<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 25, 1998.
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to _____________________
Commission file number: 0-6643
UNITOG COMPANY
- - ----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 44-0529828
- - ------------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1300 Washington Street, Kansas City, MO 64105
- - -------------------------------------------- ------------------------------
(Address of principal executive offices) (Zip Code)
(816) 474-7000
- - ------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
- - ------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No _____
---------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
As of October 25, 1998, the registrant had 9,398,896 shares of
common stock, par value $.01 per share, outstanding.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NUMBER
<S> <C> <C>
ITEM 1. Financial Statements
(1) Condensed Consolidated Financial Statements (unaudited):
Condensed Consolidated Balance Sheets as of October 25, 1998
and January 25, 1998. 3
Condensed Consolidated Statements of Earnings for the Three
Months ended October 25, 1998 and October 26, 1997. 4
Condensed Consolidated Statements of Earnings for the Nine
Months ended October 25, 1998 and October 26, 1997. 5
Condensed Consolidated Statements of Cash Flows for the Nine
Months ended October 25, 1998 and October 26, 1997. 6
(2) Notes to Condensed Consolidated Financial Statements. 7
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. 10
PART II.-OTHER INFORMATION
ITEM I. Legal Proceedings 13
ITEM 6. Exhibits and Reports on Form 8-K 13
</TABLE>
2
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
UNITOG COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
OCTOBER 25, 1998 AND JANUARY 25, 1998
<TABLE>
<CAPTION>
(unaudited)
ASSETS October 25, 1998 January 25, 1998
---------------- ----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 25,153 $ 1,492,720
Accounts receivable, less allowance
for doubtful receivables of $1,174,000
and $1,009,000, respectively 29,158,134 29,631,566
Inventories (note 2) 21,278,796 18,508,958
Rental garments in service, net 40,582,087 41,862,753
Prepaid expenses 1,732,678 1,102,585
------------- -------------
Total current assets 92,776,848 92,598,582
------------- -------------
Property, plant and equipment, at cost 180,663,473 189,231,058
Less accumulated depreciation 66,149,804 71,920,005
------------- -------------
Net property, plant and equipment 114,513,669 117,311,053
------------- -------------
Other assets, net 25,589,744 29,592,025
Excess cost over net assets of businesses
acquired, net 37,321,247 36,806,869
------------- -------------
$270,201,508 $276,308,529
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 3,611,317 $ 3,502,885
Accounts payable 9,464,843 18,591,196
Accrued expenses 12,598,306 12,144,680
Accrued and deferred income taxes payable 13,406,748 12,262,867
------------- -------------
Total current liabilities 39,081,214 46,501,628
------------- -------------
Long-term debt, less current installments 102,129,650 110,268,916
Deferred income taxes and other liabilities 15,904,011 15,340,392
Stockholder's equity:
Common stock of $.01 par value. Authorized
30,000,000 shares; issued 9,659,305 shares
at October 25, 1998 and 9,657,909 shares at
January 25, 1998 96,593 96,579
Treasury stock, 260,409 common shares at
October 25, 1998 and 289,425 shares at
January 25, 1998, at cost (5,659,844) (6,295,337)
Additional paid-in capital 41,308,439 41,470,281
Retained earnings 77,341,445 68,926,070
------------- -------------
Total stockholder's equity 113,086,633 104,197,593
------------- -------------
$270,201,508 $276,308,529
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
UNITOG COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED OCTOBER 25, 1998 AND OCTOBER 26, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
October 25, 1998 October 26, 1997
--------------------- ---------------------
Revenues:
<S> <C> <C>
Rental operations $ 56,772,345 $ 56,082,575
Direct sales 12,398,343 14,005,264
--------------------- ---------------------
Total revenues 69,170,688 70,087,839
--------------------- ---------------------
Operating costs and expenses:
Cost of rental operations 44,880,835 44,991,869
Cost of direct sales 10,742,171 11,664,583
Depreciation and amortization 4,729,891 4,483,717
General and administrative 2,028,059 2,149,381
Special items (notes 7 and 8) (2,071,052) (1,000,000)
--------------------- ---------------------
Total costs and expenses 60,309,904 62,289,550
--------------------- ---------------------
Operating income 8,860,784 7,798,289
Interest expense 1,945,269 1,546,704
Other income, net (54,840) (17,015)
--------------------- ---------------------
Earnings before income taxes 6,970,355 6,268,600
Income taxes 2,650,000 2,382,000
--------------------- ---------------------
Net earnings $ 4,320,355 $ 3,886,600
--------------------- ---------------------
Net earnings per common share, basic $ .46 $ .40
===================== =====================
Net earnings per common share, assuming dilution $ .46 $ .40
===================== =====================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
UNITOG COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
NINE MONTHS ENDED OCTOBER 25, 1998 AND OCTOBER 26, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
October 25, 1998 October 26, 1997
------------------ -----------------
<S> <C> <C>
Revenues:
Rental operations $ 173,430,093 $ 164,788,068
Direct sales 38,161,980 42,880,394
------------------ -------------------
Total revenues 211,592,073 207,668,462
------------------ -------------------
Operating costs and expenses:
Cost of rental operations 139,521,137 132,817,294
Cost of direct sales 32,859,709 35,590,825
Depreciation and amortization 14,454,078 12,989,761
General and administrative 6,211,385 6,671,254
Special items (notes 7 and 8) (2,071,052) (1,000,000)
------------------ -------------------
Total costs and expenses 190,975,257 187,069,134
------------------ -------------------
Operating income 20,616,816 20,599,328
Interest expense 5,877,627 4,627,368
Other income, net (118,027) (89,529)
------------------ -------------------
Earnings before income taxes 14,857,216 16,061,489
Income taxes 5,645,000 6,103,000
------------------ -------------------
Net earnings $ 9,212,216 $ 9,958,489
================== ===================
Net earnings per common share, basic $ .98 $ 1.03
================== ===================
Net earnings per common share, assuming dilution $ .98 $ 1.02
================== ===================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
UNITOG COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED OCTOBER 25, 1998 AND OCTOBER 26, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
October 25, 1998 October 26, 1997
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 9,212,216 $ 9,958,489
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 14,454,078 12,989,761
Provision for deferred income taxes 264,000 600,000
Gain on disposal of equipment (2,109,549) (48,797)
Changes in assets and liabilities:
Accounts receivable 473,432 (6,127,675)
Inventories (2,687,272) (1,628,702)
Rental garments in service 406,388 (334,968)
Prepaid expenses (705,854) 137,082
Other noncurrent assets 424,386 1,277,716
Accounts payable (9,126,353 1,693,364
Accrued expenses (1,649,658) 2,384,151
Income taxes payable 1,028,881 2,334,863
Other noncurrent liabilities 414,619 191,270
---------------- ----------------
Net cash provided by operating activities 10,399,314 23,426,554
---------------- ----------------
Cash flows from investing activities:
Acquisition of rental operations (13,028,369) (3,102,392)
Purchase of property, plant and equipment (10,688,343) (21,957,806)
Proceeds from disposal of equipment and rental operations 20,203,841 182,930
---------------- ----------------
Net cash used by investing activities (3,512,871) (24,877,268)
---------------- ----------------
Cash flows from financing activities:
Proceeds from stock issuance 582,221 232,020
Dividends paid (845,766) (723,583)
Increases (decreases) in long-term debt (8,030,834) 1,928,400
Purchase of treasury stock (59,631) --
---------------- ----------------
Net cash provided (used) by financing activities (8,354,010) 1,436,837
---------------- ----------------
Net increase (decrease) in cash and cash equivalents (1,467,567) (13,877)
Cash and cash equivalents at beginning of period 1,492,720 31,307
---------------- ----------------
Cash and cash equivalents at end of period $ 25,153 $ 17,430
================ ================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 6,237,000 $ 5,028,000
================ ================
Income taxes $ 4,231,825 $ 3,119,000
================ ================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
UNITOG COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED OCTOBER 25, 1998 AND OCTOBER 26, 1997
Note 1
- - ------
In the opinion of the Company, the accompanying unaudited condensed consolidated
financial statements reflect adjustments (consisting of normal recurring
accruals) necessary to present fairly the financial position of the Company as
of October 25, 1998, and the results of its operations and its cash flows for
the nine months ended October 25, 1998 and October 26, 1997 and the results of
its operations for the three months ended October 25, 1998 and October 26, 1997.
The results of operations for the nine months ended October 25, 1998 are not
necessarily indicative of the results to be expected for the full year. Certian
reclassifications have been made to prior years' financial statements to confrom
to the current year's presentation.
