<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 Section240.14a-11(c) or
Section240.14a-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)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
UNITOG COMPANY
1300 WASHINGTON STREET
KANSAS CITY, MISSOURI 64105
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1998
TO ALL STOCKHOLDERS:
The Annual Meeting of Stockholders of Unitog Company will be held on
Thursday, May 21, 1998, at 10:00 a.m., at the Company's corporate headquarters,
1300 Washington Street, Kansas City, Missouri for the following purposes:
(1) To elect two directors to serve three-year terms;
(2) To approve the appointment of KPMG Peat Marwick LLP as independent
auditors for fiscal 1999; and
(3) 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, 1998 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, 1998 will be available for inspection during business
hours from May 9 through May 20, 1998 at 1300 Washington 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 20, 1998.
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
1300 WASHINGTON STREET
KANSAS CITY, MISSOURI 64105
------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1998
------------------------
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 21, 1998, commencing at 10:00 a.m., at the Company's corporate
headquarters, 1300 Washington Street, Kansas City, Missouri. This Proxy
Statement and the accompanying form of proxy are being mailed on or about April
20, 1998.
Only stockholders of record at the close of business on March 31, 1998 will
be entitled to notice of, and to vote at, the annual meeting. On the record
date, the Company had 9,392,755 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 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 and the
approval of the appointment of KPMG Peat Marwick LLP as independent auditors for
fiscal 1999. 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 auditors requires 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 auditors is in effect a
vote against the proposal. Shares represented by proxies which are marked
"withhold authority" with respect to the election of one or more nominees for
<PAGE>
election 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, 1998 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 OF
NAME OF BENEFICIAL OWNER SOLE SHARED OTHER CLASS(1)
- --------------------------------------------------- --------- --------- --------- -------------
<S> <C> <C> <C> <C>
T. Rowe Price Associates, Inc.
100 E. Pratt Street
Baltimore, Maryland 21202........................ -- -- 999,100(2) 10.6%
Fleet Financial Group, Inc.
One Federal Street
Boston, Massachusetts 02110...................... -- -- 926,391(3) 9.8%
William D. Thomas
120 West 12th Street
Kansas City, Missouri 64105...................... 35,848 661,870(4) -- 7.4%
G. Kenneth Baum
120 West 12th Street
Kansas City, Missouri 64105...................... 1,511 661,870(4) -- 7.0%
George K. Baum Group, Inc.
120 West 12th Street
Kansas City, Missouri 64105...................... 661,870(4) -- -- 7.0%
Randolph K. Rolf
1300 Washington Street
Kansas City, Missouri 64105...................... 627,150 15,000 -- 6.8%
T. Rowe Price Small Cap Value Fund, Inc.
100 E. Pratt Street
Baltimore, Maryland 21202........................ -- -- 592,000(2) 6.3%
Stein Roe & Farnham Incorporated
One South Wacker Drive
Chicago, Illinois 60606.......................... -- -- 488,850(5) 5.2%
SR&F Special Portfolio
One South Wacker Drive
Chicago, Illinois 60606.......................... -- -- 488,850(5) 5.2%
J. Craig Peterson.................................. 56,950(6) -- -- *
Terence C. Shoreman................................ 42,000(6) -- -- *
D. Patrick Curran.................................. 25,925 750 -- *
Robert M. Barnes................................... 22,500(6) 750 -- *
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
VOTING AND INVESTMENT POWER
------------------------------- PERCENT OF
NAME OF BENEFICIAL OWNER SOLE SHARED OTHER CLASS(1)
- --------------------------------------------------- --------- --------- --------- -------------
<S> <C> <C> <C> <C>
John W. Caffry..................................... 5,258 1,500 -- *
Gerald J. Arrowsmith............................... 6,750(6) -- -- *
Andrew B. Schmitt.................................. 500(7) -- -- *
Michael R. Boyce................................... -- -- -- *
All executive officers
and directors as a
group (12 persons)............................... 962,064(6) 687,670 -- 15.9%
</TABLE>
- ------------------------
* Denotes less than 1%.
(1) Based on the number of outstanding shares of common stock as of March 1,
1998 (9,366,880 shares), plus the number of shares subject to acquisition
before April 30, 1998, by the relevant beneficial owners.
