1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 16, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CINTAS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
WASHINGTON 7218 31-1188630
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NUMBER)
6800 CINTAS BOULEVARD
CINCINNATI, OHIO 45262
(513) 459-1200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
ROBERT J. KOHLHEPP
CHIEF EXECUTIVE OFFICER
CINTAS CORPORATION
6800 CINTAS BOULEVARD
CINCINNATI, OHIO 45262
(513) 459-1200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
GARY P. KREIDER, ESQ. GREGORY G. JOHNSON, ESQ.
KEATING, MUETHING & KLEKAMP, P.L.L. BRYAN CAVE LLP
1400 PROVIDENT TOWER ONE KANSAS CITY PLACE, SUITE 3500
ONE EAST FOURTH STREET 1200 MAIN STREET
CINCINNATI, OHIO 45202 KANSAS CITY, MISSOURI 64105
(513) 579-6411 (816) 374-3200
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and all other
conditions to the merger described in the enclosed Proxy Statement/Prospectus
have been satisfied or waived.
If the securities being registered on this form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) OFFERING PRICE PER UNIT AGGREGATE OFFERING PRICE(2) REGISTRATION FEE(2)
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Common Stock, no par value 6,874,078 shares Not Applicable $335,110,945 $93,161(3)
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(1) Based upon the maximum number of shares of Common Stock that the Registrant
may be required to issue in the Merger, calculated as the product of (i)
9,406,623, the aggregate number of shares of Common Stock of Unitog Company
outstanding and (ii) an assumed Conversion Number of .73077 shares of
Registrant's Common Stock for each share of Unitog Company Common Stock.
(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act of 1933, as amended, and
computed pursuant to Rule 457(f)(1) thereunder on the basis of the market
value of Unitog Company Common Stock to be exchanged in the Merger, which
was computed, in accordance with Rule 457(c), as the product of (i) $35.625
(the average of the high and low prices per share of Unitog Company Common
Stock on February 12, 1999 as reported by the Nasdaq National Market) and
(ii) 9,406,623, the aggregate number of shares of Unitog Company Common
Stock outstanding.
(3) Pursuant to Rule 457(b), the registration fee has been reduced by the
$76,250 paid on February 3, 1999 upon the filing under the Securities
Exchange Act of 1934 of preliminary copies of Unitog Company's proxy
materials included herein. Therefore, the registration fee payable upon the
filing of this Registration Statement is $16,911.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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TABLE OF CONTENTS
WHAT UNITOG STOCKHOLDERS WILL RECEIVE IN THE MERGER......... -2 -
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... -4 -
WHO CAN HELP ANSWER QUESTIONS?.............................. -5 -
SUMMARY..................................................... -6 -
The Companies..................................... -6 -
Reasons For the Merger............................ -6 -
Recommendation to Stockholders.................... -6 -
The Merger........................................ -6 -
Conditions to Completing the Merger............... -6 -
Termination of the Merger Agreement............... -7 -
Termination Fees.................................. -7 -
Certain Federal Income Tax Considerations......... -7 -
Comparative Stock Prices.......................... -7 -
Accounting Treatment.............................. -7 -
Required Regulatory Approvals..................... -8 -
No Dissenters' Rights............................. -8 -
Certain Transactions/Interests of Certain
Persons........................................... -8 -
Vote Required..................................... -8 -
Comparison of Stockholder Rights.................. -8 -
Opinions of Financial Advisors.................... -8 -
CINTAS SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA...... -9 -
UNITOG SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA...... -10 -
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA........ -11 -
COMPARATIVE PER SHARE DATA.................................. -13 -
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS........... -16 -
Unaudited Pro Forma Combined Statement of Income
For The Six Month Period Ended November 30,
1998.............................................. -17 -
Unaudited Pro Forma Combined Statement of Income
For The Six Month Period Ended November 30,
1997.............................................. -18 -
Unaudited Pro Forma Combined Statement of Income
For The Year Ended May 31, 1998................... -19 -
Unaudited Pro Forma Combined Statement of Income
For The Year Ended May 31, 1997................... -20 -
Unaudited Pro Forma Combined Statement of Income
For The Year Ended May 31, 1996................... -21 -
Unaudited Pro Forma Combined Balance Sheet As Of
November 30, 1998................................. -22 -
Notes To Unaudited Pro Forma Combined Financial
Statements........................................ -23 -
COMPARATIVE STOCK PRICE AND DIVIDEND INFORMATION............ -24 -
FORWARD LOOKING STATEMENTS.................................. -24 -
RISK FACTORS................................................ -25 -
Uncertainties Associated with the Integration of
Unitog and Achievement of Cost Savings............ -25 -
Possible Fluctuation of Merger Consideration...... -25 -
Acquisitions...................................... -25 -
Competition....................................... -26 -
Economic Conditions............................... -26 -
Environmental Regulation.......................... -26 -
Dependence of Senior Management; Ability to
Attract and Retain Quality Personnel.............. -27 -
Information Systems; Year 2000.................... -27 -
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THE SPECIAL MEETING......................................... -28 -
Introduction...................................... -28 -
Matters to be Considered; Board Recommendation.... -28 -
Record Date and Voting............................ -28 -
Vote Required..................................... -29 -
Revocability of Proxies........................... -29 -
Solicitation of Proxies........................... -29 -
Adjournment of the Special Meeting................ -30 -
No Dissenters' Rights............................. -30 -
THE MERGER.................................................. -30 -
Form of the Merger................................ -30 -
Background of the Merger.......................... -30 -
Reasons for the Merger............................ -32 -
Opinions of Financial Advisors.................... -32 -
Goldsmith, Agio, Helms Securities,
Inc....................................... -32 -
George K. Baum & Company................ -35 -
Federal Income Tax Consequences................... -38 -
Federal Securities Law Consequences............... -39 -
Certain Effects of the Merger..................... -39 -
Conduct of Business if Merger Not Consummated..... -39 -
Interests of Certain Persons in the Merger........ -40 -
Severance Agreements for Unitog
Executive Officers........................ -40 -
Stock Option Plans...................... -40 -
Affiliation with Financial Advisor...... -40 -
Outside Director Fee/Stock Program...... -40 -
Directors' and Officers' Indemnification
and Insurance............................. -41 -
Regulatory Filings and Approvals.................. -41 -
THE MERGER AGREEMENT........................................ -41 -
Terms of the Merger............................... -41 -
The Merger.............................. -41 -
Effective Time.......................... -41 -
Conversion of Unitog Common Stock in the
Merger.................................... -41 -
Effect of Cintas Share Price
Fluctuation............................... -41 -
Effect of Environmental Liability
Reduction................................. -42 -
Assumption of Outstanding Stock
Options................................... -42 -
Fractional Shares....................... -42 -
Exchange of Certificates.......................... -42 -
Exchange Agent.......................... -42 -
Exchange Procedures..................... -42 -
Distributions With Respect to
Unexchanged Shares........................ -43 -
Transfers of Ownership.................. -43 -
Escheat and Withholding................. -43 -
Lost, Stolen or Destroyed
Certificates.............................. -43 -
Representations and Warranties.................... -43 -
Corporate Status; Capital Stock......... -43 -
Approvals and Filings................... -43 -
Absence of Conflict..................... -43 -
Accuracy of Reports and Financial
Statements................................ -43 -
Conduct of Business..................... -44 -
Absence of Material Untrue Statements... -44 -
Other Matters........................... -44 -
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Conduct of Business Pending the Merger............ -44 -
Conduct of Business of Cintas and
Unitog.................................... -44 -
Limitations on Conduct of Business
Applicable to Unitog...................... -44 -
No Solicitation......................... -45 -
Additional Agreements............................. -45 -
Access to Information;
Confidentiality........................... -45 -
Indemnification; Insurance.............. -45 -
Employees............................... -45 -
Further Action/Tax Treatment............ -45 -
Treatment of Options.................... -45 -
Accountants' Letters.................... -45 -
Pooling Accounting Treatment............ -46 -
Conditions to the Merger.......................... -46 -
Conditions to Obligation of Each Party
to Effect the Merger...................... -46 -
Stockholder Approval.................... -46 -
Listing................................. -46 -
Injunction.............................. -46 -
Registration Statement.................. -46 -
Accountants' Letters.................... -46 -
Financial Advisors' Opinions............ -46 -
Additional Conditions to Obligations of
Cintas to Effect the Merger............... -46 -
Representations and Warranties True..... -46 -
Covenants Performed..................... -46 -
Consents and Filings Made............... -46 -
Tax Opinion Received.................... -46 -
Additional Conditions to Obligation of
Unitog to Effect the Merger............... -46 -
Representations and Warranties True..... -46 -
Covenants Performed..................... -46 -
Consents and Filings Made............... -46 -
Tax Opinion Received.................... -47 -
Termination....................................... -47 -
Conditions to Termination............... -47 -
Termination Fees........................ -47 -
Amendment and Waiver.............................. -47 -
COMPARISON OF STOCKHOLDER RIGHTS............................ -48 -
Authorized Capital Stock.......................... -48 -
Board of Directors................................ -48 -
Removal of Directors.............................. -48 -
Amendment of Governing Documents.................. -49 -
Special Meeting of Shareholders................... -49 -
Anti-Takeover Provisions.......................... -49 -
Indemnification................................... -50 -
Appraisal or Dissenter Rights..................... -50 -
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ -51 -
LEGAL MATTERS............................................... -52 -
EXPERTS..................................................... -52 -
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING............... -53 -
WHERE YOU CAN FIND MORE INFORMATION......................... -53 -
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UNITOG LOGO
Dear Unitog Stockholder:
The Board of Directors of Unitog Company cordially invites you to attend a
special meeting of Unitog stockholders ("Special Meeting") to be held at 10:00
a.m. local time on March 24, 1999, at the Unitog corporate offices located at
1300 Washington Street, Kansas City, Missouri.
At the Special Meeting, you will be asked to approve the Agreement and Plan
of Merger dated January 9, 1999 between Unitog and Cintas Corporation (the
"Merger Agreement"). The Merger Agreement provides for the acquisition of Unitog
by Cintas. If the Merger Agreement is approved by Unitog stockholders and
certain other conditions are met, Unitog will become a subsidiary of Cintas and
Unitog stockholders will become Cintas stockholders.
If the Merger is completed, Unitog stockholders will receive, as
consideration for their shares of Unitog common stock, a certain number of
shares of Cintas common stock determined by a conversion number. The conversion
number is targeted at a $ per share value for Unitog common stock but varies
depending upon the average of the daily high and low sales prices of Cintas
common stock on the Nasdaq National Market for a specified period prior to the
Special Meeting. THE METHOD OF CALCULATING THE CONVERSION NUMBER IS SET FORTH ON
PAGE 3 OF THIS DOCUMENT. If the average Cintas trading price during the
specified period is less than $52 per share (thereby resulting in a value of
less than $ per share of Unitog common stock), Unitog may (but is not
obligated to) terminate the Merger Agreement.
Your Board of Directors has received opinions, from Goldsmith, Agio, Helms
Securities, Inc. and George K. Baum & Company, its financial advisors, dated
, 1999, to the effect that as of such date the merger consideration to
be received by Unitog's stockholders pursuant to the Merger Agreement is fair to
such stockholders from a financial point of view.
Your Board of Directors unanimously approved the Merger Agreement and
believes that the Merger is in the best interest of Unitog stockholders. The
Board unanimously recommends and advises that you approve the Merger Agreement
at the Special Meeting so that the Merger may be completed.
In the materials accompanying this letter you will find a Notice of Special
Meeting of Stockholders, a Proxy Statement/Prospectus and a proxy card. The
Proxy Statement/Prospectus more fully describes the proposed Merger and the
Merger Agreement. We encourage you to read these materials carefully.
Whether or not you plan to attend the Special Meeting, please take the time
to vote by completing, signing and returning to us the enclosed proxy card. A
postage paid envelope is enclosed for your convenience. If you sign, date and
return your proxy card without indicating how you want to vote, your proxy will
be counted as a vote in favor of the Merger Agreement. Even if you plan to
attend the Special Meeting, please complete, sign and return your proxy card. By
following certain procedures, you can later revoke your proxy if you wish.
Sincerely,
/s/ Randolph K. Rolf
Randolph K. Rolf
Chairman, President and Chief
Executive Officer
6
UNITOG COMPANY
1300 WASHINGTON STREET
KANSAS CITY, MISSOURI 64105
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 24, 1999
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Notice is hereby given that a Special Meeting of Stockholders ("Special
Meeting") of Unitog Company ("Unitog") will be held on March 24, 1999 at the
corporate offices of Unitog located at 1300 Washington Street, Kansas City,
Missouri. The Special Meeting will start at 10:00 a.m., local time.
