<PAGE>
SCHEDULE 14A
(Rule 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
G&K Services, Inc.
- --------------------------------------------------------------------------------
(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:
-----------------------------------------------------------------------
(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:
-----------------------------------------------------------------------
<PAGE>
[LOGO]
G&K SERVICES, INC.
5995 Opus Parkway, Suite 500
Minneapolis, Minnesota 55343
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 28, 1999
---------------------
TO THE STOCKHOLDERS OF G&K SERVICES, INC.:
Please take notice that the Annual Meeting of Stockholders of G&K Services,
Inc. (the "Company") will be held, pursuant to due call by the Board of
Directors of the Company, in the Mississippi River Room of the Marquette Hotel,
South Seventh Street and Marquette Avenue, Minneapolis, Minnesota, on Thursday,
October 28, 1999, at 10:00 a.m., or at any adjournment or adjournments thereof,
for the purpose of considering and taking appropriate action with respect to the
following:
1. To elect eight directors;
2. To ratify the appointment of Arthur Andersen LLP, Certified Public
Accountants, as independent auditors of the Company for fiscal 2000;
3. To transact any other business as may properly come before the meeting
or any adjournments thereof.
Pursuant to due action of the Board of Directors, stockholders of record on
September 16, 1999, will be entitled to vote at the meeting or any adjournments
thereof.
A PROXY FOR THE MEETING IS ENCLOSED HEREWITH. YOU ARE REQUESTED TO FILL IN
AND SIGN THE PROXY, WHICH IS SOLICITED BY THE BOARD OF DIRECTORS, AND MAIL IT
PROMPTLY IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
G&K SERVICES, INC.
[SIGNATURE]
Jeffrey L. Wright, SECRETARY
September 27, 1999
<PAGE>
PROXY STATEMENT
OF
G&K SERVICES, INC.
5995 OPUS PARKWAY, SUITE 500
MINNEAPOLIS, MINNESOTA 55343
------------------------
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
OCTOBER 28, 1999
---------------------
PROXIES AND VOTING
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of G&K Services, Inc. (the "Company") to be
used at the Annual Meeting of Stockholders of the Company to be held October 28,
1999. The approximate date on which this Proxy Statement and the accompanying
proxy were first sent or given to stockholders was September 27, 1999. Each
stockholder who signs and returns a proxy in the form enclosed with this Proxy
Statement may revoke the same at any time prior to its use by giving notice of
such revocation to the Company in writing, in open meeting or by executing and
delivering a new proxy to the Secretary of the Company. Unless so revoked, the
shares represented by each proxy will be voted at the meeting and at any
adjournments thereof. Presence at the meeting of a stockholder who has signed a
proxy does not, alone, revoke that proxy. Only stockholders of record at the
close of business on September 16, 1999 (the "Record Date") will be entitled to
vote at the meeting or any adjournments thereof. All shares which are entitled
to vote and are represented at the Annual Meeting by properly executed proxies
received prior to or at the Meeting, and not revoked, will be voted at the
Meeting in accordance with the instructions indicated on such proxies.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The Company has outstanding two classes of voting securities, Class A Common
Stock, $0.50 par value, and Class B Common Stock, $0.50 par value, of which
19,043,915 shares of Class A Common Stock and 1,474,996 shares of Class B Common
Stock were outstanding as of the close of business on the Record Date. Each
share of Class A Common Stock is entitled to one vote and each share of Class B
Common Stock is entitled to ten votes on all matters put to a vote of
stockholders.
The following table sets forth, as of the Record Date, certain information
with regard to the beneficial ownership of the Company's Class A and Class B
Common Stock and the voting power resulting from the ownership of such stock by
(i) all persons known by the Company to be the owner, of record or beneficially,
of more than 5% of the outstanding Class A or Class B Common Stock of the
Company, (ii) each of the directors and nominees for election to the Board of
Directors of the Company, (iii) each executive officer named in the Summary
Compensation Table, and (iv) all executive officers and directors
1
<PAGE>
as a group, inclusive of each Named Executive Officer and without regard to
whether such persons are also reporting persons for purposes of Section 16(a) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
<TABLE>
<CAPTION>
CLASS A COMMON
STOCK(2) CLASS B COMMON STOCK
--------------------- --------------------- PERCENT OF
NUMBER OF PERCENT NUMBER PERCENT VOTING
NAME OF BENEFICIAL OWNER(1) SHARES OF CLASS OF SHARES OF CLASS POWER(3)
- ------------------------------------------------------------ --------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Bruce G. Allbright(4)(7)(12)................................ 29,282 * -- -- *
Paul Baszucki(4)(7)......................................... 5,500 * -- -- *
Richard Fink(4)(5)
5995 Opus Parkway, Suite 500
Minneapolis, MN 55343..................................... 291,500 1.5 1,315,135 89.2 39.8
Wayne M. Fortun(4)(7)....................................... 6,155 * -- -- *
Donald W. Goldfus(4)(7)..................................... 5,750 * -- -- *
William Hope(4)............................................. 59,677 * -- -- *
Timothy W. Kuck(6).......................................... 13,010 * -- -- *
Thomas Moberly(4)(8)........................................ 50,484 * -- -- *
Martin Reader............................................... 2,545 * -- -- *
Bernard Sweet(4)(7)......................................... 21,705 * -- -- *
All executive officers and
directors as a group (13 persons)(9)........................ 490,258 2.6 1,315,135 89.2 40.3
Salomon Smith Barney Inc.(10)
Salomon Brothers Holding Company Inc.