Note 2 Inventories
- - -------------------
The following is a summary of inventories at October 25, 1998 and January 25,
1998:
<TABLE>
<CAPTION>
October 25, 1998 January 25, 1998
----------------- -----------------
<S> <C> <C>
Raw materials $ 3,837,358 $ 3,977,563
Work in progress 3,889,395 2,683,273
Finished goods 18,093,836 16,250,295
----------- -----------
25,820,589 22,911,131
Less LIFO allowance (4,541,793) (4,402,173)
----------- -----------
$21,278,796 $18,508,958
=========== ===========
</TABLE>
Note 3 Cash Dividend
- - --------------------
In November 1998, the Board of Directors declared a $.09 per share cash dividend
payable on December 18, 1998 to stockholders of record on December 4, 1998. The
$.09 per share dividend was a 20% increase over the semi-annual dividend paid
the prior year.
Note 4 Acquisitions
- - -------------------
During the first quarter of fiscal 1999, the Company acquired certain uniform
rental operations for approximately $13 million in cash. The assets acquired
were primarily industrial uniform routes in Minnesota and Omaha, Nebraska and
industrial uniform and linen routes and production facilities in Bethlehem and
Harrisburg, Pennsylvania. These acquisitions are expected to add over $10.5
million in annual rental revenues with an insignificant effect on net earnings.
These acquisitions were accounted for using the purchase method.
7
<PAGE>
Note 5 Other Comprehensive Income
- - ---------------------------------
During the first quarter of fiscal 1999 the Company adopted Financial Accounting
Standard No. 130, Reporting Comprehensive Income (FAS 130). FAS 130 establishes
------------------------------
standards for the reporting and display of items that affect stockholders'
equity but are not components of reported net earnings. The Company's only
component of comprehensive income was foreign currency translation adjustments.
For the quarters ended October 25, 1998 and October 26, 1997 comprehensive
income differed from net earnings as follows:
<TABLE>
<CAPTION>
October 25, 1998 October 26, 1997
---------------------- ---------------------
<S> <C> <C>
Net earnings $ 4,320,355 $ 3,886,600
Other comprehensive income, net of tax:
Foreign currency translation adjustments 26,383 4,077
--------------------- ---------------------
Comprehensive income $ 4,346,738 $ 3,890,677
===================== =====================
</TABLE>
For the nine months ended October 25, 1998 and October 26, 1997 comprehensive
income differed from net earnings as follows:
<TABLE>
<CAPTION>
October 25, 1998 October 26, 1997
--------------------- ---------------------
<S> <C> <C>
Net earnings $ 9,212,216 $ 9,958,489
Other comprehensive income, net of tax:
Foreign currency translation adjustments 52,789 15,606
------------------- -------------------
Comprehensive income $ 9,265,005 $ 9,974,095
=================== ===================
</TABLE>
Accumulated other comprehensive income consisted entirely of foreign currency
translation adjustments at October 25, 1998 and January 25, 1998. Accumulated
other comprehensive income of $105,000 and $52,000 was included in retained
earnings at October 25, 1998 and January 25, 1998, respectively.
Note 6 Net Earnings Per Common Share
- - ------------------------------------
Net earnings per common share and net earnings per common share assuming
dilution have been computed in accordance with FASB No. 128, Earnings Per Share.
------------------
For the quarters ended October 25, 1998 and October 26, 1997 weighted average
common shares outstanding and weighted average common shares outstanding,
assuming dilution, were as follows:
<TABLE>
<CAPTION>
October 25, 1998 October 26, 1997
---------------- ----------------
<S> <C> <C>
Weighted average common
shares outstanding 9,392,166 9,652,814
Dilutive effect of in-the-money
employee stock options 51,557 85,065
-------------- --------------
Weighted average common shares
outstanding, assuming dilution 9,443,723 9,737,879
============== ==============
</TABLE>
8
<PAGE>
For the nine month periods ended October 25, 1998 and October 26, 1997 weighted
average common shares outstanding and weighted average common shares
outstanding, assuming dilution, were as follows:
<TABLE>
<CAPTION>
October 25, 1998 October 26, 1997
---------------- ----------------
<S> <C> <C>
Weighted average common
shares outstanding 9,388,801 9,648,093
Dilutive effect of in-the-money
employee stock options 56,368 72,847
---------------- ----------------
Weighted average common shares
outstanding, assuming dilution 9,445,169 9,720,940
================ ================
</TABLE>
For the quarters and nine month periods ended October 25, 1998 and October 26,
1997, stock options were the Company's only potentially dilutive securities.
Note 7 Sale of Linen Plants
- - ---------------------------
In September 1998, the Company sold three rental laundry facilities to NuCentury
Textile Services, Inc., a privately held organization. These principally linen
rental facilities were located in Long Beach, California, Duluth, Minnesota and
Toledo, Ohio. Estimated annual revenues for these operations are approximately
$20 million. These linen facilities were acquired in conjunction with prior
acquisitions that expanded geographically our industrial uniform rental network.
Some linen business we had acquired in Michigan was also sold with the
transaction. The Company retained its industrial uniform rental business in
Toledo and will process it from existing facilities in Detroit. The proceeds
from the sale of approximately $20 million were used to repay bank debt. A
pretax gain on the sale of the linen business of approximately $2.1 million was
included as a special item in operating income during the third quarter of
fiscal 1999.
Included in rental revenues were $2.6 million and $5.0 million of sold linen
revenues for the quarter ended October 25, 1998 and October 26, 1997,
respectively. Included in rental revenues were $12.4 million and $14.7 million
of sold linen revenues for the nine month periods ended October 25, 1998 and
October 26, 1997, respectively. The operating results of the sold linen
operations, exclusive of the gain on the sale of the linen business, had an
insignificant effect on net earnings for both the quarter and nine month periods
ended October 25, 1998 and October 26, 1997, respectively.
Note 8 Legal Settlement and Environmental Charge
- - ------------------------------------------------
During the third quarter of fiscal 1998, the Company reached a $2 million breach
of contract settlement with a former customer. Also during the third quarter of
fiscal 1998, the Company charged $1 million to operations for additional costs
related to potential environmental and other matters. The combined $1 million
gain from the legal recovery and the potential environmental costs was included
as a special item in operating income.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $10.4 million for the nine month
period ended October 25, 1998, a decrease of $13.0 million compared to last
year. The decrease was due to reductions in accounts payable related to the
timing of payments for our fiscal 1998 capital expenditures and higher
inventories. At October 25, 1998, the Company had $36.6 million available under
its foreign and domestic bank credit facilities. The Company's capitalization
ratio was 47.5% at October 25, 1998 compared to 51.4% at January 25, 1998.
Working capital was $53.7 million at October 25, 1998 compared to $46.1 million
at January 25, 1998. The decrease in accounts payable combined with higher
inventory levels to produce the $7.6 million increase in working capital.
Capital expenditures were $10.7 million through October 25, 1998, $11.3 million
less than the comparable period last year. Capital expenditures for fiscal 1999
are expected to approximate $17 million.
During the first quarter of fiscal 1999, the Company acquired certain uniform
rental operations for approximately $13 million in cash. The assets acquired
were primarily industrial uniform routes in Minnesota and Omaha, Nebraska and
industrial uniform and linen routes and production facilities in Bethlehem and
Harrisburg, Pennsylvania. These acquisitions are expected to add over $10.5
million in annual rental revenues. These acquisitions were accounted for using
the purchase method.
In September 1998, the Company sold three rental laundry facilities to NuCentury
Textile Services, Inc., a privately held organization. These principally linen
rental facilities were located in Long Beach, California, Duluth, Minnesota and
Toledo, Ohio. Estimated annual revenues for these operations were approximately
$20 million. These linen facilities were acquired in conjunction with prior
acquisitions that expanded geographically our industrial uniform rental network.
Some linen business we had acquired in Michigan was also sold with the
transaction. The Company retained its industrial uniform rental business in
Toledo and will process it from existing facilities in Detroit. The proceeds
from the sale of approximately $20 million were used to repay bank debt. A
pretax gain on the sale of the linen business of approximately $2.1 million was
included as a special item in operating income during the third quarter of
fiscal 1999.
In November 1998, the Board of Directors declared a $.09 per share cash dividend
payable on December 18, 1998 to stockholders of record on December 4, 1998. The
$.09 per share dividend was a 20% increase over the semi-annual dividend paid
the prior year.
Management believes that cash generated from operations and its bank credit
facilities will be sufficient to meet its cash requirements for acquisitions and
capital expenditures in the foreseeable future.
10
<PAGE>
RESULTS OF OPERATIONS
Third quarter fiscal 1999 compared to third quarter fiscal 1998
- - ---------------------------------------------------------------
Revenues for the third quarter of fiscal 1999 were $69 million, about the same
as the $70 million last year. In September 1998 Unitog sold three linen
facilities consistent with its strategic focus on the industrial rental
business. Excluding revenues from the sold linen operations in both periods,
third quarter rental revenues of $54 million in the quarter increased by $3.1
million or 6% over the prior year. The increase in rental revenues was created
by a combination of internal growth and acquired operations. Direct sales for
the third quarter of fiscal 1999 were $12 million, a decrease of $1.6 million or
12% below the comparable period last year. The decrease in Direct sales was
principally due to volume declines in four national account programs and fewer
implementations of new image programs with national accounts.