The Special Meeting will be held for the following purposes:
(1) To consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger dated January 9, 1999 (the "Merger
Agreement"). The Merger Agreement provides for, among other things, the
merger of a wholly-owned subsidiary of Cintas Corporation ("Cintas") into
Unitog, with Unitog surviving the merger and becoming a wholly-owned
subsidiary of Cintas (the "Merger"). A copy of the Merger Agreement is
attached as Appendix A to the Proxy Statement/Prospectus accompanying this
Notice.
(2) To transact such other business as may properly come before the
Special Meeting or any adjournment or postponement thereof (including
adjournment of the Special Meeting to allow for additional solicitation of
stockholder votes in order to obtain a quorum or to obtain the required
vote in favor of the Merger Agreement).
Only holders of Unitog common stock of record as of the close of business
on February 18, 1999 are entitled to notice of and to vote at the Special
Meeting and any adjournment or postponement thereof.
The Merger will not be completed unless the Merger Agreement is adopted and
approved by the affirmative vote of the holders of a majority of the shares of
Unitog common stock entitled to vote at the Special Meeting.
Whether or not you plan to be present at the Special Meeting, please
complete, date and sign the enclosed proxy card and return it in the enclosed
postage paid envelope. If you plan to attend the Special Meeting, please mark
the appropriate space on the enclosed proxy card.
THE UNITOG BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AT THE SPECIAL MEETING SO THAT THE
MERGER MAY BE COMPLETED.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Robert M. Barnes
Robert M. Barnes
Vice President-General Counsel and
Secretary
Kansas City, Missouri
February 19, 1999
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY CARD
PROMPTLY.
7
PROXY STATEMENT
FOR SPECIAL MEETING OF
STOCKHOLDERS OF
UNITOG COMPANY
UNITOG LOGO
Subject to certain conditions, Unitog Company and Cintas Corporation have agreed
to merge a wholly-owned subsidiary of Cintas with and into Unitog (the
"Merger"). Unitog will become a wholly-owned subsidiary of Cintas, and the
shares of Unitog common stock held by Unitog stockholders will be converted into
shares of Cintas common stock based upon a conversion formula targeted at a $
per share value for Unitog common stock.
On February 18, 1999, the last reported sales prices on the Nasdaq National
Market of Unitog common stock and Cintas common stock were $ and
$ per share, respectively.
The Merger cannot occur unless the majority of shares held by the Unitog
stockholders approve it. The Unitog Board of Directors has scheduled a special
meeting of Unitog stockholders to vote on the Merger as follows:
March 24, 1999
10:00 a.m.
Unitog corporate offices
1300 Washington Street
Kansas City, Missouri
PROSPECTUS
OF
CINTAS CORPORATION
CINTAS LOGO
COMMON STOCK
This Proxy Statement/Prospectus provides you detailed information about the
proposed Merger. Unitog has provided the information concerning Unitog and
Cintas has provided the information concerning Cintas. Please see "Where You Can
Find More Information" for additional information about Unitog and Cintas on
file with the Securities and Exchange Commission. This document also
incorporates important business and financial information about Unitog and
Cintas that is not delivered with this document. You may obtain documents
incorporated by reference in this Proxy Statement/Prospectus by requesting them
in writing or by telephone from Unitog and Cintas at the following addresses:
Unitog Company Cintas Corporation
1300 Washington Street 6800 Cintas Blvd.
Kansas City, Missouri 64105 Cincinnati, Ohio 45262
Attn: Robert M. Barnes Attn: William C. Gale
(816) 474-7000 (513) 459-1200
If you would like to request documents from Unitog or Cintas, please do so by
March 14, 1999 to receive them before the Unitog Special Meeting. If you request
any such documents, the companies will mail them to you by first-class mail, or
other equally prompt means, within one business day of receipt of your request.
This Proxy Statement/Prospectus and proxy card are being mailed to stockholders
of Unitog beginning about February 19, 1999.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION, NOR ANY STATE SECURITIES
REGULATOR, HAS APPROVED OR DISAPPROVED THE CINTAS COMMON STOCK TO BE ISSUED
UNDER THIS PROXY STATEMENT/PROSPECTUS OR DETERMINED IF THIS PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
YOU SHOULD BE AWARE THAT THIS IS A COMPLICATED TRANSACTION. WE URGE UNITOG
STOCKHOLDERS TO READ AND CONSIDER CAREFULLY THIS PROXY STATEMENT/PROSPECTUS IN
ITS ENTIRETY, INCLUDING THE MATTERS REFERRED TO BEGINNING ON PAGE 25 UNDER "RISK
FACTORS".
The date of this Proxy Statement/Prospectus is February 19, 1999
8
WHAT UNITOG STOCKHOLDERS WILL RECEIVE IN THE MERGER
The amount of Cintas common stock into which one share of Unitog common stock
would be converted in the Merger is referred to in this Proxy
Statement/Prospectus as the "conversion number". The conversion number is
determined by dividing the "target" Unitog Share Price of $ (which includes
a reduction of $ for certain environmental liability estimates
described below) by the average of the high and low sales prices of Cintas
common stock as reported on the Nasdaq National Market and calculated on a daily
basis for the period of 20 trading days ending the third trading day prior to
the date of the Unitog special stockholders meeting ("Cintas share price"),
subject to certain adjustments based on the Cintas Share Price as follows:
- - If the Cintas share price is greater than $66.43, the Cintas share price used
to determine the conversion number is equal to $66.43 plus one-half of the
amount by which the Cintas share price is greater than $66.43 (and thereby
results in a value of more than $ per Unitog share based upon the Cintas
share price).
- - If the Cintas share price is equal to or between $52 and $66.43, each Unitog
share would be exchanged for Cintas common stock with a $ value (based
upon the Cintas share price).
- - If the Cintas share price is less than $52, the Cintas share price used to
determine the conversion number is deemed to be $52 (and thereby results in a
value of less than $ per Unitog share based upon the Cintas share price),
but in such event the Unitog Board of Directors has the right to terminate the
Merger Agreement. The Unitog Board is not required to exercise this right and
does not currently intend to resolicit stockholder approval should it decide
not to exercise such right. THEREFORE, UNITOG STOCKHOLDERS COULD RECEIVE
MERGER CONSIDERATION VALUING THEIR SHARES OF UNITOG COMMON STOCK AT LESS THAN
$ PER SHARE.
- 2 -
9
Illustrations of calculation of the conversion number are provided below:
(2) (4)
(1) THE CINTAS SHARE PRICE (3) THE VALUE OF THE MERGER
IF THE AVERAGE USED IN THE CALCULATION THE CONVERSION NUMBER CONSIDERATION PER UNITOG SHARE
TRADING CINTAS OF THE CONVERSION NUMBER [$ / CINTAS SHARE PRICE [BASED ON CINTAS SHARE PRICE
SHARE PRICE IS: IS DEEMED TO BE: IN COLUMN (2)] IS: IN COLUMN (1)] IS:
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$50.00 $52.000 .7308 $36.54
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$52.00 $52.000 .7308 $38.00
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$60.00 $60.000 .6333 $38.00
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$66.43 $66.430 .5720 $38.00
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$70.00 $68.215 .5571 $39.00
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$75.00 $70.715 .5374 $40.31
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$80.00 $73.215 .5190 $41.52
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Unitog expects to announce the average trading Cintas share price, the
conversion number and the per share merger consideration value on March 20,
1999, assuming a Unitog special stockholders meeting date of March 24, 1999.
Such information will also be available by calling 1-800-xxx-xxxx on or after
March 20, 1999 and until the closing of the Merger.
Because the period for calculating the average trading price of Cintas common
stock will end before the date of the Unitog special stockholders meeting and
the subsequent closing of the Merger, the actual market value of the Cintas
common stock you receive as merger consideration may differ from the calculated
value of the merger consideration shown above which is provided here for
illustrative purposes only.
- 3 -
10
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY IS UNITOG PROPOSING THE MERGER?
A: During the second calendar quarter of 1998, Unitog's Board of Directors
began considering various strategic alternatives for enhancing the value of
Unitog common stock. Unitog's financial advisors solicited proposals for the
acquisition of Unitog, and the proposal submitted by Cintas was deemed by
the Board as the most attractive. The merger of Unitog and Cintas presents
an opportunity for Unitog stockholders to realize a premium over historic
market prices for their shares through a tax-free re-organization.
Q: WILL I OWE ANY FEDERAL INCOME TAX AS A RESULT OF THE MERGER?
A: In general, you will not recognize any gain or loss for federal income tax
purposes as a result of the Merger, except to the extent of any gain with
respect to any cash payment you receive instead of any fractional share of
Cintas common stock.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: The companies are working to complete the Merger as soon as possible. In
addition to the approval of Unitog stockholders, certain other conditions
must be met. The Merger is expected to be completed shortly after its
approval by Unitog stockholders.
Q: WHAT DO I NEED TO DO NOW?
A: Just mail your completed, signed and dated proxy card in the enclosed return
envelope as soon as possible so that your shares will be represented at the
Unitog special meeting of stockholders, which will take place on March 24,
1999.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your Unitog shares only if you provide instructions on
how to vote. You should follow the directions provided by your broker
regarding how to instruct your broker to vote your shares.
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You can change your vote at any time before your proxy is voted at the
special meeting. You can do this in three ways. First, you can send Unitog a
written statement that you would like to revoke your proxy. Second, you can
send Unitog a new signed and later-dated proxy card. You should send any
revocation or new proxy card to Unitog's Secretary at the address set forth
at "Who Can Help Answer Questions?" on the following page. Third, you can
attend the special meeting and vote in person. However, your attendance
alone will not revoke your proxy.
Q: SHOULD I SEND IN MY STOCK CERTIFICATE NOW?
A: No. If the Merger is completed, Unitog stockholders will receive written
instructions for exchanging their stock certificates.
Q: WHAT HAPPENS TO MY DIVIDENDS?
A: We expect no changes in Unitog's or Cintas' dividend policies before the
Merger. In 1997, 1998 and 1999, Cintas declared $0.15, $0.18 and $0.22 per
share in annual dividends, respectively. Payment of dividends by Cintas in
the future will depend on business and financial conditions, earnings and
other factors.
- 4 -
11
WHO CAN HELP ANSWER QUESTIONS?
If you have more questions about the Merger, you should contact:
Unitog Company
1300 Washington Street
Kansas City, Missouri 64105
(816) 474-7000
Attention: Robert M. Barnes, Secretary
If you have additional questions about Unitog's solicitation of your proxy, you
should contact:
Beacon Hill Partners, Inc.
90 Broad Street, 20th Floor
New York, New York 10004
(800) 755-5001
Attention: Angela Harewood
Assuming a special meeting of Unitog stockholders on March 24, 1999, Unitog
will be able to determine the conversion number, and thus the per share merger
consideration payable to Unitog stockholders, at the market close on March 19,
1999. You are encouraged to call at 1-800-xxx-xxxx on or after March 20, 1999 to
hear a recorded message stating the conversion number and the per share merger
consideration value.
- 5 -
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SUMMARY
This summary highlights selected information from this Proxy
Statement/Prospectus and may not contain all of the information that is
important to you. To understand the Merger more fully and for a complete
description of the legal terms of the Merger, you should read carefully this
entire document and the documents we have referred to you. See "WHERE YOU CAN
FIND MORE INFORMATION."
Throughout this Proxy Statement/Prospectus, the term "Merger" refers to the
merger of a wholly-owned subsidiary of Cintas Corporation into Unitog Company,
with Unitog surviving the merger as a wholly-owned subsidiary of Cintas. The
term "Merger Agreement" refers to the Agreement and Plan of Merger dated January
9, 1999, a copy of which is included at the back of this Proxy
Statement/Prospectus as Appendix A.
THE COMPANIES
UNITOG COMPANY
1300 Washington Street
Kansas City, Missouri 64105
(816) 474-7000
Unitog provides uniform rental services to a variety of industries and sells
custom-designed uniforms to national companies as well as smaller independent
businesses. Unitog provides rental services in 56 locations to over 60,000
customers in 34 states, and the province of Ontario, Canada. Unitog sells
garments directly to over 190,000 customers nationwide. Unitog operates seven
manufacturing facilities and four distribution centers.
CINTAS CORPORATION
6800 Cintas Blvd.
Cincinnati, Ohio 45262
(513) 459-1200
Cintas designs, manufactures, and implements corporate identity uniform programs
throughout the United States and Canada. Cintas provides uniform and other
ancillary products and services through a network of over 200 locations serving
over 300,000 customers in 39 states and two Canadian provinces. Cintas is also
engaged in the business of distributing and selling certain first aid and safety
products.
REASONS FOR THE MERGER
During the second calendar quarter of 1998, Unitog's Board of Directors began
considering various strategic alternatives for enhancing the value of Unitog
common stock. Unitog's financial advisors solicited proposals for the
acquisition of Unitog, and the proposal submitted by Cintas was deemed the most
attractive. The merger of Unitog and Cintas presents an opportunity for Unitog
stockholders to realize a premium over historic market prices for their shares
through a tax-free reorganization.
