EXHIBIT 10(e)
SEVERANCE AND NONCOMPETITION AGREEMENT
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(Senior Management)
THIS AGREEMENT ("AGREEMENT") is made and entered into this 15th day of
October, 1998, by and between XXXXXXXX X. XXXX ("EMPLOYEE") and UNITOG COMPANY,
a Delaware corporation, including its wholly-owned subsidiaries and affiliated
companies (collectively, "EMPLOYER").
RECITALS
WHEREAS, the Board of Directors of Employer (the "BOARD") has
determined that it is in the best interests of Employer to reinforce and
encourage the continuity of management personnel in anticipation of a possible
or potential Change of Control (as defined below); and
WHEREAS, the Board believes this objective can best be served by
providing for a compensation arrangement for Employee upon Employee's
termination of employment under certain circumstances in the event of a Change
of Control.
NOW, THEREFORE, in consideration of the mutual promises and covenants
as hereinafter set forth, the parties agree as follows:
AGREEMENT
1. GENERAL. Employer is engaged in the rental and sale of garments,
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linens, mats, mops, towels, dust control and other related items on a nationwide
basis. Employee is employed by Employer in a senior management position in which
Employee has or will have access to the Employer's confidential information and
trade secrets.
2. EMPLOYMENT RELATIONSHIP. Employee understands that his employment is
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on an at-will basis and, subject to the provisions of Section 3 hereof, may be
terminated for any reason at any time by either Employee or Employer.
3. TERMINATION UPON CHANGE OF CONTROL.
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(a) Severance Payment. In the event that Employee's employment is
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terminated within two (2) years following a "Change of Control" (as defined
below) and such termination is either (i) Without Cause (as defined below),
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or (ii) is a Constructive Termination (as defined below), Employee shall
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receive, in addition to all compensation due and payable to or accrued for
the benefit of Employee as of the date of termination, a lump sum payment
equal to 2.99 times the "base amount" (as defined in Section 280G(b)(3) of
the Internal Revenue Code of 1986, as amended (the "CODE")) of Employee's
compensation ("SEVERANCE PAYMENT").
(b) Excise Tax.
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(i) Notwithstanding anything to the contrary set forth in this
Agreement, in no event shall a Severance Payment payable pursuant to
this Section 3 exceed an amount equal to the lesser of (i) 2.99 times
the "base amount" (as defined in Section 280G(b)(3) of the Code) of
Employee's compensation, or (ii) such other amount which would
constitute an "excess parachute payment" (as defined in Section 280G
of the Code). In the event that it shall be determined that any
Severance Payment to Employee (whether paid or payable or distributed
or distributable) would be subject to the excise tax imposed by
Section 4999 of the Code, or any successor provision thereto (the
"EXCISE TAX"), then Employee shall be entitled to receive from
Employer an additional payment (the "GROSS-UP PAYMENT") in an amount
such that the net amount of the Severance Payment and the Gross-Up
Payment retained by Employee after the calculation and deduction of
all Excise Taxes (including any interest or penalties imposed with
respect to such taxes) on the payment and all Federal, state and local
income tax, employment tax and Excise Tax (including any interest or
penalties imposed with respect to such taxes) on the Gross-Up Payment
provided for in this Section, and taking into account any lost or
reduced tax deductions on account of the Gross-Up Payment, shall be
equal to the Severance Payment. In the event Employer exhausts its
remedies pursuant to this Section and Employee is required to make a
payment of any Excise Tax, the Gross-Up Payment shall be promptly paid
by Employer to or for Employee's benefit.
