 Maturity; Surrender, Etc. In the case of each prepayment of
Notes pursuant to this Section 8, the principal amount of each Note to be
prepaid shall mature and become due and payable on the date fixed for such
prepayment (which shall be a Business Day), together with interest on such
principal amount accrued to such date and the Prepayment Premium, if any, and
the LIBOR Breakage Amount, if any. From and after such date, unless the Company
shall fail to pay such principal amount when so due and payable, together with
the interest and the Prepayment Premium, if any, and the LIBOR Breakage Amount,
if any, as aforesaid, interest on such principal amount shall cease to accrue.
Any Note paid or prepaid in full shall be surrendered to the Company and
cancelled and shall not be reissued, and no Note shall be issued in lieu of any
prepaid principal amount of any Note.
Section 8.5 Purchase of Notes. The Company will not, and will not permit
any Affiliate to, purchase, redeem, prepay or otherwise acquire, directly or
indirectly, any of the outstanding Notes except (a) upon the payment or
prepayment of the Notes in accordance with the terms of this Agreement and the
Notes or (b) pursuant to an offer to purchase made by the Company or an
Affiliate pro rata to the holders of all Notes at the time outstanding upon the
same terms and conditions. Any such offer shall provide each holder with
sufficient information to enable it to make an informed decision with respect to
such offer, and shall remain open for at least 20 Business Days. If the holders
of more than 50% of the principal amount of the Notes then outstanding accept
such offer, the Company shall promptly notify the remaining holders of such fact
and the expiration date for the acceptance by holders of Notes of such offer
shall be extended by the number of days necessary to give each such remaining
holder at least five Business Days from its receipt of such notice to accept
such offer. The Company will promptly cancel all Notes acquired by it or any
Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to
any provision of this Agreement and no Notes may be issued in substitution or
exchange for any such Notes.
Section 8.6 Change of Control.
(a) Promptly and in any event within five Business Days after any
Responsible Officer has knowledge of the occurrence of a Change of
Control, the Company shall give written notice thereof to each holder of a
Note, which notice shall (1) refer specifically to this Section 8.6 and
describe the Change of Control in reasonable detail (including the Persons
party thereto), (2) specify a Business Day not less than 30 days and not
more than 45 days after the date of such notice (the "Control Prepayment
Date") and specify the Control Response Date (as defined below) and (3)
offer to prepay
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on the Control Prepayment Date the Notes of such holder, at 100% of the
principal amount thereof, together with interest accrued thereon to the
Control Prepayment Date, without any premium but with the LIBOR Breakage
Amount, if any, if such prepayment occurs on a date other than an Interest
Payment Date. Each holder of a Note shall notify the Company of such
holder's acceptance or rejection of such offer by giving written notice of
such acceptance or rejection to the Company on a date at least 10 days
prior to the Control Prepayment Date (such date 10 days prior to the
Control Prepayment Date being the "Control Response Date"), and the
Company shall prepay on the Control Prepayment Date all Notes held by each
holder that has accepted such offer in accordance with this Section 8.6(a)
at a price in respect of each such Note held by such holder equal to 100%
of the principal amount thereof, together with interest accrued thereon to
the Control Prepayment Date, without any premium but with the LIBOR
Breakage Amount, if any, if such prepayment occurs on a date other than an
Interest Payment Date.
(b) A "Change of Control" will be deemed to have occurred for
purposes of Section 8.6(a) if any Person or two or more Persons acting in
concert acquires beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act) of more than 35% of the Company's Voting Stock,
provided, however, that no acquisition of any of the Company's Voting
Stock by Richard M. Fink, his spouse, any direct or indirect lineal
descendant and/or any trust created primarily for the benefit of any or
all of such persons shall constitute or be considered in determining
whether or not a Change of Control has occurred.
SECTION 9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
Section 9.1 Compliance with Law. Without limiting Section 10.8, the
Company will, and will cause each of its Subsidiaries to, comply with all laws,
ordinances or governmental rules or regulations to which each of them is
subject, including, without limitation, ERISA, the USA Patriot Act and
Environmental Laws, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental authorizations
necessary to the ownership of their respective properties or to the conduct of
their respective businesses, in each case to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other governmental authorizations would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
Section 9.2 Insurance. The Company will, and will cause each of its
Restricted Subsidiaries to, maintain, with financially sound and reputable
insurers, insurance with respect to their respective properties and businesses
against such casualties and contingencies, of such types, on such terms and in
such amounts (including deductibles, co-insurance and self-insurance, if
adequate reserves are maintained with respect thereto) as is customary in the
case of entities of established reputations engaged in the same or a similar
business and similarly situated except for any non-maintenance that would not
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Section 9.3 Maintenance of Properties. The Company will, and will cause
each of its Restricted Subsidiaries to, maintain and keep, or cause to be
maintained and kept, their respective properties in good repair, working order
and condition (other than ordinary wear and tear), so that the business carried
on in connection therewith may be properly conducted at all times, provided that
this Section shall not prevent the Company or any Restricted Subsidiary from
discontinuing the operation and the maintenance of any of its properties if such
discontinuance is desirable in the conduct of its business and the Company has
concluded that such discontinuance would not, individually or in the aggregate,
Section 9.4 Payment of Taxes and Claims. The Company will, and will cause
each of its Subsidiaries to, file all tax returns required to be filed in any
jurisdiction and to pay and discharge all taxes shown to be due and payable on
such returns and all other taxes, assessments, governmental charges or levies
imposed on them or any of their properties, assets, income or franchises, to the
extent such taxes, assessments, governmental charges or levies have become due
and payable and before they have become delinquent and all claims for which sums
have become due and payable that have or might become a Lien on properties or
assets of the Company or any Subsidiary not permitted by Section 10.4, provided
that neither the Company nor any Subsidiary need pay any such tax, assessment,
governmental charge, levy or claim if (a) the amount, applicability or validity
thereof is contested by the Company or such Subsidiary on a timely basis in good
faith and in appropriate proceedings, and the Company or a Subsidiary has
established adequate reserves therefor in accordance with GAAP on the books of
the Company or such Subsidiary or (b) the non-filing of all such tax returns or
the nonpayment of all such taxes, assessments, governmental charges, levies and
claims, in the aggregate, would not reasonably be expected to have a Material
Adverse Effect.
Section 9.5 Corporate Existence, Etc. Subject to Section 10.5, the Company
will at all times preserve and keep in full force and effect its corporate
existence. Subject to Sections 10.5 and 10.6, the Company will at all times
preserve and keep in full force and effect the legal existence of each of its
Restricted Subsidiaries (unless merged into the Company or another Restricted
Subsidiary) and all rights and franchises of the Company and its Restricted
Subsidiaries unless, in the good faith judgment of the Company, the termination
of or failure to preserve and keep in full force and effect such corporate
existence, right or franchise would not, individually or in the aggregate,
Section 9.6 Designation of Subsidiaries. The Company may from time to time
cause any Restricted Subsidiary (other than a Subsidiary Guarantor) to be
designated as an Unrestricted Subsidiary or any Unrestricted Subsidiary to be
designated a Restricted Subsidiary; provided, however, that at the time of such
designation and immediately after giving effect thereto, (a) no Default or Event
of Default would exist under the terms of this Agreement and (b) the Company and
its Subsidiaries or Restricted Subsidiaries, as the case may be, would be in
compliance with all of the covenants set forth in this Section 9 and Section 10
if tested on the date of such action and provided, further, that once a
Subsidiary has been designated an Unrestricted Subsidiary or a Restricted
Subsidiary pursuant to this Section 9.6, it shall not thereafter be redesignated
as a Restricted Subsidiary or an Unrestricted Subsidiary on more than one
occasion. Within 10 days following any designation described above, the Company
will deliver to each holder of Notes a
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notice of such designation accompanied by a certificate signed by a Senior
Financial Officer certifying compliance with all requirements of this Section
9.6 and setting forth all information required in order to establish such
compliance.
Section 9.7 Notes and Subsidiary Guaranty to Rank Pari Passu.
(a) The Notes and all other obligations of the Company under this
Agreement are and at all times shall remain direct and senior unsecured
obligations of the Company ranking pari passu as against the assets of the
Company with all other Notes from time to time issued and outstanding
hereunder without any preference among themselves and pari passu with all
other present and future unsecured Debt (actual or contingent) of the
Company which is not expressed to be subordinate or junior in rank to any
other unsecured Debt of the Company.
(b) The Subsidiary Guaranty and all other obligations of each
Subsidiary Guarantor under the Subsidiary Guaranty are and at all times
shall remain direct and senior unsecured obligations of such Subsidiary
Guarantor ranking pari passu as against the assets of such Subsidiary
Guarantor with all other present and future unsecured Debt (actual or
contingent) of such Subsidiary Guarantor which is not expressed to be
subordinate or junior in rank to any other unsecured Debt of such
Subsidiary Guarantor.
Section 9.8 Books and Records. The Company will, and will cause each of
its Restricted Subsidiaries to, maintain proper books of record and account in
conformity with GAAP and all applicable requirements of any Governmental
Authority having legal or regulatory jurisdiction over the Company or such
Restricted Subsidiary, as the case may be.
Section 9.9 Line of Business. The Company and its Restricted Subsidiaries,
taken as a whole, will continue to engage in the business in which they are
engaged on the Closing Date as described in the Memorandum and business
reasonably related or complementary thereto or in the furtherance thereof,
except for lines of business which are insignificant when viewed in the overall
context of the business then engaged in by the Company and its Subsidiaries.
Section 9.10 Additional Subsidiary Guarantors. The Company will cause any
Subsidiary which becomes a co-obligor or guarantor in respect of Debt under the
Bank Credit Agreement to become a party to the Subsidiary Guaranty and deliver
to each of the holders of the Notes (concurrently with becoming a co-obligor or
guarantor in respect of Debt under the Bank Credit Agreement) the following
items:
(a) a supplement to the Subsidiary Guaranty in the form of Exhibit A
to the Subsidiary Guaranty (a "Supplement");
(b) a certificate signed by an authorized Responsible Officer making
representations and warranties to the effect of those contained in
Sections 5.4(c), 5.6 and 5.7, with respect to such Subsidiary and the
Subsidiary Guaranty, as applicable; and
(c) an opinion of counsel (who may be in-house counsel for the
Company) addressed to each of the holders of Notes satisfactory to the
Required Holders, to the
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effect that the Supplement entered into by such Person has been duly
authorized, executed and delivered and that the Subsidiary Guaranty
constitutes the legal, valid and binding contract and agreement of such
Person enforceable against such Person in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
fraudulent conveyance and similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.
Notwithstanding the foregoing, a non-U.S. Subsidiary that is an obligor under,
or a guarantor of, a non-U.S. dollar denominated sub-facility of the Bank Credit
Agreement shall not be deemed to be a co-obligor or guarantor in respect of Debt
under the Bank Credit Agreement if such Subsidiary shall have no obligations
under the Bank Credit Agreement for the repayment of any Debt outstanding
thereunder (whether upon default by any party to the Bank Credit Agreement or
otherwise) other than (i) Debt directly borrowed by such Subsidiary under such
sub-facility or (ii) Debt of any other non-U.S. Subsidiary which Subsidiary
shall also satisfy the conditions of this sentence.
SECTION 10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
Section 10.1 Maintenance of Consolidated Net Worth. The Company will not,
at any time, permit Consolidated Net Worth to be less than the sum of (a)
$250,000,000 plus (b) an amount equal to 35% of Consolidated Net Income for each
completed fiscal year of the Company beginning with the fiscal year ending July
2, 2005 (but only if Consolidated Net Income for such fiscal year is a positive
number).
Section 10.2 Consolidated Debt to Consolidated EBITDA Ratio. The Company
will not, at any time, permit the Consolidated Debt to Consolidated EBITDA Ratio
to exceed 3.50 to 1.00, provided, however, that the Consolidated Debt to
Consolidated EBITDA Ratio may exceed 3.50 to 1.00 with respect to a period or
periods not in excess of three years on a cumulative basis during the term of
the Notes as a direct result of the Company or any Restricted Subsidiary
creating, assuming, incurring, guaranteeing or otherwise becoming liable in
respect of Acquisition Debt so long as the Consolidated Debt to Consolidated
EBITDA Ratio shall not exceed 4.00 to 1.00 at any time.
Section 10.3 Limitation on Priority Debt. The Company will not, at any
time, permit the aggregate amount of all Priority Debt to exceed an amount equal
to 15% of Consolidated Total Capitalization, determined as of the end of the
then most recently ended fiscal quarter of the Company.
