10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

F O R M 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended December 27, 2003 Commission file number 0-4063

G&K SERVICES, INC

(Exact name of registrant as specified in its charter)

MINNESOTA	41-0449530
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

5995 OPUS PARKWAY, SUITE 500
MINNETONKA, MINNESOTA 55343

(Address of principal executive offices and zip code)

(952) 912-5500

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES X NO

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES X NO

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

CLASS A
Common Stock, par value $0.50 per share Outstanding February 2, 2004
19,373,542

CLASS B
Common Stock, par value $0.50 per share Outstanding February 2, 2004
1,474,996

TABLE OF CONTENTS

Table of Contents
PART I FINANCIAL INFORMATION
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Unaudited)
PART II OTHER INFORMATION
SIGNATURES
Executive Employment Agreement - Jeffrey R. Kiesel
First Amendment to Credit Agreement
Certification of CEO to Section 302
Certification of CFO to Section 302
Certification of CEO to Section 906
Certification of CFO to Section 906

G&K Services, Inc.
Form 10-Q

Table of Contents

		PAGE
PART I
Item 1.	Financial Statements
	Consolidated Condensed Balance Sheets as of     December 27, 2003 and June 28, 2003		3
	Consolidated Statements of Operations for the three and six     months ended December 27, 2003 and December 28, 2002		4
	Consolidated Condensed Statements of Cash Flows for the six months ended     December 27, 2003 and December 28, 2002		5
	Notes to Consolidated Condensed Financial Statements		6
Item 2.	Management's Discussion and Analysis of Financial Condition and     Results of Operations		11
Item 3.	Quantitative and Qualitative Disclosure About Market Risk		18
Item 4.	Controls and Procedures		18
PART II
Item 6.	Exhibits and Reports on Form 8-K		19
Signatures			20

2

PART I
FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
G&K Services, Inc. and Subsidiaries

			December 27,
			2003		June 28,
(In thousands)			(Unaudited)		2003
ASSETS
Current Assets
		Cash and cash equivalents	$	17,479	$	11,504
		Accounts receivable, less allowance for doubtful accounts of $3,721 and $3,687		72,196		69,839
		Inventories		91,956		95,853
		Prepaid expenses		9,694		14,848
	Total current assets			191,325		192,044
Property, Plant and Equipment, net				242,591		250,757
Goodwill				274,335		266,140
Other Assets				69,345		69,865
			$	777,596	$	778,806
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
		Accounts payable	$	19,011	$	20,228
		Accrued expenses		78,103		68,679
		Deferred income taxes		13,561		13,459
		Current maturities of long-term debt		23,367		14,430
	Total current liabilities			134,042		116,796
Long-Term Debt, net of Current Maturities				193,487		236,731
Deferred Income Taxes				29,327		28,667
Other Noncurrent Liabilities				18,288		16,343
Stockholders’ Equity				402,452		380,269
			$	777,596	$	778,806

The accompanying notes are an integral part of these consolidated condensed financial statements.

3

CONSOLIDATED STATEMENTS OF OPERATIONS
G&K Services, Inc. and Subsidiaries
(Unaudited)

		For the Three Months Ended				For the Six Months Ended
		Dec 27,		Dec 28,		Dec 27,		Dec 28,
(In thousands, except per share data)		2003		2002		2003		2002
Revenues
	Rental operations	$	174,620	$	171,633	$	347,900	$	337,084
	Direct sales		7,919		8,020		13,242		12,367
	Total revenues		182,539		179,653		361,142		349,451
Operating Expenses
	Cost of rental operations		111,062		106,090		220,907		207,560
	Cost of direct sales		5,783		5,427		10,084		8,928
	Selling and administrative		38,791		38,827		77,324		75,482
	Depreciation and amortization		9,773		9,454		19,463		18,473
	Total operating expenses		165,409		159,798		327,778		310,443
Income from Operations			17,130		19,855		33,364		39,008
	Interest expense		2,933		3,531		6,088		6,792
Income before Income Taxes			14,197		16,324		27,276		32,216
	Provision for income taxes		5,395		6,366		10,365		12,564
Net Income		$	8,802	$	9,958	$	16,911	$	19,652
	Basic weighted average number of shares outstanding		20,666		20,567		20,638		20,556
Basic Earnings per Common Share		$	0.43	$	0.48	$	0.82	$	0.96
	Diluted weighted average number of shares outstanding		20,850		20,759		20,789		20,722
Diluted Earnings per Common Share		$	0.42	$	0.48	$	0.81	$	0.95
Dividends per share		$	0.0175	$	0.0175	$	0.0350	$	0.0350

The accompanying notes are an integral part of these consolidated condensed financial statements.

4

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
G&K Services, Inc. and Subsidiaries
(Unaudited)

			For the Six Months Ended
			December 27,			December 28,
(In thousands)			2003			2002
Operating Activities:
	Net income		$	16,911		$	19,652
	Adjustments to reconcile net income to net cash provided by operating activities -
	Depreciation and amortization			19,463			18,473
	Deferred income taxes			562			(331	)
	Amortization of deferred compensation — restricted stock			467			544
	Changes in current operating items, exclusive of			15,314			8,782
		acquisitions
	Other, net			197			240
Net cash provided by operating activities				52,914			47,360
Investing Activities:
	Property, plant and equipment additions, net			(8,372	)		(18,074	)
	Acquisitions of business assets and other			(7,137	)		(71,797	)
Net cash used for investing activities				(15,509	)		(89,871	)
Financing Activities:
	Proceeds from debt financing			65,775			163,209
	Repayments of debt financing			(99,557	)		(112,839	)
	Cash dividends paid			(726	)		(725	)
	Sale of common stock			2,703			384
Net cash provided by (used for) financing activities				(31,805	)		50,029
Increase in Cash and Cash Equivalents				5,600			7,518
Effect of Exchange Rates on Cash				375			69
Cash and Cash Equivalents:
	Beginning of period			11,504			9,986
	End of period		$	17,479		$	17,573

The accompanying notes are an integral part of these consolidated condensed financial statements.

5

G&K SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Amounts in thousands, except per share data)
Three and six month periods ended December 27, 2003 and December 28, 2002
(Unaudited)

The consolidated condensed financial statements included herein, except for the June 28, 2003 balance sheet which was derived from the audited consolidated financial statements for the fiscal year ended June 28, 2003, have been prepared by G&K Services, Inc. (the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position of the Company as of December 27, 2003, and the results of its operations for the three and six months ended and its cash flows for the six months ended December 27, 2003 and December 28, 2002. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures herein are adequate to make the information presented not misleading. It is suggested that these consolidated condensed financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s latest report on Form 10-K.

The results of operations for the three and six month periods ended December 27, 2003 and December 28, 2002 are not necessarily indicative of the results to be expected for the full year.

1.    Summary of Significant Accounting Policies

Accounting policies followed by the Company are set forth in Note 1 in the Company’s Annual Report on Form 10-K for the fiscal year ended June 28, 2003.

        Nature of Business

G&K Services, Inc. is a market leader in providing corporate identity apparel and facility services programs to a wide variety of industrial, service and high-technology companies. The Company’s apparel programs provide rental-lease or purchase options as well as non-apparel items such as floor mats, dust mops, wiping towels, selected linen items and several restroom products. The Company also manufactures certain uniform garments that it uses to support its garment rental programs.

        Principles of Consolidation

The accompanying consolidated condensed financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. Intercompany balances and transactions have been eliminated in consolidation.

        Revenue Recognition

The Company recognizes revenue from rental operations in the period in which the services are provided. Direct sale revenue is recognized in the period in which the product is shipped. Beginning in the third quarter of fiscal 2003, the Company made a change in the classification of billings to customers for lost or abused merchandise to a preferred classification of including such billings in revenue. Accordingly, all prior period billings for lost or abused garments have been reclassified from a reduction of cost of rental operations to rental operations revenue.

6

        Derivative Financial Instruments

The Company uses derivative financial instruments principally to manage the risk that changes in interest rates will affect the amount of its future interest payments. Interest rate swap contracts are used to adjust the proportion of total debt that is subject to variable and fixed interest rates. The interest rate swap contracts are reflected at fair value in the consolidated condensed balance sheet and the related gains or losses on these contracts are deferred in stockholders’ equity (as a component of other comprehensive income). Amounts to be paid or received under the contracts are accrued as interest rates change and are recognized over the life of the contracts as an adjustment to interest expense. The net effect of this accounting is that interest expense on the portion of variable rate debt being hedged is at a fixed rate during the interest rate swap contract period.

The Company may periodically hedge firm cash flow commitments with its foreign subsidiary, generally with foreign currency contracts. These agreements are recorded at current market values and the gains and losses are included in earnings. Gains and losses on such transactions were not significant in the second quarter of fiscal 2004 or fiscal 2003. Notional amounts outstanding under foreign currency contracts at December 27, 2003 were $1,612, all of which will mature during fiscal 2004. Notional amounts outstanding under foreign currency contracts at December 28, 2002 were $2,402, all of which matured during fiscal 2003. Foreign currency contracts were recorded at fair value as of December 27, 2003.

        Per Share Data

Basic earnings per common share was computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share was computed similar to the computation of basic earnings per share, except that the denominator is increased for the assumed exercise of dilutive options and other dilutive securities, including nonvested restricted stock, using the treasury stock method.

	Three Months Ended				Six Months Ended
	Dec 27,		Dec 28,		Dec 27,		Dec 28,
	2003		2002		2003		2002
Weighted average number of common shares outstanding		20,666		20,567		20,638		20,556
Shares used in computation of basic earnings per share		20,666		20,567		20,638		20,556
Weighted average effect of nonvested restricted stock grants and assumed exercise of options		184		192		151		166
Shares used in computation of diluted earnings per share		20,850		20,759		20,789		20,722

        Stock-Based Compensation

The Company maintains Stock Option and Compensation Plans (the Employee Plans), which are more fully described in Note 6 in the Company’s Annual Report on Form 10-K for the fiscal year ended June 28, 2003. The Company applies Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations in accounting for its stock option plans. Accordingly, only compensation cost related to restricted stock issued under the Employee Plans has been recognized in the accompanying consolidated statements of operations. Compensation cost related to the restricted shares

7

was $235 and $272 for the three-month periods and $467 and $544 for the six-month periods ended December 27, 2003 and December 28, 2002, respectively. Had compensation cost been recognized based on the fair values of options at the grant dates consistent with the provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (SFAS 123), the Company’s net income and net income per common share would have been adjusted as follows:

		Three Months Ended						Six Months Ended
		December 27,			December 28,			December 27,			December 28,
		2003			2002			2003			2002
Net income, as reported		$	8,802		$	9,958		$	16,911		$	19,652
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects			(506	)		(511	)		(950	)		(931	)
Pro forma net income		$	8,296		$	9,447		$	15,961		$	18,721
Basic net income per share:
	As reported	$	0.43		$	0.48		$	0.82		$	0.96
	Pro forma		0.40			0.46			0.77			0.91
Diluted net income per share:
	As reported	$	0.42		$	0.48		$	0.81		$	0.95
	Pro forma		0.40			0.46			0.77			0.90

2.    Comprehensive Income

For the three and six month periods ended December 27, 2003 and December 28, 2002, the components of comprehensive income were as follows:

		Three Months Ended					Six Months Ended
		Dec 27,			Dec 28,		Dec 27,		Dec 28,
		2003			2002		2003		2002
Net income		$	8,802		$	9,958	$	16,911	$	19,652
Other comprehensive income
	Foreign currency translation adjustments, net of tax		2,845			581		2,502		(1,971	)
	Net unrealized holding gain (loss) on derivative financial instruments, net of tax		(45	)		34		326		(30	)
Comprehensive income		$	11,602		$	10,573	$	19,739	$	17,651

8

3.    Goodwill and Intangible Assets

In July 2001, the Company adopted the provisions of SFAS No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets.” The changes in the carrying amount of goodwill for the six months ended December 27, 2003, by operating segment, are as follows:

	United States		Canada		Total
Balance as of June 28, 2003	$	236,913	$	29,227	$	266,140
Acquired goodwill		7,463		—		7,463
Other, primarily foreign currency translation		—		732		732
Balance as of December 27, 2003	$	244,376	$	29,959	$	274,335

Information regarding the Company’s other intangible assets are as follows:

	As of December 27, 2003
	Carrying		Accumulated
	Amount		Amortization		Net
Customer contracts and related customer relationships	$	77,869	$	35,515	$	42,354
Non-competition agreements		9,756		5,536		4,220
Total	$	87,625	$	41,051	$	46,574

	As of June 28, 2003
	Carrying		Accumulated
	Amount		Amortization		Net
Customer contracts and related customer relationships	$	76,853	$	31,919	$	44,934
Non-competition agreements		9,721		5,055		4,666
Total	$	86,574	$	36,974	$	49,600

Amortization expense was $3,917 and $3,495 for the six months ended December 27, 2003 and December 28, 2002, respectively. Estimated amortization expense for each of the five succeeding fiscal years based on the intangible assets as of December 27, 2003 is as follows:

2004 remaining	$	3,923
2005		7,786
2006		7,458
2007		7,333
2008		6,960
2009		3,288

9

4.    Long-Term Debt

The Company maintains a $325,000 term loan and revolving credit facility. On December 17, 2003 the credit facility was amended to revise certain restricted covenants. Under the amended credit facility, the Company is required to maintain a minimum fixed charge coverage ratio, minimum stockholders’ equity and a maximum leverage ratio, all as defined. As of December 27, 2003, the Company was in compliance with all debt covenants.

5.    Segment Information

The Company has two operating segments under the guidelines of SFAS No. 131: United States and Canada, which have been identified as components of the Company that are reviewed by the Company’s Chief Executive Officer to determine resource allocation and evaluate performance. Each operating segment derives revenues from the corporate identity apparel and facility services industry, which includes garment rental and non-apparel items such as floor mats, dust mops, wiping towels, selected linen items and several restroom products. No one customer’s transactions account for 1.0% or more of the Company’s revenues.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 1). Corporate expenses are allocated to the segments based on segment revenue. The Company evaluates performance based on income from operations. Financial information by geographic location for the three and six month periods ended December 27, 2003 and December 28, 2002 is as follows:

		United
For the Three Months Ended		States		Canada		Total
Second Quarter Fiscal Year 2004:
	Revenues	$	157,209	$	25,330	$	182,539
	Income from operations		12,085		5,045		17,130
	Property, plant and equipment additions, net		3,794		957		4,751
	Depreciation and amortization		8,671		1,102		9,773
Second Quarter Fiscal Year 2003:
	Revenues	$	158,527	$	21,126	$	179,653
	Income from operations		15,388		4,467		19,855
	Property, plant and equipment additions, net		6,158		2,940		9,098
	Depreciation and amortization		8,635		819		9,454

		United
For the Six Months Ended		States		Canada		Total
Fiscal Year 2004:
	Revenues	$	312,967	$	48,175	$	361,142
	Income from operations		24,382		8,982		33,364
	Property, plant and equipment additions, net		7,471		901		8,372
	Depreciation and amortization		17,298		2,165		19,463
Fiscal Year 2003:
	Revenues	$	307,885	$	41,566	$	349,451
	Income from operations		30,227		8,781		39,008
	Property, plant and equipment additions, net		12,841		5,233		18,074
	Depreciation and amortization		16,751		1,722		18,473

10

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Unaudited)

Overview

G&K Services, Inc., founded in 1902 and headquartered in Minnetonka, Minnesota, is a market leader in providing corporate identity apparel and facility services programs to a wide variety of North American industrial, service and high-technology companies. We rent uniforms and other related products such as floor mats, dust mops, wiping towels, restroom supplies and selected linen items. We also sell uniforms and other apparel items to customers in our direct sale programs. The North American rental market is approximately $6.3 billion, while the direct sales market, targeted by us, is approximately $4.5-$5.0 billion in size.

Critical Accounting Policies

The discussion of the financial condition and results of operations are based upon the consolidated condensed financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States. As such, management is required to make certain estimates, judgments and assumptions that are believed to be reasonable based on the information available. These estimates and assumptions affect the reported amount of assets and liabilities, revenues and expenses, and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. See Note 1 to the consolidated condensed financial statements for additional discussion of the application of these and other accounting policies.

Revenue Recognition and Allowance for Doubtful Accounts

Our rental operations business is largely based on written service agreements whereby we agree to collect, launder and deliver uniforms and other related products. The service agreements provide for weekly billing upon completion of the laundering process and delivery to the customer. Accordingly, we recognize revenue from rental operations in the period in which the services are provided. Direct sale revenue is recognized in the period in which the product is shipped. Beginning in the third quarter of fiscal 2003, we made a change in the classification of billings to customers for lost or abused merchandise to a preferred classification of including such billings in revenue. Accordingly, all prior period billings for lost or abused garments have been reclassified from a reduction of cost of rental operations to rental operations revenue.

