EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit 10.1
THIS EXECUTIVE EMPLOYMENT AGREEMENT is made and entered into as of the 16th day of November,
2007, by and between G&K SERVICES, INC., a Minnesota corporation with its principal business office
in the State of Minnesota (“Employer,” as further defined in Section 1.10 below);
and Xxxxxxx X. Xxxxxxxxxxx, a resident of the State of Minnesota.
A. Employment. Employer has employed Executive (as defined below) in the capacity of
its Chairman of its Board of Directors and its Chief Executive Officer under that Executive
Employment Agreement dated December 21, 2006, which amended and superseded the Executive Employment
Agreement effective as of August 31, 2004, as amended by that First Amendment to Executive
Employment Agreement executed October 3, 2006, which superseded that Executive Employment Agreement
effective as of June 2002, and now wishes to enter into this Executive Employment Agreement.
Except as otherwise specifically set forth herein, this Agreement (as defined below) is intended to
fully supersede all previous agreements between Executive and Employer, including, without
limitation, the foregoing agreements and that Change of Control Agreement dated as of November 12,
2002. Executive is also subject to the same polices, terms and conditions as those described in
Employer’s employee handbook, its Code of Ethics, policies, and employee benefit plans (as modified
from time to time by Employer), except as otherwise specifically provided in this Agreement.
B. Code Section 409A. The changes in this Agreement, as compared with the Executive
Employment Agreement executed and delivered by Executive and Employer dated December 21, 2006, are
intended primarily to reduce the risk that any of the benefits to be provided to Executive under
this Agreement will cause adverse tax consequences to Executive under Section 409A of the Internal
Revenue Code of 1986, as amended from time to time or any successor legislation, as well as
Treasury Regulations and guidance issued thereunder (collectively, “Code Section 409A”).
The changes also provide Executive with additional benefits, including attorneys’ fees under
Section 9.2 and a tax gross-up for Code Section 409A, as described in Section 9.11.
C. Other Intentions. Executive wishes to accept Employer’s offer to continue as its
Chairman of the Board of Directors and Chief Executive Officer, and the additional benefits set
forth in this Agreement. Executive agrees to continue to be bound by the confidentiality and
restrictive covenants carried forward from the previous Executive Employment Agreement entered into
between the parties.
In consideration of the facts recited above, which are a part of this Agreement, and the
parties’ mutual undertakings in this Agreement, Employer and Executive agree to the following:
Capitalized terms used generally in this Agreement will be consistently defined throughout the
Agreement. The following terms will have the meanings set forth below, unless the context clearly
requires otherwise.
1.1 “Agreement” means this Agreement, as it may be amended from time to time.
1.2 “Base Salary” means the total annual cash compensation payable to Executive on a
regular periodic basis under this Agreement, other than under Employer’s annual management
incentive Plan (as defined below), without regard to any voluntary salary deferrals or reductions
to fund employee benefits.
1.3 “Board” means the Board of Directors of Employer.
1.4 “Cause” has the meaning set forth in Section 5.3.
1.5 “Change in Control” has the meaning set forth in Section 7.1(c).
1.6 “Confidential Information” has the meaning set forth in Section 8.1.
1.7 “Date of Termination” has the meaning set forth in Section 5.2(a).
1.8 “Disability” means the unwillingness or inability of Executive to perform the
essential functions of Executive’s position (with or without reasonable accommodation) under this
Agreement for a period of ninety (90) days (consecutive or otherwise) within any period of six (6)
consecutive months because of Executive’s incapacity due to physical or mental illness, bodily
injury or disease and, if Executive has not returned to the full-time performance of Executive’s
duties within thirty (30) days after a Notice of Termination is issued by Employer, Executive will
on such thirtieth (30th) day incur his Date of Termination; provided, however, that if
Executive (or Executive’s legal representative) does not agree with a determination of the
existence of a Disability (or the existence of a physical or mental illness or bodily injury or
disease), this determination will be subject to the certification of a qualified medical doctor
mutually agreed to by Employer and Executive. In the absence of agreement, each party will
nominate a qualified medical doctor and the two doctors will select a third doctor, who will make
the determination as to Disability. The decision of the designated physician will be binding upon
the parties.
1.9 “Effective Date” shall mean the date referred to in the first paragraph of
this Agreement.
1.10 “Employer” means all of the following, jointly and severally: (a) G&K Services,
Inc., (b) any Subsidiary of G&K Services, Inc. and (c) any Successor of G&K Services, Inc.
1.11 “Executive” means the individual named in the first paragraph of this Agreement.
1.12 “Good Reason,” with respect to Executive’s termination of employment, has the
meaning set forth in Section 5.4.
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1.13 “Notice of Termination” has the meaning set forth in Section 5.2(b).
1.14 “Plan” means any bonus or incentive compensation agreement, plan, program, policy
or arrangement sponsored, maintained or contributed to by Employer in which executive employees of
Employer generally are covered, including, without limitation, (a) any stock option or any other
equity-based compensation plan, and specifically the G&K Services, Inc. 2006 Equity Incentive Plan,
and any predecessor or successor plan thereto (hereinafter the “Equity Incentive Plan”) (b)
any annual or long-term incentive bonus plan; (c) any employee benefit plan, such as a thrift,
profit sharing, deferred compensation, medical, dental, disability income, accident, life
insurance, automobile allowance, perquisite, fringe benefit, vacation, sick or parental leave,
separation or relocation plan or policy and (d) any other agreement, plan, program, policy or
arrangement intended to benefit executive employees of Employer.
1.15 “Subsidiary” means any corporation or other business entity controlled by
Employer.
1.16 “Successor” means any corporation, individual, group, association, partnership,
limited liability company, firm, venture or other entity or person that, subsequent to the
Effective Date, succeeds to the actual or practical ability to control (either immediately or with
the passage of time) substantially all of Employer and/or Employer’s business and/or assets,
directly or indirectly, by merger, consolidation, recapitalization, purchase, liquidation,
redemption, assignment, similar corporate transaction, operation of law or otherwise.
2.1 Employment. Subject to the terms and conditions of this Agreement, Employer
hereby continues to employ Executive and Executive accepts such employment for an indefinite term.
Executive will continue to serve in the capacity of Employer’s Chairman of the Board of Directors
and its Chief Executive Officer reporting to Employer’s Board of Directors. Subject to the
respective rights of the parties under this Agreement, this Agreement and Executive’s employment
may be terminated by Employer at any time and for any reason, with or without cause. Executive’s
employment with Employer is and shall be at all times an employment at will.
2.2 Duties. While Executive is employed under this Agreement, and excluding any
periods of vacation, sick, disability, or other leave to which Executive is entitled or is
authorized to take, Executive agrees to devote substantially all of Executive’s attention and time
during normal business hours to the business and affairs of Employer and to use Executive’s
reasonable best efforts to perform faithfully and efficiently such responsibilities assigned to
Executive from time to time, in the capacity of Employer’s Chairman of the Board of Directors and
its Chief Executive Officer. Executive will comply with each of Employer’s policies and
procedures, including those described in Employer’s employee handbook, Code of Ethics, policies,
and employee benefit plans, as modified from time to time by Employer; provided, however, that to
the extent these policies and procedures are inconsistent with this Agreement, the provisions of
this Agreement will control.
