Exhibit 10.3
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT
AGREEMENT is made and entered into as of the 16th day of
November 2007 by and between G&K Services, Inc. , a
Minnesota corporation with its principal business office in the
State of Minnesota (“ Employer ,” as further
defined in Section 1.10 below); and David M. Miller , a
resident of the State of Minnesota.
INTRODUCTION
A. Employment . Employer
has employed Executive (as defined below) in the capacity of its
President, U.S Rental Operations under that Executive Employment
Agreement effective March 1, 2007 which amended and superseded
the Executive Employment Agreement previously entered into between
the parties effective as of December 19, 2005, and now wishes
to enter into this Executive Employment Agreement. Except as
otherwise specifically set forth herein, this Agreement (as defined
below) is intended to fully supersede all previous agreements or
understandings between Executive and Employer, including, without
limitation, the foregoing agreements. Executive is also subject to
the same polices, terms and conditions as those described in
Employer’s employee handbook, its Code of Ethics, policies,
and employee benefit plans (as modified from time to time by
Employer), except as otherwise specifically provided in this
Agreement.
B. Code
Section 409A . The changes in this Agreement, as compared
with the Executive Employment Agreement executed and delivered by
Executive and Employer effective March 1, 2007, are intended
primarily to reduce the risk that any of the benefits to be
provided to Executive under this Agreement will cause adverse tax
consequences to Executive under Section 409A of the Internal
Revenue Code of 1986, as amended from time to time or any successor
legislation, as well as Treasury Regulations and guidance issued
thereunder (collectively, “ Code Section 409A
”). The changes also provide Executive with additional
benefits, including attorneys’ fees under
Section 8.2 .
C. Other Intentions .
Executive wishes to accept Employer’s offer to continue as
its President, U.S Rental Operations, and the additional benefits
set forth in this Agreement. Executive agrees to continue to be
bound by the confidentiality and restrictive covenants carried
forward from the previous Executive Employment Agreement entered
into between the parties.
AGREEMENT
In consideration of the facts recited
above, which are a part of this Agreement, and the parties’
mutual undertakings in this Agreement, Employer and Executive agree
to the following:
ARTICLE 1
DEFINITIONS
Capitalized terms used generally in
this Agreement will be consistently defined throughout the
Agreement. The following terms will have the meanings set forth
below, unless the context clearly requires otherwise.
1.1 “ Agreement ”
means this Agreement, as it may be amended from time to time.
1.2 “ Base Salary
” means the total annual cash compensation payable to
Executive on a regular periodic basis under this Agreement, other
than under Employer’s annual management incentive Plan (as
defined below), without regard to any voluntary salary deferrals or
reductions to fund employee benefits.
1.3 “Board” means
the Board of Directors of Employer.
1.4 “Cause” has
the meaning set forth in Section 4.3 .
1.5 “Change in
Control” has the meaning set forth in
Section 6.1(c) .
1.6 “Confidential
Information” has the meaning set forth in
Section 7.1(a) .
1.7 “Date of
Termination” has the meaning set forth in
Section 4.2(a) .
1.8 “ Disability ”
means the unwillingness or inability of Executive to perform the
essential functions of Executive’s position (with or without
reasonable accommodation) under this Agreement for a period of
ninety (90) days (consecutive or otherwise) within any period
of six (6) consecutive months because of Executive’s
incapacity due to physical or mental illness, bodily injury or
disease; if Executive has not returned to the full-time performance
of Executive’s duties within thirty (30) days after a
Notice of Termination is issued by Employer, Executive will on such
thirtieth (30 th ) day incur
Executive’s Date of Termination; provided, however, that if
Executive (or Executive’s legal representative) does not
agree with a determination of the existence of a Disability (or the
existence of a physical or mental illness or bodily injury or
disease), this determination will be subject to the certification
of a qualified medical doctor mutually agreed to by Employer and
Executive. In the absence of agreement, each party will nominate a
qualified medical doctor and the two doctors will select a third
doctor, who will make the determination as to Disability. The
decision of the designated physician will be binding upon the
parties.
1.9 “ Effective Date
” shall mean the date referred to in the first paragraph of
this Agreement.
1.10 “ Employer ”
means all of the following, jointly and severally: (a) G&K
Services, Inc., (b) any Subsidiary of G&K Services, Inc.
and (c) any Successor of G&K Services, Inc.