Estimates are used in determining the collectibility of billed accounts receivable. Management analyzes specific accounts receivable and historical bad debt experience, customer credit worthiness, current economic trends and the age of outstanding balances when evaluating the adequacy of the allowance for doubtful accounts. Significant management judgments and estimates are used in connection with establishing the allowance in any accounting period. Material differences may result in the amount and timing of bad debt expense recognition for any given period if management makes different judgments or utilizes different estimates.

Inventories

Our inventories consist of new goods and rental merchandise in service. Estimates are used in determining the likelihood that new goods on hand can be sold to customers or used in rental operations. Historical inventory usage and current revenue trends are considered in estimating both obsolete and excess inventories. New goods are stated at lower of cost or market, net of any reserve for obsolete or excess inventory. Merchandise placed in service to support rental operations is amortized into cost of rental operations over the estimated useful lives of the underlying inventory items, primarily on a straight-line basis, which results in a matching of the cost of the merchandise with the weekly rental revenue generated by merchandise. Estimated lives of rental merchandise in service range from nine

11

months to three years. In establishing estimated lives for merchandise in service, management considers historical experience and the intended use of the merchandise. Material differences may result in the amount and timing of operating profit for any period if management makes different judgments or utilizes different estimates.

Goodwill, Intangibles and Other Long-Lived Assets

We adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”) at the beginning of fiscal 2002 and as a result no longer amortize goodwill. SFAS 142 also requires that companies test goodwill for impairment on an annual basis and when events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit to which goodwill is assigned below its carrying amount. Our evaluation considers changes in the operating environment, competitive information, market trends, operating performance and cash flow modeling. Management completes its annual impairment test in the fourth quarter of each fiscal year and there have been no impairments of goodwill or definite-lived intangible assets in fiscal 2003 or through the first six months of fiscal 2004. Future events could cause management to conclude that impairment indicators exist and that goodwill and other intangibles associated with acquired businesses are impaired. Any resulting impairment loss could have a material impact on our financial condition and results of operations.

Property, plant and equipment and definite-lived intangible assets are depreciated or amortized over their useful lives. Useful lives are based on management estimates of the period that the assets will generate revenue. Long-lived assets are evaluated for impairment whenever events and circumstances indicate an asset may be impaired. There have been no write-downs of any long-lived assets in fiscal 2003 or through the first six months of fiscal 2004.

Insurance

We self-insure for certain obligations related to health and workers’ compensation programs. We purchase stop-loss insurance policies to protect us from catastrophic losses. Estimates are used in determining the potential liability associated with reported claims and for losses that have occurred, but have not been reported. Management estimates consider historical claims experience, escalating medical cost trends, expected timing of claim payments and an actuarial analysis provided by a third party. Changes in the cost of medical care, our ability to settle claims and the estimates and judgment used by management could have a material impact on the amount and timing of expense for any period.

12

Results of Operations

The percentage relationships to net sales of certain income and expense items for the three and six month periods ended December 27, 2003 and December 28, 2002, and the percentage changes in these income and expense items between periods are presented in the following table:

			Three Months						Six Months						Percentage
			Ended						Ended						Change
															Three Months			Six Months
			Dec 27,			Dec 28,			Dec 27,			Dec 28,			FY 2004			FY 2004
			2003			2002			2003			2002			vs. FY 2003			vs. FY 2003
Revenues:
	Rental			95.7	%		95.5	%		96.3	%		96.5	%		1.7	%		3.2	%
	Direct			4.3			4.5			3.7			3.5			(1.3	)		7.1
		Total revenues		100.0			100.0			100.0			100.0			1.6			3.3
Expenses:
	Cost of rental sales			63.6			61.8			63.5			61.6			4.7			6.4
	Cost of direct sales			73.0			67.7			76.2			72.2			6.6			12.9
		Total cost of sales		64.0			62.1			64.0			62.0			4.8			6.7
	Selling and administrative			21.3			21.6			21.4			21.6			(0.1	)		2.4
	Depreciation and amortization			5.3			5.2			5.4			5.2			3.4			5.4
Income from operations				9.4			11.1			9.2			11.2			(13.7	)		(14.5	)
Interest expense				1.6			2.0			1.6			2.0			(16.9	)		(10.4	)
Income before income taxes				7.8			9.1			7.6			9.2			(13.0	)		(15.3	)
Provision for income taxes				3.0			3.6			2.9			3.6			(15.3	)		(17.5	)
Net income				4.8	%		5.5	%		4.7	%		5.6	%		(11.6	)%		(13.9	)%

Three months ended December 27, 2003 compared to three months ended December 28, 2002

Revenues. Total revenues in the second quarter of fiscal 2004 increased 1.6% to $182.5 million from $179.7 million in the second quarter of fiscal 2003. Rental revenue increased $3.0 million in the second quarter, or 1.7%. The organic industrial rental growth rate, which is calculated using industrial rental revenue adjusted for foreign currency exchange rate differences and revenue from newly acquired business compared to prior-period results, was approximately negative 2.0%. We believe that the organic industrial rental growth rate better reflects the growth of our existing industrial business and is therefore useful in analyzing our financial condition and results of operations.

Direct sale revenue was essentially flat to last year at $7.9 million in the second quarter of fiscal 2004 compared to $8.0 million in the same period of fiscal 2003.

Cost of Rental and Direct Sale. Cost of rental operations increased 4.7% to $111.1 million in the second quarter of fiscal 2004 from $106.1 million in the same period of fiscal 2003. Gross margin from rental sales decreased to 36.4% in the second quarter of fiscal 2004 from 38.2% in the second quarter of fiscal 2003. The decrease in rental gross margins was due to higher energy costs, employee benefit costs (including pension) and lost margin from lower employment levels within our existing customer base. These items were partially offset by improved labor productivity.

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Cost of direct sales increased 6.6% to $5.8 million in the second quarter of fiscal 2004 from $5.4 million in the same period of fiscal 2003. Gross margin from direct sales decreased to 27.0% in the second quarter of fiscal 2004 from 32.3% in the second quarter of fiscal 2003 due to product mix and pricing pressures.

Selling and Administrative. Selling and administrative expenses remained constant at $38.8 million in the second quarter of both fiscal 2004 and fiscal 2003. As a percentage of total revenues, selling and administrative expenses decreased to 21.3% in the second quarter of fiscal 2004 from 21.6% in the second quarter of fiscal 2003. The decrease as a percent of revenue was due to reduced selling expenses.

Depreciation and Amortization. Depreciation and amortization expense increased 3.4% to $9.8 million in the second quarter of fiscal 2004 from $9.5 million in the same period of fiscal 2003. As a percentage of total revenues, depreciation and amortization expense increased to 5.3% in the second quarter of fiscal 2004 from 5.2% in the second quarter of fiscal 2003. Capital expenditures, excluding acquisition of businesses, were $4.8 million in the second quarter of fiscal 2004 compared to $9.1 million in the prior year’s quarter. The lower level of capital expenditures was primarily due to timing of new plant construction and a continued focus on asset utilization.

Interest Expense. Interest expense was $2.9 million in the second quarter of fiscal 2004, down from $3.5 million in the same period of fiscal 2003. This decrease was due primarily to lower debt levels.

Provision for Income Taxes. Our effective tax rate decreased to 38.0% in the second quarter of fiscal 2004 from 39.0% in the same period of fiscal 2003 largely due to decreases in Canadian statutory income tax rates.

Six months ended December 27, 2003 compared to six months ended December 28, 2002

Revenues. Total revenues for the first six months of fiscal 2004 increased 3.3% to $361.1 million from $349.5 million for the same period of fiscal 2003. Rental revenue increased $10.8 million in the first six months, or 3.2%. The organic industrial rental growth rate, which is calculated using industrial rental revenue adjusted for foreign currency exchange rate differences and revenue from newly acquired business compared to prior-period results, was approximately negative 1.7%. We believe that the organic industrial rental growth rate better reflects the growth of our existing industrial business and is therefore useful in analyzing our financial condition and results of operations.

Direct sale revenue increased 7.1% to $13.2 million in the first six months of fiscal 2004 compared to $12.4 million in the same period of fiscal 2003. The increase in revenue was driven by a focused effort to provide direct sale garment solutions to our existing rental customers.

Cost of Rental and Direct Sale. Cost of rental operations increased 6.4% to $220.9 million in the first six months of fiscal 2004 from $207.6 million in the same period of fiscal 2003. Gross margin from rental sales decreased to 36.5% in the first six months of fiscal 2004 from 38.4% in the same period of fiscal 2003. The decrease in rental gross margins was due to higher energy costs, employee benefit costs (including pension), acquisition integration and plant consolidation costs and lost margin from lower employment levels within our existing customer base.

Cost of direct sales increased 12.9% to $10.1 million in the first six months of fiscal 2004 from $8.9 million in the same period of fiscal 2003. Gross margin from direct sales decreased to 23.8% in the first six months of fiscal 2004 from 27.8% in the same period of fiscal 2003. This decrease in direct sale gross margins was a result of product mix and pricing pressures.

Selling and Administrative. Selling and administrative expenses increased 2.4% to $77.3 million in the first six months of fiscal 2004 from $75.5 million in the same period of fiscal 2003. As a percentage of total revenues, selling and administrative expenses decreased to 21.4% in the first six months of fiscal 2004 from 21.6% in the same period of fiscal 2003. Increased employee benefit costs, including pension, were largely offset by reduced expense related to uncollectible accounts receivable and reduced selling expenses.

Depreciation and Amortization. Depreciation and amortization expense increased 5.4% to $19.5 million in the first six months of fiscal 2004 from $18.5 million in the same period of fiscal 2003. As a percentage of total revenues, depreciation and amortization expense increased to 5.4% in the first six months of fiscal 2004 from 5.2% in the same

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period of fiscal 2003. Capital expenditures, excluding acquisition of businesses, were $8.4 million in the first six months of fiscal 2004 compared to $18.1 million in the same period of fiscal 2003. The lower level of capital expenditures was primarily due to timing of new plant construction and a continued focus on asset utilization.

Interest Expense. Interest expense was $6.1 million in the first six months of fiscal 2004, down from $6.8 million in the same period of fiscal 2003.

Provision for Income Taxes. Our effective tax rate decreased to 38.0% in the first six months of fiscal 2004 from 39.0% in the same period of fiscal 2003 due largely to decreases in Canadian statutory income tax rates.

Liquidity, Capital Resources and Financial Condition

Our primary sources of cash are net cash flows from operations and borrowings under our credit facilities. Primary uses of cash are interest payments on indebtedness, capital expenditures, acquisitions and general corporate purposes.

Operating Activities. Net cash provided by operating activities was $52.9 million in the first six months of fiscal 2004 and $47.4 million in the same period of fiscal 2003. Operating cash flow was up over the prior year due to effective working capital management including a continued focus on timely collection of accounts receivable, management of new and in-service inventories levels and timing of payments for various liabilities.

Working capital at December 27, 2003 was $57.3 million, down 23.9% from $75.2 million at June 28, 2003. The decrease is due to an increase in the current maturities of long-term debt associated with scheduled debt payments and an increase in income tax payable due to timing of payments.

Investing Activities. Net cash used in investing activities was $15.5 million in the first six months of fiscal 2004 and $89.9 million in the same period of fiscal 2003. In both fiscal 2004 and 2003, cash was primarily used for property, plant and equipment additions and for acquisition of business assets.

Financing Activities. Cash used for financing activities was $31.8 million in the first six months of fiscal 2004 and cash provided by financing activities was $50.0 million in the same period of fiscal 2003. Cash used in fiscal 2004 was primarily related to the repayment of long-term debt. Cash provided in fiscal 2003 was from debt proceeds used primarily for acquisitions of businesses. The Company paid dividends of $0.7 million during the first six months of fiscal 2004.

We maintain a $325,000 term loan and revolving credit facility. On December 17, 2003 the credit facility was amended to revise certain restricted covenants providing additional flexibility in meeting our capital needs. Under the amended credit facility, we are required to maintain a minimum fixed charge coverage ratio, minimum stockholders’ equity and a maximum leverage ratio, all as defined. As of December 27, 2003, we were in compliance with all debt covenants.

Cash Obligations. Under various agreements, we are obligated to make future cash payments in fixed amounts. These include payments under the variable rate term loan and revolving credit facility, the fixed rate term loan, capital lease obligations and rent payments required under non-cancelable operating leases with initial or remaining terms in excess of one year.

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The following table summarizes our fixed cash obligations as of December 27, 2003 for the fiscal years ending June (in thousands):

	2004											2009 and
	Remaining			2005		2006		2007		2008		There-after		Total
Variable rate term loan and revolving credit facility		$	5,625	$	15,000	$	18,750	$	22,500	$	100,400	$	—	$	162,275
Fixed rate term loan			—		7,143		7,143		7,143		7,143		21,428		50,000
Other debt arrangements, including capital leases			2,285		1,734		531		29		—		—		4,579
Operating leases			6,603		11,805		9,446		7,719		6,238		3,626		45,437
Total contractual cash obligations		$	14,513	$	35,682	$	35,870	$	37,391	$	113,781	$	25,054	$	262,291

Also, at December 27, 2003, we had stand-by letters of credit totaling $15.4 million that have been issued and are outstanding, primarily in connection with our property and casualty insurance programs. No amounts have been drawn upon these letters of credit.

At December 27, 2003, we had available cash on hand of $17.5 million and over $100.0 million of available capacity under our revolving credit facility. We anticipate that we will generate sufficient cash flows from operations to satisfy our cash commitments and capital requirements for fiscal 2004; however, we may utilize borrowings under the revolving credit facility to supplement our cash requirements from time to time.

The amount of cash flow generated from operations is subject to a number of risks and uncertainties. In fiscal 2004, we may actively seek and consider acquisitions of business assets, the consummation of any acquisition could affect our liquidity profile and level of outstanding debt. We believe that available capacity under our revolving credit facility will be adequate to finance any such acquisitions and planned capital expenditures in fiscal 2004.

On October 22, 2003, we filed a registration statement with the Securities and Exchange Commission to issue, at an indeterminate date, debt securities, Class A Common Stock and securities warrants with an aggregate initial offering price not to exceed $200 million. The SEC declared this registration statement effective on November 5, 2003. The securities covered by the registration statement, which may be offered in one or more offerings and in any combination, would in each case be offered pursuant to a prospectus supplement that will describe the specific types, amounts, price and other terms of the offered securities. Unless the applicable prospectus supplement states otherwise, the net proceeds from any sale of the offered securities would be used for working capital, the repayment of indebtedness, the funding of certain expenditures in connection with acquisitions and for general corporate purposes. Currently, we have no specific plans to issue any securities under the registration statement.

Pension Obligations

We account for our defined benefit pension plan using Statement of Financial Accounting Standards No. 87 “Employer’s Accounting for Pensions” (“SFAS 87”). Under SFAS 87, pension expense is recognized on an accrual basis over employees’ approximate service periods. Pension expense calculated under SFAS 87 is generally independent of funding decisions or requirements. We recognized expense for our defined benefit pension plan of $1.5 million in the second quarter of fiscal 2004 and $0.8 million in the same period of fiscal 2003. At June 28, 2003, the fair value of our pension plan assets totaled $16.8 million. Lower investment returns, benefit payments and declining discount rates resulted in additional minimum pension liability of $2.9 million (net of tax of $1.7 million) as of June 28, 2003. We made a cash contribution of approximately $2.8 million in the first quarter of fiscal 2004.

The calculation of pension expense and the corresponding liability requires the use of a number of critical assumptions, including the expected long-term rate of return on plan assets and the assumed discount rate. Changes in these assumptions can result in different expense and liability amounts, and future actual experience can differ from these assumptions. Pension expense increases as the expected rate of return on pension plan assets decreases.

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At June 28, 2003, we estimated that the pension plan assets will generate a long-term rate of return of 8.0%. This rate was developed by evaluating input from our actuary as well as long-term inflation assumptions. The expected long-term rate of return on plan assets at June 28, 2003 is based on an allocation of U.S. equities and U.S. fixed income securities. Decreasing the expected long-term rate of return by 0.5% (from 8.0% to 7.5%) would increase our estimated fiscal 2004 pension expense by approximately $0.1 million. Pension liability and future pension expense increase as the discount rate is reduced. We discounted future pension obligations using a rate of 6.0% at June 28, 2003. The discount rate is determined based on the current rates earned on high quality long-term bonds. Decreasing the discount rate by 0.5% (from 6.0% to 5.5%) would have increased our accumulated benefit obligation at June 28, 2003 by approximately $3.4 million and increased the estimated fiscal 2004 pension expense by approximately $1.0 million.

Future changes in plan asset returns, assumed discount rates and various other factors related to the participants in our pension plan will impact our future pension expense and liabilities. We cannot predict with certainty what these factors will be in the future.