Salomon Smith Barney Holdings Inc.
388 Greenwich Street
New York, NY 10013
Citigroup Inc.
153 East 53(rd) Street
New York, NY 10043........................................ 1,102,146 5.8 -- -- 3.3
Wellington Management Company, LLP(11)
Wellington Trust Company, NA
75 State Street
Boston, MA 02109.......................................... 1,314,600 6.9 -- -- 3.9
</TABLE>
- ------------------------
* Less than 1%.
(1) Unless otherwise noted, each person or group identified possesses sole
voting and investment power with respect to the shares shown opposite the
name of such person or group.
(2) Does not include shares of Class A Common Stock which may be acquired by
holders of Class B Common Stock upon conversion of their shares of Class B
Common Stock, at any time, on the basis of one share of Class A Common
Stock for each share of Class B Common Stock converted.
- ------------------------
(FOOTNOTES CONTINUED ON NEXT PAGE)
2
<PAGE>
(FOOTNOTES CONTINUED FROM PREVIOUS PAGE)
(3) Holders of Class B Common Stock are entitled to ten votes for each share on
all matters submitted to a vote of stockholders. Holders of Class A Common
Stock are entitled to one vote per share on all matters submitted to a vote
of stockholders.
(4) Each of these persons is currently a director and/or nominee for election
to the Board of Directors of the Company. Messrs. Fink and Moberly are also
executive officers of the Company. Mr. Hope retired from his position as
Chief Executive Officer of the Company effective as of January 1999.
(5) Includes 116,130 shares held by Richard Fink as co-trustee for the benefit
of one of his children, and 6,656 shares owned by a private foundation with
respect to which Mr. Fink has shared voting power. Also includes 8,700
shares held by Mr. Fink's spouse.
(6) Includes 6,450 shares subject to options which are exercisable within the
next 60 days.
(7) Includes 5,000 shares subject to options which are exercisable within the
next 60 days.
(8) Includes 309 shares subject to options which are exercisable within the
next 60 days, 250 shares held as joint tenant with his spouse and 726
shares held as guardian for his minor children.
(9) Includes 31,759 shares subject to options which are exercisable within the
next 60 days.
(10) Based solely upon the most recent Schedule 13G on file with the Securities
and Exchange Commission. The reporting person shares both voting and
dispositive power with respect to all 1,102,146 shares. Salomon Brothers
Holding Company Inc. ("SBHC") is the sole stockholder of Salomon Smith
Barney Inc. ("SSB"); Salomon Smith Barney Holdings Inc. ("SSB Holdings")
is the sole stockholder of SBHC; and Citigroup Inc. ("Citigroup") is the
sole stockholder of SSB Holdings. Both SSB Holdings and Citigroup disclaim
beneficial ownership of the securities referred to in the Schedule 13G
filing.
(11) Based solely upon the most recent Schedule 13G on file with the SEC. The
reporting person shares voting power with respect to 734,500 shares and
shares dispositive power with respect to 1,314,600 shares.
(12) Includes 15,000 shares owned by a trust of which Mr. Allbright is a
co-trustee, and 5,000 shares owned by a partnership in which Mr. Allbright
is a general partner.
The foregoing footnotes are provided for informational purposes only and
each person disclaims beneficial ownership of shares owned by any member of his
or her family or held in trust for any other person, including family members.
On June 14, 1985, Richard Fink, Chairman of the Board of the Company and
certain other persons who are no longer holders of Class B Common Stock entered
into a Stockholder Agreement with the Company. This Stockholder Agreement
presently covers 1,315,135 shares of Class B Common Stock, representing
approximately 89.2% of the outstanding shares of the Class B Common Stock. The
Stockholder Agreement provides for restrictions on the transferability of the
Class B Common Stock, in addition to certain restrictions contained in the
Company's Restated Articles of Incorporation. The shares of Class B Common Stock
were acquired pursuant to an exchange offer made by the Company in May 1985. The
shares of Class B Common Stock owned by Mr. Fink represent substantial voting
control of the Company.