2.3 Relationship of Parties. The relationship between Employer and Executive will be
that of employer and employee. Except as otherwise specifically provided in this Agreement,
nothing in this Agreement will be construed to give Executive any interest in the assets of
Employer. All of the
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records and files pertaining to Employer’s suppliers, licensors, licensees and customers, and
any Confidential Information, are specifically acknowledged to be the property of Employer and not
that of Executive.
3.1 Base Salary. Employer will continue to pay Executive a Base Salary at an annual
rate as approved from time to time by the Board or the Compensation Committee of the Board, but in
any event no less than the annual rate being paid Executive on the Effective Date. The Base Salary
is to be paid in substantially equal regular periodic payments in accordance with Employer’s
regular payroll practices. Executive’s Base Salary shall not be reduced in amount during the term
of this Agreement but otherwise may be increased at any time during Executive’s employment by
Employer, and the increased amount will become the Base Salary under this Agreement, subject to any
subsequent changes.
3.2 Other Compensation and Benefits. While Executive is employed by Employer under
this Agreement:
(a) Executive will be permitted to participate in all Plans for which Executive is or
becomes eligible under their respective terms.
(b) Employer may, in its sole discretion, amend or terminate any Plan that provides
benefits generally to its employees or its executive officers; provided, however, that in
the event Employer terminates its health, dental or life Plan offered to Executive, without
replacing the Plan, Executive, while employed, will be entitled to receive as additional
compensation an amount equal to Executive’s cost of replacing such terminated benefit with a
plan or policy that offers substantially the same benefit as determined by Employer.
(c) Executive shall be entitled to a target incentive opportunity under Employer’s
annual management incentive Plan in effect from time to time, including Executive’s target
incentive for fiscal year 2008 established by the Board in August 2007. Executive’s future
incentive pay may be increased and determined on an annual basis by the Board; provided,
however, that Executive’s target incentive shall not be reduced during the terms of the
Agreement, and provided further that any incentive pay established under this Agreement will
remain in effect until the Board has completed its next annual review of Executive’s
performance. Any incentive pay earned shall be paid no later than two and one-half (21/2)
months after the close of the later of Executive’s or Employer’s taxable year in which the
incentive pay was earned.
(d) [Reserved.]
(e) Executive will also be entitled to participate in or receive benefits under any
Plan made available by Employer in the future to its executives and key management
employees, subject to and on a basis consistent with the terms, conditions and overall
administration of the Plans and the preceding provisions of this Section 3.2.
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(f) Subject to any plan or program adopted by Employer after the date hereof, Executive
will have the use of a personal automobile leased by Employer under its Executive Automobile
Program with a value up to the greater of (i) Seventy-Five Thousand Dollars ($75,000.00),
(ii) the value set forth in Employer’s Executive Automobile Program, or (iii) such other
value as the Board or its Compensation Committee may determine for Executive.
(g) Executive will have available annual financial planning and tax preparation
benefits with a value up to the greater of (i) Five Thousand Dollars ($5,000.00), (ii) the
value set forth in Employer’s Plans for such services, or (iii) such other value as the
Board or its Compensation Committee may determine for Executive.
(h) Executive will be entitled to up to six (6) weeks of vacation annually in
accordance with Employer’s vacation pay policy, or such greater period of time as the Board
or its Compensation Committee may determine from time to time.
(i) Executive will be entitled to any other fringe benefit that the Compensation
Committee of the Board approves for Employer’s Chief Executive Officer, provided that to the
extent a fringe benefit is eliminated, Executive will be entitled to compensation equal to
the value of the eliminated benefit, as determined by Employer.
3.3 Limitation on Right to Deferred Compensation. The rights of Executive, or
Executive’s beneficiaries or estate, to any deferred compensation under this Agreement will be
solely those of an unsecured creditor of Employer. Nothing in this Agreement confers any right on
Executive, any of Executive’s beneficiaries, or Executive’s estate to receive, assign rights under,
or transfer any compensation, including any deferred compensation, other than as provided for under
the applicable Plan.
ARTICLE 4
[RESERVED.]
[RESERVED.]
Executive’s employment with Employer may be terminated at any time as of the applicable Date
of Termination as follows; provided, however, that those provisions contained in this Agreement
which by their terms are to remain enforceable after a Date of Termination shall remain enforceable
to the full extent necessary to give them effect:
5.1 Termination. Except as specifically provided otherwise in this Agreement, this
Agreement and Executive’s employment with Employer may be terminated by Employer upon thirty (30)
days advance written notice to Executive, or by Executive for any reason or no reason, or at any
time by mutual written agreement of the parties. During the period after notice is given, at
Employer’s request and sole discretion, Executive will continue to render Executive’s normal
service to Employer to the best of Executive’s ability, and Employer will continue to compensate
Executive through the Date of Termination as set forth in Section 6.2. In addition, this
Agreement and Executive’s employment under this Agreement will terminate in the event of
Executive’s death or Disability, as of the applicable Date of Termination.
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(a) For purposes of this Agreement, “Date of Termination” will mean: (i) if
Executive’s employment is terminated due to death, the date of Executive’s death; (ii) if
Executive’s employment is terminated for Disability, thirty (30) calendar days after the
Notice of Termination is provided; (iii) if Executive’s employment is terminated by Employer
for Cause, the date stated in the Notice of Termination; (iv) if Executive’s employment is
terminated by mutual agreement of the parties, the termination date provided for under the
agreement; (v) if Executive’s employment is terminated by Executive voluntarily, the
termination date provided to Employer by Executive in Executive’s Notice of Termination;
(vi) if Executive’s employment is terminated by Executive for Good Reason, in accordance
with the notice requirements of Section 5.4; (vii) if Executive’s employment is
terminated for any other reason, and subject to the terms of Section 5.1 above, the
date stated in the Notice of Termination, unless an earlier date has been expressly agreed
to by Executive in writing either before or after receiving the Notice of Termination.
(b) For purposes of this Agreement, a “Notice of Termination” will mean a
notice that indicates the date on which termination of Executive’s employment is effective.
Any termination by Employer or by Executive under this Agreement, other than Executive’s
death, or a termination by mutual agreement, will be communicated to the other party by
submission of a written Notice of Termination. If termination is by Employer for Cause or
by Executive for Good Reason, the Notice of Termination will set forth in reasonable detail
the facts and circumstances claimed to provide the basis for the termination, consistent
with the terms of this Agreement.
