<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
UNITOG COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
<PAGE>
UNITOG COMPANY
101 WEST 11TH STREET
KANSAS CITY, MISSOURI 64105
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 22, 1997
TO ALL STOCKHOLDERS:
The Annual Meeting of Stockholders of Unitog Company will be held on
Thursday, May 22, 1997, at 10:00 a.m., at the Kansas City Club, 1228
Baltimore, Kansas City, Missouri for the following purposes:
(1) To elect two directors to serve three-year terms;
(2) To approve the Unitog Company 1997 Stock Option Plan;
(3) To approve the appointment of KPMG Peat Marwick LLP as independent
auditors for fiscal 1998; and
(4) To transact such other business as may properly come before the meeting
or any adjournments or postponements thereof.
Stockholders of record at the close of business on March 31, 1997 are
entitled to receive notice of, and to vote at, the meeting or any adjournments
or postponements thereof. A list of stockholders of the Company as of the
close of business on March 31, 1997 will be available for inspection during
business hours from May 9 through May 21, 1997 at 101 W. 11th Street, Kansas
City, Missouri and will also be available at the meeting.
By Order of the Board of Directors
Randolph K. Rolf
Chairman of the Board
Dated: April 22, 1997.
IMPORTANT--YOUR PROXY IS ENCLOSED
YOU ARE URGED TO SIGN, DATE AND MAIL YOUR PROXY EVEN THOUGH YOU MAY PLAN TO
ATTEND THE MEETING. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. IF
YOU ATTEND THE MEETING, YOU MAY VOTE BY PROXY OR YOU MAY WITHDRAW YOUR PROXY
AND VOTE IN PERSON.
<PAGE>
UNITOG COMPANY
101 WEST 11TH STREET
KANSAS CITY, MISSOURI 64105
----------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 22, 1997
----------------
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Unitog Company (the "Company") for use at
the Annual Meeting of Stockholders of the Company. The meeting will be held on
Thursday, May 22, 1997, commencing at 10:00 a.m., at the Kansas City Club,
1228 Baltimore, Kansas City, Missouri. This Proxy Statement and the
accompanying form of proxy are being mailed on or about April 22, 1997.
Only stockholders of record at the close of business on March 31, 1997 will
be entitled to notice of, and to vote at, the annual meeting. On the record
date, the Company had 9,644,607 shares of common stock issued and outstanding
and entitled to vote.
All shares represented by proxies will be voted by the individuals
designated on the enclosed proxy card in accordance with the stockholders'
directions. If the proxy card is signed and returned without any direction
given, shares will be voted in accordance with the recommendations of the
Board of Directors as described below. Any stockholder giving a proxy may
revoke it at any time before such proxy is voted at the meeting by giving
written notice of revocation to the Secretary of the Company, by submitting a
later dated proxy or by attending the meeting and voting in person. The
Chairman and Chief Executive Officer will announce the closing of the polls
during the meeting. All proxies must be received prior to the closing of the
polls to be counted.
The Company will bear all the costs of solicitation of proxies. Officers,
agents and employees of the Company may, by letter, by telephone or in person,
make additional requests for the return of proxies and may receive proxies on
behalf of the Company. Brokers, nominees, fiduciaries and other custodians
will be requested to forward soliciting materials to the beneficial owners of
shares and will be reimbursed for their expenses.
Stockholders representing a majority of the common stock outstanding and
entitled to vote must be present or represented by proxy in order to
constitute a quorum to conduct business at the meeting. The following
proposals will be submitted to stockholders at the meeting: the election of
two directors; the approval of the Unitog Company 1997 Stock Option Plan (the
"1997 Plan"); and the approval of the appointment of KPMG Peat Marwick LLP as
independent auditors for fiscal 1998. If any other matters are properly
brought before the meeting, the enclosed proxy grants discretionary authority
to the persons named in the proxy to vote the shares in their best judgment.
Each share of common stock represented at the meeting is entitled to one
vote on each matter properly brought before the meeting. The two nominees for
director who receive the highest number of votes cast will be elected as
directors. Approval of the 1997 Plan and approval of the auditors each require
the affirmative vote of a majority of the total number of shares represented
and entitled to vote at the meeting. Therefore, an abstention with respect to
approval of the 1997 Plan or with respect to approval of the auditors is in
effect a vote against
<PAGE>
the proposal. Shares represented by proxies which are marked "withhold
authority" with respect to the election of one or more nominees as directors
will be considered to be represented at the meeting, but will not be included
in determining the number of votes cast. In instances where brokers are
prohibited from exercising discretionary authority for beneficial owners who
have not returned proxies to the brokers, those shares will not be included in
the vote totals and, therefore, will have no effect on the vote.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
common stock as of March 1, 1997 for: (i) each person known to be the
beneficial owner of more than 5% of the Company's common stock; (ii) each
director and each nominee for director; (iii) each executive officer listed in
the charts under Executive Compensation and Other Information; and (iv) all
directors and executive officers as a group.
<TABLE>
<CAPTION>
VOTING AND
INVESTMENT
POWER
------------------ PERCENT
NAME OF BENEFICIAL OWNER SOLE SHARED OTHER OF CLASS(1)
- ------------------------ ------- ------- ------- -----------
<S> <C> <C> <C> <C>
T. Rowe Price Associates, Inc..... 702,050(2) -- -- 7.3%
100 E. Pratt Street
Baltimore, Maryland 21202
William D. Thomas................. 35,089 661,870(3) -- 7.2%
120 West 12th Street
Kansas City, Missouri 64105
G. Kenneth Baum................... 976 661,870(3) -- 6.9%
120 West 12th Street
Kansas City, Missouri 64105
George K. Baum Group, Inc......... 661,870(3) -- -- 6.9%
120 West 12th Street
Kansas City, Missouri 64105
Randolph K. Rolf.................. 629,550 15,000 -- 6.7%
101 West 11th Street
Kansas City, Missouri 64105
Stein Roe & Farnham Incorporated.. -- -- 644,350(4) 6.7%
One South Wacker Drive
Chicago, Illinois 60606
SteinRoe Special Fund............. -- -- 488,850(4) 5.1%
One South Wacker Drive
Chicago, Illinois 60606
Robert F. Hagans.................. 118,400 2,250 -- 1.3%
J. Craig Peterson................. 58,900(5) -- -- *
Terence C. Shoreman............... 34,500(5) -- -- *
D. Patrick Curran................. 25,103 750 -- *
Gary R. Russell................... 22,975(5) -- -- *
Robert M. Barnes.................. 20,750(5) 750 -- *
John W. Caffry.................... 4,697 1,500 -- *
David B. Sharrock................. 5,000 -- -- *
All executive officers and
directors as a group (13
persons)......................... 962,064(5) 689,920 -- 16.9%
</TABLE>
2
<PAGE>
- --------
*Denotes less than 1%.
(1) Based on the number of outstanding shares of common stock as of March 1,
1997 (9,643,857 shares), plus the number of shares subject to acquisition
before April 30, 1997, by the relevant beneficial owners.
(2) Based on a Schedule 13G, dated February 14, 1997, T. Rowe Price
Associates, Inc. ("Price Associates") beneficially owned 702,050 shares as
of December 31, 1996. Price Associates has sole dispositive power as to
all such shares and has sole voting power as to 38,500 of such shares.
These securities are owned by various individual and institutional
investors for which Price Associates serves as investment adviser with
power to direct investments and/or sole power to vote the securities. For
purposes of the reporting requirements of the Securities Exchange Act of
1934, Price Associates is deemed to be a beneficial owner of such
securities; however, Price Associates expressly disclaims that it is, in
fact, the beneficial owner of such securities.
(3) Shares are owned directly by George K. Baum Group, Inc., of which Mr. Baum
and Mr. Thomas are directors, officers and stockholders.
(4) Information is as of December 31, 1996 based on a joint Schedule 13G,
dated February 12, 1997. Stein Roe & Farnham Incorporated has sole
investment power as to 644,350 shares and SteinRoe Special Fund has sole
voting power as to 488,850 of such shares.
(5) Includes maximum number of shares subject to acquisition before April 30,
1997 upon the exercise of stock options as follows: Mr. Peterson, 30,000
shares; Mr. Shoreman, 34,500 shares; Mr. Russell, 21,375 shares; Mr.
Barnes, 19,250 shares; all executive officers as a group, 111,249 shares.