3
<PAGE>
ELECTION OF DIRECTORS
Eight directors are to be elected at the meeting, each director to hold
office until the next Annual Meeting of Stockholders, or until his successor is
elected and qualified. All of the persons listed below are now serving as
directors of the Company and they have all consented to serve as a director, if
elected. The Board of Directors proposes for election the nominees listed below:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE DIRECTOR
NAME AND AGE OF NOMINEE PAST FIVE YEARS AND DIRECTORSHIPS IN PUBLIC COMPANIES SINCE
- --------------------------- ------------------------------------------------------------------------ ----------
<S> <C> <C>
Bruce G. Allbright (70) Retired since January 1990, formerly President of Dayton Hudson 1985
Corporation. Prior thereto, Mr. Allbright was Chairman and Chief
Executive Officer of Target Stores, a Division of Dayton Hudson
Corporation. Mr. Allbright is a director of TCF Financial, Inc. and
F.A., Hannaford Brothers Company.
Paul Baszucki (59) Chairman of the Board of Directors of Norstan, Inc. since May 1997. 1994
Prior thereto, Mr. Baszucki was Chief Executive Officer of Norstan, Inc.
Mr. Baszucki is also a director of Washington Scientific Industries Inc.
Richard Fink (69) Chairman of the Board of the Company. Mr. Fink was also Chief Executive 1968
Officer of the Company until January 1997.
Wayne M. Fortun (50) President, Chief Executive Officer and a director of Hutchinson 1994
Technology Inc., and a director of Excelsior-Henderson Motorcycle
Manufacturing Company.
Donald W. Goldfus (65) Retired since June 1999. Formerly the Chairman of the Board of Directors 1989
of Apogee Enterprises, Inc. Mr. Goldfus continues as a director of
Apogee Enterprises, Inc. and also served as Chief Executive Officer of
that company from 1986 until January 1998.
William Hope (66) Retired since January 1999. Formerly the Chief Executive Officer of the 1983
Company from January 1997 until January 1999. From 1993 to 1997, Mr.
Hope served as President and Chief Operating Officer of the Company. Mr.
Hope is also a director of Minntech Corporation.
Thomas Moberly (51) Chief Executive Officer since January 1999. President since September 1998
1997. Chief Operating Officer of the Company from September 1997 to
January 1999. From 1993 to 1997, Mr. Moberly served as Executive Vice
President of the Company. Prior thereto, Mr. Moberly was a Regional
Manager of the Company.
Bernard Sweet (75) Retired since 1985, formerly President and Chief Executive Officer of 1975
Republic Airlines, Inc. Mr. Sweet is a director of US Foodservice.
</TABLE>
4
<PAGE>
All shares represented by proxies will be voted FOR the election of the
foregoing nominees unless a contrary choice is specified. If any nominee should
withdraw or otherwise become unavailable for reasons not presently known, the
proxies which would have otherwise been voted for such nominee will be voted for
such substitute nominee as may be selected by the Board of Directors.
The affirmative vote of the holders of the greater of (a) a majority of the
outstanding shares of Class A and Class B Common Stock present and entitled to
vote on the election of directors or (b) a majority of the voting power of the
minimum number of shares entitled to vote that would constitute a quorum for
transaction of business at the meeting, is required for election to the Board of
each of the eight (8) nominees named above. A stockholder who abstains with
respect to the election of directors is considered to be present and entitled to
vote on the election of directors at the meeting, and is in effect casting a
negative vote, but a stockholder (including a broker) who does not give
authority to a proxy to vote, or withholds authority to vote on the election of
directors, shall not be considered present and entitled to vote on the election
of directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ALL OF THE
NOMINEES LISTED ABOVE.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the cash and noncash compensation for each of
the last three fiscal years awarded to or earned by the Chief Executive Officer
of the Company and the four other most highly compensated executive officers of
the Company who served as executive officers during fiscal 1999 (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION AWARDS
ANNUAL COMPENSATION
----------------------------------- -----------------------------
OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
FISCAL SALARY(1) BONUS COMPENSATION(2) STOCK AWARDS(3) UNDERLYING COMPENSATION(4)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) OPTIONS(#) ($)
- ------------------------------ ------ --------- ------ --------------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard Fink 1999 354,000 0 55,915 -- 3,850 30,615
Chairman of the Board 1998 354,000 30,975 54,909 -- -- 24,018
1997 333,230 0 36,305 -- -- 18,859
William Hope 1999 197,981 0 71,985 -- 3,860 21,800
Chief Executive Officer(5) 1998 355,629 35,500 70,137 -- -- 23,336
1997 313,442 0 46,988 -- -- 18,509
Thomas Moberly 1999 311,154 0 14,654 -- 2,880 18,396
President and Chief 1998 232,693 26,500 28,306 -- 2,160 13,465
Executive Officer(5) 1997 192,019 0 19,710 172,718 -- 10,682
Timothy W. Kuck(6) 1999 179,231 0 15,049 -- 1,480 11,239
Regional Vice President 1998 170,000 10,625 2,517 -- -- 3,994
1997 19,615 0 0 152,320 22,575 --
Martin Reader(7) 1999 165,692 0 25,712 -- 1,410 7,756
Vice President of 1998 162,000 12,150 22,626 -- -- 6,067
Direct Sales and
Corporate Development
</TABLE>
- ------------------------
(1) Includes cash compensation deferred at the election of the executive officer
under the terms of the Company's 401(k) Savings Incentive Plan and the
Executive Deferred Compensation Plan.
