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EXHIBIT 10.1

SURMODICS, INC.

2003 EQUITY INCENTIVE PLAN

(AS AMENDED AND RESTATED DECEMBER 13, 2005)

SECTION 1.

DEFINITIONS

     As used herein, the following terms shall have the meanings indicated below:

     (a) “Administrator” shall mean the Board of Directors of the Company, or one or more
Committees appointed by the Board, as the case may be.

     (b) “Affiliate(s)” shall mean a Parent or Subsidiary of the Company.

     (c) “Award” shall mean any grant of an Option, Restricted Stock Award, Restricted Stock Unit
Award, Stock Appreciation Right or Performance Award.

     (d) “Committee” shall mean a Committee of two or more directors who shall be appointed by and
serve at the pleasure of the Board. To the extent necessary for compliance with Rule 16b-3, or any
successor provision, each of the members of the Committee shall be a “non-employee director.”
Solely for purposes of this Section 1(d), “non-employee director” shall have the same meaning as
set forth in Rule 16b-3, or any successor provision, as then in effect, of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended. Further, to the extent
necessary for compliance with the limitations set forth in Internal Revenue Code Section 162(m),
each of the members of the Committee shall be an “outside director” within the meaning of Code
Section 162(m) and the regulations issued thereunder.

     (e) The “Company” shall mean SurModics, Inc., a Minnesota corporation.

     (f) “Fair Market Value” as of any date shall mean (i) if such stock is listed on the Nasdaq
National Market, Nasdaq SmallCap Market, or an established stock exchange, the price of such stock
at the close of the regular trading session of such market or exchange on such date, as reported by
The Wall Street Journal or a comparable reporting service, or, if no sale of such stock
shall have occurred on such date, on the next preceding date on which there was a sale of stock;
(ii) if such stock is not so listed on the Nasdaq National Market, Nasdaq SmallCap Market, or an
established stock exchange, the average of the closing “bid” and “asked” prices quoted by the OTC
Bulletin Board, the National Quotation Bureau, or any comparable reporting service on such date or,
if there are no quoted “bid” and “asked” prices on such date, on the next preceding date for which
there are such quotes; or (iii) if such stock is not publicly traded as of such date, the per share
value as determined by the Board, or the Committee, in its sole discretion by applying principles
of valuation with respect to the Company’s Common Stock.

     (g) The “Internal Revenue Code” or “Code” is the Internal Revenue Code of 1986, as amended
from time to time.

 

 

     (h) “Option” means an incentive stock option or nonqualified stock option granted pursuant to
the Plan.

     (i) “Parent” shall mean any corporation which owns, directly or indirectly in an unbroken
chain, fifty percent (50%) or more of the total voting power of the Company’s outstanding stock.

     (j) The “Participant” means (i) a key employee of the Company or any Affiliate to whom an
incentive stock option has been granted pursuant to Section 9; (ii) a consultant or advisor to, or
director, key employee or officer, of the Company or any Affiliate to whom a nonqualified stock
option has been granted pursuant to Section 10; (iii) a consultant or advisor to, or director, key
employee or officer, of the Company or any Affiliate to whom a Restricted Stock Award or Restricted
Stock Unit Award has been granted pursuant to Section 11; (iv) a consultant or advisor to, or
director, key employee or officer, of the Company or any Affiliate to whom a Performance Award has
been granted pursuant to Section 12; or (v) a consultant or advisor to, or director, key employee
or officer, of the Company or any Affiliate to whom a Stock Appreciation Right has been granted
pursuant to Section 13.

     (k) “Performance Award” shall mean any Performance Shares or Performance Units granted
pursuant to Section 12 hereof.

     (l) “Performance Objective(s)” shall mean one or more performance objectives established by
the Administrator, in its sole discretion, for Awards granted under this Plan. For any Awards that
are intended to qualify as “performance-based compensation” under Code Section 162(m), the
Performance Objectives shall be limited to any one, or a combination of, (i) revenue, (ii) net
income, (iii) stockholders’ equity, (iv) earnings per share, (v) return on equity, (vi) return on
assets, (vii) total shareholder return, (viii) net operating income, (ix) cost controls, (x) cash
flow, (xi) increase in revenue, (xii) economic value added, (xiii) increase in share price or
earnings, (xiv) return on investment, (xv) department or business unit performance goals, (xvi)
client contracting goals, (xvii) technological and business development milestones and contracting
goals, (xviii) increase in market share, (xix) regulatory, clinical or commercial milestones, and
(xx) quality control, in all cases including, if selected by the Administrator, threshold, target
and maximum levels.

     (m) “Performance Period” shall mean the period, established at the time any Performance Award
is granted or at any time thereafter, during which any Performance Objectives specified by the
Administrator with respect to such Performance Award are to be measured.

     (n) “Performance Share” shall mean any grant pursuant to Section 12 hereof of an award, which
value, if any, shall be paid to a Participant by delivery of shares of Common Stock of the Company
upon achievement of such Performance Objectives during the Performance Period as the Administrator
shall establish at the time of such grant or thereafter.

 

 

     (o) “Performance Unit” shall mean any grant pursuant to Section 12 hereof of an award, which
value, if any, shall be paid to a Participant by delivery of cash upon achievement of such
Performance Objectives during the Performance Period as the Administrator shall establish at the
time of such grant or thereafter.

     (p) The “Plan” means the SurModics, Inc. 2003 Equity Incentive Plan, as amended hereafter from
time to time, including the form of Agreements as they may be modified by the Administrator from
time to time.

     (q) “Restricted Stock Award” or “Restricted Stock Unit Award” shall mean any grant of
restricted shares of Stock of the Company or the grant of any restricted stock units pursuant to
Section 11 hereof.

     (r) “Stock,” “Option Stock” or “Common Stock” shall mean Common Stock of the Company (subject
to adjustment as described in Section 14) reserved for Options and Awards pursuant to this Plan.

     (s) “Stock Appreciation Right” shall mean a grant pursuant to Section 13 hereof.

     (t) A “Subsidiary” shall mean any corporation of which fifty percent (50%) or more of the
total voting power of the Company’s outstanding Stock is owned, directly or indirectly in an
unbroken chain, by the Company.

SECTION 2.

PURPOSE

     The purpose of the Plan is to promote the success of the Company and its Affiliates by
facilitating the employment and retention of competent personnel and by furnishing incentive to
officers, directors, employees, consultants, and advisors upon whose efforts the success of the
Company and its Affiliates will depend to a large degree.

     It is the intention of the Company to carry out the Plan through the granting of Options which
will qualify as “incentive stock options” under the provisions of Section 422 of the Internal
Revenue Code, or any successor provision, pursuant to Section 9 of this Plan; through the granting
of “nonqualified stock options” pursuant to Section 10 of this Plan; through the granting of
Restricted Stock Awards and Restricted Stock Unit Awards pursuant to Section 11 of this Plan;
through the granting of Performance Awards pursuant to Section 12 of this Plan; and through the
granting of Stock Appreciation Rights pursuant to Section 13 of this Plan. Adoption of this Plan
shall be and is expressly subject to the condition of approval by the shareholders of the Company
within twelve (12) months before or after the adoption of the Plan by the Board of Directors. In
no event shall any Awards be granted prior to the date this Plan is approved by the shareholders of
the Company.

 

 

SECTION 3.

EFFECTIVE DATE OF PLAN

     The Plan shall be effective as of the date of adoption by the Board of Directors, subject to
approval by the shareholders of the Company as required in Section 2.

SECTION 4.

ADMINISTRATION

     The Plan shall be administered by the Board of Directors of the Company (hereinafter referred
to as the “Board”) or by a Committee which may be appointed by the Board from time to time to
administer the Plan (hereinafter collectively referred to as the “Administrator”). Except as
otherwise provided herein, the Administrator shall have all of the powers vested in it under the
provisions of the Plan, including but not limited to exclusive authority to determine, in its sole
discretion, whether an Award shall be granted; the individuals to whom, and the time or times at
which, Awards shall be granted; the number of shares subject to each Award; the option price; and
the performance criteria, if any, and any other terms and conditions of each Award. The
Administrator shall have full power and authority to administer and interpret the Plan, to make and
amend rules, regulations and guidelines for administering the Plan, to prescribe the form and
conditions of the respective agreements evidencing each Award (which may vary from Participant to
Participant), and to make all other determinations necessary or advisable for the administration of
the Plan. The Administrator’s interpretation of the Plan, and all actions taken and determinations
made by the Administrator pursuant to the power vested in it hereunder, shall be conclusive and
binding on all parties concerned.

     No member of the Board or the Committee shall be liable for any action taken or determination
made in good faith in connection with the administration of the Plan. In the event the Board
appoints a Committee as provided hereunder, any action of the Committee with respect to the
administration of the Plan shall be taken pursuant to a majority vote of the Committee members or
pursuant to the written resolution of all Committee members.

SECTION 5.

PARTICIPANTS

     The Administrator shall from time to time, at its discretion and without approval of the
shareholders, designate those employees, officers, directors, consultants, and advisors of the
Company or of any Affiliate to whom Awards shall be granted under this Plan; provided, however,
that consultants or advisors shall not be eligible to receive Awards hereunder unless such
consultant or advisor renders bona fide services to the Company or any Affiliate and such services
are not in connection with the offer or sale of securities in a capital raising transaction and do
not directly or indirectly promote or maintain a market for the Company’s securities. The
Administrator shall, from time to time, at its discretion and without approval of the shareholders,
designate those employees of the Company or any Affiliate to whom Awards, including incentive stock
options shall be granted under this Plan. The Administrator may grant additional Awards, including
incentive stock options, under this Plan to some or all Participants then

 

 

holding Awards, or may grant Awards solely or partially to new Participants. In designating
Participants, the Administrator shall also determine the number of shares to be optioned or awarded
to each such Participant and the performance criteria applicable to each Performance Award. The
Administrator may from time to time designate individuals as being ineligible to participate in the
Plan.

     Notwithstanding anything in the Plan to the contrary, the following limits will apply to
Awards granted under the Plan:

     (a) In no event shall a Participant be granted Options or Stock Appreciation Rights during any
fiscal year of the Company covering in the aggregate more than Two Hundred Thousand (200,000)
shares of Stock, subject to adjustment as provided in Section 14; provided, however, that a share
of Stock subject to a Stock Appreciation Right that is granted in tandem with an Option shall count
as one share against this limitation.

     (b) In no event shall a Participant be granted Restricted Stock Awards or, to the extent
payable in or measured by the value of shares of Stock, Restricted Stock Unit Awards during any
fiscal year of the Company covering in the aggregate more than Two Hundred Thousand (200,000)
shares of Stock, subject to adjustment as provided in Section 14.

     (c) To the extent payable in or measured by the value of shares of Stock, in no event shall a
Participant be granted Performance Awards during any fiscal year of the Company covering in the
aggregate more than Two Hundred Thousand (200,000) shares of Stock, subject to adjustment as
provided in Section 14.

SECTION 6.