RECOMMENDATION TO STOCKHOLDERS
The Unitog Board of Directors unanimously recommends that Unitog stockholders
approve and adopt the Merger Agreement at the Unitog special stockholders
meeting so that the Merger may be completed.
THE MERGER
In the Merger, a subsidiary of Cintas will merge with Unitog and Unitog, as the
survivor of the Merger, will become a subsidiary of Cintas. The stockholders of
Unitog will become stockholders of Cintas. For a description of what Unitog
stockholders will receive in the Merger, see "What Unitog Stockholders Will
Receive in the Merger" on page 2 of this Proxy Statement/Prospectus. Based on
the last reported sales price of Cintas common stock ($ per share as of the
trading day immediately preceding the date of this Proxy Statement/Prospectus),
the aggregate dollar value of Cintas common stock to be issued in the Merger to
Unitog stockholders would be approximately $ million. The actual value will
depend upon the average of the daily high and low sales prices of Cintas common
stock for the twenty trading days ending the third day prior to the Unitog
special stockholder meeting. We encourage you to read the Merger Agreement
because it is the legal document that governs the Merger.
CONDITIONS TO COMPLETING THE MERGER
Completion of the Merger depends upon satisfaction of a number of conditions,
including the following:
1. Unitog stockholders' approval and adoption of the Merger Agreement;
2. required regulatory approvals;
3. no governmental or legal actions prohibiting completion of the Merger;
- 6 -
13
4. receipt by both companies of letters from their independent public
accountants to the effect that the Merger will qualify for "pooling of
interests" accounting treatment;
5. Cintas' and Unitog's respective tax counsel's issuance of opinions regarding
the federal income tax treatment of the Merger;
6. no breach of representations or warranties which would constitute a material
adverse effect (as defined in the Merger Agreement) on Unitog or Cintas since
January 9, 1999; and
7. neither Cintas nor Unitog terminates the Merger Agreement as set forth below.
To the extent permitted by law, certain of the closing conditions may be waived
by the party entitled to assert them. The Unitog Board does not currently intend
to resolicit stockholder approval for its waiver of any of the conditions
mentioned above.
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time by mutual agreement of Cintas
and Unitog.
Either Cintas or Unitog may terminate the Merger Agreement if:
1. legal or governmental authority prohibits the Merger on a final and
non-appealable basis;
2. the Merger has not occurred by June 30, 1999; or
3. Unitog stockholders do not approve the Merger Agreement at the Unitog special
stockholder's meeting.
Cintas may terminate the Merger Agreement if:
1. there has been a misrepresentation or breach of warranty or a failure to
perform a covenant under the Merger Agreement on the part of Unitog which has
a material adverse effect; or
2. the Unitog Board withdraws or materially modifies or changes its
recommendation of the Merger Agreement in a manner adverse to Cintas.
Unitog may terminate the Merger Agreement if:
1. there has been a misrepresentation or breach of warranty or failure to
perform a covenant under the Merger Agreement on the part of Cintas which has
a material adverse effect;
2. the Board of Directors of Unitog, in the exercise of its fiduciary duty to
Unitog stockholders, determines that a proposal superior to the Merger
exists; or
3. the average trading Cintas share price is less than $52.00.
TERMINATION FEES
In the event of the termination of the Merger Agreement under certain
circumstances involving an acquisition proposal from a third party, Unitog will
be obligated to pay Cintas a termination fee of $10,960,867.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
Unitog and Cintas have structured the Merger to qualify as a tax-free
reorganization for federal income tax purposes. Assuming that the Merger
qualifies as a reorganization, neither Cintas, Unitog nor their stockholders
will recognize any gain or loss for federal income tax purposes in the Merger
except for any gain recognized with respect to cash payment received in lieu of
a fractional share of Cintas common stock. No ruling has been or will be sought
from the Internal Revenue Service as to the federal income tax consequences of
the Merger. TAX MATTERS ARE VERY COMPLICATED AND THE TAX CONSEQUENCES OF THE
MERGER TO YOU MAY DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD CONSULT
YOUR OWN TAX ADVISOR TO UNDERSTAND FULLY THE TAX CONSEQUENCES OF THE MERGER TO
YOU.
COMPARATIVE STOCK PRICES
Cintas common stock is traded on the Nasdaq National Market under the symbol
"CTAS". Unitog common stock is traded on the Nasdaq National Market under the
symbol "UTOG". On January 8, 1999, the last trading day ending prior to the
public announcement of the proposed Merger, the last reported Nasdaq sales price
for Unitog common stock was $29.75 and for Cintas common stock was $72. On
February 18, 1999, the last reported sales price for Unitog common stock was
$ and for Cintas common stock was $ .
Cintas will file an application to list on Nasdaq the shares of Cintas common
stock to be issued in the Merger.
ACCOUNTING TREATMENT
Unitog and Cintas expect the Merger to qualify as a "pooling of interests" under
applicable regulations, which means that Unitog and Cintas will be treated as if
they had always been combined for accounting and financial reporting purposes.
- 7 -
14
REQUIRED REGULATORY APPROVALS
The Hart-Scott-Rodino Act prohibits Cintas and Unitog from completing the Merger
until each has furnished certain information to the Antitrust Division of the
Department of Justice and the Federal Trade Commission and a required waiting
period has expired or been terminated. Cintas and Unitog each filed the required
notification and report forms with the Antitrust Division and FTC and, on
February 5, 1999, early termination of the waiting period was granted.
NO DISSENTERS' RIGHTS
Under applicable law, Unitog stockholders do not have appraisal rights in
connection with the Merger.
CERTAIN TRANSACTIONS/INTERESTS OF CERTAIN PERSONS
Some of the Unitog directors and officers have interests in the Merger that
differ, or are in addition to, the interests of Unitog stockholders. These
interests include:
- - certain Unitog directors and officers hold Unitog stock options that will vest
upon completion of the Merger or would become vested and cashed out if their
employment is terminated in certain circumstances within one year after the
Merger;
- - certain Unitog officers are parties to severance and retention arrangements
with Unitog which provide for certain benefits in the event of termination of
employment under certain circumstances after the Merger; and
- - certain outside directors of Unitog will receive accelerated issuance of
Unitog stock, in lieu of director fees, upon the completion of the Merger.
VOTE REQUIRED
The affirmative vote of holders of at least a majority of the outstanding shares
of Unitog Common Stock is required to approve the Merger. Directors and
executive officers of Unitog are entitled to vote 1,296,739 shares or
approximately 13.8% of the outstanding shares of Unitog common stock.
COMPARISON OF STOCKHOLDER RIGHTS
The Delaware General Corporation Law and Unitog's Certificate of Incorporation
and Bylaws currently govern your rights as a stockholder of Unitog. Cintas is a
Washington corporation, and, if the Merger is completed, the Washington Business
Corporation Act and Cintas' Articles of Incorporation and Bylaws will govern
your stockholder rights. Washington law and Cintas' Articles of Incorporation
and Bylaws differ from Delaware law and Unitog's Certificate of Incorporation
and Bylaws in certain respects.
OPINIONS OF FINANCIAL ADVISORS
In deciding to approve the Merger, Unitog's Board of Directors considered the
opinions of its financial advisors, Goldsmith, Agio, Helms Securities, Inc. and
George K. Baum & Company, that the merger consideration (as expressed by the
conversion number) to be received by Unitog stockholders in the Merger was fair,
from a financial point of view. The written opinions of Goldsmith, Agio, Helms
Securities, Inc. and George K. Baum & Company are attached as Appendix B and
Appendix C, respectively, to this Proxy Statement/Prospectus. We encourage you
to read these opinions. In connection with delivering their opinions, Goldsmith,
Agio, Helms Securities, Inc. and George K. Baum & Company performed a variety of
financial analyses. These analyses included valuing discounted cash flows,
examining the historical trading prices of Unitog and Cintas common stock,
comparing Unitog to other publicly traded companies and reviewing and analyzing
prior similar transactions.
- 8 -
15
CINTAS SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The following information is being provided to assist you in analyzing the
financial aspects of the Merger. The selected consolidated historical financial
data below are derived from the consolidated financial statements of Cintas,
with the data as of and for the five fiscal years ended May 31, 1998 being
derived from Cintas' consolidated financial statements which have been audited
by Ernst & Young LLP, and the data as of and for the six fiscal month periods
ended November 30, 1998 and November 30, 1997, respectively, being derived from
Cintas' quarterly financial statements, which are unaudited. Such unaudited
consolidated financial statements reflect all adjustments which are, in the
opinion of Cintas' management, necessary for a fair presentation of the interim
financial statements and consist of normal, recurring adjustments. The results
of operations for the interim periods are not necessarily indicative of the
results expected for the full fiscal year. The information presented below is
only a summary. More comprehensive financial information is included in reports
and other documents filed by Cintas with the Securities and Exchange Commission.
Cintas' Annual Report on Form 10-K for the fiscal year ended May 31, 1998 and
its Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 1998
and November 30, 1998 are each incorporated herein by reference. See "Where You
Can Find More Information."
SIX MONTHS ENDED
NOVEMBER 30, YEARS ENDED MAY 31,
---------------------- ----------------------------------------------------------
1998 1997 1998 1997 1996 1995 1994
---------- -------- ---------- -------- -------- -------- --------
(in thousands except per share data)
Net revenue.......... $ 721,672 $566,502 $1,198,307 $995,207 $875,833 $735,870 $625,094
Net income........... $ 73,660 $ 60,992 $ 122,857 $105,988 $ 87,744 $ 74,929 $ 59,182
Cintas pro forma net
income (A)......... $ 73,660 $ 57,566 $ 117,907 $100,194 $ 82,939 $ 70,268 $ 56,500
Basic earnings per
share.............. $ 0.70 $ 0.60 $ 1.21 $ 1.07 $ 0.89 $ 0.77 $ 0.61
Cintas pro forma
basic earnings per
share (A).......... $ 0.70 $ 0.57 $ 1.16 $ 1.01 $ 0.84 $ 0.72 $ 0.58
Diluted earnings per
share.............. $ 0.69 $ 0.59 $ 1.19 $ 1.05 $ 0.88 $ 0.75 $ 0.60
Cintas pro forma
diluted earnings
per share (A)...... $ 0.69 $ 0.56 $ 1.14 $ 0.99 $ 0.83 $ 0.71 $ 0.57
Dividends per
share.............. $ -- $ -- $ 0.18 $ 0.15 $ 0.13 $ 0.10 $ 0.09
Total assets......... $1,103,002 $911,698 $1,017,836 $843,290 $750,762 $665,236 $568,667
Long-term debt....... $ 168,526 $130,488 $ 180,007 $125,566 $133,422 $128,641 $ 97,264
Shareholders'
equity............. $ 730,018 $605,003 $ 654,492 $549,825 $465,529 $404,744 $344,015
- ---------------
Note:
(A) During fiscal 1998, Cintas acquired Uniforms To You Companies (UTY) in a
merger transaction accounted for as a pooling of interests. Prior to the
merger, UTY had elected S Corporation status for income tax purposes. As a
result of the merger, UTY terminated its S Corporation election. Cintas pro
forma net income, pro forma basic earnings per share and pro forma diluted
earnings per share reflects the pro forma tax expense of UTY as if UTY had
been a C Corporation during the financial statement periods presented.
- 9 -
16
UNITOG SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The following information is being provided to assist you in analyzing the
financial aspects of the Merger. The selected consolidated historical financial
data below are derived from the consolidated financial statements of Unitog,
with the data as of and for the five fiscal years ended January 25, 1998,
January 26, 1997, January 28, 1996, January 29, 1995 and January 30, 1994,
respectively, being derived from Unitog's consolidated financial statements
which have been audited by KPMG LLP, and the data as of and for the nine fiscal
months ended October 25, 1998 and October 26, 1997, respectively, being derived
from Unitog's quarterly financial statements, which are unaudited. Such
unaudited consolidated financial statements reflect all adjustments which are,
in the opinion of Unitog's management, necessary for a fair presentation of the
interim financial statements and consist of normal, recurring adjustments. The
results of operations for the interim periods are not necessarily indicative of
the results expected for the full fiscal year. The information presented below
is only a summary. More comprehensive financial information is included in
reports and other documents filed by Unitog with the Securities and Exchange
Commission. Unitog's Annual Report on Form 10-K for the fiscal year ended
January 25, 1998 and its Quarterly Reports on Form 10-Q for the fiscal quarters
ended April 26, 1998, July 26, 1998 and October 25, 1998 are each incorporated
herein by reference. See "Where You Can Find More Information."
