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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 8, 1998
CINTAS CORPORATION
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(Exact name of registrant as specified in its charter)
Washington 0-11399 31-1188630
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
6800 Cintas Boulevard, P.O. Box 625737, Cincinnati, Ohio 45262-5737
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(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code (513) 459-1200
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(Former name or former address, if changed since last report.)
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Item 2. Acquisition or Disposition of Assets.
On April 8, 1998, Cintas Corporation completed the acquisition of Uniforms
To You and Company and certain of its affiliates ("UTY"), headquartered in
Chicago, Illinois. Cintas paid an adjusted purchase price of $168,699,000 in the
acquisition. The purchase price was paid with 3,959,262 shares of Cintas common
stock based upon the average closing price of Cintas common stock over an agreed
upon ten (10) day measurement period as set forth in an Agreement and Plan of
Merger and Reorganization dated as of January 12, 1998, as amended. UTY designs,
manufactures and provides uniforms to over twenty-five thousand customers in the
food and hospitality, transportation and entertainment industries.
The transaction will be accounted for as a pooling of interest and Cintas
will restate its previously reported results to include the results of UTY.
In the quarter ending May 31, 1998, UTY will record a large one-time
expense coinciding with the effective date of the merger due to special charges
which are triggered by this transaction. These one-time expenses should cause a
dilutive impact of approximately $.03 per share on Cintas' expected fourth
quarter earnings. However, including these one-time charges, Cintas' fiscal year
1998 results are expected to increase on a pro forma basis, by approximately
$.02 per share. The Company expects that earnings will be positively impacted as
a result of the acquisition for the fiscal year ending May 31, 1999 and
thereafter.
The Private Securities Litigation Reform Act of 1995 provides a safe harbor
from civil litigation for forward-looking statements. This Form 8-K contains
forward-looking statements that reflect the Company's current views as to future
events and financial performance with respect to the acquisition of UTY. These
statements are subject to risks and uncertainties which could cause actual
results to differ materially from those set forth in this Form 8-K. Factors
that might cause such a difference include the possibility of greater than
anticipated costs in closing the transaction, lower sales volumes for UTY
customers, higher assumed sourcing or distribution costs of products sold to UTY
customers and the reactions of competitors to the transaction in terms of price
and service. Forward-looking statements speak only as of the date made. Cintas
undertakes no obligation to update any forward-looking statements to reflect the
events or circumstances arising after the date of which they are made.
Item 7. Financial Statements. Pro Forma Financial Information and Exhibits.
(a) and (b) No financial statements and no pro forma financial
information are required under Regulation S-X.
(c) Exhibits
2. Agreement and Plan of Merger and Reorganization dated
as of January 12, 1998
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CINTAS CORPORATION.
Date: April 23, 1998 By: /s/ William C. Gale
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William C. Gale, Vice President -
Finance and Chief Financial Officer
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Exhibit 2
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
UNIFORMS TO YOU AND COMPANY
CINTAS CORPORATION
CINTAS MERGER SUB, INC. - ILLINOIS
INTEGRITY UNIFORM CO.
PRIDE MANUFACTURING COMPANY
M. FRANK & CO.
UTY CANADA, LTD.
WORKING CLASS, LTD.
MICHAEL/KEITH PARTNERSHIP
UTY MEXICO PARTNERS
JANUARY 12, 1998
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TABLE OF CONTENTS
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1. THE ACQUISITION..........................................................................................2
1.1 Transactions...................................................................................2
1.2 Consideration..................................................................................2
1.3 Adjustments to the Purchase Price..............................................................3
1.4 Conversion of Shares...........................................................................4
1.5 Tax-free Reorganizations.......................................................................5
1.6 Pooling........................................................................................5
1.7 Exchange for Consideration.....................................................................6
1.8 Closing........................................................................................6
1.9 Articles of Incorporation and By-laws of the Surviving Corporations............................6
1.10 Board of Directors and Officers................................................................6
1.11 Treatment of Stock Options and Warrants........................................................7
2. REPRESENTATIONS AND WARRANTIES OF
THE ACQUIRED COMPANIES AND THE SHAREHOLDERS..............................................................7
2.1 Organization...................................................................................7
2.2 Capitalization.................................................................................7
2.3 Authorization..................................................................................8
2.4 No Violation; Consents and Approvals...........................................................8
2.5 Subsidiaries and Other Capital Stock...........................................................9
2.6 Financial Statements...........................................................................9
2.7 Absence of Undisclosed Liabilities............................................................10
2.8 Absence of Certain Changes or Events..........................................................10
2.9 Title to and Condition of Non-Real Estate Assets..............................................10
2.10 Real Property.................................................................................11
2.11 Trademarks and Similar Rights.................................................................11
2.12 Insurance.....................................................................................12
2.13 Contracts and Agreements......................................................................12
2.14 Bank Accounts.................................................................................12
2.15 Litigation....................................................................................12
2.16 Employee Benefit Plans........................................................................13
2.17 Employee Compensation.........................................................................13
2.18 Collective Bargaining, Employment and Non-Competition Agreements..............................13
2.19 Purchase Orders...............................................................................14
2.20 Accounts Receivable...........................................................................14
2.21 Licenses and Permits..........................................................................14
2.22 Employee Matters..............................................................................14
2.23 Taxes and Tax Returns.........................................................................15
2.24 Transactions With Affiliates..................................................................15
2.25 Compliance with Applicable Law................................................................16
2.26 Customer Contracts............................................................................16
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2.27 Employee or Supplier Problems.................................................................17
2.28 SEC Disclosure................................................................................17
2.29 General Disclosure Matters....................................................................17
3. REPRESENTATIONS AND WARRANTIES OF
CINTAS AND CINTAS SUB...................................................................................17
3.1 Organization..................................................................................17
3.2 Capitalization................................................................................18
3.3 Authorization.................................................................................18
3.4 No Violation; Consents and Approvals..........................................................18
3.5 SEC Filings and Financial Statements..........................................................19
3.6 Transaction Stock.............................................................................20
3.7 Litigation....................................................................................20
3.8 SEC Disclosure................................................................................20
3.9 Absence of Undisclosed Liabilities............................................................20
3.10 Absence of Certain Changes or Events..........................................................20
3.11 General Disclosure Matters....................................................................20
4. COVENANTS OF THE SHAREHOLDERS AND THE ACQUIRED ENTITIES.................................................21
4.1 Announcements and Communications..............................................................21
4.2 Fees for Professional Services................................................................21
4.3 Meetings......................................................................................21
4.4 Corporate Transactions........................................................................21
4.5 Conduct of Business Pending the Merger........................................................22
4.6 Cause Conditions to be Satisfied..............................................................23
4.7 Notice of Certain Actions.....................................................................24
4.8 Delivery of Disclosure Schedules..............................................................24
5. COVENANTS OF CINTAS AND CINTAS SUB......................................................................24
5.1 Announcements and Communications..............................................................24
5.2 Corporate Transactions........................................................................24
5.3 Ordinary Course of Business...................................................................24
5.4 Cause Conditions to be Satisfied..............................................................24
5.5 Adherence to Confidentiality Agreement........................................................24
5.6 Notice of Certain Actions. ..................................................................25
6. CINTAS COMMON STOCK - REGISTRATION RIGHTS...............................................................25
6.1 Cintas Common Stock to be Issued..............................................................25
6.2 Restrictive Legend............................................................................25
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6.3 Information...................................................................................25
6.4 Transactions in Cintas Common Stock...........................................................25
6.5 Restricted Securities.........................................................................26
6.6 Registration Rights...........................................................................26
6.7 Post Effective Matters........................................................................26
6.8 Stock Exchange Listing........................................................................27
6.9 Registration Expenses.........................................................................27
6.10 Additional Covenants..........................................................................27
6.11 Indemnification...............................................................................29
7. CINTAS DUE DILIGENCE....................................................................................31
7.1 Cintas Due Diligence..........................................................................31
7.2 Supplemental Disclosure.......................................................................32
8. CONDITIONS PRECEDENT....................................................................................32
8.1 Conditions Precedent to Cintas' and Cintas Sub's Obligations..................................32
8.2 Conditions Precedent to the Shareholders' Obligations.........................................34
8.3 Hart-Scott-Rodino.............................................................................35
9. DOCUMENTS TO BE DELIVERED AT CLOSING....................................................................35
9.1 Documents to be Delivered by the Acquired Entities and the
Shareholders at the Closing...................................................................35
9.2 Documents to be Delivered by Cintas and Cintas Sub at the Closing.............................36
10. INDEMNIFICATION AND ESCROW..............................................................................37
10.1 Survival of Representations and Warranties....................................................37
10.2 Indemnification...............................................................................38
10.3 Basket and Maximum Liability..................................................................39
10.4 Escrowed Shares; Indemnification Offsets......................................................39
10.5 Indemnification Procedure; Arbitration........................................................39
10.6 Escrow Not to Limit Indemnification...........................................................41
10.7 Indemnification for Registration Statement Matters............................................41
10.8 Shareholder Contributions.....................................................................41
11. CERTAIN AGREEMENTS......................................................................................42
11.1 Confidential Information......................................................................42
11.2 Preparation of Registration Statement.........................................................42
11.3 Termination...................................................................................42
11.4 Tax Compliance; Final Tax Return..............................................................43
11.5 Environmental Audit Follow-Up.................................................................43
11.6 Shareholder Guarantees........................................................................44
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11.7 Post Closing Dividends........................................................................44
12. MISCELLANEOUS...........................................................................................44
12.1 Expenses......................................................................................44
12.2 Notices.......................................................................................44
12.3 Entire Agreement..............................................................................45
12.4 Headings......................................................................................45
12.5 Successors in Interest........................................................................45
12.6 Counterparts..................................................................................46
12.7 Governing Law.................................................................................46
12.8 Brokerage.....................................................................................46
12.9 Waiver........................................................................................46
12.10 Remedies for Breach; Specific Performance.....................................................46
12.11 Publicity.....................................................................................47
12.12 Construction..................................................................................47
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of
January 12, 1998 (the "Agreement"), is made and entered into by and among Cintas
Corporation, a Washington corporation ("Cintas"), Cintas Merger Sub,
Inc.--Illinois, an Illinois corporation and a direct subsidiary of Cintas
("Cintas Sub"), Uniforms To You and Company, an Illinois corporation (the
"Company"), Integrity Uniform Co., a Delaware corporation, Pride Manufacturing
Company, a Georgia corporation, M. Frank & Co., an Illinois corporation,
(collectively, the "Additional S Corporations"), UTY Canada Ltd., a corporation
organized under the laws of the province of Quebec ("Canada Sub," and with the
Company and the Additional S Corporations, the "Acquired Companies"), Working
Class, Ltd., an Illinois limited partnership, Michael/Keith Partnership, an
Illinois general partnership and UTY Mexico Partners, an Illinois general
partnership (collectively the "Partnerships," and with the Acquired Companies,
the "Acquired Entities") (the Company, Cintas Sub and the Additional S
Corporations being hereinafter sometimes referred to as the "Constituent
Corporations"), and the shareholders and partners of the Acquired Entities
identified on the signature pages hereto (each individually a "Shareholder" and
collectively the "Shareholders"). For purposes of this Agreement, the term
"Shareholder" includes each person who holds an option under the Phantom Stock
Plan (later defined); provided, however, that if an optionee does not exercise
his option prior to the Closing, he shall not be deemed to be a Shareholder
hereunder.
WHEREAS, (i) the Boards of Directors of Cintas, the Acquired Companies
and Cintas Sub and (ii) the general partners of the Partnerships have approved
or will approve the mergers and reorganizations involving the Acquired Entities
prior to the Preliminary Review Termination Date (later defined) on the terms
and conditions set forth in this Agreement in accordance with the Articles of
Merger to be delivered at the Closing (later defined) (the "Articles of
Merger"), which state, among other things, the manner and basis of exchanging
the shares of issued and outstanding Company Common Stock, without par value
(the "Company Common Stock"), for shares of Common Stock, no par value, of
Cintas (the "Cintas Common Stock")(the "Parent Merger"); the subsequent merger
and reorganization of the Additional S Corporations with and into the Company
again in exchange for Cintas Common Stock (the "S Corporation Merger" and with
the Parent Merger, the "Mergers"); the acquisition of the outstanding capital
stock of Canada Sub again in exchange for Cintas Common Stock (the "Canada
Reorganization"); and the acquisition of outstanding interests of the
Partnerships (the "Interests") again in exchange for Cintas Common Stock (the
"Partnership Acquisition," and with the Parent Merger, the S Corporation Merger
and the Canada Reorganization, the "Transactions");
WHEREAS, the parties' obligations under this Agreement are conditioned
upon the Mergers being declared effective under applicable law.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements herein contained, the parties hereto agree as follows:
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1. THE ACQUISITION
1.1 TRANSACTIONS. Cintas and Cintas Sub will acquire the Acquired
Entities as follows:
(a) Subject to the terms and conditions of this Agreement,
Cintas Sub shall be merged with and into the Company, the separate existence of
Cintas Sub shall cease and the Company shall be the surviving corporation in the
Parent Merger and shall continue its corporate existence under the laws of the
State of Illinois. The Parent Merger shall be consummated when a properly
executed and certified copy of Articles of Merger are filed in accordance with
the Illinois Business Corporation Act (the "Illinois Corporation Act") with the
Secretary of State of the State of Illinois, and the Illinois Secretary of State
issues a Certificate of Merger (the "Parent Merger Effective Time")(the time
period immediately prior to the Parent Merger Effective Time is sometimes
referred to herein as the "Merger Closing Time"). From and after the Parent
Merger Effective Time, the Company, as surviving corporation, shall possess all
of the rights, privileges, powers and franchises of a public as well as of a
private nature, and be subject to all the restrictions, disabilities and duties,
of each of the Constituent Corporations to the Parent Merger, all as set forth
in Sections 5/11.05 et seq. of the Illinois Corporation Law.
(b) Immediately following the consummation of the Parent Merger, the
Additional S Corporations shall be merged with and into the Company, the
separate existence of each of the Additional S Corporations shall cease and the
Company shall be the surviving corporation in each such S Corporation Merger and
shall continue its corporate existence under the laws of the State of Illinois.
The S Corporation Merger shall be consummated when properly executed and
certified copies of the appropriate Articles of Merger is filed in accordance
with the Illinois Corporation Act and the jurisdiction of organization of each
of the Additional S Corporations with the Secretary of State of Illinois and
with such other jurisdictions and Secretaries of State as are applicable and
when each such Secretary of State issues a Certificate of Merger (collectively,
the time when such documentation is last filed hereafter, the "S Corporation
Merger Effective Time"). From and after the S Corporation Merger Effective Time,
the Company, as the surviving corporation, shall possess all of the rights,
privileges, powers and franchises of a public as well as of a private nature,
and be subject to all the restrictions, disabilities and duties, of each of the
Constituent Corporations to the S Corporation Merger all as set forth in
applicable law.
(c) Simultaneously with the S Corporation Merger, the Company shall
acquire (i) all outstanding capital stock of Canada Sub in the Canada
Reorganization and (ii) all Interests in the Partnership Acquisition.
1.2 CONSIDERATION. The aggregate consideration to be paid by Cintas and
Cintas Sub to the Shareholders in connection with the Transactions shall be
Cintas Common Stock with an aggregate fair market value (determined in
accordance with Section 1.4) of One Hundred Seventy Five Million Dollars
($175,000,000) subject to adjustment as set forth in Section 1.3 herein (the
"Purchase Price").
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1.3 ADJUSTMENTS TO THE PURCHASE PRICE. For purposes of this Section
1.3, the term "the Company" includes all of the Acquired Entities and Sharprint
Silkscreen & Graphics, Inc. ("Sharprint") collectively.
(a) The Purchase Price is based upon the assumption that,
as of the Closing Date, the Company's net worth (the book value of all Company
assets less liabilities), as determined in accordance with generally accepted
accounting principles consistently applied, is at least equal to (i) the
Company's represented net worth as set forth on the Company's September 30, 1997
combined balance sheet of Thirty-Eight Million Nine Hundred Forty Seven Thousand
Dollars ($38,947,000) (of which Four Hundred Four Thousand Dollars ($404,000)
represents the net worth of Sharprint at September 30, 1997) plus (ii) the
aggregate net earnings of the Company from October 1, 1997 through the Closing
Date (including an accrual for tax return preparation expenses as set forth in
Section 11.4 hereof) as determined in accordance with generally accepted
accounting principles consistently applied, less (iii) all dividend and other
distributions to Shareholders from October 1, 1997 through the Closing Date,
whether regular or special, which shall include a dividend in the amount of
approximately Two Million Six Hundred Fifty Thousand Dollars ($2,650,000) paid
in December 1997 and all other dividends paid or accrued in accordance with
Section 4.5(b) and plus (iv) the impact of option exercises resulting from the
exercise of options under the Phantom Stock Plan provided such impact increases
the net worth (collectively the "Represented Net Worth"). If such actual net
worth on the Closing Date is not at least equal to the Represented Net Worth,
the Purchase Price shall be decreased. The adjustment shall be equal to the
difference between the Company's actual net worth as of the Closing Date and the
Represented Net Worth. The Purchase Price will decrease accordingly, dollar for
dollar, and the number of shares of Cintas Common Stock to be issued pursuant to
Section 1.4 hereof will be adjusted accordingly at a conversion rate equal to
the Cintas Share Value (later defined).