STOCK

     The Stock to be optioned under this Plan shall consist of authorized but unissued shares of
Common Stock. Two Million Four Hundred Thousand (2,400,000) shares of Common Stock shall be
reserved and available for Awards under the Plan; provided, however, that the total number of
shares of Common Stock reserved for Awards under this Plan shall be subject to adjustment as
provided in Section 14 of the Plan; and provided, further, that all shares of Stock reserved and
available under the Plan shall constitute the maximum aggregate number of shares of Stock that may
be issued through incentive stock options. The following shares of Stock shall continue to be
reserved and available for Awards granted pursuant to the Plan: (i) any outstanding Award that
expires for any reason, (ii) any portion of an outstanding Option or Stock Appreciation Right that
is terminated prior to exercise, (iii) any portion of an Award that is terminated prior to the
lapsing of the risks of forfeiture on such Award, (iv) shares of Stock used to pay the exercise
price under any Award, (v) shares of Stock used to satisfy any tax withholding obligation
attributable to any Award, whether such shares are withheld by the Company or tendered by the
Participant, and (vi) shares of Stock covered by an Award to the extent the Award is settled in
cash.

 

 

SECTION 7.

DURATION OF PLAN

     Incentive stock options may be granted pursuant to the Plan from time to time during a period
of ten (10) years from the effective date as defined in Section 3. Other Awards may be granted
pursuant to the Plan from time to time after the effective date of the Plan and until the Plan is
discontinued or terminated by the Administrator.

SECTION 8.

PAYMENT

     Participants may pay for shares upon exercise of Options granted pursuant to this Plan with
cash, personal check, certified check or, if approved by the Administrator in its sole discretion,
previously-owned shares of the Company’s Common Stock, or any combination thereof. Any stock so
tendered as part of such payment shall be valued at such stock’s then Fair Market Value, or such
other form of payment as may be authorized by the Administrator. The Administrator may, in its
sole discretion, limit the forms of payment available to the Participant and may exercise such
discretion any time prior to the termination of the Option granted to the Participant or upon any
exercise of the Option by the Participant. “Previously-owned shares” means shares of the Company’s
Common Stock which the Participant has owned for at least six (6) months prior to the exercise of
the Option, or for such other period of time as may be required by generally accepted accounting
principles.

     With respect to payment in the form of Common Stock of the Company, the Administrator may
require advance approval or adopt such rules as it deems necessary to assure compliance with Rule
16b-3, or any successor provision, as then in effect, of the General Rules and Regulations under
the Securities Exchange Act of 1934, if applicable.

SECTION 9.

TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS

     Each incentive stock option granted pursuant to this Section 9 shall be evidenced by a written
incentive stock option agreement (the “Option Agreement”). The Option Agreement shall be in such
form as may be approved from time to time by the Administrator and may vary from Participant to
Participant; provided, however, that each Participant and each Option Agreement shall comply with
and be subject to the following terms and conditions:

     (a) Number of Shares and Option Price. The Option Agreement shall state the total
number of shares covered by the incentive stock option. Except as permitted by Code Section
424(d), or any successor provision, the option price per share shall not be less than one hundred
percent (100%) of the per share Fair Market Value of the Common Stock on the date the Administrator
grants the Option; provided, however, that if a Participant owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the Company or of its
Parent or any Subsidiary, the option price per share of an incentive stock

 

 

option granted to such Participant shall not be less than one hundred ten percent (110%) of the per
share Fair Market Value of the Company’s Common Stock on the date of the grant of the Option. The
Administrator shall have full authority and discretion in establishing the option price and shall
be fully protected in so doing.

     (b) Term and Exercisability of Incentive Stock Option. The term during which any
incentive stock option granted under the Plan may be exercised shall be established in each case by
the Administrator. Except as permitted by Code Section 424(d), in no event shall any incentive
stock option be exercisable during a term of more than ten (10) years after the date on which it is
granted; provided, however, that if a Participant owns stock possessing more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company or of its Parent or any
Subsidiary, the incentive stock option granted to such Participant shall be exercisable during a
term of not more than five (5) years after the date on which it is granted.

     The Option Agreement shall state when the incentive stock option becomes exercisable and shall
also state the maximum term during which the Option may be exercised. In the event an incentive
stock option is exercisable immediately, the manner of exercise of the Option in the event it is
not exercised in full immediately shall be specified in the Option Agreement. The Administrator
may accelerate the exercisability of any incentive stock option granted hereunder which is not
immediately exercisable as of the date of grant.

     (c) Nontransferability. No incentive stock option shall be transferable, in whole or
in part, by the Participant other than by will or by the laws of descent and distribution. During
the Participant’s lifetime, the incentive stock option may be exercised only by the Participant.
If the Participant shall attempt any transfer of any incentive stock option granted under the Plan
during the Participant’s lifetime, such transfer shall be void and the incentive stock option, to
the extent not fully exercised, shall terminate.

     (d) No Rights as Shareholder. A Participant (or the Participant’s successor or
successors) shall have no rights as a shareholder with respect to any shares covered by an
incentive stock option until the date of the issuance of a stock certificate evidencing such
shares. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property), distributions or other rights for which the record date is prior to
the date such stock certificate is actually issued (except as otherwise provided in Section 14 of
the Plan).

     (e) Withholding. The Company or its Affiliate shall be entitled to withhold and
deduct from future wages of the Participant all legally required amounts necessary to satisfy any
and all withholding and employment-related taxes attributable to the Participant’s exercise of an
incentive stock option or a “disqualifying disposition” of shares acquired through the exercise of
an incentive stock option as defined in Code Section 421(b). In the event the Participant is
required under the Option Agreement to pay the Company, or make arrangements satisfactory to the
Company respecting payment of, such withholding and employment-related taxes, the Administrator
may, in its discretion and pursuant to such rules as it may adopt, permit the Participant to
satisfy such obligation, in whole or in part, by electing to have the Company withhold shares of
Common Stock otherwise issuable to the Participant as a result of the exercise of the incentive
stock option having a Fair Market Value equal to the minimum required tax

 

 

withholding, based on the minimum statutory withholding rates for federal and state tax purposes,
including payroll taxes, that are applicable to the supplemental income resulting from such
exercise. In no event may the Company or any Affiliate withhold shares having a Fair Market Value
in excess of such statutory minimum required tax withholding. The Participant’s election to have
shares withheld for this purpose shall be made on or before the date the incentive stock option is
exercised or, if later, the date that the amount of tax to be withheld is determined under
applicable tax law. Such election shall be approved by the Administrator and otherwise comply with
such rules as the Administrator may adopt to assure compliance with Rule 16b-3, or any successor
provision, as then in effect, of the General Rules and Regulations under the Securities Exchange
Act of 1934, if applicable.

     (f) Other Provisions. The Option Agreement authorized under this Section 9 shall
contain such other provisions as the Administrator shall deem advisable. Any such Option Agreement
shall contain such limitations and restrictions upon the exercise of the Option as shall be
necessary to ensure that such Option will be considered an “incentive stock option” as defined in
Section 422 of the Internal Revenue Code or to conform to any change therein.

SECTION 10.

TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS

     Each nonqualified stock option granted pursuant to this Section 10 shall be evidenced by a
written nonqualified stock option agreement (the “Option Agreement”). The Option Agreement shall
be in such form as may be approved from time to time by the Administrator and may vary from
Participant to Participant; provided, however, that each Participant and each Option Agreement
shall comply with and be subject to the following terms and conditions:

     (a) Number of Shares and Option Price. The Option Agreement shall state the total
number of shares covered by the nonqualified stock option. Unless otherwise determined by the
Administrator, the option price per share shall be one hundred percent (100%) of the per share Fair
Market Value of the Common Stock on the date the Administrator grants the Option.

     (b) Term and Exercisability of Nonqualified Stock Option. The term during which any
nonqualified stock option granted under the Plan may be exercised shall be established in each case
by the Administrator. The Option Agreement shall state when the nonqualified stock option becomes
exercisable and shall also state the maximum term during which the Option may be exercised. In the
event a nonqualified stock option is exercisable immediately, the manner of exercise of the Option
in the event it is not exercised in full immediately shall be specified in the Option Agreement.
The Administrator may accelerate the exercisability of any nonqualified stock option granted
hereunder which is not immediately exercisable as of the date of grant.

     (c) Transferability. The Administrator may, in its sole discretion, permit the
Participant to transfer any or all nonqualified stock options to any member of the Participant’s
“immediate family” as such term is defined in Rule 16a-1(e) promulgated under the Securities
Exchange Act of 1934, or any successor provision, or to one or more trusts whose beneficiaries are
members of such Participant’s “immediate family” or partnerships in which such family

 

 

members are the only partners; provided, however, that the Participant cannot receive any
consideration for the transfer and such transferred nonqualified stock option shall continue to be
subject to the same terms and conditions as were applicable to such nonqualified stock option
immediately prior to its transfer.

     (d) No Rights as Shareholder. A Participant (or the Participant’s successor or
successors) shall have no rights as a shareholder with respect to any shares covered by a
nonqualified stock option until the date of the issuance of a stock certificate evidencing such
shares. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property), distributions or other rights for which the record date is prior to
the date such stock certificate is actually issued (except as otherwise provided in Section 14 of
the Plan).

     (e) Withholding. The Company or its Affiliate shall be entitled to withhold and
deduct from future wages of the Participant all legally required amounts necessary to satisfy any
and all withholding and employment-related taxes attributable to the Participant’s exercise of a
nonqualified stock option. In the event the Participant is required under the Option Agreement to
pay the Company, or make arrangements satisfactory to the Company respecting payment of, such
withholding and employment-related taxes, the Administrator may, in its discretion and pursuant to
such rules as it may adopt, permit the Participant to satisfy such obligation, in whole or in part,
by delivering shares of the Company’s Common Stock or by electing to have the Company withhold
shares of Common Stock otherwise issuable to the Participant as a result of the exercise of the
nonqualified stock option having a Fair Market Value equal to the minimum required tax withholding,
based on the minimum statutory withholding rates for federal and state tax purposes, including
payroll taxes, that are applicable to the supplemental income resulting from such exercise. In no
event may the Company or any Affiliate withhold shares having a Fair Market Value in excess of such
statutory minimum required tax withholding. The Participant’s election to deliver shares or to
have shares withheld for this purpose shall be made on or before the date the nonqualified stock
option is exercised or, if later, the date that the amount of tax to be withheld is determined
under applicable tax law. Such election shall be approved by the Administrator and otherwise
comply with such rules as the Administrator may adopt to assure compliance with Rule 16b-3, or any
successor provision, as then in effect, of the General Rules and Regulations under the Securities
Exchange Act of 1934, if applicable.

     (f) Other Provisions. The Option Agreement authorized under this Section 10 shall
contain such other provisions as the Administrator shall deem advisable.

SECTION 11.