Operating income for the third quarter of fiscal 1999 was $8.9 million, an
increase of $1.1 million or 14% greater than the comparable period last year.
Operating income for both fiscal 1999 and fiscal 1998 were affected by special
items. A gain on the sale of the linen business of approximately $2.1 million
was included as a special item in operating income during the third quarter of
fiscal 1999. During the third quarter of fiscal 1998 the Company recorded as a
special item a combination of a legal recovery and a potential environmental
charge which increased operating income by $1.0 million. Excluding the effect
of these special items from both years, operating income was approximately the
same as last year.
Net earnings for the third quarter of fiscal 1999 were $4.3 million, an increase
of $434,000 or 11% above the comparable period last year. Excluding the effect
of special items from both fiscal periods, net earnings were $3.0 million during
the third quarter compared to $3.3 million last year, a decrease of $300,000 or
9%. Higher interest expense created the decrease in net earnings. Net earnings
for the third quarter of fiscal 1999 were $.46 per diluted share, an increase of
$.06 per diluted share or 15% greater than the comparable period last year.
Excluding the effect of special items from both fiscal 1999 and fiscal 1998, net
earnings were $.32 per diluted share compared to $.34 per diluted share,
respectively. Weighted average shares outstanding, assuming dilution, decreased
by 3% due to stock repurchases initiated under the Company's stock repurchase
program.
Nine months fiscal 1999 compared to nine months fiscal 1998
- - -----------------------------------------------------------
Revenues for the nine months ended October 25, 1998 were $212 million, an
increase of $4 million or 2% over the comparable period last year. Excluding
revenues from the sold linen operations in both periods, rental revenues were
$161 million, an increase of $11 million or 7% over last year. The increase in
rental revenues was created by a combination of internal growth and acquired
operations. Direct sales for the first nine months of fiscal 1999 were $38
million, a decrease of $5 million or 11% less than the comparable period last
year. The decrease in Direct sales was due to volume losses within four
national account programs and fewer implementations of new image programs.
Operating income for the nine months ended October 25, 1998 was $20.6 million
approximately the same as last year. Operating income for both fiscal 1999 and
fiscal 1998 were affected by special items. A gain on the sale of the linen
business of approximately $2.1 million was included as a special item in
operating income during the third quarter of fiscal 1999. During the third
quarter of fiscal 1998 the Company recorded as a special item a combination of a
legal recovery and a potential environmental charge which increased operating
income by approximately $1.0 million. Excluding the effect of these special
items from both fiscal periods, operating income for the nine months ended
October 25, 1998 decreased $1.1
11
<PAGE>
million or 5% below the comparable period last year. Lower profitability of the
Direct sales business created the decrease in operating income.
Net earnings for the nine months ended October 25, 1998 were $9.2 million, a
decrease of $750,000 or 8% below the comparable period last year. Net earnings
per diluted share were $.98 for the nine months ended October 25, 1998, a
decrease of $.04 per diluted share below the comparable period last year.
Excluding the effect of special items from both fiscal 1999 and fiscal 1998, net
earnings were $7.9 million or $.84 per diluted share for the first nine months
of fiscal 1999 compared to $9.3 million or $.96 per diluted share for the
comparable period last year. Lower operating profitability of the Direct sales
business created the decrease in net earnings and net earnings per diluted
share.
OTHER
-----
In November 1998, the Company announced that it retained investment banking
counsel to advise on future strategies for enhancing shareholder value.
Goldsmith, Agio, Helms & Company and George K. Baum & Company were retained to
advise on strategic alternatives including the sale of the Company, a strategic
merger, or other changes in business strategy. Information regarding the Company
has been provided to a number of companies under confidentiality agreements and
detailed discussions are currently underway with a select group of parties.
YEAR 2000
---------
The Year 2000 issue involves computer programs and embedded logic devices that
utilize two digits rather than four digits to define the applicable year and the
possible failure of those programs and devices to properly recognize date-
sensitive information when the year changes to 2000. Systems that do not
properly recognize date-sensitive information could generate erroneous data or
could cause a system failure. The Company is conducting reviews of its computer
systems and those of its significant business relationships to identify those
that could be affected by the Year 2000 issue. The Company has proactively
changed some of its mission critical systems including its data processing
equipment, its communication equipment, and its core business software
applications to respond to increased customer service opportunities with its
present customers and vendors and to develop new opportunities with future
prospective customers and vendors. The Company is currently testing the systems
referenced above, along with other mission critical and non-mission critical
systems to determine Year 2000 compliance. The Company intends to complete this
testing by March 31, 1999. The Company plans to develop formal contingency plans
for any mission critical systems not expected to be compliant prior to the
beginning of Year 2000. The Company believes its contingency plans will be
completed by May 31, 1999. The Company believes it will complete the remediation
of Year 2000 issues on its mission critical systems by June 30, 1999. Future
costs relating to mitigation of Year 2000 risks are not expected to be material.
There can be no assurance that the Company's key information technology systems,
as well as those of its significant business relationships, will be compliant or
that any such failure would not have an adverse effect on the Company's systems
and operations.
FORWARD LOOKING STATEMENTS
--------------------------
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
certain forward-looking statements. This Form 10-Q contains forward-looking
statements that reflect the Company's current views with respect to future
events and financial performance. These forward-looking statements are subject
to certain risks and uncertainties that could cause actual results to differ
materially from historical results or those anticipated. The words "should,"
"believe," "expect," "anticipate," "intend," "estimate," and other expressions
that indicate future events and trends identify forward-looking statements.
Actual future results and trends may differ materially from historical results
or those anticipated depending on a variety of factors, including, but not
limited to, performance of acquisitions; economic and business changes;
fluctuations in the cost of materials; strikes and unemployment levels; demand
and price for the Company's products and services; successfully addressing Year
2000 issues; and the outcome of pending and future litigation and environmental
matters.
12
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
-----------------
The Company has been named as a potentially responsible party, and thus faces
joint and several liability, under the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") as a result of alleged environmental
contamination in Tempe, Arizona. Unitog's facility in Tempe is located within
the South Indian Bend Wash Federal Superfund ("SIBW") site. The SIBW site is
several square miles in size and is designated for action because of the
presence of volatile organic compounds in soil and groundwater there. Soil
testing at the Company's facility detected volatile organic compounds in the
soil and the Company is now in the process of remediating the soil at its
facility. The Company's estimate of the expense related to soil remediation at
its facility has been accrued and charged to operating expense. Groundwater
testing at the Company's property has detected what the Company believes are
very low levels of volatile organic compound contamination on site. The United
States Environmental Protection Agency ("EPA") has made a preliminary
determination that groundwater contamination in the vicinity of the Company's
plant does not warrant remediation at this time and will be appropriate for
monitored natural attenuation. It is possible that the EPA will attempt to
collect from the potentially responsible parties the costs it has incurred with
respect to the SIBW site. It is not possible at this time to determine the
amount of costs incurred by the EPA or to determine the Company's share of such
costs or when the EPA may seek to collect such costs. The Company does not
believe that its liability, if any, with respect to the SIBW site will be
material to the consolidated financial position of the Company. The charge, if
any, to net earnings during any future quarterly period for costs should the EPA
seek reimbursement from the Company of its costs could have a material adverse
effect on net earnings of that quarterly period.
Item 5. Other Information
-----------------
In November 1998, the Company announced that it retained investment banking
counsel to advise on future strategies for enhancing shareholder value.
Goldsmith, Agio, Helms & Company and George K. Baum & Company were retained to
advise on strategic alternatives including the sale of the Company, a strategic
merger, or other changes in business strategy. Information regarding the Company
has been provided to a number of companies under confidentiality agreements and
detailed discussions are currently underway with a select group of parties.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits.
4(a) Amendment No. 6 to Loan and letter of Credit Reimbursement Agreement,
dated June 29, 1998, between Unitog Company, Unitog Rental Services,
Inc., UMB Bank, Harris Trust and Savings Bank and The First National
Bank of Chicago.
10(a) Severance and Noncompetition Agreement dated November 2, 1998,
between Unitog Company and G. Jay Arrowsmith.
10(b) Severance and Noncompetition Agreement dated October 15, 1998,
between Unitog Company and Robert M. Barnes.
10(c) Severance and Noncompetition Agreement dated December 1, 1998,
between Unitog Company and Ronald J. Harden.
13
<PAGE>
10(d) Severance and Noncompetition Agreement dated October 15, 1998,
between Unitog Company and J. Craig Peterson.