The computation of the Company's actual Net Worth as of the Closing
Date shall initially be made by the Shareholders and delivered to Cintas within
forty-five (45) days of Closing along with all of the Company's work papers and
similar documentation used in making such determination. The determination of
net worth shall be based upon the physical inventory observed by the Company's
accountants for the Company's December 31, 1997 fiscal year-end rolled-forward
through the Closing Date in a manner acceptable to Cintas' outside accountants,
Ernst & Young LLP. An Ernst & Young LLP representative satisfactory to Cintas
shall be entitled to participate as an observer in the taking of the Company's
fiscal year-end physical inventory. For purposes of this Agreement, inventory
items shall be valued based upon the Company's cost and net of reserves computed
consistently with prior and historical practices. If Cintas objects to the
computation of Company net worth as of the Closing Date made by the
Shareholders, then Cintas shall notify the Shareholders of such objection within
ten (10) business days of receipt of such computation. If the parties cannot
resolve such objections within thirty (30) days of such notification by Cintas,
then Cintas and the Shareholders shall jointly select an accountant or
accounting firm to resolve such matters which may, if Cintas in its reasonable
determination feels to be necessary, undertake an audit of the Company as of the
Closing Date, without giving effect to the consummation of the Transactions. If
no accounting firm can be agreed upon, Arthur Andersen LLP shall be used. The
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decision of such accounting firm shall be binding upon all of the parties
hereto. If the accountant or accounting firm selected determines that the
Company's actual net worth on the Closing Date was five percent (5%) or more
less than that initially determined by the Shareholders, then the Shareholders
shall pay the reasonable fees and expenses of such accounting firm. In all other
instances the reasonable fees and expenses of such firm shall be paid by Cintas.
(b) The Purchase Price shall be reduced by an amount equal to the
estimated dollar cost of fulfilling the recommendations set forth in the
environmental audits conducted in accordance with Section 7.1 subject to the
terms and limitations specifically set forth in Section 11.5.
(c) The number of shares of Cintas Common Stock issued to the
Shareholders in the Transactions shall also be adjusted accordingly if the
record or payment date for a stock split, stock dividend or similar event
becomes effective between the date of this Agreement and the Closing Date.
(d) Any amounts paid to dissenting Shareholders who exercise their
appraisal rights under applicable Illinois or Georgia law shall reduce the
Purchase Price and the number of shares of Cintas Common Stock to be issued
pursuant to Section 1.4 below.
(e) The Purchase Price shall be reduced by an amount equal to the
aggregate consideration paid pursuant to Section 8.1(n) hereof to the
stockholders of the entities listed on Attachment 3.
1.4 CONVERSION OF SHARES. Simultaneously with the Transactions, as a
result of the Mergers, the Canada Reorganization and the Partnership
Acquisition, and without any further action on the part of any of Cintas, Cintas
Sub, the Company, the Additional S Corporations, the Partnerships, Canada Sub or
the Shareholders (except such actions as are contemplated hereby), all
outstanding shares of capital stock of the Company, Additional S Corporations
and Canada Sub, except with respect to shares for which appraisal rights have
been exercised and all Interests, shall be converted into or exchanged for a
number of shares of Cintas Common Stock to be determined by dividing the
Purchase Price, as adjusted pursuant to Section 1.3, by the average closing
price of Cintas Common Stock as reported in the Nasdaq National Market System on
the ten (10) trading days immediately preceding the date of this Agreement
("Cintas Share Value"). The Purchase Price shall be allocated among the Acquired
Entities as set forth on Attachment No. 1, and the number of shares of Cintas
Common Stock to be delivered to each Shareholder of each of the Acquired
Entities shall equal the percentage set forth next to such Shareholder's name on
Attachment No. 1 multiplied by the aggregate number of shares of Cintas Common
Stock allocable to each such Acquired Entity in the Transactions. Attachment No.
1 assumes that options outstanding under the Phantom Stock Plan are exercised in
whole by the holders thereof on or before the Closing Date. Fractional shares
will be rounded up or down to the nearest whole number in an effort to equitably
account for otherwise fractional shares (which may increase or decrease the
aggregate number of shares of Cintas Common Stock received). No fractional
shares or cash in lieu of fractional shares will be issued.
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Notwithstanding the foregoing, if the closing price of Cintas Common
Stock on the date immediately preceding the Closing Date (later defined) is ten
percent (10%) or more less than the Cintas Share Value, the Shareholders, acting
on authorization of those entitled to at least seventy-five (75%) percent of the
shares of Cintas Common Stock to be delivered in the aggregate (the "Majority
Holders"), may postpone the Closing (later defined) upon written notice to
Cintas delivered prior to Closing. If the closing price of Cintas Common Stock
on the date immediately preceding the Closing Date is ten percent (10%) or more
greater than the Cintas Share Value, Cintas may postpone the Closing upon
written notice to the Company delivered prior to Closing (such maximum and
minimum share prices being hereinafter referred to as the "Collar"). Such
postponement shall extend for up to thirty (30) days. If at any time during this
thirty (30) day period Cintas Common Stock closes within the Collar, the
transaction shall be closed within three (3) business days after the first day
during such period that the Cintas Common Stock closes within the Collar. The
Cintas Share Value will not be adjusted based upon the Collar or this paragraph.
If the transaction has been so postponed and Cintas Common Stock does not close
within the Collar during this thirty (30) day period, the Closing Date may again
be postponed for up to thirty (30) days if Cintas and the Shareholders, acting
by authorization of the Majority Holders, consent in writing. The Closing shall
occur within three (3) business days after the first day during such period that
the Cintas Common Stock closes within the Collar. If the Cintas Common Stock
does not close within the Collar on any date within such new postponement
period, the parties can, upon agreement of Cintas and the Shareholders, acting
by authorization of the Majority Holders, either: (i) close based upon the
Cintas Share Value, or (ii) agree to a different number of shares of Cintas
Common Stock to be issued in the Transactions. If agreement can not be reached
on (i) or (ii) above, either Cintas or the Majority Holders may choose to
terminate this Agreement by such party's delivering of written notice to the
other parties hereto as set forth herein.
1.5 TAX-FREE REORGANIZATIONS. The parties intend that the Parent Merger
and the S Corporation Merger shall each constitute a tax-free reorganization
within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1986,
as amended (the "Code") and agree to take such actions as are necessary to
ensure that the Mergers receive such treatment and to refrain from taking any
actions that would result in such treatment not being available. The parties
intend that the Canada Reorganization shall constitute a tax-free reorganization
within the meaning of Section 368(a)(2)(B) of the Code.
1.6 POOLING. The parties intend that the Transactions will be treated
as pooling of interest transactions for accounting purposes by Cintas.
Notwithstanding any other provision of this Agreement, the Acquired Entities
shall, prior to the Closing (as defined in Section 1.8 hereof), obtain from the
Shareholders their written undertaking in a form reasonably satisfactory to the
parties (a "Pooling Letter") under which each Shareholder agrees not to sell,
transfer or otherwise reduce his or her risk relative to any of the Cintas
Common Stock issued pursuant to the Transactions in a manner that would result
in the Transactions not qualifying for such accounting treatment until such time
as Cintas publishes financial results covering at least 30 days of combined
operations of Cintas and the Acquired Entities after the Closing as specified in
Accounting Series Releases No. 130 (1972) and No. 135 (1973) of the Securities
and Exchange Commission ("SEC"). Cintas agrees to
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use its best efforts to publish such financial results covering at least 30 days
of combined operations within 15 days following the conclusion of Cintas' first
fiscal quarter-end subsequent to the Closing Date and if such quarter does not
include at least thirty (30) days of combined results, then Cintas will use its
best efforts to publish such financial results for the next succeeding quarter
within twenty-five (25) days following the conclusion of such quarter unless
such quarter is also a fiscal year-end in which event Cintas shall have
forty-five (45) days from such fiscal year-end to publish such financial
results.. To the extent consummation of any of the adjustment transactions set
forth in Section 1.3 above would have a negative adverse affect on the treatment
of the Transactions as pooling of interest transactions, Cintas, the Acquired
Entities and the Shareholders agree to work together in good faith to find other
alternatives to accomplish the parties' objectives.
1.7 EXCHANGE FOR CONSIDERATION. On the Closing Date, the Shareholders
shall surrender all certificates representing capital stock and Interests or
units of the Acquired Entities to Cintas, and the Shareholders shall then be
entitled to receive the number of shares of Cintas Common Stock provided for in
Section 1.4 hereof subject to the provisions of Section 1.3 and Section 10.4
herein. The shares of Cintas Common Stock will be delivered by the transfer
agent for Cintas to the Shareholders at Closing.
1.8 CLOSING. Subject to the provisions of this Agreement, the closing
(the "Closing") of the Transactions shall take place at the offices of Neal,
Gerber & Eisenberg, Two North La Salle Street, Chicago, Illinois 60602 on March
5, 1998 at 10:00 a.m., or at such other time, place or date as Cintas, Cintas
Sub, the Shareholders and the Company may mutually agree. Provided, however,
that if a condition to Closing set forth in Article VIII or elsewhere herein
shall not have been fulfilled or waived at such time, any party hereto entitled
to the benefits of such condition may postpone the Closing by notice to the
other parties until such condition or conditions shall have been met or waived,
except that in no event shall the Closing occur after March 31, 1998 without the
written agreement of all parties hereto. The date and time of such Closing are
herein referred to as the "Closing Date." Concurrently with the Closing, the
Articles of Merger shall be filed with the Secretaries of State of the
appropriate jurisdictions. Closing shall be conditioned upon effectiveness of
the Mergers.
1.9 ARTICLES OF INCORPORATION AND BY-LAWS OF THE SURVIVING
CORPORATIONS. The Articles of Incorporation and By-Laws of the Company, as in
effect immediately prior to the Mergers, shall be the Articles of Incorporation
and By-Laws of the Company, as the surviving corporation in the Mergers, until
thereafter changed or amended as provided therein or by law.
1.10 BOARD OF DIRECTORS AND OFFICERS. The directors and officers of
Cintas Sub immediately prior to the Mergers plus such additional officers and
directors as chosen by Cintas, shall be the directors and officers of the
Company after the Mergers, and each of such directors and officers shall hold
office, subject to the applicable provisions of the Certificate of Incorporation
and By-laws of the Company, until their successors are duly elected and
qualified, or their earlier death, resignation or removal. The Company may add
such additional officers and directors on or after the Closing Date as it shall
see fit.
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1.11 TREATMENT OF STOCK OPTIONS AND WARRANTS. On or before the Closing
Date, each holder of an outstanding option under the Company's Phantom Stock
Option Plan (the "Phantom Stock Plan") shall be entitled to exercise his option,
in whole or in part, and upon payment of the option exercise price, shall be
issued shares of capital stock of the Acquired Companies and general or limited
partnership interests, as the case may be, in the Partnerships in accordance
with the terms of the Phantom Stock Plan. To the extent any option has not been
exercised in whole prior to the effective time of the Mergers and the
Partnership Acquisition, each such outstanding option or warrant to purchase
shares of capital stock or partnership interests of any Acquired Entity, whether
vested or unvested, will be canceled as of the effective time of the Mergers and
releases in form and substance satisfactory to Cintas and its counsel will be
executed by each such option or warrant holder.
2. REPRESENTATIONS AND WARRANTIES OF
THE ACQUIRED COMPANIES AND THE SHAREHOLDERS
Except as otherwise excepted in the disclosure schedules to be
delivered by the Acquired Entities and Shareholders to Cintas and Cintas Sub
(the "Disclosure Schedule") within ten (10) days of the date hereof, the
Acquired Entities and the Shareholders, represent and warrant, which
representations and warranties shall be true and accurate in all material
respects as of the Closing Date as if such representations and warranties had
been made as of the Closing Date, with and to Cintas, and Cintas Sub, their
successors and assigns, as follows:
2.1 ORGANIZATION. Each Acquired Entity (i) is a corporation or
partnership, respectively, duly organized, validly existing and, if applicable,
in good standing under the laws of its jurisdiction of organization, (ii) has
full corporate or partnership power and authority to own, lease and operate all
of its properties and assets and to carry on its business as it is now being
conducted, (iii) is duly qualified to do business as a foreign corporation or
partnership in each jurisdiction where the character of its properties or the
nature of its business makes such qualification necessary, except where the
failure to be so qualified will not have a material adverse effect on the
financial condition of the Acquired Entities considered as a whole, and all such
jurisdictions are listed in Section 2.1 of the Disclosure Schedule, and (iv) is
in good standing in each jurisdiction in which it is qualified to do business.
The minute books and other corporate or partnership records of the Acquired
Entities made available to Cintas for review contain complete and accurate
summaries of all meetings and other corporate actions held or taken of such
entity's Board of Directors, the committees thereof, their shareholders,
partners and/or Interest holders. All actions reflected in said books were duly
and validly taken in compliance with the laws of the applicable jurisdiction.
2.2 Capitalization.
---------------
(a) The authorized capital stock, and the number of issued and
outstanding shares of each Acquired Company, as well as the holders of such
shares, are set forth on Section 2.2 of the Disclosure Schedule. All issued and
outstanding shares of Acquired Company capital stock have
<PAGE> 13
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been duly and validly issued and are fully paid and non-assessable, free of any
claim of pre-emptive rights, and no shares are held in treasury. Other than as
set forth on Section 2.2 of the Disclosure Schedule, there are no outstanding
rights to purchase or receive, or options, warrants, puts, calls, contracts,
commitments or demands of any character relating to the any Acquired Company's
authorized or issued capital stock or which could require the issuance of
capital stock by any Acquired Company. There are no voting trusts or other
agreements or understandings to which any Acquired Company is a party with
respect to the voting of the capital stock of such Acquired Company.
(b) The outstanding Interests of each Partnership, as well as the
holders of each such Interests, are set forth on Section 2.2 of the Disclosure
Schedule. All issued and outstanding Interests have been duly subscribed for and
are, free of any claims. Other than as set forth on Section 2.2 of the
Disclosure Schedule, there are no outstanding rights to purchase or receive, or
options, warrants, puts, calls, contracts, commitments or demands of any
character relating to the Interests of any Partnership which could require the
issuance of additional Interests by any Partnership. There are no voting trusts
or other agreements or understandings to which any Partnership is a party with
respect to the voting of the Interests of such Partnership.
2.3 AUTHORIZATION. This Agreement and all other documents and
agreements provided for in this Agreement, the execution and delivery hereof and
thereof by the Acquired Entities, the Transactions and the performance by the
Acquired Entities of their obligations and undertakings referenced herein, have
been or will be within twenty-one (21) days of the date hereof, duly authorized
and approved by the Shareholders and Board of Directors of the Acquired
Companies and the partners of the Partnership, and the officers and general
partners executing this Agreement on behalf of the Acquired Entities have (or
will have within twenty-one (21) days of the date hereof) authority to do so and
upon execution of this Agreement by such officers, general partners and the
Shareholders, this Agreement shall be the valid and binding obligation of the
Acquired Entities and the Shareholders, subject to the terms and conditions
hereof.
2.4 NO VIOLATION; CONSENTS AND APPROVALS. Except as set forth in
Section 2.4 of the Disclosure Schedule, neither the execution and delivery of
this Agreement and all other documents and agreements provided for in this
Agreement by the Acquired Entities, nor the consummation of the transactions
contemplated hereby and thereby, will conflict with, result in a breach of,
permit any party to terminate or accelerate the provisions of, or result in the
imposition of any lien, encumbrance or restriction upon the property or assets
of any Acquired Entity under (i) the provisions of the applicable Articles of
Incorporation or the By-Laws of any Acquired Entity, (ii) the provisions of any
obligation, indenture, agreement, permit or other instrument to which any
Acquired Entity is a party or which any Acquired Entity holds, or (iii) any
statute or law or any order, decree, judgment, rule or regulation of any court
or governmental agency or authority having jurisdiction over any Acquired
Entity. Except for (i) filing and recordation of appropriate merger documents as
may be required by the various jurisdictions, and (ii) requirements of the
Hart-Scott- Rodino Antitrust Improvements Act, no permit, consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority or other person (either
<PAGE> 14
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governmental or private) is necessary in connection with the execution and
delivery by the Acquired Entities or the Shareholders of this Agreement and
other documents and agreements provided for in this Agreement or the
consummation by them of the transactions contemplated hereby and thereby.
2.5 SUBSIDIARIES AND OTHER CAPITAL STOCK. Other than those entities
listed in Section 2.5 of the Disclosure Schedules, none of the Acquired Entities
have any subsidiaries. As used herein, the term "subsidiaries" means any
corporation or other entity in which an Acquired Entity is entitled by virtue of
its ownership of securities (or equivalent interests) to elect a majority of the
directors (or persons performing equivalent functions). Except as disclosed in
Section 2.5 of the Disclosure Schedule, none of the Acquired Entities own,
directly or indirectly, any capital stock or other equity securities of any
corporation or have any direct or indirect equity or ownership interest in any
other business. Except as disclosed in Section 2.5 of the Disclosure Schedule,
all capital stock or other equity securities of any corporation owned, directly
or indirectly, by any Acquired Entity, is owned free and clear of all liens,
options, encumbrances, pledges, security interests, claims or charges of any
kind, and are validly issued, fully paid and non-assessable, with no personal
liability attaching to the ownership thereof, and there are no outstanding
options, rights or agreements of any kind relating to the sale or transfer of
any such capital stock or other equity securities.