(ii) Employee shall notify Employer in writing of any claim by
the Internal Revenue Service that, if successful, would require the
payment by Employer of the Gross-Up Payment. Such notification shall
be given as soon as practicable after Employee is informed in writing
of such claim and shall apprise Employer of the nature of such claim
and the date on which such claim is requested to be paid. Employee
shall not pay such claim prior to the expiration of the 30-day period
following the date on which Employee gives such notice to Employer (or
such shorter period ending on the date that any payment of taxes,
interest and/or penalties with respect to such claim is due). If
Employer notifies Employee in writing prior to the expiration of such
period that it desires to contest such claim, Employee shall:
(A) give Employer any information reasonably requested by
Employer relating to such claim;
(B) take such action in connection with contesting such
claim as Employer shall reasonably request in writing from time
to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by Employer;
(C) cooperate with Employer in good faith in order to
effectively contest such claim; and
(D) permit Employer to participate in any proceedings
relating to such claims;
provided, however, that Employer shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify Employee for and hold
Employee harmless from, on an after-tax basis, any Excise Tax or
income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of all related
costs and expenses. Without limiting the foregoing provisions of this
section, Employer shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and
all administrative appeals, proceedings, hearings and conferences with
the taxing authority in respect of such claim and may, at its sole
option, either direct Employee to pay the tax claimed and xxx for a
refund or contest the claim in any permissible manner, and Employee
agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one
or more appellate courts, as Employer shall determine; provided,
however, that if Employer directs Employee to pay such claim and xxx
for a refund, Employer shall advance the amount of such payment to
Employee, on an interest-free basis, and shall indemnify Employee for
and hold Employee harmless from, on an after-tax basis, any Excise Tax
or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed
income with respect to such advance (including as a result of any
forgiveness by Employer of such advance); provided, further, that any
extension of the statute of limitations relating to the payment of
taxes for the taxable year of Employee with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, Employer's control of the contest shall
be limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and Employee shall be entitled to settle or contest,
as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(c) Change of Control. "Change of Control" shall mean: (i) a
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person, corporation, entity or group (A) makes a tender or exchange
offer for the issued and outstanding voting stock of Employer and
beneficially owns twenty-five percent (25%) or more of the issued and
outstanding voting stock of Employer after such tender or exchange
offer, or (B) acquires, directly or indirectly, the beneficial
ownership of twenty-five percent (25%) or more of the issued and
outstanding voting stock of Employer in a single transaction or a
series of transactions; (ii) Employer is a party to a merger,
consolidation or similar transaction and following such transaction,
fifty percent (50%) or more of the issued and outstanding voting stock
of the resulting entity is not beneficially owned by those persons,
corporations or entities that constituted the stockholders of Employer
immediately prior to the transaction; (iii) Employer sells fifty
percent (50%) or more of its assets to any other person or persons
(other than an affiliate or affiliates of Employer); or (iv)
individuals who, as of the date hereof, constitute the
Board (the "INCUMBENT BOARD") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof, whose election or nomination was
approved by a majority of the directors then comprising the Incumbent
Board, shall be considered a member of the Incumbent Board, but not
including any individual whose initial Board membership is a result of an
actual or threatened election contest (as that term is used in Rule 14a-11
promulgated under the Securities Exchange Act of 1934, as amended) or an
actual or threatened solicitation of proxies or consents by or on behalf of
a party other than the Board.
(d) Termination Without Cause. Termination "Without Cause" shall
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mean termination of Employee by Employer for reasons other than: (i) the
willful, persistent failure of Employee (after thirty (30) days written
notice and an opportunity to cure) to perform his or her material duties
hereunder for reasons other than death or disability; (ii) the breach by
Employee of any material provision of this Agreement; or (iii) Employee's
conviction of a felony by a trial court of competent jurisdiction, whether
or not an appeal is taken.
(e) Constructive Termination. "Constructive Termination" shall mean:
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(i) a material, adverse change of Employee's responsibilities, authority,
status, position, offices, titles, duties or reporting requirements
(including directorships); (ii) an adverse change in Employee's annual
compensation or benefits; (iii) a requirement to relocate in excess of
fifty (50) miles from Employee's then current place of employment; or (iv)
the breach by Employer of any material provision of this Agreement. For
purposes of this definition, Employee's responsibilities, authority,
status, position, offices, titles, duties and reporting requirements are to
be determined as of the date of this Agreement. For purposes of this
Section, all determinations of Constructive Termination shall be made in
good faith by Employee and shall be conclusive.
4. ESCROW ACCOUNT. Within a reasonable period of time following the date
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hereof, Employer shall establish an account (the "Escrow Account") at a
nationally recognized bank or other financial institution which shall be funded
in an amount equal or greater than the aggregate amount of any Severance
Payments payable to Employee hereunder and any amounts payable to other
employees of Employer under similar agreements. The amount of funding by
Employer of such Escrow Account shall be exclusive of any potential Gross-Up
Payments payable pursuant to Section 3 hereof. Promptly upon the establishment
of the Escrow Account, Employer shall provide Employee with information and
instructions regarding the Escrow Account such that, upon meeting the
requirements of Section 3 hereof, Employee would be able to request and obtain
access to any Severance Payment payable to Employee pursuant to and in
accordance with Section 3 hereof.