10(e) Severance and Noncompetition Agreement dated October 15, 1998,
between Unitog Company and Randolph K. Rolf
10(f) Severance and Noncompetition Agreement dated October 15, 1998,
between Unitog Company and Terence C. Shoreman.
10(g) Severance and Noncompetition Agreement dated October 29, 1998,
between Unitog Company and Robert L. Wilhelm.
10(h) Retention Agreement with G. Jay Arrowsmith.
10(i) Retention Agreement with Ronald J. Harden.
10(j) Retention Agreement with Robert L. Wilhelm
27 Financial Data Schedule for the quarter ended October 25, 1998.
99 Press Release dated November 30, 1998.
(b) Reports on Form 8-K.
Unitog Company did not file any reports on Form 8-K during the
quarter ended October 25, 1998.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Unitog Company
Dated : December 7, 1998 By: /s/ J. Craig Peterson
----------------------
J. Craig Peterson
Executive Vice President
Chief Administrative and Financial Officer
(Duly Authorized Officer)
15
<PAGE>
EXHIBIT 4(A)
AMENDMENT NO. 6
TO LOAN AND LETTER OF CREDIT
REIMBURSEMENT AGREEMENT
-----------------------
THIS AMENDMENT NO. 6 ("Amendment No. 6") is made effective as of the 29th
day of June, 1998, among UNITOG COMPANY, a Delaware corporation (the "Company"),
UNITOG RENTAL SERVICES, INC., a California corporation ("Rental") (Company and
Rental being sometimes collectively referred to herein as the "Borrowers" or
individually as a "Borrower"), UMB Bank, n.a., f/k/a United Missouri Bank,
N.A., Kansas City, Missouri, a national banking association ("UMB"), HARRIS
TRUST AND SAVINGS BANK, Chicago, Illinois, an Illinois banking corporation
("Harris"), THE FIRST NATIONAL BANK OF CHICAGO, Chicago, Illinois, a national
banking association ("First Chicago") (UMB, Harris and First Chicago being
sometimes collectively referred to herein as the "Banks" or individually as a
"Bank") and UMB Bank, n.a., f/k/a United Missouri Bank, N.A., Kansas City,
Missouri, a national banking association, as agent for the Banks herein (in such
capacity, the "Agent").
RECITALS
--------
WHEREAS, the Borrowers, UMB, Harris, NBD BANK, Detroit, Michigan, a
Michigan banking corporation ("NBD"), and the Agent entered into a Loan and
Letter of Credit Reimbursement Agreement (the "Agreement") dated September 10,
1993, the terms of which were modified and amended by Amendment No. 1 to Loan
and Letter of Credit Reimbursement Agreement ("Amendment No. 1") dated December
29, 1994, and further modified and amended by Amendment No. 2 to Loan and Letter
of Credit Reimbursement Agreement ("Amendment No. 2") dated November 9, 1995,
Amendment No. 3 to Loan and Letter of Credit Reimbursement Agreement ("Amendment
No. 3") dated effective February 1, 1996, Amendment No. 4 to Loan and Letter of
Credit Reimbursement Agreement ("Amendment No. 4") dated effective November 25,
1996, and Amendment No. 5 to Loan and Letter of Credit Reimbursement Agreement
dated effective October 6, 1997 ("Amendment No. 5"), each executed by the
Borrowers, the Banks and the Agent (the Agreement, as modified and amended by
Amendment No. 1, Amendment No. 2, Amendment No. 3, Amendment No. 4 and Amendment
No. 5, herein the "Loan Agreement"); and
WHEREAS, by Assignment Agreement dated February 27, 1998, NBD sold and
assigned to its affiliate First Chicago, and First Chicago purchased and assumed
from its affiliate NBD, NBD's interest in and to NBD's rights and obligations
under the Loan Agreement; and
WHEREAS, pursuant to the Loan Agreement the Banks agreed to provide
revolving loans to the Borrowers of up to Sixty-Four Million Five Hundred Sixty-
One Thousand Six Hundred Forty-Four Dollars ($64,561,644); and
WHEREAS, the Borrowers have requested an increase in the amount of
revolving loans available under the Loan Agreement to Seventy Million Dollars
($70,000,000) and to extend
<PAGE>
the Revolving Credit Maturity Date, which is now September 8, 2000, and the
Banks have agreed to such request, subject to the terms and conditions of this
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein, the parties mutually agree as follows:
1. Amendment to Section 1.2 of the Loan Agreement. Section 1.2 of the Loan
----------------------------------------------
Agreement is amended as follows:
a. The term "Banks" is hereby amended to have the meaning ascribed
thereto in the Preamble to this Amendment No. 6.
b. The amounts of the revolving credit commitments of the Banks set forth
in the definition of "Revolving Credit Commitments" are deleted and
----------------------------
replaced with the following: (i) Twenty Five Million Two Hundred Thousand
Dollars ($25,200,000), in the case of UMB; (ii) Twenty Two Million Four
Hundred Thousand Dollars ($22,400,000), in the case of Harris; and (iii)
Twenty Two Million Four Hundred Thousand Dollars ($22,400,000), in the case
of First Chicago.
c. The term "Revolving Credit Maturity Date" is revised to mean September
9, 2001, or as otherwise extended, if extended.
d. The following defined term is inserted:
"First Chicago" shall have the meaning ascribed thereto in the Preamble to
-------------
this Amendment No. 6.
2. Substitution.The Loan Agreement is further amended by substituting the
------------
term "First Chicago" for the term "NBD" in each place in which the latter term
appears.
3. Condition Precedent. For and in consideration of the Banks' agreement
-------------------
to increase the amount of the Revolving Credit Commitments, and as a condition
precedent thereto, Borrowers agree to reimburse Agent for its reasonable legal
fees and expenses related to this Amendment No. 6 and to pay Banks a fee of
Twenty Thousand Three Hundred Ninety Four and 00/100 Dollars ($20,394.00),
receipt of which is hereby acknowledged, such fee to be shared equally by
Harris and First Chicago.
4. Restatement of Section 12.8 of the Loan Agreement. Borrowers expressly
-------------------------------------------------
restate and affirm the provision of Section 12.8 of the Loan Agreement.
5. Adjustment of Banks' Pro Rata Share. Borrowers, Banks and Agent agree
-----------------------------------
and acknowledge that by reason of the amendment set forth in Paragraph 1.b
hereof, each Bank's "Pro Rata Share," as that term is defined in Section 1.2
of the Agreement, has been changed. More particularly, the"Pro Rata Share" of
UMB has decreased from Forty Percent (40%) to Thirty Six Percent (36%) while
the "Pro Rata Share" of each of Harris and First Chicago has increased from
Thirty Percent (30%) to Thirty Two Percent (32%).
<PAGE>
6. Fourth Amended and Restated Master Credit Revolving Note. Borrowers
--------------------------------------------------------
agree to execute and deliver to each of the Banks a Fourth Amended and
Restated Master Revolving Credit Note ("Fourth Amended Note") in the form of
Exhibit C attached hereto and incorporated herein by reference payable to each
of the Banks in accordance with the amount of their respective Revolving
Credit Commitment as amended hereunder. Following the execution and delivery
of the Fourth Amended Note to each Bank, each Fourth Amended Note shall
evidence all of Borrowers' indebtedness to the Bank to which it is payable,
and each Bank shall then mark the Third Amended Note held by it "Modified
pursuant to that certain Fourth Amended and Restated Master Revolving Credit
Note, dated [the date hereof]" and return such Third Amended Note to
Borrowers. Exhibit C to the Loan Agreement is deleted and replaced in its
entirety by Exhibit C hereto.
7. No Other Modifications. Except as hereby modified and amended, all of
----------------------
the terms, conditions and covenants contained in the Loan Agreement shall
remain in full force and effect.
8. Representations and Warranties. The Borrowers hereby represent and
------------------------------
warrant that:
a. The representations and warranties contained in the Loan Agreement and
in each certificate or document furnished by the Borrowers and delivered
therewith are true and correct in all material respects on and as of the date
hereof as though made on and as of the date hereof;
b. No Event of Default, and to the Borrowers' knowledge no event which
with the passage of time or the giving of notice or both could become an Event
of Default, exists on the date hereof, and no offsets or defenses exist against
their obligations under the Loan Agreement or the documents delivered in
connection therewith;
c. This Amendment has been duly authorized, executed and delivered so as
to constitute the legal, valid and binding obligation of the Borrowers,
enforceable in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditor's rights generally and general principles of equity;
d. The execution, delivery and performance of this Amendment will not
violate any applicable provision of law or judgment, order or regulation of any
court or of any public or governmental agency or authority nor conflict with or
constitute a breach of or a default under any instrument to which the Borrowers
are a party or by which the Borrowers' or the Borrower's properties is bound nor
result in the creation of any lien, charge or encumbrance upon any assets of the
Borrowers.