(2) According to a Schedule 13G, dated February 12, 1998, T. Rowe Price
Associates, Inc. ("Price Associates") beneficially owned 999,100 shares as
of December 31, 1997. Price Associates has sole investment power as to all
such shares and has sole voting power as to 115,100 of such shares. These
securities are owned by various individual and institutional investors,
including T. Rowe Price Small Cap Value Fund, Inc. (which has sole voting
power as to 592,000 of such shares, representing 6.3% of the shares
outstanding), 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) According to a Schedule 13G, dated February 13, 1998, Fleet Financial Group,
Inc. ("Fleet") beneficially owned 926,391 shares as of December 31, 1997.
Based on the Schedule 13G, Fleet has sole voting power as to 381,900 shares;
shared voting power as to 422,891 shares; sole investment power as to
501,500 shares; and shared investment power as to 417,000 shares.
(4) Shares are owned directly by George K. Baum Group, Inc., of which Mr. Baum
and Mr. Thomas are directors, officers and stockholders.
(5) Information is as of December 31, 1997 based on a joint Schedule 13G, dated
February 11, 1998. Stein Roe & Farnham Incorporated has sole investment
power as to 488,850 shares and SR&F Special Portfolio has sole voting power
as to 488,850 of such shares.
(6) Includes maximum number of shares subject to acquisition before April 30,
1998 upon the exercise of stock options as follows: Mr. Peterson, 34,500
shares; Mr. Shoreman, 42,000 shares; Mr. Barnes, 21,000 shares; Mr.
Arrowsmith, 6,750 shares; all executive officers as a group, 106,750 shares.
(7) Mr. Schmitt's beneficial ownership is as of March 12, 1998, the date of his
election to the Board.
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.
3
<PAGE>
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 2000 Annual Meeting and Class C at the 1998 Annual Meeting. At its March 12,
1998 meeting, the Board of Directors nominated the two persons listed below for
election as Class C Directors for a three-year term expiring at the 2001 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.
NOMINEES FOR THREE-YEAR TERMS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE TWO
NOMINEES FOR CLASS C DIRECTOR NAMED BELOW:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME OF NOMINEE DIRECTOR FOR LAST FIVE YEARS
FOR DIRECTOR AGE SINCE AND DIRECTORSHIPS
- --------------------------------------------- --- ----------- --------------------------------------------------
<S> <C> <C> <C>
G. Kenneth Baum.............................. 67 1984 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............................ 53 1984 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.
</TABLE>
4
<PAGE>
CONTINUING DIRECTORS
The following is information concerning the directors whose terms continue
after the annual meeting:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
DIRECTOR CURRENT FOR LAST FIVE YEARS
NAME AGE SINCE TERM AND DIRECTORSHIPS
- --------------------------------- --- ----------- ----------- ----------------------------------------------------
<S> <C> <C> <C> <C>
Michael R. Boyce................. 50 1998 2000 Mr. Boyce has served as President and Chief
Operating Officer of Harris Chemical Group, Inc., a
company engaged in the sale of various chemical
products, since January 1990.
John W. Caffry................... 70 1989 2000 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.
Randolph K. Rolf................. 56 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.
Andrew B. Schmitt................ 49 1998 2000 Mr. Schmitt has served as President and Chief
Executive Officer of Layne Christensen Company, a
company engaged in the water and mineral drilling
business, since October 1993. Prior to that time he
was a private investor. Mr. Schmitt also serves on
the Board of Directors of Layne Christensen Company.
William D. Thomas................ 54 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>
5
<PAGE>
DIRECTOR NOMINATIONS
In addition to the Board of Director's 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 Thursday immediately prior to Memorial Day).
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 five meetings during fiscal 1998.
During fiscal 1998, all directors attended at least 75% of the total number of
meetings of the Board of Directors and Committees of which they were members.
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, 2000, will be issued for 91% of the fair market value of
Unitog stock as of the date the director fees would otherwise be payable. For
periods thereafter, the Compensation Committee will establish a percentage of
fair market value at a level between
6
<PAGE>
67% and 91%. The Company also provides each non-employee director group term
life insurance coverage of $50,000. The Unitog Company 1997 Stock Option Plan
grants outside directors an option to purchase 1,000 shares of Company common
stock 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) and on the day after each annual meeting of stockholders. The exercise
price for the options is the fair market value of Unitog stock on the date of
grant. The options become exercisable one year after grant, and terminate on the
tenth anniversary of the grant.
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 1998. 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 three meetings during fiscal 1998. It
consists of two 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, the Company's Stock Option Plans and the Director
Program.
The Executive Committee did not meet during fiscal 1998. It consists of one
non-employee director 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 1998 its executive officers
and directors complied with all applicable filing requirements in a timely
manner.