RESTRICTED STOCK AND RESTRICTED STOCK UNIT AWARDS

     Each Restricted Stock Award or Restricted Stock Unit Award granted pursuant to the Plan shall
be evidenced by a written restricted stock or restricted stock unit agreement (the “Restricted
Stock Agreement” or “Restricted Stock Unit Agreement,” as the case may be). The Restricted Stock
Agreement or Restricted Stock Unit Agreement shall be in such form as may be approved from time to
time by the Administrator and may vary from Participant to Participant;

 

 

provided, however, that each Participant and each Restricted Stock Agreement or Restricted Stock
Unit Agreement shall comply with and be subject to the following terms and conditions:

     (a) Number of Shares. The Restricted Stock Agreement or Restricted Stock Unit
Agreement shall state the total number of shares of Stock covered by the Restricted Stock Award or
Restricted Stock Unit Award.

     (b) Risks of Forfeiture. The Restricted Stock Agreement or Restricted Stock Unit
Agreement shall set forth the risks of forfeiture, if any, including risks of forfeiture based on
Performance Objectives, which shall apply to the shares of Stock covered by the Restricted Stock
Award or Restricted Stock Unit Award, and shall specify the manner in which such risks of
forfeiture shall lapse. The Administrator may, in its sole discretion, modify the manner in which
such risks of forfeiture shall lapse but only with respect to those shares of Stock which are
restricted as of the effective date of the modification.

     (c) Issuance of Shares; Rights as Shareholder.

     (i) With respect to a Restricted Stock Award, the Company shall cause to be issued a stock
certificate representing such shares of Stock in the Participant’s name, and shall deliver such
certificate to the Participant; provided, however, that the Company shall place a legend on such
certificate describing the risks of forfeiture and other transfer restrictions set forth in the
Participant’s Restricted Stock Agreement and providing for the cancellation and return of such
certificate if the shares of Stock subject to the Restricted Stock Award are forfeited. Until the
risks of forfeiture have lapsed or the shares subject to such Restricted Stock Award have been
forfeited, the Participant shall be entitled to vote the shares of Stock represented by such stock
certificates and shall receive all dividends attributable to such shares, but the Participant shall
not have any other rights as a shareholder with respect to such shares.

     (ii) With respect to a Restricted Stock Unit Award, as the risks of forfeiture on the
restricted stock units lapse, the Participant shall be entitled to payment of the Restricted Stock
Units. The Administrator may, in its sole discretion, pay Restricted Stock Units in cash, shares
of Stock or any combination thereof. If payment is made in shares of Stock, the Administrator
shall cause to be issued one or more stock certificates in the Participant’s name and shall deliver
such certificates to the Participant in satisfaction of such restricted stock units. Until the
risks of forfeiture on the restricted stock units have lapsed, the Participant shall not be
entitled to vote any shares of stock which may be acquired through the restricted stock units,
shall not receive any dividends attributable to such shares, and shall not have any other rights as
a shareholder with respect to such shares.

     (d) Withholding Taxes. The Company or its Affiliate shall be entitled to withhold and
deduct from future wages of the Participant all legally required amounts necessary to satisfy any
and all withholding and employment-related taxes attributable to the Participant’s Restricted Stock
Award or Restricted Stock Unit Award. In the event the Participant is required under the
Restricted Stock Agreement or Restricted Stock Unit Agreement to pay the Company, or make
arrangements satisfactory to the Company respecting payment of, such withholding and
employment-related taxes, the Administrator may, in its discretion and pursuant to such rules as

 

 

it may adopt, require the Participant to satisfy such obligations, in whole or in part, by
delivering shares of Stock received pursuant to the Restricted Stock Award or Restricted Stock Unit
Award on which the risks of forfeiture have lapsed or to permit the Participant to satisfy such
obligations, in whole or in part, by delivering shares of Common Stock, including shares of Stock
received pursuant to the Restricted Stock Award or Restricted Stock Unit Award on which the risks
of forfeiture have lapsed. Such shares shall have a Fair Market Value equal to the minimum
required tax withholding, based on the minimum statutory withholding rates for federal and state
tax purposes, including payroll taxes, that are applicable to the supplemental income resulting
from the lapsing of the risks of forfeiture on such restricted stock or restricted stock unit. In
no event may the Participant deliver shares having a Fair Market Value in excess of such statutory
minimum required tax withholding. The Participant’s election to deliver shares of Common Stock for
this purpose shall be made on or before the date that the amount of tax to be withheld is
determined under applicable tax law. Such election shall be approved by the Administrator and
otherwise comply with such rules as the Administrator may adopt to assure compliance with Rule
16b-3, or any successor provision, as then in effect, of the General Rules and Regulations under
the Securities Exchange Act of 1934, if applicable.

     (f) Nontransferability. No Restricted Stock Award or Restricted Stock Unit Award
shall be transferable, in whole or in part, by the Participant, other than by will or by the laws
of descent and distribution, prior to the date the risks of forfeiture described in the Restricted
Stock Agreement or Restricted Stock Unit Agreement have lapsed. If the Participant shall attempt
any transfer of any Restricted Stock Award or Restricted Stock Unit Award granted under the Plan
prior to such date, such transfer shall be void and the Restricted Stock Award or Restricted Stock
Unit Award shall terminate.

     (g) Delay of Payment for Section 162(m). In the event the Administrator reasonably
anticipates that the Company’s income tax deduction with respect to the vesting of any Restricted
Stock Award or any payment or issuance of shares of Stock required by a Restricted Stock Unit Award
would be limited or eliminated by Code Section 162(m), the Administrator may, subject to such terms
and conditions as determined by the Administrator, delay all or a portion of such payment or the
vesting or issuance of all or a portion of such shares of Stock until the earlier of (i) the date
at which the Administrator reasonably anticipates that the corresponding income tax deduction will
not be so limited or eliminated, and (ii) the Participant’s separation from service, as such term
is defined in Code Section 409A and the regulations, notices and other guidance of general
applicability issued thereunder.

     (h) Other Provisions. The Restricted Stock Agreement or Restricted Stock Unit
Agreement authorized under this Section 11 shall contain such other provisions as the Administrator
shall deem advisable.

SECTION 12.

PERFORMANCE AWARDS

     Each Performance Award granted pursuant to this Section 12 shall be evidenced by a written
performance award agreement (the “Performance Award Agreement”). The Performance

 

 

Award Agreement shall be in such form as may be approved from time to time by the Administrator and
may vary from Participant to Participant; provided, however, that each Participant and each
Performance Award Agreement shall comply with and be subject to the following terms and conditions:

     (a) Awards. Performance Awards in the form of Performance Units or Performance Shares
may be granted to any Participant in the Plan. Performance Units shall consist of monetary awards
which may be earned or become vested in whole or in part if the Company or the Participant achieves
certain Performance Objectives established by the Administrator over a specified Performance
Period. Performance Shares shall consist of shares of Stock or other Awards denominated in shares
of Stock that may be earned or become vested in whole or in part if the Company or the Participant
achieves certain Performance Objectives established by the Administrator over a specified
Performance Period.

     (b) Performance Objectives, Performance Period and Payment. The Performance Award
Agreement shall set forth:

     (i) the number of Performance Units or Performance Shares subject to the Performance Award,
and the dollar value of each Performance Unit;

     (ii) one or more Performance Objectives established by the Administrator;

     (iii) the Performance Period over which Performance Units or Performance Shares may be earned
or may become vested;

     (iv) the extent to which partial achievement of the Performance Objectives may result in a
payment or vesting of the Performance Award, as determined by the Administrator; and

     (v) the date upon which payment of Performance Units will be made or Performance Shares will
be issued, as the case may be, and the extent to which such payment or the receipt of such
Performance Shares may be deferred.

     (c) Withholding Taxes. The Company or its Affiliates shall be entitled to withhold
and deduct from future wages of the Participant all legally required amounts necessary to satisfy
any and all withholding and employment-related taxes attributable to the Participant’s Performance
Award. In the event the Participant is required under the Performance Award Agreement to pay the
Company or its Affiliates, or make arrangements satisfactory to the Company or its Affiliates
respecting payment of, such withholding and employment-related taxes, the Administrator may, in its
discretion and pursuant to such rules as it may adopt, permit the Participant to satisfy such
obligations, in whole or in part, by delivering shares of Common Stock. Such shares shall have a
Fair Market Value equal to the minimum required tax withholding, based on the minimum statutory
withholding rates for federal and state tax purposes, including payroll taxes. In no event may the
Participant deliver shares having a Fair Market Value in excess of such statutory minimum required
tax withholding. The Participant’s election to deliver shares of Common Stock for this purpose
shall be made on or before the date

 

 

that the amount of tax to be withheld is determined under applicable tax law. Such election shall
be approved by the Administrator and otherwise comply with such rules as the Administrator may
adopt to assure compliance with Rule 16b-3, or any successor provision, as then in effect, of the
General Rules and Regulations under the Securities Exchange Act of 1934, if applicable.

     (d) Nontransferability. No Performance Award shall be transferable, in whole or in
part, by the Participant, other than by will or by the laws of descent and distribution. If the
Participant shall attempt any transfer of any Performance Award granted under the Plan, such
transfer shall be void and the Performance Award shall terminate.

     (e) No Rights as Shareholder. A Participant (or the Participant’s successor or
successors) shall have no rights as a shareholder with respect to any shares covered by a
Performance Award until the date of the issuance of a stock certificate evidencing such shares. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or
other property), distributions or other rights for which the record date is prior to the date such
stock certificate is actually issued (except as otherwise provided in Section 14 of the Plan).

     (f) Delay of Payment for Section 162(m). In the event the Administrator reasonably
anticipates that the Company’s income tax deduction with respect to any payment or issuance of
shares of Stock required by a Performance Award would be limited or eliminated by Code Section
162(m), the Administrator may, subject to such terms and conditions as determined by the
Administrator, delay all or a portion of such payment or the issuance of all or a portion of such
shares of Stock, as the case may be, until the earlier of (i) the date at which the Administrator
reasonably anticipates that the corresponding income tax deduction will not be so limited or
eliminated, and (ii) the Participant’s separation from service, as such term is defined in Code
Section 409A and the regulations, notices and other guidance of general applicability issued
thereunder.

     (g) Other Provisions. The Performance Award Agreement authorized under this Section
12 shall contain such other provisions as the Administrator shall deem advisable.

SECTION 13.

STOCK APPRECIATION RIGHTS

     Each Stock Appreciation Right granted pursuant to this Section 13 shall be evidenced by a
written stock appreciation right agreement (the “Stock Appreciation Right Agreement”). The Stock
Appreciation Right Agreement shall be in such form as may be approved from time to time by the
Administrator and may vary from Participant to Participant; provided, however, that each
Participant and each Stock Appreciation Right Agreement shall comply with and be subject to the
following terms and conditions:

     (a) Awards. A Stock Appreciation Right shall entitle the Participant to receive, upon
exercise, cash, shares of Stock, or any combination thereof, having a value equal to the excess of
(i) the Fair Market Value of a specified number of shares of Stock on the date of such exercise,
over (ii) a specified exercise price. Unless otherwise determined by the Administrator, the

 

 

specified exercise price shall not be less than 100% of the Fair Market Value of such shares of
Stock on the date of grant of the Stock Appreciation Right. A Stock Appreciation Right may be
granted independent of or in tandem with a previously or contemporaneously granted Option.