Section 10.4 Limitation on Liens. The Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly create,
incur, assume or permit to exist (upon the happening of a contingency or
otherwise) any Lien on or with respect to any property or asset (including,
without limitation, any document or instrument in respect of goods or accounts
receivable) of the Company or any such Restricted Subsidiary, whether now owned
or held or hereafter acquired, or any income or profits therefrom, or assign or
otherwise convey any right to
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receive income or profits (unless it makes, or causes to be made, effective
provision whereby the Notes will be equally and ratably secured with any and all
other obligations thereby secured, such security to be pursuant to an agreement
reasonably satisfactory to the Required Holders and, in any such case, the Notes
shall have the benefit, to the fullest extent that, and with such priority as,
the holders of the Notes may be entitled under applicable law, of an equitable
Lien on such property), except:
(a) Liens for taxes, assessments or other governmental charges that
are not yet due and payable or the payment of which is not at the time
required by Section 9.4;
(b) any attachment or judgment Lien, unless the judgment it secures
shall not, within 60 days after the entry thereof, have been discharged or
execution thereof stayed pending appeal, or shall not have been discharged
within 60 days after the expiration of any such stay;
(c) Liens incidental to the conduct of business or the ownership of
properties and assets (including landlords', carriers', warehousemen's,
mechanics', materialmen's and other similar Liens for sums not yet due and
payable) and Liens to secure the performance of bids, tenders, leases or
trade contracts or to secure statutory obligations (including obligations
under workers' compensation, unemployment insurance and other social
security legislation), surety or appeal bonds or other Liens incurred in
the ordinary course of business and not in connection with the borrowing
of money;
(d) leases or subleases granted to others, easements, rights-of-way,
restrictions and other similar charges or encumbrances, in each case
incidental to the ownership of property or assets or the ordinary conduct
of the business of the Company or any of its Restricted Subsidiaries, and
Liens incidental to minor survey exceptions and the like, provided that
such Liens do not, in the aggregate, materially detract from the value of
such property;
(e) Liens securing Debt of a Restricted Subsidiary to the Company or
to another Restricted Subsidiary;
(f) Liens existing on the Closing Date and reflected in Schedule
10.4;
(g) Liens incurred after the Closing Date given to secure the
payment of the purchase price incurred in connection with the acquisition,
construction or improvement of property (other than accounts receivable or
inventory) useful and intended to be used in carrying on the business of
the Company or a Restricted Subsidiary, including Liens existing on such
property at the time of acquisition or construction thereof or improvement
thereon, or Liens incurred within 365 days of such acquisition or
completion of such construction or improvement, provided that (1) the Lien
shall attach solely to the property acquired, purchased, constructed or
improved, (2) at the time of acquisition, construction or improvement of
such property (or, in the case of any Lien incurred within 365 days of
such acquisition or completion of such construction or improvement, at the
time of the incurrence of the Debt secured by such Lien), the
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aggregate amount remaining unpaid on all Debt secured by Liens on such
property, whether or not assumed by the Company or a Restricted
Subsidiary, shall not exceed the lesser of (i) the cost of such
acquisition, construction or improvement or (ii) the Fair Market Value at
such time of such property (as determined in good faith by one or more
officers of the Company to whom authority to enter into the transaction
has been delegated by the board of directors of the Company), (3) the
aggregate principal amount of all Debt secured by such Liens shall be
permitted by the limitations set forth in Section 10.2 and (4) at the time
of such incurrence and after giving effect thereto, no Default or Event of
Default would exist;
(h) any Lien existing on property of a Person immediately prior to
its being consolidated with or merged into the Company or a Restricted
Subsidiary or its becoming a Subsidiary, or any Lien existing on any
property acquired by the Company or any Restricted Subsidiary at the time
such property is so acquired (whether or not the Debt secured thereby
shall have been assumed), provided that (1) no such Lien shall have been
created or assumed in contemplation of such consolidation or merger or
such Person's becoming a Subsidiary or such acquisition of property, (2)
each such Lien shall extend solely to the item or items of property so
acquired and, if required by the terms of the instrument originally
creating such Lien, other property which is an improvement to or is
acquired for specific use in connection with such acquired property, (3)
the aggregate principal amount of all Debt secured by such Liens shall be
permitted by the limitations set forth in Section 10.2 and (4) at the time
of such incurrence and after giving effect thereto, no Default or Event of
Default would exist;
(i) any extensions, renewals or replacements of any Lien permitted
by the preceding paragraphs (f), (g) or (h) of this Section 10.4, provided
that (1) no additional property shall be encumbered by such Liens, (2) the
unpaid principal amount of the Debt or other obligations secured thereby
shall not be increased on or after the date of any extension, renewal or
replacement and (3) at such time and immediately after giving effect
thereto, no Default or Event of Default shall have occurred and be
continuing; and
(j) other Liens not otherwise permitted by paragraphs (a) through
(i), inclusive, of this Section 10.4 securing Debt, provided that (1) the
aggregate principal amount of all Debt secured by such Liens shall be
permitted by the limitations set forth in Sections 10.2 and 10.3 and (2)
at the time of such incurrence and after giving effect thereto, no Default
or Event of Default shall have occurred or be continuing.
Section 10.5 Merger and Consolidation. The Company will not, and will not
permit any of its Restricted Subsidiaries to, consolidate with or merge with any
other Person or convey, transfer or lease all or substantially all of its assets
in a single transaction or series of transactions to any Person; provided that:
(a) any Restricted Subsidiary may (1) consolidate with or merge
with, or convey, transfer or lease all or substantially all of its assets
in a single transaction or series of transactions to, (i) the Company or
another Restricted Subsidiary so long as in any merger or consolidation
involving the Company, the Company shall be the surviving
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or continuing corporation or (ii) any other Person so long as the
surviving or continuing entity is the Restricted Subsidiary or (2) convey,
transfer or lease all of its assets in compliance with the provisions of
Section 10.6; and
(b) the Company may consolidate or merge with, or convey, transfer
or lease all or substantially all of the assets of the Company in a single
transaction or series of transactions to, any Person so long as:
(1) the successor formed by such consolidation or the survivor
of such merger or the Person that acquires by conveyance, transfer
or lease all or substantially all of the assets of the Company as an
entirety, as the case may be (the "Successor Corporation"), shall be
a solvent entity organized and existing under the laws of the United
States of America, any State thereof or the District of Columbia;
(2) if the Company is not the Successor Corporation, (i) such
Successor Corporation shall have executed and delivered to each
holder of Notes its assumption of the due and punctual performance
and observance of each covenant and condition of this Agreement and
the Notes (pursuant to such agreements and instruments as shall be
in form and substance reasonably satisfactory to the Required
Holders), (ii) the Successor Corporation shall have caused to be
delivered to each holder of Notes an opinion of nationally
recognized independent counsel, to the effect that all agreements or
instruments effecting such assumption are enforceable in accordance
with their terms and comply with the terms hereof and (iii) each
Subsidiary Guarantor shall have reaffirmed in writing its
obligations under the Subsidiary Guaranty; and
(3) immediately after giving effect to such transaction no
Default or Event of Default would exist.
Section 10.6 Sales of Assets. The Company will not, and will not permit
any Restricted Subsidiary to, sell, lease or otherwise dispose of any
substantial part (as defined below) of the assets of the Company and its
Restricted Subsidiaries; provided, however, that the Company or any Restricted
Subsidiary may sell, lease or otherwise dispose of assets constituting a
substantial part of the assets of the Company and its Restricted Subsidiaries if
such assets are sold for Fair Market Value and, at such time and after giving
effect thereto, no Default or Event of Default shall have occurred and be
continuing and an amount equal to the net proceeds received from such sale,
lease or other disposition (but only with respect to that portion of such assets
that exceeds the definition of "substantial part" set forth below) shall be used
within 365 days of such sale, lease or disposition, in any combination:
(a) to acquire productive assets used or useful in carrying on the
business of the Company and its Restricted Subsidiaries and having a Fair
Market Value at least equal to the Fair Market Value of such assets sold,
leased or otherwise disposed of; and/or
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(b) to prepay or retire Senior Debt of the Company and/or its
Restricted Subsidiaries, provided that, to the extent any such proceeds
are used to prepay the outstanding principal amount of the Notes, such
prepayment shall be made in accordance with the terms of Section 8.2.
As used in this Section 10.6, a sale, lease or other disposition of assets
shall be deemed to be a "substantial part" of the assets of the Company and its
Restricted Subsidiaries if the book value of such assets, when added to the book
value of all other assets sold, leased or otherwise disposed of by the Company
and its Restricted Subsidiaries during the period of 12 consecutive months
ending on the date of such sale, lease or other disposition, exceeds 10% of the
book value of Consolidated Total Assets, determined as of the end of the fiscal
quarter immediately preceding such sale, lease or other disposition; provided
that there shall be excluded from any determination of a "substantial part" (1)
any sale, lease or other disposition of assets in the ordinary course of
business of the Company and its Restricted Subsidiaries, (2) any sale, lease or
other disposition of assets from the Company to any Restricted Subsidiary or
from any Restricted Subsidiary to the Company or another Restricted Subsidiary,
(3) any sale of property acquired or constructed by the Company or any
Restricted Subsidiary after the date of this Agreement to any Person within 365
days following the acquisition or completion of construction of such property by
the Company or any Restricted Subsidiary if the Company or a Restricted
Subsidiary shall concurrently with such sale, lease such property, as lessee and
(4) the sale of accounts receivable to a Securitization Subsidiary in connection
with a Receivables Securitization Transaction; provided that, to the extent any
such sale to a Securitization Subsidiary results in the aggregate amount of Debt
of Securitization Subsidiaries being in excess of $75,000,000, the Company shall
treat that portion of such sale resulting in the aggregate amount of Debt of
Securitization Subsidiaries being in excess of $75,000,000 as sale of assets
subject to this Section 10.6 without application of this clause (4).
Section 10.7 Transactions with Affiliates. The Company will not, and will
not permit any Restricted Subsidiary to, enter into directly or indirectly any
Material transaction or Material group of related transactions (including
without limitation the purchase, lease, sale or exchange of properties of any
kind or the rendering of any service) with any Affiliate (other than the Company
or another Restricted Subsidiary), except in the ordinary course and pursuant to
the reasonable requirements of the Company's or such Restricted Subsidiary's
business and upon fair and reasonable terms no less favorable to the Company or
such Restricted Subsidiary than would be obtainable in a comparable arm's-length
transaction with a Person not an Affiliate.
Section 10.8 Terrorism Sanctions Regulations. The Company will not, and
will not permit any of its Subsidiaries to, (a) become a Person described or
designated in the Specially Designated Nationals and Blocked Persons List of the
Office of Foreign Assets Control or in Section 1 of the Anti-Terrorism Order or,
(b) to the knowledge of the Company, after due inquiry, engage in any dealings
or transactions with any such Person.
SECTION 11. EVENTS OF DEFAULT.