1.11 “ Executive ”
means the individual named in the first paragraph of this
Agreement.
1.12 “ Good Reason
,” with respect to Executive’s termination of
employment after a Change in Control, has the meaning set forth in
Section 6.1(f) .
1.13 “ Notice of
Termination ” has the meaning set forth in
Section 4.2(b) .
1.14 “ Plan ”
means any bonus or incentive compensation agreement, plan, program,
policy or arrangement sponsored, maintained or contributed to by
Employer in which executive employees of Employer generally are
covered, including, without limitation, (a) any stock option
or any other equity-based compensation plan, and specifically the
G&K Services, Inc. 2006 Equity Incentive Plan, and any
predecessor or successor Plan thereto (hereinafter the “
Equity Incentive Plan ”) (b) any annual or long-term
incentive bonus plan; (c) any employee benefit plan, such as a
thrift, profit sharing,
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deferred
compensation, medical, dental, disability income, accident, life
insurance, automobile allowance, perquisite, fringe benefit,
vacation, sick or parental leave, separation or relocation plan or
policy and (d) any other agreement, plan, program, policy or
arrangement intended to benefit executive employees of
Employer.
1.15 “ Subsidiary
” means any corporation or other business entity controlled
by Employer.
1.16 “ Successor ”
means any corporation, individual, group, association, partnership,
limited liability company, firm, venture or other entity or person
that, subsequent to the Effective Date, succeeds to the actual or
practical ability to control (either immediately or with the
passage of time) substantially all of Employer and/or
Employer’s business and/or assets, directly or indirectly, by
merger, consolidation, recapitalization, purchase, liquidation,
redemption, assignment, similar corporate transaction, operation of
law or otherwise.
ARTICLE 2
EMPLOYMENT AND DUTIES
2.1 Employment . Upon the
terms and conditions set forth in this Agreement, Employer hereby
continues to employ Executive and Executive accepts such employment
for an indefinite term. Executive will continue to serve in the
capacity of Employer’s President, U.S Rental Operations, or
such other comparable senior leadership positions as determined by
Employer. This Agreement and Executive’s employment by
Employer may be terminated at any time and for any reason, with or
without cause
2.2 Duties . While Executive
is employed under this Agreement, and excluding any periods of
vacation, sick, disability, or other leave to which Executive is
entitled or is authorized to take, Executive agrees to devote
substantially all of Executive’s attention and time during
normal business hours to the business and affairs of Employer and
to use Executive’s reasonable best efforts to perform
faithfully and efficiently such responsibilities assigned to
Executive from time to time. Executive will comply with each of
Employer’s policies and procedures, including those described
in Employer’s employee handbook, Code of Ethics, policies,
and employee benefit plans, as modified from time to time by
Employer; provided, however, that to the extent these policies and
procedures are inconsistent with this Agreement, the provisions of
this Agreement will control.
2.3 Relationship of Parties .
The relationship between Employer and Executive will be that of
employer and employee. Except as otherwise specifically provided in
this Agreement, nothing in this Agreement will be construed to give
Executive any interest in the assets of Employer. All of the
records and files pertaining to Employer’s suppliers,
licensors, licensees and customers, and any Confidential
Information, are specifically acknowledged to be the property of
Employer and not that of Executive.
ARTICLE 3
COMPENSATION AND BENEFITS
3.1 Base Salary . Employer
shall continue to pay Executive a Base Salary at an annual rate as
approved from time to time by the Board or the Compensation
Committee of the Board, such Base Salary to be paid in
substantially equal regular periodic payments in accordance with
Employer’s regular payroll practices. If Executive’s
Base Salary is changed at any time during Executive’s
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employment by Employer, the changed amount shall become the Base
Salary under this Agreement, subject to any subsequent
changes.
3.2 Other Compensation and
Benefits . While Executive is employed by Employer under this
Agreement:
(a) Executive will be permitted to
participate in all Plans for which Executive is or becomes eligible
under their respective terms.
(b) Executive will be entitled to a
target incentive opportunity under the annual management incentive
Plan in effect at Employer from time to time, including
Executive’s target incentive for fiscal year 2008 established
by the Board. Any incentive pay earned shall be paid no later than
two and one-half (2 1 / 2 ) months after the close of the later of
Executive’s or Employer’s taxable year in which the
incentive pay was earned.