Impact of Inflation

In general, management believes that our results of operations are not dependent on moderate changes in the inflation rate. Historically, we have been able to manage the impact of more significant changes in inflation rates through our customer relationships, customer agreements that generally provide for price increases consistent with the rate of inflation or 5.0%, whichever is greater, and continued focus on improvements of operational productivity.

Significant increases in energy costs, specifically natural gas and gasoline, can materially affect our results of operations and financial condition. Currently, energy costs represent between 3-4% of our total revenue.

Litigation

We are involved in a variety of legal actions relating to personal injury, customer contracts, employment, trade practices, environmental and other legal matters that arise in the normal course of business. These legal actions include lawsuits that challenge the practice of charging for certain environmental services on invoices, being named, along with other defendants, as a potentially responsible party at certain waste disposal sites where ground water contamination has been detected or is suspected and a lawsuit in California that alleges G&K violated certain state wage and hour laws applicable to its route representatives. While we are unable to predict the ultimate outcome of these legal actions, it is the opinion of management that the disposition of these matters will not have a material adverse effect on our consolidated financial statements taken as a whole.

Cautionary Statements Regarding Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 (the “Act”) provides companies with a “safe harbor” when making forward-looking statements as a way of encouraging them to furnish their shareholders with information regarding expected trends in their operating results, anticipated business developments and other prospective information. Statements made in this report concerning our intentions, expectations or predictions about future results or events are “forward-looking statements” within the meaning of the Act. These statements reflect our current expectations or beliefs, and are subject to risks and uncertainties that could cause actual results or events to vary from stated expectations, which could be material and adverse. Given that circumstances may change, and new risks to the business may emerge from time to time, having the potential to negatively impact our business in ways we could not anticipate at the time of making a forward-looking statement, you are cautioned not to place undue reliance on these statements, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Some of the factors that could cause actual results or events to vary from stated expectations include, but are not limited to, the following: unforeseen operating risks; the effects of overall economic conditions; fluctuations in costs of insurance and energy; acquisition integration costs; the performance of acquired businesses; preservation of positive labor relationships; competition, including pricing, within the corporate identity apparel and facility services industry; and the availability of capital to finance planned growth. Additional information concerning potential

17

factors that could effect future financial results is included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 28, 2003.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Interest Rate Risk

We are subject to market risk exposure related to changes in interest rates. We use financial instruments, including fixed and variable rate debt, as well as interest rate swaps to manage interest rate risk. Interest rate swap agreements are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those exposures. Assuming the current level of borrowings, a one percentage point increase in interest rates under these borrowings would have increased our interest expense for the second quarter of fiscal 2004 by approximately $0.3 million. This estimated exposure considers the mitigating effects of interest rate swap agreements outstanding at December 27, 2003 on the change in the cost of variable rate debt.

Foreign Currency Exchange Risk

We have a significant foreign subsidiary located in Canada. The assets and liabilities of this subsidiary are denominated in the Canadian dollar and as such are translated into U.S. dollars at the exchange rate in effect at the balance sheet date. Results of operations are translated using the average exchange rates throughout the period. The effect of exchange rate fluctuations on translation of assets and liabilities are recorded as a component of stockholders’ equity. Gains and losses from foreign currency transactions are included in results of operations.

ITEM 4.  CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) or Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this Form 10-Q. Based on their evaluation, our chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures are effective.

There have been no significant changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation referenced above.

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PART II
 
OTHER INFORMATION

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

a.	The Company held its Annual Meeting of Shareholders on November 6, 2003.
b.	The following three persons were elected as Class II directors: Paul Baszucki, Richard L. Marcantonio and Alice M. Richter. The following six persons comprise the other directors whose terms of office continued after the Annual Meeting of Shareholders: Michael G. Allen, Richard M. Fink, Wayne M. Fortun, Donald W. Goldfus, Thomas Moberly and M. Lenny Pippin.
c.	1.       Each director nominee received the following votes:

	Shares
	In Favor		Withhold Authority
Mr. Baszucki		31,017,739		1,965,605
Mr. Marcantonio		32,284,947		698,397
Ms. Richter		32,502,420		480,924

2.	Shareholders ratified the appointment of Ernst & Young LLP, Certified Public Accountants, as independent auditors of the Company for 2004: 31,070,983 shares in favor, 1,798,303 shares voting against and 114,058 shares abstaining.
3.	Shareholders voted against a shareholder proposal recommending the declassification of the Company’s Board of Directors: 12,421,974 shares in favor, 17,939,006 shares voting against, 139,630 shares abstaining and 2,482,734 broker non-vote.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

a. Exhibits

10.1 Executive Employment Agreement between Registrant and Jeffrey R. Kiesel, dated July 14, 2003.

10.2 First Amendment, dated December 17, 2003, to Credit Agreement dated June 25, 2002, among the Registrant, G&K Services Canada, Inc., Bank One, N.A., Wachovia Bank, National Association, Wachovia Securities, Inc, Banc One Capital Markets, Inc. and various lenders

31.1 Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-15(e)/15d-15(e) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-15(e)/15d-15(e) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

b. Reports on Form 8-K

None

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		G&K SERVICES, INC. (Registrant)
Date:	February 5, 2004	By:	/s/ Jeffrey L. Wright Jeffrey L. Wright Chief Financial Officer and Secretary (Principal Financial Officer)
		By:	/s/ Michael F. Woodard Michael F. Woodard Controller (Principal Accounting Officer)