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of seven members,
one of whom is an executive officer of the Company.
The Company's Certificate of Incorporation and Bylaws provide for a
classified Board of Directors under which there are three classes of
directors, all of which are as equal in number as possible. The class to which
each director is assigned is designated as Class A, Class B or Class C. The
term of office of Class A Directors will expire at the 1999 Annual Meeting,
Class B at the 1997 Annual Meeting and Class C at the 1998 Annual Meeting. At
its March 13, 1997 meeting, the Board of Directors nominated the two persons
listed below for election as Class B Directors for a three-year term expiring
at the 2000 Annual Meeting. Each director elected will continue in office
until a successor has been elected or until resignation or removal. Both
nominees for directors are current Board members.
Shares represented by the accompanying form of proxy will be voted for the
election of the two nominees listed below, unless otherwise instructed on the
proxy card. If any nominee should at the time of the meeting be unavailable or
unable to serve as a director, the shares represented by the proxies will be
voted to elect the remaining nominees or any substitute nominee or nominees
designated by the Board. The Board knows of no reason why either of the
nominees would be unavailable or unable to serve.
3
<PAGE>
NOMINEES FOR THREE-YEAR TERMS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE TWO NOMINEES
FOR CLASS B DIRECTOR NAMED BELOW:
<TABLE>
<CAPTION>
NAME OF NOMINEE DIRECTOR PRINCIPAL OCCUPATION FOR
FOR DIRECTOR AGE SINCE LAST FIVE YEARS AND DIRECTORSHIPS
--------------- --- -------- ---------------------------------
<C> <C> <C> <S>
John W. Caffry.... 69 1989 Mr. Caffry served as Executive Vice President,
Administration, for Northern Telecom, Inc., a
company engaged in the telecommunications
industry, from February 1991 until his
retirement in October 1991. Prior to that time
he served as Executive Vice President, Finance
and Administration, for Northern Telecom, Inc.
He is a member of the Compensation Committee.
David B. Sharrock. 60 1994 Mr. Sharrock has been engaged as a private
consultant since January 1994. He served as
Executive Vice President and Chief Operating
Officer of Marion Merrell Dow Inc., a
pharmaceutical manufacturer, from January 1990
until his retirement in December 1993. He is a
member of the Compensation Committee. Mr.
Sharrock also serves on the Board of Directors
of Cincinnati Bell, Inc., Intercardia, Inc.,
Interneuron Pharmaceuticals, Inc., Praecis
Pharmaceuticals, Inc. and Progenitor, Inc.
</TABLE>
CONTINUING DIRECTORS
The following is information concerning the directors whose terms continue
after the annual meeting:
<TABLE>
<CAPTION>
DIRECTOR CURRENT PRINCIPAL OCCUPATION FOR
NAME AGE SINCE TERM LAST FIVE YEARS AND DIRECTORSHIPS
---- --- -------- ------- ---------------------------------
<C> <C> <C> <C> <S>
G. Kenneth Baum... 66 1984 1998 Mr. Baum has served as Chairman of the
Board of George K. Baum Group, Inc.,
an investment company, since May 1994.
He served as Chairman of the Board of
George K. Baum & Company, an
investment banking firm, from April
1982 to May 1994. He is a member of
the Compensation Committee and
Executive Committee. Mr. Baum also
serves on the Board of Directors of
H & R Block, Inc., Interstate Bakeries
Corporation and Sealright Co., Inc.
D. Patrick Curran. 52 1984 1998 Mr. Curran has served as Chairman and
Chief Executive Officer of Curran
Companies, a company engaged in the
specialty chemicals business, since
August 1979. He is a member of the
Audit Committee. Mr. Curran also
serves on the Board of Directors of
American Safety Razor Company,
Applebee's International, Inc. and
Sealright Co., Inc.
Robert F. Hagans.. 70 1979 1998 Mr. Hagans served as Chairman of the
Board of the Company from 1979 until
his retirement in May 1991. He is a
member of the Executive Committee. Mr.
Hagans also serves on the Board of
Directors of Sealright Co., Inc.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR CURRENT PRINCIPAL OCCUPATION FOR
NAME AGE SINCE TERM LAST FIVE YEARS AND DIRECTORSHIPS
---- --- -------- ------- ---------------------------------
<C> <C> <C> <C> <S>
Randolph K. Rolf.. 55 1986 1999 Mr. Rolf has served as Chairman of the
Board of the Company since May 1991
and President and Chief Executive
Officer since May 1988. He is a member
of the Executive Committee. Mr. Rolf
also serves on the Board of Directors
of SOS Staffing Services, Inc.
William D. Thomas. 53 1984 1999 Mr. Thomas has served as President of
George K. Baum Group, Inc., an
investment company, since May 1994. He
has also served as Executive Director
of George K. Baum Merchant Banc,
L.L.C., an investment advisor, since
May 1994. He served as Vice Chairman
of George K. Baum & Company, an
investment banking firm, from June
1991 to May 1994. He is a member of
the Audit Committee. Mr. Thomas also
serves on the Board of Directors of
Sealright Co., Inc.
</TABLE>
DIRECTOR NOMINATIONS
In addition to the Board of Directors' selection of nominees, nominations
for directors may be made by the Company's stockholders in compliance with
certain provisions of the Company's Bylaws. These requirements include written
notice to the Secretary of the Company not less than 60 days and not more than
90 days prior to the meeting. In the event that less than 70 days' notice (or
public disclosure) of the stockholder meeting date is given, notice of
stockholder nominations must be received by the Company's Secretary before the
close of business on the 10th day following the date on which notice was
mailed or public disclosure of the meeting was made. In the case of the
Company's annual meeting of stockholders, such public disclosure of the
meeting date is considered to have been made more than 70 days in advance,
because the meeting date is set forth in the Company's Bylaws (unless the
meeting date is changed from the fourth Thursday in May).
A stockholder notice regarding a director nomination must include:
. The name, age, business address, residence address, principal occupation
and/or employment of each nominee;
. The number of shares of each class of the Company's stock beneficially
owned by each director nominee;
. Such other information concerning the nominee as would be required under
the rules of the Securities and Exchange Commission in a proxy statement
soliciting proxies for the election of the nominee;
. The name and address of the stockholder or stockholders giving notice of
the nomination (as such name and address appear in the Company's stock
ledger); and
. The number of shares of each class of the Company's stock beneficially
owned by the nominating stockholder or stockholders.
The person acting as chairman of the stockholder meeting may determine
whether a nomination was made in accordance with the Bylaw procedures
described above, and, if the nomination is defective, shall declare that the
nomination shall be disregarded.
BOARD MEETINGS
The Board of Directors of the Company held six meetings during fiscal 1997.
During fiscal 1997, all directors attended at least 75% of the total number of
meetings of the Board of Directors and Committees of which they were members.
5
<PAGE>
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive annual retainers of
$12,000 and meeting fees of $1,000 for each Board of Directors meeting
attended, $300 for each telephonic Board of Directors meeting attended and
$300 for each Board of Directors committee meeting attended (except committee
chairmen receive $500 per committee meeting). The Company's Outside Director
Fee/Stock Program (the "Director Program") permits non-employee directors to
take all or a portion of their director fees in Unitog stock. Shares issued
for director fees payable before January 1, 1998, will be issued for 91% of
the fair market value as of the date the director fees would otherwise be
payable. After that time, the Compensation Committee will establish a
percentage of fair market value for each calendar year, at a level between 67%
and 91%. The Company also provides each non-employee director group term life
insurance coverage of $50,000. The 1997 Plan, which is being voted on by the
stockholders, would grant outside directors an option to purchase 1,000 shares
of Company common stock at the following times: on the date stockholders
approve the 1997 Plan; on the day after each annual meeting of stockholders
beginning in 1998; and on the date of an outside director's initial election
or appointment to the Board of Directors, unless the initial election is at an
annual stockholders meeting. See Proposal 2. The Board typically establishes
outside director compensation for the next year at its May meeting. Because
the 1997 Plan grants stock options to outside directors, the Board has
determined not to consider any increases in outside director compensation
before May 1998.
COMMITTEES
The Board has established standing Audit, Compensation and Executive
Committees. The Board does not have a standing nominating committee. The
biographical information included in this Proxy Statement identifies committee
memberships held by each director.