5. EMPLOYEE'S ACKNOWLEDGMENTS AND COVENANTS.
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(a) Confidential Materials and Information. Employer has developed
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confidential information, strategies and programs, which include customer
lists, prospects lists, expansion and acquisition plans, market research,
sales systems, marketing
programs, computer systems and programs, product development strategies,
manufacturing strategies and techniques, budgets, pricing strategies,
identity and requirements of national accounts, customer lists, methods of
operating, service systems, training programs and methods, other trade
secrets and other information about the business in which Employer is
engaged that is not known to the public and gives Employer an opportunity
to obtain an advantage over competitors who do not know of such information
(collectively, "CONFIDENTIAL INFORMATION"). In performing duties for
Employer, Employee regularly will be exposed to and work with the
Confidential Information. Employee acknowledges that such Confidential
Information is critical to Employer's success and that Employer has
invested substantial sums of money in developing the Confidential
Information. While Employee is employed by Employer and after such
employment ends for any reason, Employee will never reproduce, publish,
disclose, use, reveal, show or otherwise communicate to any person or
entity any Confidential Information unless specifically directed by
Employer to do so in writing.
(b) Nonsolicitation of Employees. While Employee is employed by
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Employer and for eighteen (18) months after such employment ends for any
reason, Employee, acting either directly or indirectly, or through any
other person, firm, or corporation, will not hire, contract with or employ
any employee of Employer or induce or attempt to induce or influence any
employee of Employer to terminate employment with Employer. Such
nonsolicitation restriction shall not apply to Employee in the case of the
solicitation of his or her immediate family members.
(c) Covenant Against Unfair Competition. While Employee is employed
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by Employer and for eighteen (18) months after such employment ends for any
reason, Employee will not, directly or indirectly, or through any other
person, firm or corporation (i) be employed by, consult for, have any
ownership interest in or engage in any activity on behalf of any competing
business that operates a facility within one hundred (100) miles of any
facility operated by Employer; (ii) be employed by, consult for, or engage
in any activity on behalf of Xxxxxxxx Corporation, Aramark Corporation,
Cintas Corporation, Xxxxx Textile Services, Inc., G & K Services, Inc.,
Xxxxxx Small Manufacturing, Lion Apparel, Inc., Mission Industries, Xxxxxx
Services, Inc., National Linen Service, Division of NSI, Omni Service,
Inc., Protexall, Inc., Red Kap Industries, Inc., Riverside Manufacturing
Co., Xxxx Corporation, UniFirst Corporation, Xxx Xxxx-Xxxxxx, Inc., or any
subsidiary or affiliated company or any successor to any of those
companies; or (iii) call on, solicit or communicate with any of Employer's
customers (whether actual or potential) for the purpose of renting or
selling (or servicing on a customer-owned-goods basis) garments, linens,
mats, mops, towels, dust control items and other related items to such
customer other than for the benefit of Employer. (As used in this
Agreement, the term "competing business" means a business that rents or
sells uniforms, linens, mats, mops, towels, dust control items or other
related items, and the term "customer" means any customer (whether actual
or potential) with whom Employee or any other employee of Employer had
business contact on behalf of Employer during the eighteen (18) months
immediately before Employee's employment with Employer ended.)
Notwithstanding the foregoing, this paragraph shall not be
construed to prohibit Employee from owning less than five percent (5%) of
the outstanding securities of a corporation which is publicly traded on a
securities exchange or over-the-counter.
(d) Return of Confidential Materials and Information. Employee agrees
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that whenever Employee's employment with Employer ends for any reason, all
documents containing or referring to Confidential Information as may be in
Employee's possession or control will be delivered by Employee to Employer
immediately, with no request being required.