5.3 Termination by Employer for Cause. Employer may terminate Executive’s at will
employment at any time for Cause, with or without advance notice, except as otherwise provided in
this Section 5.3. For purposes of this Agreement, “Cause” means any of the
following, with respect to Executive’s position of employment with Employer:
(a) Executive’s failure or refusal to perform the duties and responsibilities set forth
in Section 2.2, if the failure or refusal (i) is not due to a Disability or a
physical or mental illness or bodily injury or disease; or (ii) is not due to Executive’s
reasonable best efforts to perform faithfully and efficiently the responsibilities of his
position with Employer, acting in good faith in the interests of Employer, its shareholders
and employees;
(b) Any drunkenness or use of drugs that interferes with the performance of Executive’s
obligations under this Agreement;
(c) Executive’s indictment for or conviction of (including entering a guilty plea or
plea of no contest to) a felony or of any crime involving moral turpitude, fraud, dishonesty
or theft;
(d) Any material dishonesty of Executive involving or affecting Employer;
(e) Any gross negligence, or any willful or intentional act or omission of Executive
having the effect or reasonably likely to have the effect of injuring the reputation,
business or business relationships of Employer in a material way;
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(f) Any willful or intentional breach by Executive of a fiduciary duty to Employer;
(g) Except as otherwise specifically provided in this Section 5.3, Executive’s
material violation or breach of Employer’s standard business practices and policies;
(h) Any court order or settlement agreement that prohibits Executive’s continued
employment with Employer;
(i) Any material breach by Executive not covered by any of the above clauses
(a) through (h) above of any material term, provision or condition of this
Agreement.
Notwithstanding any of the foregoing, “Cause” shall not be deemed to exist unless and
until Employer provides Executive with (1) at least ten (10) days prior written notice of its
intention to terminate employment for Cause, together with a written statement describing the
nature of the Cause, including the clause or clauses of this definition that Employer deems
applicable, and (2) if the item constituting Employer’s “Cause” for termination of Executive is
within the scope of clauses (a), (b), (g) or (i) above, thirty (30)
days to cure any acts or omissions on which the finding of Cause is based. If Executive cures, in
accordance with the terms of the written notice, the acts or omissions on which the finding of
Cause is based, Employer shall not have Cause to terminate Executive’s employment under this
Agreement.
For purposes of this Section 5.3, no act, or failure to act, on Executive’s part will
be considered “dishonest,” “willful” or “intentional” unless done, or omitted to be done, by
Executive in bad faith and without reasonable belief that Executive’s action or omission was
in or not opposed to, the best interest of Employer. Any act, or failure to act, based
upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of
counsel for Employer will be conclusively presumed to be done, or omitted to be done, by Executive
in good faith and in the best interests of Employer. Furthermore, the term “Cause” will
not include ordinary negligence or failure to act, whether due to an error in judgment or
otherwise, if Executive has exercised substantial efforts in good faith to perform the duties
reasonably assigned or appropriate to the position.
5.4 Termination by Executive for Good Reason. Executive may terminate employment with
Employer for Good Reason, upon notice as provided below, and in Section 5.2(a)(vi). For
purposes of this Agreement, “Good Reason” will mean any of the following:
(a) An adverse involuntary change in Executive’s status or position as Chairman and
Chief Executive Officer of Employer, including, without limitation, (i) any adverse change
in Executive’s status or position as a result of a material diminution in Executive’s
duties, responsibilities or authority; (ii) the assignment to Executive of any duties or
responsibilities that, in Executive’s reasonable judgment, are significantly inconsistent
with Executive’s status or position; or (iii) any removal of Executive from, or any failure
to reappoint or reelect Executive to, such position (except in connection with a termination
of Executive’s employment for Cause in accordance with Article 5, or as a result of
Executive’s Disability or death);
(b) Either (i) a reduction by Employer in Executive’s Base Salary, or (ii) a
termination or adverse change in Executive’s incentive-based compensation package that
materially and adversely affects Executive’s compensation as a whole, other than an adverse
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effect attributable to poor performance of Executive or the failure to meet performance
goals required to achieve an incentive award;
(c) The taking of any action by Employer that would materially and adversely affect the
physical conditions existing as of the Effective Date that result in Executive being unable
to perform Executive’s employment duties for Employer, and under which Executive regularly
performs employment duties for Employer;
(d) Any requirement that Executive relocate (other than on a sporadic or intermittent
basis) to a location which is more than thirty-five (35) miles from Employer’s corporate
headquarters as of the Effective Date of this Agreement as a necessary condition for
Executive to perform his employment duties for Employer;
(e) Any failure by Employer to obtain from any Successor an assumption of this
Agreement; or
(f) Any purported termination by Employer or by any Successor either of this Agreement
or of the employment of Executive that is not expressly authorized by this Agreement; or any
breach of this Agreement by Employer at any time, other than an isolated, insubstantial and
inadvertent failure that does not occur in bad faith and is remedied by Employer within a
reasonable period after Employer’s receipt of notice thereof from Executive.
Provided, however, that Executive’s employment shall not be deemed terminated by Executive for Good
Reason unless Executive has first notified Employer of the existence of a Good Reason within ninety
(90) days following the incident(s) giving rise to the Good Reason, and Employer shall have failed
or refused to remove or otherwise cure the circumstance(s) giving rise to the Good Reason within
thirty (30) days of the notification.
6.1 Compensation during Disability. During any period in which Executive fails to
perform Executive’s duties under this Agreement as a result of Executive’s incapacity due to
physical or mental illness or bodily injury or disease, Executive will continue to receive all Base
Salary and other compensation and benefits to which Executive is otherwise entitled under this
Agreement and any Plan through Executive’s Date of Termination, but only to the extent that
Executive is not receiving substantially equivalent benefits under any Plan maintained by Employer.
6.2 Compensation Until Date of Termination of Employment. If Executive’s employment
under this Agreement is terminated, then Employer will pay Executive the Base Salary through the
Date of Termination, plus any other amounts to which Executive is entitled prior to the Date of
Termination under this Agreement and under any Plan as provided under the Plan, provided that
Executive continues to perform his duties in accordance with Article 2.
6.3 Payments Following Termination of Employment by Employer Without Cause, or by
Executive for Good Reason. In the event Executive’s employment under this Agreement is
terminated by Employer without Cause or by Executive for Good Reason, and provided Executive shall
first execute a written release substantially in the form attached to this Agreement as Exhibit A
consistent
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with this Section 6.3 (the “Release Agreement”), and provided further that
Executive has not exercised rights to revoke or rescind the release of claims under to the Release
Agreement, then Employer shall provide to Executive the following benefits:
(a) Separation Pay Benefits. Employer will pay to Executive, as separation pay,
which Executive has not earned and to which Executive is not otherwise entitled, an amount
equal to Executive’s annual Base Salary in effect as of the Date of Termination multiplied
by the factor 2.99. That portion, if any, of such separation pay as is equal to the amount
that can constitute pay under a “separation pay plan” under Code Section 409A shall be made
to Executive in a lump sum payment on the first regular payroll date of Employer as soon as
practicable following sixteen (16) days after Executive’s execution of the Release
Agreement, provided that Executive has not exercised rights to revoke or rescind the release
of claims as provided in the Release Agreement. That portion, if any, of such separation pay
as exceeds the amount that can constitute pay under a “separation pay plan” under Code
Section 409A shall be made to Executive in equal weekly payments for twelve (12) months. The
first payment of benefits under the foregoing sentence will commence on the first regular
payroll date of Employer following the six (6) month anniversary of the date of Executive’s
“separation from service,” as defined in Code Section 409A, provided that Executive has not
exercised rights to revoke or rescind the release of claims as provided in the Release
Agreement. Provided, however, that in the event any portion of the payments due under this
Section 6.3(a) would result in adverse tax consequences to Executive under Code
Section 409A, taking into account all amounts otherwise payable to Executive under this
Agreement, then, to such extent, all or such portions of any payment under this Section
6.3(a) shall be delayed until the later of (i) the time of payment set forth above or
(ii) the first regular payroll date of Employer following the six (6) month anniversary of
the date of Executive’s “separation from service,” as defined in Code Section 409A (or
Executive’s death, if earlier). The initial payment shall include all payments (without
interest) that would have been made had payment of benefits commenced as otherwise provided
in this Section 6.3(a).