NINE MONTHS ENDED YEARS ENDED
------------------------- -------------------------------------------------------------------
OCTOBER 25, OCTOBER 26, JANUARY 25, JANUARY 26, JANUARY 28, JANUARY 29, JANUARY 30,
1998 1997 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- ----------- -----------
(in thousands except per share data)
Total revenue........ $211,592 $207,668 $277,212 $261,717 $214,317 $189,144 $177,915
Net earnings (A)..... $ 9,212 $ 9,958 $ 12,519 $ 12,128 $ 11,489 $ 10,013 $ 7,796
Basic earnings per
share.............. $ 0.98 $ 1.03 $ 1.30 $ 1.27 $ 1.24 $ 1.08 $ 0.87
Diluted earnings per
share.............. $ 0.98 $ 1.02 $ 1.29 $ 1.26 $ 1.23 $ 1.07 $ 0.87
Dividends per share.. $ 0.09 $ 0.075 $ 0.15 $ 0.12 $ 0.10 $ 0.08 $ 0.07
Total assets......... $270,202 $273,259 $276,309 $254,565 $223,569 $143,448 $132,790
Long-term debt....... $102,130 $103,917 $110,269 $103,524 $ 83,731 $ 34,838 $ 35,665
Stockholders'
equity............. $113,087 $108,572 $104,198 $ 99,105 $ 86,125 $ 75,433 $ 66,161
- ---------------
Note:
(A) Includes for the nine months ended October 25, 1998 a $1.3 million
after-tax, or $.14 per basic and diluted share gain from the sale of certain
linen facilities. Includes for the nine months ended October 26, 1997 and
for the year ended January 25, 1998 a $1.2 million after-tax, or $.12 per
basic and diluted share recovery from a legal settlement with a former
customer and a $600,000 after-tax, or $.06 per basic and diluted share
charge for certain environmental and other matters.
(B) Environmental liability estimates for certain Unitog sites determined in
accordance with the Merger Agreement, together with new information
concerning another environmental matter, may amount in a charge of between
$ and $ to Unitog's pre-tax earnings in the fourth quarter of fiscal
1999.
- 10 -
17
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following selected unaudited pro forma combined financial data for the
combined company is based on adjustments to the historical consolidated
financial statements of Cintas and Unitog to give effect to the Merger using the
pooling of interests method of accounting for business combinations. You should
read the respective audited and unaudited consolidated financial statements and
related notes of Cintas and Unitog incorporated by reference into this Proxy
Statement/Prospectus. Additionally, you should read this information in
conjunction with the "Unaudited Pro Forma Combined Financial Statements"
beginning on page 16. The pro forma information, while helpful in illustrating
the financial characteristics of the combined company under one set of
assumptions, does not attempt to predict or suggest future results. The pro
forma information also does not attempt to show how the combined company would
actually have performed had the companies been combined throughout these
periods. Only normal recurring adjustments necessary for a fair statement of
results of the unaudited historical interim periods have been included.
SIX MONTHS ENDED
NOVEMBER 30, YEARS ENDED MAY 31,
-------------------- --------------------------------------
1998 1997 1998 1997 1996
-------- -------- ---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
REVENUE:
Net rentals............................... $640,339 $526,058 $1,095,911 $ 948,588 $ 819,150
Other service revenue..................... 222,589 179,202 381,034 313,311 284,342
-------- -------- ---------- ---------- ----------
862,928 705,260 1,476,945 1,261,899 1,103,492
COSTS AND EXPENSES (INCOME):
Cost of rentals........................... 374,337 310,268 647,099 566,744 494,532
Cost of other service revenue............. 154,065 121,968 258,729 212,889 194,642
Selling and administrative expenses....... 197,074 164,226 362,230 288,496 249,885
Interest income........................... (2,477) (2,380) (4,825) (4,449) (2,685)
Interest expense.......................... 8,876 7,554 15,824 16,033 14,258
-------- -------- ---------- ---------- ----------
731,875 601,636 1,279,057 1,079,713 950,632
-------- -------- ---------- ---------- ----------
Income before income taxes................ 131,053 103,624 197,888 182,186 152,860
Income taxes.............................. 50,492 35,777 63,580 63,521 53,892
-------- -------- ---------- ---------- ----------
Net income................................ $ 80,561 $ 67,847 $ 134,308 $ 118,665 $ 98,968
======== ======== ========== ========== ==========
Combined pro forma net income (A)......... $ 80,561 $ 64,421 $ 129,358 $ 112,871 $ 94,163
======== ======== ========== ========== ==========
PER SHARE DATA:
Basic earnings per share:
Pro forma (using Cintas historical)
assuming average Cintas share price of:
$52.00.............................. $ 0.72 $ 0.63 $ 1.24 $ 1.12 $ 0.94
$60.00.............................. $ 0.73 $ 0.63 $ 1.25 $ 1.13 $ 0.95
$66.43.............................. $ 0.73 $ 0.64 $ 1.25 $ 1.13 $ 0.96
$72.50.............................. $ 0.73 $ 0.64 $ 1.26 $ 1.14 $ 0.96
$80.00.............................. $ 0.73 $ 0.64 $ 1.26 $ 1.14 $ 0.96
Pro forma (using Cintas pro forma)
assuming average Cintas share price of
(A):
$52.00.............................. $ 0.72 $ 0.60 $ 1.19 $ 1.06 $ 0.90
$60.00.............................. $ 0.73 $ 0.60 $ 1.20 $ 1.07 $ 0.91
$66.43.............................. $ 0.73 $ 0.60 $ 1.21 $ 1.08 $ 0.91
$72.50.............................. $ 0.73 $ 0.61 $ 1.21 $ 1.08 $ 0.91
$80.00.............................. $ 0.73 $ 0.61 $ 1.21 $ 1.08 $ 0.91
- 11 -
18
SIX MONTHS ENDED
NOVEMBER 30, YEARS ENDED MAY 31,
------------------------ --------------------------------------
1998 1997 1998 1997 1996
---------- ---------- ---------- ---------- ----------
DILUTED EARNINGS PER SHARE:
Pro forma using Cintas historical and
assuming average Cintas share price
of:
$52.00........................... $ 0.71 $ 0.62 $ 1.21 $ 1.10 $ 0.93
$60.00........................... $ 0.71 $ 0.62 $ 1.22 $ 1.11 $ 0.94
$66.43........................... $ 0.72 $ 0.63 $ 1.23 $ 1.12 $ 0.94
$72.50........................... $ 0.72 $ 0.63 $ 1.23 $ 1.12 $ 0.94
$80.00........................... $ 0.72 $ 0.63 $ 1.24 $ 1.12 $ 0.95
Pro forma using Cintas pro forma and
assuming average Cintas share price
of (A):
$52.00........................... $ 0.71 $ 0.59 $ 1.17 $ 1.05 $ 0.88
$60.00........................... $ 0.71 $ 0.59 $ 1.18 $ 1.06 $ 0.89
$66.43........................... $ 0.72 $ 0.59 $ 1.19 $ 1.06 $ 0.90
$72.50........................... $ 0.72 $ 0.59 $ 1.19 $ 1.06 $ 0.90
$80.00........................... $ 0.72 $ 0.60 $ 1.19 $ 1.07 $ 0.90
Dividends per share: Pro forma assuming
average Cintas share price of:
$52.00........................... N/A N/A $ 0.18 $ 0.15 $ 0.13
$60.00........................... N/A N/A $ 0.18 $ 0.15 $ 0.13
$66.43........................... N/A N/A $ 0.18 $ 0.15 $ 0.13
$72.50........................... N/A N/A $ 0.18 $ 0.15 $ 0.13
$80.00........................... N/A N/A $ 0.18 $ 0.15 $ 0.13
Book Value per share: Pro forma
assuming average Cintas share price
of:
$52.00........................... $ 7.40 $ 6.58 $ 6.83 $ 6.07 $ 5.27
$60.00........................... $ 7.46 $ 6.63 $ 6.89 $ 6.12 $ 5.32
$66.43........................... $ 7.50 $ 6.67 $ 6.92 $ 6.16 $ 5.35
$72.50........................... $ 7.52 $ 6.69 $ 6.94 $ 6.17 $ 5.36
$80.00........................... $ 7.54 $ 6.70 $ 6.96 $ 6.19 $ 5.38
Total assets........................... $1,361,961 $1,185,376 $1,310,154 $1,102,726 $ 997,416
Long-term debt......................... $ 270,656 $ 234,405 $ 307,633 $ 227,799 $ 237,550
Shareholders' equity................... $ 832,130 $ 714,061 $ 761,574 $ 652,551 $ 555,541
- ---------------
(A) During fiscal 1998, Cintas acquired Uniforms To You Companies (UTY) in a
merger transaction accounted for as a pooling of interests. Prior to the
merger, UTY had elected S Corporation status for income tax purposes. As a
result of the merger, UTY terminated its S Corporation election. Cintas pro
forma net income, pro forma basic earnings per share and pro forma diluted
earnings per share reflect the pro forma tax expense of UTY as if UTY had
been a C Corporation during the financial statement periods presented.
- 12 -
19
COMPARATIVE PER SHARE DATA
Set forth below are net income, cash dividends and book value per common share
data separately for Cintas and Unitog on a historic basis, for Cintas on a
Cintas pro forma basis, for Cintas and Unitog on a pro forma combined basis and
on a pro forma combined basis per Unitog equivalent share. The relative exchange
ratios for the business combination are as follows:
- - .7308 Cintas share for one Unitog share -- assumes the average Cintas share
price is $52.00
- - .6333 Cintas share for one Unitog share -- assumes the average Cintas share
price is $60.00
- - .5720 Cintas share for one Unitog share -- assumes the average Cintas share
price is $66.43
- - .5470 Cintas share for one Unitog share -- assumes the average Cintas share
price is $72.50
- - .5190 Cintas share for one Unitog share -- assumes the average Cintas share
price is $80.00
The Unitog equivalent share pro forma information shows the effect of the Merger
from the perspective of an owner of Unitog common stock. The information was
computed by multiplying the pro forma (using Cintas historical data) combined
information by the above respective exchange ratios.
You should read the respective audited and unaudited consolidated financial
statements and related notes of Cintas and Unitog incorporated by reference into
this Proxy Statement/Prospectus. Additionally, you should read this information
in conjunction with the "Unaudited Pro Forma Combined Financial Statements"
beginning on page 16.