An "Event of Default" shall exist if any of the following conditions or
events shall occur and be continuing:
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(a) the Company defaults in the payment of any principal, Prepayment
Premium or LIBOR Breakage Amount on any Note when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by
declaration or otherwise; or
(b) the Company defaults in the payment of any interest on any Note
for more than five Business Days after the same becomes due and payable;
or
(c) (1) the Company defaults in the performance of or compliance
with any term contained in Section 10 or (2) any Subsidiary Guarantor
defaults in the performance of or compliance with any term of the
Subsidiary Guaranty beyond any period of grace or cure period provided
with respect thereto; or
(d) the Company defaults in the performance of or compliance with
any term contained herein (other than those referred to in paragraphs (a),
(b) and (c) of this Section 11) and such default is not remedied within 30
days after the earlier of (1) a Responsible Officer obtaining actual
knowledge of such default or (2) the Company receiving written notice of
such default from any holder of a Note (any such written notice to be
identified as a "notice of default" and to refer specifically to this
paragraph (d) of Section 11); or
(e) the Subsidiary Guaranty ceases to be a legal, valid, binding and
enforceable obligation or contract of any Subsidiary Guarantor (other than
upon a release of such Subsidiary Guarantor from the Subsidiary Guaranty
in accordance with the terms of Section 2.2(b)), or any Subsidiary
Guarantor or any party by, through or on account of any such Subsidiary
Guarantor, challenges the validity, binding nature or enforceability of
the Subsidiary Guaranty; or
(f) any representation or warranty made in writing by or on behalf
of the Company or any Subsidiary Guarantor or by any officer of the
Company or any Subsidiary Guarantor in this Agreement, the Subsidiary
Guaranty or any writing furnished in connection with the transactions
contemplated hereby or by the Subsidiary Guaranty proves to have been
false or incorrect in any material respect on the date as of which made;
or
(g) (1) the Company or any Restricted Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any principal
of or premium or make-whole amount or interest (in the payment amount of
at least $100,000) on any Debt other than the Notes that is outstanding in
an aggregate principal amount of at least $10,000,000 beyond any period of
grace provided with respect thereto, (2) the Company or any Restricted
Subsidiary is in default in the performance of or compliance with any term
of any instrument, mortgage, indenture or other agreement relating to any
Debt other than the Notes in an aggregate principal amount of at least
$10,000,000 or any other condition exists, and as a consequence of such
default or condition such Debt has become, or has been declared, due and
payable or (3) as a consequence of the occurrence or continuation of any
event or condition (other than the passage of time or the right of
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the holder of Debt to convert such Debt into equity interests), the
Company or any Restricted Subsidiary has become obligated to purchase or
repay Debt other than the Notes before its regular maturity or before its
regularly scheduled dates of payment in an aggregate outstanding principal
amount of at least $10,000,000; or
(h) the Company, any Material Subsidiary or any Subsidiary Guarantor
(1) is generally not paying, or admits in writing its inability to pay,
its debts as they become due, (2) files, or consents by answer or
otherwise to the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy, insolvency,
reorganization, moratorium or other similar law of any jurisdiction, (3)
makes an assignment for the benefit of its creditors, (4) consents to the
appointment of a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial part
of its property, (5) is adjudicated as insolvent or to be liquidated or
(6) takes corporate action for the purpose of any of the foregoing; or
(i) a court or governmental authority of competent jurisdiction
enters an order appointing, without consent by the Company, any Material
Subsidiary or any Subsidiary Guarantor, a custodian, receiver, trustee or
other officer with similar powers with respect to it or with respect to
any substantial part of its property, or constituting an order for relief
or approving a petition for relief or reorganization or any other petition
in bankruptcy or for liquidation or to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or ordering the dissolution,
winding-up or liquidation of the Company, any of its Material Subsidiaries
or any Subsidiary Guarantor, or any such petition shall be filed against
the Company, any of its Material Subsidiaries or any Subsidiary Guarantor
and such petition shall not be dismissed within 60 days; or
(j) a final judgment or judgments at any one time outstanding for
the payment of money aggregating in excess of $10,000,000 are rendered
against one or more of the Company or its Restricted Subsidiaries and
which judgments are not, within 60 days after entry thereof, bonded,
discharged or stayed pending appeal, or are not discharged within 60 days
after the expiration of such stay; or
(k) if (1) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is sought
or granted under Section 412 of the Code, (2) a notice of intent to
terminate any Plan shall have been or is reasonably expected to be filed
with the PBGC or the PBGC shall have instituted proceedings under Section
4042 of ERISA to terminate or appoint a trustee to administer any Plan or
the PBGC shall have notified the Company or any ERISA Affiliate that a
Plan may become a subject of any such proceedings, (3) the aggregate
"amount of unfunded benefit liabilities" (within the meaning of Section
4001(a)(18) of ERISA) under all Plans, determined in accordance with Title
IV of ERISA, shall exceed $10,000,000, (4) the Company or any ERISA
Affiliate shall have incurred or is reasonably expected to incur any
liability pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, (5) the Company
or any ERISA Affiliate withdraws from any
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Multiemployer Plan, or (6) the Company or any Subsidiary establishes or
amends any employee welfare benefit plan that provides post-employment
welfare benefits in a manner that could increase the liability of the
Company or any Subsidiary thereunder; and any such event or events
described in clauses (1) through (6) above, either individually or
together with any other such event or events, would reasonably be expected
to have a Material Adverse Effect.
As used in Section 11(k), the terms "employee benefit plan" and "employee
welfare benefit plan" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.
SECTION 12. REMEDIES ON DEFAULT, ETC.
Section 12.1 Acceleration.
(a) If an Event of Default with respect to the Company described in
paragraph (h) or (i) of Section 11 (other than an Event of Default
described in clause (1) of paragraph (h) or described in clause (6) of
paragraph (h) by virtue of the fact that such clause encompasses clause
(1) of paragraph (h)) has occurred, all the Notes then outstanding shall
automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing,
the Required Holders may at any time at its or their option, by notice or
notices to the Company, declare all the Notes then outstanding to be
immediately due and payable.
(c) If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing with respect to any Notes, any
holder or holders of Notes at the time outstanding affected by such Event
of Default may at any time, at its or their option, by notice or notices
to the Company, declare all the Notes held by such holder or holders to be
immediately due and payable.
Upon any Notes becoming due and payable under this Section 12.1, whether
automatically or by declaration, such Notes will forthwith mature and the entire
unpaid principal amount of such Notes, plus (1) all accrued and unpaid interest
thereon (including, but not limited to, interest accrued thereon at the Default
Rate), (2) the Prepayment Premium, if any, determined in respect of such
principal amount (to the full extent permitted by applicable law) and (3) the
LIBOR Breakage Amount, if any, shall all be immediately due and payable, in each
and every case without presentment, demand, protest or further notice, all of
which are hereby waived. The Company acknowledges, and the parties hereto agree,
that each holder of a Note has the right to maintain its investment in the Notes
free from repayment by the Company (except as herein specifically provided for)
and that the provision for payment of the Prepayment Premium, if any, and the
LIBOR Breakage Amount, if any, by the Company in the event that the Notes are
prepaid or are accelerated as a result of an Event of Default, is intended to
provide compensation for the deprivation of such right under such circumstances.
Section 12.2 Other Remedies. If any Default or Event of Default has
occurred and is continuing, and irrespective of whether any Notes have become or
have been declared
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immediately due and payable under Section 12.1, the holder of any Note at the
time outstanding may proceed to protect and enforce the rights of such holder by
an action at law, suit in equity or other appropriate proceeding, whether for
the specific performance of any agreement contained herein or in any Note, or
for an injunction against a violation of any of the terms hereof or thereof, or
in aid of the exercise of any power granted hereby or thereby or by law or
otherwise.
Section 12.3 Rescission. At any time after any Notes have been declared
due and payable pursuant to paragraph (b) or (c) of Section 12.1, the Required
Holders, by written notice to the Company, may rescind and annul any such
declaration and its consequences if (a) the Company has paid all overdue
interest on the Notes, all principal of Prepayment Premium, if any, and LIBOR
Breakage Amount, if any, on any Notes that are due and payable and are unpaid
other than by reason of such declaration, and all interest on such overdue
principal, overdue Prepayment Premium, if any, overdue LIBOR Breakage Amount, if
any, and (to the extent permitted by applicable law) any overdue interest in
respect of the Notes, at the Default Rate, (b) neither the Company nor any other
Person shall have paid any amounts which have become due solely by reason of
such declaration, (c) all Events of Default and Defaults, other than non-payment
of amounts that have become due solely by reason of such declaration, have been
cured or have been waived pursuant to Section 17 and (d) no judgment or decree
has been entered for the payment of any monies due pursuant hereto or to the
Notes. No rescission and annulment under this Section 12.3 will extend to or
affect any subsequent Event of Default or Default or impair any right consequent
thereon.
Section 12.4 No Waivers or Election of Remedies, Expenses, Etc. No course
of dealing and no delay on the part of any holder of any Note in exercising any
right, power or remedy shall operate as a waiver thereof or otherwise prejudice
such holder's rights, powers or remedies. No right, power or remedy conferred by
this Agreement or by any Note upon any holder thereof shall be exclusive of any
other right, power or remedy referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise. Without limiting the
obligations of the Company under Section 15, the Company will pay to the holder
of each Note on demand such further amount as shall be sufficient to cover all
costs and expenses of such holder incurred in any enforcement or collection
under this Section 12, including, without limitation, reasonable attorneys'
fees, expenses and disbursements.
SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
Section 13.1 Registration of Notes. The Company shall keep at its
principal executive office a register for the registration and registration of
transfers of Notes. The name and address of each holder of one or more Notes,
each transfer thereof and the name and address of each transferee of one or more
Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes
hereof, and the Company shall not be affected by any notice or knowledge to the
contrary. The Company shall give to any holder of a Note that is an
Institutional Investor promptly upon request therefor, a complete and correct
copy of the names and addresses of all registered holders of Notes.
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Section 13.2 Transfer and Exchange of Notes. Upon surrender of any Note to
the Company at the address and to the attention of the designated officer (all
as specified in Section 18(3)), for registration of transfer or exchange (and in
the case of a surrender for registration of transfer accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
such holder's attorney duly authorized in writing and accompanied by the
relevant name, address and other information for notices of each transferee of
such Note or part thereof), within 10 Business Days thereafter, the Company
shall execute and deliver, at the Company's expense (except as provided below),
one or more new Notes (as requested by the holder thereof) in exchange therefor,
in an aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person as such
holder may request and shall be substantially in the form of Exhibit 1. Each
such new Note shall be dated and bear interest from the date to which interest
shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon. The Company may
require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than $100,000, provided that if necessary
to enable the registration of transfer by a holder of its entire holding of
Notes, one Note may be in a denomination of less than $100,000. Any transferee,
by its acceptance of a Note registered in its name (or the name of its nominee),
shall be deemed to have made the representation set forth in Section 6.3,
provided, that such holder may (in reliance upon information provided by the
Company, which shall not be unreasonably withheld) make a representation to the
effect that the purchase by any holder of any Note will not constitute a
non-exempt prohibited transaction under Section 406(a) of ERISA.
Section 13.3 Replacement of Notes. Upon receipt by the Company at the
address and to the attention of the designated officer (all as specified in
Section 18(3)) of evidence reasonably satisfactory to it of the ownership of and
the loss, theft, destruction or mutilation of any Note (which evidence shall be,
in the case of an Institutional Investor, notice from such Institutional
Investor of such ownership and such loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note
is, or is a nominee for, an original Purchaser or another holder of a Note
with a minimum net worth of at least $50,000,000 or a Qualified
Institutional Buyer, such Person's own unsecured agreement of indemnity
shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver not more than five
Business Days following satisfaction of such conditions, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
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SECTION 14. PAYMENTS ON NOTES.
Section 14.1 Place of Payment. Subject to Section 14.2, payments of
principal, Prepayment Premium, if any, LIBOR Breakage Amount, if any, and
interest becoming due and payable on the Notes shall be made in New York, New
York at the principal office of Banc of America Securities LLC in such
jurisdiction. The Company may at any time, by notice to each holder of a Note,
change the place of payment of the Notes so long as such place of payment shall
be either the principal office of the Company in such jurisdiction or the
principal office of a bank or trust company in such jurisdiction.
Section 14.2 Home Office Payment. So long as any Purchaser or its nominee
shall be the holder of any Note, and notwithstanding anything contained in
Section 14.1 or in such Note to the contrary, the Company will pay all sums
becoming due on such Note for principal, Prepayment Premium, if any, LIBOR
Breakage Amount, if any, and interest by the method and at the address specified
for such purpose for such Purchaser on Schedule A hereto, or by such other
method or at such other address as such Purchaser shall have from time to time
specified to the Company in writing for such purpose, without the presentation
or surrender of such Note or the making of any notation thereon, except that
upon written request of the Company made concurrently with or reasonably
promptly after payment or prepayment in full of any Note, such Purchaser shall
surrender such Note for cancellation, reasonably promptly after any such
request, to the Company at its principal executive office or at the place of
payment most recently designated by the Company pursuant to Section 14.1. Prior
to any sale or other disposition of any Note held by any Purchaser or its
nominee, such Purchaser will, at its election, either endorse thereon the amount
of principal paid thereon and the last date to which interest has been paid
thereon or surrender such Note to the Company in exchange for a new Note or
Notes pursuant to Section 13.2. The Company will afford the benefits of this
Section 14.2 to any Institutional Investor that is the direct or indirect
transferee of any Note.
SECTION 15. EXPENSES, ETC.
Section 15.1 Transaction Expenses. Whether or not the transactions
contemplated hereby are consummated, the Company will pay all costs and expenses
(including reasonable attorneys' fees of a special counsel and, if reasonably
required by the Required Holders, local or other counsel) incurred by each
Purchaser and each other holder of a Note in connection with such transactions
and in connection with any amendments, waivers or consents under or in respect
of this Agreement, the Subsidiary Guaranty or the Notes (whether or not such
amendment, waiver or consent becomes effective), including, without limitation:
(a) the costs and expenses incurred in enforcing or defending (or determining
whether or how to enforce or defend) any rights under this Agreement, the
Subsidiary Guaranty or the Notes or in responding to any subpoena or other legal
process or informal investigative demand issued in connection with this
Agreement, the Subsidiary Guaranty or the Notes, or by reason of being a holder
of any Note and (b) the costs and expenses, including financial advisors' fees,
incurred in connection with the insolvency or bankruptcy of the Company or any
Subsidiary or in connection with any work-out or restructuring of the
transactions contemplated hereby, by the Subsidiary Guaranty and by the Notes.