(c) Executive will also be entitled
to participate in or receive benefits under any Plan made available
by Employer in the future to its executives, subject to and on a
basis consistent with the terms, conditions and overall
administration of the Plans and the provisions of this
Section 3.2 .
(d) Executive will be entitled to any
other fringe benefit or perquisite that the Compensation Committee
of the Board approves with respect to Executive.
(e) Employer may, in its sole
discretion, amend or terminate any Plan that provides benefits
generally to its employees, key management employees, or executive
team members.
3.3 Limitation on Right to
Deferred Compensation . The rights of Executive, or
Executive’s beneficiaries or estate, to any deferred
compensation under this Agreement will be solely those of an
unsecured creditor of Employer. Nothing in this Agreement confers
any right on Executive, any of Executive’s beneficiaries, or
Executive’s estate to receive, assign rights under, or
transfer any compensation, including any deferred compensation,
other than as provided for under the applicable Plan.
ARTICLE 4
TERMINATION
Executive’s employment with
Employer may be terminated at any time as of the applicable Date of
Termination as follows; provided, however, that those provisions
contained in this Agreement which by their terms are to remain
enforceable after a Date of Termination shall remain enforceable to
the full extent necessary to give them effect:
4.1 Termination . Except as
specifically provided otherwise in this Agreement, this Agreement
and Executive’s employment with Employer may be terminated by
Employer or by Executive upon thirty (30) days advance written
notice, for any reason or no reason, or at any time by mutual
written agreement of the parties. During the period after notice is
given, at Employer’s request and sole discretion, Executive
will continue to render Executive’s normal service to
Employer to the best of Executive’s ability, and Employer
will continue to compensate Executive through the Date of
Termination as set forth in Section 5.2 . In addition,
this Agreement and Executive’s employment
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under
this Agreement will terminate in the event of Executive’s
death or Disability, as of the applicable Date of
Termination.
4.2 Date of Termination and Notice
of Termination .
(a) For purposes of this Agreement,
“ Date of Termination ” will mean: (i) if
Executive’s employment is terminated due to death, the date
of Executive’s death; (ii) if Executive’s
employment is terminated for Disability, thirty (30) calendar
days after the Notice of Termination is provided; (iii) if
Executive’s employment is terminated by Employer for Cause,
the date stated in the Notice of Termination; (iv) if
Executive’s employment is terminated by mutual agreement of
the parties, the termination date provided for under the agreement;
(v) if Executive’s employment is terminated for any
other reason, and subject to the terms of Section 4.1
above and, as applicable, the notice requirements of
Section 6.1(f) below, the date stated in the Notice of
Termination, unless an earlier date has been expressly agreed to by
Executive in writing either before or after receiving the Notice of
Termination.
(b) For purposes of this Agreement, a
“ Notice of Termination ” will mean a notice
that indicates the date on which termination of Executive’s
employment is effective. Any termination by Employer or by
Executive under this Agreement, other than Executive’s death,
or a termination by mutual agreement, will be communicated to the
other party by submission of a written Notice of Termination. If
termination is by Employer for Cause or by Executive for Good
Reason, the Notice of Termination will set forth in reasonable
detail the facts and circumstances claimed to provide the basis for
the termination, consistent with the terms of this Agreement.
4.3 Termination by Employer for
Cause . Employer may terminate Executive’s at will
employment at any time for Cause, with or without advance notice,
except as otherwise provided in this Section 4.3 . For
purposes of this Agreement, “ Cause ” means any
of the following, with respect to Executive’s position of
employment with Employer:
(a) Executive’s failure or
refusal to perform the duties and responsibilities as set forth in
Section 2.2 , if the failure or refusal (i) is not
due to a Disability or a physical or mental illness or bodily
injury or disease; or (ii) is not due to Executive’s
reasonable best efforts to perform faithfully and efficiently the
responsibilities of Executive’s position with Employer,
acting in good faith in the interests of Employer, its shareholders
and employees;
(b) Any drunkenness or use of drugs
that interferes with the performance of Executive’s
obligations under this Agreement;
(c) Executive’s indictment for
or conviction of (including entering a guilty plea or plea of no
contest to) a felony or of any crime involving moral turpitude,
fraud, dishonesty or theft;
(d) Any material dishonesty of
Executive involving or affecting Employer;
(e) Any gross negligence, or any
willful or intentional act or omission of Executive having the
effect or reasonably likely to have the effect of injuring the
reputation, business or business relationships of Employer in a
material way;
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(f) Any willful or intentional breach
by Executive of a fiduciary duty to Employer;
(g) Except as otherwise specifically
provided in this Section 4.3 , Executive’s
material violation or breach of Employer’s standard business
practices and policies;
(h) Any court order or settlement
agreement that prohibits Executive’s continued employment
with Employer; or
(i) Any material breach by Executive
not covered by any of the above clauses (a) through
(h) above of any material term, provision or condition of
this Agreement.