     (b) Term and Exercisability. The term during which any Stock Appreciation Right
granted under the Plan may be exercised shall be established in each case by the Administrator.
The Stock Appreciation Right Agreement shall state when the Stock Appreciation Right becomes
exercisable and shall also state the maximum term during which such Stock Appreciation Right may be
exercised. In the event a Stock Appreciation Right is exercisable immediately, the manner of
exercise of such Stock Appreciation Right in the event it is not exercised in full immediately
shall be specified in the Stock Appreciation Right Agreement. The Administrator may accelerate the
exercisability of any Stock Appreciation Right granted hereunder which is not immediately
exercisable as of the date of grant. If a Stock Appreciation Right is granted in tandem with an
Option, the Stock Appreciation Right Agreement shall set forth the extent to which the exercise of
all or a portion of the Stock Appreciation Right shall cancel a corresponding portion of the
Option, and the extent to which the exercise of all or a portion of the Option shall cancel a
corresponding portion of the Stock Appreciation Right.

     (c) Withholding Taxes. The Company or its Affiliate shall be entitled to withhold and
deduct from future wages of the Participant all legally required amounts necessary to satisfy any
and all withholding and employment-related taxes attributable to the Participant’s Stock
Appreciation Right. In the event the Participant is required under the Stock Appreciation Right to
pay the Company or its Affiliate, or make arrangements satisfactory to the Company or its Affiliate
respecting payment of, such withholding and employment-related taxes, the Administrator may, in its
discretion and pursuant to such rules as it may adopt, permit the Participant to satisfy such
obligations, in whole or in part, by delivering shares of Common Stock. Such shares shall have a
Fair Market Value equal to the minimum required tax withholding, based on the minimum statutory
withholding rates for federal and state tax purposes, including payroll taxes. In no event may the
Participant deliver shares having a Fair Market Value in excess of such statutory minimum required
tax withholding. The Participant’s election to deliver shares of Common Stock for this purpose
shall be made on or before the date that the amount of tax to be withheld is determined under
applicable tax law. Such election shall be approved by the Administrator and otherwise comply with
such rules as the Administrator may adopt to assure compliance with Rule 16b-3, or any successor
provision, as then in effect, of the General Rules and Regulations under the Securities Exchange
Act of 1934, if applicable.

     (d) Nontransferability. No Stock Appreciation Right shall be transferable, in whole
or in part, by the Participant, other than by will or by the laws of descent and distribution. If
the Participant shall attempt any transfer of any Stock Appreciation Right granted under the Plan,
such transfer shall be void and the Stock Appreciation Right shall terminate.

     (e) No Rights as Shareholder. A Participant (or the Participant’s successor or
successors) shall have no rights as a shareholder with respect to any shares covered by a Stock
Appreciation Right until the date of the issuance of a stock certificate evidencing such shares.
No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities

 

 

or other property), distributions or other rights for which the record date is prior to the date
such stock certificate is actually issued (except as otherwise provided in Section 14 of the Plan).

     (f) Other Provisions. The Stock Appreciation Right Agreement authorized under this
Section 13 shall contain such other provisions as the Administrator shall deem advisable, including
but not limited to any restrictions on the exercise of the Stock Appreciation Right which may be
necessary to comply with Rule 16b-3 of the Securities Exchange Act of 1934, as amended.

SECTION 14.

RECAPITALIZATION, SALE, MERGER, EXCHANGE

OR LIQUIDATION

     In the event of an increase or decrease in the number of shares of Common Stock resulting from
a stock dividend, stock split, reverse split, combination or reclassification of the Common Stock,
or any other increase or decrease in the number of issued shares of Common Stock effected without
receipt of consideration by the Company, the Board may, in its sole discretion, adjust the number
of shares of Stock reserved under Section 6 hereof, the number of shares of Stock covered by each
outstanding Award, and, if applicable, the price per share thereof to reflect such change.
Additional shares which may become covered by the Award pursuant to such adjustment shall be
subject to the same restrictions as are applicable to the shares with respect to which the
adjustment relates.

     Unless otherwise provided in the agreement evidencing an Award, in the event of an acquisition
of the Company through the sale of substantially all of the Company’s assets and the consequent
discontinuance of its business or through a merger, consolidation, exchange, reorganization,
reclassification, extraordinary dividend, divestiture (including a spin-off), liquidation,
recapitalization, stock split, stock dividend or otherwise (collectively referred to as a
“transaction”), the Board may provide for one or more of the following:

     (a) the equitable acceleration of the exercisability of any outstanding Options or Stock
Appreciation Rights, the vesting and payment of any Performance Awards, or the lapsing of the risks
of forfeiture on any Restricted Stock Awards or Restricted Stock Unit Awards;

     (b) the complete termination of this Plan, the cancellation of outstanding Options or Stock
Appreciation Rights not exercised prior to a date specified by the Board (which date shall give
Participants a reasonable period of time in which to exercise such Option or Stock Appreciation
Right prior to the effectiveness of such transaction), the cancellation of any Performance Award
and the cancellation of any Restricted Stock Awards or Restricted Stock Unit Awards for which the
risks of forfeiture have not lapsed;

     (c) that Participants holding outstanding Options and Stock Appreciation Rights shall receive,
with respect to each share of Stock subject to such Option or Stock Appreciation Right, as of the
effective date of any such transaction, cash in an amount equal to the excess of the Fair Market
Value of such Stock on the date immediately preceding the effective date of such

 

 

transaction over the price per share of such Options or Stock Appreciation Rights; provided
that the Board may, in lieu of such cash payment, distribute to such Participants shares of Common
Stock of the Company or shares of stock of any corporation succeeding the Company by reason of such
transaction, such shares having a value equal to the cash payment herein;

     (d) that Participants holding outstanding Restricted Stock Awards, Restricted Stock Unit
Awards and Performance Share Awards shall receive, with respect to each share of Stock subject to
such Awards, as of the effective date of any such transaction, cash in an amount equal to the Fair
Market Value of such Stock on the date immediately preceding the effective date of such
transaction; provided that the Board may, in lieu of such cash payment, distribute to such
Participants shares of Common Stock of the Company or shares of stock of any corporation succeeding
the Company by reason of such transaction, such shares having a value equal to the cash payment
herein;

     (e) the continuance of the Plan with respect to the exercise of Options or Stock Appreciation
Rights which were outstanding as of the date of adoption by the Board of such plan for such
transaction and the right to exercise such Options and Stock Appreciation Rights as to an
equivalent number of shares of stock of the corporation succeeding the Company by reason of such
transaction; and

     (f) the continuance of the Plan with respect to Restricted Stock Awards or Restricted Stock
Unit Awards for which the risks of forfeiture have not lapsed as of the date of adoption by the
Board of such plan for such transaction and the right to receive an equivalent number of shares of
stock of the corporation succeeding the Company by reason of such transaction.

     (g) the continuance of the Plan with respect to Performance Awards and, to the extent
applicable, the right to receive an equivalent number of shares of stock of the corporation
succeeding the Company by reason for such transaction.

The Board may restrict the rights of or the applicability of this Section 14 to the extent
necessary to comply with Section 16(b) of the Securities Exchange Act of 1934, the Internal Revenue
Code or any other applicable law or regulation. The grant of an Award pursuant to the Plan shall
not limit in any way the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge, exchange or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets.

SECTION 15.

INVESTMENT PURPOSE

     No shares of Stock shall be issued pursuant to the Plan unless and until there has been
compliance, in the opinion of Company’s counsel, with all applicable legal requirements, including
without limitation, those relating to securities laws and stock exchange listing requirements. As
a condition to the issuance of Stock to Participant, the Administrator may require Participant to
(a) represent that the shares of Stock are being acquired for investment and not resale and to make
such other representations as the Administrator shall deem necessary or

 

 

appropriate to qualify the issuance of the shares as exempt from the Securities Act of 1933 and any
other applicable securities laws, and (b) represent that Participant shall not dispose of the
shares of Stock in violation of the Securities Act of 1933 or any other applicable securities laws.

     As a further condition to the grant of any Option or the issuance of Stock to Participant,
Participant agrees to the following:

     (a) In the event the Company advises Participant that it plans an underwritten public offering
of its Common Stock in compliance with the Securities Act of 1933, as amended, and the
underwriter(s) seek to impose restrictions under which certain shareholders may not sell or
contract to sell or grant any option to buy or otherwise dispose of part or all of their stock
purchase rights of the Common Stock underlying Awards, Participant will not, for a period not to
exceed 180 days from the prospectus, sell or contract to sell or grant an option to buy or
otherwise dispose of any Option granted to Participant pursuant to the Plan or any of the
underlying shares of Common Stock without the prior written consent of the underwriter(s) or its
representative(s).

     (b) In the event the Company makes any public offering of its securities and determines in its
sole discretion that it is necessary to reduce the number of issued but unexercised stock purchase
rights so as to comply with any state’s securities or Blue Sky law limitations with respect
thereto, the Board of Directors of the Company shall have the right (i) to accelerate the
exercisability of any Option and the date on which such Option must be exercised, provided that the
Company gives Participant prior written notice of such acceleration, and (ii) to cancel any Options
or portions thereof which Participant does not exercise prior to or contemporaneously with such
public offering.

     (c) In the event of a transaction (as defined in Section 14 of the Plan), Participant will
comply with Rule 145 of the Securities Act of 1933 and any other restrictions imposed under other
applicable legal or accounting principles if Participant is an “affiliate” (as defined in such
applicable legal and accounting principles) at the time of the transaction, and Participant will
execute any documents necessary to ensure compliance with such rules.

     The Company reserves the right to place a legend on any stock certificate issued in connection
with an Award pursuant to the Plan to assure compliance with this Section 15.

SECTION 16.

AMENDMENT OF THE PLAN

     The Board may from time to time, insofar as permitted by law, suspend or discontinue the Plan
or revise or amend it in any respect; provided, however, that no such revision or amendment, except
as is authorized in Section 14, shall impair the terms and conditions of any Award which is
outstanding on the date of such revision or amendment to the material detriment of the Participant
without the consent of the Participant. Notwithstanding the foregoing, no such revision or
amendment shall (i) materially increase the number of shares subject to the Plan except as provided
in Section 14 hereof, (ii) change the designation of the class of employees

 

 

eligible to receive Awards, (iii) decrease the price at which Options may be granted, or (iv)
materially increase the benefits accruing to Participants under the Plan without the approval of
the shareholders of the Company if such approval is required for compliance with the requirements
of any applicable law or regulation. Furthermore, the Plan may not, without the approval of the
shareholders, be amended in any manner that will cause incentive stock options to fail to meet the
requirements of Section 422 of the Internal Revenue Code.

SECTION 17.