SIX MONTHS ENDED
NOVEMBER 30, YEARS ENDED MAY 31,
---------------- -----------------------
1998 1997 1998 1997 1996
------ ------ ----- ----- -----
BASIC EARNINGS PER SHARE:
Cintas historical........................................... $0.70 $ 0.60 $1.21 $1.07 $0.89
Pro forma (using Cintas historical) assuming the average
Cintas share price of:
$52.00.................................................. $0.72 $ 0.63 $1.24 $1.12 $0.94
$60.00.................................................. $0.73 $ 0.63 $1.25 $1.13 $0.95
$66.43.................................................. $0.73 $ 0.64 $1.25 $1.13 $0.96
$72.50.................................................. $0.73 $ 0.64 $1.26 $1.14 $0.96
$80.00.................................................. $0.73 $ 0.64 $1.26 $1.14 $0.96
Cintas pro forma (A)........................................ $0.70 $ 0.57 $1.16 $1.01 $0.84
Pro forma (using Cintas pro forma) assuming the average
Cintas share price of (A):
$52.00.................................................. $0.72 $ 0.60 $1.19 $1.06 $0.90
$60.00.................................................. $0.73 $ 0.60 $1.20 $1.07 $0.91
$66.43.................................................. $0.73 $ 0.60 $1.21 $1.08 $0.91
$72.50.................................................. $0.73 $ 0.61 $1.21 $1.08 $0.91
$80.00.................................................. $0.73 $ 0.61 $1.21 $1.08 $0.91
Unitog historical (B)....................................... $0.75 $ 0.72 $1.23 $1.29 $1.25
Pro forma (using Cintas historical) per Unitog equivalent
common share and assuming the average Cintas share price
of (C):
$52.00.................................................. $0.53 $ 0.46 $0.90 $0.82 $0.69
$60.00.................................................. $0.46 $ 0.40 $0.79 $0.71 $0.60
$66.43.................................................. $0.42 $ 0.36 $0.72 $0.65 $0.55
$72.50.................................................. $0.40 $ 0.35 $0.69 $0.62 $0.52
$80.00.................................................. $0.38 $ 0.33 $0.65 $0.59 $0.50
- 13 -
20
SIX MONTHS ENDED
NOVEMBER 30, YEARS ENDED MAY 31,
---------------- -----------------------
1998 1997 1998 1997 1996
------ ------ ----- ----- -----
DILUTED EARNINGS PER SHARE:
Cintas historical........................................... $0.69 $ 0.59 $1.19 $1.05 $0.88
Pro forma (using Cintas historical) assuming the average
Cintas share price of:
$52.00.................................................. $0.71 $ 0.62 $1.21 $1.10 $0.93
$60.00.................................................. $0.71 $ 0.62 $1.22 $1.11 $0.94
$66.43.................................................. $0.72 $ 0.63 $1.23 $1.12 $0.94
$72.50.................................................. $0.72 $ 0.63 $1.23 $1.12 $0.94
$80.00.................................................. $0.72 $ 0.63 $1.24 $1.12 $0.95
Cintas pro forma (A)........................................ $0.69 $ 0.56 $1.14 $0.99 $0.83
Pro forma (using Cintas pro forma) assuming the average
Cintas share price of (A):
$52.00.................................................. $0.71 $ 0.59 $1.17 $1.05 $0.88
$60.00.................................................. $0.71 $ 0.59 $1.18 $1.06 $0.89
$66.43.................................................. $0.72 $ 0.59 $1.19 $1.06 $0.90
$72.50.................................................. $0.72 $ 0.59 $1.19 $1.06 $0.90
$80.00.................................................. $0.72 $ 0.60 $1.19 $1.07 $0.90
Unitog historical (B)....................................... $0.74 $ 0.71 $1.22 $1.27 $1.24
Pro forma (using Cintas historical) per Unitog equivalent
common share and assuming the average Cintas share price
of (C):
$52.00.................................................. $0.52 $ 0.45 $0.89 $0.80 $0.68
$60.00.................................................. $0.45 $ 0.39 $0.78 $0.70 $0.59
$66.43.................................................. $0.41 $ 0.36 $0.70 $0.64 $0.54
$72.50.................................................. $0.39 $ 0.34 $0.67 $0.61 $0.52
$80.00.................................................. $0.37 $ 0.33 $0.64 $0.58 $0.49
DIVIDENDS PER SHARE:
Cintas historical........................................... N/A N/A $0.18 $0.15 $0.13
Pro forma assuming the average Cintas share price of:
$52.00.................................................. N/A N/A $0.18 $0.15 $0.13
$60.00.................................................. N/A N/A $0.18 $0.15 $0.13
$66.43.................................................. N/A N/A $0.18 $0.15 $0.13
$72.50.................................................. N/A N/A $0.18 $0.15 $0.13
$80.00.................................................. N/A N/A $0.18 $0.15 $0.13
Unitog historical (B)....................................... $0.09 $0.075 $0.15 $0.12 $0.10
Pro forma (using Cintas historical) per Unitog equivalent
common share and assuming the average Cintas share price
of (C):
$52.00.................................................. N/A N/A $0.13 $0.11 $0.09
$60.00.................................................. N/A N/A $0.11 $0.09 $0.08
$66.43.................................................. N/A N/A $0.10 $0.09 $0.07
$72.50.................................................. N/A N/A $0.10 $0.08 $0.07
$80.00.................................................. N/A N/A $0.09 $0.08 $0.07
- 14 -
21
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 1998 MAY 31, 1998
----------------- ------------
BOOK VALUE PER SHARE:
Cintas historical........................................... $ 6.92 $ 6.26
Pro forma assuming the average Cintas share price of:
$52.00................................................. $ 7.40 $ 6.83
$60.00................................................. $ 7.46 $ 6.89
$66.43................................................. $ 7.50 $ 6.92
$72.50................................................. $ 7.52 $ 6.94
$80.00................................................. $ 7.54 $ 6.96
Unitog historical (B)....................................... $12.03 $11.37
Pro forma (using Cintas historical) per Unitog equivalent
common share and assuming the average Cintas share price
of (C):
$52.00................................................. $ 5.41 $ 4.99
$60.00................................................. $ 4.73 $ 4.36
$66.43................................................. $ 4.29 $ 3.96
$72.50................................................. $ 4.11 $ 3.80
$80.00................................................. $ 3.91 $ 3.61
- ---------------
(A) The Cintas pro forma data is a result of Cintas acquiring Uniforms To You
Companies (UTY) in a merger transaction accounted for as a pooling of
interests in fiscal 1998. Prior to the merger, UTY had elected S Corporation
status for income tax purposes. As a result of the merger, UTY terminated
its S Corporation election. Cintas pro forma net income reflects the pro
forma tax expense of UTY as if UTY had been a C Corporation during the
financial statement periods presented.
(B) Unitog historical per share data is for the recasted six month periods ended
October 25, 1998 and October 26, 1997, and for the recasted fiscal years
ended April 26, 1998, April 27, 1997 and April 28, 1996.
(C) Pro forma earnings per Unitog equivalent common share is provided in
accordance with additional disclosure requirements.
- 15 -
22
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The unaudited pro forma combined financial statements are based on the
historical consolidated financial statements of Cintas and Unitog and give
effect to the Merger as a pooling of interests. Such pro forma information
includes (1) the historical results of operations of Cintas for the six month
periods ended November 30, 1998 and November 30, 1997, the three fiscal years
ended May 31, 1998, and the historical balance sheet of Cintas as of November
30, 1998; and (2) the historical results of operations of Unitog for the
recasted six month periods ended October 25, 1998 and October 26, 1997, the
recasted three fiscal years ended April 26, 1998, April 27, 1997 and April 28,
1996 and the historical balance sheet of Unitog as of October 25, 1998. The
unaudited pro forma adjustments described in the accompanying notes are based
upon preliminary estimates and certain assumptions that the managements of
Cintas and Unitog believe are reasonable. Actual adjustments may differ from
those reflected in the unaudited pro forma combined financial statements. Cintas
and Unitog are still in the process of reviewing their respective accounting
policies relative to those utilized by the other entity. As a result of this
review, it may be necessary to restate certain amounts in Cintas' or Unitog's
financial statements to conform to those accounting policies that are most
appropriate. In management's opinion, any such restatements will not be
material.
Certain one-time expenses will be incurred as a result of combining Unitog and
Cintas. The unaudited pro forma earnings per share data do not reflect these
expenses. They do include merger-related costs associated with acquisitions
completed by both Cintas and Unitog since June 1995.
The Merger should provide the combined company with certain financial benefits
that include reduced operating expenses and enhanced revenue opportunities.
These anticipated cost savings and benefits are not reflected in the pro forma
information. The pro forma information, while helpful in illustrating the
financial characteristics of the combined company under one set of assumptions,
does not attempt to predict or suggest future results. The pro forma information
also does not attempt to show how the combined company would actually have
performed had the companies been combined throughout these periods. Only normal
recurring adjustments necessary for a fair statement of results of the unaudited
historical interim periods have been included.
For pro forma combined financial statement presentation, Cintas' three fiscal
years ended May 31, 1998 have been combined with Unitog's recasted fiscal years
ended April 26, 1998, April 27, 1997 and April 28, 1996. Cintas' six month
periods ended November 30, 1998 and November 30, 1997 have been combined with
Unitog's recasted six month periods ended October 25, 1998 and October 26, 1997.
The unaudited pro forma financial statements are not necessarily indicative of
the actual or future financial position or results of operations that would have
or will occur upon consummation of the Merger, and should be read in conjunction
with the audited and unaudited historical consolidated financial statements,
including the notes thereto, of Cintas and Unitog incorporated by reference and
the Selected Unaudited Pro Forma Combined Financial Data on page 11.
- 16 -
23
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE SIX MONTH PERIOD ENDED NOVEMBER 30, 1998
HISTORICAL
---------------------- PRO FORMA PRO FORMA
CINTAS UNITOG ADJUSTMENTS COMBINED
---------- -------- ----------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
REVENUE:
Net rentals.............................. $ 524,332 $116,007 $ -- $ 640,339
Other service revenue.................... 197,340 25,249 -- 222,589
---------- -------- -------- ----------
721,672 141,256 -- 862,928
COSTS AND EXPENSES (INCOME):
Cost of rentals.......................... 292,600 92,532 (14,081)(B) 374,337
3,313 (C)
(27)(F)
Cost of other service revenue............ 136,796 21,937 (5,827)(B) 154,065
861 (C)
389 (D)
(91)(E)
Depreciation and amortization............ -- 9,629 (9,629)(C)
Selling and administrative expenses...... 169,747 2,057* 19,908 (B) 197,074
5,455 (C)
(93)(F)
Interest income.......................... (2,380) (97) -- (2,477)
Interest expense......................... 4,981 3,895 -- 8,876
---------- -------- -------- ----------
601,744 129,953 178 731,875
---------- -------- -------- ----------
Income before income taxes............... 119,928 11,303 (178) 131,053
Income taxes............................. 46,268 4,293 (69)(G) 50,492
---------- -------- -------- ----------
Net income............................... $ 73,660 $ 7,010 $ (109) $ 80,561
========== ======== ======== ==========
Pro forma net income (A)................. $ 73,660 $ 7,010 $ (109) $ 80,561
========== ======== ======== ==========
PER SHARE DATA:
Basic earnings per share................. $ .70 $ .75 $ .73
Diluted earnings per share............... $ .69 $ .74 $ .72
Weighted average shares outstanding
(basic)................................ 104,959 9,395 110,333(L)
Weighted average shares outstanding
(diluted).............................. 107,040 9,450 112,446(L)
See notes to unaudited pro forma combined financial statements on page 23.
* Contains a $2.1 million gain from the sale of certain linen facilities.
- 17 -
24
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE SIX MONTH PERIOD ENDED NOVEMBER 30, 1997
HISTORICAL
-------------------- PRO FORMA PRO FORMA
CINTAS UNITOG ADJUSTMENTS COMBINED
-------- -------- ----------- ---------
(IN THOUSANDS EXCEPT PER SHARE DATA)
REVENUE:
Net rentals................................. $415,301 $110,757 $ -- $526,058
Other service revenue....................... 151,201 28,001 -- 179,202
-------- -------- -------- --------
566,502 138,758 -- 705,260
COSTS AND EXPENSES (INCOME):
Cost of rentals............................. 231,650 88,595 (13,290)(B) 310,268
3,324 (C)
(11)(F)
Cost of other service revenue............... 104,445 22,754 (6,519)(B) 121,968
797 (C)
499 (D)
(8)(E)
Depreciation and amortization............... -- 8,831 (8,831)(C) --
Selling and administrative expenses......... 135,806 4,223* 19,809 (B) 164,226
4,710 (C)
(322)(F)
Interest income............................. (2,338) (42) -- (2,380)
Interest expense............................ 4,382 3,172 -- 7,554
-------- -------- -------- --------
473,945 127,533 158 601,636
-------- -------- -------- --------
Income before income taxes.................. 92,557 11,225 (158) 103,624
Income taxes................................ 31,565 4,266 (54)(G) 35,777
-------- -------- -------- --------
Net income.................................. $ 60,992 $ 6,959 $ (104) $ 67,847
======== ======== ======== ========
Pro forma net income (A).................... $ 57,566 $ 6,959 $ (104) $ 64,421
======== ======== ======== ========
PER SHARE DATA:
Basic earnings per share.................... $ .60 $ .72 $ .64
Diluted earnings per share.................. $ .59 $ .71 $ .63
Weighted average shares outstanding
(basic)................................... 101,097 9,650 106,617(L)
Weighted average shares outstanding
(diluted)................................. 102,952 9,735 108,521(L)
See notes to unaudited pro forma combined financial statements on page 23.
* Contains a $2 million gain from a legal recovery with a former customer, and a
$1 million charge for environmental and other matters.
- 18 -
25
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED MAY 31, 1998
HISTORICAL
---------------------- PRO FORMA PRO FORMA
CINTAS UNITOG ADJUSTMENTS COMBINED
---------- -------- ----------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
REVENUE:
Net rentals.............................. $ 872,739 $223,172 $ -- $1,095,911
Other service revenue.................... 325,568 55,466 -- 381,034
---------- -------- -------- ----------
1,198,307 278,638 -- 1,476,945
COSTS AND EXPENSES (INCOME):
Cost of rentals.......................... 487,021 180,173 (26,849)(B) 647,099
6,719 (C)
35 (F)
Cost of other service revenue............ 223,225 46,154 (12,838)(B) 258,729
1,645 (C)
906 (D)
(363)(E)
Depreciation and amortization............ -- 18,095 (18,095)(C) --
Selling and administrative expenses...... 304,271 8,662* 39,687 (B) 362,230
9,731 (C)
(121)(F)
Interest income.......................... (4,719) (106) -- (4,825)
Interest expense......................... 9,075 6,749 -- 15,824
---------- -------- -------- ----------
1,018,873 259,727 457 1,279,057
---------- -------- -------- ----------
Income before income taxes............... 179,434 18,911 (457) 197,888
Income taxes............................. 56,577 7,189 (186)(G) 63,580
---------- -------- -------- ----------
Net income............................... $ 122,857 $ 11,722 $ (271) $ 134,308
========== ======== ======== ==========
Pro forma net income (A)................. $ 117,907 $ 11,722 $ (271) $ 129,358
========== ======== ======== ==========
PER SHARE DATA:
Basic earnings per share................. $ 1.21 $ 1.23 $ 1.25
Diluted earnings per share............... $ 1.19 $ 1.22 $ 1.23
Weighted average shares outstanding
(basic)................................ 101,751 9,557 107,218(L)
Weighted average shares outstanding
(diluted).............................. 103,623 9,628 109,131(L)
See notes to unaudited pro forma combined financial statements on page 23.