20 EX-10.1 3 c82507exv10w1.txt EXECUTIVE EMPLOYMENT AGREEMENT - JEFFREY R. KIESEL EXHIBIT 10.1 EXECUTIVE EMPLOYMENT AGREEMENT THIS AGREEMENT is made and entered into on 14th day of July, 2003, by and between G&K SERVICES, INC., a Minnesota corporation with its principal business office in the State of Minnesota (hereinafter "Employer", as such term is further defined in Section 1.7 below); and Jeffrey R. Kiesel, a Connecticut resident (hereinafter "Executive"). INTRODUCTION A. Employment and Protection of Employer. Employer desires to retain Executive as an employee in the capacity of Senior Vice President, Field Operations (reporting to Employer's President and Chief Operating Officer), or, subject to Executive's rights hereunder, such other title and position as the Board (as defined below) shall later determine, and obtain Executive's promises not to harm Employer (as set forth in Article 7). Article 7 of this Agreement includes a description of Employer's "Confidential Information." In Executive's position with Employer, Executive will have access to and control over certain of Employer's Confidential Information, which Employer has developed at great expense, time and effort. As a result, disclosure of any such Confidential Information to a competitor would cause irreparable harm to Employer, and Employer is not willing to offer Executive employment and the additional benefits set forth in this Agreement unless Executive signs this Agreement to provide Employer with reasonable protection for its Confidential Information, and to protect Employer in other ways set forth in Article 7. B. Employment and Benefits. For those purposes, Employer is willing to retain Executive as an employee and to grant to Executive benefits to which Executive is not otherwise entitled, consisting of the right to receive certain separation compensation and outplacement benefits (as described in Articles 5 and 6), if Executive's employment with Employer terminates under certain circumstances described therein, including without limitation in connection with a Change in Control (as defined in Article 6). C. Other Intentions. Executive desires to accept Employer's offer of employment and additional benefits set forth in this Agreement, to which Executive is not otherwise entitled. Executive agrees, as a condition of Employer's offer of employment and additional benefits set forth in this Agreement, to sign this Agreement in order that Employer may have reasonable protections against the disclosure of its Confidential Information and other conduct of Executive prohibited by Article 7 of this Agreement. AGREEMENT NOW, THEREFORE, in consideration of the facts recited above, which are a part of this Agreement, and the parties' mutual promises contained in this Agreement, Employer and Executive agree as follows: ARTICLE 1 DEFINITIONS Capitalized terms used generally in this Agreement shall have their defined meaning throughout the Agreement. The following terms shall have the meanings set forth below; unless the context clearly requires otherwise. 1.1 "Agreement" means this Agreement, as it may be amended from time to time. 1.2 "Base Salary" means the total annual cash compensation payable to Executive on a regular periodic basis under Section 3.1, without regard to any voluntary salary deferrals or reductions to fund employee benefits. 1.3 "Board" means the Board of Directors of Employer. 1 1.4 "Cause" has the meaning set forth in Section 5.2. 1.5 "Date of Termination" has the meaning set forth in Section 5.6(b). 1.6 "Disability" means the unwillingness or inability of Executive to perform the essential functions of Executive's position (with or without reasonable accommodation) under this Agreement for a period of ninety (90) days (consecutive or otherwise) within any period of six (6) consecutive months because of Executive's incapacity due to physical or mental illness, bodily injury or disease, if within ten (10) days after a Notice of Termination is thereafter given by Employer, Executive shall not have returned to the full-time performance of the Executive's duties; provided, however, that if Executive (or Executive's legal representative, if applicable) does not agree with a determination of the existence of a Disability (or the existence of a physical or mental illness or bodily injury or disease), such determination shall be subject to the certification of a qualified medical doctor mutually agreed to by Employer and Executive (or, in the event of the Executive's incapacity to designate a doctor, the Executive's legal representative). In the absence of such agreement, each party shall nominate a qualified medical doctor and the two doctors shall select a third doctor, who shall make the determination as to Disability. The decision of the designated physician shall be binding upon the parties hereto. 1.7 "Employer" means all of the following, jointly and severally: (a) G&K Services, Inc., (b) any Subsidiary thereof and (c) any Successor thereto. 1.8 "Executive" means the individual named in the first paragraph of this Agreement. 1.9 "Notice of Termination" has the meaning set forth in Section 5.6(a). 1.10 "Plan" means any bonus or incentive compensation agreement, plan, program, policy or arrangement sponsored, maintained or contributed to by Employer, to which Employer is a party or under which employees of Employer are covered, including, without limitation, (a) any stock option or any other equity-based compensation plan; (b) any annual or long-term incentive (bonus) plan; (c) any employee benefit plan, such as a thrift, pension, profit sharing, deferred compensation, medical, dental, disability income, accident, life insurance, automobile allowance, perquisite, fringe benefit, vacation, sick or parental leave, severance or relocation plan or policy and (d) any other agreement, plan, program, policy or arrangement intended to benefit employees or executive officers of Employer. 1.11 "Subsidiary" means any corporation or other business entity that is controlled by Employer. 1.12 "Successor" has the meaning set forth in Section 8.1(a). ARTICLE 2 EMPLOYMENT AND DUTIES 2.1 Employment. Upon the terms and conditions set forth in this Agreement, Employer hereby employs Executive for an indefinite term, and Executive accepts such employment. Pursuant to such employment, Executive shall serve in the capacity of Senior Vice President, Field Operations (reporting to Employer's President and Chief Operating Officer) or, subject to Executive's rights hereunder, such other title and position as the Board shall later determine. This Agreement and Executive's employment by Employer may be terminated at any time pursuant to Article 5. 2.2 Duties. While Executive is employed hereunder, and excluding any periods of vacation, sick, disability or other leave to which Executive is entitled, Executive agrees to devote substantially all of Executive's attention and time during normal business hours to the business and affairs of Employer and, to the extent necessary to discharge the responsibilities assigned to Executive hereunder and under Employer's bylaws as amended from time to time, to use Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. Executive shall comply with Employer's policies and procedures; provided, however, that to the extent such policies and procedures are inconsistent with this Agreement, the provisions of this Agreement shall control. ARTICLE 3 COMPENSATION AND BENEFITS 3.1 Base Salary. Commencing as of the Effective Date, Employer shall pay Executive a Base Salary at an annual rate of Two Hundred Ninety Thousand Dollars ($290,000.00), or such other annual rate as may from time to time be approved by the Board. Such Base Salary to be paid in substantially equal regular periodic payments in accordance with Employer's regular payroll practices. If Executive's Base Salary is changed at any time during Executive's employment by Employer, the changed amount shall become the Base Salary under this Agreement, subject to any subsequent changes. 3.2 Other Compensation and Benefits. While Executive is employed by Employer under this Agreement: (a) Executive shall be permitted to participate in all Plans for which Executive is or becomes eligible under their respective terms. (b) Employer may, in its sole discretion, amend or terminate any Plan that provides benefits generally to its employees or its executive officers. (c) Executive shall also be entitled to participate in or receive benefits under any Plan made available by Employer in the future to its executives and key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such Plans and the preceding provisions of this Section 3.2. 3.3 Limitation on Right to Deferred Compensation. The rights of Executive, or Executive's beneficiaries or estate, to any deferred compensation under this Agreement shall be solely those of an unsecured creditor of Employer. Neither Executive nor any of Executive's beneficiaries or estate shall be entitled to assign or transfer (except to Employer) any right to receive any part of any deferred compensation amounts hereunder and, in the event of any attempt to assign or transfer any such amounts, Employer shall have no further liability hereunder for such amounts. ARTICLE 4 4.1 Restricted Stock Agreement. As of the Effective Date, Employer hereby grants Executive the right to purchase Employer Stock (as defined below) in the amount, at the price and on the terms set forth in the Restricted Stock Agreement attached hereto as EXHIBIT A. ARTICLE 5 TERMINATION 5.1 Termination. This Article 5 sets forth the terms for termination of Executive's employment under this Agreement, subject to the respective continuing rights and obligations of the parties under this Agreement. In general, this Agreement and Executive's employment with the Employer may be terminated by either Employer or Executive at will upon thirty (30) days notice, for any reason or no reason, or any time by mutual written agreement of the parties. This Agreement and Executive's employment under this Agreement shall terminate in the event of Executive's death or Disability, as of the applicable Date of Termination. In any such case, this Agreement shall terminate as of the applicable Date of Termination, except for the rights and obligations of the parties under this Agreement that survive beyond Executive's termination of employment. 5.2 Termination by Employer for Cause. Employer may terminate this Agreement at any time for Cause, with or without advance notice (except as otherwise provided in this Section 5.2). For purposes of this Agreement, "Cause" means any of the following, with respect to Executive's position of employment with Employer: (a) Executive's failure or refusal to perform the duties and responsibilities set forth in Section 2.2, if such failure or refusal is not (i) due to a Disability or a physical or mental illness or bodily injury or disease; and (ii) is not cured within five (5) days after written notice of such failure or refusal is received by Executive from Employer; (b) any drunkenness or use of drugs that interferes with the performance of Executive's obligations under this Agreement; and continues for more than five (5) days after a written notice to Executive; provided, however, that Employer shall have the right to prevent Executive from performing any duties hereunder and from entering the premises of Employer during any such period; (c) Executive's indictment for or conviction of (including entering a guilty plea or plea of no contest to) a felony or any crime involving moral turpitude, fraud, dishonesty or theft; (d) any material dishonesty of Executive involving or affecting Employer; (e) any gross negligence or other willful or intentional act or omission of Executive having the effect or reasonably likely to have the effect of injuring the reputation, business or business relationships of Employer in a material way; (f) any willful or intentional breach by Executive of a fiduciary duty to Employer; (g) Except as otherwise specifically provided in this Section 5.2, Executive's material violation or breach of Employer's standard business practices and policies, including, without limitation, policies against racial or sexual discrimination or harassment; and (h) any material breach (not covered by any of the above clauses (a) through (g)) of any material term, provision or condition of this Agreement, if such breach is not cured (to the extent curable) within five (5) days after written notice thereof is received by Executive from Employer. For purposes of this Section 5.2, no act, or failure to act, on Executive's part shall be considered "dishonest," "willful" or "intentional" unless done, or omitted to be done, by Executive in bad faith and without reasonable belief that Executive's action or omission was in or not opposed to the best interest of Employer. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for Employer shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of Employer. Furthermore, the term "Cause" shall not include ordinary negligence or failure to act, whether due to an error in judgment or otherwise, if Executive has exercised substantial efforts in good faith to perform the duties reasonably assigned or appropriate to the position. 5.3 Termination by Executive for Good Reason. After a Change in Control (as defined in Article 6), Executive may voluntarily resign from employment under this Agreement with or without Good Reason (as such term is defined in Section 6.1(f)). 5.4 Notice of Termination and Date of Termination. (a) For purposes of this Agreement, a "Notice of Termination" shall mean a notice that shall indicate the specific termination provisions in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide the basis for such termination. Any termination by Employer or by Executive pursuant to this Agreement (other than Executive's death or a termination by mutual agreement) shall be communicated by written Notice of Termination to the other party hereto. (b) For purposes of this Agreement, "Date of Termination" shall mean: (i) if Executive's employment is terminated due to death, the date of Executive's death; (ii) if Executive's employment is terminated for Disability, thirty (30) calendar days after the Notice of Termination is given; (iii) if Executive's employment is terminated by Employer for Cause or by Executive for Good Reason, the date specified in the Notice of Termination; (iv) if Executive's employment is terminated by mutual agreement of the parties, the termination date specified in such agreement; or (v) if Executive's employment is terminated for any other reason, the date specified in the Notice of Termination, which in such event shall be a date no earlier than thirty (30) calendar days after the date on which the Notice of Termination is given, unless an earlier date has been expressly agreed to by Executive in writing either before or after receiving such Notice of Termination. 5.5 Compensation during Disability and upon Termination. (a) During any period in which Executive fails to perform Executive's duties hereunder as a result of Executive's incapacity due to physical or mental illness or bodily injury or disease, Executive shall continue to receive all Base Salary and other compensation and benefits to which Executive is otherwise entitled under this Agreement and any Plan through Executive's Date of Termination. (b) Except as otherwise provided in Article 6 or a mutual agreement of the parties, if Executive's employment under this Agreement is terminated (i) by Executive's death, (ii) voluntarily by Executive, (iii) by Employer for Cause, or (iv) by mutual agreement of the parties, then Employer shall pay Executive the Base Salary through the Date of Termination, plus any amounts to which the Executive is entitled under any Plan (in accordance with the terms of such Plan). Employer shall also pay any retirement benefits to which Executive is or becomes entitled under any Plan, except to the extent any such benefits are forfeited under the terms of such Plan. (c) Except in the case of a termination for Disability, if within the first twenty-four (24) months of Executive's employment hereunder, either (i) Employer terminates Executive's employment hereunder without Cause; or (ii) Executive voluntarily terminates his employment hereunder for Good Reason (as such term is defined in Section 6.1(f) below); and if Executive executes a written release substantially in the form attached hereto as EXHIBIT B and consistent with this Section 5.5(c) (a "Release Agreement"), then Employer shall pay to Executive, as separation pay, which Executive has not earned and to which he is not otherwise entitled, an amount equal to eighteen (18) months of Executive's monthly Base Salary in effect as of the Date of Termination. Such payment will be made to the Executive in weekly payments beginning at least sixteen days after Executive's execution of the Release Agreement, provided that the Executive has not exercised his rights to revoke or rescind his release of claims pursuant to the Release Agreement. (d) Except in the case of a termination for Disability, if after the first twenty-four (24) months of Executive's employment hereunder, either (i) Employer terminates Executive's employment hereunder without Cause; or (ii) Executive voluntarily terminates his employment hereunder for Good Reason; and if Executive executes a written release substantially in the form attached hereto as EXHIBIT B and consistent with this Section 5.5(d) (a "Release Agreement"), then Employer shall pay to Executive, as separation pay, which Executive has not earned and to which he is not otherwise entitled, an amount equal to twelve (12) months of Executive's monthly Base Salary in effect as of the Date of Termination. Such payment will be made to the Executive in weekly payments beginning at least sixteen days after Executive's execution of the Release Agreement, provided that the Executive has not exercised his rights to revoke or rescind his release of claims pursuant to the Release Agreement. (i) If Executive (or any individual eligible for group health Plan benefits through Executive) is eligible under the plan or applicable law to continue participation in Employer's group health Plan during the severance period and does elect to continue such benefits, Employer shall continue to pay Employer's share of the cost of such benefits, as if Executive remained continuously employed with Employer throughout such severance period, but only while Executive or such other individual continues to pay the balance of such cost. (ii) Employer will pay the fees of a reputable outplacement organization select by employee, but not to exceed $12,000 in the aggregate. Executive shall not be required to mitigate Employer's payment obligations under this Article 5 by making any efforts to secure other employment; and Executive's commencement of employment with another employer shall not reduce the obligations of Employer pursuant to this Article 5. ARTICLE 6 CHANGE IN CONTROL 6.1 Definitions Relating to a Change in Control. The following terms shall have the meanings set forth below; unless the context clearly requires otherwise: (a) "1934 Act" shall mean the Securities Exchange Act of 1934, as amended (or any successor provision), and the regulations promulgated thereunder. (b) "Beneficial Ownership" by a person or group of persons shall be determined in accordance with Regulation 13D (or any similar successor regulation) promulgated by the Securities and Exchange Commission pursuant to the 1934 Act. Beneficial Ownership of an equity security may be established by any reasonable method, but shall be presumed conclusively as to any person who files a Schedule 13D report with the Securities and Exchange Commission reporting such ownership. (c) "Change of Control" means the occurrence of any of the following events: (i) any person or group of persons attains Beneficial Ownership (as defined below) of 30% or more of any equity security of Employer entitled to vote for the election of directors; (ii) a majority of the members of the Board is replaced within the period of less than two years by directors not nominated and approved by the Board; or (iii) the stockholders of Employer approve an agreement to merge or consolidate with or into another corporation, or an agreement to sell or otherwise dispose of all or substantially all of Employer's assets (including a plan of liquidation). (d) "Continuing Directors" are (i) directors who were in office prior to the time any events described in paragraphs (c)(i), (c)(ii) or (c)(iii) of this Section 6.1 occurred, or any person publicly announced an intention to acquire 20% or more of any equity security of Employer; (ii) directors in office for a period of more than two years; and (iii) directors nominated and approved by the Continuing Directors. (e) "Change in Control Termination" shall mean that a Change in Control of Employer has occurred, and either of the following events also occurs within one (1) year after such Change in Control: (i) Employer terminates the Executive's employment or this Agreement for any reason other than for Cause, Executive's death or Executive's Disability; or (ii) Executive terminates Executive's employment for Good Reason. (f) "Good Reason" shall mean, with respect to a voluntary termination of employment by Executive after a Change in Control, any of the following: (i) an adverse involuntary change in Executive's status or position as an executive officer of Employer, including, without limitation, (A) any adverse change in Executive's status or position as a result of a material diminution in Executive's duties, responsibilities or authority as of the day before the Change in Control; (B) the assignment to Executive of any duties or responsibilities that, in Executive's reasonable judgment, are significantly inconsistent with Executive's status or position; or (C) any removal of Executive from, or any failure to reappoint or reelect Executive to, such position (except in connection with a termination of Executive's employment for Cause in accordance with Article 5, or as a result of Executive's Disability or death); (ii) a reduction by Employer in Executive's Base Salary as in effect on the day before the Change in Control; (iii) the taking of any action by Employer that would materially and adversely affect the physical conditions existing, as of the day before the Change in Control, under which Executive performs employment duties for Employer; (iv) Employer's requiring Executive to be based anywhere other than where Executive's office is located as of the day before the Change in Control, except for required travel on Employer's business to an extent substantially consistent with business travel obligations that Executive undertook on behalf of Employer as of the day before the Change in Control; (v) any failure by Employer to obtain from any Successor an assumption of this Agreement as contemplated by Section 8.1; or (vi) any purported termination by Employer of this Agreement or the employment of the Executive at any time after a Change in Control, that is not expressly authorized by this Agreement; or any breach of this Agreement by Employer at any time after a Change in Control, other than an isolated, insubstantial and inadvertent failure that does not occur in bad faith and is remedied by Employer within a reasonable period after Employer's receipt of notice thereof from Executive. 6.2 Benefits Upon a Change in Control Termination. If a Change in Control Termination occurs with respect to Executive, Executive shall be entitled to the following benefits; provided, however, that to the extent Executive has already received the same type of benefits under Article 5 as a result of Executive's Change in Control Termination, Executive's benefits under this Section 6.2 shall be offset by such other benefits, to the extent necessary to prevent duplication of benefits hereunder: (a) all of the payments and benefits that Executive would have been entitled to receive if the Change in Control Termination were described in Section 5.5(c), except that in lieu of any further Base Salary payments to Executive for periods subsequent to the Date of Termination, Employer shall pay to Executive an amount equal to seventeen (17) months of Executive's monthly Base Salary in effect as of the Date of Termination; such payment to be made in a lump sum on or before the tenth (10th) calendar day following the Date of Termination; and (b) for a period of not less than six (6) months following Executive's Date of Termination, Employer will reimburse Executive for all reasonable expenses incurred by Executive (excluding any arrangement by which Executive prepays expenses for a period of greater than thirty (30) days) in seeking employment with another employer, including the fees of a reputable outplacement organization selected by Employer, but not to exceed $12,000.00 in the aggregate. Executive shall not be required to mitigate Employer's payment obligations under this Article 6 by making any efforts to secure other employment; and Executive's commencement of employment with another employer shall not reduce the obligations of Employer pursuant to this Article 6. 6.3 Acceleration of Incentives. If upon the occurrence of a Change of Control, the Board and a majority of the Continuing Directors (as such term is defined in the G&K Services, Inc. 1998 Stock Option and Compensation Plan (the "1998 Plan")) determine that the economic incentives (including without limitation stock options and awards of restricted stock) (the "Incentives") granted under the 1998 Plan shall not accelerate immediately in accordance with Section 11.12 of the 1998 Plan (or an successor provision), then the following shall nonetheless occur with respect to any and all Incentives that are owned by Executive at the time of such Change of Control: (a) the restrictions set forth in the 1998 Plan on all shares of restricted stock awards shall lapse immediately; (b) all outstanding options and stock appreciation rights shall become exercisable immediately; and (c) all performance shares shall be deemed to be met and payment made immediately. 6.4 Limitation on Severance Payment. Notwithstanding any provision contained herein to the contrary, if any amount or benefit to be paid or provided under this Article 6, or any other plan or agreement between Executive and Employer would be an "Excess Parachute Payment," within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), or any successor provision thereto, but for the application of this sentence, then the payments and benefits to be paid or provided under this Article 6 shall be reduced to the minimum extent necessary (but in no event to less than zero) so that no portion of any such payment or benefit, as so reduced, constitutes an Excess Parachute Payment; provided, however, that the foregoing reduction shall be made only if and to the extent that such reduction would result in an increase in the aggregate payment and benefits to be provided to Executive, determined on an after-tax basis (taking into account the excise tax imposed pursuant to Section 4999 of the Code, or any successor provision thereto, any tax imposed by any comparable provision of state law, and any applicable federal, state and local income taxes). If requested by Executive or Employer, the determination of whether any reduction in such payments or benefits to be provided under this Article 6 or otherwise is required pursuant to the preceding sentence shall be made by an independent accounting firm that is a "Big-4 Accounting Firm" (or other accounting firm mutually acceptable to Executive and Employer) not then-engaged as Employer's independent public auditor, at the expense of Employer, and the determination such independent accounting firm shall be final and binding on all parties. In making its determination, the independent accountant shall allocate a reasonable portion of the severance payment to the value of any personal services rendered following the Change in Control and the value of any non-competition agreement or similar agreements to the extent that such items reduce the amount of the parachute payment. In the event that any payment or benefit intended to be provided under this Article 6 or otherwise is required to be reduced pursuant to this Section 6.3, Executive (in his sole discretion) shall be entitled to designate the payments and/or benefits to be so reduced in order to give effect to this Section. Employer shall provide Executive with all information reasonably requested by Executive to permit Executive to make such designation. In the event that Executive fails to make such designation within ten (10) business days of receiving such information, Employer may effect such reduction in any manner it deems appropriate. ARTICLE 7 PROTECTION OF EMPLOYER 7.1 Confidential Information. For purposes of this Article 7, "Confidential Information" means information that is proprietary to Employer or proprietary to others and entrusted to Employer; whether or not such information includes trade secrets. Confidential Information includes, but is not limited to, information relating to Employer's business plans and to its business as conducted or anticipated to be conducted, and to its past or current or anticipated products and services. Confidential Information also includes, without limitation, information concerning Employer's customer lists or routes, pricing, purchasing, inventory, business methods, training manuals or other materials developed for Employer's employee training, employee compensation, research, development, accounting, marketing and selling. All information that Executive has a reasonable basis to consider as confidential shall be Confidential Information, whether or not originated by Executive and without regard to the manner in which Executive obtains access to this and any other proprietary information of Employer. Executive shall not, during or after the termination of Executive's employment under this Agreement, (a) directly or indirectly use for Executive's own benefit; or (b) disclose any Confidential Information to, or otherwise permit access to Confidential Information by, any person or entity not employed by Employer or not authorized by Employer to receive such Confidential Information, without the prior written consent of Employer. Executive will use reasonable and prudent care to safeguard and protect and prevent the unauthorized use and disclosure of Confidential Information. Furthermore, except in the usual course of Executive's duties for Employer, Executive shall not at any time remove any Confidential Information from the offices of Employer, record or copy any Confidential Information or use for Executive's own benefit or disclose to any person or entity directly or indirectly competing with Employer any information, data or materials obtained from the files or customers of Employer, whether or not such information, data or materials are Confidential Information. Upon any termination of Executive's employment, Executive shall collect and return to Employer (or its authorized representative) all original copies and all other copies of any Confidential Information acquired by Executive while employed by Employer. The obligations contained in this Section 7.1 will survive for as long as Employer in its sole judgment considers the information to be Confidential Information. The obligations under this Section 7.1 will not apply to any Confidential Information that is now or becomes generally available to the public through no fault of Executive or to Executive's disclosure of any Confidential Information required by law or judicial or administrative process. 7.2 Non-Competition. Executive agrees that, while employed by Employer and for a period of eighteen (18) months following the date of Executive's termination of employment for any reason, Executive shall not, directly or indirectly, alone or as an officer, director, shareholder, partner, member, employee or consultant of any other corporation or any partnership, limited liability company, firm or other business entity: (a) engage in, have any ownership interest in, financial participation in, or become employed by, any business or commercial activity in competition (i) with any part of Employer's business, as conducted anywhere within the geographic area in which Employer has conducted its business within the three (3) years before such date, or (ii) with any part of Employer's contemplated business with respect to which Executive has Confidential Information governed by Section 7.1. For purposes of this paragraph, "ownership interest" shall not include beneficial ownership of less than one percent (1%) of the combined voting power of all issued and outstanding voting securities of a publicly held corporation whose stock is traded on a major stock exchange or quoted on NASDAQ; (b) call upon, solicit or attempt to take away any customers or accounts of Employer; (c) solicit, induce or encourage any supplier of goods or services to Employer to cease its business relationship with Employer, or violate any term of any contract with Employer; or (d) solicit, induce or encourage any other employee of Employer to cease employment with Employer, or otherwise violate any term of such employee's contract of employment with Employer. The restrictions set forth in this Section 7.2 shall survive any termination of this Agreement or other termination of Executive's employment with Employer, and shall remain effective and enforceable for such 18-month period; provided, however, that such period shall be automatically extended and shall remain in full force for an additional period equal to any period in which Executive is proven to have violated any such restriction. 7.3 Protection of Reputation. Executive shall, both during and after the termination of Executive's employment under this Agreement, refrain from communicating to any person, including without limitation any employee of Employer, any statements or opinions that are negative in any way about Employer or any of its past, present or future officials. In return, whenever Employer sends or receives any Notice of Termination of Executive's employment under this Agreement, Employer shall advise the members of its operating committee and executive committee (or any successors to such committees), to refrain from negative communications about Executive to third parties. 7.4 Remedies. The parties declare and agree that it is impossible to accurately measure in money the damages that will accrue to Employer by reason of Executive's failure to perform any of Executive's obligations under this Article 7; and that any such breach will result in irreparable harm to Employer, for which any remedy at law would be inadequate. Therefore, if Employer institutes any action or proceeding to enforce the provisions of this Article 7, Executive hereby waives the claim or defense that such party has an adequate remedy at law, Executive shall not assert in any such action or proceeding the claim or defense that such party has an adequate remedy at law, and Employer shall be entitled, in addition to all other remedies or damages at law or in equity, to temporary and permanent injunctions and orders to restrain any violations of this Article 7 by Executive and all persons or entities acting for or with Executive. 7.5 Survival. The provisions of Article 7 of this Agreement shall survive the termination of this Agreement or the termination of the Executive's employment with Employer, and shall remain in full force and effect thereafter. ARTICLE 8 GENERAL PROVISIONS 8.1 Successors and Assigns; Beneficiary. (a) For purposes of this Agreement, "Successor" shall mean any corporation, individual, group, association, partnership, limited liability company, firm, venture or other entity or person that, subsequent to the Effective Date, succeeds to the actual or practical ability to control (either immediately or with the passage of time) substantially all of Employer and/or Employer's business and/or assets, directly or indirectly, by merger, consolidation, recapitalization, purchase, liquidation, redemption, assignment, similar corporate transaction, operation of law or otherwise. (b) This Agreement shall be binding upon and inure to the benefit of any Successor of Employer and each Subsidiary, and any such Successor shall absolutely and unconditionally assume all of Employer's and any Subsidiary's obligations hereunder. Upon Executive's written request, Employer shall seek to have any Successor, by agreement in form and substance satisfactory to Executive, assent to the fulfillment by Employer of their obligations under this Agreement. Failure to obtain such assent prior to the time a person or entity becomes a Successor (or where Employer does not have advance notice that a person or, entity may become a Successor, within one (1) business day after having notice that such person or entity may become or has become a Successor) shall constitute Good Reason for termination of employment by Executive pursuant to Article 6. (c) This Agreement and all rights of Executive hereunder shall inure to the benefit of and be enforceable by Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees and any assignees permitted hereunder. If Executive dies while any amounts would still be payable to Executive hereunder if Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive's Beneficiary. Executive may not assign this Agreement, in whole or in any part, without the prior written consent of Employer. (d) For purposes of this Section 8.1, "Beneficiary" means the person or persons designated by Executive (in writing to Employer) to receive benefits payable after Executive's death pursuant to Section 8.1(c). In the absence of any such designation or in the event that all of the persons so designated predecease Executive, Beneficiary means the executor, administrator or personal representative of Executive's estate. 8.2 Litigation Expense. If any party is made or shall become a party to any litigation (including arbitration) commenced by or against the other party involving the enforcement of any of the rights or remedies of such party, or arising on account of a default of the other party in its performance of any of the other party's obligations hereunder, then the prevailing party in such litigation shall receive from the other party all costs incurred by the prevailing party in such litigation, plus reasonable attorneys' fees to be fixed by the court or arbitrator (as applicable), with interest thereon from the date of judgment or arbitrator's decision at the rate of eight percent (8%) or, if less, the maximum rate permitted by law. 8.3 No Offsets. In no event shall any amount payable to Executive pursuant to this Agreement be reduced for purposes of offsetting, either directly or indirectly, any indebtedness or liability of Executive to Employer. 8.4 Notices. All notices, requests and demands given to or made pursuant hereto shall, except as otherwise specified herein, be in writing and be personally delivered or mailed postage prepaid, registered or certified U. S. mail, to any party as its address set forth on the last page of this Agreement. Either party may, by notice hereunder, designate a changed address. Any notice hereunder shall be deemed effectively given and received: (a) if personally delivered, upon delivery; or (b) if mailed, on the registered date or the date stamped on the certified mail receipt. 8.5 Captions. The various headings or captions in this Agreement are for convenience only and shall not affect the meaning or interpretation of this Agreement. When used herein, the terms "Article" and "Section" mean an Article or Section of this Agreement, except as otherwise stated. 8.6 Governing Law. The validity, interpretation, construction, performance, enforcement and remedies of or relating to this Agreement, and the rights and obligations of the parties hereunder, shall be governed by the substantive laws of the State of Minnesota (without regard to the conflict of laws rules or statutes of any jurisdiction), and any and every legal proceeding arising out of or in connection with this Agreement shall be brought in the appropriate courts of the State of Minnesota, each of the parties hereby consenting to the exclusive jurisdiction of said courts for this purpose. 8.7 Construction. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement. 8.8 Waiver. No failure on the part of either party to exercise, and no delay in exercising, any right or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy granted hereby or by any related document or by law. 8.9 Modification. This Agreement may not be modified or amended except by written instrument signed by the parties hereto. 8.10 Entire Agreement. This Agreement constitutes the entire agreement and understanding between the parties hereto in reference to all the matters herein agreed upon. This Agreement replaces in full all prior employment agreements or understandings of the parties hereto, and any and all such prior agreements or understandings are hereby rescinded by mutual agreement. 8.11 Survival. The parties expressly acknowledge and agree that the provisions of this Agreement which by their express or implied terms extend (a) beyond the termination of Executive's employment hereunder (including without limitation, the provisions relating to severance compensation and effects of a Change in Control); or (b) beyond the termination of this Agreement (including, without limitation the provisions in Article 7 relating to confidential information, non-competition and non-solicitation), shall continue in full force and effect notwithstanding Executive's termination of employment hereunder or the termination of this Agreement, respectively. 8.12 Voluntary Agreement. Executive has entered into this Agreement voluntarily, after having the opportunity to consult with an advisor chosen freely by Executive. IN WITNESS WHEREOF, the parties hereto have caused this Executive Employment Agreement to be duly executed and delivered on the day and year first above written, but effective retroactively as of the Effective Date. EMPLOYER: G&K SERVICES, INC. By /s/ Thomas Moberly ----------------------------------- Thomas R. Moberly Its Chief Executive Officer EXECUTIVE: /s/ Jeffrey R. Kiesel ----------------------------------- Jeffrey R. Kiesel Executive's Address: 104 Cherry Lane Wilton, Connecticut 06897 EX-10.2 4 c82507exv10w2.txt FIRST AMENDMENT TO CREDIT AGREEMENT EXHIBIT 10.2 AMENDMENT NO. 1 TO CREDIT AGREEMENT THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT ("Amendment") is entered into as of December 17, 2003 by and among G&K Services Inc. (the "Domestic Borrower"), G&K Services Canada Inc. (the "Canadian Borrower", and together with the Domestic Borrower, the "Borrowers"), the financial institutions party to the below-defined "Credit Agreement" as lenders (the "Lenders"), Wachovia Bank, National Association, as Syndication Agent (the "Syndication Agent"), and Bank One, NA (Main Office Chicago), as Administrative Agent (the "Administrative Agent"). Each capitalized term used herein and not defined herein shall have the meaning ascribed thereto in the below-defined Credit Agreement. WITNESSETH WHEREAS, the Borrowers, the Lenders, the Syndication Agent and the Administrative Agent are parties to a Credit Agreement dated as of June 25, 2002 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"); and WHEREAS, the Borrowers wish to amend the Credit Agreement in certain respects and the Lenders and the Administrative Agent are willing to amend the Credit Agreement pursuant to the terms of this Amendment; NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the Lenders and the Administrative Agent agree as follows. 1. Amendments to Credit Agreement. Subject to the satisfaction of the conditions precedent set forth in Section 2 below, the Borrowers, the Lenders and the Administrative Agent agree that the Credit Agreement is hereby amended as follows: 1.1 Clause (j) of the definition of "Debt" set forth in Section 1.1 of the Credit Agreement is hereby amended to insert immediately at the end thereof the following: "and all then outstanding Receivables Transaction Attributed Indebtedness." 1.2 The definition of "L/C Commitment" set forth in Section 1.1 of the Credit Agreement is hereby amended in its entirety as follows: "L/C Commitment" means the lesser of (a) Thirty Million Dollars ($30,000,000) and (b) the Revolving Credit Commitment. 1.3 Section 1.1 of the Credit Agreement is hereby amended to insert alphabetically therein the following defined terms: "Acquisition Period" means a period beginning with the month in which the first Leverage Ratio Acquisition to occur after December 17, 2003 is consummated and ending with the last calendar day of the calendar month to occur eighteen months after the month in which the Leverage Ratio Acquisition occurred. "Leverage Ratio Acquisition" means any acquisition of property or other assets by either Borrower or any of their respective Subsidiaries that is permitted under this Agreement and which, after giving effect thereto, causes the Leverage Ratio, on a pro forma basis on the date such acquisition is consummated, to equal or exceed 3.00 to 1.00. In order for an acquisition to constitute a Leverage Ratio Acquisition, the Borrowers shall deliver to the Administrative Agent, prior to the consummation of such acquisition, written evidence in form and substance acceptable to the Administrative Agent supporting the above-described pro forma calculation. "Qualified Receivables Transaction" means any transaction or series of transactions that may be entered into by the Domestic Borrower or any Subsidiary pursuant to which the Domestic Borrower or any Subsidiary may sell, convey or otherwise transfer to a newly-formed Subsidiary or other special-purpose entity, or any other Person, any accounts or notes receivable and rights related thereto, provided that all of the terms and conditions of such transaction or series of transactions, including without limitation the amount and type of any recourse to the Domestic Borrower or any Subsidiary with respect to the assets transferred, are reasonably acceptable to the Administrative Agent. "Receivables Transaction Attributed Indebtedness" means the amount of obligations outstanding under the legal documents entered into as part of any Qualified Receivables Transaction on any date of determination that would be characterized as principal if such Qualified Receivables Transaction were structured as a secured lending transaction rather than as a purchase. 1.4 Each of Section 4.4(b)(i)(A), Section 4.4(b)(i)(B), and Section 4.4(b)(ii) of the Credit Agreement is hereby amended in its entirety as follows: "Intentionally Omitted". 1.5 Section 4.4(b)(iii) of the Credit Agreement is hereby amended to delete therefrom the last sentence thereof and to substitute therefor the following: "Notwithstanding the foregoing or anything to the contrary set forth herein, (i) accounts or notes receivable sold by the Domestic Borrower in connection with Qualified Receivables Transactions permitted under this Agreement, including, without limitation, the requirements of Section 11.1(g), shall not be subject to this Section 4.4(b)(iii) and no mandatory prepayment shall be required in connection therewith, and (ii) upon and during the continuance of a Default or an Event of Default, and upon notice from the Administrative Agent, all Asset Sale Proceeds received by the Domestic Borrower or any of its Subsidiaries shall be applied to make mandatory principal prepayments of 2 the Term Loans, such mandatory principal repayments to be made within three (3) Business Days after the date of receipt of such Asset Sale Proceeds." 1.6 Section 5.1(c) of the Credit Agreement is hereby amended to delete therefrom the pricing grid set forth therein and to substitute therefor the following:

----------------------------------- Applicable Margin - ------------------ --------------------------------------------------------------- --------------- ----------------- Pricing Level Leverage Ratio LIBOR Rate Base Rate and and Canadian Base Acceptance Fee Rate ================== =============================================================== =============== ================= I Greater than 3.00 to 1.00 2.000% 0.750% - ------------------ --------------------------------------------------------------- --------------- ----------------- II Greater than or equal to 2.75 to 1.00 but less than or equal 1.750% 0.500% to 3.00 to 1.00 - ------------------ --------------------------------------------------------------- --------------- ----------------- III Greater than or equal to 2.25 to 1.00 but less than 2.75 to 1.500% 0.250% 1.00 - ------------------ --------------------------------------------------------------- --------------- ----------------- IV Greater than or equal to 1.75 to 1.00 but less than 2.25 to 1.250% 0.000% 1.00 - ------------------ --------------------------------------------------------------- --------------- ----------------- V Less than 1.75 to 1.00 1.000% 0.000% - ------------------ --------------------------------------------------------------- --------------- -----------------

1.7 Section 5.3(a) of the Credit Agreement is hereby amended to delete therefrom the pricing grid set forth therein and to substitute therefor the following:

- --------------------- ---------------------------------------------------------------- ----------------------------- Pricing Level Leverage Ratio Commitment Fee Rate ===================== ================================================================ ============================= I Greater than 3.00 to 1.00 0.375% - --------------------- ---------------------------------------------------------------- ----------------------------- II Greater than or equal to 2.75 to 1.00 but less than or equal 0.300% to 3.00 to 1.00 - --------------------- ---------------------------------------------------------------- ----------------------------- III Greater than or equal to 2.25 to 1.00 but less than 2.75 to 0.275% 1.00 - --------------------- ---------------------------------------------------------------- ----------------------------- IV Greater than or equal to 1.75 to 1.00 but less than 2.25 to 0.250% 1.00 - --------------------- ---------------------------------------------------------------- ----------------------------- V Less than 1.75 to 1.00 0.225% - --------------------- ---------------------------------------------------------------- -----------------------------