(b) In-Kind Benefits.
(i) If Executive (or any individual receiving group health Plan benefits through
Executive) is eligible under applicable law to continue participation in Employer’s
group health Plan following the Date of Termination and elects to continue these
benefits, Employer will, for a period of up to eighteen (18) months commencing as of
the Date of Termination, continue to pay Employer’s share of the cost of these
benefits as if Executive remained continuously employed with Employer throughout such
period but only while Executive or such other individual continues to pay the balance
of such cost and Executive or the person who elected continuation coverage is not
eligible for coverage under any other employer’s group health plan.
(ii) Employer will pay for all reasonable expenses of a reputable outplacement
organization selected by Executive, but not to exceed twenty-five thousand dollars
($25,000.00) in the aggregate that are incurred during the one (1) year period
commencing as of the Date of Termination, by direct payment to providers or by
reimbursement to Executive within the calendar year after the end of the calendar
year
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in which the expense was incurred; provided, however, that Executive must
request reimbursement at least thirty (30) days before the end of that calendar year.
(c) Other Cash Payments. Except as otherwise provided in Section
6.3(a), and subject to any plan or program adopted by Employer after the date hereof,
Employer will pay Executive a lump sum payment on the six (6) month anniversary of the date
of Executive’s “separation from service,” as defined in Code Section 409A (or Executive’s
death, if earlier) in the amount that is necessary to acquire for, and obtain full title
issued in the name of, Executive the personal automobile leased by Employer for Executive
under its Executive Automobile Program.
(d) Previously Earned Bonus. Employer will pay to Executive any unpaid
management incentive bonus that Executive had earned a right to receive as of the last day
of the fiscal year ending prior to his Date of Termination, with payment being be made in
accordance with the terms of the applicable Plan.
6.4 Vesting of Equity Grants. In the event that (i) Executive shall have reached the
age of 591/2, (ii) gives Employer a written Notice of Termination at least six (6) months in advance
of the Date of Termination stated in the Notice, and (iii) thereafter retires from his employment
with Employer on a Date of Termination that is consistent with such notice, then effective as of
that Date of Termination all unvested stock options and restricted stock granted to Executive by
Employer before that Date of Termination will automatically become fully vested and all
restrictions on the exercise of such options or transfers of such stock (as applicable) will
automatically lapse; provided, however, that the six (6) month notice requirement and the 59 1/2 age
requirement stated in this Section 6.4 shall not apply, and Executive shall nevertheless be
entitled to the benefits stated in this Section 6.4, in the event of Executive’s
termination with Employer due to his involuntary termination by Employer without Cause or due to
his Disability. For purposes of this Section 6.4, the term “Disability” shall have
the meaning set forth in Section 1.8 of this Agreement, and include, in addition, an
inability of Executive to perform the essential functions of Executive’s position (with or without
reasonable accommodation) under this Agreement for a period of ninety (90) days (consecutive or
otherwise) within any period of six (6) consecutive months because of Executive’s incapacity due to
the physical or mental illness, disease, or bodily injury of Executive’s spouse or child; provided
further, however, that the determination of the existence of a disability will be made by
certification of a qualified medical doctor selected by Employer and approved by Executive (or, in
the event of Executive’s incapacity to designate a doctor, then Executive’s legal representative),
which approval shall not be unreasonably withheld.
(a) The exercise period for any stock options granted to Executive before August 24,
2006 that have not expired by their terms before that Date of Termination will be
automatically extended, until the latest of: (i) the last day of the calendar year in which
the option period would otherwise have expired if it had not been extended, or (ii) a date
two and one-half months after the option period would otherwise have expired due to
Executive’s retirement, with all rights and privileges set forth under Employer’s Equity
Incentive Plan or (iii) any longer period determined by the Board or its Compensation
Committee; provided, however, that in no case shall any extension extend the option term
beyond either the original fixed term of such option, or the tenth (10th) anniversary of the
date of grant of the option.
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(b) The exercise period for stock options granted to Executive after August 24, 2006
will continue until the end of their original fixed term with all the rights and privileges
set forth under Employer’s Equity Incentive Plan, but not beyond the tenth (10th)
anniversary of the date of grant of the options.
6.6 No Additional Pay/Benefits. Except as specifically set forth above and except as
provided in Article 7, no post-termination payments or benefits will be provided to
Executive following the Date of Termination of Executive’s employment, except as otherwise provided
under any Plan in which Executive is a participant. No 401(k) contributions or contributions to
any other Plan will be paid by Employer based on post-termination separation pay. Further,
Executive will not be entitled to an incentive award under Employer’s incentive Plans or any other
bonus for any fiscal year, or part thereof, during which post-termination separation pay is paid.
6.7 No Mitigation. Executive will not be required to mitigate Employer’s payment
obligations under this Article 6 by making any efforts to secure other employment, and
Executive’s commencement of employment with another employer will not reduce the obligations of
Employer under this Article 6.
7.1 Definitions Relating to a Change in Control. The following terms will have the
meanings set forth below; unless the context clearly requires otherwise:
(a) “1934 Act” will mean the Securities Exchange Act of 1934, as amended (or
any successor provision), and applicable regulations.
(b) “Beneficial Ownership” by a person or group of persons will be determined
in accordance with Regulation 13D (or any similar successor regulation) promulgated by the
Securities and Exchange Commission pursuant to the 1934 Act. Beneficial Ownership of an
equity security may be established by any reasonable method, but will be presumed
conclusively as to any person who files a Schedule 13D report with the Securities and
Exchange Commission reporting the ownership.
(c) “Change of Control” means the occurrence of any of the following events:
(i) Any person or group of persons attains Beneficial Ownership of thirty
percent (30%) or more of any equity security of Employer entitled to vote for the
election of directors;
(ii) A majority of the members of the Board is replaced within a period of less
than two (2) years by directors not nominated and approved by the Board; or
(iii) Employer is merged or consolidated with or into, or sells or otherwise
disposes of all or substantially all of Employer’s assets to, another corporation,
entity or person in which less than 50% of the total voting power is owned, directly
or indirectly, by Employer; provided, however, that this Section 7.1(c)(iii)
shall not be deemed to apply, and no Change in Control shall be deemed to occur, in
the event of a conversion
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of Employer from being a publicly-traded company to a private company through
efforts led by or coordinated with a management group of Employer in which Executive
actively and voluntarily participates other than at the request or behest of the
Board.