NO OBLIGATION TO EXERCISE OPTION

     The granting of an Option shall impose no obligation upon the Participant to exercise such
Option. Further, the granting of an Award hereunder shall not impose upon the Company or any
Affiliate any obligation to retain the Participant in its employ for any period.exv10w1

 

EXHIBIT 10.1

EXECUTIVE EMPLOYMENT AGREEMENT

     THIS AGREEMENT is made and entered into effective as of the 19th day of December,
2005, (the “Effective Date”) by and between G&K SERVICES, INC., a Minnesota corporation with its
principal business office in the State of Minnesota (“Employer”, as further defined in Section 1.10
below); and David Miller a resident of the State of Minnesota (“Executive”).

INTRODUCTION

	 	A.	 	Employment. Executive is employed by Employer under this Agreement the terms
and conditions of this Agreement. As such, Executive is subject to the same polices, terms
and conditions as those described in the Employer’s employee handbook, its Code of Ethics,
policies, and employee benefit plans (as modified from time to time by Employer), except as
otherwise specifically provided in this Agreement.
	 
	 	B.	 	Protection of Employer. In performing Executive’s job-related duties and
responsibilities for Employer, Executive will have extensive access to Employer’s
confidential design, manufacturing, distribution, marketing and sales information which
Employer has developed at great expense, time and effort, as well as opportunities to
cultivate valuable business relationships with employees, customers and vendors of
Employer. This information is Confidential Information, as defined in Section 8 of this
Agreement, and its disclosure to a competitor would cause irreparable harm to Employer.
Therefore, Employer is not willing to offer Executive employment and the additional
benefits contained in this Agreement unless Executive signs this Agreement, providing
Employer with reasonable protection for its Confidential Information as well as other the
protections set forth below.

AGREEMENT

     In consideration of the facts recited above, which are a part of this Agreement, and the
parties’ mutual undertakings in this Agreement, Employer and Executive agree as follows:

ARTICLE 1

DEFINITIONS

     Capitalized terms used generally in this Agreement will have their defined meaning throughout
the Agreement. The following terms will have the meanings set forth below; unless the context
clearly requires otherwise.

     1.1 “Agreement” means this Agreement, as it may be amended from time to time.

     1.2 “Base Salary” means the total annual cash compensation payable to Executive on a regular
periodic basis under this Agreement Section 3.1, without regard to any voluntary salary deferrals
or reductions to fund employee benefits.

     1.3 “Board” means the Board of Directors of Employer.

 

 

     1.4 “Cause” has the meaning set forth in Section 4.2.

     1.5 “Change in Control” has the meaning set forth in Article 7.

     1.6 “Confidential Information” has the meaning set forth in Section 8.1.

     1.7 “Date of Termination” has the meaning set forth in Section 4.6.

     1.8 “Disability” means the unwillingness or inability of Executive to perform the essential
functions of Executive’s position (with or without reasonable accommodation) under this Agreement
for a period of ninety (90) days (consecutive or otherwise) within any period of six (6)
consecutive months because of Executive’s incapacity due to physical or mental illness, bodily
injury or disease, if Executive has not returned to the full-time performance of the Executive’s
duties within ten (10) days after a Notice of Termination is issued by Employer; provided, however,
that if Executive (or Executive’s legal representative) does not agree with a determination of the
existence of a Disability (or the existence of a physical or mental illness or bodily injury or
disease), this determination will be subject to the certification of a qualified medical doctor
mutually agreed to by Employer and Executive. In the absence of agreement, each party will
nominate a qualified medical doctor and the two doctors will select a third doctor, who will make
the determination as to Disability. The decision of the designated physician will be binding upon
the parties.

     1.9 “Effective Date” has the meaning referred to in the first paragraph of this Agreement.

     1.10 “Employer” means all of the following, jointly and severally: (a) G&K Services, Inc., (b)
any Subsidiary of G&K Services, Inc. and (c) any Successor of G&K Services, Inc.

     1.11 “Executive” means the individual named in the first paragraph of this Agreement.

     1.12 “Notice of Termination” has the meaning set forth in Section 4.6(a).

     1.13 “Plan” means any bonus or incentive compensation agreement, plan, program, policy or
arrangement sponsored, maintained or contributed to by Employer, to which Employer is a party or
under this Agreement which employees of Employer are covered, including, without limitation, (a)
any stock option or any other equity-based compensation plan; (b) any annual or long-term incentive
(bonus) plan; (c) any employee benefit plan, such as a thrift, profit sharing, deferred
compensation, medical, dental, disability income, accident, life insurance, automobile allowance,
perquisite, fringe benefit, vacation, sick or parental leave, separation or relocation plan or
policy and (d) any other agreement, plan, program, policy or arrangement intended to benefit
employees or executive officers of Employer.

     1.14 “Subsidiary” means any corporation or other business entity controlled by Employer.

     1.15 “Successor” means any corporation, individual, group, association, partnership, limited
liability company, firm, venture or other entity or person that, subsequent to the Effective Date,
succeeds to the actual or practical ability to control (either immediately or with the passage of
time) substantially all of Employer and/or Employer’s business and/or assets, directly or
indirectly, by merger, consolidation,

Executive Employment Agreement 2005

 

 

recapitalization, purchase, liquidation, redemption,
assignment, similar corporate transaction, operation of law or otherwise.

ARTICLE 2

EMPLOYMENT AND DUTIES

     2.1 Employment. Under this Agreement the terms and conditions of this Agreement,
Employer offers and Executive accepts employment for an indefinite term. Executive will serve in
the capacity of President, US Rental Operations, reporting to Employer’s Chief Executive Officer
or, subject to Executive’s rights under this Agreement, such other title and position as the Chief
Executive Officer will determine. This Agreement and Executive’s employment may be terminated by
Employer at any time and for any reason, with or without cause.

     2.2 Duties. While Executive is employed under this Agreement, and excluding any
periods of vacation, sick, disability or other leave to which Executive is entitled, Executive
agrees to devote substantially all of Executive’s attention and time during normal business hours
to the business and affairs of Employer and to use Executive’s best efforts to perform faithfully
and efficiently such responsibilities assigned to Executive from time to time.

     Executive will comply with Employer’s policies and procedures including those described in the
Company’s employee handbook, Code of Ethics, policies, and employee benefit plans of Employer, as
modified from time to time by Employer; provided, however, that to the extent these policies and
procedures are inconsistent with this Agreement, the provisions of this Agreement will control.

     2.3 Relationship of Parties. The relationship between Employer and Executive will be
that of employer and employee. Except as otherwise specifically provided in Article 4, nothing in
this Agreement will be construed to give Executive any interest in the assets of Employer. All of
the records and files pertaining to Employer’s suppliers, licensors, licensees and customers are
specifically acknowledged to be the property of Employer and not that of Executive.

ARTICLE 3

COMPENSATION AND BENEFITS

     3.1 Base Salary. Commencing as of the Effective Date, Employer will pay
Executive a Base Salary at an annual rate of Two Hundred Ninety Thousand Dollars ($290,000.00), or
such other annual rate as may from time to time be approved by the Board. The Base Salary is to be
paid in substantially equal regular periodic payments in accordance with Employer’s regular payroll
practices. If Executive’s Base Salary is changed at any time during Executive’s employment by
Employer, the changed amount will become the Base Salary under this Agreement, subject to any
subsequent changes.

     3.2 Other Compensation and Benefits. While Executive is employed by Employer
under this Agreement:

     (a) Executive will have an annual incentive opportunity equal to fifty percent (50%) at
target (100% achievement of objectives) under Employer’s management incentive plan in effect
for its 2006 fiscal year, and incentives determined under Employer’s management incentive
plans for future fiscal years. For fiscal year 2006 there is no cap on the maximum payout
on the

Executive Employment Agreement 2005

 

 

management incentive plan for members of Employer’s Executive Team. Executive is a
member of Employer’s Executive Team. For fiscal year 2006 only, Employer guarantees a
minimum payout of fifty percent (50%) of Executive’s target incentive opportunity, prorated
based upon the Effective Date.

     (b) For fiscal year 2006 only, and as a bonus for signing and implementing this
Agreement, Employer will pay to Executive the sum of Twenty-Five Thousand Dollars
($25,000.00) payable with Executive’s first paycheck as an employee.

     (c) As
determined by the Board, Exertive may receive an initial grant of stock option

shares as approved by the Board, with three (3) year graded vesting, and a grant of
restricted stock shares with five (5) year graded vesting. Executive will be eligible for
an annual equity grant of stock, starting as of the beginning of fiscal year 2007, as
determined by the Board for performance at target with potential upside for superior
performance against objectives.

     (d) Executive will be permitted to participate in all Plans for which Executive is or
becomes eligible as provided by the respective Plan terms. Employer may, in its sole
discretion, amend or terminate any Plan that provides benefits generally to its employees or
its executive officers.

     (e) As a member of Employer’s Executive Team, Executive will receive a leased vehicle
of Executive’s choice with a value of up to Fifty-Five Thousand Dollars ($55,000.00), and
will be eligible for a financial planning benefit of up to Two Thousand Five Hundred
($2,500.00) annually, and an annual executive physical paid for by Employer.

     (f) Executive is eligible for up to four (4) weeks paid vacation annually.

     (g) Executive will also be entitled to participate in or receive benefits under any
Plan made available by Employer in the future to its executives and key management
employees, subject to and on a basis consistent with the terms, conditions and overall
administration of the Plans and the preceding provisions of this Section 3.2.

     3.3 Limitation on Right to Deferred Compensation. The rights of Executive, or
Executive’s beneficiaries or estate, to any deferred compensation under this Agreement will be
solely those of an unsecured creditor of Employer. Neither Executive nor any of Executive’s
beneficiaries or estate will be entitled to assign or transfer (except to Employer) any right to
receive any part of any deferred compensation amounts under this Agreement and, in the event of any
attempt to assign or transfer any of these amounts, Employer will have no further liability under
this Agreement for these amounts.

ARTICLE 4

TERMINATION

     Executive’s employment with the Employer may be terminated at any time as follows:

     4.1 Death or Disability This Agreement and Executive’s employment under this Agreement
will, upon Executive’s death or Disability, terminate as of the applicable Date of Termination.

Executive Employment Agreement 2005

 

 

     4.2 Termination by Employer for Cause. Employer may terminate Executive’s at
will employment at any time for Cause, with or without advance notice (except as otherwise provided
in this Section 4.2). For purposes of this Agreement, “Cause” means any of the following, with
respect to Executive’s position of employment with Employer:

     (a) Executive’s failure or refusal to perform the duties and responsibilities set forth
under this Agreement if the failure or refusal is not due to Disability or a physical or
mental illness or bodily injury or disease;

     (b) use of alcohol or drugs that interferes with the performance of Executive’s
obligations under this Agreement or Executive’s duties, responsibilities and obligation as
an employee of Employer;

     (c) Executive’s indictment for or conviction of (including entering a guilty plea or
plea of no contest to) a felony or of any crime involving moral turpitude, fraud, dishonesty
or theft;

     (d) any material dishonesty of Executive involving or affecting Employer;

     (e) any gross negligence or other willful or intentional act or omission of Executive
having the effect or reasonably likely to have the effect of injuring the reputation,
business or business relationships of Employer or Executive in a material way;

     (f) any willful or intentional breach by Executive of a fiduciary duty to Employer;

     (g) any court order or settlement agreement prohibits Executive’s continued employment
with Employer;

     (h) any willful or intentional breach by Executive of a written or oral non-competition
agreement, confidentiality agreement, proprietary information agreement, trade secret
agreement or any other agreement which would prevent Executive from working for Employer
and/or performing Executive’s duties at Employer;

     (i) any willful or intentional breach by Executive of Employer’s standard business
practices and policies, including, without limitation, policies against racial or sexual
discrimination or harassment; and

     (j) any material breach by Executive (not covered by any of the above clauses (a)
through (i)) of any material term, provision or condition of this Agreement, if the breach
is not cured (to the extent curable) within five (5) days after written notice of the breach
is issued to Executive from Employer.