* Contains a $2 million gain from a legal recovery with a former customer, and a
$1 million charge for environmental and other matters.
- 19 -
26
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED MAY 31, 1997
HISTORICAL
-------------------- PRO FORMA PRO FORMA
CINTAS UNITOG ADJUSTMENTS COMBINED
-------- -------- ----------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
REVENUE:
Net rentals............................... $739,207 $209,381 $ -- $ 948,588
Other service revenue..................... 256,000 57,311 -- 313,311
-------- -------- -------- ----------
995,207 266,692 -- 1,261,899
COSTS AND EXPENSES (INCOME):
Cost of rentals........................... 416,597 169,169 (25,119)(B) 566,744
6,090 (C)
7 (F)
Cost of other service revenue............. 177,058 47,381 (12,726)(B) 212,889
1,608 (C)
(225)(D)
(207)(E)
Depreciation and amortization............. -- 15,906 (15,906)(C) --
Selling and administrative expenses....... 234,034 8,486 37,845 (B) 288,496
8,208 (C)
(77)(F)
Interest income........................... (4,328) (121) -- (4,449)
Interest expense.......................... 10,080 5,953 -- 16,033
-------- -------- -------- ----------
833,441 246,774 (502) 1,079,713
-------- -------- -------- ----------
Income before income taxes................ 161,766 19,918 502 182,186
Income taxes.............................. 55,778 7,552 191 (G) 63,521
-------- -------- -------- ----------
Net income................................ $105,988 $ 12,366 $ 311 $ 118,665
======== ======== ======== ==========
Pro forma net income (A).................. $100,194 $ 12,366 $ 311 $ 112,871
======== ======== ======== ==========
PER SHARE DATA:
Basic earnings per share.................. $ 1.07 $ 1.29 $ 1.13
Diluted earnings per share................ $ 1.05 $ 1.27 $ 1.12
Weighted average shares outstanding
(basic)................................. 99,221 9,618 104,723(L)
Weighted average shares outstanding
(diluted)............................... 100,725 9,704 106,276(L)
See notes to unaudited pro forma combined financial statements on page 23.
- 20 -
27
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED MAY 31, 1996
HISTORICAL
---------------------- PRO FORMA PRO FORMA
CINTAS UNITOG ADJUSTMENTS COMBINED
---------- -------- ----------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
REVENUE:
Net rentals.............................. $ 648,616 $170,534 $ -- $ 819,150
Other service revenue.................... 227,217 57,125 -- 284,342
---------- -------- -------- ----------
875,833 227,659 -- 1,103,492
COSTS AND EXPENSES (INCOME):
Cost of rentals.......................... 369,386 138,298 (18,970)(B) 494,532
5,608 (C)
210 (F)
Cost of other service revenue............ 159,189 46,548 (12,639)(B) 194,642
1,349 (C)
421 (D)
(226)(E)
Depreciation and amortization............ -- 12,228 (12,228)(C) --
Selling and administrative expenses...... 204,882 7,934 31,609 (B) 249,885
5,271 (C)
189 (F)
Interest income.......................... (2,658) (27) -- (2,685)
Interest expense......................... 10,243 4,015 -- 14,258
---------- -------- -------- ----------
741,042 208,996 594 950,632
---------- -------- -------- ----------
Income before income taxes............... 134,791 18,663 (594) 152,860
Income taxes............................. 47,047 7,049 (204)(G) 53,892
---------- -------- -------- ----------
Net income............................... $ 87,744 $ 11,614 $ (390) $ 98,968
========== ======== ======== ==========
Pro forma net income (A)................. $ 82,939 $ 11,614 $ (390) $ 94,163
========== ======== ======== ==========
PER SHARE DATA:
Basic earnings per share................. $ .89 $ 1.25 $ .96
Diluted earnings per share............... $ .88 $ 1.24 $ .94
Weighted average shares outstanding
(basic)................................ 98,157 9,289 103,471(L)
Weighted average shares outstanding
(diluted).............................. 99,661 9,393 105,034(L)
See notes to unaudited pro forma combined financial statements on page 23.
- 21 -
28
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF NOVEMBER 30, 1998
HISTORICAL
---------------------- PRO FORMA PRO FORMA
CINTAS UNITOG ADJUSTMENTS COMBINED
---------- -------- ----------- ----------
(IN THOUSANDS)
ASSETS
Current assets:
Cash and marketable securities........... $ 79,290 $ 25 $(11,185)(K) $ 68,130
Accounts receivable, net of allowance.... 187,108 29,158 216,266
Inventories.............................. 117,637 21,279 (3,551)(D) 139,906
Uniforms and other rental items in
service............................... 151,050 40,582 4,541 (E) 191,632
Prepaid expenses......................... 6,660 1,733 (1,048)(F) 7,345
---------- -------- -------- ----------
Total current assets....................... 541,745 92,777 (11,243) 623,279
Property, plant and equipment, at cost,
net...................................... 422,891 114,514 -- 537,405
Other assets............................... 138,366 62,911 -- 201,277
---------- -------- -------- ----------
Total assets............................... $1,103,002 $270,202 $ (11,243) $1,361,961
========== ======== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable......................... $ 41,619 $ 9,465 $ -- $ 51,084
Accrued compensation and related
liabilities........................... 17,003 -- 4,968 (H) 21,971
Accrued liabilities...................... 77,674 12,598 (268)(G) 87,845
(3,449)(H)
1,290 (I)
Deferred income taxes.................... 34,504 13,407 (1,290)(I) 46,621
Long-term debt due within one year....... 6,353 3,611 -- 9,964
---------- -------- -------- ----------
Total current liabilities.................. 177,153 39,081 1,251 217,485
Long-term debt due after one year.......... 168,526 102,130 -- 270,656
Deferred income taxes 27,305.... 15,904 (1,519)(H) 41,690
Shareholders' Equity:
Common stock............................. 48,182 97 -- 48,279
Treasury stock........................... -- (5,660) 5,660 (J) --
Additional paid in capital............... -- 41,308 (41,308)(J) --
Retained earnings........................ 687,206 77,342 35,858 (J) 789,221
(11,185)(K)
Accumulated other comprehensive income... (5,370) -- -- (5,370)
---------- -------- -------- ----------
Total shareholders' equity................. 730,018 113,087 (10,975) 832,130
---------- -------- -------- ----------
Total liabilities and shareholders'
equity................................... $1,103,002 $270,202 $ (11,243) $1,361,961
========== ======== ======== ==========
See notes to unaudited pro forma combined financial statements on page 23.
- 22 -
29
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(A) During 1998, Cintas acquired Uniforms To You Companies (UTY) in a merger
transaction accounted for as a pooling of interests. Prior to the merger,
UTY had elected S Corporation status for income tax purposes. As a result of
the merger, UTY terminated its S Corporation election. Cintas pro forma
presents net income and per share information for the pro forma tax expense
of UTY as if UTY had been a C Corporation during the financial statement
periods presented.
(B) Represents the reclassification of certain selling and administrative
expenses to conform the presentation of Unitog results to that of Cintas.
(C) Represents the reclassification of depreciation and amortization expenses
to conform the presentation of Unitog results to that of Cintas.
(D) Represents the change in an inventory obsolescence reserve as a result of
(E).
(E) Represents the change from the Unitog method of costing inventories on a
last-in, first-out method to the Cintas method of costing inventories on a
first-in, first-out method.
(F) Represents the expensing of certain prepaid supplies to conform the
presentation of Unitog results to that of Cintas.
(G) Represents the tax effect of the above Pro Forma Adjustments at the Cintas
effective tax rate for all periods presented, respectively.
(H) Represents the reclassification of accrued compensation and related
liabilities to conform the presentation of Unitog to that of Cintas.
(I) Represents the reclassification of the current tax liability to conform the
presentation of Unitog to that of Cintas.
(J) Represents the conversion of Unitog common stock into Cintas common shares
and reflects the impact of pro forma adjustments.
(K) Cintas and Unitog estimate that they will incur direct transaction costs of
approximately $11.185 million associated with the Merger. These costs
consist primarily of investment banking, legal, accounting, printing,
regulatory filing fees, and retention bonuses to certain Unitog employees.
The unaudited pro forma combined balance sheet reflects such expenses as if
they had been paid as of November 30, 1998. Pro forma net income and
earnings per share do not reflect these one-time transaction costs.
(L) Per share information is based on an average Cintas per share price of
$66.43 and a target Unitog Share Price of $38. Pro forma weighted average
shares outstanding were computed using Unitog weighted average shares
outstanding, for the respective period, multiplied by the conversion factor
related to the average Cintas share price of $66.43 (.5720). This amount
was added to Cintas weighted average shares outstanding for the respective
period.
- 23 -
30
COMPARATIVE STOCK PRICE AND DIVIDEND INFORMATION
Unitog common stock is traded on the Nasdaq National Market under the symbol
"UTOG." Dividends have been paid on Unitog common stock on a semi-annual basis
since fiscal 1994.
Cintas common stock is traded on the Nasdaq National Market under the symbol
"CTAS." Dividends have been paid on Cintas common stock on an annual basis since
1983.
The following table sets forth, for the calendar quarters indicated, the high
and low sales prices per share of Unitog common stock and Cintas common stock as
quoted on the Nasdaq National Market, and the dividends per share declared
during such quarter.
UNITOG COMMON STOCK CINTAS COMMON STOCK
------------------------------ ------------------------------
HIGH LOW DIVIDEND HIGH LOW DIVIDEND
------- ------- -------- ------- ------- --------
1999
First Quarter
(through February 18,
1999)........................ $ $ $ $ $0.22
1998
Fourth Quarter............... 29.500 16.969 $ 0.09 71.250 43.000
Third Quarter................ 22.438 19.250 54.875 39.875
Second Quarter............... 26.000 19.563 0.09 52.000 43.250
First Quarter................ 23.125 18.000 52.875 39.000 0.18
1997
Fourth Quarter............... 26.875 19.625 0.075 42.500 35.250
Third Quarter................ 30.000 23.750 37.625 32.625
Second Quarter............... 27.250 19.000 0.075 35.250 25.688
First Quarter................ 27.625 19.750 30.000 25.500 0.15
FORWARD LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor from
civil litigation for certain forward-looking statements. Forward-looking
statements include the information concerning future results of operations, cost
savings and synergies of Cintas and Unitog after the Merger set forth in
"QUESTIONS AND ANSWERS ABOUT THE MERGER," "SUMMARY," "THE MERGER," "THE
COMPANIES," "SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA" and those
preceded by, followed by or that otherwise include the statements "should,"
"believe," "expect," "anticipate," "intend," "may," "will," "continue,"
"estimate" and other expressions that indicate future events and trends.
Although we believe that in making such statements our expectations are based on
reasonable assumptions, such statements may be influenced by risks and
uncertainties which could cause actual results and trends to be materially
different from historical results or those anticipated depending on a variety of
factors. These include, without limitation, performance of acquisitions,
economic and business changes, fluctuations in the cost of materials, labor
strikes and unemployment levels, unanticipated costs and expenses in integrating
Cintas' and Unitog's operations, demand and price for Cintas' and Unitog's
products and services, the reactions of competitors to the Merger in terms of
price and service, successfully addressing Year 2000 issues, and the outcome of
pending and future litigation and environmental matters. You should understand
that these factors, in addition to those discussed elsewhere in this document
and in documents which have been incorporated by reference, could affect the
future results of Cintas and Unitog, and could cause those results to be
materially different from those expressed in our forward-looking statements.
Cintas and Unitog do not undertake any obligation to update any forward looking
statements to reflect events or circumstances arising after the date of this
Proxy Statement/Prospectus.
- 24 -
31
RISK FACTORS
In considering whether to approve and adopt the Merger Agreement, the
stockholders of Unitog should consider, in addition to the other information
contained in this Proxy Statement/Prospectus, the following matters. Certain
capitalized terms used in this section are defined in other sections of this
Proxy Statement/Prospectus.
UNCERTAINTIES ASSOCIATED WITH THE INTEGRATION OF UNITOG AND ACHIEVEMENT OF COST
SAVINGS
The Merger will present challenges to Cintas involving the integration of the
operations, technologies and personnel of Cintas and Unitog, and possible
unanticipated liabilities, unanticipated costs and diversion of management
attention.
While Cintas believes that it will be able to successfully integrate and
profitably manage Unitog's business, there is no assurance that it can do so. In
addition, there can be no assurance that, following the Merger, Unitog's
businesses will achieve sales levels, profitability, cost savings or synergies
that justify the investment made or that the acquisition will be accretive to
Cintas' earnings in any future period.