The Company will pay, and will save each Purchaser and each other holder of a
Note harmless from, all claims in respect of any fees, costs or expenses if any,
of brokers and
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finders (other than those, if any, retained by a Purchaser or other holder in
connection with its purchase of the Notes).
Section 15.2 Survival. The obligations of the Company under this Section
15 will survive the payment or transfer of any Note, the enforcement, amendment
or waiver of any provision of this Agreement, the Subsidiary Guaranty or the
Notes, and the termination of this Agreement.
SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by any Purchaser of any Note or portion thereof or interest therein and the
payment of any Note and may be relied upon by any subsequent holder of any Note,
regardless of any investigation made at any time by or on behalf of any
Purchaser or any other holder of any Note. All statements contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant to this Agreement shall be deemed representations and warranties of the
Company under this Agreement. Subject to the preceding sentence, this Agreement
and the Notes embody the entire agreement and understanding between the
Purchasers and the Company and supersede all prior agreements and understandings
relating to the subject matter hereof.
SECTION 17. AMENDMENT AND WAIVER.
Section 17.1 Requirements. This Agreement and the Notes may be amended,
and the observance of any term hereof or of the Notes may be waived (either
retroactively or prospectively), with (and only with) the written consent of the
Company and the Required Holders, except that (a) no amendment or waiver of any
of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term
(as it is used in any such Section), will be effective as to any holder of Notes
unless consented to by such holder of Notes in writing and (b) no such amendment
or waiver may, without the written consent of all of the holders of Notes at the
time outstanding affected thereby, (1) subject to the provisions of Section 12
relating to acceleration or rescission, change the amount or time of any
prepayment or payment of principal of, or reduce the rate or change the time of
payment or method of computation of interest (if such change results in a
decrease in the interest rate) or of Prepayment Premium, if any, or LIBOR
Breakage Amount, if any, on, the Notes, (2) change the percentage of the
principal amount of the Notes the holders of which are required to consent to
any such amendment or waiver or (3) amend any of Sections 8, 11(a), 11(b), 12,
17 or 20.
Section 17.2 Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is
required, to enable such holder to make an informed and considered
decision with respect to any proposed amendment, waiver or consent in
respect of any of the provisions hereof or of the Notes. The Company will
deliver executed or true and correct copies of each amendment, waiver or
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consent effected pursuant to the provisions of this Section 17 to each
holder of outstanding Notes promptly following the date on which it is
executed and delivered by, or receives the consent or approval of, the
requisite holders of Notes.
(b) Payment. The Company will not, directly or indirectly, pay or
cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, or grant any security or provide
other credit support, to any holder of Notes as consideration for or as an
inducement to the entering into by any holder of Notes of any waiver or
amendment of any of the terms and provisions hereof unless such
remuneration is concurrently paid, or security is concurrently granted or
other credit support is concurrently provided, on the same terms, ratably
to each holder of Notes then outstanding even if such holder did not
consent to such waiver or amendment.
Section 17.3 Binding Effect, Etc. Any amendment or waiver consented to as
provided in this Section 17 applies equally to all holders of Notes and is
binding upon them and upon each future holder of any Note and upon the Company
without regard to whether such Note has been marked to indicate such amendment
or waiver. No such amendment or waiver will extend to or affect any obligation,
covenant, agreement, Default or Event of Default not expressly amended or waived
or impair any right consequent thereon. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder of such
Note. As used herein, the term "this Agreement" and references thereto shall
mean this Agreement as it may from time to time be amended or supplemented.
Section 17.4 Notes Held by the Company, Etc. Solely for the purpose of
determining whether the holders of the requisite percentage of the aggregate
principal amount of Notes then outstanding approved or consented to any
amendment, waiver or consent to be given under this Agreement or the Notes, or
have directed the taking of any action provided herein or in the Notes to be
taken upon the direction of the holders of a specified percentage of the
aggregate principal amount of Notes then outstanding, Notes directly or
indirectly owned by the Company or any of its Affiliates shall be deemed not to
be outstanding.
SECTION 18. NOTICES.
All notices and communications provided for hereunder shall be in writing
and sent (a) by telecopy if the sender on the same day sends a confirming copy
of such notice by a recognized overnight delivery service (charges prepaid) or
(b) by a recognized overnight delivery service (charges prepaid). Any such
notice must be sent:
(1) if to any Purchaser or its nominee, to such Purchaser or
such nominee at the address specified for such communications in
Schedule A, or at such other address as such Purchaser or its
nominee shall have specified to the Company in writing pursuant to
this Section 18;
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(2) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in
writing pursuant to this Section 18; or
(3) if to the Company, to the Company at its address set forth
at the beginning hereof to the attention of Treasurer or at such
other address as the Company shall have specified to the holder of
each Note in writing.
Notices under this Section 18 will be deemed given only when actually received.
SECTION 19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating hereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by any Purchaser on the Closing Date (except
the Notes themselves) and (c) financial statements, certificates and other
information previously or hereafter furnished to any holder of Notes, may be
reproduced by such holder by any photographic, photostatic, electronic, digital
or other similar process and such holder may destroy any original document so
reproduced. The Company agrees and stipulates that, to the extent permitted by
applicable law, any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made by such
holder of Notes in the regular course of business) and any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible in evidence. This Section 19 shall not prohibit the Company or any
other holder of Notes from contesting any such reproduction to the same extent
that it could contest the original, or from introducing evidence to demonstrate
the inaccuracy of any such reproduction.
SECTION 20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "Confidential Information" means
information delivered to any Purchaser by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified when received by such
Purchaser as being confidential information of the Company or such Subsidiary,
provided that such term does not include information that (a) was publicly known
or otherwise known to such Purchaser prior to the time of such disclosure, (b)
subsequently becomes publicly known through no act or omission by such Purchaser
or any Person acting on such Purchaser's behalf, (c) otherwise becomes known to
such Purchaser other than through disclosure by the Company or any Subsidiary or
(d) constitutes financial statements delivered to such Purchaser under Section
7.1 that are otherwise publicly available. Each Purchaser will maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by such Purchaser in good faith to protect confidential information of
third parties delivered to such Purchaser, provided that such Purchaser may
deliver or disclose Confidential Information to (1) such Purchaser's directors,
trustees, officers, employees, agents, attorneys and affiliates (to the extent
such disclosure reasonably relates to the administration of the investment
represented by such Purchaser's Notes), (2) such Purchaser's financial advisors
and other professional
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advisors who agree to hold confidential the Confidential Information
substantially in accordance with the terms of this Section 20, (3) any other
holder of any Note, (4) any Institutional Investor to which such Purchaser sells
or offers to sell such Note or any part thereof or any participation therein (if
such Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 20), (5) any Person
from which such Purchaser offers to purchase any security of the Company (if
such Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 20), (6) any federal
or state regulatory authority having jurisdiction over such Purchaser, (7) the
NAIC or the SVO or, in each case, any similar organization or any nationally
recognized rating agency that requires access to information about such
Purchaser's investment portfolio or (8) any other Person to which such delivery
or disclosure may be necessary or appropriate (i) to effect compliance with any
law, rule, regulation or order applicable to such Purchaser) (ii) in response to
any subpoena or other legal process, (iii) in connection with any litigation to
which such Purchaser is a party or (iv) if an Event of Default has occurred and
is continuing, to the extent such Purchaser may reasonably determine such
delivery and disclosure to be necessary or appropriate in the enforcement or for
the protection of the rights and remedies under such Purchaser's Notes, the
Subsidiary Guaranty and this Agreement. Each holder of a Note, by its acceptance
of a Note, will be deemed to have agreed to be bound by and to be entitled to
the benefits of this Section 20 as though it were a party to this Agreement. On
reasonable request by the Company in connection with the delivery to any holder
of a Note of information required to be delivered to such holder under this
Agreement or requested by such holder (other than a holder that is a party to
this Agreement or its nominee), such holder will enter into an agreement with
the Company embodying the provisions of this Section 20.
SECTION 21. SUBSTITUTION OF PURCHASER.
Each Purchaser shall have the right to substitute any one of its
Affiliates as the purchaser of the Notes that such Purchaser has agreed to
purchase hereunder, by written notice to the Company, which notice shall be
signed by both such Purchaser and such Affiliate, shall contain such Affiliate's
agreement to be bound by this Agreement and shall contain a confirmation by such
Affiliate of the accuracy with respect to it of the representations set forth in
Section 6. Upon receipt of such notice, any reference to such Purchaser in this
Agreement (other than in this Section 21), shall be deemed to refer to such
Affiliate in lieu of such original Purchaser. In the event that such Affiliate
is so substituted as a Purchaser hereunder and such Affiliate thereafter
transfers to such original Purchaser all of the Notes then held by such
Affiliate, upon receipt by the Company of notice of such transfer, any reference
to such Affiliate as a "Purchaser" in this Agreement (other than in this Section
21), shall no longer be deemed to refer to such Affiliate, but shall refer to
such original Purchaser and such original Purchaser shall again have all the
rights of an original holder of the Notes under this Agreement.
SECTION 22. MISCELLANEOUS.
Section 22.1 Successors and Assigns. All covenants and other agreements
contained in this Agreement by or on behalf of any of the parties hereto bind
and inure to the benefit of their respective successors and assigns (including,
without limitation, any subsequent holder of a Note) whether so expressed or
not.
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Section 22.2 Payments Due on Non-Business Days. Anything in this Agreement
or the Notes to the contrary notwithstanding (but without limiting the
requirement in Section 8.4 that the notice of any optional prepayment specify a
Business Day as the date fixed for such prepayment), any payment of principal
of, Prepayment Premium, if any, or LIBOR Breakage Amount, if any, or interest on
any Note that is due on a date other than a Business Day shall be made on the
next succeeding Business Day without including the additional days elapsed in
the computation of the interest payable on such next succeeding Business Day;
provided that if the maturity date of any Note is a date other than a Business
Day, the payment otherwise due on such maturity date shall be made on the next
succeeding Business Day and shall include the additional days elapsed in the
computation of interest payable on such next succeeding Business Day.
Section 22.3 Accounting Terms. All accounting terms used herein which are
not expressly defined in this Agreement have the meanings respectively given to
them in accordance with GAAP. Except as otherwise specifically provided herein,
(a) all computations made pursuant to this Agreement shall be made in accordance
with GAAP and (b) all financial statements shall be prepared in accordance with
GAAP.
Section 22.4 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.
Section 22.5 Construction. Each covenant contained herein shall be
construed (absent express provision to the contrary) as being independent of
each other covenant contained herein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provision herein refers to action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.
For the avoidance of doubt, all Schedules and Exhibits attached to this
Agreement shall be deemed to be a part hereof.
Section 22.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument. Each counterpart may consist of a number of copies
hereof, each signed by less than all, but together signed by all, of the parties
hereto.
Section 22.7 Governing Law. This Agreement shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the law
of the State of New York excluding choice-of-law principles of the law of such
State that would permit the application of the laws of a jurisdiction other than
such State.
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Section 22.8 Jurisdiction and Process; Waiver of Jury Trial.
(a) The Company irrevocably submits to the non-exclusive
jurisdiction of any New York State or federal court sitting in the Borough
of Manhattan, The City of New York, over any suit, action or proceeding
arising out of or relating to this Agreement or the Notes. To the fullest
extent permitted by applicable law, the Company irrevocably waives and
agrees not to assert, by way of motion, as a defense or otherwise, any
claim that it is not subject to the jurisdiction of any such court, any
objection that it may now or hereafter have to the laying of the venue of
any such suit, action or proceeding brought in any such court and any
claim that any such suit, action or proceeding brought in any such court
has been brought in an inconvenient forum.
(b) The Company consents to process being served by or on behalf of
any holder of Notes in any suit, action or proceeding of the nature
referred to in Section 22.8(a) by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, return receipt requested, to it at its address specified in
Section 18 or at such other address of which such holder shall then have
been notified pursuant to said Section. The Company agrees that such
service upon receipt (1) shall be deemed in every respect effective
service of process upon it in any such suit, action or proceeding and (2)
shall, to the fullest extent permitted by applicable law, be taken and
held to be valid personal service upon and personal delivery to it.
Notices hereunder shall be conclusively presumed received as evidenced by
a delivery receipt furnished by the United States Postal Service or any
reputable commercial delivery service.