1.8 Section 10.1 of the Credit Agreement is hereby amended in its entirety as follows: Section 10.1 Leverage Ratio. As of any fiscal quarter end, permit the ratio of (a) Total Debt on such date to (b) EBITDA for the period of four (4) consecutive fiscal quarters ending on or immediately prior to such quarter end to be greater than (1) 3.25 to 1.00 if such fiscal quarter ends at any time other than during the Acquisition Period and (2) 3.50 to 1.00 if such fiscal quarter ends during the Acquisition Period. 3 1.9 Sections 11.1(f) and (g) of the Credit Agreement are hereby amended in their entirety as follows: (f) Guaranty Obligations in favor of the Administrative Agent, for the benefit of the Agents and the Lenders, and Guaranty Obligations with respect to Debt permitted pursuant to subsections (b) through (e) of this Section 11.1; (g) Receivables Transaction Attributed Indebtedness incurred by the Domestic Borrower or for which the Domestic Borrower is otherwise obligated pursuant to Qualified Receivables Transactions in an aggregate amount not to exceed $60,000,000 at any time; 1.10 Section 11.1(j) of the Credit Agreement is hereby amended in its entirety as follows: (j) Debt not otherwise permitted by this Section 11.1 in an aggregate amount not to exceed the greater of: (1) ten percent (10%) of Net Worth on any date of determination; and (2) $100,000,000. 1.11 Section 11.2 of the Credit Agreement is hereby amended to insert immediately at the end thereof the following clause (i): "(i) Liens in connection with Receivables Transaction Attributed Indebtedness incurred by the Domestic Borrower or for which the Domestic Borrower is otherwise obligated pursuant to Qualified Receivables Transactions that are permitted under Section 11.1(g)." 1.12 Section 11.3(c)(viii) of the Credit Agreement is hereby amended in its entirety as follows: "Intentionally Omitted". 1.13 Section 11.3(c)(ix) of the Credit Agreement is hereby amended in its entirety as follows: "Intentionally Omitted". 1.14 Section 11.3 of the Credit Agreement is hereby amended to insert immediately at the end thereof the following clause (h): "(h) investments comprised of capital contributions (whether in the form of cash, a note, or other assets) to a Subsidiary or other special-purpose entity created solely to engage in a Qualified Receivables Transaction permitted hereunder or otherwise resulting from transfers of assets permitted under this Agreement to such a special-purpose entity." 1.15 Section 11.5(d) of the Credit Agreement is hereby amended in its entirety as follows: (d) the sale or discount without recourse to: 4 (1) the Domestic Borrower, or (2) any Subsidiary of the Domestic Borrower other than a special-purpose entity created solely to engage in a Qualified Receivables Transaction permitted hereunder, of accounts receivable arising in the ordinary course of business in connection with the compromise or collection thereof, or any sale or contribution of accounts or notes receivable pursuant to a Qualified Receivables Transaction permitted under this Agreement; provided, however, that the foregoing shall not apply to recourse to the Domestic Borrower or any non-special-purpose entity Subsidiary resulting from (x) the breach of any customary representation or warranty made by the Domestic Borrower or such Subsidiary in the ordinary course of establishing and maintaining such Qualified Receivables Transaction and transferring assets as contemplated thereby or (y) returns, allowances, net credits and other non-cash reductions related to accounts or notes receivable subject to such Qualified Receivables Transaction, including, without limitation, the goods or services the sale of which gave rise to such accounts or notes receivable; 1.16 Section 15.10(d) of the Credit Agreement is hereby amended to insert immediately at the end thereof the following: "Notwithstanding anything herein to the contrary, confidential information shall not include, and each party hereto (and each employee, representative or other agent of any party hereto) may disclose to any and all Persons, without limitation of any kind, the U.S. federal income tax treatment and U.S. federal income tax structure of the transactions contemplated hereby and all materials of any kind (including opinions or other tax analyses) that are or have been provided to such party relating to such tax treatment or tax structure, and it is hereby confirmed that each party hereto has been authorized to make such disclosures since the commencement of discussions regarding the transactions contemplated hereby." 2. Conditions to Effectiveness. This Amendment shall not become effective unless: 2.1 the Administrative Agent shall have received counterparts of this Amendment executed by each Borrower, the Administrative Agent and the Required Lenders; 2.2 the Administrative Agent shall have received from the Borrowers for the ratable benefit of the Lenders who deliver their executed signature pages to this Amendment to the Administrative Agent by 5:00 p.m. Chicago time on December 12, 2003 a non-refundable amendment fee in immediately available funds equal to 0.05% times the aggregate amount of the Revolving Credit Commitments of such Lenders as in effect on such date. The Administrative Agent's receipt of any signature page by such 5:00 p.m. Chicago time deadline shall be determined by the Administrative Agent in its sole reasonable judgment; and 2.3 the Administrative Agent shall have received a Reaffirmation of Guaranty in substantially the form attached hereto as Exhibit A. 5 3. Representations and Warranties of Each Borrower. Each Borrower represents and warrants as follows: 3.1 Such Borrower has the legal power and authority to execute and deliver this Amendment and the officers of such Borrower executing this Amendment have been duly authorized to execute and deliver the same and bind such Borrower with respect to the provisions hereof. 3.2 This Amendment and the Credit Agreement as previously executed and as amended hereby constitute legal, valid and binding obligations of such Borrower, enforceable against it in accordance with their terms (except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditor's rights generally). 3.3 Such Borrower hereby reaffirms all covenants, representations and warranties made in the Credit Agreement and the other Loan Documents and agrees and confirms that all such representations and warranties are true and correct in all material respects as of the date of this Amendment except for changes thereto reflecting events, conditions or transactions permitted or not prohibited by the Credit Agreement or the other Loan Documents; provided, that the words "in all material respects" in this clause (c) shall, as to any representation or warranty that contains a materiality standard, operate without duplication of such standard. 3.4 Such Borrower has caused to be conducted a thorough review of the terms of the Credit Agreement and the other Loan Documents and such Borrower's and its Subsidiaries' operations since the Closing Date and, as of the date hereof, there are no Defaults or Events of Default thereunder. 4. Reference to the Effect on the Credit Agreement. 4.1 Upon the effectiveness of this Amendment pursuant to Section 2 above, on and after the date hereof, each reference in the Credit Agreement to "this Credit Agreement," "hereunder," "hereof," "herein" or words of like import shall mean and be a reference to the Credit Agreement as modified hereby. 4.2 Except as specifically waived or modified above, the Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith, shall remain in full force and effect, and are hereby ratified and confirmed. 4.3 The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power of remedy of the Administrative Agent or the Lenders, nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith. 5. Costs and Expenses. The Borrowers jointly and severally agree to pay all reasonable costs, fees and out-of-pocket expenses (including attorneys' fees and expenses charged to the Administrative Agent) incurred by the Administrative Agent in connection with the preparation, arrangement, execution and enforcement of this Amendment. 6 6. Governing Law. THIS AMENDMENT SHALL BE GOVERNED IN ACCORDANCE WITH THE INTERNAL LAWS, AS OPPOSED TO THE CONFLICTS OF LAW PROVISIONS, OF THE STATE OF NORTH CAROLINA. 7. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. 8. Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. A facsimile signature page hereto sent to the Administrative Agent or the Administrative Agent's counsel shall be effective as a counterpart signature provided each party executing such a facsimile counterpart agrees, if requested, to deliver originals thereof to the Administrative Agent. 9. No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Amendment, the Credit Agreement and the other Loan Documents. In the event an ambiguity or question of intent or interpretation arises, this Amendment, the Credit Agreement and the other Loan Documents shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Amendment, the Credit Agreement or any of the other Loan Documents. The remainder of this page is intentionally blank. 7 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed under seal by their duly authorized officers, all as of the day and year first written above. DOMESTIC BORROWER: G&K SERVICES INC., as Domestic Borrower By ____________________________ Name: Title: CANADIAN BORROWER: G&K SERVICES CANADA INC., as Canadian Borrower By ____________________________ Name: Title: BANK ONE, NA (MAIN OFFICE CHICAGO), as Administrative Agent and Lender By ____________________________ Name: Title: WACHOVIA BANK, NATIONAL ASSOCIATION, as Syndication Agent and Lender By _________________________ Name: Title: HARRIS TRUST AND SAVINGS BANK, as Lender By _________________________ Name: Title: WELLS FARGO BANK, N.A., as Lender By ____________________________ Name: Title: SUNTRUST BANK, as Lender By ____________________________ Name: Title: BANK OF TOKYO-MITSUBISHI, LTD., Chicago Branch, as Lender By ____________________________ Name: Title: THE ROYAL BANK OF SCOTLAND PLC, as Lender By ____________________________ Name: Title: COMERICA BANK, as Lender By ____________________________ Name: Title: REGIONS BANK, as Lender By ____________________________ Name: Title: U.S. BANK NATIONAL ASSOCIATION, as Lender By ____________________________ Name: Title: BANK OF AMERICA, N.A., as Lender By: ____________________________ Name: Title: ALLIED IRISH BANKS, PLC, as Lender By: ____________________________ Name: Title: By: ____________________________ Name: Title: THE NORINCHUKIN BANK, NEW YORK BRANCH, as Lender By: _____________________________ Name:________________________ Title:_______________________ THE NORTHERN TRUST COMPANY, as Lender By:____________________________ Name:_______________________ Title:______________________ BANK HAPOALIM B.M., as Lender By:_____________________________ Name:________________________ Title:_______________________ By:_____________________________ Name:________________________ Title:_______________________ EXHIBIT A REAFFIRMATION OF GUARANTY ATTACHED EX-31.1 5 c82507exv31w1.txt CERTIFICATION OF CEO TO SECTION 302 EXHIBIT 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECURITIES EXCHANGE ACT RULE 13A-15(e)/15D-15(e) AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Richard L. Marcantonio, certify that: 1. I have reviewed this quarterly report on Form 10-Q of G&K Services, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. G&K Services, Inc.'s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for G&K Services, Inc., and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to G&K Services, Inc., including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of G&K Services, Inc.'s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) disclosed in this report any change in G&K Services, Inc.'s internal control over financial reporting that occurred during G&K Services, Inc.'s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, G&K Services, Inc.'s internal control over financial reporting; 5. G&K Services, Inc.'s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to G&K Services, Inc.'s auditors and the audit committee of G&K Services, Inc.'s board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect G&K Services, Inc.'s ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in G&K Services, Inc.'s internal control over financial reporting. Date: February 5, 2004 By: /s/ Richard L. Marcantonio --------------------------------- Richard L. Marcantonio, Chief Executive Officer (Principal Executive Officer) EX-31.2 6 c82507exv31w2.txt CERTIFICATION OF CFO TO SECTION 302 EXHIBIT 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECURITIES EXCHANGE ACT RULE 13A-15(e)/15D-15(e) AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Jeffrey L. Wright, certify that: 1. I have reviewed this quarterly report on Form 10-Q of G&K Services, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. G&K Services, Inc.'s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for G&K Services, Inc., and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to G&K Services, Inc., including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of G&K Services, Inc.'s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) disclosed in this report any change in G&K Services, Inc.'s internal control over financial reporting that occurred during G&K Services, Inc.'s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, G&K Services, Inc.'s internal control over financial reporting; 5. G&K Services, Inc.'s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to G&K Services, Inc.'s auditors and the audit committee of G&K Services, Inc.'s board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect G&K Services, Inc.'s ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in G&K Services, Inc.'s internal control over financial reporting. Date: February 5, 2004 By: /s/ Jeffrey L. Wright ---------------------------------- Jeffrey L. Wright, Chief Financial Officer and Secretary (Principal Financial Officer) EX-32.1 7 c82507exv32w1.txt CERTIFICATION OF CEO TO SECTION 906 EXHIBIT 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Richard L. Marcantonio, certify that: 1. I have reviewed this quarterly report on Form 10-Q of G&K Services, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report. Date: February 5, 2004 By: /s/ Richard L. Marcantonio --------------------------------- Richard L. Marcantonio, Chief Executive Officer (Principal Executive Officer) EX-32.2 8 c82507exv32w2.txt CERTIFICATION OF CFO TO SECTION 906 EXHIBIT 32.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Jeffrey L. Wright, certify that: 1. I have reviewed this quarterly report on Form 10-Q of G&K Services, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report. Date: February 5, 2004 By: /s/ Jeffrey L. Wright --------------------------------- Jeffrey L. 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EX-10.1

                                                                    EXHIBIT 10.1

                         EXECUTIVE EMPLOYMENT AGREEMENT


         THIS AGREEMENT is made and entered into on 14th day of July, 2003, by
and between G&K SERVICES, INC., a Minnesota corporation with its principal
business office in the State of Minnesota (hereinafter "Employer", as such term
is further defined in Section 1.7 below); and Jeffrey R. Kiesel, a Connecticut
resident (hereinafter "Executive").

                                  INTRODUCTION

         A. Employment and Protection of Employer. Employer desires to retain
Executive as an employee in the capacity of Senior Vice President, Field
Operations (reporting to Employer's President and Chief Operating Officer), or,
subject to Executive's rights hereunder, such other title and position as the
Board (as defined below) shall later determine, and obtain Executive's promises
not to harm Employer (as set forth in Article 7). Article 7 of this Agreement
includes a description of Employer's "Confidential Information." In Executive's
position with Employer, Executive will have access to and control over certain
of Employer's Confidential Information, which Employer has developed at great
expense, time and effort. As a result, disclosure of any such Confidential
Information to a competitor would cause irreparable harm to Employer, and
Employer is not willing to offer Executive employment and the additional
benefits set forth in this Agreement unless Executive signs this Agreement to
provide Employer with reasonable protection for its Confidential Information,
and to protect Employer in other ways set forth in Article 7.

         B. Employment and Benefits. For those purposes, Employer is willing to
retain Executive as an employee and to grant to Executive benefits to which
Executive is not otherwise entitled, consisting of the right to receive certain
separation compensation and outplacement benefits (as described in Articles 5
and 6), if Executive's employment with Employer terminates under certain
circumstances described therein, including without limitation in connection with
a Change in Control (as defined in Article 6).

         C. Other Intentions. Executive desires to accept Employer's offer of
employment and additional benefits set forth in this Agreement, to which
Executive is not otherwise entitled.

         Executive agrees, as a condition of Employer's offer of employment and
additional benefits set forth in this Agreement, to sign this Agreement in order
that Employer may have reasonable protections against the disclosure of its
Confidential Information and other conduct of Executive prohibited by Article 7
of this Agreement.

                                    AGREEMENT

         NOW, THEREFORE, in consideration of the facts recited above, which are
a part of this Agreement, and the parties' mutual promises contained in this
Agreement, Employer and Executive agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

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

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

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

         1.3 "Board" means the Board of Directors of Employer.


                                       1




         1.4 "Cause" has the meaning set forth in Section 5.2.

         1.5 "Date of Termination" has the meaning set forth in Section 5.6(b).

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

         1.7 "Employer" means all of the following, jointly and severally: (a)
G&K Services, Inc., (b) any Subsidiary thereof and (c) any Successor thereto.

         1.8 "Executive" means the individual named in the first paragraph of
this Agreement.

         1.9 "Notice of Termination" has the meaning set forth in Section
5.6(a).

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

         1.11 "Subsidiary" means any corporation or other business entity that
is controlled by Employer.

         1.12 "Successor" has the meaning set forth in Section 8.1(a).



                                    ARTICLE 2
                              EMPLOYMENT AND DUTIES

         2.1 Employment. Upon the terms and conditions set forth in this
Agreement, Employer hereby employs Executive for an indefinite term, and
Executive accepts such employment. Pursuant to such employment, Executive shall
serve in the capacity of Senior Vice President, Field Operations (reporting to
Employer's President and Chief Operating Officer) or, subject to Executive's
rights hereunder, such other title and position as the Board shall later
determine. This Agreement and Executive's employment by Employer may be
terminated at any time pursuant to Article 5.

         2.2 Duties. While Executive is employed hereunder, and excluding any
periods of vacation, sick, disability or other leave to which Executive is
entitled, Executive agrees to devote substantially all of Executive's attention
and time during normal business hours to the business and affairs of Employer
and, to the extent necessary to discharge the responsibilities assigned to
Executive hereunder and under Employer's bylaws as amended from time to time, to
use Executive's reasonable best efforts to perform faithfully and efficiently
such responsibilities.







         Executive shall comply with Employer's policies and procedures;
provided, however, that to the extent such policies and procedures are
inconsistent with this Agreement, the provisions of this Agreement shall
control.

                                    ARTICLE 3
                            COMPENSATION AND BENEFITS

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

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

                  (a) Executive shall be permitted to participate in all Plans
         for which Executive is or becomes eligible under their respective
         terms.

                  (b) Employer may, in its sole discretion, amend or terminate
         any Plan that provides benefits generally to its employees or its
         executive officers.

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

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


                                    ARTICLE 4

         4.1 Restricted Stock Agreement. As of the Effective Date, Employer
hereby grants Executive the right to purchase Employer Stock (as defined below)
in the amount, at the price and on the terms set forth in the Restricted Stock
Agreement attached hereto as EXHIBIT A.


                                    ARTICLE 5
                                   TERMINATION

         5.1 Termination. This Article 5 sets forth the terms for termination of
Executive's employment under this Agreement, subject to the respective
continuing rights and obligations of the parties under this Agreement. In
general, this Agreement and Executive's employment with the Employer may be
terminated by either Employer or Executive at will upon thirty (30) days notice,
for any reason or no reason, or any time by mutual written agreement of the
parties. This Agreement and Executive's employment under this Agreement shall
terminate in the event of Executive's death or Disability, as of the applicable
Date of Termination.

         In any such case, this Agreement shall terminate as of the applicable
Date of Termination, except for the rights and obligations of the parties under
this Agreement that survive beyond Executive's termination of employment.







         5.2 Termination by Employer for Cause. Employer may terminate this
Agreement at any time for Cause, with or without advance notice (except as
otherwise provided in this Section 5.2). For purposes of this Agreement, "Cause"
means any of the following, with respect to Executive's position of employment
with Employer:

                  (a) Executive's failure or refusal to perform the duties and
         responsibilities set forth in Section 2.2, if such failure or refusal
         is not (i) due to a Disability or a physical or mental illness or
         bodily injury or disease; and (ii) is not cured within five (5) days
         after written notice of such failure or refusal is received by
         Executive from Employer;

                  (b) any drunkenness or use of drugs that interferes with the
         performance of Executive's obligations under this Agreement; and
         continues for more than five (5) days after a written notice to
         Executive; provided, however, that Employer shall have the right to
         prevent Executive from performing any duties hereunder and from
         entering the premises of Employer during any such period;

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

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

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

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

                  (g) Except as otherwise specifically provided in this Section
         5.2, Executive's material violation or breach of Employer's standard
         business practices and policies, including, without limitation,
         policies against racial or sexual discrimination or harassment; and

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

         For purposes of this Section 5.2, no act, or failure to act, on
Executive's part shall be considered "dishonest," "willful" or "intentional"
unless done, or omitted to be done, by Executive in bad faith and without
reasonable belief that Executive's action or omission was in or not opposed to
the best interest of Employer. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board or based upon the
advice of counsel for Employer shall be conclusively presumed to be done, or
omitted to be done, by Executive in good faith and in the best interests of
Employer. Furthermore, the term "Cause" shall not include ordinary negligence or
failure to act, whether due to an error in judgment or otherwise, if Executive
has exercised substantial efforts in good faith to perform the duties reasonably
assigned or appropriate to the position.

         5.3 Termination by Executive for Good Reason. After a Change in Control
(as defined in Article 6), Executive may voluntarily resign from employment
under this Agreement with or without Good Reason (as such term is defined in
Section 6.1(f)).

         5.4 Notice of Termination and Date of Termination.

                  (a) For purposes of this Agreement, a "Notice of Termination"
         shall mean a notice that shall indicate the specific termination
         provisions in this Agreement relied upon and shall set forth in
         reasonable detail the facts and circumstances claimed to provide the
         basis for such termination. Any termination by Employer or by Executive
         pursuant to this Agreement (other than Executive's death or a
         termination by mutual agreement) shall be communicated by written
         Notice of Termination to the other party hereto.







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

                  5.5 Compensation during Disability and upon Termination.

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

                  (b) Except as otherwise provided in Article 6 or a mutual
         agreement of the parties, if Executive's employment under this
         Agreement is terminated (i) by Executive's death, (ii) voluntarily by
         Executive, (iii) by Employer for Cause, or (iv) by mutual agreement of
         the parties, then Employer shall pay Executive the Base Salary through
         the Date of Termination, plus any amounts to which the Executive is
         entitled under any Plan (in accordance with the terms of such Plan).
         Employer shall also pay any retirement benefits to which Executive is
         or becomes entitled under any Plan, except to the extent any such
         benefits are forfeited under the terms of such Plan.

                  (c) Except in the case of a termination for Disability, if
         within the first twenty-four (24) months of Executive's employment
         hereunder, either (i) Employer terminates Executive's employment
         hereunder without Cause; or (ii) Executive voluntarily terminates his
         employment hereunder for Good Reason (as such term is defined in
         Section 6.1(f) below); and if Executive executes a written release
         substantially in the form attached hereto as EXHIBIT B and consistent
         with this Section 5.5(c) (a "Release Agreement"), then Employer shall
         pay to Executive, as separation pay, which Executive has not earned and
         to which he is not otherwise entitled, an amount equal to eighteen (18)
         months of Executive's monthly Base Salary in effect as of the Date of
         Termination. Such payment will be made to the Executive in weekly
         payments beginning at least sixteen days after Executive's execution of
         the Release Agreement, provided that the Executive has not exercised
         his rights to revoke or rescind his release of claims pursuant to the
         Release Agreement.

                  (d) Except in the case of a termination for Disability, if
         after the first twenty-four (24) months of Executive's employment
         hereunder, either (i) Employer terminates Executive's employment
         hereunder without Cause; or (ii) Executive voluntarily terminates his
         employment hereunder for Good Reason; and if Executive executes a
         written release substantially in the form attached hereto as EXHIBIT B
         and consistent with this Section 5.5(d) (a "Release Agreement"), then
         Employer shall pay to Executive, as separation pay, which Executive has
         not earned and to which he is not otherwise entitled, an amount equal
         to twelve (12) months of Executive's monthly Base Salary in effect as
         of the Date of Termination. Such payment will be made to the Executive
         in weekly payments beginning at least sixteen days after Executive's
         execution of the Release Agreement, provided that the Executive has not
         exercised his rights to revoke or rescind his release of claims
         pursuant to the Release Agreement.