The Audit Committee held two meetings during fiscal 1997. It consists of two
non-employee directors. The functions performed by the Audit Committee are
review of significant financial information of the Company, review of the
effectiveness of the Company's accounting and internal control system,
oversight of the audit function, and recommendation of the appointment of
independent auditors of the Company.
The Compensation Committee held four meetings during fiscal 1997. It
consists of three non-employee directors. The Compensation Committee
establishes the general compensation policies and specific compensation levels
for executive officers and key management of the Company. The Committee also
administers the Management Incentive Plan and the Unitog Company 1992 Stock
Option Plan and the Director Program.
The Executive Committee did not meet during fiscal 1997. It consists of two
non-employee directors and one employee director. The Executive Committee has
authority to exercise, between Board meetings, all the powers and authority of
the Board, subject to certain restrictions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors to file with the Securities and Exchange
Commission and Nasdaq reports of ownership and reports of changes in such
ownership of common stock and other equity securities of the Company. SEC
regulations require those persons to furnish the Company with copies of all
Section 16(a) reports they file. Based solely on a review of the copies of
such reports received by it, and written representations that no Forms 5 were
required, the Company believes that during fiscal 1997 its executive officers
and directors complied with all applicable filing requirements in a timely
manner.
6
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table provides information concerning compensation provided to
the Company's Chief Executive Officer and each of the four other most highly
compensated executive officers of the Company for the fiscal years ended
January 26, 1997, January 28, 1996 and January 29, 1995.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
---------------- ------------
SECURITIES ALL OTHER
FISCAL UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(#) ($)(1)
- --------------------------- ------ -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Randolph K. Rolf............ 1997 $272,606 -- -- $ 9,618
Chairman, President and 1996 262,872 $50,150 -- 10,495
Chief Executive Officer 1995 251,043 99,780 -- 11,709
Terence C. Shoreman......... 1997 $183,356 -- 6,000 $ 5,258
Executive Vice President-- 1996 148,346 $28,959 6,000 4,991
Chief Operating Officer 1995 140,601 41,396 12,000 4,564
J. Craig Peterson........... 1997 $150,173 -- 6,000 $ 5,107
Executive Vice President-- 1996 144,442 $24,481 -- 5,073
Chief Administrative and 1995 138,173 41,456 6,000 5,597
Financial Officer
Gary R. Russell............. 1997 $147,981 -- 6,000 $ 5,459
Sr. Vice President-- 1996 120,808 $13,670 -- 4,697
Rental Operations 1995 115,173 21,318 4,500 4,774
Robert M. Barnes............ 1997 $107,173 -- 2,000 $ 3,985
Vice President--General 1996 101,808 $11,809 -- 3,967
Counsel and Secretary 1995 95,808 25,910 4,500 4,216
</TABLE>
- --------
(1) All Other Compensation for fiscal 1997 includes the Company contribution
under the qualified thrift plan as follows: Mr. Rolf, $8,178; Mr.
Shoreman, $3,957; Mr. Peterson, $4,027; Mr. Russell, $4,402; and Mr.
Barnes, $3,215. All other amounts reported for fiscal 1997 under this
heading represent premiums paid by the Company for term life insurance.
7
<PAGE>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the grant of stock
options during fiscal 1997 to the named executive officers.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
INDIVIDUAL GRANTS(1) AT ASSUMED
-------------------------------------------------- ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES PERCENT OF TOTAL EXERCISE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED TO OR BASE OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
- ---- ---------- ------------------ --------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Randolph K. Rolf........ -- -- -- -- -- --
Terence C. Shoreman..... 6,000 7.9% $24.75 3/15/06 $93,540 $236,100
J. Craig Peterson....... 6,000 7.9% 24.75 3/15/06 93,540 236,100
Gary R. Russell......... 6,000 7.9% 24.75 3/15/06 93,540 236,100
Robert M. Barnes........ 2,000 2.6% 24.75 3/15/06 31,180 78,700
</TABLE>
- --------
(1) The options were granted on March 15, 1996 and become exercisable in four
equal annual installments commencing one year from the date of grant. In
the event the employment of an option holder is terminated within one year
after a change of control, any unvested options which have been held for
at least six months immediately vest and are settled by the payment to the
option holder of an amount equal to the excess of the fair market value of
the shares over the exercise price of the option. Options become
immediately exercisable upon the death or, in some instances, the
retirement of the option holder.
(2) The price of Unitog Company common stock at the end of the 10-year option
term would be as follows: assuming 5% annual appreciation, $40.34 per
share, and assuming 10% annual appreciation, $64.10 per share. The assumed
annual rates of stock price appreciation of 5% and 10% are set by the
Securities and Exchange Commission and are not intended as a forecast of
possible future appreciation in stock prices.
STOCK OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END STOCK OPTION
VALUES
The following table provides information concerning stock options exercised
during fiscal 1997 and unexercised options held as of the end of fiscal 1997
by the named executive officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR IN-THE-MONEY OPTIONS AT
SHARES END(#) FISCAL YEAR END($)(1)
ACQUIRED ON VALUE ------------------------- -----------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISED
- ---- ----------- ----------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Randolph K. Rolf........ -- -- -- -- -- --
Terence C. Shoreman..... -- -- 26,250 18,750 $339,975 $133,485
J. Craig Peterson....... 60,000 $1,185,000 24,000 12,000 329,490 77,010
Gary R. Russell......... -- -- 17,625 9,375 247,065 44,910
Robert M. Barnes........ -- -- 15,000 6,500 201,878 54,008
</TABLE>
- --------
(1) Based on the closing market price of the Company's common stock at fiscal
year end ($26.25 per share).
8
<PAGE>
TERMINATION OF EMPLOYMENT ARRANGEMENTS
Under the terms of the Unitog Company 1992 Stock Option Plan, in the event
the employment of an option holder is terminated within one year after a
change of control of the Company, any unvested options then outstanding which
have been held for at least six months immediately vest and all outstanding
options are settled by the payment to the option holder of an amount equal to
the excess of the fair market value of the shares subject to outstanding
options over the exercise price of the options. Under the 1992 Stock Option
Plan, a "change of control" is deemed to have occurred in the event: (i) any
person acquires more than 25% of the common stock through a tender offer,
exchange offer or otherwise; or (ii) the Company is liquidated or dissolved
following the sale of all or substantially all of its assets; or (iii) the
Company is not the surviving parent corporation resulting from any merger or
consolidation to which it is a party.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors establishes the general
compensation policies and specific compensation levels for executive officers
and key management of the Company and administers the Management Incentive
Plan and the Unitog Company 1992 Stock Option Plan. The Compensation Committee
is composed of three members, each of whom is a non-employee director. All
decisions by the Compensation Committee relating to the compensation of the
Company's executive officers and key management are ratified by the entire
Board, except for decisions about awards under the 1992 Stock Option Plan
which are made solely by the Compensation Committee. The Compensation
Committee has furnished the following report on executive compensation:
The Company's executive compensation policies are designed to integrate
compensation with the Company's financial performance and long-term stock
appreciation, to provide competitive levels of compensation to assist the
Company in attracting and retaining qualified executives and to recognize
individual initiatives and achievements. There are three principal elements in
the Company's executive compensation program.
. Base Salary Compensation
. Annual Incentive Compensation
. Stock-Based Performance Compensation through Stock Option Grants
Base Salary
Base salary ranges are established each year for each executive position
based primarily on a review of salaries offered by other industrial companies
with revenues comparable to Unitog's for positions with comparable
responsibilities. The Compensation Committee believes that the Company's base
salary structure should approximate the 50th percentile of companies with
revenues comparable to Unitog's. The Compensation Committee sets executive
salaries within the applicable ranges each year after reviewing the following
criteria for each executive: job performance and results achieved, potential
for future responsibilities, the overall financial performance (primarily
revenues and operating income) of the Company or, for those executives who
work primarily in a particular operating segment, a combination of financial
performance of the Company and of the executive's business segment, and the
experience of the executive, in roughly that order of importance.