(2) Includes compensation relating to reimbursement for the payment of taxes
resulting from the vesting of restricted stock awards, personal use of
company car and country club dues.
(3) Amounts shown in this column reflect the dollar value (net of any
consideration paid by the named executive officer) of awards of restricted
stock as of the date such awards were granted, calculated by multiplying the
closing market price of unrestricted Class A Common Stock of the registrant
on the Nasdaq National Market on the date of grant by the number of shares
awarded. As of June 26, 1999, the Named Executive Officers held the
following as a result of grants under the 1989 Stock Option and Compensation
Plan and/or the 1998 Stock Option and Compensation Plan: Mr. Fink held 4,374
restricted shares at a market value (net of any consideration paid by Mr.
Fink) of $212,685.75; Mr. Moberly held 3,380 restricted shares at a market
value (net of any consideration paid by
- ------------------------
(FOOTNOTES CONTINUED ON NEXT PAGE)
6
<PAGE>
(FOOTNOTES CONTINUED FROM PREVIOUS PAGE)
Mr. Moberly) of $164,352.50; Mr. Kuck held 3,400 restricted shares at a
market value (net of any consideration paid by Mr. Kuck) of $165,325.00; and
Mr. Reader held 2,410 restricted shares at a market value (net of any
consideration paid by Mr. Reader) of $117,186.25. Restricted stock awards
vest in seven equal annual installments beginning on the first anniversary
of the date of grant. Regular dividends are paid on the restricted shares.
The Company has agreed to make certain payments to the recipients of
restricted stock to cover the taxes payable by such persons upon the vesting
of such shares. See footnote 2 above.
(4) Represents matching contributions by the Company under the Company's 401(k)
Savings Incentive Plan and the Executive Deferred Compensation Plan and
payment by the Company of term life insurance premiums.
(5) Mr. Hope served as the Chief Executive Officer of the Company and Mr.
Moberly served as the President and Chief Operating Officer of the Company
through January 1999. Mr. Hope retired as an executive officer of the
Company as of January 1999, at which time Mr. Moberly was named the
President and Chief Executive Officer of the Company.
(6) Mr. Kuck joined the Company in May 1997.
(7) Mr. Reader was designated an executive officer of the Company effective
August 27, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the number of individual grants of stock
options made during fiscal year 1999 to the Named Executive Officers:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
-------------------------------------------------------------- STOCK PRICE
NUMBER OF SHARES PERCENT OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OR OPTION TERM
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME GRANTED(#) FISCAL YEAR (%) ($/SHARE)(1) DATE 5%($)(2) 10%($)(2)
- ----------------------------- ----------------- ----------------- ------------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard M. Fink 3,850 1.8 46.00 9/1/2008 111,377 282,252
William Hope 3,860 1.8 46.00 1/8/2002 31,357 66,407
Thomas Moberly 2,880 1.3 46.00 9/1/2008 83,316 211,139
Timothy W. Kuck 1,480 0.7 46.00 9/1/2008 42,815 108,502
Martin S. Reader 1,410 0.7 46.00 9/1/2008 40,790 103,370
</TABLE>
- ------------------------
(1) The fair market value of the Company's Common Stock on the date of grant was
$46.00. Options are exercisable on September 1, 2001.
(2) The hypothetical potential appreciation shown in these columns for the named
executive is required by rules of the SEC. These amounts do not represent
either the historical or anticipated future performance of the Company's
common stock price appreciation.
7
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information as to the exercise of options and
number and value of unexercised options at fiscal year-end for each of the Named
Executive Officers who owned options during fiscal 1999:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES ACQUIRED VALUE 6/26/99 (#) 6/26/99 ($)
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---------------------------------------- --------------- ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Richard M. Fink (1) -0- N/A -0-/3,850 -0-/12,031
William Hope (1) -0- N/A -0-/3,860 -0-/12,063
Thomas Moberly (2) -0- N/A 309/1,851 2,240/13,420
Thomas Moberly (1) -0- N/A -0-/2,880 -0-/9,000
Timothy W. Kuck (3) -0- N/A 6,450/16,125 107,231/268,078
Timothy W. Kuck (1) -0- N/A -0-/1,480 -0-/4,625
Martin S. Reader (1) -0- N/A -0-/1,410 -0-/4,406
</TABLE>
- ------------------------
(1) Unexercisable options were granted on September 1, 1998 at an exercise price
of $46.00 per share. The closing sale price of the Class A Common Stock on
June 25, 1999 was $49.125.