(c) Nothing in this Section 22.8 shall affect the right of any
holder of a Note to serve process in any manner permitted by law, or limit
any right that the holders of any of the Notes may have to bring
proceedings against the Company in the courts of any appropriate
jurisdiction or to enforce in any lawful manner a judgment obtained in one
jurisdiction in any other jurisdiction.
(d) THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY IN ANY ACTION
BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT, THE NOTES OR ANY OTHER
DOCUMENT EXECUTED IN CONNECTION HEREWITH OR THEREWITH.
* * * * *
-40-
The execution hereof by the Purchasers shall constitute a contract among
the Company and the Purchasers for the uses and purposes hereinabove set forth.
Very truly yours,
G&K SERVICES, INC.
By: ________________________________
Name:
Title:
-41-
Accepted as of the date first written above.
ALLSTATE LIFE INSURANCE COMPANY
By: _________________________________
Name:
By: _________________________________
Name:
Authorized Signatories
Signature Page to Note Purchase Agreement
MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By: BABSON CAPITAL MANAGEMENT LLC,
as Investment Adviser
By: ____________________________
Name:
Title:
C.M. LIFE INSURANCE COMPANY
as Investment Sub-Adviser
By: ___________________________
Name:
Title:
MASSMUTUAL ASIA LIMITED
as Investment Adviser
By: ___________________________
Name:
Title:
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
By: CIGNA INVESTMENTS, INC.
(authorized agent)
By: ___________________________
Name:
Title:
UNITED OF OMAHA LIFE INSURANCE COMPANY
By: _______________________________
Name:
Title:
PHOENIX LIFE INSURANCE COMPANY
By: _______________________________
Name:
Title:
GENERAL ELECTRIC CAPITAL ASSURANCE
COMPANY
By: _______________________________
Name:
Title:
PRINCIPAL AMOUNT
OF NOTES TO BE
NAME OF PURCHASER PURCHASED
ALLSTATE LIFE INSURANCE COMPANY $ 10,000,000
c/o Allstate Investments LLC $ 10,000,000
3075 Sanders Road, STE G5D $ 4,000,000
Northbrook, Illinois 60062-7127
Attention: Private Placements Department
Telephone Number: (847) 402-7117
Telecopier Number: (847) 402-3092
Payments
All payments on or in respect of the Notes to be made by federal transfer of
immediately available funds (identifying each payment with name of the Issuer,
the Private Placement Number and the payment as principal, interest or premium)
in the exact format as follows:
Bank: Citibank
ABA #: 021000089
Account Name: Allstate Life Insurance Company Collection Account - PP
Account #: 30547007
Reference: OBI 361268 B* 5, G&K Services, Inc., Floating Rate Senior
Notes due June 30, 2015
Payment Due Date (MM/DD/YY) and the type and amount of payment being made.
For example:
P____(Enter "P" and amount of principal being remitted,
for example, P5000000.00) -
I ____(Enter "I" and amount of interest being remitted,
for example, I225000.00)
Notices
All notices of scheduled payments and written confirmation of each such payment,
to be addressed:
Allstate Investments LLC
Investment Operations - Private Placements
3075 Sanders Road, STE G4A
Northbrook, IL 60062-7127
Telephone: (847) 402-6672 Private Placements
Telecopy: (847) 326-7032
E-Mail: PrivateIOD@allstate.com
SCHEDULE A
(to Note Purchase Agreement)
All financial reports, compliance certificates and all other written
communications, including notice of prepayments to be sent by e-mail
(PrivateCompliance@allstate.com) or hard copy to the address as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 36-2554642
A-2
PRINCIPAL AMOUNT
OF NOTES TO BE
MASSACHUSETTS MUTUAL LIFE $ 9,400,000
INSURANCE COMPANY
c/o Babson Capital Management LLC
1500 Main Street
Springfield, MA 01115
Attn: Securities Investment Division
Payments
All payments on account of the Notes shall be made by crediting in the form of
bank wire transfer of federal or other immediately available funds, (identifying
each payment as "G&K Services, Inc., Floating Rate Senior Notes due June 30,
2015, PPN 361268 B* 5, principal, premium or interest") to:
Citibank, N.A.
New York, NY
ABA No. 021000089
For MassMutual Unified Traditional
Acct. Name: MassMutual BA 0033 TRAD Private ELBX
Account No. 30566056
Re: Description of security, cusip, principal and interest split
With telephone advice of payment to the Securities Custody and Collection
Department of Babson Capital Management LLC at (413) 226-1803 or (413) 226-1889
Notices
Address for Notices Related to Payments:
Massachusetts Mutual Life Insurance Company
1500 Main Street, Suite 800
Attention: Securities Custody and Collection Department
Address for all other Notices to be addressed as first provided above.
A-3
PRINCIPAL AMOUNT
OF NOTES TO BE
INSURANCE COMPANY
1500 Main Street
Payments
Citibank, N.A.
New York, NY
ABA No. 021000089
For MassMutual Pension Management
Notices
A-4
PRINCIPAL AMOUNT
OF NOTES TO BE
INSURANCE COMPANY
1500 Main Street
Payments
Citibank, N.A.
New York, NY
ABA No. 021000089
For MassMutual IFM Non-Traditional
Notices
A-5
PRINCIPAL AMOUNT
OF NOTES TO BE
C.M. LIFE INSURANCE COMPANY $ 1,900,000
1500 Main Street
Payments
Citibank, N.A.
New York, NY
ABA No. 021000089
For CM Life Segment 43 - Universal Life
Notices
C.M. Life Insurance Company
A-6
PRINCIPAL AMOUNT
OF NOTES TO BE
MASSMUTUAL ASIA LIMITED $ 1,000,000
1500 Main Street
Payments
Gerlach & Co.
c/o Citibank, N.A.
ABA No. 021000089
Concentration Account 36112805
Attn: Judy Rock
Re: MassMutual Asia
Notices
MassMutual Asia Limited
Address for Notices Related to Corporate Action:
Citigroup Global Securities Services
Attn: Corporate Action Dept.
3800 Citibank Center Tampa
Building B Floor 3
Tampa, FL 33610-9122
A-7
Name of Nominee in which Notes are to be issued: Gerlach & Co.
Taxpayer I.D. Number:
A-8
PRINCIPAL AMOUNT
OF NOTES TO BE
CONNECTICUT GENERAL LIFE INSURANCE $5,000,000
COMPANY $3,400,000
c/o CIGNA Investments, Inc. $2,600,000
280 Trumbull Street $1,000,000
Hartford, Connecticut 06103 $1,000,000
Fax: (860) 727-8024 $1,000,000
Attention: Fixed Income Securities, H16B
Payments
All payments on or in respect of the Notes to be by Federal Funds Wire Transfer
to:
J.P. Morgan Chase Bank
BNF=CIGNA Private Placements/AC=9009001802
ABA #021000021
OBI= G&K Services, Inc., Floating Rate Senior Notes due June 30, 2015
PPN 361268 B* 5;
Address for all notices to be addressed as first provided above with a copy of
notices related to payments to:
J.P. Morgan Chase Bank
14201 Dallas Parkway, 13th Floor
Dallas, TX 75254
Attention: Heather Frisina, Mail Code 300-116
Fax: (469) 477-1904
Name of Nominee in which Notes are to be issued: CIG & Co.
Taxpayer I.D. Number for CIG & Co.: 13-3574027
A-9
PRINCIPAL AMOUNT
OF NOTES TO BE
UNITED OF OMAHA LIFE INSURANCE COMPANY $ 8,000,000
Mutual of Omaha Plaza
Omaha, Nebraska 68175-1011
Attention: 4-Investment Loan Administration
Payments
All principal and interest payments on the Notes shall be made by wire transfer
of immediately available funds to:
JPMorgan Chase Bank
ABA #021000021
Private Income Processing
For credit to:
United of Omaha Insurance Company
Account #900-9000200
a/c: G07097
Cusip/PPN: 361268 B* 5
Interest Amount: _____________________________________
Principal Amount: ____________________________________
Notices
All notices of payments, on or in respect of the Notes and written confirmation
of each such payment, corporate actions and reorganization notifications to:
JPMorgan Chase Bank
14201 Dallas Parkway - 13th Floor
Dallas, TX 75254-2917
Attn: Income Processing - G. Ruiz
a/c: G07097
All other notices and communications (i.e., quarterly/annual reports, tax
filings, modifications, waivers regarding the indenture) to be addressed as
first provided above.
A-10
PRINCIPAL AMOUNT
OF NOTES TO BE
PHOENIX LIFE INSURANCE COMPANY $ 1,000,000
c/o Phoenix Investment Partners
Attn: Private Placement Department
56 Prospect Street
Hartford, CT 06115
Payments
JPMorgan Chase Bank, N.A.
New York, NY
ABA #021 000 021
Account #: 900 9000 200
Account Name: Income Processing
Reference: G05915, Phoenix Life Ins., PPN = (361268 B* 5), OBI =
(G&K Services, Inc.), Floating Rate due June 2015 INCLUDE company name,
principal and interest breakdown and premium, if any.
Notices
All communications shall be delivered or mailed as first provided above with a
copy of all legal notices to:
Phoenix Life Insurance Company
Attn: John Mulrain
One American Row
P.O. Box 5056
Hartford, CT 06102-5056
A-11
PRINCIPAL AMOUNT
OF NOTES TO BE
56 Prospect Street
Hartford, CT 06115
Payments
New York, NY
ABA #021 000 021
Account #: 900 9000 200
Reference: G06476, Phoenix Life Ins., PPN = (361268 B* 5), OBI =
(G&K Services, Inc.), Floating Rate due June 2015 INCLUDE company name,
Notices
Attn: John Mulrain
One American Row
P.O. Box 5056
A-12
PRINCIPAL AMOUNT
OF NOTES TO BE
56 Prospect Street
Hartford, CT 06115
Payments
New York, NY
ABA #021 000 021
Account #: 900 9000 200
Reference: G05134, Phoenix Life Ins., PPN = (361268 B* 5), OBI = (G&K
Services, Inc.), Floating Rate due June 2015 INCLUDE company name,
Notices
Attn: John Mulrain
One American Row
P.O. Box 5056
A-13
PRINCIPAL AMOUNT
OF NOTES TO BE
56 Prospect Street
Hartford, CT 06115
Payments
New York, NY
ABA #021 000 021
Account #: 900 9000 200
Reference: G05515, Phoenix Life Ins., PPN = (361268 B* 5), OBI = (G&K
Services, Inc.), Floating Rate due June 2015 INCLUDE company name,
Notices
Attn: John Mulrain
One American Row
P.O. Box 5056
A-14
PRINCIPAL AMOUNT
OF NOTES TO BE
GENERAL ELECTRIC CAPITAL ASSURANCE $ 5,000,000
COMPANY
c/o Genworth Financial
Account: General Electric Capital Assurance Company
601 Union Street, Suite 2200
Seattle, Washington 98101
Attn: Private Placements
Telephone: (206) 516-4515
Fax No.: (206) 516-4578
E-mail: GNW.privateplacements@genworth.com
Payments
The Bank of New York
ABA #021000018
Account Number/Beneficiary: GLA111566
SWIFT Code: IRVTUS3N
ATTN: PP P&I DEPARTMENT
Bank to Bank Information: General Electric Capital Assurance Company,
Account #127459, CUSIP/PPN & Security Description, and Identify Principal
& Interest Amounts
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, including interest payments,
redemptions, premiums, make wholes, and fees should be addressed as above with
additional copies addressed to:
State Street
Account: General Electric Capital Assurance Company
801 Pennsylvania
Kansas City, MO 64105
Attn: Tammy Karn
Telephone No: (816) 871-9286
Fax No: (816) 691-5593
and
A-15
Hare & Co.
The Bank of New York
Income Collection Department
P.O. Box 11203
New York, NY 10286
Attn: PP P&I Department
Ref: General Electric Capital Assurance Company, Account #127459,
CUSIP/PPN and Security Description
P&I Contact: Anthony Largo - (718) 315-3022
If available, an electronic copy is additionally requested.
Please send to: geam.statestreetkc.com (preferred delivery method)
Name of Nominee in which Notes are to be issued: HARE & CO.
A-16
DEFINED TERMS
As used herein, the following terms have the respective meanings set forth
below or set forth in the Section hereof following such term:
"Adjusted LIBOR Rate" for each Interest Period shall mean a rate per annum
equal to LIBOR for such Interest Period plus 0.60%.