     For purposes of this Section 4.2, no act, or failure to act, on Executive’s part will be
considered “dishonest,” “willful” or “intentional” unless done, or omitted to be done, by Executive
in bad faith and without reasonable belief that Executive’s action or omission was in or
not opposed to, the best interest of Employer. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for
Employer will be conclusively presumed to be done, or omitted to be done, by Executive in good
faith and in the best interests of Employer. Furthermore, the term

Executive Employment Agreement 2005

 

 

“Cause” will not include ordinary negligence or failure to act, whether due to an error in
judgment or otherwise, if Executive has exercised substantial efforts in good faith to perform the
duties reasonably assigned or appropriate to the position.

     4.3 Termination by Executive for Good Reason. After a Change in Control (as
defined in Article 7), Executive may voluntarily resign from employment under this Agreement with
or without Good Reason (as this term is defined in Section 7.1(f)).

     4.4 Voluntary Termination by Executive. Executive may, upon thirty (30) days
notice to Employer, terminate Executive’s at will employment at any time for any reason. During
the thirty (30) day period after notice is given Executive agrees that, at Employer’s request and
sole discretion, Executive will continue to render Executive’s normal service to Employer to the
best of Executive’s ability, and Employer will continue to pay Executive the Base Salary.

     4.5 Termination by Employer without Cause. Employer may, upon written notice,
terminate Executive’s at will employment without cause, at any time and for any reason or no
reason.

     4.6 Notice of Termination and Date of Termination.

     (a) For purposes of this Agreement, a “Notice of Termination” will mean a notice that
indicates the date on which termination of Executive’s employment is effective. Any
termination by Employer or by Executive under to this Agreement (other than Executive’s
death or a termination by mutual agreement) will be communicated to the other party by
submission of a written Notice of Termination. If termination is by Employer For Cause or
by Executive for Good Reason, the Notice of Termination will set forth in reasonable detail
the facts and circumstances claimed to provide the basis for the termination, consistent
with the terms of this Agreement.

     (b) For purposes of this Agreement, “Date of Termination” will mean: (i) if Executive’s
employment is terminated due to death, the date of Executive’s death; (ii) if Executive’s
employment is terminated for Disability, thirty (30) calendar days after the Notice of
Termination is given; (iii) if Executive’s employment is terminated by Employer for Cause or
by Executive for Good Reason, the date stated in the Notice of Termination; (iv) if
Executive’s employment is terminated by mutual agreement of the parties, the termination
date provided for in the agreement; or (v) if Executive’s employment is terminated for any
other reason, the date stated in the Notice of Termination provided the date is no earlier
than thirty (30) calendar days after the date on which the Notice of Termination is
submitted to the intended recipient, unless an earlier date has been expressly agreed to by
Executive in writing either before or after receiving the Notice of Termination.

ARTICLE 5

PAYMENTS UPON TERMINATION

     5.1 Compensation during Disability. During any period in which
Executive fails to perform Executive’s duties under this Agreement as a result of
Executive’s incapacity due to physical or mental illness or bodily injury or disease,
Executive will continue to receive all Base Salary and other compensation and benefits to
which Executive is otherwise entitled under this Agreement and any Plan, through Executive’s
Date of Termination.

Executive Employment Agreement 2005

 

 

     5.2 Compensation upon Termination by Reason of Death, Voluntary Termination
by Executive, For Cause by Employer or by Mutual Agreement. Except as provided in
Article 7, if Executive’s employment under this Agreement is terminated (i) by Executive’s
death, (ii) voluntarily by Executive, (iii) by Employer for Cause, or (iv) by mutual
agreement of the parties, then Employer will pay Executive the Base Salary through the Date
of Termination, plus any amounts to which the Executive is entitled under this Agreement,
and under any Plan as provided by the Plan. Employer will also pay any retirement benefits
to which Executive is or becomes entitled under this Agreement or under any Plan, except to
the extent any benefits are forfeited under the terms of the Plan.

     5.3 Compensation Upon Termination by Employer Without Cause or Executive for
Good Reason. In the event either (i) Employer terminates Executive’s employment under
this Agreement without Cause; or (ii) Executive voluntarily terminates employment under this
Agreement for Good Reason [as this term is defined in Section 7.1 (f)]; and, if Executive
executes a written release substantially in the form attached to this
Agreement as Exhibit A and consistent with this Section 6.3 (a “Release Agreement”), then

     (i) Employer will pay to Executive, as separation pay which Executive
has not earned and to which he is not otherwise entitled, an amount equal to eleven
(11) months of Executive’s monthly Base Salary in effect as of the Date of
Termination [in addition to a thirty day notice of termination set forth in Section
4.6(b)]. Separation payment will be made to the Executive in weekly payments
beginning at least sixteen (16) days after Executive’s execution of the Release
Agreement, provided the Executive has not exercised rights to revoke or rescind the
release of claims as provided in the Release Agreement

     (ii) If Executive (or any individual eligible for group health Plan benefits
through Executive) is eligible under this Agreement, the Plan or applicable law to
continue participation in Employer’s group health Plan during the separation pay
period and does elect to continue these benefits, Employer will, for that period
during which Executive is entitled to receive separation pay under Section 5.3(i),
continue to pay Employer’s share of the cost of these benefits as if Executive
remained continuously employed with Employer throughout the separation pay period but
only while Executive or such other individual continues to pay the balance of such
cost. In the alternative, and under these circumstances, Employer may elect, in its
discretion, to pay to Executive on or about the Date of Termination a lump sum
calculated to represent Employer’s share of the cost of these benefits.

	 	5.4	 	Outplacement. Employer will, for a period of up to eleven (11) months
following Executive’s Date of Termination, reimburse Executive for all reasonable
expenses of a reputable outplacement organization selected by Executive, but not to
exceed $12,000.00 in the aggregate.
	 
	 	5.5	 	No Additional Pay/Benefits. Except as specifically set forth above, no
post-termination payments or benefits will be provided to Executive following the Date
of Termination of Executive’s employment. No 401(k) contributions will be paid by
Employer based on post-termination separation pay. Further, Executive will not be
entitled to an incentive award

Executive Employment Agreement 2005

 

 

under the Employer’s incentive Plans or any other bonus for any fiscal year, or part
thereof, during which post-termination separation pay is paid.

     Executive will not be required to mitigate Employer’s payment obligations under this Article 5
by making any efforts to secure other employment, and Executive’s commencement of employment with
another employer will not reduce the obligations of Employer under this Article 5.

ARTICLE 6

CHANGE IN CONTROL

     6.1 Definitions Relating to a Change in Control. The following terms will have
the meanings set forth below; unless the context clearly requires otherwise:

     (a) “1934 Act” will mean the Securities Exchange Act of 1934, as amended (or any
successor provision), and applicable regulations.

     (b) “Beneficial Ownership” by a person or group of persons will be determined in
accordance with Regulation 13D (or any similar successor regulation) promulgated by the
Securities and Exchange Commission pursuant to the 1934 Act. Beneficial Ownership of an
equity security may be established by any reasonable method, but will be presumed
conclusively as to any person who files a Schedule 13D report with the Securities and
Exchange Commission reporting the ownership.

     (c) “Change of Control” means the occurrence of any of the following events:

     (i) any person or group of persons attains Beneficial Ownership of thirty per
cent (30%) or more of any equity security of Employer entitled to vote for the
election of directors;

     (ii) a majority of the members of the Board is replaced within a period of less
than two (2) years by directors not nominated and approved by the Board; or

     (iii) the stockholders of Employer approve an agreement to merge or consolidate
with or into another corporation or entity unrelated to Employer, or an agreement to
sell or otherwise dispose of all or substantially all of Employer’s assets (including
a plan of liquidation).

     (d) “Continuing Directors” are (i) directors who were in office prior to the time any
events described in paragraphs (c)(i), (c)(ii) or (c)(iii) of this Section 6.1 have
occurred, or any person that has publicly announced an intention to acquire twenty per cent
(20%) or more of any equity security of Employer; (ii) directors in office for a period of
more than two (2) years; and (iii) directors nominated and approved by the Continuing
Directors.

     (e) “Change in Control Termination” will mean that a Change in Control of Employer
has occurred, and either of the following events has also occurred within one (1) year after
the Change in Control: (i) Employer terminates the Executive’s employment or this Agreement
for any

Executive Employment Agreement 2005

 

 

reason
other than for Cause, Executive’s death or Executive’s Disability; or (ii) Executive
terminates Executive’s employment for Good Reason.

     (f) “Good Reason” will mean, with respect to a voluntary termination of
employment by Executive after a Change in Control, any of the following:

     (i) an adverse involuntary change in Executive’s status or position as an
executive officer of Employer, including, without limitation, (A) any adverse change
in Executive’s status or position as a result of a material diminution in Executive’s
duties, responsibilities or authority as of the day before the Change in Control; (B)
the assignment to Executive of any duties or responsibilities that, in Executive’s
reasonable judgment, are significantly inconsistent with Executive’s duties,
responsibilities or authority as of the day before the Change in Control; or (C) any
removal of Executive from, or any failure to reappoint or reelect Executive to, a
position with the same duties, responsibilities or authority Executive had as of the
day before the Change in Control (except in connection with a termination of
Executive’s employment for Cause in accordance with Article 4, or as a result of
Executive’s Disability or death);

     (ii) a reduction by Employer in Executive’s Base Salary as in effect on the day
before the Change in Control;

     (iii) the taking of any action by Employer that would materially and adversely
affect the physical conditions existing, as of the day before the Change in Control,
under which Executive performs employment duties for Employer;

     (iv) Employer’s requiring Executive to be based anywhere other than where
Executive’s office is located as of the day before the Change in Control, except for
required travel on Employer’s business to an extent substantially consistent with
business travel obligations that Executive had undertaken on behalf of Employer as
prior to the Change in Control;

     (v) any failure by Employer to obtain from any Successor an assumption of this
Agreement as contemplated by Section 6.1; or

     (vi) any purported termination by Employer of this Agreement or the employment
of the Executive at any time after a Change in Control that is not expressly
authorized by this Agreement; or any breach of this Agreement by Employer at any time
after a Change in Control, other than an isolated, insubstantial and inadvertent
failure that does not occur in bad faith and is remedied by Employer within a
reasonable period after Employer’s receipt of notice of the failure from Executive.