(2) Options were granted on January 2, 1998 at an exercise price of $41.875 per
share. The closing sale price of the Class A Common Stock on June 25, 1999
was $49.125.
(3) Options were granted on May 12, 1997 at an exercise price of $32.50 per
share. The closing sale price of the Class A Common Stock on June 25, 1999
was $49.125.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 125,000 $ 31,250 $ 41,666 $ 52,083 $ 62,500 $ 62,500
150,000 37,500 50,000 62,500 75,000 75,000
175,000 43,750 58,333 72,917 87,500 87,500
200,000 50,000 66,667 83,333 100,000 100,000
225,000 56,250 75,000 93,750 112,500 112,500
250,000 62,500 83,333 104,167 125,000 125,000
300,000 75,000 100,000 125,000 150,000 150,000
350,000 87,500 116,667 145,833 175,000 175,000
400,000 100,000 133,333 166,667 200,000 200,000
450,000 112,500 150,000 187,500 225,000 225,000
</TABLE>
The table above sets forth the estimated annual straight life annuity
benefits payable upon an executive's retirement at age 65 under both the
Company's Pension Plan and its Supplemental Executive Retirement Plan, for
various compensation and years of service categories, without any reduction for
Social Security benefits. These plans take into account the average annual
salary and bonus shown in the Summary Compensation Table, paid during the five
consecutive calendar years in which such amounts were highest (within the past
10 years). The number of years of service credited for Messrs. Fink, Hope,
Moberly, Kuck and Reader as of June 26, 1999 were 34 years, 33 years, 25 years,
2 year and 5 years, respectively.
8
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has employment agreements with each of Messrs. Moberly, Kuck and
Reader that are for indefinite terms. Each agreement will terminate upon the
death, disability or retirement of the respective Named Executive Officer and
provides that employment may be terminated at any time by the Company or by such
employee. Each such Named Executive Officer also covenants and agrees that for a
period of eighteen (18) months following the date his employment with the
Company terminates, he will not (i) compete against the Company, (ii) obtain any
ownership interest in any competitor or become employed by any competitor, (iii)
encourage any employees of the Company to violate the terms of their employment
contracts with the Company or (iv) attempt to take away any customers of the
Company. Each such Named Executive Officer also agrees not to disclose any
confidential Company information at any time before or after termination of his
employment with the Company.
CHANGE IN CONTROL AGREEMENTS
The Company has entered into change of control agreements with each of
Messrs. Fink, Moberly, Kuck and Reader. Each agreement provides that upon a
Change in Control, as defined in the 1989 Stock Option and Compensation Plan
and/or the 1998 Stock Option and Compensation Plan (together the "Plans"), (i)
the restrictions on all shares of restricted stock awards shall lapse
immediately; (ii) all outstanding options and stock appreciation rights shall
become immediately exerciseable; and (iii) all performance shares shall be
deemed to have been met and payment made immediately.
DIRECTOR COMPENSATION
The Company pays each director who is not otherwise employed by the Company
an annual fee of $14,000 and $1,000 for each meeting of the Board of Directors
and $500 for each committee meeting of the Board of Directors attended.
In addition, eligible directors also participate in the 1996 Director Stock
Option Plan (the "1996 Plan") which provides for an annual grant to non-employee
directors of options to purchase 1,000 shares at an option exercise price equal
to the average of the closing prices of the Company's Common Stock during the
ten business days preceding the Company's Annual Meeting for a given year. Each
such option has a ten-year term and generally becomes exercisable on the first
anniversary of the grant date. In connection with the original adoption of the
1996 Plan, each of Messrs. Allbright, Baszucki, Fortun, Goldfus and Sweet
received a one-time grant of options to purchase 3,000 shares of Common Stock.
Those options have ten-year terms and vest in three equal installments on each
of the first, second and third anniversaries of the grant date.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
The Company's Compensation Committee is comprised of William Hope, Wayne M.
Fortun and Chairman Donald W. Goldfus. Until January of 1999, Mr. Hope served as
the Chief Executive Officer of the Company.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions on compensation of the Company's executives generally have been
made by the Compensation Committee (the "Compensation Committee") of the Board.
Each member of the Compensation Committee is a non-employee director, although
Mr. Hope served as the Chief Executive Officer of the
9
<PAGE>
Company through January of 1999. The members of the Compensation Committee are
William Hope, Wayne M. Fortun and Chairman Donald W. Goldfus.