9
<PAGE>
Annual Incentive Compensation
The purpose of the Company's Management Incentive Plan is to provide a
direct financial incentive in the form of an annual cash bonus for achievement
of Company, major business segment and individual goals. For fiscal 1997, at
least 60% of an executive's annual bonus opportunity was based on actual
versus targeted operating income performance, either as to the Company as a
whole or, for those executives who work primarily in a particular operating
segment, a combination of operating income of the Company and of the
executive's business segment. Up to 20% of an executive's bonus may be based
on objective criteria applicable to the executive's area of responsibility,
such as revenues and expense control, which are set by the executive's
supervisor, and up to 20% of the bonus may be based on a subjective evaluation
of whether individual goals applicable to the executive were attained. To the
extent the financial and individual goals are met, an executive receives a
cash bonus equivalent to a pre-determined percentage of base salary that is
based on the executive's level of responsibility within the Company. The
specific operating income goals for the major business segments and the
Company as a whole are approved by the Compensation Committee at the beginning
of each fiscal year based on financial plans for the year. Although bonuses
are generally not paid unless the Company attains a minimum operating income
goal for the year, the Compensation Committee has the discretion to award
individual or major segment bonuses if the operating income goal is not met.
Because relevant operating income goals were not met, no bonuses were paid to
executive officers for fiscal 1997.
Based on an evaluation of the Company's executive compensation structure by
a national employment benefits consulting firm, the Compensation Committee
recommended and the Board approved certain changes to the Management Incentive
Plan for fiscal 1998. The Plan was modified to provide that up to 40% of an
individual's bonus could be paid if the person's individual goals were met
even if the corporate income goals were not achieved. The Plan limits the
total amount that can be paid in a given year to a predetermined percentage of
operating income. The Plan was also modified for fiscal 1998 to make earnings
per share, rather than operating income, the key financial performance measure
for the portion of bonuses paid based on Company-wide financial results (which
under the Plan must be at least 40% of an executive's bonus opportunity). The
Plan will utilize earnings per share in order to more closely integrate the
financial targets under the Plan with shareholder return.
Stock Option Grants
Stock-based performance compensation is provided through stock options
granted under the 1992 Stock Option Plan. The purpose of the 1992 Stock Option
Plan is to align executive and stockholder long-term interests by creating a
direct link between executive compensation and stockholder return. The
selection of the participants, allotment of shares, exercise price (which may
not be less than the fair market value on the date of grant), determination of
the vesting schedule and other conditions are established by the Compensation
Committee. There is no explicit formula for deciding specific stock option
grants. Generally, senior management is considered for stock option grants
annually. Other participants in the Plan are considered for stock options
every other year. In awarding options the Committee evaluates the recipient's
ability to influence the Company's long-term growth and profitability and to a
lesser extent the recipient's prior contributions to the Company. The
Committee also considers the number of options previously granted the
recipient and, in certain cases, the number of shares of common stock held by
the recipient.
Chief Executive Compensation
Mr. Rolf is eligible to participate in the same executive compensation plans
available to other executive officers. Mr. Rolf's base salary is determined
each year by the Compensation Committee based on a review of the Company's
prior year financial performance (revenues, operating income and net
earnings), salaries paid to chief executive officers of companies with
revenues comparable to Unitog's and salaries paid by companies
10
<PAGE>
included in the peer group, in that order of importance. As with other
executives, it is the Committee's belief that the base salary for the chief
executive officer should be set within a range that approximates the 50th
percentile of companies with revenues comparable to Unitog's. In fiscal 1997,
Mr. Rolf received a base salary of $273,000, an increase of $10,000, or 3.8%,
over fiscal 1996 base salary. The Compensation Committee determined that the
increase in base salary was appropriate in consideration of the 13% increase
in revenues, the 14% increase in operating income and the 15% increase in net
earnings from fiscal 1995 to fiscal 1996. Mr. Rolf did not receive a bonus for
fiscal 1997 under the Management Incentive Plan because the Company failed to
meet minimum operating income goals set by the Compensation Committee. Mr.
Rolf declined stock options in fiscal 1997 because of his desire that
available stock options be granted to executives with a less significant
ownership stake in the Company.
Deductibility of Compensation Expenses
Under the Omnibus Budget Reconciliation Act of 1993, the Company is not
allowed a tax deduction for compensation paid in excess of $1 million to any
officer listed in the Summary Compensation Table, subject to certain
exceptions. The Committee did not consider this restriction in setting
executive compensation because in no case does compensation subject to the
limitation paid to any executive approach the $1 million limit.
John W. Caffry, Chairman
G. Kenneth Baum
David B. Sharrock
11
<PAGE>
TOTAL MARKET RETURN
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG UNITOG COMPANY, THE S & P 500 INDEX AND A PEER GROUP
[PERFORMANCE CHART APPEARS HERE]
<TABLE>
<CAPTION>
1/26/92 1/31/93 1/30/94 1/29/95 1/28/96 1/26/97
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Unitog Company 100 126 153 167 224 249
Peer Group 100 104 117 119 159 190
S&P 500 Index 100 109 123 123 171 216
</TABLE>
Assumes $100 invested on January 26, 1992 in the Company's common stock, in
the S & P 500 Index and in a peer group of companies comprised of Angelica
Corporation, Cintas Corporation, G & K Services, Inc., National Service
Industries, Inc. and UniFirst Corporation.
- --------
*Total return equals price appreciation plus dividends and assumes
reinvestment of dividends.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of G. Kenneth Baum, John W. Caffry
and David B. Sharrock. None of these individuals is or has ever been an
officer or employee of the Company. During fiscal 1997, no executive officer
of the Company served as a director of any corporation for which any of these
individuals served as an executive officer, and there were no other
compensation committee interlocks with the companies with which these
individuals or the Company's other directors are affiliated.
12
<PAGE>
PROPOSAL NO. 2
APPROVAL OF UNITOG COMPANY 1997 STOCK OPTION PLAN
DESCRIPTION OF THE PLAN
General
The Board of Directors believes that the Company's long-term success is
dependent upon its ability to attract and retain outstanding individuals and
to motivate them to exert their best efforts on behalf of the Company's
stockholders. The Board believes that the 1997 Plan, like the Unitog Company
1992 Stock Option Plan (the "1992 Plan"), will be instrumental in fulfilling
these goals.
The 1997 Plan authorizes the grant of incentive stock options ("ISO's") and
non-qualified stock options ("NQSO's"). ISO's are "incentive stock options" as
defined by federal tax law (described below). An NQSO is any option to
purchase Company stock which is not an ISO. ISO's and NQSO's are called
"options." A copy of the 1997 Plan is included as Exhibit A to this Proxy
Statement. The following description of the 1997 Plan is qualified by
reference to the complete document.
The 1997 Plan may be administered by the Compensation Committee of the Board
of Directors or by the full Board of Directors (the "Administrator"). Key
employees of the Company and its subsidiaries are eligible to receive awards.
As of January 26, 1997, the Company had approximately 4,400 employees.
Directors who are neither employees of the Company or its subsidiaries nor
holders of more than 10% of the total voting power of the Company stock
("Outside Directors"), also participate in the 1997 Plan. Grants of NQSO's to
Outside Directors are automatic.
Upon a "change of control" of the Company, any unvested options then
outstanding vest immediately. Under the 1997 Plan, a "change of control" is
deemed to have occurred in the event: (i) any person, other than the Company,
a subsidiary or a Company employee benefit plan, acquires more than 25% of the
common stock through a tender offer, exchange offer or otherwise; or (ii) the
Company stockholders approve (A) a merger or similar transaction where the
Company stockholders will not hold more than 50% of the voting power after
such transaction, (B) liquidation or dissolution of the Company or (C) a sale
of all or substantially all of the Company's assets.
The purchase price must be paid in full at the time of exercise either in
cash or, in the discretion of the Administrator, in Unitog common stock with
an equivalent market value or in a combination of cash and common stock.
The 1997 Plan authorizes the issuance of up to 500,000 shares of the
Company's common stock. Shares are charged against the limit only to the
extent shares are issued under the 1997 Plan; shares covered by forfeited
awards may be re-granted. Options granted to any person in one calendar year
may not exceed 50,000 shares. Appropriate adjustments to these limits are
required for stock splits and similar events. No options may be granted under
the 1997 Plan after March 13, 2007. No grants to employees or Outside
Directors have been made under the Plan. As of April 1, 1997, 16,288 shares
were available for grants under the 1992 Plan, and options to acquire a total
of 387,775 shares of Company common stock were outstanding under the 1992
Plan.