2.6 Financial Statements.
---------------------
(a) Section 2.6 of the Disclosure Schedule sets forth true and correct
copies of the unaudited combined balance sheet of the Acquired Entities and
Sharprint at September 30, 1997 and the audited combined balance sheets of the
Acquired Entities and Sharprint for the years ended December 31, 1996 and 1995
and the audited balance sheet of the Company at December 31, 1994. Also attached
to Section 2.6 of the Disclosure Schedule are true and correct copies of the
unaudited combined income statement of the Acquired Entities and Sharprint for
the nine months ended September 30, 1997 and the audited combined income
statements of the Acquired Entities and Sharprint for the years ended December
31, 1996 and 1995 and the audited income statement of the Company for the year
ended December 31, 1994. The foregoing financial statements are collectively
referred to herein as the "Financial Statements" and the combined balance sheet
as at September 30, 1997 is referred to as the "Balance Sheet."
(b) The Financial Statements have been prepared from the books and
records of the Acquired Entities and Sharprint as, at and for the periods
indicated and have been prepared in accordance with generally accepted
accounting principles consistently followed throughout the periods indicated,
and present fairly the financial position of the Acquired Entities, and the
results of their operations, as, at and for the periods indicated except that
Financial Statements as of and for the nine months ended September 30, 1997 are
subject to normal and customary year-end adjustments consistent with past
practices. The Company will deliver to Cintas upon request, all available
supporting documentation and work papers covering the most recent ten fiscal
years as
<PAGE> 15
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reasonably requested by Cintas relating to the Financial Statements to permit
Cintas to restate its financial statements if required by rules and regulations
of the SEC.
2.7 ABSENCE OF UNDISCLOSED LIABILITIES. The Acquired Entities do not
have any liabilities or obligations (absolute, accrued, contingent or otherwise)
which individually, or in the aggregate, would have a material adverse effect on
the Acquired Entities, except for (a) liabilities and obligations reflected in
the Financial Statements (including the notes thereto), (b) liabilities and
obligations disclosed in Section 2.7 of the Disclosure Schedule and (c)
liabilities incurred in the ordinary course of business consistent with past
practice since the date of the Balance Sheet.
2.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on
Section 2.8 of the Disclosure Schedule, since September 30, 1997, there has not
been: (a) any adverse change in the business, properties, assets, financial
condition or results of operation which would be material to any of the Acquired
Entities or the Acquired Entities considered as a whole; (b) any damage,
destruction or loss, whether covered by insurance or not, materially and
adversely affecting the properties or business of any of the Acquired Entities
or the Acquired Entities considered as a whole; (c) any declaration, setting
aside or payment of any dividend (whether in cash, stock or property) in respect
of Company Common Stock or the capital stock of any other Acquired Entity, or
any redemption or other acquisition of such stock by any Acquired Entity; (d)
except for a normal scheduled increase made to the compensation of one officer
of an Acquired Entity, any increase in the compensation payable or to become
payable by any of the Acquired Entities to its officers or key employees, or any
material increase in any bonus, insurance, pension or other employee benefit
plan, payment or arrangement made to, for or with any such officers or key
employees; (e) any labor or employee dispute involving any of the Acquired
Entities, other than routine matters, none of which is material; (f) except in
the ordinary course of business consistent with past practice, any borrowing or
lending of money or guarantee of any obligation by any of the Acquired Entities;
(g) any adoption, amendment or termination of any employee benefit plan or
arrangement of any of the Acquired Entities; (h) any disposition of any material
properties or assets used in the business of any Acquired Entity other than
sales of inventory in the ordinary course of its business; (i) any engagement by
any Acquired Entity in activities outside the ordinary course of its business;
(j) the incurring of any liability of any Acquired Entity (whether absolute or
contingent) except liabilities which were incurred in the ordinary course of
business; (k) any changes in any Acquired Entity's delivery system, change in
policy regarding new goods inventory put in service or other changes in
inventory policy; (l) any change in the general pricing policy of any Acquired
Entity for their services or any general price increase charged for the any of
the Acquired Entity's goods and services; or (m) any agreement (whether oral or
written) to do any of the foregoing.
2.9 TITLE TO AND CONDITION OF NON-REAL ESTATE ASSETS. Each Acquired
Entity has good and marketable title to, or valid leasehold interests in, all
non-real estate assets reflected on the Balance Sheet and good and marketable
title to all non-real estate assets owned as of the date of the Balance Sheet,
except for such assets as have been disposed of in the ordinary conduct of an
Acquired Entity's business since the date of the Balance Sheet, and to all such
assets acquired since such date or otherwise used in the operation of its
business, free and clear of all liens, claims,
<PAGE> 16
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mortgages, charges, easements or other encumbrances of any kind whatsoever
except: (i) to the extent reflected or reserved against on the Balance Sheet, or
(ii) for liens for property taxes not yet due. All the fixed assets reflected on
the Balance Sheet, and those assets acquired since the date thereof, and not
disposed of as permitted hereunder, constitute all the fixed assets used by each
Acquired Entity and necessary to conduct its business as it is being conducted
on the date hereof and all leases of such fixed assets will, at the Closing, be
in full force and effect. All such fixed assets, including all mechanical and
component parts thereof, are in working condition, in a state of reasonable
maintenance and repair, ordinary wear and tear excepted, and are free from any
known defects.
2.10 REAL PROPERTY. Section 2.10 of the Disclosure Schedule sets forth
a description all real property of the Acquired Entities owned, leased or
subject to a purchase contract or lease commitment, detailing which properties
are owned and which are leased, with a brief description of all buildings and
structures thereon (sometimes collectively the "Real Property"). A copy of any
such purchase contract or lease (with amendments) has been delivered to Cintas.
With respect to the Real Property that is owned and identified on the Disclosure
Schedule, except as set forth on Section 2.10 of the Disclosure Schedule, the
Acquired Entities have good and marketable title to the Real Property, free and
clear of all liens, encumbrances, adverse claims and other matters affecting the
applicable Acquired Entity's title to or possession of such Real Property,
including, but not limited to, all encroachments, boundary disputes, covenants,
restrictions, easements, rights of way, mortgages, security interests, leases,
encumbrances and title objections, except (i) liens reflected on and adequately
reserved against on the Balance Sheet, (ii) liens for real estate taxes not yet
due and payable and (iii) such easements, restrictions and covenants presently
of record which do not, in Cintas' reasonable judgment (which judgment will be
exercised prior to Closing to the extent such easements, restrictions and
covenants have been disclosed in Section 2.10 of the Disclosure Schedule),
interfere in any material respect with the use of any of the Real Property in a
manner consistent with the Acquired Entities' present use, which easements,
restrictions and covenants are listed on the Disclosure Schedule in a manner so
that the Real Property to which they relate is readily identifiable
(collectively the "Permitted Encumbrances"). All real estate and the buildings
located thereon are in material compliance with applicable zoning laws and
regulations. All buildings and structures owned or leased by any Acquired
Entity, and the mechanical components (including HVAC systems), roofs, fixtures
and equipment located therein or thereon, are in a state of reasonable
maintenance and repair, ordinary wear and tear excepted, free of known defects,
subject only to normal maintenance and repair.
2.11 TRADEMARKS AND SIMILAR RIGHTS. Section 2.11 of the Disclosure
Schedule sets forth all letters of patent, patent applications, inventions upon
which patent applications have not yet been filed, copyrights, trademarks,
service marks, trade, assumed and divisional names, licenses and rights in any
thereof owned in whole or in part or used by each Acquired Entity in the conduct
of its business. Except as indicated in Section 2.11 of the Disclosure Schedule,
to the knowledge of the Acquired Entities and the Shareholders, neither the
validity of, nor any Acquired Entity's rights under, any of the items listed
therein, is being questioned or contested by others.
<PAGE> 17
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2.12 INSURANCE. Section 2.12 of the Disclosure Schedule sets forth all
insurance contracts in force with respect to all Acquired Entities and its
property, copies of which will be made available to Cintas; all such insurance
contracts are in full force and effect and will continue to be renewed,
maintained and/or replaced so as to be in full force and effect at the Closing.
2.13 CONTRACTS AND AGREEMENTS. Section 2.13 of the Disclosure Schedule
sets forth a description of (a) all contracts and agreements (whether written or
oral) and all amendments thereto or modifications thereof to which any Acquired
Entity is a party or by which it is bound which involve future payments by or to
the Acquired Entities in the aggregate of $50,000 or more other than (i)
contracts with customers which are covered by Section 2.26 of the Disclosure
Schedule or (ii) contracts which are terminable by the Acquired Entity upon
thirty (30) days or less notice without cost or expense to the Acquired Entity
or Entities and (b) all notes, mortgages, pledges, deeds of trust, security,
loan or credit agreements and similar instruments or arrangements to which the
Acquired Entity or Companies is a party or by which it is bound and all
amendments or modifications thereof (collectively (a) and (b) referred to as the
"Contracts"). Except as set forth in Section 2.13 of the Disclosure Schedule:
(i) Each Contract is a valid and binding agreement of the
contracting Acquired Entity and, to the best of the Shareholders' and
the Acquired Entity's knowledge, is a valid and binding agreement of
the other parties thereto;
(ii) The contracting Acquired Entity has fulfilled all
obligations required pursuant to each Contract to have been performed
by such Acquired Entity on its part prior to the date hereof, and the
Acquired Entity has no reason to believe that it will not be able to
fulfill, when due, all of the Acquired Entity's obligations under the
Contracts which remain to be performed after the date hereof and prior
to the Closing;
(iii) There has not occurred any default under any
Contract on the part of any Acquired Entity; the Acquired Entities do
not have any knowledge that any default under any Contract on the part
of the other parties thereto has occurred; and the Acquired Entities do
not have any knowledge that any event has occurred which with the
giving of notice or the lapse of time, or both, would constitute any
default under any of the Contracts.
2.14 BANK ACCOUNTS. Section 2.14 of the Disclosure Schedule sets forth
the name and address of each bank in which all of the Acquired Entities have an
account or safety deposit box, the designation of such account and the names of
all persons authorized to draw thereon or enter therein, as may be the case.
2.15 LITIGATION. Section 2.15 of the Disclosure Schedule sets forth any
and all actions, suits, claims, proceedings, investigations or inspections
pending or, to the knowledge of the Acquired Entities and the Shareholders,
threatened against or affecting any of the Acquired Entities or any of their
properties or rights in any court or before any governmental authority.
<PAGE> 18
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2.16 EMPLOYEE BENEFIT PLANS. Section 2.16 of the Disclosure Schedule
sets forth a description of all bonus, stock option, phantom stock option,
incentive compensation, profit sharing, retirement, pension, group insurance,
death benefit or other fringe benefit plans, trust agreements or arrangements of
the Acquired Entities, and copies of all documents relating to each of said
benefit plans have been separately delivered to Cintas. Such plans and
arrangements which are subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), are referred to hereafter as the "Benefit Plans".
The Acquired Entities have made available to Cintas for inspection all annual
reports filed on Internal Revenue Service ("IRS") Form 5500 with respect to any
Benefit Plans and other reports filed with the Pension Benefit Guaranty
Corporation since January 1, 1990 to the extent applicable. All reports which
have been prepared by an enrolled actuary with respect to any Benefit Plans.
With respect to the Benefit Plans:
(a) The Internal Revenue Service has issued, and the Acquired Entities
have made available to Cintas for inspection, favorable determination letters
with respect to the qualification of all Benefit Plans and all amendments
thereto, as currently in effect and as required to be amended to comply with the
Internal Revenue Code of 1986, as amended (the "Code") to be qualified
retirement plans;
(b) None of the Benefit Plans or any assets thereof has engaged in, or
been a party to any "prohibited transaction" as defined in ERISA or the Code;
(c) No Benefit Plan has been terminated resulting in liability to any
of the Acquired Entities except for liabilities as to which adequate reserves
are reflected in the Balance Sheet, and there exists no condition presenting a
material risk of such liability;
(d) Except as disclosed on Section 2.16 of the Disclosure Schedule, all
Benefit Plans have been operated in compliance with ERISA, the Code and other
applicable law, and all reports have been filed with respect to the Benefit
Plans in accordance with ERISA and the Code.
(e) None of the Benefit Plans is a "multi employer" pension plan which
is subject to the Multi Employer Pension Plan Amendment Act of 1980.
(f) Each Benefit Plan is in compliance with the funding requirements of
Section 302 of ERISA.
2.17 EMPLOYEE COMPENSATION. Section 2.17 of the Disclosure Schedule
sets forth, by facility location, the names, positions, dates of hire and
current compensation, including bonuses and customary commissions, of all
present officers and employees of the Acquired Entities whose annual
compensation was $50,000 or more in calendar year 1997 or if not employed
throughout 1997, is expected to exceed $50,000 in calendar year 1998.
2.18 COLLECTIVE BARGAINING, EMPLOYMENT AND NON-COMPETITION AGREEMENTS.
None of the Acquired Entities is a party to any collective bargaining or similar
labor agreement. Section 2.18
<PAGE> 19
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of the Disclosure Schedule sets forth (i) all consulting agreements to which any
of the Acquired Entities is a party and (ii) all employment, non-competition and
compensation agreements (whether written or oral) with officers or other
employees of any Acquired Entity. Except as set forth in Section 2.18 of the
Disclosure Schedule, all employees of the Acquired Entities who customarily have
direct contact with such company's customers (including all officers, general
managers, sales persons, service sales representatives, sales managers and route
salespersons), have executed written non-competition agreements or employment
agreements containing non-competition covenants in one of the forms attached
hereto to Section 2.18. Except as set forth in such Section 2.18 of the
Disclosure Schedule, there exist no labor grievances or other material problems
involving labor relations of any Acquired Entity which have not been fully
satisfied or discharged. None of the Acquired Entities nor any of the
Shareholders knows of any organizational effort to have any labor organization
certified by any of the Acquired Entities. None of the Acquired Entities is a
member of any multi-employer association nor a participant in any multi employer
bargaining group in any dealings with any labor organization.
2.19 PURCHASE ORDERS. All written or oral purchase orders or purchase
commitments with an aggregate remaining commitment of $100,000 or more are
listed in Section 2.19 of the Disclosure Schedule.
2.20 ACCOUNTS RECEIVABLE. A complete list of all accounts, notes and
other receivables of each of the Acquired Entities as of December 31, 1997 and
the aging thereof will be separately delivered to Cintas. All such accounts
receivable and those arising from December 31, 1997 through the Closing arose or
will arise in the ordinary course of business and no entitlements to or claims
of offset or reduction have been or will be made or exist and, subject to any
allowance for doubtful accounts set forth on the Balance Sheet, such accounts in
the aggregate are fully collectible without offset or compromise within 180 days
of Closing.
2.21 LICENSES AND PERMITS. Section 2.21 of the Disclosure Schedule sets
forth a list of and the Acquired Entities are in possession of, all material
licenses, permits and authorizations required for the conduct of the Company's
business (the "Permits") and the Permits are valid and in full force and effect.
Except as set forth in Section 2.21 of the Disclosure Schedule, as of the Merger
Closing Time the Company is in compliance in all material respects with all
conditions or requirements imposed by or in connection with the Permits and with
respect to the conduct of its business, and none of the Acquired Entities have
received notice and none of the Acquired Entities have knowledge or reason to
believe that any authority intends to cancel, terminate or modify any of the
Permits or adopt or modify rules and regulations which would adversely affect
the Permits.
2.22 EMPLOYEE MATTERS. Except as set forth in Section 2.22 of the
Disclosure Schedule:
(a) Each Acquired Entity is in compliance in all material respects with
all federal and state laws respecting employment and employment practices, terms
and conditions of employment, and wages and hours, and is not engaged in any
unfair labor practices.
<PAGE> 20
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(b) All obligations of the Acquired Entities, whether arising by
operation of law, by contract or by past custom, for payments by the Acquired
Entities directly to its employees or to trusts or other funds or to any
governmental agency, for employment compensation benefits, workers compensation
benefits, accident, sickness and disability benefits, pension, profit sharing
and any other retirement benefits, social security benefits, vacation and
holiday pay, bonuses and other forms of compensation, or any other benefits,
have been paid or adequate accruals therefor have been made on the Balance Sheet
or, with respect to accruals required from September 30, 1997 through the
Closing, have been made in accordance with normal accounting procedures of the
Acquired Entities and in compliance with generally accepted accounting
principles, consistently applied.