9. Miscellaneous.
-------------
a. The laws of the State of Missouri shall govern this Amendment.
<PAGE>
b. This Amendment shall be binding on the parties hereto and their
respective successors and assigns, and shall inure to the benefits of the
parties hereto.
c. This Amendment may be executed in any number of counterparts, all of
which when taken together shall constitute but one agreement and any of the
parties hereto may execute this Amendment by signing any such counterpart.
d. Section captions used in this Amendment are for convenience only and
shall not affect the construction of this Amendment.
e. Capitalized terms used herein and not specifically herein defined
shall have the meanings ascribed in the Loan Agreement.
10. Statutory Statement. (Mo. Rev. Stat. (S) 432.045)
-------------------
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING PAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND
OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT BORROWERS AND BANKS
FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH
COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING AND THE DOCUMENTS
REFERRED TO HEREIN, WHICH ARE THE COMPLETE AND EXCLUSIVE STATEMENT OF
THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO
MODIFY IT.
IN WITNESS WHEREOF, the Borrowers, the Banks and the Agent have caused this
Amendment No. 6 to be executed by their respective officers duly authorized as
of the dates written beside their respective names below.
DATE: 6-29-98 UNITOG COMPANY
By: /s/ J. Craig Peterson
Name: J. Craig Peterson
Title: Chief Financial Officer
DATE: 6-29-98 UNITOG RENTAL SERVICES, INC.
By: /s/ J. Craig Peterson
Name: J. Craig Peterson
Title: Chief Financial Officer
<PAGE>
DATE: June 29, 1998 UMB BANK, n.a.
Individually and as Agent
By: /s/ David A. Proffitt
Name: David A. Proffitt
Title: Sr. V.P.
DATE: 6-29-98 THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ William J. Oleferchik
Name: William J. Oleferchik
Title: Vice President
DATE: 6/30/98 HARRIS TRUST AND SAVINGS BANK
By: /s/ Len E. Meyer
Name: Len E. Meyer
Title: Vice President
<PAGE>
EXHIBIT 10(a)
SEVERANCE AND NONCOMPETITION AGREEMENT
--------------------------------------
(Senior Management)
THIS AGREEMENT ("AGREEMENT") is made and entered into this 2nd day of
November, 1998, by and between G. JAY ARROWSMITH ("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,
-------
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 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.
----------------------------------
(a) Severance Payment. In the event that Employee's employment
-----------------
is terminated within two (2) years following a "Change of Control" (as
defined below) and such termination is either (i) Without Cause (as defined
---
below), or (ii) is a Constructive Termination (as defined below), Employee
--
shall 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 Employee's Annual Compensation ("SEVERANCE PAYMENT").
"Annual Compensation" shall mean Employee's base annual salary plus annual
bonus (computed at par levels), an amount equal to the annual cost to
Employee of obtaining annual healthcare coverage comparable to that
currently provided by Employer
<PAGE>
(grossed-up to compensate Employee for the taxable nature of such payment),
an amount equal to normal annual matching by Employer in Employer's 401(k)
plan (as grossed-up to compensate Employee for the taxable nature of such
payment), annual automobile allowance or the annual cost to Employee of
obtaining a motor vehicle comparable to that provided by Employer to
Employee, as the case may be, annual tax preparation costs and an amount
equal to the annual cost to Employee of obtaining life insurance and
insurance coverage for accidental death and disability comparable to that
provided by Employer to Employee (as grossed-up to compensate Employee for
the taxable nature of such payment). Employer shall use its best efforts to
convert the existing life insurance and accidental death and disability
insurance policies to individual policies in the name of Employee.
(b) Excise Tax.
----------
(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
Internal Revenue Code of 1986, as amended (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,
<PAGE>
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 sue 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 sue
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.
<PAGE>
(c) Change of Control. "Change of Control" shall mean: (i) a
-----------------
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
-------------------------
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: (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 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
<PAGE>
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.
----------------------------------------
(a) Confidential Materials and Information. Employer has
--------------------------------------
developed 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
----------------------------
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 by Employer and for twelve (12) 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 Angelica Corporation, Aramark Corporation,
Cintas Corporation, Coyne Textile Services, Inc., G & K Services, Inc.,
Horace Small Manufacturing, Lion Apparel, Inc., Mission Industries, Morgan
Services, Inc., National
<PAGE>
Linen Service, Division of NSI, Omni Service, Inc., Protexall, Inc., Red
Kap Industries, Inc., Riverside Manufacturing Co., Todd Corporation,
UniFirst Corporation, Van Dyne-Crotty, 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 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
---------------------------------
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 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 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
<PAGE>
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 (2%).
7. RESOLUTION OF DISPUTES. If there shall be any dispute between
----------------------
Employer 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 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 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
--------------
enforced according to the law of the State of Missouri.
11. SEPARABILITY. If any portion of this Agreement is held to be
------------
invalid or 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.
<PAGE>
12. WAIVER. This Agreement may be modified, supplemented or amended,
------
and 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
------------------
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/ G. Jay Arrowsmith
G. Jay Arrowsmith
UNITOG COMPANY,
including its subsidiaries and affiliates
By: /s/ Randolph K. Rolf
Name: Randolph K. Rolf
Title: Pres.
<PAGE>
EXHIBIT 10(b)
SEVERANCE AND NONCOMPETITION AGREEMENT
--------------------------------------
(Senior Management)
THIS AGREEMENT ("AGREEMENT") is made and entered into this 15th day of
October, 1998, by and between ROBERT M. BARNES ("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,
-------
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 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.
----------------------------------
(a) Severance Payment. In the event that Employee's
-----------------
employment is terminated within two (2) years following a "Change of
Control" (as defined below) and such termination is either (i) Without
---
Cause (as defined below), or (ii) is a Constructive Termination (as defined
--
below), Employee shall 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 two (2) times Employee's Annual
Compensation ("SEVERANCE PAYMENT"). "Annual Compensation" shall mean
Employee's base annual salary plus annual bonus (computed at par levels),
an amount equal to the annual cost to Employee of obtaining annual
healthcare coverage comparable to that currently provided
<PAGE>
by Employer (grossed-up to compensate Employee for the taxable nature of
such payment), an amount equal to normal annual matching by Employer in
Employer's 401(k) plan (as grossed-up to compensate Employee for the
taxable nature of such payment), annual automobile allowance or the annual
cost to Employee of obtaining a motor vehicle comparable to that provided
by Employer to Employee, as the case may be, annual tax preparation costs
and an amount equal to the annual cost to Employee of obtaining life
insurance and insurance coverage for accidental death and disability
comparable to that provided by Employer to Employee (as grossed-up to
compensate Employee for the taxable nature of such payment). Employer shall
use its best efforts to convert the existing life insurance and accidental
death and disability insurance policies to individual policies in the name
of Employee.
(b) Excise Tax.
----------
(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
Internal Revenue Code of 1986, as amended (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,
<PAGE>
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 sue 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 sue
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.
<PAGE>
(C) Change of Control. "Change of Control" shall mean: (i) a
-----------------
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 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.
(c) Constructive Termination. "Constructive Termination"
------------------------
shall mean: (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 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
<PAGE>
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.
----------------------------------------
(a) Confidential Materials and Information. Employer has
--------------------------------------
developed 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
----------------------------
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 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 Angelica Corporation, Aramark
Corporation, Cintas Corporation, Coyne Textile Services, Inc., G & K
Services, Inc., Horace Small Manufacturing, Lion Apparel, Inc., Mission
Industries, Morgan Services, Inc., National
<PAGE>
Linen Service, Division of NSI, Omni Service, Inc., Protexall, Inc., Red
Kap Industries, Inc., Riverside Manufacturing Co., Todd Corporation,
UniFirst Corporation, Van Dyne-Crotty, 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 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
---------------------------------
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 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 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
<PAGE>
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 (2%).
- - -------
7. RESOLUTION OF DISPUTES. If there shall be any dispute between
----------------------
Employer 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 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 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
--------------
enforced according to the law of the State of Missouri.
11. SEPARABILITY. If any portion of this Agreement is held to be
------------
invalid or 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.
<PAGE>
12. WAIVER. This Agreement may be modified, supplemented or
------
amended, and 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
------------------
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/ Robert M. Barnes
Robert M. Barnes
UNITOG COMPANY,
including its subsidiaries and affiliates
By: /s/ Randolph K. Rolf
Name: R. K. Rolf
Title: President
<PAGE>
EXHIBIT 10(C)
SEVERANCE AND NONCOMPETITION AGREEMENT
--------------------------------------
(Senior Management)
THIS AGREEMENT ("AGREEMENT") is made and entered into this 1st day of
December, 1998, by and between RONALD J. HARDEN ("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,
-------
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 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.