All decisions by the Compensation Committee relating to the compensation of
the Company's executive officers are reviewed by the full Board. Pursuant to
rules designed to enhance disclosure of the Company's policies toward executive
compensation, set forth below is a report prepared by the Board of Directors
addressing the Company's compensation policies for the fiscal year ended June
26, 1999 as they affected the Company's executive officers.
The Compensation Committee's executive compensation policies are designed to
provide competitive levels of compensation that integrate pay with the Company's
annual objectives and long-term goals, reward above average corporate
performance, recognize individual initiative and achievements, and assist the
Company in attracting and retaining qualified executives. Executive compensation
is set at levels that the Compensation Committee believes to be competitive with
those offered by employers of comparable size, growth and profitability in the
Company's industry.
There are three elements in the Company's executive compensation program,
each of which is determined by individual and corporate performance: base salary
compensation, annual incentive compensation and long-term incentive
compensation.
Base salary compensation is determined by the potential impact the
individual may have on the Company, the skills and experience required by the
job, comparisons with comparable companies and the performance and potential of
the incumbent in the job.
For fiscal 1999, the Named Executive Officers of the Company, together with
certain other vice presidents and group general managers, were eligible to
receive an annual incentive bonus. The Compensation Committee established a
target bonus for each executive officer expressed as a percentage of base
salary. These percentages varied by executive officer, ranging from 25% to a
high of 40% in the case of the Company's Chief Executive Officer. The bonus
program identified four key performance measures, although the Compensation
Committee retained discretion in considering additional factors in awarding
bonuses. The four key performance measures included operating income margin,
weekly rental revenue gain, customer satisfaction and employee satisfaction.
Each element of the incentive compensation program is weighted equally. In the
case of operating income and weekly revenue gain, bonus credit is based on
meeting operating forecasts approved by the Board of Directors of the Company.
In the case of customer and employee satisfaction, bonus credit is based on
independent customer surveys and Company-wide employee sensing ratings,
including surveys, exit interviews and employee turnover rates.
Long-term incentive compensation, pursuant to the Company's Plans, to the
Chief Executive Officer, as well as other executive officers of the Company, is
designed to integrate compensation with the Company's annual objectives and
long-term goals, reward above-average corporate performance, recognize
individual initiative and achievements, assist in the retention of executives
and align the long-term interests of management with those of the Company's
shareholders. The Compensation Committee makes recommendations to the Board
regarding the granting of restricted stock awards and stock option grants to
executives and key personnel. Awards vest and options become exercisable based
upon criteria established by the Company. During fiscal 1999, the Compensation
Committee made no awards of restricted stock to any Named Executive Officer, but
did make awards of non-qualified stock options to certain of the Company's
officers as follows: Mr. Richard Fink, the Company's Chairman of the Board was
granted an option to purchase 3,850 shares; Mr. William Hope, the Company's
former Chief Executive Officer was granted an option to purchase 3,860 shares;
Mr. Thomas Moberly, the Company's President and Chief
10
<PAGE>
Executive Officer was granted an option to purchase 2,880 shares; Mr. Timothy W.
Kuck, the Company's former Chief Financial Officer and current Regional Vice
President was granted an option to purchase 1,480 shares; Mr. Martin S. Reader,
the Company's Vice President of Direct Sales and Corporate Development was
granted an option to purchase 1,410 shares. All options have an exercise price
of $46.00 per share, the fair market value of the Common Stock on the grant
date, and vest on September 1, 2001. The Compensation Committee also recommended
that stock options be granted to certain other non-executive officers of the
Company.
The Compensation Committee did not award any annual incentive bonuses to the
Named Executive Officers for fiscal 1999. In determining not to award any
incentive bonuses, the Compensation Committee noted that the Company did not
achieve its weekly rental revenue growth or operating margin objectives, and in
light of these considerations, the Compensation Committee determined not to
award an annual incentive bonus to any of the Named Executive Officers for
fiscal 1999.
In fiscal 1999, William Hope, the Company's Chief Executive Officer through
January 1999, received a base salary of $197,981. Mr. Hope was eligible for an
annual incentive bonus of approximately forty percent (40%) of his base salary,
but did not receive any incentive bonus for fiscal 1999. In 1992, Mr. Hope
received a restricted stock award of 21,620 shares. The award vests in seven
equal annual installments, and 3,089 shares vested in 1999. Mr. Hope received an
additional bonus in 1999 in the amount of approximately $59,734 to cover taxes
due on the value of the restricted shares which vested in 1999. As noted above,
Mr. Hope was also granted an option to acquire 3,860 shares of the Company's
common stock at an exercise price of $46.00. This option vests on September 1,
2001. As a result of Mr. Hope's retirement, Mr. Hope has until January 8, 2002
to exercise this option.