2.23 TAXES AND TAX RETURNS. Each of the Acquired Entities has timely
filed all federal, state and local (United States and all foreign jurisdictions)
tax returns required to be filed by it (unless a valid extension therefore has
been granted), and all such returns are true, complete and correct in all
material respects. The Acquired Entities have timely paid or made adequate
provision (in the Balance Sheet) for the payment of all taxes, assessments and
other governmental charges which have been incurred by the Acquired Entities as
set forth in the aforementioned tax returns or are otherwise due and payable
with respect to periods covered thereby. All necessary sales tax exemption
certificates have been obtained by the Acquired Entities and all such
certificates have been properly completed and maintained. Except as set forth in
Section 2.23(a) of the Disclosure Schedule, no tax return filed by any of the
Acquired Entities is under audit or examination by any taxing authority and
there are no applications or agreements for the extension of the time for the
filing of any tax return or for the assessment of any amounts of tax nor any
consent to an extension of the period of limitations applicable to such
assessment or to the collection of any tax. Except as set forth in Section
2.23(b) of the Disclosure Schedule, no issue or issues have been brought to the
attention of the Acquired Entities or the Shareholders by any tax authority in
connection with any prior or pending inquiry into, or audit of, any tax filings
of any of the Acquired Entities which has not been resolved. The Acquired
Entities will make available to Cintas true and complete copies of all federal,
state and local (United States and foreign) income tax returns for each of the
past three (3) years listed on Section 2.23(c) of the Disclosure Schedule which
it has filed, together with copies of all schedules, work papers, elections, tax
depreciation schedules and other documents which were used in the preparation of
each such tax return. There are no liens for taxes upon the assets of any of the
Acquired Entities except for liens for taxes not yet due. As used herein,
"taxes" mean (a) all net income, gross income, gross receipts, sales, use,
transfer, franchise, profits, withholding, payroll, employment, excise,
severance, property or windfall profits taxes, or other taxes of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority (domestic or foreign) upon
any Acquired Entity with respect to all periods or portions thereof ending on or
before the date hereof and/or (b) any liability of any Acquired Entity for the
payment of any amounts of the type described in the immediately preceding clause
(a) as a result of being a member of an affiliated or combined group.
2.24 TRANSACTIONS WITH AFFILIATES. Except as set forth in Section 2.24
of the Disclosure Schedule or provided for in this Agreement and except for
compensation or other customary
<PAGE> 21
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employee benefits provided in the ordinary course of business, since September
30, 1997, no Acquired Entity has entered into or been a party to any transaction
which provided for payment to or from, or the transfer of, any of such Acquired
Entity's property to or from any Shareholder, any director, officer or other
employee of such Acquired Entity, to any member of the family of any such person
or to any corporation, partnership, trust or other entity in which any such
person has an ownership interest (except for ownership interests of less than
five percent (5%) of the voting securities of any such entity), or is an
officer, director, partner or trustee of such entity.
2.25 COMPLIANCE WITH APPLICABLE LAW. Except as set forth in Section
2.25 of the Disclosure Schedule, each Acquired Entity is conducting and has
conducted its business so as to comply in all material respects with all
applicable laws, ordinances, regulations, decrees and orders, of any
governmental entity, including without limitation those specifically referred in
Sections 2.21 and 2.22 hereof and all city, county, state and Federal statutes,
regulations, laws and ordinances applicable to air or water pollution,
environmental protection, soil contamination, hazardous substances (as defined
in any of the following statutes which shall be deemed to include, without
limitation, asbestos and PCBs), hazardous waste generation, transportation,
storage and disposal or other environmental matters including the Resource,
Conservation and Recovery Act of 1976, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Clean Air Act, the Toxic Substances
Control Act, the Federal Water Pollution Control Act, the Federal Hazardous
Substances Act, the Solid Waste Disposal Act and other similar and related
Federal and state laws and regulations regulating the protection of the
environment, all as amended through the date hereof, compliance with the
National Labor Relations Act as amended, the Welfare and Pension Plans
Disclosure Act, the Fair Labor Standards Act and Equal Pay Act, Title 7 of the
Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the
Occupational Safety and Health Act of 1970, the Americans With Disabilities Act
of 1990, and the Employees Retirement Income Security Act of 1974, and any other
law, ordinance, regulation, decree or order, the failure to comply with which
would have a material adverse effect on the financial condition, business,
properties or results of operations of the Acquired Entities taken as a whole.
None of the Real Property or other assets owned or leased by an Acquired Entity
have been used by such Acquired Entity for hazardous waste storage or disposal
or have been contaminated by hazardous waste (as defined in the Resource
Conservation and Recovery Act, or applicable state law) or hazardous substances
(as defined in Sec. 101(14), 42 U.S.C. Sec. 9601(14), of CERCLA) and none of the
Acquired Entities' operations or assets have contaminated the lands or waters of
others with hazardous waste or hazardous substances. All underground or
above-ground storage tanks contained on or under real estate used by any of the
Acquired Entities are described in Section 2.25 of the Disclosure Schedule. All
such tanks are registered, were installed pursuant to existing laws and
regulations at the time of such installation, and are at this date in compliance
in all material respects with all applicable rules and regulations.
2.26 CUSTOMER CONTRACTS. Section 2.26 of the Disclosure Schedule lists
(i) customers of the Acquired Entities whose inventory requirements are unique
to that customer indicating (A) which customers have contracts requiring that
customer to purchase all or a portion of such inventory upon termination of its
relationship with the Acquired Entities, (B) which customers do
<PAGE> 22
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not have such contracts and (C) the value of all such inventory as of December
31, 1997; (ii) all customers of any of the Acquired Entities that purchased more
than $1,000,000 of merchandise from the Acquired Entities in the aggregate in
1996 or are reasonably expected to have purchased more than $1,000,000 of
merchandise in 1997; and (iii) a list of all other written contracts (exclusive
of purchase orders received from customers in the ordinary course of business)
with customers. Copies of all such contracts described in Section 2.27 of the
Disclosure Schedule will be made available to Cintas.
2.27 EMPLOYEE OR SUPPLIER PROBLEMS. To the knowledge of the
Shareholders, there is no conflict or problem with any officer, manager or other
key employee of any Acquired Entity that is reasonably likely to result in the
termination or resignation of employment of any such person. Except as set forth
in Section 2.27 of the Disclosure Schedule, the Acquired Entities and
Shareholders have not received written notice from any supplier that would
likely result in the termination of a source of supply of a material product
where a second source of supply at a comparable cost to such Acquired Entity is
not readily available, nor do the Acquired Entities or Shareholders know of any
long term commitment with any supplier.
2.28 SEC DISCLOSURE. None of the information to be supplied by any
Acquired Entity in writing specifically for use in the Registration Statement
(later defined), including the SEC Materials (later defined), will contain any
untrue statement of a material fact or omit to state any material fact which is
necessary in order to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. As used in this
Agreement, the term "Registration Statement" shall mean the registration
statement referred to in Section 6.6 hereof in such form as it is finally
declared effective. The "SEC Materials" consists of the information furnished in
writing by the Acquired Entities specifically for inclusion in the Registration
Statement.
2.29 GENERAL DISCLOSURE MATTERS. No representation or warranty by any
of the Acquired Entities or Shareholders contained in this Agreement, the
Disclosure Schedule to be delivered to Cintas or in any written statement or
certification furnished or to be furnished to Cintas pursuant hereto or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein not
misleading.
3. REPRESENTATIONS AND WARRANTIES OF
CINTAS AND CINTAS SUB
Cintas and Cintas Sub represent and warrant, which representations and
warranties shall be true and accurate in all material respects as of the Closing
Date as if such representations and warranties had been made at the Closing
Date, with and to the Company and to the Shareholders, their heirs, successors
and assigns, as follows:
3.1 ORGANIZATION. Cintas is a corporation duly organized, validly
existing and in good standing under the laws of the State of Washington and duly
authorized under its Certificate of
<PAGE> 23
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Incorporation and under applicable laws to engage in the business conducted by
it. Cintas Sub is a corporation duly organized, validly existing and in good
standing under the laws of Illinois and is duly authorized under its Articles of
Incorporation and under applicable law to engage in the business conducted by
it.
3.2 CAPITALIZATION. The authorized capital stock of Cintas consists of
(i) 120,000,000 shares of Company Common Stock, 97,795,862 of which were issued
and outstanding on December 3, 1997 and (ii) 100,000 shares of Preferred Stock,
none of which are issued and outstanding. All issued and outstanding shares of
Cintas Common Stock have been duly and validly issued and are fully paid and
non-assessable and free of any claim of pre-emptive rights. Except as disclosed
in the Cintas SEC Filings (later defined) or as otherwise disclosed to the
Shareholders, there are no outstanding rights to purchase or receive, or
options, warrants, puts, calls, contracts, commitments or demands of any
character relating to Cintas' authorized or issued capital stock or which could
require the issuance of capital stock by Cintas.
3.3 AUTHORIZATION. The respective Boards of Directors of Cintas and
Cintas Sub each have approved, or will approve within twenty-one (21) days of
the date hereof, the execution and delivery of this Agreement, the Articles of
Merger and all other documents and agreements provided for in this Agreement and
the performance by each of its respective obligations and undertakings hereunder
and thereunder. The officers executing this Agreement on behalf of Cintas and
Cintas Sub have or within twenty-one (21) days of the date hereof will have
authority to do so, and this Agreement is the valid and binding obligation of
Cintas and Cintas Sub enforceable against each of them in accordance with the
terms hereof. Cintas, as the sole shareholder of Cintas Sub, has approved, or
will approve within twenty-one (21) days of the date hereof, the Parent Merger
and the execution and delivery of the Articles of Merger and the consummation of
the other transactions contemplated thereby. The foregoing actions are
sufficient to approve this Agreement, the Transactions and all other
transactions contemplated hereby in accordance with applicable corporate
statutes. Shareholder approval by the shareholders of Cintas is not required
under applicable law.
3.4 NO VIOLATION; CONSENTS AND APPROVALS. Neither the execution nor
delivery of this Agreement and the Plan of Merger by Cintas or Cintas Sub nor
the consummation of the transactions contemplated hereby and thereby will
conflict with, result in a breach of, permit any party to terminate or
accelerate the provisions of, or result in the imposition of any lien,
encumbrance or restriction upon the property or assets of Cintas or any of its
subsidiaries under (i) the provisions of their respective charters or by-laws,
(ii) the provisions of any obligation, indenture, agreement, permit or other
instrument to which Cintas or any of its subsidiaries is a party or which Cintas
or any of its subsidiaries holds, or (iii) any statute or law or any order,
decree, judgment, rule or regulation of any court or governmental agency or
authority having jurisdiction over Cintas or any of its subsidiaries, except in
the case of clause (ii) above where such violations individually or in the
aggregate with all such other violations would not have a material adverse
effect on the financial condition, business, properties, results of operations
or prospects of Cintas and its subsidiaries considered as a whole. Except for
(i) filing and recordation of the Plan of Merger and such other appropriate
merger documents as may be required by the applicable law and (ii) any filings
required
<PAGE> 24
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in connection with the issuance of the shares of Cintas Common Stock, and (iii)
requirements of the Hart-Scott-Rodino Antitrust Improvements Act, no permit,
consent, approval or authorization of, or declaration, filing or registration
with, any governmental or regulatory authority or other person (either
governmental or private) is necessary in connection with the execution and
delivery by Cintas and of this Agreement and the Plan of Merger or the
consummation by them of the transactions contemplated hereby and thereby.
3.5 SEC Filings and Financial Statements.
-------------------------------------
(a) Cintas has furnished or, upon filing with the SEC, will furnish to
the Shareholders, true and complete copies of (i) its Annual Reports on Form
10-K for the fiscal years ended May 31, 1997, 1996 and 1995 and its quarterly
reports on Form 10-Q for the quarters ended August 31, 1997 and November 30,
1997 as filed with the SEC pursuant to the Securities Exchange Act of 1934, as
amended (the "Act"); (ii) its Proxy Statement relating to the Annual Meeting of
stockholders of Cintas held on October 22, 1997 and the related annual reports
to stockholders (collectively, the "Cintas SEC Filings"). The Cintas SEC Filings
did not, or will not, as of their respective dates of filing, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein, in light
of the circumstances under which they were made, not misleading.
(b) Cintas' Annual Reports on Form 10-K for the fiscal years ended May
31, 1997, 1996 and 1995, contain true and complete copies of Cintas' audited
consolidated balance sheets as at May 31, 1997, 1996 and 1995, audited
consolidated statements of income, statements of common stockholders' equity and
statements of cash flows for each of the years in the three years ended May 31,
1997, 1996 and 1995, respectively, and notes to the consolidated financial
statements (collectively, with the audited consolidated balance sheet and
audited consolidated statements of income, statement of common stockholders'
equity and statements of cash flows for each of the years in the three years
ended May 31, 1997, 1996 and 1995, respectively, which have been separately
delivered to the Shareholders, the "Audited Cintas Financial Statements").
Cintas' Quarterly Report on Form 10-Q for the fiscal quarter ended November 30,
1997 contains true and complete copies of Cintas' unaudited balance sheet as at
November 30, 1997, unaudited consolidated statements of income, statements of
common stockholders' equity and statements of cash flows for the three and six
months ended November 30, 1997 and 1996, respectively, and notes to the
unaudited consolidated financial statements (collectively, the "Unaudited Cintas
Financial Statements" and with the Audited Cintas Financial Statements, the
"Cintas Financial Statements"). The Audited Cintas Financial Statements have
been prepared from the books and records of Cintas and present fairly the
consolidated financial position of Cintas and its subsidiaries as at May 31,
1997, 1996 and 1995 and their consolidated results of operations, changes in
stockholders' equity and cash flows for each of the years in the three years
ended May 31, 1997, 1996 and 1995, all in conformity with United States
generally accepted accounting principles applied on a consistent basis for such
periods. The Unaudited Cintas Financial Statements were prepared from the books
and records of Cintas, present fairly the consolidated financial position of
Cintas and its subsidiaries at November 30, 1997 and their consolidated results
of operations, changes in stockholders' equity and cash flows
<PAGE> 25
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for the three months and six months then ended in conformity with United States
generally accepted accounting principles.
3.6 TRANSACTION STOCK. The Cintas Common Stock to be issued to the
Shareholders in the Transactions in exchange for the capital stock and Interests
of the Acquired Entities will, when issued and delivered, be duly authorized,
validly issued, fully paid and non-assessable shares of Cintas Common Stock,
free and clear of all claims, liens and other encumbrances and not subject to
any preemptive rights.
3.7 LITIGATION. There are no actions, suits, claims, proceedings,
investigations or inspections, pending or threatened, against or affecting
Cintas or its subsidiaries which could have a material adverse effect on Cintas
and its subsidiaries considered as a whole and to Cintas' best knowledge formed
after reasonable inquiry there are no matters of litigation or governmental
proceedings expected to be brought against it or its subsidiaries which could
have a material adverse effect on Cintas and its subsidiaries considered as a
whole.
3.8 SEC DISCLOSURE. The Registration Statement will not contain any
untrue statement of a material fact nor will it omit to state a material fact
necessary to make the statements contained therein not misleading, except that
no representation is made with respect to information to be contained therein
regarding the Acquired Entities and supplied by the Acquired Entities or the
Shareholders in writing specifically for inclusion therein.
3.9 ABSENCE OF UNDISCLOSED LIABILITIES. Cintas and its subsidiaries do
not have any liabilities or obligations (absolute, accrued, contingent or
otherwise) which individually or in the aggregate, would have a material adverse
effect on Cintas, except for (a) liabilities and obligations reflected in the
Cintas Financial Statements (including the notes thereto), (b) liabilities and
obligations disclosed in the Cintas SEC Filings and (c) liabilities incurred in
the ordinary course of business consistent with past practice since the date of
the most recent Cintas Financial Statements.
3.10 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since November 30, 1997,
there has not been any adverse change in the business, properties, assets,
financial condition or results of operations of Cintas which would be material
to Cintas and its subsidiaries considered as a whole.
3.11 GENERAL DISCLOSURE MATTERS. No representation or warranty by
Cintas or Cintas Sub contained in this Agreement or in any written statement or
certification furnished or to be furnished to the Acquired Entities or
Shareholders pursuant hereto or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
<PAGE> 26
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4. COVENANTS OF THE SHAREHOLDERS AND THE ACQUIRED ENTITIES
4.1 ANNOUNCEMENTS AND COMMUNICATIONS. The Acquired Entities and
Shareholders shall not, without the prior approval of Cintas, make any public
announcement or furnish any information to the public concerning the
transactions contemplated by this Agreement. The Acquired Entities and
Shareholders shall promptly advise Cintas of all communications which they
receive pertaining to the transactions contemplated by this Agreement,
including, without limitation, communications from governmental agencies and
authorities.
4.2 FEES FOR PROFESSIONAL SERVICES. The Shareholders shall pay all fees
for professional services rendered to the Acquired Entities and the Shareholders
in connection with the transactions contemplated by this Agreement, including
all attorney, accountant and investment banking fees.
4.3 MEETINGS. The Acquired Entities and Shareholders will (i) cause a
meeting of each Acquired Company's shareholders and each Partnership's Interest
holders, if applicable, to be duly called and held for the purpose of voting
upon the transactions contemplated by this Agreement (or cause an action in
writing to be taken as permitted by applicable law or by agreement) and do all
other acts required to be done pursuant to applicable law in the manner required
to authorize the execution and carrying out of this Agreement including the
making of full disclosure of the terms and conditions hereof to all Shareholders
and (ii) use their reasonable efforts to obtain such shareholder and other
required approvals. The Acquired Entities will keep Cintas and Cintas Sub
closely advised of all developments relative to the consummation of the
transactions contemplated by this Agreement.