----------------------------------
(a) Severance Payment. In the event that Employee's employment
-----------------
is terminated within two (2) years following a "Change of Control" (as
defined below) and such termination is either (i) Without Cause (as defined
---
below), or (ii) is a Constructive Termination (as defined below), Employee
--
shall 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 Employee's Annual Compensation ("SEVERANCE PAYMENT").
"Annual Compensation" shall mean Employee's base annual salary plus annual
bonus (computed at par levels), an amount equal to the annual cost to
Employee of obtaining annual healthcare coverage comparable to that
currently provided by Employer
<PAGE>
(grossed-up to compensate Employee for the taxable nature of such payment),
an amount equal to normal annual matching by Employer in Employer's 401(k)
plan (as grossed-up to compensate Employee for the taxable nature of such
payment), annual automobile allowance or the annual cost to Employee of
obtaining a motor vehicle comparable to that provided by Employer to
Employee, as the case may be, annual tax preparation costs and an amount
equal to the annual cost to Employee of obtaining life insurance and
insurance coverage for accidental death and disability comparable to that
provided by Employer to Employee (as grossed-up to compensate Employee for
the taxable nature of such payment). Employer shall use its best efforts to
convert the existing life insurance and accidental death and disability
insurance policies to individual policies in the name of Employee.
(b) Excise Tax.
----------
(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
Internal Revenue Code of 1986, as amended (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,
<PAGE>
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 sue 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 sue 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.
<PAGE>
(c) Change of Control. "Change of Control" shall mean: (i) a
-----------------
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 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:
(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 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
<PAGE>
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.
----------------------------------------
(a) Confidential Materials and Information. Employer has
--------------------------------------
developed 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
----------------------------
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 by Employer and for twelve (12) 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 Angelica Corporation, Aramark Corporation,
Cintas Corporation, Coyne Textile Services, Inc., G & K Services, Inc.,
Horace Small Manufacturing, Lion Apparel, Inc., Mission Industries, Morgan
Services, Inc., National
<PAGE>
Linen Service, Division of NSI, Omni Service, Inc., Protexall, Inc., Red
Kap Industries, Inc., Riverside Manufacturing Co., Todd Corporation,
UniFirst Corporation, Van Dyne-Crotty, 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 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
---------------------------------
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
------------------------------------
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
---------------
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
<PAGE>
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 (2%).
- - -------
7. RESOLUTION OF DISPUTES. If there shall be any dispute between
----------------------
Employer 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 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 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
--------------
enforced according to the law of the State of Missouri.
11. SEPARABILITY. If any portion of this Agreement is held to be invalid
------------
or 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.
<PAGE>
12. WAIVER. This Agreement may be modified, supplemented or amended, and
------
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
------------------
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/ Ronald J. Harden
Ronald J. Harden
UNITOG COMPANY,
including its subsidiaries and affiliates
By: /s/ Randolph K. Rolf
Name: Randolph K. Rolf
Title: Pres.
<PAGE>
EXHIBIT 10(d)
SEVERANCE AND NONCOMPETITION AGREEMENT
--------------------------------------
(Senior Management)
THIS AGREEMENT ("AGREEMENT") is made and entered into this 15th day of
October, 1998, by and between J. CRAIG PETERSON ("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,
-------
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
-----------------------
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.
----------------------------------
(a) Severance Payment. In the event that Employee's employment is
-----------------
terminated within two (2) years following a "Change of Control" (as defined
below) and such termination is either (i) Without Cause (as defined below),
---
or (ii) is a Constructive Termination (as defined below), Employee shall
--
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 two (2) times Employee's Annual Compensation ("SEVERANCE
PAYMENT"). "Annual Compensation" shall mean Employee's base annual salary
plus annual bonus (computed at par levels), an amount equal to the annual
cost to Employee of obtaining annual healthcare coverage comparable to that
currently provided by Employer (grossed-up to compensate Employee for the
taxable nature of such payment), an amount equal to normal annual matching
by Employer in Employer's 401(k) plan (as grossed-up to compensate Employee
for the taxable nature of such
<PAGE>
payment), annual automobile allowance or the annual cost to Employee of
obtaining a motor vehicle comparable to that provided by Employer to
Employee, as the case may be, annual tax preparation costs and an amount
equal to the annual cost to Employee of obtaining life insurance and
insurance coverage for accidental death and disability comparable to that
provided by Employer to Employee (as grossed-up to compensate Employee for
the taxable nature of such payment). Employer shall use its best efforts to
convert the existing life insurance and accidental death and disability
insurance policies to individual policies in the name of Employee.
(b) Excise Tax.
----------
(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 Internal
Revenue Code of 1986, as amended (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
<PAGE>
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 sue 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 sue
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
-----------------
person, corporation, entity or group (A) makes a tender or exchange offer
for the issued and
<PAGE>
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
-------------------------
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:
------------------------
(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
--------------
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
<PAGE>
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.
----------------------------------------
(a) Confidential Materials and Information. Employer has developed
--------------------------------------
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
----------------------------
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
-----------------------------------
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 Angelica Corporation, Aramark Corporation,
Cintas Corporation, Coyne Textile Services, Inc., G & K Services, Inc.,
Horace Small Manufacturing, Lion Apparel, Inc., Mission Industries, Morgan
Services, Inc., National Linen Service, Division of NSI, Omni Service,
Inc., Protexall, Inc., Red Kap Industries, Inc., Riverside Manufacturing
Co., Todd Corporation, UniFirst Corporation, Van
<PAGE>
Dyne-Crotty, 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 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
---------------------------------
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
------------------------------------
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
---------------
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
<PAGE>
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 (2%).
7. RESOLUTION OF DISPUTES. If there shall be any dispute between
----------------------
Employer 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 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 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
--------------
enforced according to the law of the State of Missouri.
11. SEPARABILITY. If any portion of this Agreement is held to be invalid
------------
or 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
------
any provision of this Agreement can be waived, only by written instrument making
specific reference
<PAGE>
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
------------------
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/ J. Craig Peterson
J. Craig Peterson
UNITOG COMPANY,
including its subsidiaries and affiliates
By: /s/ Randolph K. Rolf
Name: R. K. Rolf
Title: President
<PAGE>
EXHIBIT 10(e)
SEVERANCE AND NONCOMPETITION AGREEMENT
--------------------------------------
(Senior Management)
THIS AGREEMENT ("AGREEMENT") is made and entered into this 15th day of
October, 1998, by and between RANDOLPH K. ROLF ("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,
-------
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
-----------------------
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.
----------------------------------
(a) Severance Payment. In the event that Employee's employment is
-----------------
terminated within two (2) years following a "Change of Control" (as defined
below) and such termination is either (i) Without Cause (as defined below),
---
or (ii) is a Constructive Termination (as defined below), Employee shall
--
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").
<PAGE>
(b) Excise Tax.
----------
(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;
<PAGE>
(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 sue 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 sue
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
-----------------
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
<PAGE>
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
-------------------------
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:
------------------------
(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
--------------
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.
----------------------------------------
(a) Confidential Materials and Information. Employer has developed
--------------------------------------
confidential information, strategies and programs, which include customer
lists, prospects lists, expansion and acquisition plans, market research,
sales systems, marketing
<PAGE>
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
----------------------------
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
-----------------------------------
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 Angelica Corporation, Aramark Corporation,
Cintas Corporation, Coyne Textile Services, Inc., G & K Services, Inc.,
Horace Small Manufacturing, Lion Apparel, Inc., Mission Industries, Morgan
Services, Inc., National Linen Service, Division of NSI, Omni Service,
Inc., Protexall, Inc., Red Kap Industries, Inc., Riverside Manufacturing
Co., Todd Corporation, UniFirst Corporation, Van Dyne-Crotty, 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
<PAGE>
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
-------------------------------------------------
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
----------------------------------
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
-------------------------------------
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
----------------
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
-----------------------
(2%).
7. RESOLUTION OF DISPUTES. If there shall be any dispute between Employer
-----------------------
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
<PAGE>
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
------------
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
-----------
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
---------------
enforced according to the law of the State of Missouri.
11. SEPARABILITY. If any portion of this Agreement is held to be invalid or
-------------
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
-------
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
-------------------
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.
<PAGE>
EMPLOYEE ACKNOWLEDGES THAT HE/SHE HAS READ THE ENTIRE CONTENTS OF THIS
AGREEMENT AND THAT HE/SHE UNDERSTANDS ITS TERMS.
EMPLOYEE:
/s/ Randolph K. Rolf
Randolph K. Rolf
UNITOG COMPANY,
including its subsidiaries and affiliates
By: /s/ Terence C. Shoreman
Name: Terence C. Shoreman
Title: Chief Operating Officer
<PAGE>
EXHIBIT 10(f)
SEVERANCE AND NONCOMPETITION AGREEMENT
--------------------------------------
(Senior Management)
THIS AGREEMENT ("AGREEMENT") is made and entered into this 15th day of
October, 1998, by and between TERENCE C. SHOREMAN ("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, 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 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.