7
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table contains 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
25, 1998, January 26, 1997 and January 28, 1996.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION SECURITIES ALL OTHER
----------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS OPTIONS(#) ($)(1)
- -------------------------------------------------- ----------- ----------- ---------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Randolph K. Rolf 1998 $ 282,861 -- -- $ 9,926
Chairman, President and 1997 272,606 -- -- 9,618
Chief Executive Officer 1996 262,872 $ 50,150 -- 10,495
Terence C. Shoreman 1998 $ 195,399 - 6,000 $ 7,115
Executive Vice President - 1997 183,356 -- 6,000 5,258
Chief Operating Officer 1996 148,346 $ 28,959 6,000 4,991
J. Craig Peterson 1998 $ 164,135 $ 5,010 6,000 $ 5,952
Executive Vice President - 1997 150,173 -- 6,000 5,107
Chief Administrative and 1996 144,442 24,481 -- 5,073
Financial Officer
Robert M. Barnes 1998 $ 112,173 $ 3,420 2,000 $ 4,168
Vice President-General 1997 107,173 -- 2,000 3,985
Counsel and Secretary 1996 101,808 11,809 -- 3,967
Gerald J. Arrowsmith 1998 $ 110,538 $ 2,576 2,000 $ 4,108
Vice President-Manufacturing 1997 104,712 -- 2,000 3,892
and Distribution 1996 97,538 7,494 2,000 760
</TABLE>
- ------------------------
(1) All Other Compensation for fiscal 1998 includes the Company contribution
under the qualified thrift plan as follows: Mr. Rolf, $8,486; Mr. Shoreman,
$5,729; Mr. Peterson, $4,785; Mr. Barnes, $3,365; and Mr. Arrowsmith,
$3,316. All other amounts reported for fiscal 1998 under this heading
represent premiums paid by the Company for term life insurance.
8
<PAGE>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the grant of stock
options during fiscal 1998 to the named executive officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS(1) VALUE AT ASSUMED
------------------------------------------------------------ ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES PERCENT OF TOTAL APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE OR FOR OPTION TERM(2)
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
- ---------------------------------- ------------- ------------------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Randolph K. Rolf.................. -- -- -- -- -- --
Terence C. Shoreman............... 6,000 22.2% $ 21.25 3/13/07 $ 80,340 $ 202,740
J. Craig Peterson................. 6,000 22.2% 21.25 3/13/07 80,340 202,740
Robert M. Barnes.................. 2,000 7.4% 21.25 3/13/07 26,780 67,580
Gerald J. Arrowsmith.............. 2,000 7.4% 21.25 3/13/07 26,780 67,580
</TABLE>
- ------------------------
(1) The options were granted on March 13, 1997 under the Unitog Company 1992
Stock Option Plan 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, $34.64 per share,
and assuming 10% annual appreciation, $55.04 per share. The assumed annual
rates of stock price appreciation of 5% and 10% are set by the Securities
and Exchange Commission and are not intended as a forecast of possible
future appreciation in stock prices.
FISCAL YEAR END STOCK OPTION VALUES
The following table provides information concerning unexercised options held
as of the end of fiscal 1998 by the named executive officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
YEAR END(#) AT FISCAL YEAR END($)(1)
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Randolph K. Rolf.......................................... -- -- -- --
Terence C. Shoreman....................................... 34,500 16,500 $ 173,580 $ 10,470
J. Craig Peterson......................................... 30,000 12,000 178,710 3,900
Robert M. Barnes.......................................... 18,875 4,625 110,363 2,318
Gerald J. Arrowsmith...................................... 4,313 5,437 7,703 1,430
</TABLE>
- ------------------------
(1) Based on the closing market price of the Company's common stock at fiscal
year end ($19.06) per share.
9
<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 voluntarily or involuntarily 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 shall immediately
vest and any such stock option shall be settled by the payment to the option
holder of an amount equal to the excess of the fair market value of the shares
subject thereto over the exercise price of such option. The 1997 Stock Option
Plan provides for the automatic vesting of any stock option issued under that
plan upon a change of control. Under the 1992 and 1997 Stock Option Plans, 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 THE SPECIFIC COMPENSATION LEVELS FOR EXECUTIVE
OFFICERS AND KEY MANAGEMENT OF THE COMPANY AND ADMINISTERS THE MANAGEMENT
INCENTIVE PLAN AND THE UNITOG COMPANY 1992 AND 1997 STOCK OPTION PLANS. THE
COMPENSATION COMMITTEE IS COMPOSED OF TWO 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 STOCK
OPTION PLANS 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.