The Board of Directors may amend or terminate the 1997 Plan at any time;
provided, however, that it may not, without stockholder approval, (i) increase
the maximum number of shares for which options may be granted under the 1997
Plan, (ii) materially increase the benefits accruing to option holders under
the 1997 Plan, (iii) with respect to NQSO's, modify eligibility to participate
in the 1997 Plan, or with respect to ISO's, change the class of employees to
whom ISO's may be granted, or (iv) make any other change requiring stockholder
approval under applicable law.
13
<PAGE>
The last sale price of the Company's common stock on April 1, 1997 was
$20.50 per share.
Employee Options
The Administrator determines, within the limits of the 1997 Plan, the
selection of the employee participants, allotment of shares, exercise price,
the vesting schedule, whether an option is an ISO or an NQSO and other matters
relating to awards.
Generally, stock options granted under the Plan are exercisable for a period
of up to ten years from the date of grant. The aggregate fair market value of
the stock (at the time the option is granted) with respect to which ISO's are
exercisable for the first time by any recipient during any calendar year may
not exceed $100,000. The exercise price for ISO's may not be less than 100% of
the fair market value of the common stock on the date of the grant. The term
of an ISO granted under the 1997 Plan to any stockholder owning more than 10%
of the outstanding common stock may not exceed five years and the exercise
price of an ISO granted to such stockholder may not be less than 110% of the
fair market value of the common stock on the date of the grant.
Options granted under the 1997 Plan may contain such provisions as the
Administrator determines regarding the extent, if any, to which options may be
exercised after termination of employment, provided that ISO's may not be
exercised after three months after termination of employment or, in case of
termination by reason of death or disability, after 12 months after
termination. Generally, options may not be assigned or transferred other than
by will or by the laws of descent and distribution and, during the option
holder's lifetime, may be exercised only by the option holder. To the extent
permitted by applicable law, however, options granted to Outside Directors may
be transferred to their immediate family members, trusts for the benefit of
such family members, or partnerships held by such family members, or as the
Administrator allows. In addition, options granted to employees may be
transferred to the extent the Administrator allows.
Outside Director Options
The 1997 Plan provides for an automatic grant to each Outside Director of an
NQSO to purchase 1,000 shares of Company common stock at the following times:
(i) on the date stockholders approve the 1997 Plan;
(ii) on the day after each annual meeting of stockholders, beginning in
1998; and
(iii) on the date of an Outside Director's initial election or
appointment to the Board of Directors, unless the initial election is at an
annual stockholders' meeting.
Outside Director NQSO's become exercisable one year after the grant, and
terminate on the tenth anniversary of the grant. The exercise price for all
options granted to Outside Directors will be the fair market value of the
stock on the grant date.
Any NQSO's held by an Outside Director terminate immediately if he or she is
removed for cause or if he or she engages in competition with the Company or
in conduct which is adverse or contrary to the Company's interests. Outside
Director NQSO's held at the time an Outside Director retires or dies become
immediately exercisable, and may be exercised for a period of one year or
until the earlier expiration or termination of the option. If an Outside
Director's service terminates for any other reason, he or she may exercise any
options exercisable at the time of such termination for a period of three
months after such termination (or until the earlier expiration or termination
of the option).
14
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
ISO's
An option holder does not realize taxable income and the Company is not
entitled to a deduction on the grant of an ISO or on its exercise.
If the option holder does not sell or otherwise dispose of the shares
acquired ("ISO Shares") within one year from the exercise date or within two
years from the grant date (the "Required Holding Periods"), the option
holder's gain or loss upon a sale will be long-term capital gain or loss, and
the Company will not be entitled to a deduction. The amount of such gain or
loss will be the difference between the amount realized on the sale and the
option holder's basis in the ISO shares.
If an option holder disposes of the ISO Shares without satisfying the
Required Holding Periods, such disposition will constitute a disqualifying
disposition, which gives rise to ordinary income on the date of such
disposition. The amount of such ordinary income is the excess of the fair
market value of the ISO Shares on the exercise date over the option price,
except that, if the disqualifying disposition is a sale and the sale price is
lower than the value of the ISO Shares on the exercise date, the lower sale
price generally governs the amount of ordinary income. The Company will
ordinarily be entitled to a deduction equal to the amount of the ordinary
income resulting from a disqualifying disposition. If the sale price is higher
than the value of the ISO Shares on the exercise date, the excess will be
capital gain.
An option holder does realize income on the exercise of an ISO for
alternative minimum tax ("AMT") purposes. On the other hand, income from a
disqualifying disposition is normally not income for AMT purposes.
NQSO's
An option holder does not realize taxable income on the grant of an NQSO,
but does realize ordinary income on the exercise date. The amount of income in
the case of an NQSO exercise is the amount by which the fair market value of
the shares received exceeds the option exercise price. The Company will
ordinarily be entitled to a deduction on the exercise date equal to the
ordinary income realized by the option holder from the exercise of NQSO's.
Transfer of Options
In the case of a gift of a vested option as permitted by the 1997 Plan, (for
example, the gift of an NQSO by an Outside Director to a family member), there
will be no income tax consequences to the donor, the donee or the Company at
the time of the gift. As long as the donor does not retain any control over
the option or the power to change its disposition, the transfer will be a
completed gift for gift tax purposes. The amount of the gift will be subject
to gift tax (if the amount exceeds the applicable exclusion), and the value of
the option will not be included in the donor's taxable estate for federal
estate tax purposes. The amount of the gift is equal to the fair market value
of the option given (provided that the donor and his or her family do not own
50% or more of the stock of the Company and certain other restrictions are
met). In the case of an NQSO, when the donee subsequently exercises the
option, the donor will be subject to income tax on the difference between the
fair market value of the stock at the time of exercise and the exercise price.
The basis of the stock held by the donee after exercise would be the exercise
price of the option plus the amount of gain included in the donor's gross
income. The Company would be entitled to an income tax deduction equal to the
amount the donor includes in gross income.
15
<PAGE>
If an option is transferred by gift before it becomes vested, while such a
transfer might be effective to transfer the donor's interest in the option to
the donee, for tax purposes it likely would not be reasonably susceptible to
valuation and therefore would be treated as an incomplete gift. As a result,
any tax consequences would be delayed until the option becomes vested (at
which time the value of the option could be determined). In that case, the
gift would occur for gift tax purposes when the option becomes vested, and as
described above, when the donee subsequently exercises the option, the donor
would be subject to income tax on the difference between the fair market value
of the stock at the time of exercise and the exercise price.
OTHER TAX PROVISIONS
The Company is not allowed a deduction for compensation paid to any officer
listed in the Summary Compensation Table in excess of $1 million each in any
taxable year, except to the extent such excess constitutes performance-based
compensation under Section 162(m) of the Internal Revenue Code of 1986, as
amended ("Section 162(m)"). Compensation from the Company's options will
constitute performance-based compensation if certain requirements are met,
including requirements that (i) the option grant is made by a committee
consisting solely of two or more "outside directors" (as defined in
regulations promulgated under Section 162(m)), (ii) the stock option plan
states the maximum number of shares with respect to which options may be
granted during a specified period to any employee, and (iii) under the terms
of the option, the employee receives compensation based solely on an increase
in stock value after the grant date. Although no annual compensation package
of any of the Company's officers approaches $1 million at this time, the
Company currently contemplates that all options granted to officers under the
1997 Plan will meet the requirements for performance-based compensation under
Section 162(m).
VOTE REQUIRED FOR THIS PROPOSAL
The affirmative vote of a majority of the total number of shares represented
and entitled to vote at the meeting is required for approval of the 1997 Plan.
Therefore, an abstention with respect to the 1997 Plan is in effect a vote
against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE UNITOG COMPANY
1997 STOCK OPTION PLAN.
PROPOSAL NO. 3:
APPROVAL OF INDEPENDENT AUDITORS
For fiscal 1997, KPMG Peat Marwick LLP examined the consolidated financial
statements of the Company and its subsidiaries. Representatives of KPMG Peat
Marwick LLP will attend the meeting, will have an opportunity to make a
statement if they desire and will be available to respond to questions by
stockholders.
The Board of Directors, upon recommendation of the Audit Committee, has
selected KPMG Peat Marwick LLP as independent auditors of the Company for
fiscal 1998 and is therefore asking the stockholders to approve the
appointment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE APPOINTMENT OF
KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS.