-----------------------------------
(a) Severance Payment. In the event that Employee's employment is
------------------
terminated within two (2) years following a "Change of Control" (as defined
below) and such termination is either (i) Without Cause (as defined below),
---
or (ii) is a Constructive Termination (as defined below), Employee shall
--
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 two (2) times Employee's Annual Compensation ("SEVERANCE
PAYMENT"). "Annual Compensation" shall mean Employee's base annual salary
plus annual bonus (computed at par levels), an amount equal to the annual
cost to Employee of obtaining annual healthcare coverage comparable to that
currently provided by Employer (grossed-up to compensate Employee for the
taxable nature of such payment), an amount equal to normal annual matching
by Employer in Employer's
<PAGE>
401(k) plan (as grossed-up to compensate Employee for the taxable nature of
such payment), annual automobile allowance or the annual cost to Employee
of obtaining a motor vehicle comparable to that provided by Employer to
Employee, as the case may be, annual tax preparation costs and an amount
equal to the annual cost to Employee of obtaining life insurance and
insurance coverage for accidental death and disability comparable to that
provided by Employer to Employee (as grossed-up to compensate Employee for
the taxable nature of such payment). Employer shall use its best efforts to
convert the existing life insurance and accidental death and disability
insurance policies to individual policies in the name of Employee.
(b) Excise Tax.
----------
(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
Internal Revenue Code of 1986, as amended (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
<PAGE>
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 sue 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 sue
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
-----------------
person, corporation, entity or group (A) makes a tender or exchange offer
for the issued and
<PAGE>
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
-------------------------
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: (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 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
<PAGE>
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.
----------------------------------------
(a) Confidential Materials and Information. Employer has
--------------------------------------
developed 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
----------------------------
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 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 Angelica Corporation, Aramark
Corporation, Cintas Corporation, Coyne Textile Services, Inc., G & K
Services, Inc., Horace Small Manufacturing, Lion Apparel, Inc., Mission
Industries, Morgan Services, Inc., National Linen Service, Division of NSI,
Omni Service, Inc., Protexall, Inc., Red Kap Industries, Inc., Riverside
Manufacturing Co., Todd Corporation, UniFirst Corporation, Van
<PAGE>
Dyne-Crotty, 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 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
---------------------------------
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 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 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
<PAGE>
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 (2%).
7. RESOLUTION OF DISPUTES. If there shall be any dispute between
----------------------
Employer 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 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 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
--------------
enforced according to the law of the State of Missouri.
11. SEPARABILITY. If any portion of this Agreement is held to be invalid
------------
or 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
------
any provision of this Agreement can be waived, only by written instrument making
specific reference
<PAGE>
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
------------------
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/ Terence C. Shoreman
Terence C. Shoreman
UNITOG COMPANY,
including its subsidiaries and affiliates
By: /s/ Randolph K. Rolf
Name: R. K. Rolf
Title: President
<PAGE>
EXHIBIT 10(G)
SEVERANCE AND NONCOMPETITION AGREEMENT
--------------------------------------
(Senior Management)
THIS AGREEMENT ("AGREEMENT") is made and entered into this 29th day of
October, 1998, by and between ROBERT WILHELM ("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,
-------
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
-----------------------
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.
----------------------------------
(a) Severance Payment. In the event that Employee's employment is
-----------------
terminated within two (2) years following a "Change of Control" (as defined
below) and such termination is either (i) Without Cause (as defined below),
---
or (ii) is a Constructive Termination (as defined below), Employee shall
--
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 Employee's Annual Compensation ("SEVERANCE PAYMENT"). "Annual
Compensation" shall mean Employee's base annual salary plus annual bonus
(computed at par levels), an amount equal to the annual cost to Employee of
obtaining annual healthcare coverage comparable to that currently provided
by Employer
<PAGE>
(grossed-up to compensate Employee for the taxable nature of such payment),
an amount equal to normal annual matching by Employer in Employer's 401(k)
plan (as grossed-up to compensate Employee for the taxable nature of such
payment), annual automobile allowance or the annual cost to Employee of
obtaining a motor vehicle comparable to that provided by Employer to
Employee, as the case may be, annual tax preparation costs and an amount
equal to the annual cost to Employee of obtaining life insurance and
insurance coverage for accidental death and disability comparable to that
provided by Employer to Employee (as grossed-up to compensate Employee for
the taxable nature of such payment). Employer shall use its best efforts to
convert the existing life insurance and accidental death and disability
insurance policies to individual policies in the name of Employee.
(b) Excise Tax.
----------
(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 Internal
Revenue Code of 1986, as amended (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,
<PAGE>
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 sue 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 sue 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.
<PAGE>
(c) Change of Control. "Change of Control" shall mean: (i) a
-----------------
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
-------------------------
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: (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 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
<PAGE>
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.
----------------------------------------
(a) Confidential Materials and Information. Employer has
--------------------------------------
developed 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
----------------------------
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 by Employer and for twelve (12) 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 Angelica Corporation, Aramark Corporation,
Cintas Corporation, Coyne Textile Services, Inc., G & K Services, Inc.,
Horace Small Manufacturing, Lion Apparel, Inc., Mission Industries, Morgan
Services, Inc., National
<PAGE>
Linen Service, Division of NSI, Omni Service, Inc., Protexall, Inc., Red
Kap Industries, Inc., Riverside Manufacturing Co., Todd Corporation,
UniFirst Corporation, Van Dyne-Crotty, 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 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
---------------------------------
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 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 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
<PAGE>
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 (2%).
- - -------
7. RESOLUTION OF DISPUTES. If there shall be any dispute between
----------------------
Employer 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 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 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
--------------
enforced according to the law of the State of Missouri.
11. SEPARABILITY. If any portion of this Agreement is held to be
------------
invalid or 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.
<PAGE>
12. WAIVER. This Agreement may be modified, supplemented or amended,
------
and 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
------------------
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/ Robert Wilhelm
Robert Wilhelm
UNITOG COMPANY,
including its subsidiaries and affiliates
By: /s/ Randolph K. Rolf
Name: Randolph K. Rolf
Title: Pres.
<PAGE>
EXHIBIT 10(H)
[LETTERHEAD OF UNITOG APPEARS HERE]
October 27, 1998
GERALD J ARROWSITH
VP MANUFACTURING
1010 MANUFACTURING GENERAL
As announced, Unitog's Board of Directors has retained advisors to help it
explore strategic alternatives for the future. Two possible alternatives
include a sale or a merger of the Company. In the event of a sale or merger, we
will include you as a participant in the retention plan. The retention program
is designed to provide you with additional incentives to remain with Unitog
until the completion of a sale or merger.
Effective today, you will accrue an additional 50% of your base pay for each
completed week of work up to the closing of a sale or merger. All retention
benefits are contingent on the sale or merger of the Company and will be paid as
soon as possible after the completion of a sale or merger. In the event the
Board decides not to sell or merge the Company, you will be notified and the
retention program will cease and no retention benefits will be paid. Should
your employment terminate without cause while the retention program is in effect
and prior to the closing of a sale or merger, you will receive the amount
accrued for you for each completed week of work as of the date of termination.
Additionally, the Board has approved the terms of a Severance and Noncompetition
Agreement. Under this Agreement the Company would pay you one year's
compensation in the event your employment is terminated without cause or is
constructively terminated within two years after a change of control. The
Agreement also includes a one year noncompetition agreement. This Agreement
will be provided to you under separate cover. Please read it carefully and
contact Rob Barnes on ext. 3069 with any questions.
Your stock options also provide you with an important incentive to stay with
Unitog through this process. As a participant in Unitog's stock option program,
you currently hold stock options as presented on the attached sheet.
Generally, your options become vested at the rate of 25% per year. In the event
of a "change of control," which generally means the sale of the Company, the
vesting schedule of your options changes. For options granted prior to 1998,
any options that are not vested at the time of the change of control become
vested if your employment is voluntarily or involuntarily terminated within one
year after the change of control. In that instance you would receive a cash
payment equal to the value of Unitog stock at the time of the change of control
minus the exercise price for the option. Options granted in 1998 provide that
in the event of a change of control all unvested options automatically become
fully vested.
<PAGE>
As a result, if you voluntarily leave Unitog prior to a change of control, you
will not receive the benefits of the future accelerated vesting of your options.
Furthermore, if you voluntarily leave Unitog (except for retirement after age
65) all options that were outstanding (whether vested or unvested) on your last
day of employment would be terminated.
This letter is only a summary of the terms of your stock options. Please refer
specifically to the terms of the 1992 and 1997 stock option plans and the
prospectus describing those plans previously sent to you. If you would like to
discuss your options further, please contact Rob Barnes at extension 3069.