4.4 CORPORATE TRANSACTIONS. Until the earlier of the Closing Date or
the termination of this Agreement in accordance with the terms hereof, the
Shareholders: (i) shall not seek to merge any of the Acquired Entities into any
entity other than Cintas or an affiliate of Cintas, (ii) shall not negotiate or
entertain any offer with respect to the sale of all or part of the capital stock
of any of the Acquired Entities or substantially all of the assets of any of the
Acquired Entities and (iii) shall not, and shall not authorize or permit any
officer, director, employee, investment banker, attorney, accountant or other
representative to, solicit or encourage the making of any proposals reasonably
expected to lead to the acquisition of all or part of the capital stock of any
of the Acquired Entities or substantially all of the assets of any of the
Acquired Entities. The Acquired Entities and Shareholders shall promptly notify
Cintas and Cintas Sub in writing of the receipt of any such proposal.
<PAGE> 27
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4.5 CONDUCT OF BUSINESS PENDING THE MERGER. The Shareholders and
Acquired Entities covenant and agree that, prior to the effective time of the
Transactions, unless Cintas shall otherwise agree in writing, which consent
shall not be unreasonably withheld, or as otherwise expressly permitted or
contemplated by this Agreement:
(a) the business of the Acquired Entities shall be conducted in all
material respects only in the ordinary course and consistent with past practice
and none of the Acquired Entities shall (i) make any material change in its
operations, or (ii) purchase or sell any significant properties or assets
outside of the ordinary course of business;
(b) none of the Acquired Entities shall (i) split, combine or
reclassify any shares of its capital stock or units of partnership or (ii)
except for dividends in amounts sufficient to enable the Shareholders to pay
income taxes in respect of earnings of the Acquired Entities through the Closing
Date (which dividend amounts shall be computed in a manner consistent with past
practices) declare, set aside or pay any dividend or other distribution or make
any payment in cash, stock or property in respect of any shares of its capital
stock or units of partnership;
(c) none of the Acquired Entities shall (i) amend its respective
Articles or Certificate of Incorporation, By-laws or other organizational
documents, (ii) except in connection with the exercise of outstanding options
under the Phantom Stock Plan, issue or sell any shares or units of, or rights of
any kind to acquire any shares or units of or to receive any payment based on
the value of, its capital stock, its partnership interests or any securities
convertible into such securities, (iii) incur any indebtedness except in the
ordinary course of business, (iv) acquire, directly or indirectly, by redemption
or otherwise, any shares of its capital stock or partnership interests, (v)
cancel or decrease any existing insurance coverage, or (vi) modify any existing
contract, agreement, commitment or arrangement with respect to any of the
foregoing;
(d) the Acquired Entities shall use their reasonably best efforts to
preserve intact their business organization, to keep available the services of
their current officers and key employees, and to preserve the goodwill of those
having business relationships with them;
(e) none of the Acquired Entities shall (i) except for capital stock
and partnership interests issuable upon the exercise of outstanding options
under the Phantom Stock Plan, increase in any manner the compensation of any of
its officers or key employees or increase the compensation of other employees
except in the ordinary course of business, (ii) pay or agree to pay any pension,
retirement allowance or other employee benefit not required by any existing
plan, agreement or arrangement to any director, officer or key employee, whether
past or present, (iii) except as required by the terms of any existing plan,
agreement or arrangement, adopt or commit itself to or enter into any additional
pension, profit-sharing, bonus, incentive, deferred compensation, stock
purchase, stock option, stock appreciation right, group insurance, severance
pay, retirement or other employee benefit plan, agreement or arrangement, or to
any employment or consulting agreement with or for the benefit of any director,
officer or employee, whether past or present, (iv)
<PAGE> 28
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amend any such plan, agreement or arrangement or (v) pay any bonus to any
officer of the Company;
(f) the Acquired Entities shall not make any capital expenditures or
commitments for capital expenditures which individually exceed $100,000 or which
in the aggregate exceed $400,000;
(g) make any additional commitments or contracts with customers unless
such commitments or contracts are with the same quality of customer on
substantially the same terms as are in existence with any of the Acquired
Entities' current customers;
(h) other than in the ordinary course of business and consistent with
past practice, none of the Acquired Entities shall waive any rights of
substantial value or make any payment, direct or indirect, of any material
liability of such Acquired Entity before the same comes due in accordance with
its terms;
(i) other than in the ordinary course of business, none of the Acquired
Entities shall borrow any money or lease, mortgage, encumber or otherwise grant
any interest in any of its assets or properties, except for liens for current
taxes not yet due and liens or encumbrances that are not substantial in amount
and do not materially detract from the value or impair the use of the property
subject thereto;
(j) the Acquired Entities shall, at all times up to and including the
effective time of the Merger, maintain its existing insurance coverage of all
types in effect or procure substantially similar substitute insurance policies
with financially sound and reputable insurance companies in at least such
amounts and against such risks as are currently covered by such policies;
(k) cause all deferred compensation liabilities of any Shareholder to
be discharged in accordance with the terms of the underlying obligations prior
to the Closing Date;
(l) duly and timely file all federal, state, local and foreign tax
returns and pay all taxes required to be paid to any such taxing authority
unless otherwise accrued for on the Balance Sheet and all sales taxes will
continue to be collected and remitted as required by applicable law; and
(m) none of the Acquired Entities shall agree, in writing or otherwise,
to take any of the actions prohibited by the foregoing clauses (a) through (l).
4.6 CAUSE CONDITIONS TO BE SATISFIED. The Shareholders and Acquired
Entities shall use their reasonable best efforts to cause all of the conditions
set forth in Sections 8.1 and 8.3 hereof to be satisfied at the earliest
practical time. Without limiting the generality of the foregoing, on or as soon
as practicable after the date on which Cintas delivers the notice contemplated
by Section 7.1, the Shareholders and the Acquired Entities shall cause all
requisite filings to be made under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act").
<PAGE> 29
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4.7 NOTICE OF CERTAIN ACTIONS. The Company shall promptly notify
Cintas, of any actions, suits, claims, investigations, or proceedings commenced
or, to the best of its knowledge, threatened against, relating to or involving
or otherwise affecting any of the Acquired Entities which, if pending on the
date hereof, would have been required to have been disclosed in writing pursuant
to this Agreement or which relate to the consummation of the Merger.
4.8 DELIVERY OF DISCLOSURE SCHEDULES. The Disclosure Schedules shall be
delivered to Cintas and its counsel within ten (10) days of the date hereof.
5. COVENANTS OF CINTAS AND CINTAS SUB
5.1 ANNOUNCEMENTS AND COMMUNICATIONS. Cintas shall not, without the
prior approval of the Shareholders, which approval shall not be unreasonably
withheld or delayed, make any public announcement or furnish any information to
the public concerning the transactions contemplated by this Agreement prior to
Closing unless such announcement or furnishing of information is necessitated by
SEC rules and regulations, Federal securities laws or other applicable laws, as
reasonably determined by counsel for Cintas. Cintas shall promptly advise the
Shareholders of all communications which it receives pertaining to the
transactions contemplated by this Agreement, including, without limitation,
communications from governmental agencies and authorities. Cintas shall, as soon
as practical after Cintas delivers the notice contemplated by Section 7.1, issue
a press release announcing the execution of this Agreement.
5.2 CORPORATE TRANSACTIONS. Until the Closing Date, Cintas shall not,
and shall not authorize or permit any officer, director, employee, investment
banker, attorney, accountant or other representative to, solicit or encourage
the making of any proposals reasonably expected to lead to the acquisition of
all or substantially all of the capital stock of Cintas or substantially all of
Cintas' assets. Cintas shall promptly notify the Shareholders in writing of any
such proposal.
5.3 ORDINARY COURSE OF BUSINESS. Until the Closing Date, Cintas shall
operate its business in the ordinary course consistent with past practices and
shall maintain its Nasdaq listing.
5.4 CAUSE CONDITIONS TO BE SATISFIED. Cintas shall use its best efforts
to cause all of the conditions set forth in Sections 8.2 and 8.3 hereof to be
satisfied at the earliest practical time. Without limiting the generality of the
foregoing, on or as soon as practicable after the date on which Cintas delivers
the notice contemplated by Section 7.1, Cintas shall cause all requisite filings
to be made under the HSR Act.
5.5 ADHERENCE TO CONFIDENTIALITY AGREEMENT. Cintas shall maintain the
confidentiality of all information provided by the Acquired Entities pursuant to
the terms of that certain Confidentiality Agreement dated November 16, 1995, as
amended (the "Confidentiality Agreement").
<PAGE> 30
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5.6 NOTICE OF CERTAIN ACTIONS. Cintas shall promptly notify the
Company, of any actions, suits, claims, investigations, or proceedings commenced
or, to the best of its knowledge, threatened against, relating to or involving
or otherwise affecting Cintas which, if pending on the date hereof, would have
been required to have been disclosed in writing pursuant to this Agreement or
which relate to the consummation of the Merger.
6. CINTAS COMMON STOCK - REGISTRATION RIGHTS
6.1 CINTAS COMMON STOCK TO BE ISSUED. The Cintas Common Stock to be
issued in the Transactions will not be registered under the Securities Act of
1933 (the "Act") at the time of issuance and will be issued pursuant to an
exemption from registration. All shares of Cintas Common Stock to be issued in
the Transactions will hereafter for purposes of this Article VI be referred to
as the "Restricted Securities". As a result, such shares must be held
indefinitely unless subsequently registered under the Act or unless an exemption
from such registration is available. Cintas assumes no obligation to register
the shares of Common Stock except as provided below. In certain circumstances
after the expiration of the registration rights provided for herein, sales of
the Common Stock may be made in reliance upon SEC Rules 144 and 145 pursuant to
the terms and conditions of those rules. Cintas will supply the holders of such
Common Stock with such information as is necessary to enable them to make sales
of the Common Stock under SEC Rules 144 and 145. Until all Restricted Securities
have been sold by the Shareholders, Cintas will adhere to the current public
information requirement of SEC Rule 144(c).
6.2 RESTRICTIVE LEGEND. The certificates for shares issued pursuant to
the Transactions will each bear a legend substantially as follows:
The securities represented by this Certificate have not
been registered under the Securities Act of 1933 or the
laws of any state and may not be transferred in the
absence of (a) an effective registration statement for the
securities under the Securities Act of 1933 and applicable
state laws or (b) an opinion of counsel to Cintas that
such registration is not required.
6.3 INFORMATION. The Company and Shareholders acknowledge receipt of
the Cintas SEC Filings. The Shareholders also acknowledge that they have been
given the opportunity to ask questions and receive answers concerning the
issuance of Restricted Securities and to obtain any additional information which
Cintas possesses or can acquire without unreasonable effort or expense.
6.4 TRANSACTIONS IN CINTAS COMMON STOCK. Each of (i) Cintas, its
executive officers, directors and affiliates and (ii) the Company, the
Shareholders and their affiliates hereby represent and warrant that they have
not, directly or indirectly, purchased, sold, or made any arrangement to
purchase or sell Cintas Common Stock or any securities convertible into or
exchangeable for Cintas
<PAGE> 31
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Common Stock or rights to purchase or sell Cintas Common Stock during the ten
days preceding the date hereof. Nothing contained herein shall restrict any
Cintas employee or director from exercising stock options during this period
which could otherwise be exercised in compliance with applicable law. The
Company and Shareholders acknowledge that Cintas may, from time to time, after
the execution of this Agreement, purchase shares of Cintas Common Stock through
the National Market System or in private transactions which may affect the
Cintas Share Value. The Cintas Common Stock purchased by Cintas, if any, may
represent all or a portion of the Cintas Common Stock delivered to the
Shareholders hereunder.
6.5 RESTRICTED SECURITIES. The Restricted Securities will cease to be
restricted when they have been effectively registered under the Act and disposed
of in accordance with that registration or they have been distributed to the
public pursuant to Rule 144 under the Act or they have been otherwise
transferred and new certificates representing such securities have been
delivered which do not bear any legend restricting their transfer and such
securities are not subject to any stop transfer order or other restriction on
transfer. The Shareholders are further restricted from selling the Cintas Common
Stock until (i) such time Cintas and the Company have been merged for a period
of at least thirty (30) days and (ii) Cintas publishes combined financial
results as set forth in Section 1.6.
6.6 REGISTRATION RIGHTS. Cintas agrees to file a Registration Statement
with the SEC within fifteen (15) business days after the Closing Date to
register the Restricted Securities for resale and shall, as expeditiously as
practicable, use its best efforts to cause the Registration Statement to be
declared effective by the SEC. Such Registration Statement shall include all of
the Restricted Securities, including those held in escrow pursuant to the terms
of this Agreement. Cintas agrees to use its best efforts to maintain the
effective status of the Registration Statement for two (2) years following the
effective date as provided in Section 6.7 herein.
6.7 POST EFFECTIVE MATTERS. For purposes of this Article VI, the term
"Prospectus" means the prospectus included in any Registration Statement, as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of the Restricted Securities, and all other amendments and
supplements to the prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such prospectus, Cintas will deliver to the holders of such Restricted
Securities after effectiveness of any Registration Statement under this
Agreement, such reasonable number of copies of the Prospectus as such holders
may from time-to-time request. Cintas shall file post-effective amendments or
supplements to such Registration Statement for a period continuing until the
Shareholders have held their Restricted Stock for a period of two (2) years
following the effective date and so long as a Prospectus is required to be
delivered under the Act and agrees to use its reasonable best efforts to keep
the Registration Statement effective at all times during such two (2) year
period and to at all times comply with the various applicable Federal and State
securities laws (after which period Cintas may withdraw such Restricted
Securities from registration), and shall deliver copies of the Prospectus
contained therein as herein-above provided. Notwithstanding the above, the
Shareholders agree to notify Cintas if a Shareholder sells all of his Restricted
Securities within two (2) years following the
<PAGE> 32
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effective date. Upon receipt of such notification from all Shareholders, Cintas'
obligation to keep the Registration Statement effective shall terminate. Each
Shareholder also agrees to notify the Chief Financial Officer of Cintas at least
two (2) full business days in advance of any sale or series of sales of the
Restricted Securities aggregating 10,000 or more shares of Cintas Common Stock.
6.8 STOCK EXCHANGE LISTING. If, at the time of any registration
pursuant to this Agreement, the Restricted Securities to be so registered meet
the criteria for listing on any exchange or exchanges on which any other Cintas
Common Stock is then listed, Cintas shall apply for and use its best efforts to
obtain a listing of such Restricted Securities on such exchange or exchanges.
6.9 REGISTRATION EXPENSES. Cintas shall pay all of the expenses in
connection with the registration referenced herein, including without limitation
costs of complying with Federal and State securities laws and regulations,
attorneys' fees of Cintas, accounting fees, printing expenses and filing fees;
except transfer taxes, underwriting commissions, discounts and expenses, and
other expenses including attorneys' fees, of the Acquired Entities and the
Shareholders whose Restricted Securities are being registered.
6.10 Additional Covenants.
---------------------
(a) Cintas shall promptly furnish to any Shareholder, without charge,
such number of copies of the Prospectus and any amendments or supplements
thereto as such Shareholder may request in order to facilitate the disposition
of the Restricted Securities being sold by such Shareholder.
(b) Cintas will use its best efforts to register or qualify the
Restricted Securities under such other securities or "blue sky" laws of such
jurisdictions as any Shareholder reasonably requests in writing and do any and
all other acts and things which may be necessary to enable such Shareholder to
consummate the disposition in such jurisdictions of such Restricted Securities
owned by such Shareholder; use its best efforts to keep each such registration
or qualification (or exemption therefrom) effective during the period which
Registration Statement is required to be kept effective; and use its best
efforts to do any and all other acts or things necessary or advisable to enable
the disposition in such jurisdictions of the Restricted Securities covered by
the Registration Statement; provided, that Cintas will not be required to
qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to general service of
process in any such jurisdiction where it is not then so subject.
(c) Cintas shall promptly prepare and file with the SEC such amendments
and post-effective amendments to the Registration Statement as may be necessary
to keep such Registration Statement effective for the period required by Section
6.7, cause the Prospectus to be supplemented by any required Prospectus
supplement and, as so supplemented to be filed pursuant to Rule 424 under the
Securities Act; and comply with the provisions of the Securities Act applicable
to it with respect to the disposition of all shares of Cintas Common Stock
covered by such Registration Statement during the applicable period in
accordance with the intended methods of disposition by
<PAGE> 33
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the Shareholders set forth in such Registration Statement or supplement to the
Prospectus; provided, however, that notwithstanding anything contained in this
Article 6 to the contrary, Cintas may suspend the effectiveness of the
Registration Statement required hereunder for a reasonable period of time, not
to exceed 15 days (a "Suspension Period"), if Cintas has been advised by legal
counsel that maintenance of such Registration Statement would require the
disclosure of a material transaction or other fact that Cintas determines
reasonably and in good faith would have a material adverse effect on Cintas,
provided that there shall be not more than two Suspension Periods in any period
of 12 consecutive months and the aggregate duration of all Suspension Periods in
any period of 12 consecutive months shall not exceed 20 days.