16
<PAGE>
MISCELLANEOUS
STOCKHOLDER PROPOSALS. In the event any stockholder intends to present a
proposal at the annual meeting of stockholders to be held in 1998, such
proposal must be received by the Company, in writing, on or before December
24, 1997 to be considered for inclusion in the Company's next Proxy Statement.
To be properly brought before a stockholder meeting, a proposal must be:
. Specified in the notice of the meeting given by the Board of Directors or
the persons calling the meeting;
. Otherwise properly brought before the meeting by the Board of Directors
or at their direction; or
. Otherwise properly brought before the meeting by a stockholder.
For a proposal to be properly brought before the meeting by a stockholder,
the stockholder must have given timely notice of the proposal in writing to
the Company's Secretary. To be timely, the notice must be given, in the case
of an annual meeting, not less than 60 days and not more than 90 days prior to
the meeting date, and, in the case of a special meeting, not later than the
close of business on the 10th day following the date on which notice of the
stockholder meeting was mailed to stockholders. If, however, a stockholder
gives notice of a proposal in order to have the matter included in the proxy
statement for a meeting not less than 120 calendar days in advance of the date
of the Company's proxy statement for the last annual stockholder meeting, that
notice will be considered timely.
Stockholder notices must set forth the following information as to each
matter proposed:
. A brief description of the proposal and the reasons for conducting such
business at the stockholder meeting;
. The name and address of record of the stockholder proposing the business
and any other stockholder or stockholders known to be supporting the
proposal;
. The number of shares of each class of Company stock beneficially owned by
the proposing stockholder or stockholders; and
. Any material interest of the proposing stockholder or stockholders in the
proposal.
The Board of Directors or chairman of the stockholder meeting must reject
any stockholder proposal not in accordance with the requirements of the
Bylaws, or which in their judgment, is not a proper subject for stockholder
action.
See "Director Nominations" for a discussion of provisions applicable to
stockholder nominations to the Board of Directors. Any stockholder desiring a
copy of the Company's Bylaws will be furnished a copy without charge upon
written request to the Company's Secretary.
VOTING PROXIES AND OTHER MATTERS. Proxies will be voted in accordance with
the choices specified on the form of Proxy. If no choice is specified, shares
will be voted "FOR" the nominees listed on the Proxy and in this Proxy
Statement, "FOR" approval of the 1997 Stock Option Plan and "FOR" approval of
the appointment of KPMG Peat Marwick LLP as independent auditors for the
Company for fiscal 1998.
Management of the Company does not intend to present any business at the
meeting except as indicated herein and presently knows of no other business to
be presented at the meeting. Should any other business come before the
meeting, the persons named in the accompanying form of Proxy will vote the
Proxy in accordance with their best judgment.
17
<PAGE>
ANNUAL REPORT. A copy of the Company's Annual Report accompanies this Proxy
Statement. The Annual Report is not part of the proxy solicitation materials. A
copy of the Company's Annual Report to the Securities and Exchange Commission
on Form 10-K for fiscal 1997 may be obtained without charge upon written
request to the Secretary, Unitog Company, 101 W. 11th Street, Kansas City,
Missouri 64105.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE COMPLETE,
SIGN, DATE AND MAIL THE ACCOMPANYING PROXY. IF YOU ARE PRESENT AT THE MEETING,
YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
BY ORDER OF THE BOARD OF DIRECTORS
Randolph K. Rolf
Chairman of the Board
April 22, 1997
18
<PAGE>
EXHIBIT A
UNITOG COMPANY 1997 STOCK OPTION PLAN
----------------
SECTION I. PURPOSE
The purpose of this Plan is to provide an incentive and to encourage
ownership of the Company's stock by the grant of stock options to certain "Key
Employees" of the Company or its subsidiaries, and to attract and retain
highly qualified people who are not employees of the Company or any of its
subsidiaries to serve as directors of the Company. It is intended that some
options granted to Key Employees pursuant to the Plan may qualify as Incentive
Stock Options ("ISO's"), as defined in Section 422(b) of the Internal Revenue
Code of 1986, as amended ("Code"), and some options granted pursuant to the
Plan may not qualify as ISO's and will be non-qualified options ("NQO's").
SECTION II. DEFINITIONS
A. "Board" or "Board of Directors" means the board of directors of the
Company.
B. "Common Stock" means shares of the common stock (including treasury
stock), par value $.01 per share, of the Company.
C. "Company" means Unitog Company or any successor thereto.
D. "Committee" or "Compensation Committee" means the compensation
committee established by the Board of Directors of the Company.
E. "Disability" means a physical or mental impairment which can be
expected to result in death or which has lasted or can be expected to
last for a continuous period of not less than 12 months, which causes a
person to be unable, in the opinion of the Company and two independent
physicians, to perform his or her duties for the Company and to be
engaged in any substantial gainful activity. Disability shall be deemed
to have occurred on the first day after the Company and the two
independent physicians have furnished their opinion of such Disability
to the Compensation Committee.
F. "Exchange Act" means the Securities Exchange Act of 1934, as amended.
G. "Fair Market Value" as of a given date, means: (a) in the case of Key
Employees, the fair market value of one share of Common Stock as
determined by the Committee in accordance with procedures established
by the Committee and in accordance with the provisions of the Code and
the regulations thereunder; and (b) in the case of Outside Directors,
as of any given date, the closing sale price of the Common Stock as
reported on the Nasdaq National Market on such date (or, if there is no
reported sale on such date, on the last preceding date on which any
reported sale occurred).
H. "Key Employee" means a person who is employed in a position of
managerial responsibility by the Company or a Subsidiary. A non-
employee member of the Board or of the board of directors of a
Subsidiary cannot be a Key Employee.
I. "Outside Director" means a member of the Board who is not (a) an
employee of the Company or a Subsidiary, or (b) a Ten Percent
Shareholder.
J. "Parent" means any parent corporation of the Company within the meaning
of Section 424 (or any successor provision) of the Code.
<PAGE>
K. "Participant" means a Key Employee who is granted a stock option
hereunder.
L. "Plan" means the Unitog Company 1997 Stock Option Plan.
M. "Retirement" with respect to an Outside Director means resignation at
or after age 65, failure to stand for re-election at or after age 65 or
failure to be re-elected at or after age 65.
N. "Subsidiary" means any subsidiary corporation of the Company within the
meaning of Section 424 (or any successor provision) of the Code.
O. "Ten Percent Shareholder" means a person who owns, on the date of grant
of an option, more than 10% of the total combined voting power of all
classes of stock of the Company, or its Parent or Subsidiary.
SECTION III. ADMINISTRATION
This Plan shall be administered by the Committee or by the full Board.
Except for the terms and conditions explicitly set forth in this Plan, the
Committee or the Board shall have the authority, in its discretion, to
determine all matters relating to the options to be granted under this Plan,
including selection of the Key Employees to be granted options, the number of
shares to be subject to each such option, the exercise price, and all other
terms and conditions of such options. Grants of options under the Plan to
Outside Directors shall be automatic as provided in Section VII below. Grants
under this Plan need not be identical in any respect, even when made
simultaneously.
The interpretation and construction by the Committee or the Board of any
terms or provisions of this Plan or any option issued hereunder, or of any
rule or regulation promulgated in connection herewith, shall be conclusive and
binding on all interested parties, so long as such interpretation and
construction with respect to ISOs correspond to the requirements of Section
422 of the Code, the regulations thereunder and any amendments thereto.
In the event the Company or any Subsidiary enters into a transaction
described in Section 424(a) of the Code with any other corporation, the
Committee or the Board may grant options to employees or former employees of
such corporation in substitution of options previously granted to them upon
such terms and conditions as shall be necessary to qualify such grant as a
substitution described in Section 424(a) of the Code.
With respect to grants made under this Plan to individuals who are subject
to Section 16 of the Exchange Act, the Committee shall be constituted at all
times so as to meet the requirements of Rule 16b-3 promulgated under Section
16(b) of the Exchange Act if any of the Company's equity securities are
registered pursuant to Section 12(b) or 12(g) of the Exchange Act.
SECTION IV. SHARES SUBJECT TO PLAN
Subject to adjustment as set forth below in this Section IV, the number of
shares of Common Stock as to which options may be granted under the Plan shall
not exceed, in the aggregate, 500,000 shares. The maximum number of shares
with respect to which options may be granted under the Plan during any
calendar year to any eligible person shall not exceed 50,000. Such shares may
be, in whole or in part, as the Board of Directors shall from time to time
determine, authorized but unissued shares, or issued shares which shall have
been reacquired by the Company. If an option expires or is terminated or
surrendered without having been fully exercised, the unpurchased shares
subject to the option shall again be available for purposes of this Plan,
including for replacement options which may be granted in exchange for such
expired, surrendered, exchanged, canceled or terminated options granted under
this Plan.