"Affiliate" shall mean, at any time, and with respect to any Person, any
other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, and, with respect to the Company, shall include any Person
beneficially owning or holding, directly or indirectly, 10% or more of any class
of voting or equity interests of the Company or any Subsidiary or any Person of
which the Company and its Subsidiaries beneficially own or hold, in the
aggregate, directly or indirectly, 10% or more of any class of voting or equity
interests. As used in this definition, "Control" shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise. Unless the context otherwise clearly
requires, any reference to an "Affiliate" is a reference to an Affiliate of the
Company.
"Agreement" is defined in the first paragraph of this Agreement.
"Acquisition Debt" shall mean Debt incurred in connection with the
acquisition by the Company or any Restricted Subsidiary of any Person or line of
business (in compliance with Section 9.9).
"Anti-Terrorism Order" shall mean Executive Order No. 13,224 of September
24, 2001, Blocking Property and Prohibiting Transactions with Persons Who
Commit, Threaten to Commit or Support Terrorism, 66 U.S. Fed. Reg. 49, 079
(2001), as amended.
"Bank Credit Agreement" shall mean the Credit Agreement dated as of June
25, 2002 by and among the Company, G&K Services, Canada Inc., certain domestic
Subsidiaries of the Company named therein, the financial institutions party
thereto, as lenders, Wachovia Bank, National Association, as syndication agent,
and Bank One, NA (Main Office Chicago), as administrative agent, as amended to
the date hereof and as further amended, restated, joined, supplemented or
otherwise modified from time to time, and any renewals, extensions or
replacements thereof, which constitute the primary bank credit facility of the
Company and its Subsidiaries.
"Bank Lenders" shall mean the banks and financial institutions party to
the Bank Credit Agreement.
"Business Day" shall mean (a) for purposes of determining the Adjusted
LIBOR Rate only, any day other than a Saturday, a Sunday or a day on which
dealings in U.S. Dollars are not carried on in the London interbank market and
(b) for all other purposes of this Agreement, any
SCHEDULE B
day other than a Saturday, a Sunday or a day on which commercial banks in
Minneapolis, Minnesota or New York, New York are required or authorized to be
closed.
"Capital Lease" shall mean, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"Capital Lease Obligation" shall mean, with respect to any Person and a
Capital Lease, the amount of the obligation of such Person as the lessee under
such Capital Lease which would, in accordance with GAAP, appear as a liability
on a balance sheet of such Person.
"Change of Control" is defined in Section 8.6(b).
"Closing Date" is defined in Section 3.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and the rules and regulations promulgated thereunder from time to time.
"Company" is defined in the first paragraph of this Agreement and includes
any successor that becomes such in the manner prescribed in Section 10.5.
"Confidential Information" is defined in Section 20.
"Consolidated Debt" shall mean, as of any date of determination, the total
amount of all Debt of the Company and its Restricted Subsidiaries, determined on
a consolidated basis in accordance with GAAP.
"Consolidated Debt to Consolidated EBITDA Ratio" shall mean, at any date,
the ratio of (a) Consolidated Debt as at such date to (b) Consolidated EBITDA
for the period of four consecutive fiscal quarters then most recently ended
determined on a pro forma basis (i.e., giving effect to acquisitions and
dispositions during such four-quarter period as of the beginning of such
period).
"Consolidated EBITDA" shall mean, for any period, Consolidated Net Income
for such period, plus, to the extent deducted in computing such Consolidated Net
Income and without duplication, (a) depreciation, depletion, if any, and
amortization expense for such period, (b) Consolidated Interest Expense for such
period, (c) income tax expense for such period and (d) other non-cash charges
for such period, all as determined in accordance with GAAP.
"Consolidated Interest Expense" shall mean, for any period, the gross
interest expense of the Company and its Restricted Subsidiaries deducted in the
calculation of Consolidated Net Income for such period, determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" shall mean, for any period, the consolidated net
income (or loss) of the Company and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP.
B-2
"Consolidated Net Worth" shall mean, as of any date of determination, on a
consolidated basis for the Company and its Restricted Subsidiaries, (a) the sum
of (1) capital stock taken at par or stated value plus (2) capital in excess of
par or stated value relating to capital stock plus (3) retained earnings (or
minus any retained earning deficit) minus (b) the sum of treasury stock, capital
stock subscribed for and unissued and other contra-equity accounts, all
determined in accordance with GAAP.
"Consolidated Total Assets" shall mean, as of any date of determination,
the total amount of all assets of the Company and its Restricted Subsidiaries,
determined on a consolidated basis in accordance with GAAP.
"Consolidated Total Capitalization" shall mean, at any time, the sum of
(a) Consolidated Net Worth and (b) Consolidated Debt.
"Control Prepayment Date" is defined in Section 8.6(a).
"Control Response Date" is defined in Section 8.6(a).
"Debt" shall mean, with respect to any Person, without duplication:
(a) its liabilities for borrowed money;
(b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable and other accrued
liabilities arising in the ordinary course of business but including,
without limitation, all liabilities created or arising under any
conditional sale or other title retention agreement with respect to any
such property);
(c) its Capital Lease Obligations;
(d) its liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has
assumed or otherwise become liable for such liabilities); and
(e) Guarantees by such Person with respect to liabilities of a type
described in any of clauses (a) through (d) hereof.
Debt of any Person shall include all obligations of such Person of the
character described in clauses (a) through (e) to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.
"Default" shall mean an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.
"Default Rate" as of any date shall mean that rate of interest that is
2.00% per annum above the then applicable Adjusted LIBOR Rate.
"Disclosure Documents" is defined in Section 5.3.
B-3
"Environmental Laws" shall mean any and all federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under Section 414 of the Code.
"Event of Default" is defined in Section 11.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fair Market Value" shall mean, at any time and with respect to any
property, the sale value of such property that would be realized in an
arm's-length sale at such time between an informed and willing buyer and an
informed and willing seller (neither being under a compulsion to buy or sell),
as reasonably determined in the good faith opinion of the Company's board of
directors.
"GAAP" shall mean those generally accepted accounting principles as in
effect from time to time in the United States of America.
"Governmental Authority" shall mean
(a) the government of
(1) the United States of America or any state or other
political subdivision thereof, or
(2) any jurisdiction in which the Company or any Restricted
Subsidiary conducts all or any part of its business, or which has
jurisdiction over any properties of the Company or any Restricted
Subsidiary, or
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
"Guaranty" shall mean, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Debt, dividend or other obligation of any other Person in any manner, whether
directly or indirectly, including, without limitation, obligations incurred
through an agreement, contingent or otherwise, by such Person:
B-4
(a) to purchase such Debt or obligation or any property constituting
security therefor primarily for the purpose of assuring the owner of such
Debt or obligation of the ability of any other Person to make payment of
the Debt or obligation;
(b) to advance or supply funds (1) for the purchase or payment of
such Debt or obligation or (2) to maintain any working capital or other
balance sheet condition or any income statement condition of any other
Person or otherwise to advance or make available funds for the purchase or
payment of such Debt or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such Debt or obligation
of the ability of any other Person to make payment of the Debt or
obligation; or
(d) otherwise to assure the owner of such Debt or obligation against
loss in respect thereof.
In any computation of the Debt or other liabilities of the obligor under
any Guaranty, the Debt or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor, provided
that the amount of such Debt outstanding for purposes of this Agreement shall
not exceed the maximum amount of Debt that is the subject of such Guaranty.
"Hazardous Material" shall mean any and all pollutants, toxic or hazardous
wastes or other substances that might pose a hazard to health and safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law including,
but not limited to, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls, petroleum, petroleum products, lead based paint, radon gas or similar
restricted, prohibited or penalized substances.
"holder" shall mean, with respect to any Note, the Person in whose name
such Note is registered in the register maintained by the Company pursuant to
Section 13.1.
"INHAM Exemption" is defined in Section 6.3(e).
"Institutional Investor" shall mean (a) any Purchaser of a Note, (b) any
holder of a Note holding (together with one or more of its affiliates) more than
$2,000,000 of the aggregate principal amount of the Notes then outstanding, (c)
any bank, trust company, savings and loan association or other financial
institution, any pension plan, any investment company, any insurance company,
any broker or dealer, or any other similar financial institution or entity,
regardless of legal form and (d) any Related Fund of any holder of any Note.
"Interest Payment Date" is defined in Section 1.2(a).
"Interest Period" shall mean each period commencing on the Closing Date
and continuing up to, but not including September 30, 2005 and thereafter,
commencing on an
B-5
Interest Payment Date and continuing, in each case, up to, but not including,
the next Interest Payment Date.
"LIBOR" shall mean, for any Interest Period, the rate per annum (rounded
upwards, if necessary, to the next higher one hundred-thousandth of a percentage
point) for deposits in U.S. Dollars for a 90-day period which appears on the
Bloomberg Financial Markets Service Page BBAM-1 (or if such page is not
available, the Reuters Screen LIBO Page) as of 11:00 a.m. (London, England time)
on the date two Business Days before the commencement of such Interest Period
(or three Business Days prior to the beginning of the first Interest Period).
"Reuters Screen LIBO Page" shall mean the display designated as the "LIBO" page
on the Reuters Monitory Money Rates Service (or such other page as may replace
the LIBO page on that service or such other service as may be nominated by the
British Bankers' Association as the information vendor for the purpose of
displaying British Banker's Association Interest Settlement Rates for U.S.
Dollar deposits).
"LIBOR Breakage Amount" is defined in Section 8.2(b).
"Lien" shall mean, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement (other than an operating
lease) or Capital Lease, upon or with respect to any property or asset of such
Person (including, in the case of stock, shareholder agreements, voting trust
agreements and all similar arrangements).
"Material" shall mean material in relation to the business, operations,
affairs, financial condition, assets or properties of the Company and its
Restricted Subsidiaries, taken as a whole.
"Material Adverse Effect" shall mean a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Restricted Subsidiaries, taken as a whole, (b) the ability of
the Company to perform its obligations under this Agreement and the Notes, (c)
the ability of any Subsidiary Guarantor to perform its obligations under the
Subsidiary Guaranty or (d) the validity or enforceability of this Agreement, the
Notes or the Subsidiary Guaranty.
"Material Subsidiary" shall mean, at any time, any Restricted Subsidiary
of the Company which, together with all other Restricted Subsidiaries of such
Restricted Subsidiary, accounts for more than (a) 5% of the consolidated total
assets of the Company and its Restricted Subsidiaries or (b) 5% of consolidated
gross revenue of the Company and its Restricted Subsidiaries.
"Memorandum" is defined in Section 5.3.
"Multiemployer Plan" shall mean any Plan that is a "multiemployer plan"
(as such term is defined in Section 4001(a)(3) of ERISA).
"NAIC" shall mean the National Association of Insurance Commissioners or
any successor thereto.
B-6
"NAIC Annual Statement" is defined in Section 6.3(a).
"Notes" is defined in Section 1.1.
"Officer's Certificate" shall mean a certificate of a Senior Financial
Officer or of any other officer of the Company or a Subsidiary Guarantor whose
responsibilities extend to the subject matter of such certificate.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"Person" shall mean an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, business
entity or Governmental Authority.
"Plan" shall mean an "employee benefit plan" (as defined in Section 3(3)
of ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
"Prepayment Premium" shall mean, in connection with any optional
prepayment of the Notes pursuant to Section 8.2 or acceleration of such Notes
pursuant to Section 12.1, an amount equal to the applicable percentage of the
principal amount of such Notes so prepaid or accelerated set forth opposite the
respective period below:
IF PREPAID DURING THE PERIOD APPLICABLE PERCENTAGE
From the Closing Date through the first 2%
anniversary of the Closing Date
After the first anniversary of the Closing Date 1%
through the second anniversary of the Closing
Date
After the second annual anniversary of the 0%
Closing Date
"Priority Debt" shall mean (without duplication), as of the date of any
determination thereof, the sum of (a) all unsecured Debt of Restricted
Subsidiaries (including all Guaranties of Debt of the Company but excluding (1)
unsecured Debt owing to the Company or any other Restricted Subsidiary, (2) Debt
outstanding at the time such Person became a Restricted Subsidiary (other than
an Unrestricted Subsidiary which is designated or redesignated as a Restricted
Subsidiary pursuant to Section 9.6), provided that such Debt shall have not been
incurred in contemplation of such Person becoming a Restricted Subsidiary and
(3) all Guaranties of Debt of the Company by any Restricted Subsidiary which has
also guaranteed the Notes and (b) all Debt of the Company and its Restricted
Subsidiaries secured by Liens other than Debt secured by Liens permitted by
subparagraphs (a) through (i), inclusive, of Section 10.4.
B-7
"property" or "properties" shall mean, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible, choate
or inchoate.