In fiscal 1999, Tom Moberly, the Company's President and Chief Executive
Officer as of January 1999, received a base salary of $311,154. Mr. Moberly was
eligible for an annual incentive bonus of approximately forty percent (40%) of
his base salary, but did not receive any incentive bonus for fiscal 1999. In
1997, Mr. Moberly received a restricted stock award of 4,732 shares. The award
vests in seven equal annual installments, and 676 shares vested in 1999. Mr.
Moberly received an additional bonus in 1999 in the amount of approximately
$13,020 to cover taxes due on the value of the restricted shares which vested in
1999. As noted above, Mr. Moberly was also granted an option to acquire 2,880
shares of the Company's common stock at an exercise price of $46.00. This option
vests on September 1, 2001.
The Compensation Committee does not anticipate that any of the compensation
payable to executive officers of the Company in the coming year will exceed the
limits and deductibilities set forth in section 162(m) of the Internal Revenue
Code of 1986, as amended. The Compensation Committee has not established a
policy regarding compensation in excess of these limits, but will continue to
monitor this issue.
WILLIAM HOPE
WAYNE M. FORTUN
DONALD GOLDFUS
11
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph summarizes the cumulative five-year return on $100
invested in the Company's common stock, the Standard and Poor's ("S&P") 500
Stock Index and a nationally recognized group of companies in the uniform
services industry (the "Peer Index"). The companies included in the Peer Index
are Angelica Corporation, Cintas Corporation, G&K Services, Inc. and Unifirst
Corporation.
The graph illustrates the cumulative values at the end of each succeeding
year resulting from the change in the stock price, assuming dividend
reinvestment.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG G&K SERVICES, INC., THE S&P 500 INDEX
AND A PEER GROUP
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
G&K SERVICES, INC. PEER GROUP S&P 500
<S> <C> <C> <C>
7/2/94 $100 $100 $100
7/1/95 $126 $110 $126
6/29/96 $185 $161 $159
6/28/97 $241 $202 $214
6/27/98 $280 $286 $279
6/26/99 $321 $328 $342
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURNS*
----------------------------------------------------------------------------------
7/2/94 7/1/95 6/29/96 6/28/97 6/27/98 6/26/99
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
G&K Services, Inc................ 100 126 185 241 280 321
Peer Group....................... 100 110 161 202 286 328
S&P 500.......................... 100 126 159 214 279 342
</TABLE>
* $100 INVESTED ON 7/2/94 IN STOCK OR ON 6/30/94 IN INDEX--INCLUDING
REINVESTMENT OF DIVIDENDS.
12
<PAGE>
PROPOSAL TO RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS
Subject to ratification by the stockholders, the Board of directors has
appointed Arthur Andersen LLP as independent auditors of the Company for the
fiscal year 2000. Arthur Andersen has performed this function for the Company
commencing with the fiscal year 1976. Members of the firm will be available at
the Annual Meeting of Stockholders to answer questions and to make a statement
if they desire to do so.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR RATIFICATION
OF THE APPOINTMENT OF AUDITORS.
OTHER MATTERS
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held five meetings during fiscal 1999. The Company
has an Audit Committee and a Compensation Committee, but does not have a
Nominating Committee of the Board of Directors. No director attended fewer than
75 percent of the aggregate number of meetings of the Board of Directors and the
committees of the Board on which he served.
The Company's Audit Committee, which presently consists of Messrs. Paul
Baszucki, Bruce G. Allbright and Bernard Sweet, held three meetings during
fiscal 1999. The Audit Committee recommends to the full Board the engagement of
the independent accountants, reviews the audit plan and results of the audit
engagement, reviews the independence of the auditors, reviews the internal audit
plan and results of their audits and reviews the adequacy of the Company's
system of internal accounting controls.
The Company's Compensation Committee, which consists of Messrs. William
Hope, Wayne M. Fortun and Donald W. Goldfus, held two meetings during fiscal
1999. The Compensation Committee reviews the Company's remuneration policies and
practices and makes recommendations to the Board in connection with all
compensation matters affecting the Company.
CERTAIN TRANSACTIONS
The Company loaned Thomas Moberly, President and Chief Executive Officer of
the Company, $200,000 in connection with his purchase of a residence in April
1994. This loan is evidenced by a promissory note which accrues interest at the
rate of 7% per year from August 1, 1999 and thereafter and requires no payments
until August 1, 1999. In July 1999, Mr. Moberly repaid the loan in full to the
Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the SEC and the Nasdaq National Market. Officers, directors and
greater-than-ten-percent shareholders are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely on review of the copies of such forms furnished to the Company,
or written representations that no Forms 5 were required, the Company believes
that during the fiscal year ended June 26, 1999, all Section 16(a) filing
requirements applicable to its officers, directors and greater-than-ten-percent
beneficial owners were complied with; except for a late Form 3 filing by Joseph
Rotunda, Chief Operating
13
<PAGE>
Officer and a late Form 4 filing by Martin Reader, Vice President of Direct
Sales and Corporate Development.