-2-
<PAGE>
The aggregate number and class of shares for which options may be granted
under this Plan, the maximum number and class of shares that may be granted to
any eligible person in a given year, the number and class of shares subject to
automatic option grants to Outside Directors pursuant to Section VII, the
number and class of shares covered by each outstanding option and the exercise
price per share thereof (but not the total price), and each such option, shall
all be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock of the Company resulting from a split-up or
consolidation of shares or any like capital adjustment, or the payment of any
stock dividend.
SECTION V. ELIGIBILITY
Only Key Employees and Outside Directors shall be eligible to participate in
this Plan.
SECTION VI. KEY EMPLOYEE STOCK OPTIONS
A. Option Price. Except as provided below, the purchase price of the Common
Stock under each ISO granted to a Key Employee hereunder shall not be less
than one hundred percent (100%) of the Fair Market Value of the Common Stock
at the time of the grant of the option. The purchase price of Common Stock
under each ISO issued to a Ten Percent Shareholder shall be no less than 110%
of the Fair Market Value of the Common Stock at the time of the grant of the
option.
B. Term and Exercise of Options. Except as provided below, the term of each
option shall be not more than ten (10) years from the date of grant. The term
of each ISO granted to a Ten Percent Shareholder shall not be more than five
(5) years from the date of grant. Options granted to Key Employees will be
exercisable at such time or times, and subject to such restrictions and
conditions, as the Committee or the Board shall in each instance approve,
which need not be uniform for all Participants.
C. Termination of Employment. Subject to the restrictions described in
Subsection B of this Section on the Participant's exercise of an option and
the provisions of Subsection E of this Section, options may contain such
provisions as the Committee shall determine regarding the extent (if any) to
which options may be exercised after termination of employment; provided,
however, that ISO's shall be subject to the following restrictions:
(a) If a Participant terminates employment for any reason other than
death or Disability, the Participant may not in any event exercise any ISO
held by such Participant after the date which is three (3) months after the
date of such termination.
(b) If a Participant's employment is terminated by reason of Disability
or death, the Participant or the personal representative of the Participant
may not in any event exercise an ISO after the date which is twelve (12)
months after the date of the Participant's employment termination.
D. Leaves of Absence. The option agreements issued pursuant to this Plan may
contain such provisions as the Committee shall determine with respect to
approved leaves of absence.
E. Limitation on Exercise of Options. The maximum aggregate Fair Market
Value (determined at the time an option is granted) of the Common Stock with
respect to which ISO's are exercisable for the first time by any Participant
during any calendar year (under all plans of the Company and its Parents and
Subsidiaries) shall not exceed $100,000. If the provisions of this Section
limit the exercisability of certain ISO's which would otherwise become
exercisable, the Committee, in its sole discretion, shall determine the times
at which such ISO's become exercisable so that the provisions of this
Subsection E are not violated; provided that in no event shall any ISO be
exercisable more than (10) years from the date of granting thereof (five (5)
years in the case of ISO's granted to Ten Percent Shareholders).
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SECTION VII. OUTSIDE DIRECTOR STOCK OPTIONS
Each option granted under the Plan to an Outside Director shall be evidenced
by a written agreement in a form approved by the Committee or Board and shall
be subject to the following terms and conditions:
A. Grant of Options. Each Outside Director shall automatically be granted an
NQO to purchase 1,000 shares of Common Stock (subject to adjustment as
provided in Section IV above) on the date this Plan is approved by the
stockholders of the Company. Each Outside Director shall automatically be
granted, on the date immediately following the date of the annual meeting of
stockholders of the Company in 1998 and on the date immediately following the
date of each annual meeting of stockholders thereafter throughout the term of
the Plan, an NQO to purchase 1,000 shares of Common Stock (subject to
adjustment as provided in Section IV above). On the date of his or her initial
election or appointment to the Board, an Outside Director shall be granted an
NQO to purchase 1,000 shares of Common Stock (subject to adjustment as
provided in Section IV above), unless the initial election of such Outside
Director is at an annual meeting of the Company's stockholders.
B. Option Price. The exercise price for the shares subject to each Outside
Director option shall be the Fair Market Value for such shares on the grant
date.
C. Exercisability. Each Outside Director option shall be exercisable in
whole or in part with respect to all of the shares covered by the option
twelve (12) months after the date of grant. Each option not earlier terminated
pursuant to Subsection D of this Section VII shall terminate and be of no
force and effect upon the tenth (10th) anniversary of the date such option is
granted.
D. Termination of Service. If service on the Board by an Outside Director
terminates for any reason other than Retirement, death, Disability or removal
for cause, each then-outstanding option of such Outside Director thereafter
may be exercised, to the extent exercisable at the time of termination, for a
period of 90 days after the date of such termination, but in no event after
the stated expiration date of such option. Upon Disability or Retirement, each
then-outstanding option of such Outside Director shall become immediately
exercisable and may be exercised until the earlier of twelve months after such
Disability or Retirement, as the case may be, or the expiration or termination
date of such option. Upon the death of an Outside Director, each then-
outstanding option held by such Outside Director shall become immediately
exercisable by his or her personal representative or other person who has
acquired the right to exercise such option by bequest or inheritance or by
reason of the laws of descent and distribution, until the earlier of twelve
months after the death of such Outside Director or the expiration or
termination of such option. An option held by an Outside Director who is
removed for cause shall terminate immediately upon removal as a director.
If any Outside Director, during or after his or her service on the Board,
engages, directly or indirectly, in any activity which is in competition with
any activity of the Company or any Subsidiary or in any action or conduct
which is in any manner adverse or in any way contrary to the interests of the
Company or any Subsidiary, any unexercised options shall immediately
terminate, unless otherwise determined by the Board of Directors. The
determination of whether an Outside Director is or has engaged in any
competitive activity or in any action or conduct which is adverse or contrary
to the interests of the Company or any Subsidiary shall be made by the Board
of Directors, and such determination shall be final and binding upon all
parties.
SECTION VIII. PAYMENT OF OPTION PRICE
Payment of the option exercise price shall be made in full at the time the
notice of exercise of the option is delivered to the Company and shall be in
cash, bank certified or cashier's check, or personal check (unless at the time
of exercise the Committee in a particular case determines not to accept a
personal check) for the shares being purchased.
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To the extent permitted by the option agreement and applicable laws and
regulations (including, but not limited to, federal tax and securities laws
and regulations and state corporate law), payment of an option exercise price
also may be made, in whole or in part, by:
(a) delivery of shares of Common Stock of the Company held by the
Participant or Outside Director, as the case may be; or
(b) delivery of a properly executed exercise notice, together with
irrevocable instructions to a broker, all in accordance with the
regulations of the Federal Reserve Board, to promptly deliver to the
Company the amount of sale or loan proceeds to pay the exercise price and
any federal, state or local withholding tax obligations that may arise in
connection with the exercise.
SECTION IX. NON-TRANSFERABILITY OF OPTIONS
Each option granted under the Plan shall by its terms be non-transferable
otherwise than by will or by the laws of descent and distribution, and an
option may be exercised, during the lifetime of the Participant or of an
Outside Director, only by such person. Notwithstanding the foregoing, to the
extent permitted by Rule 16b-3 under the Exchange Act and other applicable
laws and regulations: (a) an Outside Director may transfer options to (i) his
or her spouse, children, step-children, or grandchildren ("Immediate Family
Members"), (ii) a trust or trusts for the exclusive benefit of such Immediate
Family Members, or (iii) a partnership in which such Immediate Family Members
are the only partners; and (b) a Key Employee may transfer a NQO to the extent
permitted by the Committee or the Board, either in the option agreement, or
otherwise in writing. The Committee or the Board also may, in its discretion,
authorize all or a portion of options held by Outside Directors to be
transferred to other persons or entities.