Notwithstanding any of the foregoing,
“ Cause ” shall not be deemed to exist unless
and until Employer provides Executive with (A) at least ten
(10) days prior written notice of its intention to terminate
employment for Cause, together with a written statement describing
the nature of the Cause, including the clause or clauses of this
definition that Employer deems applicable, and (B) if the item
constituting Employer’s “Cause” for termination
of Executive is within the scope of clauses (a) , (b)
, (g) or (i) above, thirty (30) days to cure any acts
or omissions on which the finding of Cause is based. If Executive
cures, in accordance with the terms of the written notice, the acts
or omissions on which the finding of Cause is based, Employer shall
not have Cause to terminate Executive’s employment under this
Agreement.
For purposes of this
Section 4.3 , no act, or failure to act, on
Executive’s part will be considered “dishonest,”
“willful” or “intentional” unless done, or
omitted to be done, by Executive in bad faith and without
reasonable belief that Executive’s action or omission was in
or not opposed to, the best interest of Employer. Any act, or
failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or based upon the advice of counsel for
Employer will be conclusively presumed to be done, or omitted to be
done, by Executive in good faith and in the best interests of
Employer. Furthermore, the term “Cause” will not
include ordinary negligence or failure to act, whether due to an
error in judgment or otherwise, if Executive has exercised
substantial efforts in good faith to perform the duties reasonably
assigned or appropriate to the position.
ARTICLE 5
PAYMENTS UPON TERMINATION
5.1 Compensation during
Disability . During any period in which Executive fails to
perform Executive’s duties under this Agreement as a result
of Executive’s incapacity due to physical or mental illness
or bodily injury or disease, Executive will continue to receive all
Base Salary and other compensation and benefits to which Executive
is otherwise entitled under this Agreement and any Plan through
Executive’s Date of Termination, but only to the extent that
Executive is not receiving substantially equivalent benefits under
any Plan maintained by Employer.
5.2 Compensation Until Date of
Termination of Employment . If Executive’s employment
under this Agreement is terminated, then Employer will pay
Executive the Base Salary through the Date of Termination, plus any
other amounts which Executive has earned, and to which Executive
therefore is entitled, prior to the Date of Termination under this
Agreement and under any Plan as provided under the Plan, provided
that Executive continues to perform duties in accordance with
Article 2 .
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5.3 Payments Following Termination
of Employment by Employer Without Cause . In the event
Executive’s employment under this Agreement is terminated by
Employer without Cause, and provided Executive shall first execute
a written release substantially in the form attached to this
Agreement as Exhibit A consistent with this
Section 5.3 (the “ Release Agreement
”), and provided further that Executive has not exercised
rights to revoke or rescind the release of claims under to the
Release Agreement, then Employer shall provide to Executive the
following benefits:
(a) Separation Pay Benefits .
Employer will pay to Executive, as separation pay, which Executive
has not earned and to which Executive is not otherwise entitled, an
amount equal to eleven (11) months of Executive’s
monthly Base Salary in effect as of the Date of Termination, in
addition to the Base Salary due during the thirty (30) day
Notice of Termination period set forth in Section 4.1 .