(e) Acknowledgments; Irreparable Harm. Employee agrees that the
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restrictions on competition, solicitation and disclosure in this Agreement
are fair, reasonable and necessary for the protection of the interests of
Employer. Employee further agrees that a breach of any of the covenants
set forth in this Section 5 will result in irreparable injury and damage to
Employer for which Employer would have no adequate remedy at law, and
Employee further agrees that in the event of a breach, Employer will be
entitled to an immediate restraining order and injunction to prevent such
violation or continued violation, without having to prove damages, in
addition to any other remedies to which Employer may be entitled at law or
equity.
(f) Notification to Subsequent Employers. Employee grants Employer
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the right to notify any future employer or prospective employer of Employee
concerning the existence of and terms of this Agreement and grants Employer
the right to provide a copy of this Agreement to any such subsequent
employer or prospective employer.
6. FULL SETTLEMENT. Employer's obligation to make the payments provided
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for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which Employer may have against Employee or others. In
no event shall Employee be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to Employee under any of the
provisions of this Agreement and such amounts shall not be reduced whether or
not Employee obtains other employment. Employer agrees to pay promptly as
incurred, to the full extent permitted by law, all legal fees and expenses which
Employee may reasonably incur as a result of any contest (regardless of the
outcome thereof) by Employer, Employee or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by
Employee regarding the amount of any payment pursuant to this agreement), plus
in each case interest on any delayed payment at the rate published from time to
time in The Wall Street Journal as the prime rate of interest plus two percent
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(2%).
7. RESOLUTION OF DISPUTES. If there shall be any dispute between Employer
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and Employee (i) in the event of any termination of Employee's employment by
Employer, whether such termination was Without Cause, or (ii) in the event of
any Constructive Termination of employment by Employer, then, unless and until
there is a final, nonappealable judgment by a court of competent jurisdiction
declaring that such termination was not Without Cause or that the
determination by Employee of the existence of Constructive Termination was not
made in good faith, Employer shall pay all amounts, and provide all benefits, to
Employee and/or Employee's family or other beneficiaries, as the case may be,
that Employer would be required to pay or provide pursuant to Section 3 as
though such termination were by Employer Without Cause or was a Constructive
Termination by Employer; provided, however, that Employer shall not be required
to pay any disputed amounts pursuant to this Section except upon receipt of an
undertaking by or on behalf of Employer to repay all such amounts to which
Employee is ultimately adjudged by such court not to be entitled.
8. WITHHOLDING. Employer may withhold from any amounts payable under this
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Agreement the minimum Federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
9. SUCCESSORS. This Agreement is binding on, and shall inure to the benefit
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of Employee and Employer, and all successors and assigns of Employer. Employer
will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of Employer to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that Employer would be required to
perform it if no such succession had taken place. Failure of Employer to obtain
such agreement prior to the effectiveness of any such succession shall be a
material breach of this Agreement and shall entitle Employee to any Severance
Payment payable pursuant to Section 3(a) hereof.
10. APPLICABLE LAW. This Agreement will be interpreted, governed and
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enforced according to the law of the State of Missouri.
11. SEPARABILITY. If any portion of this Agreement is held to be invalid or
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unenforceable in any respect, Employee and Employer agree that such invalid and
unenforceable part will be modified to permit the Agreement to be enforced to
the maximum extent permitted by the court, with the remaining portions
unaffected by the invalidity or unenforceability of any part of this Agreement.
12. WAIVER. This Agreement may be modified, supplemented or amended, and
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any provision of this Agreement can be waived, only by written instrument making
specific reference to this Agreement signed by the party against whom
enforcement of any such modification, supplement, amendment or waiver is sought.
13. COMPLETE AGREEMENT. This Agreement contains the entire agreement
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between Employer and Employee as to the subject matter hereof. This Agreement
shall not be subject to the terms and conditions of any agreement concerning
arbitration or dispute resolution between Employer and Employee.
EMPLOYEE ACKNOWLEDGES THAT HE/SHE HAS READ THE ENTIRE CONTENTS OF THIS
AGREEMENT AND THAT HE/SHE UNDERSTANDS ITS TERMS.
EMPLOYEE:
/s/ Xxxxxxxx X. Xxxx
Xxxxxxxx X. Xxxx
UNITOG COMPANY,
including its subsidiaries and affiliates
By: /s/ Xxxxxxx X. Xxxxxxxx
Name: Xxxxxxx X. Xxxxxxxx
Title: Chief Operating Officer