Subsequent transfers of transferred options shall be prohibited except those
made in accordance with the Plan by will or the laws of descent and
distribution. Following transfer, any option transferred shall continue to be
subject to the terms and conditions applicable to the option immediately prior
to the transfer. The provisions regarding termination of employment or service
as a director shall continue to be applied with respect to the original holder
of an option, and after such termination, the options transferred shall be
exercisable by the transferee only to the extent, and for the periods
permitted by the Plan and the option agreement.
Any transfer of an option shall be subject to the condition that the
transferee acknowledge and agree that the shares to be issued upon exercise of
the option have not been registered with the Securities and Exchange
Commission and that any such exercise is conditioned on an effective
registration statement or an applicable exemption from such registration
requirements.
SECTION X. AMENDMENT AND TERMINATION.
Unless this Plan shall have terminated earlier as provided herein, this Plan
shall terminate, and no options shall be granted hereunder, after ten (10)
years from the date of its adoption by the Board of Directors. Any stock
options outstanding at the termination of this Plan shall continue in full
force and effect and shall not be affected by termination of this Plan.
The Board of Directors may, at any time prior to that date, terminate this
Plan or make such modifications to the Plan as it may deem advisable; provided
that, to the extent required for compliance with Rule 16b-3 promulgated under
the Exchange Act, Section 422 of the Code or any applicable law or regulation,
the Company's stockholders must approve any amendment which will:
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<PAGE>
(a) increase the number of shares that may be issued under this Plan;
(b) with respect to NQO's, materially modify the requirements as to
eligibility for participation in this Plan or, with respect to ISO's,
change the designation of the persons or class of persons eligible for
participation in this Plan;
(c) materially increase the benefits accruing to the option holders under
this Plan; or
(d) otherwise require stockholder approval under any applicable law or
regulation.
Such stockholder approval must be obtained (i) within 12 months of the
adoption by the Board of such amendment; (ii) if earlier, at the next annual
meeting of stockholders after such adoption by the Board; or (iii) at such
earlier date as may be required for compliance with Rule 16b-3 promulgated
under the Exchange Act.
Any amendment made to this Plan which would constitute a "modification" to
ISO's outstanding on the date of such amendment shall not be applicable to
such outstanding ISO's but shall have prospective effect only, unless the
Participant agrees otherwise.
SECTION XI. WITHHOLDING
The Company or any related corporation shall have the right to retain and
withhold from any payment of cash or shares of Common Stock under this Plan
the amount of taxes required by any government to be withheld or otherwise
deducted and paid with respect to such payment. At its discretion, the Company
may require an option holder receiving shares of Common Stock to reimburse the
Company for any such taxes required to be withheld by the Company and withhold
any distribution in whole or in part until the Company is so reimbursed. In
lieu thereof, the Company shall have the right to withhold from any other cash
amounts due or to become due from the Company to the option holder an amount
equal to such taxes. The Company may also retain and withhold or the option
holder may elect, subject to approval by the Company at its sole discretion,
to have the Company retain and withhold a number of shares having a market
value not less than the amount of such taxes required to be withheld by the
Company to reimburse the Company for any such taxes and cancel (in whole or in
part) any such shares so withheld.
SECTION XII. EFFECT OF CHANGE IN CONTROL
A. A "Change of Control" means a change in control of a nature that would be
required to be reported in response to Item 1(a) of the Current Report on Form
8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the
Exchange Act or would have been required to be so reported but for the fact
that such event had been "previously reported" as that term is defined in Rule
12b-2 of Regulation 12B of the Exchange Act; provided that, without
limitation, notwithstanding anything herein to the contrary, a change in
control shall be deemed to have occurred if (a) any person or entity (other
than the Company, a Subsidiary of the Company, or any employee benefit plan(s)
sponsored or maintained by the Company or a Subsidiary) is or becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 25% or more of the
combined voting power of the Company's then outstanding securities ordinarily
(apart from rights accruing under special circumstances) having the right to
vote at elections of directors, (b) the stockholders of the Company approve
(i) a reorganization, merger or consolidation with respect to which persons
who were the stockholders of the Company immediately prior to such
reorganization, merger or consolidation will not, immediately thereafter, own,
directly or indirectly, more than 50% of the combined voting power entitled to
vote generally in the election of directors of the reorganized, merger or
consolidation company's then outstanding voting securities, (ii) a liquidation
or dissolution of the Company, or (iii) the sale of all or substantially all
of the assets of the Company.
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<PAGE>
B. Effect of Change of Control. Notwithstanding any limitations on the right
of exercise, in the event of a Change of Control, any options held by a
Participant or Outside Director shall immediately be exercisable in full.
SECTION XIII. MISCELLANEOUS
A. Rights to Continued Employment. Nothing in this Plan or in any option
granted pursuant to this Plan shall confer on any individual any right to
continue in the employ of the Company or a Subsidiary or interfere with the
right of the Company or a Subsidiary to terminate the individual's employment
or membership on the Board at any time.
B. Retirement Plan Rights. Benefits received under this Plan by a
Participant shall not affect or be used in the calculation of the
Participant's pension or other retirement benefits under any other plan
maintained by the Company.
C. Investment Undertakings. Until and unless the issuance of shares of
Common Stock pursuant to this Plan shall have been registered pursuant to the
Securities Act of 1933 and applicable state securities laws, each person
acquiring shares of Common Stock under this Plan may be required, as a
condition precedent to such issuance, to execute and deliver to the Company a
letter or certificate containing such investment representations, agreements
restricting sale (including, without limitation, provision for stop transfer
orders and restrictive legend on stock certificates) and confirmation of other
relevant facts to support any exemption from the registration requirements
under the Securities Act of 1933 and such state securities laws on which the
Company intends to rely, all as shall be deemed reasonably necessary by
counsel for the Company and in such form as such counsel shall determine.
D. Rule 16b-3 Compliance and Bifurcation of Plan. It is the intention of the
Company that, so long as the Common Stock is registered pursuant to Section
12(b) or 12(g) of the Exchange Act, this Plan shall comply in all respects
with Rule 16b-3 under the Exchange Act. If any Plan provision is later found
not to be in compliance with such Section, the provision shall be deemed null
and void, and in all events this Plan shall be construed in favor of its
meeting the requirements of Rule 16b-3. Notwithstanding anything in this Plan
to the contrary, the Board or the Committee, in its absolute discretion, may
bifurcate this Plan so as to restrict, limit or condition the application of
any provision of this Plan to participants who are subject to Section 16 of
the Exchange Act without so restricting, limiting or conditioning this Plan
with respect to other participants.
SECTION XIV. EFFECTIVENESS OF THE PLAN
This Plan will be effective upon adoption by the Board of Directors of the
Company, so long as it is approved by the stockholders of the Company within
12 months after such adoption.
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<PAGE>
UNITOG COMPANY
ANNUAL MEETING OF STOCKHOLDERS
MAY 22, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints G. Kenneth Baum, Robert F. Hagans and
Randolph K. Rolf, jointly and individually, as Proxies, each with full power of
substitution, and hereby authorizes them to represent and to vote, as designated
below, all the shares of common stock of Unitog Company which the undersigned
would be entitled to vote if personally present at the Annual Meeting of
Stockholders to be held on May 22, 1997, or any adjournments or postponements
thereof.
1. ELECTION OF CLASS B DIRECTORS
[ ] FOR ALL NOMINEES LISTED BELOW
(except as marked to the contrary below).
[ ] WITHHOLD AUTHORITY
to vote for all nominees listed below.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name.)
John W. Caffry
David B. Sharrock
2. APPROVAL OF THE ADOPTION OF THE UNITOG COMPANY 1997 STOCK OPTION PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. APPROVAL OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS
OF THE COMPANY FOR FISCAL 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.
PLEASE SEE REVERSE SIDE
<PAGE>
PLEASE SEE REVERSE SIDE FOR MATTERS TO BE VOTED ON
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR
ALL NOMINEES FOR CLASS B DIRECTOR, FOR PROPOSAL 2, FOR PROPOSAL 3 AND AT THE
DISCRETION OF THE PROXIES ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE
MEETING.
Please mark, date, sign and return this Proxy card by mail in the enclosed
postage prepaid envelope.
DATED:_____________________________, 1997
_________________________________________
Signature
_________________________________________
Signature
(Please sign exactly as name appears on stock
certificate. Where stock is registered
jointly, all owners must sign. Corporate
owners should sign full corporate name by an
authorized person. Executors, administrators,
trustees or guardians should indicate their
status when signing.)