"PTE" is defined in Section 6.3(a).
"Purchasers" is defined in the first paragraph of this Agreement.
"QPAM Exemption" is defined in Section 6.3(d).
"Qualified Institutional Buyer" shall mean any Person who is a "qualified
institutional buyer" within the meaning of such term as set forth in Rule
144(a)(1) under the Securities Act.
"Receivables Securitization Transaction" shall mean any transaction
pursuant to which the Company or any Restricted Subsidiary sells accounts
receivable to a Securitization Subsidiary and such Securitization Subsidiary
incurs Debt in connection with the purchase of such accounts receivable and
grants a security interest in such accounts receivable as collateral security
for such Debt; provided that such Debt is non-recourse to the Company and the
other Restricted Subsidiaries other than with respect to representations,
warranties and indemnities entered into by the Company or the applicable
Restricted Subsidiary in connection with such transaction that are customary in
non-recourse securitization of receivables transactions.
"Related Fund" shall mean, with respect to any holder of any Note, any
fund or entity that (a) invests in securities or bank loans and (b) is advised
or managed by such holder, the same investment advisor as such holder or by an
affiliate of such holder or such investment advisor.
"Required Holders" shall mean, at any time, the holders of more than 50%
in principal amount of the Notes at the time outstanding (exclusive of Notes
then owned by the Company or any of its Affiliates and any Notes held by parties
who are contractually required to abstain from voting with respect to matters
affecting the holders of the Notes).
"Responsible Officer" shall mean any Senior Financial Officer and any
other officer of the Company with responsibility for the administration of the
relevant portion of this Agreement.
"Restricted Subsidiary" shall mean (a) any Subsidiary that is a Subsidiary
Guarantor and (b) any other Subsidiary in which (1) at least a majority of the
voting securities are owned by the Company and/or one or more wholly-owned
Restricted Subsidiaries and (2) the Company has not designated as an
Unrestricted Subsidiary on the Closing Date or by notice in writing given to the
holders of Notes in accordance with the provisions of Section 9.6.
"SEC" shall mean the Securities and Exchange Commission of the United
States, or any successor thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time.
"Securitization Subsidiary" shall mean any Unrestricted Subsidiary that
(a) has been created for the sole purpose and business of purchasing and owning
the accounts receivable of the Company or any other Subsidiary, (b) has no Debt
outstanding other than Debt incurred in
B-8
connection with the purchase of such accounts receivable and (c) does not, and
by the terms of its organizational documents or contractual obligations to which
it or its property is then bound can not, own or hold any other assets or
participate in any other business or incur any other Debt.
"Senior Debt" shall mean, as of the date of any determination thereof, all
Consolidated Debt, other than Subordinated Debt.
"Senior Financial Officer" shall mean the chief financial officer,
principal accounting officer, treasurer or comptroller of the Company.
"Source" is defined in Section 6.3.
"Subordinated Debt" shall mean all unsecured Debt of the Company which
shall contain or have applicable thereto subordination provisions providing for
the subordination thereof to other Debt of the Company (including, without
limitation, the obligations of the Company under this Agreement or the Notes).
"Subsidiary" shall mean, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
"Subsidiary" is a reference to a Subsidiary of the Company.
"Subsidiary Guarantor" shall mean each Subsidiary which is party to the
Subsidiary Guaranty.
"Subsidiary Guaranty" is defined in Section 2.2 of this Agreement.
"Successor Corporation" is defined in Section 10.5(b)(1).
"Supplement" is defined in Section 9.10(a) of this Agreement.
"SVO" shall mean the Securities Valuation Office of the NAIC or any
successor thereto.
"Unrestricted Subsidiary" shall mean any Subsidiary so designated by the
Company on the Closing Date or by notice in writing given to the holders of
Notes in accordance with the provisions of Section 9.6.
"USA Patriot Act" shall mean United States Public Law 107-56, Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time in
effect.
B-9
"U.S. Dollars" shall mean lawful money of the United States of America.
"Voting Stock" shall mean, with respect to any Person, any shares of stock
or other equity interests of any class or classes of such Person whose holders
are entitled under ordinary circumstances (irrespective of whether at the time
stock or other equity interests of any other class or classes shall have or
might have voting power by reason of the happening of any contingency) to vote
for the election of a majority of the directors, managers, trustees or other
governing body of such Person.
B-10
DISCLOSURE MATERIALS
None.
SCHEDULE 5.3
SUBSIDIARIES OF THE COMPANY, OWNERSHIP OF SUBSIDIARY STOCK
AND AFFILIATES
JURISDICTION OF RESTRICTED/
SUBSIDIARY GUARANTOR INCORPORATION STOCKHOLDER UNRESTRICTED
------------------------------- --------- --------------- ------------------ ------------
DOMESTIC ENTITIES:
All Rental Garment Co. of Yes Illinois G&K Services, Inc. Restricted
Rockford, Inc.
Best Industrial Uniform Supply Yes Texas G&K Services, Co. Restricted
Company, Inc.
Brunson Laundry Rentals, Inc. No South Carolina G&K Services, Co. Restricted
Carlson Management, Inc. Yes Connecticut Mechanics Uniform Restricted
Service, Inc.
G&K Jackson Holdings, LLC No Minnesota G&K Services, Co. Restricted
G&K Services LUG, LLC Yes Minnesota G&K Services, Co. Restricted
G&K Receivables Corp. No Minnesota G&K Services, Co. Unrestricted
G&K Services, Co. Yes Minnesota G&K Services, Inc. Restricted
G&K Services Linen Co. No Minnesota G&K Services, Inc. Restricted
G&K TeamWear, Inc. No Minnesota G&K Services, Inc. Restricted
Gross Industrial Towel & No Minnesota G&K Services, Inc. Restricted
Garment Service, Inc.
Imperial Cleaners of Yes Pennsylvania G&K Services, Co. Restricted
Pennsylvania, Inc.
Industrial Towel Supply, Inc. Yes Maryland G&K Services, Co. Restricted
Jackson Industrial Uniform Yes Mississippi G&K Services, Co. Restricted
Service, Inc.
Mechanics Uniform Service, Inc. Yes Connecticut G&K Services, Co. Restricted
Mechanics Uniform Service, Yes Massachusetts Mechanics Uniform Restricted
Inc., of Mass Service, Inc.
Northwest Linen Co. No Minnesota G&K Services, Inc. Restricted
Rental Uniform Company, Inc. Yes Tennessee G&K Services, Co. Restricted
Rental Uniform Service of Yes Kentucky G&K Services, Co. Restricted
Somerset, Kentucky, Inc.
Rental Uniforms of Connecticut, Yes Connecticut G&K Services, Co. Restricted
Inc.
SCHEDULE 5.4
JURISDICTION OF RESTRICTED/
SUBSIDIARY GUARANTOR INCORPORATION STOCKHOLDER UNRESTRICTED
------------------------------ --------- --------------- -------------------- ------------
Uniform Rental Supply, Inc. Yes North Carolina G&K Services, Co. Restricted
CANADIAN ENTITIES
G&K Services Canada Inc. No Ontario G&K Services, Co. Restricted
912501 Ontario Inc. No Ontario G&K Services, Inc. Restricted
912489 Ontario Limited No Ontario G&K Services, Inc. Restricted
Les Services G&K (Quebec) Inc. No Quebec G&K Services Canada, Restricted
Inc.
3075964 Nova Scotia Company No Nova Scotia G&K Services, Co. Restricted
3075965 Nova Scotia Company No Nova Scotia 3075964 Nova Scotia Restricted
Company
G&K Limited Partnership No Nova Scotia 3075964 Nova Scotia Restricted
Company
Affiliates: None
The Company's directors are:
Richard M. Fink, Chairman of the Board
Michael G. Allen
Paul Baszucki
John S. Bronson
Wayne M. Fortun
Ernest J. Mrozek
M. Lenny Pippin
Alice M. Richter
The Company's senior officers are:
Richard L. Marcantonio, President & Chief Executive Officer
Richard J. Stutz, Senior Vice President, Operations & Sourcing
Jeffrey L. Wright, Senior Vice President & Chief Financial Officer
Sally J. Bredehoft, Senior Vice President, Human Resources
Peter B.S. Ellis, Senior Vice President, Marketing & Business Development
Damian J. Luna, Senor Vice President, Sales
David F. Fisher, Vice President, General Counsel & Corporate Secretary
Glenn L. Stolt, Vice President & Treasurer
5.4-2
FINANCIAL STATEMENTS
The consolidated financial statements of the Company and its Subsidiaries
for the fiscal years ended June 30, 2001, June 29, 2002, June 28, 2003, and July
3, 2004, and for the fiscal period ended April 2, 2005.
SCHEDULE 5.5
EXISTING DEBT; FUTURE LIENS
Financial Statement
Indebtedness as of 4/2/05 Off-Balance Sheet Amount Amount (US$)
------------------------- ------------------------ -------------------
Term Loan/Swingline $ 60,800,000
Revolver $ 75,000,000
Senior Notes $ 42,857,000
Other Debt $ 12,321,000
Letters of Credit $ 28,573,000
-------------------- -------------------
Total $ 28,573,000 $ 190,977,000
SCHEDULE 5.15
EXISTING LIENS
(As of 4/2/05) Lien Amount
------------------------------------------------ ----------------- --------
Limited License Agreement dated June 30, 2000, Computer software $316,976
by and among G&K Services, Inc., IBM Credit
Corporation and SAP America, Inc., as thereafter
supplemented and amended
SCHEDULE 10.4
FORM OF NOTE
G&K SERVICES, INC.
Floating Rate Senior Notes due June 30, 2015
No. R-_______ ___________, 20__
$____________ PPN 361268 B* 5
FOR VALUE RECEIVED, the undersigned, G&K SERVICES, INC. (herein called the
"Company"), a corporation organized and existing under the laws of the State of
Minnesota, hereby promises to pay to _____________________ or registered
assigns, the principal sum of ______________ DOLLARS (or so much thereof as
shall not have been prepaid) on June 30, 2015 with interest (computed on the
basis of a 360-day and actual days elapsed) (a) on the unpaid balance thereof at
a floating rate equal to Adjusted LIBOR Rate (as defined in the Note Purchase
Agreement referred to below) for the Interest Period (as defined in the Note
Purchase Agreement referred to below) in effect from time to time from the date
hereof until maturity, payable quarterly in arrears on the 30th day of each
March, June, September and December in each year commencing September 30, 2005,
until the principal hereof shall have become due and payable, and (b) on any
overdue principal, overdue Prepayment Premium (as defined in the Note Purchase
Agreement referred to below), overdue LIBOR Breakage Amount (as defined in the
Note Purchase Agreement referenced to below) and, to the extent permitted by
applicable law, overdue interest, payable quarterly as aforesaid (or, at the
option of the registered holder hereof, on demand) at a rate per annum from time
to time equal to the Default Rate (as defined in the Note Purchase Agreement
referred to below).
Payments of principal of, Prepayment Premium, if any, LIBOR Breakage
Amount, if any, and interest on this Note are to be made in lawful money of the
United States of America at the principal office of Banc of America Securities
LLC in New York, New York or at such other place as the Company shall have
designated by written notice to the holder of this Note as provided in the Note
Purchase Agreement referred to below.
This Note is one of a series of Senior Notes (herein called the "Notes")
issued pursuant to the Note Purchase Agreement dated as of June 15, 2005 (as
from time to time amended, supplemented or modified, the "Note Purchase
Agreement"), between the Company and the respective Purchasers named therein and
is entitled to the benefits thereof. Each holder of this Note will be deemed, by
its acceptance hereof, to have (i) agreed to the confidentiality provisions set
forth in Section 20 of the Note Purchase Agreement and (ii) made the
representations set forth in Section 6.3 of the Note Purchase Agreement,
provided, that such holder may (in reliance upon information provided by the
Company, which shall not be unreasonably withheld) make a representation to the
effect that the purchase by any holder of any Note will not constitute a
non-exempt prohibited transaction under Section 406(a) of ERISA. Unless
otherwise indicated, capitalized terms used in this Note shall have the
respective meanings ascribed to such terms in the Note Purchase Agreement.
EXHIBIT 1
This Note is a registered Note and, as provided in the Note Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
This Note is subject to optional prepayment, in whole or from time to time
in part, at the times and on the terms specified in the Note Purchase Agreement,
but not otherwise.
Pursuant to the Subsidiary Guaranty certain Subsidiaries of the Company
have absolutely and unconditionally guaranteed payment in full of the principal
of, Prepayment Premium, if any, LIBOR Breakage Amount, if any, and interest on
this Note and the performance by the Company of its obligations contained in the
Note Purchase Agreement all as more fully set forth in said Subsidiary Guaranty.