POSSIBLE FLUCTUATION OF MERGER CONSIDERATION
The Merger Agreement provides for adjustments in the number of shares of Cintas
common stock to be issued to Unitog stockholders in exchange for their shares of
Unitog common stock. The amount of one share of Cintas common stock into which a
share of outstanding Unitog common stock would be converted in the Merger is
equal to the "Conversion Number." The Conversion Number is determined by
dividing the "target" Unitog Share Price of $ (reduced from $38 for certain
environmental liability estimates) by an average trading price of Cintas common
stock referred to as the "Cintas Share Price." The consideration to be received
by a Unitog stockholder in exchange for one share of Unitog common stock is
referred to in this Proxy Statement/Prospectus as the "Merger Consideration."
The Cintas Share Price is equal to the average of the daily high and low sales
prices of Cintas common stock as reported on Nasdaq during the 20 trading day
period ending on the third trading day before the special stockholders meeting.
An adjustment applies if the Cintas Share Price is greater than $66.43 or less
than $52, as described below:
- - If the Cintas Share Price is greater than $66.43, the Cintas Share Price used
to determine the Conversion Number is $66.43 plus one-half of the amount by
which the Cintas Share Price exceeds $66.43. This will result in a value of
more than $ per share of Unitog common stock (based on the Cintas Share
Price).
- - If the Cintas Share Price is less than $52, then the Cintas Share Price used
to determine the conversion number is $52. This will result in a value of less
than $ (based on the Cintas Share Price). In such event, the Unitog Board
may (but is not obligated to) terminate the Merger Agreement.
Unitog will announce the Cintas Share Price, the Conversion Number and the per
share Merger Consideration, on or about March 20, 1999. Such information will
also be available as a recorded message by calling 1-800-xxx-xxxx. We urge you
to obtain current market quotations for Cintas common stock. The market price of
Cintas common stock may change based upon changes in the business, operations or
prospects of Cintas, general market and economic conditions, regulatory
considerations and other factors.
Because the period for calculating the Cintas Share Price used to determine the
Conversion Number will end before the date of the Unitog special stockholders
meeting and the subsequent closing of the Merger, the actual market value of the
Cintas common stock you will receive as Merger Consideration may differ from the
value of the Merger Consideration calculated pursuant to the Merger Agreement.
ACQUISITIONS
From June 1, 1995 to the date of this Proxy Statement/Prospectus, Cintas has
issued approximately 10,500,000 shares of its common stock and paid
approximately $61 million in cash in 126 acquisitions. As part of its growth
strategy, Cintas intends to continue to actively pursue additional acquisition
opportunities. In order to achieve anticipated benefits from these acquisitions,
Cintas must successfully integrate any acquired business with its existing
operations, and while it believes it will be able to fully integrate these
businesses into Cintas, it can give
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no assurance that it will be successful in this regard. Cintas can also give no
assurance that it will be able to complete future acquisitions or that all
future issuances of securities in connection with acquisitions will not dilute
the interests of its shareholders.
COMPETITION
Cintas' customers in the uniform rental and sales industry primarily choose
suppliers based upon quality of products, service and price. Leading uniform
competitors include UniFirst Corporation, ARAMARK Corporation and G&K Services,
Inc. In addition to Cintas' traditional uniform rental competitors, Cintas
anticipates that future competition may be with businesses that focus on selling
uniforms and other related items. If existing or future competitors seek to gain
or retain market share by reducing prices in reaction to the Unitog Merger or
otherwise, Cintas may be required to lower prices, which would hurt its
operating results. Cintas competitors also generally compete with Cintas for
acquisition candidates, which can increase the price for acquisitions and reduce
the number of available acquisition candidates.
ECONOMIC CONDITIONS
National or regional economic slowdowns or certain industry specific slowdowns
may hurt Cintas' business. Events or conditions in a particular area, such as
adverse weather and other factors, could also hurt operating results.
Furthermore, increases in interest rates may lead to a decline in economic
activity and adversely affect operating results. While Cintas does not believe
that its exposure is greater than that of its competitors, Cintas could be
adversely affected by increases in the prices of fabric, fuel, wages and other
components of product cost unless it could recover such increases through
increases in the prices for its services and products. Competitive and general
economic conditions might limit the ability of Cintas and its competitors to
increase prices to cover such increases.
ENVIRONMENTAL REGULATION
Various federal, state and local laws and regulations governing hazardous wastes
and other substances affect Cintas and its competitors in the uniform rental
industry. Specifically, industrial laundries use and must dispose of detergent
waste water and other residues. In the past, Cintas has settled, or contributed
to the settlement of, actions or claims brought against it which relate to the
disposal of hazardous materials. Cintas may have to pay material amounts to
compensate for the consequences of disposals in the future. Under environmental
laws, an owner or tenant of real estate may be required to pay the costs of
removing or remediating certain hazardous or toxic substances located on or in
or emanating from property whether or not the owner or tenant knew of or was
responsible for the presence of such hazardous or toxic substances. While Cintas
regularly engages in environmental due diligence in connection with
acquisitions, Cintas can give no assurance that locations that have been
acquired or leased or those being acquired in the Unitog Merger have been
operated in compliance with environmental laws and regulations during prior
periods or that future uses or conditions will not make Cintas liable under
these laws or expose Cintas to third-party actions including tort suits.
Cintas' environmental due diligence, which it conducted on certain Unitog
properties pursuant to Section 8.3 of the Merger Agreement, involved the
application of assessment techniques and tests beyond those normally followed.
This process resulted in an estimated additional environmental liability of
approximately $ , which was agreed upon by the parties and led to an
adjustment of the agreed upon price of $38 per share for Unitog Common Stock to
a price of $ , thereby lowering the amount of consideration payable by
Cintas in its acquisition of Unitog. While Cintas believes that it has
identified all material problems of this nature and that the correction of these
liabilities will not be material to its financial condition or results of
operations, there can be no assurances that the remediation of these matters or
the discovery of additional environmental problems will not result in a material
impact on Cintas' financial condition or results of operations or expose it to
third-party actions including tort suits
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DEPENDENCE ON SENIOR MANAGEMENT; ABILITY TO ATTRACT AND RETAIN QUALITY PERSONNEL
Cintas' success depends in part on the skills, experience and efforts of senior
management and certain other key employees. If, for any reason, one or more
senior executives or key personnel were not to remain active with Cintas,
results of operations could be hurt. Future success also depends on Cintas'
ability to attract and retain qualified managers and technical and marketing
personnel, as well as sufficient numbers of hourly workers. Although Cintas has
an excellent track record of attracting and retaining quality people, there is
competition in the market for the services of such qualified personnel and a
tight market for hourly workers. The failure to attract and retain such
personnel or workers could hurt the results of operations.
INFORMATION SYSTEMS; YEAR 2000
Cintas has made a substantial investment in its information systems and intends
to spend significant amounts on information systems in the future. In
particular, Cintas has evaluated the programming code in its existing computer
and software systems as the Year 2000 approaches. The issue with respect to Year
2000 is whether systems will properly recognize date sensitive information when
the year changes to 2000. Systems that do not properly recognize such
information could generate erroneous data or cause complete system failures.
Cintas has completed an assessment of all of its software systems and has
determined what changes need to be made so that Cintas' computer systems will
function properly with respect to dates in the Year 2000 and thereafter. Cintas
does not expect that the total cost of those changes will be material, and will
expense the costs as incurred. Cintas expended most of its Year 2000 costs
during fiscal 1998, and expects to expense the remaining costs in fiscal 1999
when all changes are expected to be completed. Cintas is contacting key
suppliers to obtain certification of their systems Year 2000 compliance. After
Cintas identifies which vendors may fail to become Year 2000 compliant in a
timely fashion, Cintas will develop a strategy to minimize its risks which may
include contingency plans such as alternative suppliers or alternative
processes. Although Cintas believes that the likelihood of the Year 2000 having
a material effect on its operations, liquidity or financial position is remote,
there can be no such assurance that this will be the case.
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THE SPECIAL MEETING
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to the stockholders of Unitog
in connection with the solicitation of proxies by the Board of Directors of
Unitog Company ("Unitog") for use at the special meeting of Unitog stockholders
("Special Meeting") to be held on March 24, 1999 at 10:00 a.m., local time, at
Unitog's corporate offices located at 1300 Washington Street, Kansas City,
Missouri, and at any adjournments or postponements thereof. Each copy of this
Proxy Statement/Prospectus mailed to stockholders is accompanied by a proxy card
furnished in connection with the solicitation of proxies by the Unitog Board for
use at the Special Meeting.
MATTERS TO BE CONSIDERED; BOARD RECOMMENDATION
At the Special Meeting, stockholders will be asked to (i) approve the Merger
Agreement and the transactions contemplated thereby, and (ii) vote upon such
other business as may properly come before the Special Meeting or any
adjournments or postponements thereof (including, without limitation,
adjournment or postponement of the Special Meeting in order to allow for
additional solicitation of stockholder votes in order to obtain a quorum or in
order to obtain more votes in favor of the Merger Agreement). The Board of
Directors knows of no business that will be presented for consideration at the
Special Meeting other than the matters described in this Proxy
Statement/Prospectus.
The Unitog Board has determined that the Merger and the Merger Agreement are
advisable to and in the best interests of Unitog stockholders and has
unanimously approved the Merger and the Merger Agreement. ACCORDINGLY, THE BOARD
RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT. See "THE MERGER -- Background of the Merger" and " -- Reasons for the
Merger."
STOCKHOLDERS ARE REQUESTED PROMPTLY TO COMPLETE, DATE, SIGN AND RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE. FAILURE TO RETURN
A PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE SPECIAL MEETING WILL HAVE THE
SAME EFFECT AS A VOTE AGAINST THE MERGER AGREEMENT.
RECORD DATE AND VOTING
Only the holders of record of Unitog common stock ("Unitog Common Stock") as of
the close of business on February 18, 1999 (the "Record Date") are entitled to
notice of and to vote at the Special Meeting. At the close of business on the
Record Date, there were [ ] shares of Unitog Common Stock outstanding
and entitled to vote, held by approximately [425] stockholders of record and
beneficially by approximately [1,500] stockholders. Directors and executive
officers of Unitog and its affiliates (as a group) were entitled to vote
1,296,739 shares of Unitog Common Stock, or approximately 13.8% of the
outstanding votes entitled to be cast at the Special Meeting. Holders of record
of Unitog Common Stock as of the close of business on the Record Date are
entitled to one vote per share on any matter voted on at the Special Meeting.
The presence, either in person or by proxy, of the holders of a majority of the
outstanding shares of Unitog Common Stock as of the Record Date is necessary to
constitute a quorum at the Special Meeting. Broker non-votes and abstentions
count for the purpose of determining a quorum at the Special Meeting. If a
quorum is not obtained, or if fewer shares are likely to be voted in favor of
approval and adoption of the Merger Agreement than the number required for
approval, it is expected that the Special Meeting will be adjourned for the
purpose of allowing additional time for soliciting and obtaining additional
proxies or votes or for any other purpose, including obtaining necessary
regulatory approvals. At any subsequent reconvening of the Special Meeting, all
proxies will be voted in the same manner as such proxies would have been voted
at the original convening of the meeting (except for any proxy which has been
effectively revoked or withdrawn).
STOCKHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS.
IF THE MERGER IS CONSUMMATED, STOCK CERTIFICATES SHOULD BE DELIVERED IN
ACCORDANCE WITH INSTRUCTIONS SET FORTH IN A LETTER OF TRANSMITTAL, WHICH WILL
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BE SENT TO STOCKHOLDERS BY THE FIFTH THIRD BANK, CINCINNATI, OHIO IN ITS
CAPACITY AS THE EXCHANGE AGENT, PROMPTLY AFTER THE EFFECTIVE TIME.
VOTE REQUIRED
The affirmative vote of the holders of at least a majority of the outstanding
shares of Common Stock entitled to vote on the matters to be acted upon is
required to approve and adopt the Merger Agreement and the transactions
contemplated thereby. The failure to submit a proxy card (or vote in person at
the Special Meeting) or the abstention from voting by a stockholder (including
broker non-votes) shall have the same effect as a vote against the Merger
Agreement. Brokers who hold shares of Unitog Common Stock as nominees will not
have discretionary authority to vote shares with respect to the Merger Agreement
absent instructions from the beneficial owner thereof. The proxy holders named
in the enclosed proxy card will vote all shares of the Unitog Common Stock
represented by proxy cards that are properly signed and returned by stockholders
in accordance with the instructions contained therein. You may specify your
voting choices by marking the appropriate boxes on the proxy card. Shares as to
which an executed proxy card is returned but the stockholder has abstained from
voting on any matter are considered shares present at the Special Meeting for
purposes of determining a quorum and are included in determining whether the
proposals presented at the Special Meeting are approved (i.e., an abstention
would have the effect of a vote against the Merger Agreement and the
transactions contemplated thereby, and against such other business as may have
properly come before the Special Meeting, including adjournment or postponement
thereof). Shares held by a broker in street name and for which an executed proxy
card (without voting instructions) is returned to Unitog by such broker will be
considered present at the Special Meeting for purposes of determining a quorum
but will not be voted with respect to such matter (which has the effect of
voting against the proposal). IF YOU PROPERLY SIGN AND RETURN THE PROXY CARD
SENT TO YOU BY UNITOG, BUT DO NOT SPECIFY YOUR VOTING CHOICES, YOUR SHARES WILL
BE VOTED "FOR" ALL PROPOSALS AND TO APPROVE AND ADOPT THE MERGER AGREEMENT AS
RECOMMENDED BY THE BOARD OF DIRECTORS.