(d) “Continuing Directors” are (i) directors who were in office prior to the
time any events described in Sections (c)(i), (c)(ii) or (c)(iii) of
this Section 7.1 have occurred; or (ii) directors in office for a period of more
than two (2) years; or (iii) directors nominated and approved by a majority of the
Continuing Directors.
(e) “Change in Control Termination” will mean a Change in Control of Employer
has occurred and Executive’s employment is terminated by Executive or Employer for any
reason or no reason prior to the two (2) year anniversary of the Change in Control.
7.2 Benefits Upon a Change in Control Termination. If a Change in Control Termination
occurs with respect to Executive, Employer or Executive, as the circumstances indicate, shall
provide the other advance written notice of the Date of Termination as provided in Section
5.1, and Section 6.2 shall apply until the date of the Change in Control Termination.
Upon the Change in Control Termination, Executive will be entitled to the benefits described below;
provided, however, that to the extent Executive has already received the same type of benefits
under this Agreement or otherwise, Executive’s benefits under this Section 7.2 will be
offset by these other benefits to the extent necessary to prevent duplication of benefits under
this Agreement; and provided further, that Executive executes the Release Agreement in
substantially the form attached as Exhibit B to this Agreement and consistent with this Section
7.2, and Executive does not exercise rights to revoke or rescind the release of claims as
provided in the Release Agreement.
(a) Delay of Certain Benefits for Six Months. Notwithstanding any contrary
provisions of Section 6.3 or this Section 7.2, in the event any portion of
such payment due under this Section 7.2 would result in adverse tax consequences to
Executive under Code Section 409A then, to such extent, all or such portions of any payment
under either or both of those sections (other than benefits described under the headings
“In-kind Benefits” (but excluding the benefit under Section 7.2(c)(ii)) and
“Previously Earned Bonus”) by reason of Executive’s termination of employment following a
Change in Control shall be delayed until the later of (i) the time of payment set forth
below, or (ii) the first regular payroll of Employer following the six (6) month anniversary
of the date of Executive’s “separation from service,” as defined in Code Section 409A (or
the date of Executive’s death, if earlier) The initial payment shall include all payments
(without interest) that would have been made had payment of benefits commenced as otherwise
provided in this Section 7.2.
(b) Change in Control Separation Pay Benefits. Executive will also receive:
(i) An amount equal to Executive’s annual Base Salary in effect as of the Date
of Termination multiplied by the factor 2.99 as Change in Control separation pay;
(ii) An amount equal to Executive’s full, un-prorated target incentive that
Executive may otherwise have been entitled under the annual management incentive plan
in effect as of the Date of Termination, calculated as provided under said plan,
multiplied by the factor of 2.99; and
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(iii) Except as otherwise provided under Section 7.2(a), that portion,
if any, of the amounts due under Sections 7.2(b)(i) and (ii) as is
equal to the amount that can constitute pay under a “separation pay plan” under Code
Section 409A shall be made to Executive in a lump sum payment on the first regular
payroll date of Employer as soon as practicable following sixteen (16) days after
Executive’s execution of the Release Agreement in the form attached as Exhibit B,
provided that Executive has not exercised rights to revoke or rescind the release of
claims as provided in such Release Agreement. That portion, if any, of the amounts
due under Sections 7.2(b)(i) and (ii) as exceeds the amount that can
constitute pay under a “separation pay plan” under Code Section 409A shall be made to
Executive in equal weekly payments for twelve (12) months. The first payment of
benefits under the foregoing sentence will commence on the first regular payroll date
of Employer following the six (6) month anniversary of the date of Executive’s
“separation from service,” as defined in Code Section 409A, provided that Executive
has not exercised rights to revoke or rescind the release of claims as provided in
the Release Agreement in the form attached as Exhibit B.
(c) In-Kind Benefits. Executive will also receive:
(i) If Executive (or any individual receiving group health plan benefits through
Executive) is eligible under applicable law to continue participation in Employer’s
group health plan following the Date of Termination elects to continue these
benefits, Employer will, for a period of up to eighteen (18) months commencing as of
the Date of Termination, continue to pay Employer’s share of the cost of these
benefits as if Executive remained continuously employed with Employer throughout such
period, but only while Executive or such other individual continues to pay the
balance of such cost and Executive or the person who elected continuation coverage is
not eligible for coverage under any other employer’s group health plan;
(ii) All reasonable expenses of a reputable outplacement organization selected
by Executive, but not to exceed twenty-five thousand dollars ($25,000.00) in the
aggregate, that are incurred during the one (1) year period commencing as of the Date
of Termination, by direct payment to providers or by reimbursement to Executive.
Payment or reimbursement will be made by the end of the calendar year following the
calendar year in which the expense is incurred; provided, however, that Executive
must request reimbursement at least thirty (30) days prior to the end of that
calendar year; and
(iii) Financial planning and tax preparation expenses, not to exceed five
thousand dollars ($5,000.00) in any calendar year, incurred during the period
commencing on the Date of Termination and ending eighteen (18) months following the
Date of Termination, and except as otherwise provided in Section 7.2(a),
payment or reimbursement will be made by the end of the calendar year following the
calendar year in which the expense is incurred; provided, however, that Executive
must request reimbursement at least thirty (30) days prior to the end of that
calendar year.
(d) Other Cash Payments. Executive will also receive:
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(i) Except as otherwise provided in Section 7.2(a), a lump sum payment
on the six (6) month anniversary of the date of Executive’s “separation from
service,” as defined in Code Section 409A (or Executive’s death, if earlier) equal to
the value of the fringe benefits made available in accordance with Section
3.2(i) for an eighteen (18) month period following the Date of Termination;
(ii) Except as otherwise provided in Section 7.2(a), subject to any plan
or program adopted by Employer after the date hereof, a lump sum payment on the six
(6) month anniversary of the date of Executive’s “separation from service,” as
defined in Code Section 409A (or Executive’s death, if earlier) in the amount that is
necessary to acquire for, and obtain full title issued in the name of, Executive the
personal automobile leased by Employer for Executive under its Executive Automobile
Program; and
(e) Previously Earned Bonus. Executive will also receive, in accordance with
the terms of the applicable Plan, any management incentive bonus that Executive has earned a
right to receive as of the last day of the fiscal year ending prior to his Date of
Termination.
Executive will not be required to mitigate Employer’s payment obligations under this
Article 7 by making any efforts to secure other employment, and Executive’s
commencement of employment with another employer will not reduce the obligations of Employer
pursuant to this Article 7.