If an Event of Default occurs and is continuing, the principal of this
Note may be declared or otherwise become due and payable in the manner, at the
price (including the Prepayment Premium, if any, and the LIBOR Breakage Amount,
if any) and with the effect provided in the Note Purchase Agreement.
This Note shall be construed and enforced in accordance with, and the
rights of the issuer and holder hereof shall be governed by, the law of the
State of New York excluding choice-of-law principles of the law of such State
that would require the application of the laws of a jurisdiction other than such
State.
G&K SERVICES, INC.
By: _______________________________________
Name:
Title:
E-1-2
FORM OF SUBSIDIARY GUARANTY
EXHIBIT 2.2
FORM OF OPINION OF SPECIAL COUNSEL
TO THE COMPANY AND THE SUBSIDIARY GUARANTORS
The closing opinion of Maslon Edelman Borman & Brand, LLP, special counsel
for the Company and the Subsidiary Guarantors, which is called for by Section
4.4(a) of the Agreement, shall be dated the Closing Date and addressed to each
Purchaser, shall be satisfactory in scope and form to each Purchaser and shall
be to the effect that:
1. The Company is a corporation, duly incorporated, validly existing
and in good standing under the laws of the State of Minnesota, has the
corporate power and the corporate authority to execute and perform the
Agreement and to issue the Notes and has the full corporate power and the
corporate authority to conduct the activities in which it is now engaged
and is duly licensed or qualified and is in good standing as a foreign
corporation in each jurisdiction in which the character of the properties
owned or leased by it or the nature of the business transacted by it makes
such licensing or qualification necessary, other than those jurisdictions
as to which the failure to be so licensed, qualified or in good standing
would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
2. Each Restricted Subsidiary is a corporation or other business
entity duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization and is duly licensed or qualified
and is in good standing in each jurisdiction in which the character of the
properties owned or leased by it or the nature of the business transacted
by it makes such licensing or qualification necessary, other than those
jurisdictions as to which the failure to be so licensed, qualified or in
expected to have a Material Adverse Effect, and all of the issued and
outstanding shares of capital stock or other equity interests of each such
Restricted Subsidiary have been duly issued, are fully paid and
non-assessable on Schedule 5.4, and are owned by the Company, by
Subsidiaries, or by the Company and one or more Subsidiaries.
3. Each Subsidiary Guarantor has the corporate or other power and
authority to execute and perform the Subsidiary Guaranty and has the full
corporate or other power and authority to conduct the activities in which
it is now engaged.
4. The Agreement has been duly authorized by all necessary corporate
action on the part of the Company, has been duly executed and delivered by
the Company and constitutes the legal, valid and binding contract of the
Company enforceable in accordance with its terms.
5. The Notes have been duly authorized by all necessary corporate
action on the part of the Company, have been duly executed and delivered
by the Company and constitute the legal, valid and binding obligations of
the Company enforceable in accordance with their terms.
EXHIBIT 4.4(a)
6. The Subsidiary Guaranty has been duly authorized by all necessary
corporate or other action on the part of each Subsidiary Guarantor, has
been duly executed and delivered by each Subsidiary Guarantor and
constitutes the legal, valid and binding obligation of each Subsidiary
Guarantor enforceable in accordance with its terms.
7. No approval, consent or withholding of objection on the part of,
or filing, registration or qualification with, any Governmental Authority,
federal or state, is necessary in connection with the execution, delivery
or performance (a) by the Company of the Agreement or the Notes or (b) by
any Subsidiary Guarantor of the Subsidiary Guaranty.
8. The issuance and sale of the Notes and the execution, delivery
and performance by the Company of the Agreement do not conflict with any
law, rule or regulation of any Governmental Authority or conflict with or
result in any breach of any of the provisions of or constitute a default
under or result in the creation or imposition of any Lien upon any of the
property of the Company pursuant to the provisions of the Articles of
Incorporation or By-laws of the Company or any agreement or other
instrument known to such counsel to which the Company is a party or by
which the Company may be bound.
9. The execution, delivery and performance by each Subsidiary
Guarantor of the Subsidiary Guaranty do not conflict with any law, rule or
regulation of any Governmental Authority or conflict with or result in any
breach of any of the provisions of or constitute a default under or result
in the creation or imposition of any Lien upon any of the property of any
Subsidiary Guarantor pursuant to the provisions of the organizational
documents of such Subsidiary Guarantor or any agreement or other
instrument known to such counsel to which such Subsidiary Guarantor is a
party or by which the such Subsidiary Guarantor may be bound.
10. The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Agreement and the execution and delivery
of the Subsidiary Guaranty do not, under existing law, require the
registration of the Notes or the Subsidiary Guaranty under the Securities
Act or the qualification of an indenture under the Trust Indenture Act of
1939, as amended.
11. Neither the Company nor any Subsidiary Guarantor is an
"investment company" as such term is defined in the Investment Company Act
of 1940, as amended.
12. The issuance of the Notes and the use of the proceeds of the
sale of the Notes in accordance with the provisions of and contemplated by
the Agreement do not violate Regulation T, U or X of the Board of
Governors of the Federal Reserve System.
E-4.4(a)-2
The opinion of Maslon Edelman Borman & Brand, LLP shall cover such other
matters relating to the sale of the Notes as any Purchaser may reasonably
request and shall provide that (i) subsequent holders of the Notes may rely upon
such opinion and (ii) such opinion may be provided to Governmental Authorities
including, without limitation, the NAIC. With respect to matters of fact on
which such opinion is based, such counsel shall be entitled to rely on
appropriate certificates of public officials and officers of the Company.
E-4.4(a)-3
FORM OF OPINION OF SPECIAL COUNSEL
TO THE PURCHASERS
The closing opinion of Schiff Hardin LLP, special counsel to the
Purchasers, called for by Section 4.4(b) of the Agreement, shall be dated the
date of the Closing and addressed to the Purchasers, shall be satisfactory in
form and substance to the Purchasers and shall be to the effect that:
1. The Company is a corporation validly existing and in good
standing under the laws of the State of Minnesota.
2. The Company has the corporate power and authority to execute and
deliver the Agreement and the Notes being delivered on the date hereof,
and the execution and delivery hereof and thereof by the Company have been
duly authorized by all necessary corporate action on the part of the
Company.
3. The Agreement and the Notes being delivered on the date hereof
have been duly executed and delivered by the Company and constitute the
legal, valid and binding contracts of the Company, enforceable against the
Company in accordance with its terms.
4. The issuance, sale and delivery of the Notes being delivered on
the date hereof under the circumstances contemplated by this Agreement do
not, under existing law, require the registration of such Notes under the
Securities Act or the qualification of an indenture under the Trust
Indenture Act of 1939, as amended.
The opinion of Schiff Hardin LLP shall also state that the opinion of
Maslon Edelman Borman & Brand, LLP is satisfactory in scope and form to Schiff
Hardin LLP and that, in their opinion, the Purchasers are justified in relying
thereon.
In rendering the opinion set forth in paragraph 1 above, Schiff Hardin LLP
may rely, as to matters referred to in paragraph 1, solely upon an examination
of the Articles of Incorporation certified by, and a certificate of good
standing of the Company from, the Secretary of State of the State of Minnesota,
the By-laws of the Company and the general business corporation law of the State
of Minnesota. The opinion of Schiff Hardin LLP is limited to the laws of the
State of New York, the general business corporation law of the State of
Minnesota and the Federal laws of the United States.
With respect to matters of fact upon which such opinion is based, Schiff
Hardin LLP may rely on appropriate certificates of public officials and officers
of the Company and upon representations of the Company and the Purchasers
delivered in connection with the issuance and sale of the Notes.
EXHIBIT 4.4(b)
EXHIBIT 1
(to Supplement)
EXHIBIT 21
SUBSIDIARIES OF G&K SERVICES, INC.
G&K Services, Co. (incorporated in Minnesota, U.S.A.)
G&K Services Canada Inc. (incorporated in Ontario, Canada)
Les Services G&K (Quebec) Inc. (incorporated in Quebec, Canada)
EXHIBIT 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement Form
S-8 Nos. 033-63359, 333-64977, 333-66419, 333-73188, 333-101282 and 333-109892
of G&K Services, Inc. and in the related Prospectuses of our reports dated
September 7, 2005, with respect to the consolidated financial statements and
schedule of G&K Services, Inc.'s, management's assessment of the effectiveness
of internal control over financial reporting and the effectiveness of internal
control over financial reporting of G&K Services, Inc. included in this Form
10-K for the year ended July 2, 2005.
-----------------------
Ernst & Young LLP
September 14, 2005
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors of G&K
SERVICES, INC., a Minnesota corporation (the "Company"), hereby constitute and
appoint RICHARD L. MARCANTONIO and JEFFREY L. WRIGHT, and each or any of them,
his true and lawful attorneys-in-fact and agents, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute and
file the Annual Report of the Company and Form 10-K for the fiscal year ended
July 2, 2005, to be filed pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 including any amendment or amendments, with all exhibits
and any and all documents required to be filed with respect thereto with any
regulatory authority, granting unto said attorneys full power and authority to
do and perform each and every thing, requisite and necessary to be done in and
about the premises in order to execute the same as fully to all intents and
purposes as he, himself, might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents may lawfully
do or could cause to be done by virtue hereof.
IN WITNESS WHEREOF, G&K SERVICES, INC. has caused this Power of Attorney to be
executed in its name by its directors this 25th day of August 2005.
/s/ Richard M. Fink /s/ Wayne M. Fortun
---------------------------------- -----------------------------
Richard M. Fink Wayne M. Fortun
/s/ Richard L. Marcantonio /s/ Ernest J. Mrozek
---------------------------------- -----------------------------
Richard L. Marcantonio Ernest J. Mrozek
/s/ Michael G. Allen /s/ M. Lenny Pippin
---------------------------------- -----------------------------
Michael G. Allen M. Lenny Pippin
/s/ Paul Baszucki /s/ Alice M. Richter
---------------------------------- -----------------------------
Paul Baszucki Alice M. Richter
/s/ John S. Bronson /s/ J. Patrick Doyle
---------------------------------- -----------------------------
John S. Bronson J. Patrick Doyle
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECURITIES EXCHANGE ACT
RULE 13a-15(e)/15d-15(e) AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Richard L. Marcantonio, certify that:
1. I have reviewed this annual report on Form 10-K of G&K Services, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statement made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth quarter in the case of
an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: September 15, 2005
-----------------------------------------
Richard L. Marcantonio, President and
Chief Executive Officer
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECURITIES EXCHANGE ACT
RULE 13a-15(e)/15d-15(e) AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Jeffrey L. Wright, certify that:
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statement made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
information included in this report, fairly present in all material
the registrant as of, and for, the periods presented in this report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth quarter in the case of
an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.
---------------------------------------------
Jeffrey L. Wright, Senior Vice President and
Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS
ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Richard L. Marcantonio, certify that:
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
information included in this annual report, fairly present in all material
the registrant as of, and for, the periods presented in this annual
report.
----------------------------------------
Richard L. Marcantonio, President and
Chief Executive Officer
EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS
ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Jeffrey L. Wright, certify that:
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
information included in this annual report, fairly present in all material
the registrant as of, and for, the periods presented in this annual
report.
--------------------------------------------
Jeffrey L. Wright, Senior Vice President and
Chief Financial Officer
EXHIBIT 99.1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
G&K Services, Inc.
We have audited the consolidated financial statements of G&K Services, Inc. as
of July 2, 2005, and July 3, 2004, and for each of the three years in the period
ended July 2, 2005, and have issued our report thereon dated September 7, 2005
(included elsewhere in this Form 10-K). Our audits also included the financial
statement schedule listed in Item 15(a) of this Registration Statement. This
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
------------------------
Ernst & Young LLP
September 7, 2005
G&K SERVICES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
Additions
------------------------
Balance at Charged to Charged to
Beginning of Costs and Other Balance at
Description Year Expenses Accounts Deductions End of Year
------------------------------- ------------ ---------- ---------- ---------- -----------
Allowance for Doubtful Accounts
July 2, 2005 $ 2,603 $ 2,040 $ - $ 1,753 $ 2,890
============ ========== ========== ========== ===========
July 3, 2004 $ 3,687 $ 2,171 $ - $ 3,255 $ 2,603
============ ========== ========== ========== ===========
June 28, 2003 $ 3,326 $ 4,123 $ - $ 3,762 $ 3,687
============ ========== ========== ========== ===========
_______________________________________________
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G&K SERVICES INC - GKSR

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