As we explore all possible strategic alternatives, special challenges exist for
all of us to ensure the stability of our daily operations. We recognize the
uncertainty and added pressure this process places on you. I sincerely hope we
can count on your continued support and dedication as we meet the challenges
associated with the future of Unitog.
/s/ Randy Rolf
Randy Rolf
President and CEO
<PAGE>
EXHIBIT 10(I)
[LETTERHEAD OF UNITOG APPEARS HERE]
November 30, 1998
RONALD JAMES HARDEN
CONTROLLER-ASST. SECRETARY
0001 GENERAL & ADMINISTRATION-KC
As announced, Unitog's Board of Directors has retained advisors to help it
explore strategic alternatives for the future. Two possible alternatives
include a sale or a merger of the Company. In the event of a sale or merger, we
will include you as a participant in the retention plan. The retention program
is designed to provide you with additional incentives to remain with Unitog
until the completion of a sale or merger.
Effective today, you will accrue an additional 50% of your base pay for each
completed week of work up to the closing of a sale or merger. All retention
benefits are contingent on the sale or merger of the Company and will be paid as
soon as possible after the completion of a sale or merger. In the event the
Board decides not to sell or merge the Company, you will be notified and the
retention program will cease and no retention benefits will be paid. Should
your employment terminate without cause while the retention program is in effect
and prior to the closing of a sale or merger, you will receive the amount
accrued for you for each completed week of work as of the date of termination.
Additionally, the Board has approved the terms of a Severance and Noncompetition
Agreement. Under this Agreement the Company would pay you one year's
compensation in the event your employment is terminated without cause or is
constructively terminated within two years after a change of control. The
Agreement also includes a one year noncompetition agreement. This Agreement
will be provided to you under separate cover. Please read it carefully and
contact Rob Barnes on ext. 3069 with any questions.
Your stock options also provide you with an important incentive to stay with
Unitog through this process. As a participant in Unitog's stock option program,
you currently hold stock options as presented on the attached sheet.
Generally, your options become vested at the rate of 25% per year. In the event
of a "change of control," which generally means the sale of the Company, the
vesting schedule of your options changes. For options granted prior to 1998,
any options that are not vested at the time of the change of control become
vested if your employment is voluntarily or involuntarily terminated within one
year after the change of control. In that instance you would receive a cash
payment equal to the value of Unitog stock at the time of the change of control
minus the exercise price for the option. Options granted in 1998 provide that
in the event of a change of control all unvested options automatically become
fully vested.
<PAGE>
As a result, if you voluntarily leave Unitog prior to a change of control, you
will not receive the benefits of the future accelerated vesting of your options.
Furthermore, if you voluntarily leave Unitog (except for retirement after age
65) all options that were outstanding (whether vested or unvested) on your last
day of employment would be terminated.
This letter is only a summary of the terms of your stock options. Please refer
specifically to the terms of the 1992 and 1997 stock option plans and the
prospectus describing those plans previously sent to you. If you would like to
discuss your options further, please contact Rob Barnes at extension 3069.
As we explore all possible strategic alternatives, special challenges exist for
all of us to ensure the stability of our daily operations. We recognize the
uncertainty and added pressure this process places on you. I sincerely hope we
can count on your continued support and dedication as we meet the challenges
associated with the future of Unitog.
/s/ Randy Rolf
Randy Rolf
President and CEO
<PAGE>
EXHIBIT 10(J)
[LETTERHEAD OF UNITOG APPEARS HERE]
10/27/98
ROBERT WILHELM
SR. VP SALES & MARKETING
1001 PRODUCT ADMINISTRAION-KC
As announced, Unitog's Board of Directors has retained advisors to help it
explore strategic alternatives for the future. Two possible alternatives
include a sale or a merger of the Company. In the event of a sale or merger, we
will include you as a participant in the retention plan. The retention program
is designed to provide you with additional incentives to remain with Unitog
until the completion of a sale or merger.
Effective today, you will accrue an additional 50% of your base pay for each
completed week of work up to the closing of a sale or merger. All retention
benefits are contingent on the sale or merger of the Company and will be paid as
soon as possible after the completion of a sale or merger. In the event the
Board decides not to sell or merge the Company, you will be notified and the
retention program will cease and no retention benefits will be paid. Should
your employment terminate without cause while the retention program is in effect
and prior to the closing of a sale or merger, you will receive the amount
accrued for you for each completed week of work as of the date of termination.
Additionally, the Board has approved the terms of a Severance and Noncompetition
Agreement. Under this Agreement the Company would pay you one year's
compensation in the event your employment is terminated without cause or is
constructively terminated within two years after a change of control. The
Agreement also includes a one year noncompetition agreement. This Agreement
will be provided to you under separate cover. Please read it carefully and
contact Rob Barnes on ext. 3069 with any questions.
Your stock options also provide you with an important incentive to stay with
Unitog through this process. As a participant in Unitog's stock option program,
you currently hold stock options as presented on the attached sheet.
Generally, your options become vested at the rate of 25% per year. In the event
of a "change of control," which generally means the sale of the Company, the
vesting schedule of your options changes. For options granted prior to 1998,
any options that are not vested at the time of the change of control become
vested if your employment is voluntarily or involuntarily terminated within one
year after the change of control. In that instance you would receive a cash
payment equal to the value of Unitog stock at the time of the change of control
minus the exercise price for the option. Options granted in 1998 provide that
in the event of a change of control all unvested options automatically become
fully vested.
<PAGE>
As a result, if you voluntarily leave Unitog prior to a change of control, you
will not receive the benefits of the future accelerated vesting of your options.
Furthermore, if you voluntarily leave Unitog (except for retirement after age
65) all options that were outstanding (whether vested or unvested) on your last
day of employment would be terminated.
This letter is only a summary of the terms of your stock options. Please refer
specifically to the terms of the 1992 and 1997 stock option plans and the
prospectus describing those plans previously sent to you. If you would like to
discuss your options further, please contact Rob Barnes at extension 3069.
As we explore all possible strategic alternatives, special challenges exist for
all of us to ensure the stability of our daily operations. We recognize the
uncertainty and added pressure this process places on you. I sincerely hope we
can count on your continued support and dedication as we meet the challenges
associated with the future of Unitog.
/s/ Randy Rolf
Randy Rolf
President and CEO
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> OCT-26-1998
<CASH> 25,153
<SECURITIES> 0
<RECEIVABLES> 29,158,134
<ALLOWANCES> 1,174,000
<INVENTORY> 21,278,796
<CURRENT-ASSETS> 92,776,848
<PP&E> 180,663,473
<DEPRECIATION> 66,149,804
<TOTAL-ASSETS> 270,201,508
<CURRENT-LIABILITIES> 39,081,214
<BONDS> 102,129,650
0
0
<COMMON> 96,593
<OTHER-SE> 112,990,040
<TOTAL-LIABILITY-AND-EQUITY> 270,201,508
<SALES> 38,161,980
<TOTAL-REVENUES> 211,592,073
<CGS> 32,859,709
<TOTAL-COSTS> 184,763,872
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,877,627
<INCOME-PRETAX> 14,857,216
<INCOME-TAX> 5,645,000
<INCOME-CONTINUING> 9,212,216
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,212,216
<EPS-PRIMARY> 0.98
<EPS-DILUTED> 0.98
</TABLE>
<PAGE>
Exhibit 99
FOR IMMEDIATE RELEASE
- - ---------------------
Unitog Company Says It Has Engaged Investment Bankers
-----------------------------------------------------
To Advise On Strategic Alternatives
-----------------------------------
Kansas City, MO, November 30, 1998 - Unitog Company (NASDAQ: UTOG) today
announced that it has retained investment banking counsel to advise on its
strategic alternatives for enhancing shareholder value.
"We have retained Goldsmith, Agio, Helms & Company and George K. Baum & Company,
two investment banking organizations that understand both the environment of our
industry and the history and operations of our Company," said Randolph K. Rolf,
chairman, president and chief executive officer of Unitog Company. "These two
firms will add expertise to our senior management discussions as we address our
future planning."
Mr. Rolf said alternatives being explored include the sale of the Company, a
strategic merger, or other changes in business strategy. Information regarding
the Company has been provided to a number of companies under confidentiality
agreements and detailed discussions are currently underway with a select group
of parties, Rolf said.
Unitog Company is a leading provider of high-quality uniform rental services to
a variety of industries and sells custom-designed uniforms primarily to national
companies in connection with their corporate image programs. The Company
manufactures substantially all of the uniforms it rents or sells. Unitog's
common stock is publicly traded on the NASDAQ National Market under the symbol
UTOG.
CONTACT: J. Craig Peterson Jack P. Helms
Unitog Company Kevin G. Jach
1300 Washington Street Goldsmith, Agio, Helms and Company
Kansas City, MO 64105 US Bank Place - 46th Floor
816-474-7000 601 Second Avenue South
Minneapolis, MN 55402
612-339-0500