7.3 Acceleration of Incentives. Upon the occurrence of a Change of Control, and
without regard to Executive’s employment status, the following shall occur, without regard to any
contrary determination by the Board or a majority of the Continuing Directors upon occurrence of a
Change of Control, with respect to any and all economic incentives, including, without limitation,
stock options and awards of restricted stock, (collectively, “Incentives”) granted under
the Equity Incentive Plan that are owned by Executive as of the date of the Change of Control:
(a) The restrictions set forth in the Equity Incentive Plan on all shares of restricted
stock awards will lapse immediately as of the date of the Change of Control;
(b) All outstanding options and stock appreciation rights will become exercisable
immediately as of the date of the Change of Control; and
(c) All conditions for payment of any outstanding but unearned performance shares will
be deemed to be met and payment made immediately as of the date of the Change of Control.
(a) Notwithstanding any provision contained in this Agreement to the contrary, if any
amount or benefit to be paid or provided under this Article 7, or any other plan or
agreement between Executive and Employer would be an “Excess Parachute Payment,” within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the
“Code”), but for the application of this sentence, then Employer shall make a Tax
Gross Up Payment (as defined below) to or on behalf of Executive within the thirty (30) day
period immediately prior
14
to the date on which Executive is required under applicable law to pay the excise tax
imposed under Code Section 4999, but to the extent any portion of such payment due under
this Section 7.4(a) would exceed the sum of the applicable limited separation pay
exclusions as determined pursuant to Code Section 409A, then payment of the excess amount
shall be on the six (6) month anniversary of the date of Executive’s “separation from
service,” as defined in Code Section 409A (or the date of death, if earlier). For purposes
of this Agreement, “Tax Gross Up Payment” shall mean a payment to or on behalf of
Executive which shall be sufficient to pay, in full, (i) any excise tax imposed under Code
Section 4999 on any amount or benefit to be paid or provided under this Article 7;
and (ii) any federal, state and local income tax, any social security and other employment
tax, and any additional excise tax under Code Section 4999 on the amount of the excise tax
payment described in clause (i) of this Section 7.4, and the aggregate
amount of additional tax payments described in this clause (ii); but, (iii)
excluding any interest or penalties assessed by the Internal Revenue Service on Executive
which are attributable to Executive’s willful misconduct or negligence.
(b) If requested by Executive or Employer, the determination of whether any Tax Gross
Up Payment is required pursuant to the preceding paragraph will be made by an independent
accounting firm that is a “Big-4 Accounting Firm” (or other accounting firm mutually
acceptable to Executive and Employer) not then-engaged as Employer’s independent public
auditor, at the expense of Employer, and the determination of such independent accounting
firm will be final and binding on all parties. In making its determination, the independent
accountant will allocate a reasonable portion of the Change in Control separation pay to the
value of any personal services rendered following the Change in Control and the value of any
non-competition agreement or similar agreements to the extent that such items reduce the
amount of the parachute payment.
7.5 No Additional Pay/Benefits. Except as specifically set forth in this Article
7 or, if applicable, Section 9.11, no post-termination payments or benefits will be
provided to Executive with respect to a Change in Control Termination following the Date of
Termination of Executive’s employment, except as otherwise provided under any Plan in which
Executive is a participant. No 401(k) contributions or contributions to any other Plan will be
paid by Employer based on post-termination Change in Control separation pay. Further, except as
otherwise specifically provided under this Agreement, Executive will not be entitled to an
incentive award under Employer’s incentive Plans or any other bonus for any fiscal year, or part
thereof, during which post-termination Change in Control separation pay is paid.
(a) “Confidential Information” means information that is proprietary to
Employer or proprietary to others and entrusted to Employer; whether or not such information
includes trade secrets. Confidential Information includes, but is not limited to,
information relating to Employer’s business plans and to its business as conducted or
anticipated to be conducted, and to its past or current or anticipated products and
services. Confidential Information also includes, without limitation, information
concerning Employer’s customer lists or routes,
15
pricing, purchasing, inventory, business methods, training manuals or other materials
developed for Employer’s employee training, employee compensation, research, development,
accounting, marketing and selling. All information that Employer has a reasonable basis to
consider as confidential will be Confidential Information, whether or not marked as such,
whether or not originated by Executive and without regard to the manner in which Executive
obtains access to this and any other proprietary information of Employer.
(b) Executive will not, during or after any termination of Executive’s employment under
this Agreement, (i) directly or indirectly use Confidential Information for Executive’s own
benefit; or (ii) disclose any Confidential Information to, or otherwise permit access to
Confidential Information by, any person or entity not employed by Employer or not authorized
by Employer to receive such Confidential Information, without the properly authorized prior
written consent of Employer. Executive will use reasonable and prudent care to safeguard
and protect and prevent the unauthorized use and disclosure of Confidential Information.
Furthermore, except in the usual course of Executive’s duties for Employer, Executive will
not at any time remove any Confidential Information from the offices of Employer, record or
copy any Confidential Information, use for Executive’s own benefit, or disclose to any
person or entity directly or indirectly competing with Employer, any information, data or
materials obtained from the files or customers of Employer, whether or not such information,
data or materials are Confidential Information.
(c) Upon any termination of Executive’s employment, Executive will collect and return
to Employer (or its authorized representative) all original copies and all other copies of
any Confidential Information acquired by Executive while employed by Employer.
(d) The obligations contained in this Section 8.1 will survive for as long as
Employer in its sole judgment considers the information to be Confidential Information. The
obligations under this Section 8.1 will not apply to any Confidential Information
that is now or becomes generally available to the public through no fault of Executive or to
Executive’s disclosure of any Confidential Information required by law or judicial or
administrative process.
8.2 Non-Competition. While employed by Employer and for a period of eighteen (18)
months following any Date of Termination under this Agreement, Executive will not, directly or
indirectly, alone or as an officer, director, shareholder, partner, member, employee, independent
contractor, or consultant of any other corporation or any partnership, limited liability company,
firm or other business entity:
(a) engage in, have any ownership interest in, financial participation in, or become
employed by, any business or commercial activity in competition (i) with any part of
Employer’s business, as conducted anywhere within the geographic area in which Employer is
then conducting its business; Executive acknowledges that as of the date Executive commenced
employment, Employer conducted its business generally throughout the United States and
Canada, or (ii) with any part of Employer’s contemplated business with respect to which
Executive has had access to Confidential Information governed by Section 8.1,
provided that for purposes of this paragraph, “ownership interest” will not include
beneficial ownership of less than one percent (1%) of the combined voting power of all
issued and outstanding voting
16
securities of a publicly held corporation whose stock is traded on a national
securities exchange;
(b) for the purpose of taking business away from Employer, call upon, solicit or
attempt to take away any customers, accounts or prospective customers of Employer;
(c) solicit, induce or encourage any supplier of goods or services to Employer to cease
its business relationship with Employer, or violate any term of any contract with Employer;
or
(d) solicit, induce or encourage any employee of Employer to violate any term of his or
her employment contract with Employer, or to directly or indirectly hire or solicit, induce,
recruit or encourage any of Employer’s employees for the purpose of hiring them or inducing
them to leave their employment with Employer.