PROPOSALS OF STOCKHOLDERS
All proposals of stockholders intended to be included in the 2000 Proxy
Statement of the Company and presented at the 2000 Annual Meeting of
Stockholders of the Company must be received by the Company at its executive
offices on or before May 31, 2000.
DISCRETIONARY PROXY VOTING AUTHORITY/UNTIMELY STOCKHOLDER PROPOSALS
Rule 14a-4 promulgated under the Securities and Exchange Act of 1934 governs
the Company's use of its discretionary proxy voting authority with respect to a
shareholder proposal which the shareholder has not sought to include in the
Company's proxy statement. The Rule provides that if a proponent of a proposal
fails to notify the company at least 45 days prior to the month and day of
mailing of the prior year's proxy statement, management proxies will be allowed
to use their discretionary voting authority when the proposal is raised at the
meeting, without any discussion of the matter.
With respect to the Company's 2000 Annual Meeting of Shareholders, if the
Company is not provided notice of a shareholder proposal, which the shareholder
has not previously sought to include in the Company's proxy statement, by August
14, 2000, the management proxies will be allowed to use their discretionary
authority as outlined above.
SOLICITATION
The Company will bear the cost of preparing, assembling and mailing the
proxy, Proxy Statement, Annual Report and other material which may be sent to
the stockholders in connection with this solicitation. Brokerage houses and
other custodians, nominees and fiduciaries may be requested to forward
soliciting material to the beneficial owners of stock, in which case they will
be reimbursed by the Company for their expenses in doing so. Proxies are being
solicited primarily by mail, but, in addition officers and regular employees of
the Company may solicit proxies personally, by telephone, by telegram or by
special letter.
The Board of Directors does not intend to present to the meeting any other
matter not referred to above and does not presently know of any matters that may
be presented to the meeting by others. However, if other matters come before the
meeting, it is the intent of the persons named in the enclosed proxy to vote the
proxy in accordance with their best judgment.
By Order of the Board of Directors
G&K SERVICES, INC.
[SIGNATURE]
Jeffrey L. Wright, SECRETARY
14
<PAGE>
G&K SERVICES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 28, 1999
The undersigned, a shareholder of G&K Services, Inc., hereby appoints
Richard Fink and Jeffrey L. Wright, and each of them, as proxies, with full
power of substitution, to vote on behalf of the undersigned the number of shares
which the undersigned is then entitled to vote, at the Annual Meeting of
Stockholders of G&K Services, Inc. to be held in the Mississippi River Room,
Marquette Hotel, South Seventh Street and Marquette Avenue, Minneapolis,
Minnesota, at 10:00 a.m. on Thursday, October 28, 1999, and at any and all
adjournments thereof, with all the powers which the undersigned would possess if
personally present, upon:
<TABLE>
<C> <S> <C>
(1) Election of Directors:
/ / FOR all nominees (except as marked to the contrary / / WITHHOLD AUTHORITY to vote for all nominees listed below
below)
Bruce G. Allbright Paul Baszucki Richard Fink Wayne M. Fortun
Donald W. Goldfus William Hope Bernard Sweet Thomas Moberly
INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee's name on the space provided
below:
--------------------------------------------------------------------------------------------------------------------------
(2) Proposal to ratify the appointment of Arthur Andersen LLP, Certified Public Accountants, as independent auditors of the
Company for fiscal 2000.
/ / FOR / / AGAINST / / ABSTAIN
(3) Upon such other business as may properly come before the meeting or any adjournments thereof.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES AND
FOR RATIFICATION OF THE APPOINTMENT OF AUDITORS.
(CONTINUED, AND TO BE COMPLETED AND SIGNED, ON THE REVERSE SIDE)
<PAGE>
G&K SERVICES, INC.
ANNUAL MEETING
Marquette Hotel
Seventh Street and Marquette Avenue
Minneapolis, Minnesota
OCTOBER 28, 1999
10:00 A.M.
<PAGE>
[LOGO]
(CONTINUED FROM OTHER SIDE)
The undersigned hereby revokes all previous proxies relating to the shares
covered hereby and acknowledges receipt of the Notice and Proxy Statement
relating to the Annual Meeting of Stockholders.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. When properly
executed, this proxy will be voted on the proposals set forth herein as directed
by the shareholder, but if no direction is made in the space provided, this
proxy will be voted FOR the election of all nominees for director and FOR
ratification of the appointment of auditors.
Dated __________________________, 1999
X_____________________________________
X_____________________________________
(Shareholder must sign exactly as the
name appears at left. When signed as a
corporate officer, executor,
administrator, trustee, guardian,
etc., please give full title as such.
Both joint tenants must sign.)