(d) Cintas shall promptly notify each Shareholder, (i) when a
Prospectus or any Prospectus supplement or post-effective amendment has been
filed and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of the issuance by the SEC
of any stop order suspending the effectiveness of a Registration Statement or
the initiation or threatening of any proceedings for that purpose, provided that
in the case of any order suspending such effectiveness, Cintas shall use its
reasonable best efforts to obtain the withdrawal of such order at the earliest
practicable time, (iii) of the issuance by any state securities commission or
other regulatory authority of any order suspending the qualification or
exemption from qualification of any of the shares of Cintas Common Stock under
state securities or "blue sky" laws or the initiation of any proceedings for
that purpose provided that in the case of any order suspending such
effectiveness, Cintas shall use its reasonable best efforts to obtain the
withdrawal of such order at the earliest practicable time, and (iv) of the
happening of any event which makes any statement made in a Registration
Statement or related Prospectus untrue or which requires the making of any
changes in such Registration Statement or Prospectus so that they will not
contain any untrue statement or a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading; and, as promptly as practicable thereafter, use their best
efforts to prepare and file with the SEC and furnish a supplement or amendment
to such Prospectus so that, as thereafter deliverable to the purchasers of such
shares of Cintas Common Stock, such Prospectus will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(e) Prior to filing a Registration Statement or Prospectus or any
amendments or supplements thereto, Cintas will furnish to the Shareholders,
draft copies of all such documents proposed to be filed at least five Business
Days prior thereto, which documents will be subject to the review of the
Shareholders and their counsel; provided, however, that all such documents shall
be subject to the approval of the Shareholders insofar as they relate to
information concerning the Shareholders (including, without limitation, the
proposed method of distribution of such Shareholder's Restricted Securities).
<PAGE> 34
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6.11 Indemnification.
----------------
(a) INDEMNIFICATION BY CINTAS. Cintas agrees to indemnify, to the full
extent permitted by law, and hold harmless each Shareholder and each person, if
any, who controls any Shareholder (within the meaning of either Section 15 of
the Act or Section 20 of the Securities Exchange Act of 1934) from and against
all losses, claims, damages, liabilities and expenses (including reasonable
attorneys' fees) arising out of or based upon any untrue or alleged untrue
statement of material fact contained in any Registration Statement, any
amendment or supplement thereto, any Prospectus or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same arise out of or are based upon any such untrue statement or omission based
upon information with respect to such Shareholder furnished in writing to Cintas
by or on behalf of such Shareholder expressly for use therein. Such
indemnification extends to such Shareholders' respective trustees, heirs,
representatives, agents, permitted assigns and each underwriter, if any, engaged
by a Shareholder to dispose of shares of Cintas Common Stock acquired pursuant
to this Agreement.
(b) INDEMNIFICATION BY SHAREHOLDERS. Each Shareholder will furnish to
Cintas in writing such information with respect to the name and address of such
Shareholder and such other information as may be reasonably required for use in
connection with any such Registration Statement or Prospectus and agrees to
indemnify, to the full extent permitted by law, Cintas, its directors, officers,
employees, agents and trustees and each person who controls Cintas (within the
meaning of either Section 15 of the Act or Section 20 of the Securities Exchange
Act of 1934) against any losses, claims, damages, liabilities and expenses
arising out of or based upon any untrue statement of a material fact or any
omission of a material fact required to be stated in the Registration Statement
or Prospectus or any amendment thereof or supplement thereto or necessary to
make the statements therein not misleading, to the extent, but only to the
extent, that such untrue or alleged untrue statement is contained in or such
omission or alleged omission relates to any information with respect to such
Shareholder so furnished in writing or the accuracy of which was confirmed in
writing by such Shareholder specifically for inclusion in any Prospectus or
Registration Statement.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS PURSUANT TO ARTICLE 6. Any
person entitled to indemnification pursuant to this Article 6 agrees to give
prompt written notice to the indemnifying party after the receipt by such person
of any written notice of the commencement of any action, suit, proceeding or
investigation or threat thereof made in writing for which such person will claim
indemnification or contribution pursuant to this Article 6 and, unless in the
judgment of counsel of such indemnified party a conflict of interest may exist
between such indemnified party and the indemnifying party with respect to such
claim, permit the indemnifying party to assume the defense of such claim.
Whether or not such defense is assumed by the indemnifying party, the
indemnifying party will not be subject to any liability for any settlement made
without its consent (but such consent will not be unreasonably withheld). No
indemnifying party will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in
<PAGE> 35
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respect of such claim or litigation. If the indemnifying party is not entitled
to, or elects not to, assume the defense of a claim, it will not be obligated to
pay the fees and expenses of more than one counsel with respect to such claim,
unless in the judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim, in which event the indemnifying party shall be obligated
to pay the fees and expenses of such additional counsel or counsels. For the
purposes of this Section 6.11, the term "conflict of interest" shall mean that
there are one or more legal defenses available to the indemnified party that are
different from or additional to those available to the indemnifying party or
such other indemnified parties, as applicable, which different or additional
defenses make joint representation inappropriate.
(d) CONTRIBUTION. If the indemnification from the indemnifying party
provided for in this Section 6.11 is unavailable to hold harmless an indemnified
party hereunder in respect of any losses, claims, damages, liabilities or
expenses referred to herein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party or parties, on the one hand, and the
indemnified party or parties, on the other hand, in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party or parties and indemnified parties shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact, has been made by, or
relates to information supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in Section 6.11(c), any reasonable legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6.11(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6.11, no Shareholder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Restricted Securities of such Shareholder were offered
to the public exceeds the amount of any damages which such Shareholder has
otherwise been required to pay by reason of such untrue statement or omission.
No person guilty of fraudulent misrepresentation (within the meaning of Section
1(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
<PAGE> 36
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If indemnification is available under this Section 6.11, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in Sections 6.11(a) and 6.11(b) without regard to the relative fault of
said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 6.11(d).
7. CINTAS DUE DILIGENCE
7.1 CINTAS DUE DILIGENCE. During the period prior to the Closing Date,
the Acquired Entities and the Shareholders will give to Cintas and its counsel,
accountants, actuaries and other expert persons and other representatives, full
access, during normal business hours, to each of the Acquired Entity's and
Shareholders' (to the extent such items are used by any of the Acquired Entities
in its business) assets, properties (owned and leased), books, Customer
Contracts, other contracts, commitments and other records (including computer
files, retrieval programs and other documentation relating to the business of
any of the Acquired Entities) and will furnish Cintas and such representatives,
with all such information and data concerning the affairs of any of the Acquired
Entities as Cintas or such representatives reasonably may request for the
purposes of verifying the representations and warranties made herein and further
investigating the business and affairs of the Acquired Entities prior to the
Closing, and in furtherance thereof, the Acquired Entities will permit Cintas,
together with appropriate representatives of the Acquired Entities, in a manner
approved by the Company, to make contact with members of management, with
certain customers and with such other persons, firms or corporations with which
the Acquired Entities have been conducting business and shall permit Cintas, at
Cintas' expense, to conduct environmental audits on the Real Property; provided
however, that until Cintas delivers written notice to the Acquired Entities and
the Shareholders in accordance with Section 12.2 hereof that it is satisfied
with the Disclosure Schedule and the results of its preliminary due diligence
investigation (which notice, if given, shall be delivered no later of the close
of business on February 6, 1998 (the "Preliminary Review Termination Date"))
Cintas (a) shall not be given access to either the records of the Acquired
Entities or the Shareholders except as set forth on Schedule 7.1 or to the Real
Property (except for purposes of conducting the environmental audits referred to
above and the plant visits as set forth on Schedule 7.1), (b) shall not make
contact with members of management or other employees of the Acquired Entities
except as set forth on Schedule 7.1, (c) shall not make contact regarding the
Acquired Entities or this Agreement with customers or other persons, firms or
corporations with which the Acquired Entities have been conducting business and
(d) shall conduct all of its due diligence at offsite locations to be agreed
upon by Cintas and the Acquired Entities, except as specifically contemplated by
Schedule 7.1. The performance of the due diligence of Cintas or Cintas Sub or
the acquisition of information by Cintas or Cintas Sub shall not relieve the
Shareholders from any representation, warranty or covenant made by the
Shareholders in this Agreement. In connection with its due diligence
investigation, Cintas shall not interfere with the Acquired Entities' operations
and, in accordance with the Confidentiality Agreement, shall maintain the
confidentiality of all information it acquires.
<PAGE> 37
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7.2 SUPPLEMENTAL DISCLOSURE. The Acquired Entities and the Shareholders
shall each have the continuing obligation to promptly supplement or amend the
Disclosure Schedules with respect to any matter hereafter arising or discovered
which, if existing or known at the date hereof, would have been required to be
set forth or described in the Disclosure Schedules; provided, however, that for
the purpose of the rights and obligations of the parties hereunder, any such
supplemental or amended disclosure shall not be deemed to have been disclosed as
of the date hereof unless so agreed to in writing by Cintas.
8. CONDITIONS PRECEDENT
8.1 CONDITIONS PRECEDENT TO CINTAS' AND CINTAS SUB'S OBLIGATIONS. The
performance of the obligations of Cintas and Cintas Sub under this Agreement are
subject, at the election of Cintas, to the fulfillment or written waiver of each
of the following conditions on or before the Closing:
(a) All proceedings taken in connection with the transactions
contemplated by this Agreement and all instruments and documents required in
connection therewith or incident thereto shall be reasonably satisfactory in
form and substance to Cintas.
(b) The representations and warranties of the Acquired Entities and
Shareholders contained in this Agreement, the Disclosure Schedule or in any
certificate or document delivered to Cintas and Cintas Sub pursuant hereto shall
be true and correct in all material respects on the date hereof and shall be
deemed to have been made again on the Closing Date and speak as of the Closing
except for representations which speak as of a specific date and shall then also
be true and correct in all material respects, subject to any changes and
exceptions thereto which are contemplated in this Agreement or consented to in
writing by Cintas; the Acquired Entities and Shareholders shall have performed
and complied in all material respects with all agreements and conditions
required by this Agreement to be performed or complied with by them on or before
the Closing; and Cintas shall have been furnished with a certificate from each
Acquired Entity executed by the Shareholders and on behalf of such Acquired
Company by the President or a Vice President of such Acquired Company dated the
Closing Date, certifying, as of the Closing Date, to the fulfillment of the
foregoing conditions by the Company and further certifying that there has been
no material adverse change in the financial condition or business of any
Acquired Company or any damage or destruction of assets of any Acquired Entity
which would materially affect such Acquired Entity's ability to conduct business
substantially as theretofore conducted; provided, however, that any inaccuracy
of a representation or warranty, on the date hereof or on the Effective Date,
shall not result in the non-satisfaction of this Section 8.1(b) unless any such
inaccuracy or inaccuracies, either (i) individually or in the aggregate,
represent a Material Adverse Effect on the Acquired Entities or (ii) are willful
and intentional misrepresentations of a material matter that constitute common
law fraud. For purposes of this Agreement, a "Material Adverse Effect", with
respect to any person or entity, means a material adverse effect on the
financial condition, business, liabilities (including contingent liabilities) or
results of operations of the Acquired Entities, taken as a whole; and
<PAGE> 38
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"Material Adverse Change" shall mean a change or a development involving a
prospective change which would have a Material Adverse Effect.
(c) There shall have been obtained the written consents, in form and
substance reasonably satisfactory to Cintas, of each party whose consent to the
transactions contemplated hereby is required including those set forth in
Section 2.4 of this Agreement.
(d) No litigation or proceeding shall be pending which seeks to
restrain, set aside or invalidate the transactions contemplated by this
Agreement.
(e) At meetings of the shareholders or, if required, Interest holders
of each Acquired Entity or by the written action of such person as referred to
in Section 4.3 hereof, a sufficient number of outstanding shares of each
Acquired Company's capital stock and, if required, each Partnership's Interests
shall have voted to approve the matters referred to in this Agreement and the
transactions contemplated hereby.
(f) Title to all of the Real Property shall be insurable by a title
company reasonably satisfactory to Cintas free of all exceptions except those
(i) that in the reasonable opinion of Cintas do not effect in any material
respect the current use or value of such Real Property or (ii) that are
disclosed in Section 2.10 of the Disclosure Schedule.
(g) The Acquired Entities shall have delivered to Cintas the documents
required to be delivered hereunder, including those to be delivered at the
Closing pursuant to Section 9.1 hereof.
(h) Each of the directors and, to the extent requested, officers, of
each of the Acquired Companies shall have submitted their resignations in
writing effective the Closing Date unless otherwise approved in writing by
Cintas.
(i) The Pooling Letter required pursuant to Section 1.6 hereof shall
have been executed and delivered to Cintas and Cintas shall have received
confirmation from Cintas' independent accountants, Ernst & Young LLP, that the
Transactions shall qualify for "pooling of interests" accounting treatment by
Cintas.
(j) The Mergers shall be deemed to be effective under all applicable
law.
(k) Cintas shall have delivered the notice contemplated by Section 7.1
hereof on or before the close of business on the Preliminary Review Termination
Date.
(l) Nothing shall have come to the attention of Cintas subsequent to
the Preliminary Review Termination Date to lead it reasonably to believe either
that (i) any representation or warranty of the Acquired Entities or the
Shareholders in this Agreement was not true and correct in all material respects
on the date of this Agreement and that such inaccuracy of a representation or
warranty either individually or together with any other inaccuracies represent a
Material Adverse
<PAGE> 39
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Effect on the Acquired Entities, or (ii) that there has been a Material Adverse
change in the Acquired Entities.
(m) The Phantom Stock Plan shall have been terminated as provided in
Section 1.11.
(n) Cintas shall have entered into, and, concurrent with the Closing,
consummated the transactions contemplated by a Stock Purchase Agreement with the
stockholders identified on Attachment No. 3 to acquire minority interests owned
by such persons in the entities which are listed on Attachment No. 3 on terms
and conditions to be agreed upon between such stockholders and Cintas.
(o) Shareholders entitled to receive not more than 9.99% of the
aggregate consideration payable pursuant to Section 1.4 hereof shall have
properly exercised their appraisal rights under applicable Illinois and Georgia
law.
(p) Arrangements satisfactory to the parties to repay all loans to the
Shareholders from any of the Acquired Entities shall have been made.
8.2 CONDITIONS PRECEDENT TO THE SHAREHOLDERS' OBLIGATIONS. The
performance of the Shareholders under this Agreement is subject, at the election
of the Shareholders, to the fulfillment or written waiver of each of the
following conditions on or before the Closing:
(a) The representations and warranties of Cintas and Cintas Sub
contained in this Agreement or in any certificate or document delivered to the
Shareholders pursuant hereto shall be true and correct on the date hereof and
shall be deemed to have been made again on the Closing Date and speak as of the
Closing and shall then also be true and correct, subject to any changes and
exceptions thereto which are contemplated in this Agreement or consented to in
writing by the Shareholders. Cintas and Cintas Sub shall have performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by them, respectively, on or before the Closing; and
the Shareholders shall have been furnished with certificates from Cintas and
Cintas Sub executed on behalf of Cintas and Cintas Sub by the President or a
Vice President of Cintas and Cintas Sub, respectively, dated as of the Closing,
certifying to the fulfillment of the foregoing conditions by Cintas and Cintas
Sub, respectively.
(b) No litigation or administrative proceeding shall be pending or
which seeks to restrain, set aside or invalidate the transactions contemplated
by this Agreement.
(c) Cintas and Cintas Sub shall have delivered to Shareholders at the
Closing the documents required to be delivered pursuant to Section 9.2 hereof.
(d) The exchange of shares of Cintas Common Stock for shares and
Interests of the Acquired Entities pursuant to this Agreement and the Articles
of Merger shall be made in compliance with applicable federal and state
securities laws.
<PAGE> 40
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(e) The Mergers shall be deemed to be effective under applicable law.
(f) The Shareholders shall have received confirmation from Cintas'
independent accountants, Ernst & Young LLP, that the Transactions shall qualify
for "pooling of interests" accounting treatment by Cintas.
8.3 HART-SCOTT-RODINO. In addition to those conditions set forth in
Sections 8.1 and 8.2, Closing shall be conditioned upon the expiration of all
waiting periods under the HSR Act.
9. DOCUMENTS TO BE DELIVERED AT CLOSING
9.1 DOCUMENTS TO BE DELIVERED BY THE ACQUIRED ENTITIES AND THE
SHAREHOLDERS AT THE CLOSING. At the Closing, the Company or Shareholders shall
deliver to Cintas and Cintas Sub:
(a) Copies certified by the Secretary or Assistant Secretary of the
Acquired Companies of the resolutions of each of such Company's Board of
Directors and Shareholders approving this Agreement and the Articles of Merger
and authorizing the transactions contemplated hereby and thereby.
(b) Copies certified by the general partner of each Partnership of the
resolutions of such Partnership approving this Agreement and the Articles of
Merger and authorizing the transactions contemplated hereby and thereby.
(c) The Articles of Merger in a form reasonably satisfactory to the
parties executed by the Acquired Companies.
(d) The Pooling Letter in a form reasonably satisfactory to the parties
executed by the Company.
(e) An opinion dated the Closing Date of Neal, Gerber & Eisenberg,
counsel to the Company and Shareholders, in a form reasonably satisfactory to
the parties.
(f) A Non-Competition and Non-Disclosure Agreement executed by each
Shareholder listed on Attachment No. 2 attached hereto in a form substantially
as that attached hereto as EXHIBIT A (the "Non-Competition Agreement").
(g) An Escrow Agreement executed by the Shareholders in a form
reasonably satisfactory to the parties (the "Escrow Agreement").
(h) The written consents, in form and substance reasonably satisfactory
to Cintas, of each party whose consent to the transactions contemplated hereby
is required.