The restrictions set forth in this Section 8.2 will survive any termination of
this Agreement or other termination of Executive’s employment with Employer, for whatever
reason, and will remain effective and enforceable for the full eighteen (18) month period;
provided, however, that such period will be automatically extended and will remain in full
force for an additional period equal to any period in which Executive is proven to have
violated any such restriction.
8.3 Stipulated Reasonableness. Executive acknowledges and agrees that the nature of
Executive’s position, the period of time necessary to fill Executive’s position in the event
Executive’s employment is terminated, the period of time necessary to allow customers of Employer’s
business to become familiar with Executive’s replacement, and the period of time necessary to cause
an end to the identification between Executive and Employer in the minds of Employer’s customers
and vendors, requires that the eighteen (18) month noncompetition and nonsolicitation period be
imposed for the protection of Employer’s investment in its business, and that the period is
reasonable and justified.
8.4 Protection of Reputation. Executive will, both during and after any termination of
Executive’s employment under this Agreement, refrain from communicating to any person, including,
without limitation, any employee of Employer, any statements or opinions that are negative in any
way about Employer or any of its past, present or future officials. Provided, however, that this
provision shall not preclude Executive from providing truthful information about Employer as
required by the securities laws while he is employed by Employer. In return, whenever Employer
sends or receives any Notice of Termination of Executive’s employment under this Agreement,
Employer will advise the members of its operating committee and executive committee (or any
successors to such committees), to refrain from negative communications about Executive to third
parties.
8.5 Remedies. The parties declare and agree that it is impossible to accurately
measure in money the damages that will accrue to Employer by reason of Executive’s failure to
perform any of Executive’s obligations under this Article 8, and that any such breach will
result in irreparable harm to Employer, for which any remedy at law would be inadequate.
Therefore, if Employer institutes any action or proceeding to enforce the provisions of this
Article 8, Executive waives the claim or defense that Employer has an adequate remedy at
law and Executive will not assert in any such action or proceeding the claim or defense that
Employer has an adequate remedy at law. Employer will be
17
entitled, in addition to all other remedies or damages at law or in equity, to temporary and
permanent injunctions and orders to restrain any violations of this Article 8 by Executive
and all persons or entities acting for or with Executive.
8.6 Survival. The provisions of this Article 8 will survive the termination
of this Agreement or the termination of Executive’s employment with Employer, and will remain in
full force and effect following termination.
8.7 Continuation. Executive and Employer acknowledge that certain terms and
conditions of this Article 8 restate and reassert terms and conditions previously agreed to
between them as a condition for Executive’s initial and continuing employment with Employer. To
the extent that any portion of this Article 8 may be deemed invalid for a failure of
Employer to provide new consideration to Executive, then that portion of this Article 8
will be deemed to have been supported by those agreements between Executive and Employer heretofore
entered into as a condition for his initial and continuing employment with Employer to the extent
of the prior provisions.
8.8 Forfeiture of Benefits for Violations of Article 8. Executive acknowledges and
agrees that his violation of any provisions of Sections 8.1(b), 8.1(c),
8.2, 8.4, or 8.7 above shall result in the immediate forfeiture of any
unpaid benefit under this Agreement. In addition, Executive acknowledges that if he violates
Sections 8.1(b), 8.1(c), 8.2, 8.4 or 8.7, he shall repay to
Employer any amounts paid to him following his Date of Termination under this Agreement.
8.9 Severability and Blue Penciling. To the extent any provision of this Article
8 shall be determined to be invalid or unenforceable as written in any jurisdiction, the
validity and enforceability of the remainder of such provision and of this Agreement shall be
unaffected. In furtherance of and not in limitation of the foregoing, Executive expressly agrees
that should the duration of, geographical extent of, or business activities covered by, any
provision of this Article 8 be in excess of that which is valid or enforceable under
applicable law in a given jurisdiction, then such provision, as to such jurisdiction only, shall be
construed to cover only that duration, extent or activities that may validly or enforceably be
covered. Executive acknowledges the uncertainty of the law in this respect and expressly
stipulates that this Article 8 shall be construed in a manner that renders its provisions
valid and enforceable to the maximum extent (not exceeding its express terms) possible under
applicable law in each applicable jurisdiction.
(a) This Agreement will be binding upon and inure to the benefit of any Successor of
Employer, and any Successor will absolutely and unconditionally assume all of Employer’s
obligations hereunder. Employer will use its best efforts to seek to have any Successor, by
agreement in form and substance reasonably satisfactory to Executive, assent to the
fulfillment by Employer of its obligations under this Agreement. Failure to obtain such
assent prior to the time a person or entity becomes a Successor (or where Employer does not
have advance notice that a person or, entity may become a Successor, within one (1) business
day after having notice that such person or entity may become or has become a Successor)
will constitute Good
18
Reason for termination of employment by Executive with respect to Executive, but only
if Executive provides the notice and opportunity to cure required under Section 5.4.
Notwithstanding the foregoing, nothing in this Section 9.1 shall require that a
Good Reason exist as a condition for termination by Executive during the two (2) year period
immediately following a Change of Control.
(b) This Agreement and all rights of Executive under this Agreement will inure to the
benefit of and be enforceable by Executive’s personal or legal representatives, executors,
administrators, successors, heirs, distributes, devisees and legatees and any assignees
permitted under this Agreement. If Executive dies while any amounts would still be payable
to Executive under this Agreement if Executive had continued to live, all such amounts,
unless otherwise provided herein, will be paid in accordance with the terms of this
Agreement to Executive’s Beneficiary. Executive may not assign this Agreement, in whole or
in any part, without the prior written consent of Employer.
(c) For purposes of this Section 9.1, “Beneficiary” means the person or
persons designated by Executive (in writing to Employer) to receive benefits payable after
Executive’s death. In the absence of any such designation or in the event that all of the
persons so designated predecease Executive, Beneficiary means the executor, administrator or
personal representative of Executive’s estate.
9.2 Litigation Expense. If any party is made or will become a party to any litigation
(including arbitration) commenced by or against the other party involving the enforcement of any of
the rights or remedies of such party under this Agreement, or arising on account of a default of
the other party in its performance of any of the other party’s obligations under this Agreement,
then the parties will bear their own expenses and attorneys’ fees; provided, however, that in the
event Executive commences legal proceedings of any kind for the purpose of collecting against
Employer any claim for cash benefits due under this Agreement, and Executive receives an award for
any such claim, then Employer shall promptly reimburse Executive for all reasonable legal fees and
expenses incurred by Executive in securing the award.
9.3 Notices. All notices, requests and demands given to or made pursuant hereto will,
except as otherwise specified herein, be in writing and be personally delivered or mailed postage
prepaid, registered or certified U.S. mail, to any party at its address set forth on the last page
of this Agreement. Either party may, by notice under this Agreement, designate a changed address.