     6.2 Benefits Upon a Change in Control Termination. If a Change in Control
Termination occurs with respect to Executive, Executive will be entitled to the following benefits;
provided, however, that to the extent Executive has already received the same type of benefits
under this Article 6 as a result of Executive’s Change in Control Termination, Executive’s benefits
under this Section 6.2 will be offset by these other benefits to the extent necessary to prevent
duplication of benefits under this Agreement:

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          (a) all of the payments and benefits that Executive would have been entitled to receive if the
Change in Control Termination were described in Section 5.3, and payment will be made in a lump sum
on or before the tenth (10th) calendar day following the Date of Termination; and

          (b) for a period of up to six (6) months following Executive’s Date of Termination, Employer
will reimburse Executive for all reasonable expenses incurred by Executive [excluding any
arrangement by which Executive prepays expenses for a period of greater than thirty (30) days] in
seeking employment with another employer, including the fees of a reputable outplacement
organization selected by Employer, but not to exceed $12,000.00 in the aggregate;

     Executive will not be required to mitigate Employer’s payment obligations under this Agreement
this Article 6 by making any efforts to secure other employment; and Executive’s commencement of
employment with another employer will not reduce the obligations of Employer pursuant to this
Article 6.

     6.3 Acceleration of Incentives. If upon the occurrence of a Change of Control, the
Board and a majority of the Continuing Directors [as this term is defined in the G&K Services, Inc.
1998 Stock Option and Compensation Plan (the “1998 Plan”)] determine that the economic incentives
(including without limitation stock options and awards of restricted stock) (the “Incentives”)
granted under this Agreement the 1998 Plan shall not accelerate immediately in accordance with
Section 11.12 of the 1998 Plan (or any successor provision), then the following will nonetheless
occur with respect to any and all Incentives that are owned by Executive at the time of the Change
of Control:

     (a) the restrictions set forth in the 1998 Plan on all shares of restricted stock
awards will lapse immediately;

     (b) all outstanding options and stock appreciation rights will become exercisable
immediately; and

     (c) All performance shares will be deemed to be met and payment made immediately.

     6.4 Limitation on Severance Payment. Notwithstanding any provision contained in this
Agreement to the contrary, if any amount or benefit to be paid or provided under this Article 6, or
any other plan or agreement between Executive and Employer would be an “Excess Parachute Payment,”
within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”),
or any successor provision thereto, but for the application of this sentence, then the payments and
benefits to be paid or provided under this Agreement this Article 6 will be reduced to the minimum
extent necessary (but in no event to less than zero) so that no portion of any such payment or
benefit, as so reduced, constitutes an Excess Parachute Payment; provided, however, that the
foregoing reduction will be made only if and to the extent that such reduction would result in an
increase in the aggregate payment and benefits to be provided to Executive, determined on an
after-tax basis (taking into account the excise tax imposed pursuant to Section 4999 of the Code,
or any successor provision thereto, any tax imposed by any comparable provision of state law, and
any applicable federal, state and local income taxes). If requested by Executive or Employer, the
determination of whether any reduction in such payments or benefits to be provided under this
Article 6 or otherwise is required pursuant to the preceding sentence will be made by an
independent accounting firm that is a “Big-4 Accounting Firm” (or other accounting firm mutually
acceptable to Executive and Employer) not then-engaged as Employer’s independent public auditor, at
the expense of Employer, and the determination such independent accounting firm will be final and
binding on

Executive Employment Agreement 2005

 

 

all parties. In making its determination, the independent accountant will allocate a reasonable
portion of the separation payment to the value of any personal services rendered following the
Change in Control and the value of any non-competition agreement or similar agreements to the
extent that such items reduce the amount of the parachute payment. In the event that any payment
or benefit intended to be provided under this Article 6 or otherwise is required to be reduced
pursuant to this Section 6.4, Executive (in Executive’s sole discretion) will be entitled to
designate the payments and/or benefits to be so reduced in order to give effect to this Section.
Employer will provide Executive with all information reasonably requested by Executive to permit
Executive to make such designation. In the event that Executive fails to make such designation
within ten (10) business days of receiving such information, Employer may effect such reduction in
any manner it deems appropriate.

ARTICLE 7

PROTECTION OF EMPLOYER

     7.1 Confidential Information. For purposes of this Article 7, “Confidential
Information” means information that is proprietary to Employer or proprietary to others and
entrusted to Employer; whether or not such information includes trade secrets. Confidential
Information includes, but is not limited to, information relating to Employer’s business plans and
to its business as conducted or anticipated to be conducted, and to its past or current or
anticipated products and services. Confidential Information also includes, without limitation,
information concerning Employer’s customer lists or routes, pricing, purchasing, inventory,
business methods, training manuals or other materials developed for Employer’s employee training,
employee compensation, research, development, accounting, marketing and selling. All information
that Employer has a reasonable basis to consider as confidential will be Confidential Information,
whether or not originated by Executive and without regard to the manner in which Executive obtains
access to this and any other proprietary information of Employer.

Executive will not, during or after the termination of Executive’s employment under this Agreement,
(a) directly or indirectly use Confidential Information for Executive’s own benefit; or (b)
disclose any Confidential Information to, or otherwise permit access to Confidential Information
by, any person or entity not employed by Employer or not authorized by Employer to receive such
Confidential Information, without the prior written consent of Employer. Executive will use
reasonable and prudent care to safeguard and protect and prevent the unauthorized use and
disclosure of Confidential Information. Furthermore, except in the usual course of Executive’s
duties for Employer, Executive will not at any time remove any Confidential Information from the
offices of Employer, record or copy any Confidential Information or use for Executive’s own benefit
or disclose to any person or entity directly or indirectly competing with Employer any information,
data or materials obtained from the files or customers of Employer, whether or not such
information, data or materials are Confidential Information.

     Upon any termination of Executive’s employment, Executive will collect and return to Employer
(or its authorized representative) all original copies and all other copies of any Confidential
Information acquired by Executive while employed by Employer.

     The obligations contained in this Section 8.1 will survive for as long as Employer in its sole
judgment considers the information to be Confidential Information. The obligations under this
Agreement this Section 8.1 will not apply to any Confidential Information that is now or becomes
generally available

Executive Employment Agreement 2005

 

 

to the public through no fault of Executive or to Executive’s disclosure of any
Confidential Information required by law or judicial or administrative process.

     7.2 Non-Competition. While employed by Employer and for a period of eighteen
(18) months following the date of Executive’s termination of employment for any reason, Executive
will not, directly or indirectly, alone or as an officer, director, shareholder, partner, member,
employee or consultant of any other corporation or any partnership, limited liability company, firm
or other business entity:

     (a) engage in, have any ownership interest in, financial participation in, or become
employed by, any business or commercial activity in competition (i) with any part of
Employer’s business, as conducted anywhere within the geographic area in which Employer has
conducted its business within the three (3) years before such date, or (ii) with any part of
Employer’s contemplated business with respect to which Executive has Confidential
Information governed by Section 7.1. For purposes of this paragraph, “ownership interest”
will not include beneficial ownership of less than one percent (1%) of the combined voting
power of all issued and outstanding voting securities of a publicly held corporation whose
stock is traded on a major stock exchange or quoted on NASDAQ;

     (b) call upon, solicit or attempt to take away any customers, accounts or prospective
customers of Employer;

     (c) solicit, induce or encourage any supplier of goods or services to Employer to cease
its business relationship with Employer, or violate any term of any contract with Employer;
or

     (d) solicit, induce or encourage any other employee of Employer to cease employment
with Employer, or otherwise violate any term of such employee’s contract of employment with
Employer.

     The restrictions set forth in this Section 7.2 will survive any termination of this Agreement
or other termination of Executive’s employment with Employer, for whatever reason, and will remain
effective and enforceable for the full 18-month period; provided, however, that such period will be
automatically extended and will remain in full force for an additional period equal to any period
in which Executive is proven to have violated any such restriction.

     7.3 Stipulated Reasonableness. Executive acknowledges that the nature of Executive’s
position, the period of time necessary to fill Executive’s position in the event Executive’s
employment is terminated, the period of time necessary to allow customers of Employer’s business to
become familiar with Executive’s replacement, and the period of time necessary to cause an end to
the identification between Executive and Employer in the minds of Employers customers and vendors,
commands that the eighteen month (18) month noncompetition period be imposed for the protection of
Employer’s investment in its business.

     7.4 Protection of Reputation. Executive will, both during and after the
termination of Executive’s employment under this Agreement, refrain from communicating to any
person, including without limitation any employee of Employer, any statements or opinions that are
negative in any way about Employer or any of its past, present or future officials. In return,
whenever Employer sends or receives any Notice of Termination of Executive’s employment under this
Agreement, Employer will advise the members of its

Executive Employment Agreement 2005

 

 

operating committee and executive committee (or
any successors to such committees), to refrain from negative communications about Executive to
third parties.

     7.5 Remedies. The parties declare and agree that it is impossible to accurately
measure in money the damages that will accrue to Employer by reason of Executive’s failure to
perform any of Executive’s obligations under this Agreement this Article 7; and that any such
breach will result in irreparable harm to Employer, for which any remedy at law would be
inadequate. Therefore, if Employer institutes any action or proceeding to enforce the provisions
of this Article 7, Executive waives the claim or defense that such party has an adequate remedy at
law, Executive will not assert in any such action or proceeding the claim or defense that such
party has an adequate remedy at law, and Employer will be entitled, in addition to all other
remedies or damages at law or in equity, to temporary and permanent injunctions and orders to
restrain any violations of this Article 7 by Executive and all persons or entities acting for or
with Executive.

     7.6 Survival. The provisions of Article 7 of this Agreement will survive the
termination of this Agreement or the termination of Executive’s employment with Employer, and will
remain in full force and affect following termination.

ARTICLE 8

GENERAL PROVISIONS

     8.1 Successors and Assigns; Beneficiary.

     (a) This Agreement will be binding upon and inure to the benefit of any Successor of
Employer, and any Successor will absolutely and unconditionally assume all of Employer’s
obligations under this Agreement. Upon Executive’s written request, Employer will seek to
have any Successor, by agreement in form and substance satisfactory to Executive, assent to
the fulfillment by Employer of their obligations under this Agreement. Failure to obtain
such assent prior to the time a person or entity becomes a Successor (or where Employer does
not have advance notice that a person or, entity may become a Successor, within one (1)
business day after having notice that such person or entity may become or has become a
Successor) will constitute Good Reason for termination of employment by Executive pursuant
to Article 4.

     (c) This Agreement and all rights of Executive under this Agreement will inure to the
benefit of and be enforceable by Executive’s personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees and any assignees
permitted under this Agreement. If Executive dies while any amounts would still be payable
to Executive under this Agreement if Executive had continued to live, all such amounts,
unless otherwise provided herein, will be paid in accordance with the terms of this
Agreement to Executive’s Beneficiary. Executive may not assign this Agreement, in whole or
in any part, without the prior written consent of Employer.