10
<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. The Plan limits the
total amount that can be paid in a given year to a predetermined percentage of
operating income. For fiscal 1998, at least 40% of an executive's annual bonus
opportunity was based on actual versus targeted earnings per share of the
Company. For those executives who work primarily in a particular operating
segment, up to 60% of the executive's bonus may be based on the operating income
of that business segment. Up to 20% of an executive's bonus may be based on
quantitative 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 an evaluation of whether personal
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 earnings per share goals for
the Company and operating income goals for the major business segments are
approved by the Compensation Committee at the beginning of each fiscal year
based on financial plans for the year. The portion of bonuses paid based on
earnings per share performance of the Company and operating income of the
particular business units is not paid unless the Company's earnings per share
exceed the goal set by the Compensation Committee. The portion of an executive's
bonus that is based on individual accomplishment may be paid even if the
corporate earnings per share target is not achieved. Because the earnings per
share target was not achieved for fiscal 1998, the portion of bonuses based on
financial performance of the Company was not paid.
STOCK OPTION GRANTS
Stock-based performance compensation is provided through stock options
granted under the 1992 and 1997 Stock Option Plans. The purpose of the Stock
Option Plans 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,
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 receives 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 earnings per share),
salaries paid to chief executive officers of companies with revenues comparable
to Unitog's and salaries paid by companies 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 1998, Mr. Rolf received a base salary of $283,000, an
increase of $10,000, or 3.7%, over fiscal 1997
11
<PAGE>
base salary. The Compensation Committee determined that the increase in base
salary was appropriate in consideration of the 22% increase in revenues, the 16%
increase in operating income and the 6% increase in net earnings from fiscal
1996 to fiscal 1997. Mr. Rolf did not receive a bonus for fiscal 1998 under the
Management Incentive Plan because the Company failed to meet minimum earnings
per share goals set by the Compensation Committee. Mr. Rolf declined stock
options in fiscal 1998 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
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TOTAL MARKET RETURN
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG UNITOG COMPANY, THE S & P 500 INDEX AND A PEER GROUP
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
UNITOG COMPANY PEER GROUP S & P 500 INDEX
<S> <C> <C> <C>
1/31/93 $100.00 $100.00 $100.00
1/30/94 $121.52 $113.04 $112.88
1/29/95 $133.13 $114.96 $113.48
1/28/96 $178.29 $153.39 $157.36
1/26/97 $197.94 $183.24 $198.81
1/25/98 $144.67 $259.02 $252.31
</TABLE>
<TABLE>
<CAPTION>
1/31/93 1/30/94 1/29/95 1/28/96 1/26/97 1/25/98
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Unitog Company 100.00 121.52 133.13 178.29 197.94 144.67
Peer Group 100.00 113.04 114.96 153.39 183.24 259.02
S & P 500 Index 100.00 112.88 113.48 157.36 198.81 252.31
</TABLE>
Assumes $100 invested on January 31, 1993 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 and John W.
Caffry. Neither of these individuals is or has ever been an officer or employee
of the Company. During fiscal 1998, 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.
13
<PAGE>
PROPOSAL NO. 2:
APPROVAL OF INDEPENDENT AUDITORS
For fiscal 1998, 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
1999 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.
MISCELLANEOUS
STOCKHOLDER PROPOSALS. In the event any stockholder intends to present a
proposal at the annual meeting of stockholders to be held in 1999, such proposal
must be received by the Company, in writing, on or before December 21, 1998 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 be properly brought before the meeting by the Board of Directors
or at their direction; or
- Otherwise be 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.
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<PAGE>
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
and "FOR" approval of the appointment of KPMG Peat Marwick LLP as independent
auditors for the Company for fiscal 1999.
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.
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 1998 may be obtained without charge upon written request to
the Secretary, Unitog Company, 1300 Washington 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 20, 1998
15
<PAGE>
UNITOG COMPANY
ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints G. Kenneth Baum 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 21, 1998, or any adjournments or postponements
thereof.
1. ELECTION OF CLASS C DIRECTORS
/ / FOR ALL NOMINEES LISTED BELOW / / WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below). listed below.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME.)
G. Kenneth Baum D. Patrick Curran
2. APPROVAL OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT
AUDITORS OF THE COMPANY FOR FISCAL 1999.
/ / FOR / / AGAINST / / ABSTAIN
3. 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 C DIRECTOR, FOR PROPOSAL 2 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:______________________________ , 1998
___________________________________________
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.)