                           (i) If Executive (or any individual eligible for
                  group health Plan benefits through Executive) is eligible
                  under the plan or applicable law to continue participation in
                  Employer's group health Plan during the severance period and
                  does elect to continue such benefits, Employer shall continue
                  to pay Employer's share of the cost of such benefits, as if
                  Executive remained continuously employed with Employer
                  throughout such severance period, but only while Executive or
                  such other individual continues to pay the balance of such
                  cost.







                           (ii) Employer will pay the fees of a reputable
                  outplacement organization select by employee, but not to
                  exceed $12,000 in the aggregate.

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

                                    ARTICLE 6
                                CHANGE IN CONTROL

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

                  (a) "1934 Act" shall mean the Securities Exchange Act of 1934,
         as amended (or any successor provision), and the regulations
         promulgated thereunder.

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

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

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

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

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

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

                  (e) "Change in Control Termination" shall mean that a Change
         in Control of Employer has occurred, and either of the following events
         also occurs within one (1) year after such Change in Control: (i)
         Employer terminates the Executive's employment or this Agreement for
         any reason other than for Cause, Executive's death or Executive's
         Disability; or (ii) Executive terminates Executive's employment for
         Good Reason.

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

                           (i) an adverse involuntary change in Executive's
                  status or position as an executive officer of Employer,
                  including, without limitation, (A) any adverse change in
                  Executive's status or position as a result of a material
                  diminution in Executive's duties, responsibilities or
                  authority as of the day before the Change in Control; (B) the
                  assignment to Executive of any duties or responsibilities
                  that, in Executive's reasonable judgment, are significantly
                  inconsistent with Executive's status or position; or





                  (C) any removal of Executive from, or any failure to reappoint
                  or reelect Executive to, such position (except in connection
                  with a termination of Executive's employment for Cause in
                  accordance with Article 5, or as a result of Executive's
                  Disability or death);

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

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

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

                           (v) any failure by Employer to obtain from any
                  Successor an assumption of this Agreement as contemplated by
                  Section 8.1; or

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

         6.2 Benefits Upon a Change in Control Termination. If a Change in
Control Termination occurs with respect to Executive, Executive shall be
entitled to the following benefits; provided, however, that to the extent
Executive has already received the same type of benefits under Article 5 as a
result of Executive's Change in Control Termination, Executive's benefits under
this Section 6.2 shall be offset by such other benefits, to the extent necessary
to prevent duplication of benefits hereunder:

                  (a) all of the payments and benefits that Executive would have
         been entitled to receive if the Change in Control Termination were
         described in Section 5.5(c), except that in lieu of any further Base
         Salary payments to Executive for periods subsequent to the Date of
         Termination, Employer shall pay to Executive an amount equal to
         seventeen (17) months of Executive's monthly Base Salary in effect as
         of the Date of Termination; such payment to be made in a lump sum on or
         before the tenth (10th) calendar day following the Date of Termination;
         and

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

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

         6.3 Acceleration of Incentives. If upon the occurrence of a Change of
Control, the Board and a majority of the Continuing Directors (as such term is
defined in the G&K Services, Inc. 1998 Stock Option and Compensation Plan (the
"1998 Plan")) determine that the economic incentives (including without
limitation stock options and awards of restricted stock) (the "Incentives")
granted under the 1998 Plan shall not accelerate immediately in accordance with





Section 11.12 of the 1998 Plan (or an successor provision), then the following
shall nonetheless occur with respect to any and all Incentives that are owned by
Executive at the time of such Change of Control:

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

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

                  (c) all performance shares shall be deemed to be met and
         payment made immediately.

         6.4 Limitation on Severance Payment. Notwithstanding any provision
contained herein to the contrary, if any amount or benefit to be paid or
provided under this Article 6, or any other plan or agreement between Executive
and Employer would be an "Excess Parachute Payment," within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), or
any successor provision thereto, but for the application of this sentence, then
the payments and benefits to be paid or provided under this Article 6 shall be
reduced to the minimum extent necessary (but in no event to less than zero) so
that no portion of any such payment or benefit, as so reduced, constitutes an
Excess Parachute Payment; provided, however, that the foregoing reduction shall
be made only if and to the extent that such reduction would result in an
increase in the aggregate payment and benefits to be provided to Executive,
determined on an after-tax basis (taking into account the excise tax imposed
pursuant to Section 4999 of the Code, or any successor provision thereto, any
tax imposed by any comparable provision of state law, and any applicable
federal, state and local income taxes). If requested by Executive or Employer,
the determination of whether any reduction in such payments or benefits to be
provided under this Article 6 or otherwise is required pursuant to the preceding
sentence shall be made by an independent accounting firm that is a "Big-4
Accounting Firm" (or other accounting firm mutually acceptable to Executive and
Employer) not then-engaged as Employer's independent public auditor, at the
expense of Employer, and the determination such independent accounting firm
shall be final and binding on all parties. In making its determination, the
independent accountant shall allocate a reasonable portion of the severance
payment to the value of any personal services rendered following the Change in
Control and the value of any non-competition agreement or similar agreements to
the extent that such items reduce the amount of the parachute payment. In the
event that any payment or benefit intended to be provided under this Article 6
or otherwise is required to be reduced pursuant to this Section 6.3, Executive
(in his sole discretion) shall be entitled to designate the payments and/or
benefits to be so reduced in order to give effect to this Section. Employer
shall provide Executive with all information reasonably requested by Executive
to permit Executive to make such designation. In the event that Executive fails
to make such designation within ten (10) business days of receiving such
information, Employer may effect such reduction in any manner it deems
appropriate.

                                    ARTICLE 7
                             PROTECTION OF EMPLOYER

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







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

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

         The obligations contained in this Section 7.1 will survive for as long
as Employer in its sole judgment considers the information to be Confidential
Information. The obligations under this Section 7.1 will not apply to any
Confidential Information that is now or becomes generally available to the
public through no fault of Executive or to Executive's disclosure of any
Confidential Information required by law or judicial or administrative process.

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

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

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

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

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

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

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





this Agreement, Employer shall advise the members of its operating committee and
executive committee (or any successors to such committees), to refrain from
negative communications about Executive to third parties.

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

         7.5 Survival. The provisions of Article 7 of this Agreement shall
survive the termination of this Agreement or the termination of the Executive's
employment with Employer, and shall remain in full force and effect thereafter.

                                    ARTICLE 8
                               GENERAL PROVISIONS

         8.1 Successors and Assigns; Beneficiary.

                  (a) For purposes of this Agreement, "Successor" shall mean any
         corporation, individual, group, association, partnership, limited
         liability company, firm, venture or other entity or person that,
         subsequent to the Effective Date, succeeds to the actual or practical
         ability to control (either immediately or with the passage of time)
         substantially all of Employer and/or Employer's business and/or assets,
         directly or indirectly, by merger, consolidation, recapitalization,
         purchase, liquidation, redemption, assignment, similar corporate
         transaction, operation of law or otherwise.

                  (b) This Agreement shall be binding upon and inure to the
         benefit of any Successor of Employer and each Subsidiary, and any such
         Successor shall absolutely and unconditionally assume all of Employer's
         and any Subsidiary's obligations hereunder. Upon Executive's written
         request, Employer shall seek to have any Successor, by agreement in
         form and substance satisfactory to Executive, assent to the fulfillment
         by Employer of their obligations under this Agreement. Failure to
         obtain such assent prior to the time a person or entity becomes a
         Successor (or where Employer does not have advance notice that a person
         or, entity may become a Successor, within one (1) business day after
         having notice that such person or entity may become or has become a
         Successor) shall constitute Good Reason for termination of employment
         by Executive pursuant to Article 6.

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

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

         8.2 Litigation Expense. If any party is made or shall become a party to
any litigation (including arbitration) commenced by or against the other party
involving the enforcement of any of the rights or remedies of such party, or
arising on account of a default of the other party in its performance of any of
the other





party's obligations hereunder, then the prevailing party in such litigation
shall receive from the other party all costs incurred by the prevailing party in
such litigation, plus reasonable attorneys' fees to be fixed by the court or
arbitrator (as applicable), with interest thereon from the date of judgment or
arbitrator's decision at the rate of eight percent (8%) or, if less, the maximum
rate permitted by law.

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

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

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

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

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

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

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

         8.10 Entire Agreement. This Agreement constitutes the entire agreement
and understanding between the parties hereto in reference to all the matters
herein agreed upon. This Agreement replaces in full all prior employment
agreements or understandings of the parties hereto, and any and all such prior
agreements or understandings are hereby rescinded by mutual agreement.

         8.11 Survival. The parties expressly acknowledge and agree that the
provisions of this Agreement which by their express or implied terms extend (a)
beyond the termination of Executive's employment hereunder (including without
limitation, the provisions relating to severance compensation and effects of a
Change in Control); or (b) beyond the termination of this Agreement (including,
without limitation the provisions in Article 7 relating to confidential
information, non-competition and non-solicitation), shall continue in full force
and effect notwithstanding Executive's termination of employment hereunder or
the termination of this Agreement, respectively.

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







         IN WITNESS WHEREOF, the parties hereto have caused this Executive
Employment Agreement to be duly executed and delivered on the day and year first
above written, but effective retroactively as of the Effective Date.

         EMPLOYER:                        G&K SERVICES, INC.


                                          By   /s/ Thomas Moberly
                                             -----------------------------------
                                             Thomas R. Moberly
                                             Its Chief Executive Officer

         EXECUTIVE:                          /s/ Jeffrey R. Kiesel
                                             -----------------------------------
                                             Jeffrey R. Kiesel

         Executive's Address:                104 Cherry Lane
                                             Wilton, Connecticut 06897

EX-10.2

                                                                    EXHIBIT 10.2

                                 AMENDMENT NO. 1

                                       TO

                                CREDIT AGREEMENT

                  THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT ("Amendment") is
entered into as of December 17, 2003 by and among G&K Services Inc. (the
"Domestic Borrower"), G&K Services Canada Inc. (the "Canadian Borrower", and
together with the Domestic Borrower, the "Borrowers"), the financial
institutions party to the below-defined "Credit Agreement" as lenders (the
"Lenders"), Wachovia Bank, National Association, as Syndication Agent (the
"Syndication Agent"), and Bank One, NA (Main Office Chicago), as Administrative
Agent (the "Administrative Agent"). Each capitalized term used herein and not
defined herein shall have the meaning ascribed thereto in the below-defined
Credit Agreement.

                                   WITNESSETH

                  WHEREAS, the Borrowers, the Lenders, the Syndication Agent and
the Administrative Agent are parties to a Credit Agreement dated as of June 25,
2002 (as the same may be amended, restated, supplemented or otherwise modified
from time to time, the "Credit Agreement"); and

                  WHEREAS, the Borrowers wish to amend the Credit Agreement in
certain respects and the Lenders and the Administrative Agent are willing to
amend the Credit Agreement pursuant to the terms of this Amendment;

                  NOW, THEREFORE, in consideration of the premises set forth
above, the terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Borrowers, the Lenders and the Administrative Agent agree as follows.

                  1. Amendments to Credit Agreement. Subject to the
satisfaction of the conditions precedent set forth in Section 2 below, the
Borrowers, the Lenders and the Administrative Agent agree that the Credit
Agreement is hereby amended as follows:

                  1.1 Clause (j) of the definition of "Debt" set forth in
Section 1.1 of the Credit Agreement is hereby amended to insert immediately at
the end thereof the following: "and all then outstanding Receivables Transaction
Attributed Indebtedness."

                  1.2 The definition of "L/C Commitment" set forth in Section
1.1 of the Credit Agreement is hereby amended in its entirety as follows:


                  "L/C Commitment" means the lesser of (a) Thirty Million
                  Dollars ($30,000,000) and (b) the Revolving Credit
                  Commitment.







                  1.3 Section 1.1 of the Credit Agreement is hereby amended to
insert alphabetically therein the following defined terms:

                  "Acquisition Period" means a period beginning with the month
                  in which the first Leverage Ratio Acquisition to occur after
                  December 17, 2003 is consummated and ending with the last
                  calendar day of the calendar month to occur eighteen months
                  after the month in which the Leverage Ratio Acquisition
                  occurred.

                  "Leverage Ratio Acquisition" means any acquisition of property
                  or other assets by either Borrower or any of their respective
                  Subsidiaries that is permitted under this Agreement and which,
                  after giving effect thereto, causes the Leverage Ratio, on a
                  pro forma basis on the date such acquisition is consummated,
                  to equal or exceed 3.00 to 1.00. In order for an acquisition
                  to constitute a Leverage Ratio Acquisition, the Borrowers
                  shall deliver to the Administrative Agent, prior to the
                  consummation of such acquisition, written evidence in form and
                  substance acceptable to the Administrative Agent supporting
                  the above-described pro forma calculation.

                  "Qualified Receivables Transaction" means any transaction or
                  series of transactions that may be entered into by the
                  Domestic Borrower or any Subsidiary pursuant to which the
                  Domestic Borrower or any Subsidiary may sell, convey or
                  otherwise transfer to a newly-formed Subsidiary or other
                  special-purpose entity, or any other Person, any accounts or
                  notes receivable and rights related thereto, provided that all
                  of the terms and conditions of such transaction or series of
                  transactions, including without limitation the amount and type
                  of any recourse to the Domestic Borrower or any Subsidiary
                  with respect to the assets transferred, are reasonably
                  acceptable to the Administrative Agent.

                  "Receivables Transaction Attributed Indebtedness" means the
                  amount of obligations outstanding under the legal documents
                  entered into as part of any Qualified Receivables Transaction
                  on any date of determination that would be characterized as
                  principal if such Qualified Receivables Transaction were
                  structured as a secured lending transaction rather than as a
                  purchase.

                  1.4 Each of Section 4.4(b)(i)(A), Section 4.4(b)(i)(B), and
Section 4.4(b)(ii) of the Credit Agreement is hereby amended in its entirety as
follows: "Intentionally Omitted".

                  1.5 Section 4.4(b)(iii) of the Credit Agreement is hereby
amended to delete therefrom the last sentence thereof and to substitute therefor
the following: "Notwithstanding the foregoing or anything to the contrary set
forth herein, (i) accounts or notes receivable sold by the Domestic Borrower in
connection with Qualified Receivables Transactions permitted under this
Agreement, including, without limitation, the requirements of Section 11.1(g),
shall not be subject to this Section 4.4(b)(iii) and no mandatory prepayment
shall be required in connection therewith, and (ii) upon and during the
continuance of a Default or an Event of Default, and upon notice from the
Administrative Agent, all Asset Sale Proceeds received by the Domestic Borrower
or any of its Subsidiaries shall be applied to make mandatory principal
prepayments of


                                       2




the Term Loans, such mandatory principal repayments to be made within three (3)
Business Days after the date of receipt of such Asset Sale Proceeds."

                  1.6 Section 5.1(c) of the Credit Agreement is hereby amended
to delete therefrom the pricing grid set forth therein and to substitute
therefor the following:



                                                                                 -----------------------------------
                                                                                         Applicable Margin
- ------------------ --------------------------------------------------------------- --------------- -----------------
  Pricing Level                            Leverage Ratio                            LIBOR Rate     Base Rate and
                                                                                        and         Canadian Base
                                                                                   Acceptance Fee        Rate
================== =============================================================== =============== =================
                                                                                          
        I                            Greater than 3.00 to 1.00                         2.000%           0.750%
- ------------------ --------------------------------------------------------------- --------------- -----------------

       II           Greater than or equal to 2.75 to 1.00 but less than or equal       1.750%           0.500%
                                          to 3.00 to 1.00
- ------------------ --------------------------------------------------------------- --------------- -----------------

       III          Greater than or equal to 2.25 to 1.00 but less than 2.75 to        1.500%           0.250%
                                                1.00
- ------------------ --------------------------------------------------------------- --------------- -----------------

       IV           Greater than or equal to 1.75 to 1.00 but less than 2.25 to        1.250%           0.000%
                                                1.00
- ------------------ --------------------------------------------------------------- --------------- -----------------

        V                              Less than 1.75 to 1.00                          1.000%           0.000%
- ------------------ --------------------------------------------------------------- --------------- -----------------


                  1.7 Section 5.3(a) of the Credit Agreement is hereby amended
to delete therefrom the pricing grid set forth therein and to substitute
therefor the following:



- --------------------- ---------------------------------------------------------------- -----------------------------
   Pricing Level                              Leverage Ratio                               Commitment Fee Rate
===================== ================================================================ =============================
                                                                                 
         I                               Greater than 3.00 to 1.00                                0.375%
- --------------------- ---------------------------------------------------------------- -----------------------------

         II            Greater than or equal to 2.75 to 1.00 but less than or equal               0.300%
                                              to 3.00 to 1.00
- --------------------- ---------------------------------------------------------------- -----------------------------

        III             Greater than or equal to 2.25 to 1.00 but less than 2.75 to               0.275%
                                                   1.00
- --------------------- ---------------------------------------------------------------- -----------------------------

         IV             Greater than or equal to 1.75 to 1.00 but less than 2.25 to               0.250%
                                                   1.00
- --------------------- ---------------------------------------------------------------- -----------------------------

         V                                Less than 1.75 to 1.00                                  0.225%
- --------------------- ---------------------------------------------------------------- -----------------------------


                  1.8 Section 10.1 of the Credit Agreement is hereby amended in
its entirety as follows:

                  Section 10.1 Leverage Ratio. As of any fiscal quarter end,
                  permit the ratio of (a) Total Debt on such date to (b) EBITDA
                  for the period of four (4) consecutive fiscal quarters ending
                  on or immediately prior to such quarter end to be greater than
                  (1) 3.25 to 1.00 if such fiscal quarter ends at any time other
                  than during the Acquisition Period and (2) 3.50 to 1.00 if
                  such fiscal quarter ends during the Acquisition Period.