That portion, if any, of such separation pay as is equal to the
amount that can constitute pay under a “separation pay
plan” under Code Section 409A shall be made to Executive
in equal weekly payments for eleven (11) months. The first
payment of benefits under the foregoing sentence will commence on
the first regular payroll date of Employer as soon as practicable
following sixteen (16) days after Executive’s execution
of the Release Agreement, provided that Executive has not exercised
rights to revoke or rescind the release of claims as provided in
the Release Agreement. That portion, if any, of such separation pay
as exceeds the amount that can constitute pay under a
“separation pay plan” under Code Section 409A
shall be made to Executive in equal weekly payments for twelve
(12) months. The first payment of benefits under the foregoing
sentence will commence on the first regular payroll date of
Employer following the six (6) month anniversary of the date
of Executive’s “separation from service,” as
defined in Code Section 409A, provided that Executive has not
exercised rights to revoke or rescind the release of claims as
provided in the Release Agreement. Provided, however, that in the
event any portion of the payments due under this
Section 5.3(a) would result in adverse tax consequences
to Executive under Code Section 409A, taking into account all
amounts otherwise payable to Executive under this Agreement, then,
to such extent, all or such portions of any payment under this
Section 5.3(a) shall be delayed until the later of
(i) the time of payment set forth above or (ii) the first
regular payroll date of Employer following the six (6) month
anniversary of the date of Executive’s “separation from
service,” as defined in Code Section 409A (or
Executive’s death, if earlier). The initial payment shall
include all payments (without interest) that would have been made
had payment of benefits commenced as otherwise provided in this
Section 5.3(a) .
(b) In-Kind Benefits .
(i) If Executive (or any individual
receiving group health Plan benefits through Executive) is eligible
under applicable law to continue participation in Employer’s
group health Plan following the Date of Termination and elects to
continue these benefits, Employer will, for a period of up to
seventeen (17) months commencing as of the Date of
Termination, continue to pay Employer’s share of the cost of
these benefits as if Executive remained continuously employed with
Employer throughout such period but only while Executive or such
other individual continues to pay the balance of such cost and
Executive or the person who elected continuation coverage is not
eligible for coverage under any other employer’s group health
plan.
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(ii) Employer will pay for all
reasonable expenses of a reputable outplacement organization
selected by Executive, but not to exceed twelve thousand dollars
($12,000.00) in the aggregate that are incurred during the one
(1) year period commencing as of the Date of Termination, by
direct payment to providers or by reimbursement to Executive within
the calendar year after the end of the calendar year in which the
expense was incurred; provided, however, that Executive must
request reimbursement at least thirty (30) days before the end
of that calendar year.
(iii) Except as otherwise provided in
Section 5.2(a) , and subject to any plan or program
adopted by Employer after the date hereof, presuming that Employee,
on the Date of Termination, is receiving from Employer an
automobile allowance under Employer’s related program, a lump
sum payment on the six (6) month anniversary of the date of
Executive’s “separation from service,” as defined
in Code Section 409A (or Executive’s death, if earlier),
in the amount equal to six (6) times the monthly allowance
provided under such program.
(c) Previously Earned Bonus .
Employer will pay to Executive any unpaid management incentive
bonus that Executive earned a right to receive as of the last day
of the fiscal year ending prior to Executive’s Date of
Termination, with payment being made in accordance with the terms
of the applicable Plan.
5.4 No Additional Pay/Benefits
. Except as specifically set forth above and except as provided in
Article 6 , no post-termination payments or benefits
will be provided to Executive following the Date of Termination of
Executive’s employment, except as otherwise provided under
any Plan in which Executive is a participant. No 401(k)
contributions or contributions to any other Plan will be paid by
Employer based on post-termination separation pay. Further,
Executive will not be entitled to an incentive award under
Employer’s incentive Plans or any other bonus for any fiscal
year, or part thereof, during which post-termination separation pay
is paid.
5.5 No Mitigation . Executive
will not be required to mitigate Employer’s payment
obligations under this Article 5 by making any efforts
to secure other employment, and Executive’s commencement of
employment with another employer will not reduce the obligations of
Employer under this Article 5 .
ARTICLE 6
CHANGE IN CONTROL
6.1 Definitions Relating to a
Change in Control . The following terms will have the meanings
set forth below; unless the context clearly requires
otherwise:
(a) “ 1934 Act ”
will mean the Securities Exchange Act of 1934, as amended (or any
successor provision), and applicable regulations.
(b) “ Beneficial
Ownership ” by a person or group of persons will be
determined in accordance with Regulation 13D (or any similar
successor regulation) promulgated by the Securities and Exchange
Commission pursuant to the 1934 Act. Beneficial Ownership of an
equity security may be established by any reasonable method, but
will be presumed
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