<PAGE> 41
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(i) The written resignations of each of the Directors and, to the
extent requested by Cintas, officers of the Company effective the Closing Date
except as otherwise set forth.
(j) Custody to all of each Acquired Entity's books, records, papers and
other documents including minute books.
(k) The certificate required under Section 8.1(b).
(l) Copies of the Articles of Incorporation, as amended, of the Company
as certified by the Secretary of State of the State of Illinois and copies of
the By-Laws of the Company certified by the respective Secretary or an Assistant
Secretary of the Company.
(m) Certificates of Good Standing issued by the Secretaries of State of
the states of incorporation or formation for each Acquired Company, dated within
ten (10) days of the Closing Date.
(n) Certificates of Good Standing (or local law equivalent) issued by
the province of Quebec or Canada for the Canadian Sub.
(o) Certificates of Good Standing (or equivalent) for each Partnership
issued by its jurisdiction of organization, to the extent such jurisdictions
issue such certificates.
(p) Certificates representing the shares of capital stock and, to the
extent represented by certificates, the partnership interests of the Acquired
Entities being acquired by Cintas, Cintas Sub or the Company in the
Transactions.
(q) A report from Cintas' independent accountants, Ernst & Young LLP,
in a form reasonably satisfactory to the parties, confirming that the
Transactions qualify for "pooling of interests" accounting treatment by Cintas.
(r) The documents set forth in Section 8.1 to be delivered by the
Company and such other certificates and documents as Cintas or Cintas Sub may
reasonably request.
9.2 DOCUMENTS TO BE DELIVERED BY CINTAS AND CINTAS SUB AT THE CLOSING.
At the Closing, Cintas and Cintas Sub shall deliver to the Company and
Shareholders:
(a) A certified copy of the respective resolutions of the Board of
Directors of Cintas and Cintas Sub approving this Agreement and authorizing the
transactions contemplated hereby and, in the case of Cintas, authorizing the
issuance of the shares of Cintas Common Stock to be exchanged for the Company
Common Stock pursuant to this Agreement.
<PAGE> 42
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(b) A certified copy of resolutions of the shareholder of Cintas Sub
approving this Agreement and the Articles of Merger and Reorganization and the
transactions contemplated hereby and thereby.
(c) The Articles of Merger in the forms reasonably satisfactory to the
parties executed by Cintas and Cintas Sub, respectively.
(d) The Pooling Letter executed by Cintas in a form reasonably
satisfactory to the parties.
(e) The Non-Competition Agreements executed by Cintas in the form of
EXHIBIT A.
(f) The Escrow Agreement executed by Cintas in a form reasonably
satisfactory to the parties.
(g) An opinion dated the Closing Date of Keating, Muething & Klekamp,
P.L.L. Cincinnati, Ohio, counsel to Cintas and Cintas Sub, in a form attached as
EXHIBIT F hereto.
(h) The officer's certificate required under Section 8.2(b).
(i) Certificates evidencing the Cintas Common Stock to be delivered to
the Shareholders and the Escrow Agent (later defined).
(j) A report from Cintas' independent accountants, Ernst & Young LLP,
confirming that the Transactions qualify for "pooling of interests" accounting
treatment by Cintas.
(k) The documents set forth in Section 8.2 to be delivered by Cintas
and such other certificates and documents as the Shareholders may reasonably
request.
10. INDEMNIFICATION AND ESCROW
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the terms and
conditions of this Agreement, together with the warranties, representations and
covenants contained herein or in any instrument or document delivered or to be
delivered pursuant to or in connection with this Agreement, shall survive the
execution of this Agreement and the Closing notwithstanding any investigation or
due diligence heretofore or hereafter made by or on behalf of any party hereto;
provided, however, that (i) the agreements set forth in Article VI, X and XI
hereof shall continue and survive until all obligations set forth therein shall
have been performed and satisfied, and (ii) all other representations,
warranties and agreements (including those made by Cintas), including but not
limited to the agreements of Cintas and Shareholders to indemnify one another
set forth in Article X hereof, shall terminate on the one (1) year anniversary
of the Closing Date except (y) as to matters with respect to which a party shall
have given written notice of any claim within such period and (z) as to the
matters set forth in Sections 2.23 (to the extent such matter relates to an open
<PAGE> 43
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tax year which has not yet been subject to audit) and 2.25 which shall continue
and survive until such time as the applicable statute of limitations or tolling
period for such acts, laws, regulations or agreements shall have expired.
Notwithstanding the above limitations, indemnification for matters fraudulently
omitted, misrepresented or otherwise concealed by any party hereto shall extend
indefinitely or until the applicable statute of limitations period has expired.
10.2 Indemnification.
----------------
(a) Subject to the following provisions of this Article X, commencing
on the Closing Date, the Shareholders, jointly and severally, shall defend,
indemnify and hold harmless, Cintas and Cintas Sub and any of their respective
officers, directors, employees and affiliates, from any and all claims, damages,
losses, liabilities, costs or expenses (including, without limitation, amounts
paid in settlement, reasonable attorneys' fees and costs of investigation),
whether fixed or contingent, matured or unmatured, liquidated or unliquidated,
which any of them may incur or suffer as a result of or arising out of any
breach of the representations, warranties, covenants or agreements of the
Company or the Shareholders set forth in this Agreement (except that for
purposes of this Section 10.2, the qualification "in all material respects" as
set forth in Section 2.25 hereof shall be omitted and for purposes of
indemnification, such Section shall be read and construed as if such
qualification was not contained therein) and for which claim has been made
during the applicable periods hereunder (a "Claim"), except for those Claims, or
portion of a Claim, which are covered by insurance maintained by the Company
prior to Closing and (ii) those Claims for which indemnification is available
pursuant to Article 6 hereof.
(b) Subject to the following provisions of this Article X, commencing
on the Closing Date, Cintas and Cintas Sub, jointly and severally, shall
indemnify and hold the Shareholders harmless from any claim, damage, loss or
expense (including, without limitation, amounts paid in settlement, reasonable
attorneys' fees and costs of investigation), whether fixed or contingent,
matured or unmatured, liquidated or unliquidated, which it may incur of suffer
as a result of or arising out of any breach of the representations, warranties,
covenants or agreements of Cintas and Cintas Sub, set forth in this Agreement
for which claim has been made during the applicable periods hereunder except for
those claims, or portion of a claim, which are covered by insurance maintained
by an Acquired Entity prior to Closing.
(c) Except as specifically set forth in this Agreement, the
indemnification provisions contained in this Article X shall be the exclusive
basis for the assertion of claims or the imposition of liability by one party
against another party to this Agreement arising from actions or claims resulting
from the breach or default of any representation, warranty, covenant or
agreement contained herein. This Article X shall not, however, be the exclusive
basis for asserting claims arising from any subsequently entered into document
or agreement including any non-competition or similar agreement to be entered
into by the Shareholders with Cintas or a subsidiary of Cintas.
<PAGE> 44
- 39 -
10.3 Basket and Maximum Liability.
-----------------------------
(a) The parties hereto and their respective heirs, successors and
assigns agree not to assert any right against any other party hereto after the
Closing Date of this Agreement for indemnification under this Agreement unless
and until the aggregate amount sought exceeds One Million Dollars ($1,000,000)
(the "Basket"), in which event the party seeking indemnification shall be
entitled to indemnification only for amounts in excess of the Basket; provided,
however, that the Basket shall not apply to any post-closing adjustment to the
Purchase Price set forth in Section 1.3(b).
(b) The maximum indemnification obligation of the Shareholders shall be
equal to the lesser of (i) the Purchase Price or (ii) the market value of the
Cintas Common Stock received by the Shareholders at the time a Claim is paid
which shall equal the Nasdaq National Market closing price on the date a Claim
is paid or if not paid on a trading day, then on the immediately preceding
trading day) less any amounts previously paid by the Shareholders pursuant to
their indemnification obligations as set forth herein.
10.4 ESCROWED SHARES; INDEMNIFICATION OFFSETS. Five percent (5%) of the
shares of Cintas Common Stock to be delivered to the Shareholders in payment of
the Purchase Price shall be placed in escrow (the "Escrowed Shares") by the
Shareholders on the Closing Date pursuant to the terms of the Escrow Agreement
for a period of one (1) year from the Closing Date. Unless otherwise agreed to
in writing by Cintas and the Shareholders, Cintas shall satisfy any Purchase
Price adjustment set forth in Article I or any Claim against the Shareholders
which is the subject of indemnification herein from the Escrowed Shares.
Certificates evidencing the Escrowed Shares, together with stock powers executed
in triplicate, shall be delivered to The Fifth Third Bank which shall act as the
Escrow Agent under the terms and conditions of this Article X and the Escrow
Agreement.
10.5 Indemnification Procedure; Arbitration.
---------------------------------------
(a) Promptly after an indemnified party becomes aware of any claim,
demand, action, proceeding, event or condition with respect to which a claim for
indemnification may be made pursuant to this Article X, such indemnified party
shall, if a claim in respect thereof is to be made against any party, give
written notice to the latter of the nature of the matter for which a right to
indemnification is claimed (an "Indemnification Claim"); provided, however, that
the failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of any obligations, except to the extent (and
only to the extent) the indemnifying party is materially prejudiced thereby. In
case any such Indemnification Claim involves a claim, demand, action or
proceeding by a third party (a "Third Party Claim"), the indemnifying party
shall be entitled to assume the defense thereof, jointly with any other
indemnifying party similarly notified, with counsel reasonably satisfactory to
such indemnified party, such defense to be conducted at the expense of the
indemnifying party. After notice from the indemnifying party to such indemnified
party of its election to assume the defense of a Third Party Claim, the
indemnifying party shall not
<PAGE> 45
- 40 -
be liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense of the Third Party Claim,
other than reasonable costs of investigation, unless the indemnifying party has
failed to assume the defense of such Third Party Claim and to employ counsel
reasonably satisfactory to such indemnified person. Notwithstanding any of the
foregoing to the contrary, the indemnified party will be entitled to select its
own counsel and assume the defense of any Third Party Claim if the indemnifying
party fails to select counsel reasonably satisfactory to the indemnified party
or fails to prosecute the defense, the expenses of such defense to be paid by
the indemnifying party. No indemnifying party shall consent to entry of any
judgment or enter into any settlement with respect to a Third Party Claim
without the consent of the indemnified party, which consent shall not be
unreasonably withheld. No indemnified party shall consent to entry of any
judgment or enter into any settlement of any Third Party Claim the defense of
which has been assumed by an indemnifying party without the consent of such
indemnifying party. The party providing indemnification hereunder shall have all
reasonable and necessary access to the records of the other parties hereto to
the extent required to adequately defend any such claim for indemnification
pursuant hereto.
(b) Each party shall furnish written notice of any Indemnification
Claim (other than third party Indemnification Claims referred to in paragraph
(a) above) hereunder Indemnification to the other parties hereto, setting forth
the amount of the Claim, if known, and the nature of the liability. The
Shareholders shall nominate a representative (the "Nominee") and such Nominee
acting on behalf of the Shareholders shall have ten (10) business days following
the receipt of a notice of such Claim within which to deliver a written
objection to Cintas with respect to any Claim, setting forth the grounds for the
objection (a "Disputed Claim"). Cintas and the Nominee shall use their best
efforts to settle any Disputed Claim within twenty (20) business days following
receipt by Cintas of such objection. If any Disputed Claim is not settled within
such twenty business day period, and such Disputed Claim involves less than One
Hundred Thousand Dollars ($100,000), or upon agreement of the parties if such
Disputed Claim involves more than One Hundred Thousand Dollars ($100,000), such
dispute shall be submitted to arbitration to be conclusively determined by one
arbitrator if the Shareholders and Cintas can agree on one arbitrator or by a
panel of three arbitrators if they can not agree on a single arbitrator, one
arbitrator being selected by Cintas, one arbitrator being selected by the
Nominee and the third arbitrator being selected by the two so selected by Cintas
and the Nominee or, in the event of their inability to agree on a selection of a
third arbitrator, as designated by the American Arbitration Association. All
such arbitrators shall be appointed as soon as reasonably possible but in no
event later than sixty (60) days after the identification of a Disputed Claim. A
hearing on such Disputed Claim shall be held within sixty (60) days of the
appointment of the arbitrator or the last of the arbitrators if the parties are
unable to agree on a single arbitrator and the decision of such arbitrator(s)
shall be made within thirty (30) days of such hearing. Such arbitration shall be
conducted in accordance with the commercial arbitration rules of the American
Arbitration Association. A written arbitral award shall be delivered to Cintas
and the Nominee promptly following the resolution of a Disputed Claim by the
arbitrators. Such award shall be final, binding and unappealable by any party
thereto. All reasonable fees and expenses of the arbitrator(s) and costs of the
arbitration shall be paid as
<PAGE> 46
- 41 -
determined by the arbitrator(s) and to the extent not so determined, each party
shall pay his or its own expenses. Arbitration shall be conducted in Chicago,
Illinois.
10.6 ESCROW NOT TO LIMIT INDEMNIFICATION. Notwithstanding anything
herein to the contrary, the Shareholders shall indemnify Cintas, its successors
and assigns, to the extent provided in this Article X and such indemnification,
to the extent provided, shall continue after the termination of the escrow
provided in this Article X and shall not be limited to the Escrowed Shares. Any
Shareholder obligation arising under Article I or this Article X not satisfied
by the Escrowed Shares shall be satisfied by Shareholder returning shares of
Cintas Common Stock to Cintas valued as set forth in the Escrow Agreement. If a
sufficient number of shares are not retained by Shareholders to enable
Shareholders to make such payments using Cintas shares, Shareholders shall pay
Cintas by the wire transfer of immediately available funds. To the extent any
loan obligation of the Acquired Entities to any Shareholder remains outstanding
after the Closing, Cintas shall not have any right of set off with respect to
such obligations in order to satisfy an indemnification claim against any such
Shareholder. These obligations of Shareholders shall be joint and several.
10.7 INDEMNIFICATION FOR REGISTRATION STATEMENT MATTERS. The terms,
conditions and procedures governing losses, claims, damages, liabilities and
expenses arising out of or based upon matters relating to the Registration
Statement shall be governed by and set forth in Section 6.11 hereof.
10.8 SHAREHOLDER CONTRIBUTIONS.
--------------------------
(a) CONTRIBUTION. Subject to the provisions of Section ?
hereof, in the event any Shareholder (a "Loss Shareholder") incurs any claims,
damages, losses, liabilities, costs or expenses (including, without limitation,
amounts paid in settlement, reasonable attorneys' fees, costs of investigation
and any amounts set-off (whether escrowed or otherwise) against amounts owed to
such Loss Shareholder (any of the foregoing, a "Loss"), in respect of any Loss,
the other Shareholders (individually, a "Contributing Shareholder" and,
collectively, the "Contributing Shareholders") shall contribute to the amount of
the Loss their respective pro rata share of such Loss. In furtherance and not in
limitation of the foregoing, to the extent that any Loss Shareholder is actually
required to pay, whether to an indemnified party or otherwise, any
Disproportionate Amount (as defined below) in respect of any Loss arising under
Section 10.2(a) of this Agreement, then each Contributing Shareholder agrees to
pay to each Loss Shareholder such Contributing Shareholder's pro rata portion of
such Disproportionate Amount, together with a portion of the amount, if any, of
any costs, fees or other expenses incurred by such Loss Shareholder in
connection with such Loss and/or in connection with the enforcement of the
provisions of this Agreement, it being agreed that, with respect to any Loss,
the term "Disproportionate Amount" shall refer to the amount in excess of any
Loss Shareholder's pro rata share of any Loss arising under Section 10.2(a) of
this Agreement and the term "pro rata share" shall refer to a fraction, the
numerator of which shall be the number of shares of Cintas Common Stock received
by such Shareholder pursuant to this Agreement and the denominator of which
shall be the aggregate number of shares of Cintas Common Stock received by all
Shareholders pursuant to this Agreement.
<PAGE> 47
- 42 -
(b) EXPENSES. All Contributing Shareholders shall pay to
the Loss Shareholders all costs and expenses, including reasonable attorneys'
fees, incurred in the collection and enforcement of such Shareholder's
obligations hereunder.
11. CERTAIN AGREEMENTS
11.1 CONFIDENTIAL INFORMATION. In the event the transactions
contemplated by this Agreement are not consummated, each party hereto will hold
all non-public confidential information which it obtained from the other parties
hereto in the course of negotiating this Agreement, which it did not previously
know or which was not previously in the public domain, confidential; no party
will directly or indirectly use such information until the same shall become in
the public domain (other than by disclosure by a party hereto receiving such
information for use pursuant hereto), and each party will return to the
applicable party all documents, objects and records obtained from such other
party pursuant hereto which are not in the public domain. Information provided
to Cintas pursuant to this Agreement shall remain subject to the Confidentiality
Agreement. The parties acknowledge that by executing this Agreement, the phrase
"two years" in the first and second full paragraphs on page four of such
Confidentiality Agreement is hereby deleted (which was changed to "three years"
by amendment) and the phrase "four years" is inserted in lieu thereof.