                                       3




                   1.9 Sections 11.1(f) and (g) of the Credit Agreement are
hereby amended in their entirety as follows:

                  (f) Guaranty Obligations in favor of the Administrative Agent,
                  for the benefit of the Agents and the Lenders, and Guaranty
                  Obligations with respect to Debt permitted pursuant to
                  subsections (b) through (e) of this Section 11.1;

                  (g) Receivables Transaction Attributed Indebtedness incurred
                  by the Domestic Borrower or for which the Domestic Borrower is
                  otherwise obligated pursuant to Qualified Receivables
                  Transactions in an aggregate amount not to exceed $60,000,000
                  at any time;

                  1.10 Section 11.1(j) of the Credit Agreement is hereby
amended in its entirety as follows:

                  (j) Debt not otherwise permitted by this Section 11.1 in an
aggregate amount not to exceed the greater of:

                  (1) ten percent (10%) of Net Worth on any date of
                  determination; and

                  (2) $100,000,000.

                  1.11 Section 11.2 of the Credit Agreement is hereby amended to
insert immediately at the end thereof the following clause (i): "(i) Liens in
connection with Receivables Transaction Attributed Indebtedness incurred by the
Domestic Borrower or for which the Domestic Borrower is otherwise obligated
pursuant to Qualified Receivables Transactions that are permitted under Section
11.1(g)."

                  1.12 Section 11.3(c)(viii) of the Credit Agreement is hereby
amended in its entirety as follows: "Intentionally Omitted".

                  1.13 Section 11.3(c)(ix) of the Credit Agreement is hereby
amended in its entirety as follows: "Intentionally Omitted".

                 1.14 Section 11.3 of the Credit Agreement is hereby amended to
insert immediately at the end thereof the following clause (h): "(h) investments
comprised of capital contributions (whether in the form of cash, a note, or
other assets) to a Subsidiary or other special-purpose entity created solely to
engage in a Qualified Receivables Transaction permitted hereunder or otherwise
resulting from transfers of assets permitted under this Agreement to such a
special-purpose entity."

                   1.15 Section 11.5(d) of the Credit Agreement is hereby
amended in its entirety as follows:

                  (d) the sale or discount without recourse to:



                                       4




                           (1) the Domestic Borrower, or

                           (2) any Subsidiary of the Domestic Borrower other
                  than a special-purpose entity created solely to engage in a
                  Qualified Receivables Transaction permitted hereunder,

                  of accounts receivable arising in the ordinary course of
                  business in connection with the compromise or collection
                  thereof, or any sale or contribution of accounts or notes
                  receivable pursuant to a Qualified Receivables Transaction
                  permitted under this Agreement; provided, however, that the
                  foregoing shall not apply to recourse to the Domestic Borrower
                  or any non-special-purpose entity Subsidiary resulting from
                  (x) the breach of any customary representation or warranty
                  made by the Domestic Borrower or such Subsidiary in the
                  ordinary course of establishing and maintaining such Qualified
                  Receivables Transaction and transferring assets as
                  contemplated thereby or (y) returns, allowances, net credits
                  and other non-cash reductions related to accounts or notes
                  receivable subject to such Qualified Receivables Transaction,
                  including, without limitation, the goods or services the sale
                  of which gave rise to such accounts or notes receivable;

                  1.16 Section 15.10(d) of the Credit Agreement is hereby
amended to insert immediately at the end thereof the following: "Notwithstanding
anything herein to the contrary, confidential information shall not include, and
each party hereto (and each employee, representative or other agent of any party
hereto) may disclose to any and all Persons, without limitation of any kind, the
U.S. federal income tax treatment and U.S. federal income tax structure of the
transactions contemplated hereby and all materials of any kind (including
opinions or other tax analyses) that are or have been provided to such party
relating to such tax treatment or tax structure, and it is hereby confirmed that
each party hereto has been authorized to make such disclosures since the
commencement of discussions regarding the transactions contemplated hereby."

                   2. Conditions to Effectiveness. This Amendment shall not
become effective unless:

                   2.1 the Administrative Agent shall have received counterparts
of this Amendment executed by each Borrower, the Administrative Agent and the
Required Lenders;

                  2.2 the Administrative Agent shall have received from the
Borrowers for the ratable benefit of the Lenders who deliver their executed
signature pages to this Amendment to the Administrative Agent by 5:00 p.m.
Chicago time on December 12, 2003 a non-refundable amendment fee in immediately
available funds equal to 0.05% times the aggregate amount of the Revolving
Credit Commitments of such Lenders as in effect on such date. The Administrative
Agent's receipt of any signature page by such 5:00 p.m. Chicago time deadline
shall be determined by the Administrative Agent in its sole reasonable judgment;
and

                  2.3 the Administrative Agent shall have received a
Reaffirmation of Guaranty in substantially the form attached hereto as Exhibit
A.

                                       5





                   3. Representations and Warranties of Each Borrower. Each
Borrower represents and warrants as follows:

                   3.1 Such Borrower has the legal power and authority to
execute and deliver this Amendment and the officers of such Borrower executing
this Amendment have been duly authorized to execute and deliver the same and
bind such Borrower with respect to the provisions hereof.

                   3.2 This Amendment and the Credit Agreement as previously
executed and as amended hereby constitute legal, valid and binding obligations
of such Borrower, enforceable against it in accordance with their terms (except
as enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditor's rights generally).

                   3.3 Such Borrower hereby reaffirms all covenants,
representations and warranties made in the Credit Agreement and the other Loan
Documents and agrees and confirms that all such representations and warranties
are true and correct in all material respects as of the date of this Amendment
except for changes thereto reflecting events, conditions or transactions
permitted or not prohibited by the Credit Agreement or the other Loan Documents;
provided, that the words "in all material respects" in this clause (c) shall, as
to any representation or warranty that contains a materiality standard, operate
without duplication of such standard.

                   3.4 Such Borrower has caused to be conducted a thorough
review of the terms of the Credit Agreement and the other Loan Documents and
such Borrower's and its Subsidiaries' operations since the Closing Date and, as
of the date hereof, there are no Defaults or Events of Default thereunder.

                   4. Reference to the Effect on the Credit Agreement.

                   4.1 Upon the effectiveness of this Amendment pursuant to
Section 2 above, on and after the date hereof, each reference in the Credit
Agreement to "this Credit Agreement," "hereunder," "hereof," "herein" or words
of like import shall mean and be a reference to the Credit Agreement as modified
hereby.

                   4.2 Except as specifically waived or modified above, the
Credit Agreement and all other documents, instruments and agreements executed
and/or delivered in connection therewith, shall remain in full force and effect,
and are hereby ratified and confirmed.

                   4.3 The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power of remedy of the Administrative Agent or the Lenders, nor
constitute a waiver of any provision of the Credit Agreement or any other
documents, instruments and agreements executed and/or delivered in connection
therewith.

                   5. Costs and Expenses. The Borrowers jointly and severally
agree to pay all reasonable costs, fees and out-of-pocket expenses (including
attorneys' fees and expenses charged to the Administrative Agent) incurred by
the Administrative Agent in connection with the preparation, arrangement,
execution and enforcement of this Amendment.


                                       6





                   6. Governing Law. THIS AMENDMENT SHALL BE GOVERNED IN
ACCORDANCE WITH THE INTERNAL LAWS, AS OPPOSED TO THE CONFLICTS OF LAW
PROVISIONS, OF THE STATE OF NORTH CAROLINA.

                   7. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.

                   8. Counterparts. This Amendment may be executed in any number
of counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Agreement by signing any such
counterpart. A facsimile signature page hereto sent to the Administrative Agent
or the Administrative Agent's counsel shall be effective as a counterpart
signature provided each party executing such a facsimile counterpart agrees, if
requested, to deliver originals thereof to the Administrative Agent.

                   9. No Strict Construction. The parties hereto have
participated jointly in the negotiation and drafting of this Amendment, the
Credit Agreement and the other Loan Documents. In the event an ambiguity or
question of intent or interpretation arises, this Amendment, the Credit
Agreement and the other Loan Documents shall be construed as if drafted jointly
by the parties hereto and no presumption or burden of proof shall arise favoring
or disfavoring any party by virtue of the authorship of any provisions of this
Amendment, the Credit Agreement or any of the other Loan Documents.

               The remainder of this page is intentionally blank.



                                       7







                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed under seal by their duly authorized officers, all as of
the day and year first written above.

                                         DOMESTIC BORROWER:

                                         G&K SERVICES INC., as Domestic Borrower

                                         By ____________________________
                                            Name:
                                            Title:









                                           CANADIAN BORROWER:

                                           G&K SERVICES CANADA INC., as Canadian
                                           Borrower

                                           By ____________________________
                                              Name:
                                              Title:








                                             BANK ONE, NA (MAIN OFFICE CHICAGO),
                                             as Administrative Agent and Lender

                                             By ____________________________
                                                Name:
                                                Title:








                                               WACHOVIA BANK, NATIONAL
                                               ASSOCIATION, as Syndication Agent
                                                and Lender

                                               By _________________________
                                                  Name:
                                                  Title:








                                               HARRIS TRUST AND SAVINGS BANK,
                                               as Lender

                                               By _________________________
                                                  Name:
                                                  Title:








                                               WELLS FARGO BANK, N.A., as Lender

                                               By ____________________________
                                                  Name:
                                                  Title:








                                               SUNTRUST BANK, as Lender

                                               By ____________________________
                                                  Name:
                                                  Title:








                                               BANK OF TOKYO-MITSUBISHI, LTD.,
                                               Chicago Branch, as Lender

                                               By ____________________________
                                                  Name:
                                                  Title:








                                               THE ROYAL BANK OF SCOTLAND PLC,
                                               as Lender

                                               By ____________________________
                                                  Name:
                                                  Title:








                                                COMERICA BANK, as Lender

                                                By ____________________________
                                                   Name:
                                                   Title:








                                                 REGIONS BANK, as Lender

                                                 By ____________________________
                                                    Name:
                                                    Title:








                                                 U.S. BANK NATIONAL ASSOCIATION,
                                                 as Lender

                                                 By ____________________________
                                                    Name:
                                                    Title:








                                                BANK OF AMERICA, N.A., as Lender

                                                By: ____________________________
                                                    Name:
                                                    Title:








                                              ALLIED IRISH BANKS, PLC, as Lender

                                              By: ____________________________
                                                  Name:
                                                  Title:


                                              By: ____________________________
                                                  Name:
                                                  Title:









                                               THE NORINCHUKIN BANK, NEW YORK
                                               BRANCH, as Lender

                                               By: _____________________________
                                                   Name:________________________
                                                   Title:_______________________









                                           THE NORTHERN TRUST COMPANY, as Lender

                                           By:____________________________
                                              Name:_______________________
                                              Title:______________________









                                                BANK HAPOALIM B.M., as Lender

                                                By:_____________________________
                                                   Name:________________________
                                                   Title:_______________________


                                                By:_____________________________
                                                   Name:________________________
                                                   Title:_______________________








                                    EXHIBIT A
                            REAFFIRMATION OF GUARANTY
                                    ATTACHED

EX-31.1

                                                                    EXHIBIT 31.1




CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECURITIES EXCHANGE ACT
RULE 13A-15(e)/15D-15(e) AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002


I, Richard L. Marcantonio, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of G&K Services,
         Inc.;

2.       Based on my knowledge, this report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statement made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this report, fairly present in all material
         respects the financial condition, results of operations and cash flows
         of the registrant as of, and for, the periods presented in this report;

4.       G&K Services, Inc.'s other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for G&K
         Services, Inc., and have:

                  (a) designed such disclosure controls and procedures, or
         caused such disclosure controls and procedures to be designed under our
         supervision, to ensure that material information relating to G&K
         Services, Inc., including its consolidated subsidiaries, is made known
         to us by others within those entities, particularly during the period
         in which this report is being prepared;

                  (b) evaluated the effectiveness of G&K Services, Inc.'s
         disclosure controls and procedures and presented in this report our
         conclusions about the effectiveness of the disclosure controls and
         procedures, as of the end of the period covered by this report based on
         such evaluation; and

                  (c) disclosed in this report any change in G&K Services,
         Inc.'s internal control over financial reporting that occurred during
         G&K Services, Inc.'s most recent fiscal quarter that has materially
         affected, or is reasonably likely to materially affect, G&K Services,
         Inc.'s internal control over financial reporting;

5.       G&K Services, Inc.'s other certifying officer and I have disclosed,
         based on our most recent evaluation of internal control over financial
         reporting, to G&K Services, Inc.'s auditors and the audit committee of
         G&K Services, Inc.'s board of directors (or persons performing the
         equivalent functions):

                  (a) all significant deficiencies and material weaknesses in
         the design or operation of internal control over financial reporting
         which are reasonably likely to adversely affect G&K Services, Inc.'s
         ability to record, process, summarize and report financial information;
         and

                  (b) any fraud, whether or not material, that involves
         management or other employees who have a significant role in G&K
         Services, Inc.'s internal control over financial reporting.


Date: February 5, 2004
                                          By:  /s/ Richard L. Marcantonio
                                               ---------------------------------
                                               Richard L. Marcantonio, Chief
                                                 Executive Officer (Principal
                                                 Executive Officer)

EX-31.2

                                                                    EXHIBIT 31.2




CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECURITIES EXCHANGE ACT
RULE 13A-15(e)/15D-15(e) AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002


I, Jeffrey L. Wright, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of G&K Services,
         Inc.;

2.       Based on my knowledge, this report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statement made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this report, fairly present in all material
         respects the financial condition, results of operations and cash flows
         of the registrant as of, and for, the periods presented in this report;

4.       G&K Services, Inc.'s other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for G&K
         Services, Inc., and have:

                  (a) designed such disclosure controls and procedures, or
         caused such disclosure controls and procedures to be designed under our
         supervision, to ensure that material information relating to G&K
         Services, Inc., including its consolidated subsidiaries, is made known
         to us by others within those entities, particularly during the period
         in which this report is being prepared;

                  (b) evaluated the effectiveness of G&K Services, Inc.'s
         disclosure controls and procedures and presented in this report our
         conclusions about the effectiveness of the disclosure controls and
         procedures, as of the end of the period covered by this report based on
         such evaluation; and

                  (c) disclosed in this report any change in G&K Services,
         Inc.'s internal control over financial reporting that occurred during
         G&K Services, Inc.'s most recent fiscal quarter that has materially
         affected, or is reasonably likely to materially affect, G&K Services,
         Inc.'s internal control over financial reporting;

5.       G&K Services, Inc.'s other certifying officer and I have disclosed,
         based on our most recent evaluation of internal control over financial
         reporting, to G&K Services, Inc.'s auditors and the audit committee of
         G&K Services, Inc.'s board of directors (or persons performing the
         equivalent functions):

                  (a) all significant deficiencies and material weaknesses in
         the design or operation of internal control over financial reporting
         which are reasonably likely to adversely affect G&K Services, Inc.'s
         ability to record, process, summarize and report financial information;
         and

                  (b) any fraud, whether or not material, that involves
         management or other employees who have a significant role in G&K
         Services, Inc.'s internal control over financial reporting.


Date: February 5, 2004
                                          By: /s/ Jeffrey L. Wright
                                              ----------------------------------
                                              Jeffrey L. Wright, Chief Financial
                                                Officer and Secretary
                                                (Principal Financial Officer)

EX-32.1

                                                                    EXHIBIT 32.1



CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS
ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I, Richard L. Marcantonio, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of G&K Services, Inc.;

2.   Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     quarterly report.

Date: February 5, 2004

                                          By:  /s/ Richard L. Marcantonio
                                               ---------------------------------
                                               Richard L. Marcantonio, Chief
                                                 Executive Officer (Principal
                                                 Executive Officer)

EX-32.2

                                                                    EXHIBIT 32.2





CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS
ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I, Jeffrey L. Wright, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of G&K Services, Inc.;

2.   Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     quarterly report.

Date: February 5, 2004

                                          By: /s/ Jeffrey L. Wright
                                              ---------------------------------
                                              Jeffrey L. Wright, Chief Financial
                                                  Officer and Secretary
                                                  (Principal Financial Officer)