     (d) For purposes of this Section 8.1, “Beneficiary” means the person or persons
designated by Executive (in writing to Employer) to receive benefits payable after
Executive’s death pursuant to Section 8.1(c). In the absence of any such designation or in
the event that all of the persons so designated predecease Executive, Beneficiary means the
executor, administrator or personal representative of Executive’s estate.

Executive Employment Agreement 2005

 

 

     8.2 Litigation Expense. If any party is made or will become a party to any litigation
(including arbitration) commenced by or against the other party involving the enforcement of any of
the rights or remedies of such party, or arising on account of a default of the other
party in its performance of any of the other party’s obligations under this Agreement, then the
prevailing party in such litigation will receive from the other party all costs incurred by the
prevailing party in such litigation, plus reasonable attorneys’ fees to be fixed by the court or
arbitrator (as applicable), with interest thereon from the date of judgment or arbitrator’s
decision at the rate of eight percent (8%) or, if less, the maximum rate permitted by law.

     8.3 No Offsets. In no event will any amount payable to Executive pursuant to this
Agreement be reduced for purposes of offsetting, either directly or indirectly, any indebtedness or
liability of Executive to Employer.

     8.4 Notices. All notices, requests and demands given to or made pursuant hereto will,
except as otherwise specified herein, be in writing and be personally delivered or mailed postage
prepaid, registered or certified U. S. mail, to any party as its address set forth on the last page
of this Agreement. Either party may, by notice under this Agreement, designate a changed address.
Any notice under this Agreement will be deemed effectively given and received: (a) if personally
delivered, upon delivery; or (b) if mailed, on the registered date or the date stamped on the
certified mail receipt.

     8.5 Captions. The various headings or captions in this Agreement are for convenience
only and will not affect the meaning or interpretation of this Agreement. When used herein, the
terms “Article” and “Section” mean an Article or Section of this Agreement, except as otherwise
stated.

     8.6 Governing Law. The validity, interpretation, construction, performance,
enforcement and remedies of or relating to this Agreement, and the rights and obligations of the
parties under this Agreement, will be governed by the substantive laws of the State of Minnesota
(without regard to the conflict of laws rules or statutes of any jurisdiction), and any and every
legal proceeding arising out of or in connection with this Agreement will be brought in the
appropriate courts of the State of Minnesota, each of the parties hereby consenting to the
exclusive jurisdiction of said courts for this purpose.

     8.7 Construction. Wherever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under this Agreement applicable law, but if
any provision of this Agreement will be prohibited by or invalid under this Agreement applicable
law, such provision will be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or the remaining provisions of this Agreement.

     8.8 Waiver. No failure on the part of either party to exercise, and no delay in
exercising, any right or remedy under this Agreement will operate as a waiver thereof; nor will any
single or partial exercise of any right or remedy under this Agreement preclude any other or
further exercise thereof or the exercise of any other right or remedy granted hereby or by any
related document or by law

     8.9 Modification. This Agreement may not be modified or amended except by written
instrument signed by the parties hereto.

     8.10 Entire Agreement. This Agreement constitutes the entire agreement and
understanding between the parties to this Agreement in reference to all the matters agreed upon.
This Agreement replaces

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in full all prior employment agreements or understandings of the parties to
this Agreement, and any and all such prior agreements or understandings are rescinded by mutual
agreement.

     8.11 Survival. The provisions of this Agreement which by their express or implied
terms extend (a) beyond the termination of Executive’s employment under this Agreement (including,
without limitation, the provisions relating to separation compensation and effects of a Change in
Control); or (b) beyond the termination of this Agreement (including, without limitation the
provisions in Article 8 relating to confidential information, non-competition and
non-solicitation), will continue in full force and effect notwithstanding Executive’s termination
of employment under this Agreement or the termination of this Agreement, respectively.

     8.12 Voluntary Agreement. Executive has entered into this Agreement voluntarily,
after having the opportunity to consult with an advisor chosen freely by Executive.

     8.13 Remedies. No civil action may be commenced for any claim or dispute relating to
this Agreement or arising out of Executive’s employment with Employer unless the parties, within
thirty (30) days after the date of either party’s written request, attempt in good faith to
promptly resolve the claim or dispute by negotiation at agreed time(s) and location(s). All
negotiations are confidential and will be treated as settlement negotiations. Notwithstanding the
foregoing, either party may seek equitable relief prior to such good faith efforts to preserve the
status quo pending the completion of such efforts.

     IN WITNESS WHEREOF, the parties have caused this Executive Employment Agreement to be
executed and delivered as of the Effective Date.

	 	 	 	 	 	 	 	 	 
	 	 	EMPLOYER:	 	G&K SERVICES, INC.:	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Richard L. Marcantonio
 

Chairman of the Board and
	 	 
	 

	 	 	 	 	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	EXECUTIVE:
	 	 	 	/s/ David M. Miller	 	 
	 

	 	 	 	 	 	 	 	 

Executive Employment Agreement 2005

 

 

EXHIBIT A

SEVERANCE AGREEMENT AND GENERAL RELEASE

Definitions. All the words used in this Severance Agreement and General Release (this
“Agreement”) have their plain meaning in ordinary English. Specific terms used in this Agreement
have the following meanings:

	 	1.	 	Words such as I and me include both me and anyone who has or
obtains any legal rights or claims through me. My name is _______________.
	 
	 	2.	 	“G&K” means G&K Services, Inc., and its affiliated entities, and each of them,
and past or present officials, managers, agents, officers, directors, employees,
committees, insurers, indemnitors, successors or assigns of any of the foregoing
entities.

G&K’s Promises. In exchange for My Promises, G&K has promised to extend to me the
consideration set forth on a separate Severance Benefits Letter dated the same date as this
Agreement (the “Severance Benefits Letter”), but only if I have not exercised my rights to revoke
or rescind certain of my waivers as provided in this Agreement.

My Claims. The claims I am releasing include all of my rights to any relief of any kind
from G&K including but not limited to:

	 	1.	 	All claims I have now, whether or not I now know about the claims;
	 
	 	2.	 	All claims for attorney’s fees;
	 
	 	3.	 	All claims, through the date this document is executed, for alleged
discrimination against me and any other rights and claims under the federal Age
Discrimination in Employment Act (“ADEA”), the Minnesota Human Rights Act (“MHRA”), the
Minneapolis Civil Rights Act, and all claims of any nature under any federal, state or
local statute, ordinance or other law;
	 
	 	4.	 	All claims arising out of my employment or my separation from employment with
G&K including, but not limited to, any alleged breach of contract, wrongful
termination, defamation, invasion of privacy or infliction of emotional distress;
	 
	 	5.	 	All claims for any other alleged unlawful employment practices arising out of
or relating to my employment or my separation from employment; and
	 
	 	6.	 	All claims for any other form of pay, for example holiday pay, vacation pay and
sick pay.
	 
	 	7.	 	All claims I have under that certain Executive Employment
Agreement dated
_______________
(the “Executive Employment Agreement”).

 My Promises. In exchange for receiving the payments and other consideration set
forth in the Severance Benefits Letter, I hereby give up all my claims against G&K. I fully and
finally release, give up, and otherwise relinquish all of my rights and claims against G&K,
including for example rights and claims of discrimination under the ADEA, MHRA, and Minneapolis
Civil Rights Act and all claims of any nature under any federal, state or local statute, ordinance
or other law. I will not bring any lawsuits or make any other demands against G&K, except if
necessary to enforce the provisions of the Severance Benefits Letter or to determine if this
Agreement is valid under the ADEA. The money and benefits I will receive as set forth in the

1

 

Severance Benefits Letter is full and fair payment for the release of all my rights and claims and
is in full satisfaction of G&K’s obligations under my Executive Employment Agreement. G&K does not
owe me anything in addition to what I will receive under the Severance Benefits Letter.

Additional Agreements and Understandings.

	 	1.	 	My last day of employment is _______________, ______.
	 
	 	2.	 	My obligations with respect to Protection of Employer all as more thoroughly
set forth in the Executive Employment Agreement shall survive my termination. This
Agreement replaces, supersedes, and nullifies any other prior oral or written
agreements between G&K and me as to any matter herein.
	 
	 	3.	 	I will keep the terms of the Agreement and the Severance Benefits Letter
confidential and make no disclosures to anybody, except that I may make such
disclosures to my immediate family, legal and tax advisors. In return, G&K has agreed
that the terms of the Agreement will be disclosed internally only on a need to know
basis.
	 
	 	4.	 	I will refrain from communicating with any person, including without limitation,
any G&K employee, any statements or opinions that are negative in any manner
about the company and/or its officials.
	 
	 	5.	 	This Agreement does not affect my participation or rights in any G&K fringe
benefit plan in which I participate. The Summary Plan Description of those benefits
remains in effect on such benefits.
	 
	 	6.	 	I am not waiving any rights or claims under the ADEA that may arise after this
date this Agreement is executed by me.

Rights to Consider, Revoke and Rescind.

	 	1.	 	I understand that I am advised by G&K to consult an attorney prior to signing this
Severance Agreement and General Release.
	 
	 	2.	 	I further understand that I have forty-five (45) days to consider my waiver of rights and
claims of age discrimination under the ADEA, beginning ____________, the date on which I received
this Agreement. If I sign this Agreement, I understand that I will then be entitled to revoke my
release of any rights and claims of age discrimination under the ADEA within seven (7) days of
executing it, and the release of my ADEA rights and claims shall not become effective or
enforceable until the seven-day period has expired.
	 
	 	3.	 	I further understand that I have the right to rescind my release of discrimination rights
and claims under the MHRA within fifteen (15) calendar days of the date upon which I sign this
Agreement. I understand that, if I desire to rescind my release of discrimination rights and
claims under the MHRA, I must put my rescission request in writing and deliver it to G&K by hand or
by mail within 15 calendar days of the date of execution of this Agreement by me. If I deliver my
rescission request by mail, it must be:

	 	a.	 	postmarked within 15 calendar days of the day on which I sign this Agreement;
	 
	 	b.	 	addressed to General Counsel, Legal Department, G&K Services,
Inc. 5995 Opus Parkway, Minnetonka, MN 55343; and,
	 
	 	c.	 	sent by certified mail, return receipt requested.

2

 

     I understand that if I revoke or rescind my waivers as provided above, all of G&K’s
obligations under the Severance Benefits Letter will immediately cease, and G&K will not pay me any
of the money or benefits in the Severance Benefits Letter, other than those amounts listed in such
Severance Benefits Letter, if any, which specifically provide that I will be paid even if I revoke
or rescind the waivers.

     I have read this Agreement carefully and understand all of its terms. I have had the
opportunity to discuss this Agreement with my own attorney prior to signing it. In agreeing to
sign this Agreement, I have not relied on any statements or explanations made by G&K, its agents or
its attorneys, except those contained in this Agreement and in the Severance Benefits Letter.

			
	EXECUTIVE
	 	G&K SERVICES, INC.
	 
	____________________________________
	 	By ____________________________________
	 
	____________________________________

(Date)
	 	Its ____________________________________
	 
	 	Date __________________________________

3

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