Any notice under this Agreement will be deemed effectively given and received: (a) if personally
delivered, upon delivery; or (b) if mailed, on the registered date or the date stamped on the
certified mail receipt.
9.4 Captions. The various headings or captions in this Agreement are for convenience
only and will not affect the meaning or interpretation of this Agreement. When used herein, the
terms “Article,” “Section,” “paragraph” and “clause” mean an Article, Section, paragraph or clause,
respectively, of this Agreement, except as otherwise stated.
9.5 Governing Law. The validity, interpretation, construction, performance,
enforcement and remedies of or relating to this Agreement, and the rights and obligations of the
parties under this Agreement, will be governed by the substantive laws of the State of Minnesota
(without regard to the conflict of laws rules or statutes of any jurisdiction), and any and every
legal proceeding arising out of
19
or in connection with this Agreement must be brought in the appropriate courts of the State of
Minnesota, each of the parties hereby consenting to the exclusive jurisdiction of said courts for
this purpose.
9.6 Construction. Wherever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law, but if any provision
of this Agreement will be prohibited by or invalid under applicable law, such provision is
ineffective only to the extent of such prohibition or invalidity without invalidating the remainder
of such provision or the remaining provisions of this Agreement. To the extent that any provision
of this Agreement shall be determined to be invalid or unenforceable, the validity and
enforceability of the remainder of such provision and of this Agreement shall be unaffected. To
the extent any provision of this Agreement may be deemed to provide a benefit to Executive that is
treated as non-qualified deferred compensation pursuant to Code Section 409A, such provision shall
be interpreted in a manner that qualifies for any applicable exemption from compliance with Code
Section 409A or, if such interpretation would cause any reduction of benefit(s), such provision
shall be interpreted (if reasonably possible) in a manner that complies with Code Section 409A and
does not cause any such reduction.
9.7 Waiver. No failure on the part of either party to exercise, and no delay in
exercising, any right or remedy under this Agreement will operate as a waiver thereof, nor will any
single or partial exercise of any right or remedy under this Agreement preclude any other or
further exercise thereof or the exercise of any other right or remedy granted hereby or by any
related document or by law.
9.8 Modification. This Agreement may not be modified or amended except by written
instrument signed by the parties hereto.
9.9 Entire Agreement. Except as otherwise specifically provided herein, this
Agreement constitutes the entire agreement and understanding between the parties in reference to
all the matters agreed upon herein, and replaces in full all prior employment agreements,
understandings or undertakings of the parties related to the employment relationship, and any and
all such prior agreements or understandings are hereby rescinded and voided by mutual agreement
including, without limitation, that Executive Employment Agreement effective as of December 21,
2006, which superseded the Executive Employment Agreement effective as of August 31, 2004, as
amended by that First Amendment to Executive Employment Agreement executed October 3, 2006, which
superseded that Executive Employment Agreement effective as of June 2002, and that Change of
Control Agreement dated as of November 12, 2002; provided, however, that all other Plans are and
shall remain in full force and effect.
9.10 Survival. The provisions of this Agreement which by their express or implied
terms extend (a) beyond the termination of Executive’s employment hereunder (including, without
limitation, the provisions relating to separation compensation and effects of a Change in Control);
or (b) beyond the termination of this Agreement (including, without limitation the provisions in
Article 8 relating to confidential information, non-competition and non-solicitation), will
continue in full force and effect notwithstanding Executive’s termination of employment under this
Agreement or the termination of this Agreement, respectively.
20
9.11 Code Section 409A. Employer shall, with the consent of Executive, timely amend
this Agreement as many times as may be required so that adverse tax consequences to Executive under
Code Section 409A, including the imposition of any additional tax and interest penalties are
avoided. If Employer fails to timely amend the Agreement to comply with Code Section 409A, or if
Executive has timely provided his consent to any such amendment but still incurs an adverse tax
consequence under Code Section 409A, Employer shall make a 409A Tax Gross Up Payment to Executive
within the thirty (30) day period immediately prior to the date on which Executive is required
under applicable law to pay the additional tax imposed under Code Section 409A, but not earlier
than the six (6) month anniversary of the date of Executive’s “separation from service,” as defined
in Code Section 409A (or the date of death, if earlier) and the payment shall be made in a lump sum
without interest on that six (6) month anniversary. For purposes of this Section 9.1l, it
is the intent of the parties that the Agreement and any related Plan or arrangement be amended only
to the extent required to comply with Code Section 409A and that the intended benefits to
Executive, including the amount, form and timing of such benefits as specified in this Agreement,
will be preserved to the greatest extent possible. For purposes of this Agreement, “409A Tax
Gross Up Payment” shall mean a payment to or on behalf of Executive which shall be sufficient
to pay, in full, (a) any additional tax imposed under Code Section 409A on any amount or benefit to
be paid or provided under this Agreement, (b) any reasonable legal, accounting or tax preparation
fees incurred by Executive as a result of any adverse tax consequences incurred by Executive under
Code Section 409A, and (c) any federal, state and local income tax, any social security and other
employment tax, as a result of the payments described under (a) and (b) and the aggregate amount of
additional tax payments described in this clause (c) but, (d) excluding any interest or penalties
assessed by the Internal Revenue Service on Executive which are attributable to Executive’s willful
misconduct or negligence. Notwithstanding the above, no 409A Gross Up Payment will be made if
Executive fails to timely consent to any amendment of this Agreement reasonably proposed by
Employer pursuant to this Section 9.11.
9.12 Voluntary Agreement. Executive has entered into this Agreement voluntarily,
after having the opportunity to consult with any advisor chosen freely by Executive.
9.13 Remedies. No civil action may be commenced for any claim or dispute relating to
this Agreement or arising out of Executive’s employment with Employer unless the parties, within
thirty (30) days after the date of either party’s written request, attempt in good faith to
promptly resolve the claim or dispute by negotiation at agreed time(s) and location(s). All
negotiations are confidential and will be treated as settlement negotiations. Notwithstanding the
foregoing, either party may seek equitable relief prior to such good faith efforts to preserve the
status quo pending the completion of such efforts.
9.14 Counterparts. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute one and the same
instrument.
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| EMPLOYER: | G&K SERVICES, INC. | |||||
| By | /s/ Xxxxx Xxxxxx | |||||
| Xxxxx Xxxxxx | ||||||
| Chairman, Compensation Committee | ||||||
| Board of Directors | ||||||
| G&K SERVICES, INC. | ||||||
| By | /s/ Xxxxxxxxxx X. Punch | |||||
| Xxxxxxxxxx X. Punch | ||||||
| Senior Vice President, | ||||||
| Human Resources | ||||||
Employer’s Address:
|
0000 Xxxx Xxxxxxx | |||||
| Xxxxx 000 | ||||||
| Xxxxxxxxxx, XX 00000 | ||||||
| EXECUTIVE: | /s/ Xxxxxxx X. Xxxxxxxxxxx | |||||
| Xxxxxxx X. Xxxxxxxxxxx | ||||||
22
Exhibit List
Exhibit A — Release Agreement
Exhibit B — Release Agreement