11.2 PREPARATION OF REGISTRATION STATEMENT. The Company will furnish
Cintas with such information concerning the business and financial condition of
the Acquired Entities and shall provide such assistance to Cintas as may be
reasonably necessary to enable Cintas to describe the Acquired Entities, this
Agreement and the transactions contemplated hereby, and to disclose any other
required information, in each case to the extent such information is required to
be included in the Registration Statement. The Shareholders will cooperate with
Cintas to maintain the accuracy and completeness of the information in the
Registration Statement and will promptly inform Cintas of any material change,
whether adverse or favorable, in the condition of any of the Acquired Entities,
financial or otherwise, which may affect the accuracy or completeness of the
information set forth in the Registration Statement and which may occur at any
time prior to the Closing Date.
11.3 TERMINATION. Except for those obligations set forth in Section
11.1 herein which shall not terminate, either Cintas or the Company may, as
applicable, on or prior to the Closing Date, terminate this Agreement without
liability as set forth below (provided the terminating party is not responsible
for the event which permits termination hereunder):
(a) By Cintas or the Shareholders if any governmental body or agency
having jurisdiction and authority to prevent consummation of the transactions
required hereunder, has formally asserted that consummation of such transaction
violates or would violate any applicable law, or any rule or regulation of such
body or agency; or
(b) By Cintas or the Shareholders if any condition precedent to the
obligation of such party to consummate the transaction has not been satisfied or
waived provided that if Cintas terminates this Agreement because the condition
specified in Section 8.1(l) has not been satisfied
<PAGE> 48
- 43 -
or waived, it shall include in its termination notice a description of the
material breach of a representation or warranty which represents a Material
Adverse Effect or the Material Adverse Change on which its termination of this
Agreement is based.
In no event will the party entitled to terminate this Agreement pursuant to this
Section 11.3 be liable to the other party for money or other damages (liquidated
or otherwise) for failure to consummate the transactions contemplated in this
Agreement for any reason set out in this Section 11.3.
11.4 TAX COMPLIANCE; FINAL TAX RETURN. Each of the parties agrees to
take, or cause to be taken, all actions and to do or cause to be done, all
things necessary, proper or advisable to qualify the transactions contemplated
by this Agreement as described in Section 1.6. Notwithstanding any other
provision of this Agreement, the provisions of this Section shall survive the
Closing for a period of three (3) years. Further, the Acquired Entities agree to
prepare and file, at the Acquired Entities' expense, all Federal, state and
local tax returns required to be filed by the any of the Acquired Entities
through the Closing Date, subject to Cintas' written approval of each such
returns, which approval will not be unreasonably withheld.
11.5 ENVIRONMENTAL AUDIT FOLLOW-UP. If the environmental audits
conducted by Cintas on the Real Property results in recommendations by such
environmental consultants to implement investigatory and/or corrective measures
to (i) address environmental contamination (including but not limited to, soil,
ground water, air, water, structural contamination, asbestos, urea formaldehyde)
or (ii) to cause such Real Property or any operations thereon to comply with
applicable environmental laws, rules and regulations or governmental directives
or orders or (iii) necessary to prevent any imminent and substantial
endangerment to human health or the environment, such recommendations shall be
undertaken by Cintas as soon as practical after the Closing, and the Purchase
Price shall be adjusted as provided for in Section 1.3(b) by the estimated cost
of implementing such recommendation. If the Shareholders disagree with the
findings of Cintas' environmental engineers, the need for and cost of any
recommended remediation shall be determined prior to the Closing by an
independent environmental or engineering firm to be jointly designated by the
Company and Cintas. All parties agree to be bound by the findings of such third
party environmental or engineering firm. However, if the estimated costs to
undertake the environmental audit recommendations and bring the Real Property
into compliance with applicable environmental laws, rules and regulations or
governmental directives or orders, exceeds One Million Dollars ($1,000,000), the
Shareholders may either (i) assume such costs and expenses or (ii) terminate
this Agreement without cost or obligation to Cintas or Cintas Sub provided
Cintas is notified of such intent to terminate within ten (10) business days of
Shareholders' receipt of such estimated remediation expenses. Nothing in this
Section 11.5 shall affect or release Shareholders of any warranty,
representation, covenant or indemnification obligation set forth elsewhere in
this Agreement. In addition, in the event the estimated remediation amount
exceeds the threshold set forth above, Cintas may also terminate this Agreement
without cost or obligation to the Company or Shareholders provided the Company
and Shareholders are notified of such intent to terminate within ten (10)
business days of Cintas' receipt of such estimated remediation expenses. After
the estimated remediation costs are established in accordance with this Section
11.5, Michael Frank, as
<PAGE> 49
- 44 -
representative of the Shareholders, shall be entitled to participate in (i) all
discussions between Cintas and the firms which Cintas is considering retaining
to perform the required remediation services, (ii) the selection of the firm to
be retained to perform such services, (iii) the negotiation of the contract to
be entered into between Cintas and such firm and (iv) all discussions between
Cintas and such firm with respect to any proposed increases in the cost of
services provided which are in excess of those contemplated by the remediation
contract. In the event the actual cost of implementing the environmental audit
recommendations are less than those estimated by such environmental or
engineering firm, all such savings shall be passed on to the Shareholders in the
form of a post-closing adjustment to the Purchase Price. In the event the actual
cost of implementing the environmental audit recommendations exceed those
estimated by the environmental or engineering firm, all costs in excess of those
so estimated shall be borne by the Shareholders with all such costs to be first
paid from the amounts held in escrow pursuant to the Escrow Agent without regard
to the Basket.
11.6 SHAREHOLDER GUARANTEES. Cintas hereby agrees to use its best
efforts to remove all Shareholder guarantees and to indemnify and hold
Shareholders harmless from all debts and liabilities of the Acquired Entities
which have been guaranteed by Shareholders through the Closing Date. This
indemnification shall not apply to debt or liabilities not specifically or
accurately disclosed in this Agreement, the Closing Date Balance Sheet or in the
Disclosure Schedule attached hereto.
11.7 POST CLOSING DIVIDENDS. If it is determined subsequent to the
Closing that the aggregate net earnings of the Acquired Entities from September
30, 1997 through the Closing Date were more than the earnings computed pursuant
to Section 1.3(a) and that the amount of the dividends paid by the Acquired
Entities to the Shareholders pursuant to Section 4.5(b) (solely to pay income
taxes due on the earnings computed pursuant to Section 1.3(a)) were less than
the amount that should have been paid to cover tax obligations of the
Shareholders consistent with past practice of the Acquired Entities, Cintas
shall pay or shall cause the Acquired Entities to pay amounts equal to such
deficiency to the Shareholders.
12. MISCELLANEOUS
12.1 EXPENSES. Except as provided for herein, each of the parties
hereto shall bear all expenses incurred by it in connection with this Agreement
and in consummation of the transactions contemplated hereby and in preparation
therefor.
12.2 NOTICES. All notices, demands and requests required or permitted
to be given under the provisions of this Agreement shall be deemed duly given if
mailed by registered mail, postage prepaid, return receipt requested, or by
Federal Express or similar overnight delivery service, or if delivered
personally, at the following addresses pending the designation of another
address in accordance with the provisions hereof:
<PAGE> 50
- 45 -
(a) If to Cintas and/or Cintas Sub:
Cintas Corporation
6800 Cintas Boulevard
Mason, Ohio 45040
Attention: President
With a copy to:
Keating, Muething & Klekamp
1800 Provident Tower
One East Fourth Street
Cincinnati, Ohio 45202
Attention: Robert E. Coletti
(b) If to any Acquired Entities or the Shareholders:
c/o Mr. Michael A. Frank
5608 West 73rd Street
Chicago, Illinois 60638
With a copy to:
Neal, Gerber & Eisenberg
Two North LaSalle Street
Chicago, Illinois 60602
Attention: Marshall E. Eisenberg
All deliveries required to be made or received from Cintas or Cintas
Sub shall be satisfied by delivery or receipt from Cintas.
12.3 ENTIRE AGREEMENT. Except for the Confidentiality Agreement, this
Agreement, the Articles of Merger and the other exhibits hereto contain all the
terms agreed upon between the parties with respect to the subject matter hereof
and supersede all prior agreements, arrangements and communications, whether
oral or written. This Agreement may not be changed or modified, except by
agreement in writing, signed by all of the parties hereto.
12.4 HEADINGS. The headings of the Sections of this Agreement are for
convenience of reference only and shall not be deemed to explain, limit or
amplify the provisions hereof.
12.5 SUCCESSORS IN INTEREST. Except as otherwise specifically provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, legal representatives, personal
representatives, successors and assigns.
<PAGE> 51
- 46 -
12.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which shall
be deemed but one and the same instrument.
12.7 GOVERNING LAW. This Agreement shall be construed and interpreted
in accordance with and governed in all respects by the laws of the State of
Ohio.
12.8 BROKERAGE. The Acquired Entities and the Shareholders represent
and warrant that (i) they have been advised solely by William Blair and Company
with respect to this Agreement and the transactions contemplated hereby and (ii)
Shareholders will pay all sums due William Blair and Company with respect to
this Agreement and the transactions contemplated hereby. Cintas and Cintas Sub
represent and warrant that they have not engaged any advisors with respect to
the Transactions.
Except as set forth in the immediately preceding paragraph, the
Acquired Entities, Shareholders, Cintas and Cintas Sub represent and warrant
that all negotiations relative to this Agreement have been carried on by them
directly between the parties without the intervention of any person or firm, and
each of the Acquired Entities, the Shareholders, Cintas and Cintas Sub shall
each indemnify the others and hold them harmless against and in respect of any
claim for brokerage, finders fees, or other fees or commissions relative to this
Agreement or to the transactions contemplated hereby caused by their actions
relative to brokerage or similar fees.
12.9 WAIVER. At any time prior to the effective time of the
Transactions, the parties hereto by action taken by their respective Boards of
Directors or by the Shareholders may (i) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions contained herein to the extent permitted by law. Any
agreement on the part of a party hereto to any extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
12.10 REMEDIES FOR BREACH; SPECIFIC PERFORMANCE. Each of the parties
acknowledges and agrees that the other party or parties would be irreparably
damaged in the event any covenant or agreement contained in this Agreement is
not performed in accordance with its specific terms or is otherwise breached.
Accordingly, each of the parties will be entitled, without bond or other
security, to seek an injunction or injunctions to prevent breaches of the
covenants or agreements contained in this Agreement and to enforce specifically
this Agreement and the covenants and agreements contained herein or therein in
any action instituted in any court of the United States or any state thereof
having subject matter jurisdiction, in addition to any other remedy to which
such party may be entitled, at law or in equity. Each party agrees that should
any court or other competent authority hold any provision of this Agreement or
part hereof to be null, void or unenforceable, or order any party to take any
action inconsistent herewith or not to take any action required herein, the
other party shall not be entitled to specific performance of such provision or
part
<PAGE> 52
- 47 -
hereof or to any other remedy, including money damages, for breach hereof as a
result of such holding or order.
12.11 PUBLICITY. So long as this Agreement is in effect and subsequent
to the Closing, the parties hereto shall not, and shall cause their affiliates
not to, issue or cause the publication of any press release or other
announcement with respect to the Transactions or this Agreement without the
consent of the other party, which consent shall not be unreasonably withheld or
delayed if such release or announcement is required by applicable law.
12.12 CONSTRUCTION. This Agreement is to be deemed to have been
prepared jointly by the parties hereto after arms-length negotiations, and any
uncertainty or ambiguity existing herein shall not be interpreted against any
party, but according to the application of the rules of interpretation of
contracts.
[THIS SPACE INTENTIONALLY LEFT BLANK - SIGNATURE PAGES TO FOLLOW]
<PAGE> 53
- 48 -
IN WITNESS WHEREOF, the Acquired Companies, Shareholders, Cintas and
Cintas Sub each has caused this Agreement to be duly executed in its name and on
its behalf, all as of the day and year first above written.
CINTAS CORPORATION, a Washington
corporation
By: /s/ David T. Jeanmougin
----------------------------------
Name: David T. Jeanmougin
Title: Senior Vice President
CINTAS MERGER SUB, INC. - ILLINOIS,
an Illinois corporation
By: /s/ David T. Jeanmougin
----------------------------------
Name: David T. Jeanmougin
Title: Vice President
UNIFORMS TO YOU AND COMPANY,
an Illinois corporation
By: /s/ Michael B. Frank
----------------------------------
Name: Michael B. Frank
Title:
INTEGRITY UNIFORM CO.,
a Delaware corporation
By: /s/ Michael B. Frank
----------------------------------
Name: Michael B. Frank
Title:
<PAGE> 54
- 49 -
PRIDE MANUFACTURING COMPANY,
a Georgia corporation
By:
-----------------------------------
Name:
Title:
M. FRANK & CO.,
an Illinois corporation
By:
-----------------------------------
Name:
Title:
WORKING CLASS LTD.,
an Illinois limited partnership
By: WORKING CLASS, INC.,
an Illinois corporation, general partner
By: /s/ Michael B. Frank
-----------------------------------
Name: Michael B. Frank
Title:
MICHAEL/KEITH PARTNERSHIP,
an Illinois general partnership
By: MICHAEL B. FRANK
REVOCABLE TRUST, general partner
By: /s/ Michael B. Frank
-----------------------------------
Michael B. Frank, not individually,
but solely as Trustee
<PAGE> 55
- 50 -
By: KEITH T. FRANK REVOCABLE
TRUST, general partner
By: /s/ Keith T. Frank
------------------------------------------
Keith T. Frank, not individually, but
solely as Trustee
By: DIRECTION Q TRUST, general partner
By: /s/ Marshall E. Eisenberg
------------------------------------------
Marshall E. Eisenberg, not
individually, but solely as Trustee
UTY MEXICO PARTNERS,
an Illinois general partnership
By: UNIFORMS TO YOU AND COMPANY,
an Illinois corporation, general partner
By: /s/ Michael B. Frank
------------------------------------------
Name: Michael B. Frank
Title:
By: ALPHA Q. TRUST, general partner
By: /s/ Allen M. Turner
------------------------------------------
Allen M. Turner, not individually,
but solely as Trustee
SHAREHOLDERS:
ALPHA Q TRUST
By: /s/ Allen M. Turner
------------------------------------------
Allen M. Turner, not individually,
but solely as Trustee
<PAGE> 56
- 51 -
FLOSSMOOR Q TRUST
By: /s/ Allen M. Turner
--------------------------------------
Allen M. Turner, not individually,
but solely as Trustee
DIRECTION Q TRUST
By: /s/ Marshall E. Eisenberg
--------------------------------------
Marshall E. Eisenberg, not individually,
but solely as Trustee
KEITH FRANK GRANTOR ANNUITY
TRUST #1
By: /s/ Michael Frank
--------------------------------------
Michael Frank, not individually,
but solely as Trustee
MICHAEL FRANK GRANTOR ANNUITY
TRUST #1
By: /s/ Marshall E. Eisenberg
--------------------------------------
Marshall E. Eisenberg, not individually,
but solely as Trustee
MICHAEL B. FRANK REVOCABLE TRUST
By: /s/ Michael B. Frank
--------------------------------------
Michael B. Frank, not individually,
but solely as Trustee
KEITH T. FRANK REVOCABLE TRUST
By: /s/ Keith T. Frank
--------------------------------------
Keith T. Frank, not individually,
but solely as Trustee
<PAGE> 57
- 52 -
WORKING CLASS, INC., an Illinois
corporation
By: /s/ Michael B. Frank
-----------------------------------
Name: Michael B. Frank
Title:
NATALIE AND STEPHANIE TRUST
By: /s/ Marshall E. Eisenberg
-----------------------------------
Marshall E. Eisenberg, not individually,
but solely as Trustee
MADELINE TRUST
By: /s/ Marshall E. Eisenberg
-----------------------------------
Marshall E. Eisenberg, not individually,
but solely as Trustee
STEPHANIE TRUST
By: /s/ Marshall E. Eisenberg
-----------------------------------
Marshall E. Eisenberg, not individually,
but solely as Trustee
AARON AND MADELINE TRUST
By: /s/ Marshall E. Eisenberg
-----------------------------------
Marshall E. Eisenberg, not individually,
but solely as Trustee
NATALIE AND MADELINE TRUST
By: /s/ Marshall E. Eisenberg
-----------------------------------
Marshall E. Eisenberg, not individually,
but solely as Trustee
<PAGE> 58
- 53 -
ROBIN AND STEPHANIE TRUST
By: /s/ Marshall E. Eisenberg
-----------------------------------------
Marshall E. Eisenberg, not individually,
but solely as Trustee
NATALIE AND AARON TRUST
By: /s/ Marshall E. Eisenberg
-----------------------------------------
Marshall E. Eisenberg, not individually,
but solely as Trustee
MADELINE AND STEPHANIE TRUST
By: /s/ Marshall E. Eisenberg
-----------------------------------------
Marshall E. Eisenberg, not individually,
but solely as Trustee
AARON AND STEPHANIE TRUST
By: /s/ Marshall E. Eisenberg
-----------------------------------------
Marshall E. Eisenberg, not individually,
but solely as Trustee
AARON TRUST
By: /s/ Marshall E. Eisenberg
-----------------------------------------
Marshall E. Eisenberg, not individually,
but solely as Trustee
/s/ Marcia A. Frank
-----------------------------------
Marcia A. Frank
<PAGE> 59
- 54 -
/s/ David Pinzur
-----------------------------------
David Pinzur
/s/ Michael DiMino
-----------------------------------
Michael DiMino
