-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G7ihF/NwktP/HTnOvcBaMfwmZRkKxZoEBSFHpyIvMkg/rxoWE1t+J5cqQKUBQFSs 3sNrfQjj+pzyY8CVVjzfew== 0000950131-98-006400.txt : 19990113 0000950131-98-006400.hdr.sgml : 19990113 ACCESSION NUMBER: 0000950131-98-006400 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19981025 FILED AS OF DATE: 19981208 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITOG CO CENTRAL INDEX KEY: 0000101909 STANDARD INDUSTRIAL CLASSIFICATION: 2300 IRS NUMBER: 440529828 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-06643 FILM NUMBER: 98765847 BUSINESS ADDRESS: STREET 1: 101 W 11TH ST CITY: KANSAS CITY STATE: MO ZIP: 64105 BUSINESS PHONE: 8164747000 MAIL ADDRESS: STREET 1: 101 W 11TH STREET CITY: KANSAS CITY STATE: MO ZIP: 64105 10-Q 1 FORM 10-Q 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. TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE NUMBER 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
2 PART 1 - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. UNITOG COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS OCTOBER 25, 1998 AND JANUARY 25, 1998
(unaudited) ASSETS October 25, 1998 January 25, 1998 ---------------- ---------------- 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 ============= =============
See accompanying notes to condensed consolidated financial statements. 3 UNITOG COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS THREE MONTHS ENDED OCTOBER 25, 1998 AND OCTOBER 26, 1997 (UNAUDITED)
October 25, 1998 October 26, 1997 --------------------- --------------------- Revenues: 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 ===================== =====================
See accompanying notes to condensed consolidated financial statements. 4 UNITOG COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS NINE MONTHS ENDED OCTOBER 25, 1998 AND OCTOBER 26, 1997 (UNAUDITED)
October 25, 1998 October 26, 1997 ------------------ ----------------- 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 ================== ===================
See accompanying notes to condensed consolidated financial statements. 5 UNITOG COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED OCTOBER 25, 1998 AND OCTOBER 26, 1997 (UNAUDITED)
October 25, 1998 October 26, 1997 ---------------- ---------------- 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 ================ ================
See accompanying notes to condensed consolidated financial statements. 6 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:
October 25, 1998 January 25, 1998 ----------------- ----------------- 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 =========== ===========
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 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:
October 25, 1998 October 26, 1997 ---------------------- --------------------- 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 ===================== =====================
For the nine months ended October 25, 1998 and October 26, 1997 comprehensive income differed from net earnings as follows:
October 25, 1998 October 26, 1997 --------------------- --------------------- 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 =================== ===================
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:
October 25, 1998 October 26, 1997 ---------------- ---------------- 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 ============== ==============
8 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:
October 25, 1998 October 26, 1997 ---------------- ---------------- 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 ================ ================
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 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 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 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 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 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 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 EX-4.(A) 2 AMEND #6 TO LOAN & LET. OF CREDIT REIMBRSMNT AGMT. 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 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%). 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. 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 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 EX-10.(A) 3 SEVERANCE & NONCOMPETITION AGMT--ARROWSMITH 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 (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, 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. (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 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 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 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. 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. EX-10.(B) 4 SEVERANCE & NONCOMPETITION AGMT--BARNES 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 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, 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. (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 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 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 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. 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 EX-10.(C) 5 SEVERANCE & NONCOMPETITION AGMT--HARDEN 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 (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, 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. (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 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 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 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. 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. EX-10.(D) 6 SEVERANCE & NONCOMPETITION AGMT--PETERSON 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 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 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 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 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 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 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 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 EX-10.(E) 7 SEVERANCE & NONCOMPETITION AGMT--ROLF 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"). (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; (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 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 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 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 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. 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 EX-10.(F) 8 SEVERANCE & NONCOMPETITION AGMT--SHOREMAN 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 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 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 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 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 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 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 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 EX-10.(G) 9 SEVERANCE & NONCOMPETITION AGMT--WILHEM 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 (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, 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. (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 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 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 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. 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. EX-10.(H) 10 RETENTION AGREEMENT WITH G. JAY ARROWSMITH 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. 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 EX-10.(I) 11 RETENTION AGREEMENT WITH RONALD J. HARDEN 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. 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 EX-10.(J) 12 RETENTION AGREEMENT WITH ROBERT L. WILHEIM 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. 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 EX-27 13 FINANCIAL DATA SCHEDULE
5 9-MOS JAN-31-1999 OCT-26-1998 25,153 0 29,158,134 1,174,000 21,278,796 92,776,848 180,663,473 66,149,804 270,201,508 39,081,214 102,129,650 0 0 96,593 112,990,040 270,201,508 38,161,980 211,592,073 32,859,709 184,763,872 0 0 5,877,627 14,857,216 5,645,000 9,212,216 0 0 0 9,212,216 0.98 0.98
EX-99 14 PRESS RELEASE 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 -----END PRIVACY-ENHANCED MESSAGE-----