The Board is not aware of any matters other than that set forth in the Notice of
Special Meeting of Stockholders that may be brought before the Special Meeting.
If any other matters properly come before the Special Meeting, including a
motion to adjourn the Special Meeting for the purpose of soliciting additional
proxies, the persons named in the accompanying proxy will vote the shares
represented by all properly executed proxies on such matters in their
discretion, except that shares represented by proxies which have been voted
"against" the Merger Agreement will not be used to vote "for" adjournment of the
Special Meeting for the purpose of allowing additional time for soliciting
additional votes "for" the Merger Agreement.
REVOCABILITY OF PROXIES
A stockholder may revoke a proxy at any time prior to its exercise by (i)
delivering to Robert M. Barnes, Vice President- General Counsel and Secretary,
Unitog Company, 1300 Washington Street, Kansas City, Missouri 64105, a written
notice of revocation prior to the Special Meeting, (ii) delivering, prior to the
Special Meeting, a duly executed proxy bearing a later date, or (iii) attending
the Special Meeting and voting in person. The presence of a stockholder at the
Special Meeting will not in and of itself automatically revoke such
stockholder's proxy.
SOLICITATION OF PROXIES
Except for the costs of filing this Proxy Statement/Prospectus with the
Securities and Exchange Commission ("SEC"), printing and mailing this Proxy
Statement/Prospectus, and the filing fee paid for filings made under the
Hart-Scott- Rodino Act ("HSR Act"), which costs are shared equally by Cintas and
Unitog, Unitog will bear the costs of soliciting proxies from stockholders. In
addition to soliciting proxies by mail, directors, officers and employees of
Unitog, without receiving additional compensation therefor, may solicit proxies
by telephone, fax and telegram or in person. Arrangements also will be made with
brokerage firms and other custodians, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of shares held of record by such
persons, and Unitog will reimburse such brokerage firms, custodians, nominees
and fiduciaries for reasonable out-of-pocket expenses incurred by them in
connection therewith. Unitog has retained Beacon Hill Partners, Inc., a
professional soliciting organization, to aid in the solicitation of proxies.
Beacon Hill Partners, Inc.'s fee for solicitation of the proxies is estimated to
be $5,000 plus reimbursement for out-of-pocket costs and expenses.
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ADJOURNMENT OF THE SPECIAL MEETING
A vote (i) in person by a stockholder for adjournment of the Special Meeting, or
(ii) for the last proposal on the proxy card authorizing the named proxies to
vote the shares covered by such proxy in their discretion with respect to such
other business as may properly come before the Special Meeting, which would
allow such named proxies in their discretion to vote to adjourn the Special
Meeting, would allow for additional solicitation of stockholder votes in order
to obtain a quorum or in order to obtain more votes in favor of the Merger
Agreement. The Board of Directors recommends and advises that the stockholders
vote in person in favor of any adjournment of the Special Meeting so suggested
by such Board to allow time to solicit additional votes in order to obtain a
quorum or to obtain more votes in favor of the Merger Agreement, or in favor of
the last proposal on the proxy card. See "Vote Required" for the effect of
abstentions and broker non-votes with respect to a vote on a proposal to adjourn
the Special Meeting and on such other proposals.
NO DISSENTERS' RIGHTS
Pursuant to Delaware General Corporation Law sec.262(b)(1), holders of Unitog
Common Stock are not entitled to appraisal rights in connection with the Merger.
THE MERGER
FORM OF THE MERGER
If the Merger is consummated, Unitog will be acquired by Cintas through the
merger of Cintas Image Acquisition Company, a Delaware corporation wholly-owned
by Cintas, with and into Unitog, with Unitog being the surviving corporation and
becoming a wholly-owned subsidiary of Cintas.
BACKGROUND OF THE MERGER
At a special directors meeting held on January 9, 1999, the Unitog Board
determined that the Merger was advisable to and in the best interests of the
stockholders of Unitog, approved the Merger Agreement and the transactions
contemplated thereby and recommended to the Unitog stockholders that they vote
for approval and adoption of the Merger Agreement. Immediately following this
meeting, Unitog, Cintas and its subsidiary entered into the Merger Agreement.
The following discussion sets forth certain information relating to the
background of the discussions and meetings leading up to the Merger.
For the last three fiscal years, Unitog has not fulfilled certain performance
objectives previously established by its Board of Directors. Earnings of Unitog
have not met expectations of many securities analysts and stockholders during
that same period. Unitog management believes the primary reasons for
disappointing earnings included the difficulty of integrating certain
acquisitions in the Michigan area and difficulties which resulted in reduced
revenues and extra costs in Unitog's direct sale business when converting to a
new order entry system.
During the second calendar quarter of 1998, the Unitog Board began discussing
strategic alternatives for enhancing the value of Unitog Common Stock. Among the
alternatives considered were (i) continuation of operations with a restructuring
of Unitog's business and (ii) sale or other strategic transaction. In August
1998, the Unitog Board determined that one or more financial advisors should be
retained to assist the Board in its consideration of the foregoing alternatives.
As a result of these discussions and determinations, the Unitog Board
interviewed several investment banking firms and on September 18, 1998, engaged
Goldsmith, Agio, Helms and Company and George K. Baum & Company to evaluate a
sale, strategic transaction or change in business strategy. G. Kenneth Baum and
William D. Thomas are both directors of Unitog. Mr. Baum is an employee and Mr.
Thomas serves as Vice President of George K. Baum & Company. George K. Baum &
Company was one of the underwriters of Unitog's initial public offering in 1989
and has served as a financial adviser to Unitog in connection with several past
acquisitions and financings. See "THE MERGER -- Interests of Certain Persons in
the Merger -- Affiliation with Financial Advisor."
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Following an analysis by the financial advisors, in early October 1998, the
Unitog Board authorized Goldsmith, Agio, Helms and Company and George K. Baum &
Company to solicit indications of interest for the acquisition of Unitog in
order to determine the potential for recognition of value through a sale. The
Unitog Board had determined that a sale transaction was a better alternative for
enhancing value of Unitog Common Stock than the other alternatives, in light of
the evaluation by the financial advisors.
After the Unitog Board's authorization to solicit such indications of interest,
on October 9, 1998, Goldsmith, Agio, Helms and Company contacted several
prospective purchasers to determine if these parties were interested in
evaluating the potential acquisition of a United States based company in the
commercial garment industry. Twelve of those parties were interested in
proceeding with an evaluation of the opportunity and each signed a
confidentiality agreement and received a confidential memorandum that described
Unitog. Seven of the twelve parties submitted preliminary indications of
interest based upon the review of the confidential memorandum.
Based upon these preliminary indications, six interested parties were invited to
meet with Unitog management and examine certain confidential information
assembled in a data room. The confidential information included tax and
financial records, operating data, information on environmental and legal
matters, business contracts, employee benefits and compensation data and other
business information. In addition, counsel for Unitog provided certain
interested parties with proposed drafts of definitive merger agreements.
On December 11, 1998, Cintas and other parties submitted definitive proposals
for the acquisition of Unitog. The definitive proposals included markups of
Unitog's proposed merger agreement showing each party's requested changes to
such agreement. Based upon an analysis of the definitive proposals received, on
December 16, 1998, the Unitog Board concluded that the offer by one party was
superior and negotiations of a definitive agreement with such party were
pursued. Cintas then submitted revised proposals or clarifications on December
18, 24 and 29, 1998. The Unitog Board rejected the December 29, 1998 Cintas
proposal and communicated its reasons for such rejection on December 31, 1998.
In correspondence dated January 4 and 5, 1999, Cintas presented revised
financial terms which appeared to make its proposal superior to the proposal
from the other party previously considered superior by the Unitog Board on
December 16, 1998.
From January 6 through January 8, 1999, representatives of Unitog, along with
its legal counsel and representatives of Goldsmith, Agio, Helms and Company, met
with representatives of Cintas and its legal counsel in Kansas City, Missouri,
to discuss Cintas' proposal and to negotiate the proposed agreement. By the
afternoon of January 7, 1999, most open issues were resolved. The Unitog Board
met and Goldsmith, Agio, Helms and Company and George K. Baum & Company made a
financial presentation and reviewed the sales process to date, and Unitog's
legal counsel reviewed the terms of the current draft of the Merger Agreement.
An in-depth discussion of the Merger Agreement then followed. By the morning of
January 8, 1999, the remaining open items were resolved, and the Cintas Board
met and approved the Merger Agreement. On Saturday, January 9, 1999, the Unitog
Board reconvened to consider the final Merger Agreement. At this meeting,
Goldsmith, Agio, Helms and Company (through its affiliate, Goldsmith, Agio,
Helms Securities, Inc.) and George K. Baum & Company delivered their oral
opinions, which were subsequently confirmed in writing and described below under
"THE MERGER -- Opinions of Financial Advisors", to the effect that as of January
9, 1999, the proposed merger consideration to be received by holders of Unitog
Common Stock is fair from a financial point of view to such holders. Unitog's
legal counsel then described those terms of the Merger Agreement that had been
modified since the prior meeting of the Unitog Board. Following the discussion,
at this special meeting the Unitog Board approved the Merger Agreement by
unanimous vote of those directors present. A statement of unanimous consent was
executed by the entire Unitog Board after January 9, 1999 in order to include
the approval of the Merger Agreement by two directors who were not able to
attend the January 9 meeting but who had been present or participated in
virtually all prior meetings of the Unitog Board regarding this matter and who
were apprised of the relevant discussions at the January 9 meeting. On January
9, 1999, the Merger Agreement was executed and delivered by Unitog and the
proposed Merger was publicly announced by Unitog and Cintas on Monday, January
11, 1999.
The Merger Agreement established a target price of $38 per Unitog share. This
price, divided by the applicable price for Cintas Common Stock, determines the
amount of Cintas Shares to be issued in exchange for Unitog Shares. Section 8.3
of the Merger Agreement provided that the $38 Unitog price was subject to
reduction if certain
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environmental liability estimates regarding Unitog exceeded a specified level.
On February , 1999, after consultation with their respective environmental
consultants, Unitog and Cintas agreed on the amount of the estimated
environmental liability, thereby reducing the Unitog share price from $38 to
$ .
REASONS FOR THE MERGER
During the second calendar quarter of 1998, Unitog's Board of Directors began
considering various strategic alternatives for enhancing the value of Unitog
common stock. Unitog's financial advisors solicited proposals for the
acquisition of Unitog, and the proposal submitted by Cintas was deemed the most
attractive. The merger of Unitog and Cintas pursuant to the terms of the Merger
Agreement presents an opportunity for Unitog stockholders to realize a premium
over historic market prices for their shares through a tax-free reorganization.
OPINIONS OF FINANCIAL ADVISORS
Goldsmith, Agio, Helms Securities, Inc.
On January 9, 1999, Goldsmith, Agio, Helms and Company, through its affiliate,
Goldsmith, Agio, Helms Securities, Inc. ("GAHS"), delivered to the Unitog Board
GAHS' oral opinion, which was confirmed subsequently in writing, to the effect
that, as of such date, and subject to the assumptions, procedures and
limitations set forth therein, the proposed Merger Consideration to be received
by the holders of Unitog Common Stock pursuant to the Merger Agreement is fair
from a financial point of view to Unitog stockholders.
A copy of GAHS' opinion dated January 9, 1999, which sets forth the assumptions
made, matters considered, and limits on the review taken, is attached as
Appendix B to this Proxy Statement/Prospectus and is incorporated herein by
reference. Unitog stockholders are urged to read the GAHS opinion in its
entirety. The description of the GAHS opinion set forth herein is qualified in
its entirety by reference to the full text of such opinion. The GAHS opinion is
rendered for the benefit and use of the Board of Directors of Unitog in
connection with the Board's consideration of the Merger and does not constitute
a recommendation to any holder of Unitog Common Stock as to how such stockholder
should vote with respect to the Merger.
In arriving at its opinion, GAHS undertook such reviews, analyses and inquiries
as it deemed necessary and appropriate under the circumstances. Among other
things, GAHS (i) reviewed the Merger Agreement; (ii) analyzed financial and
other information that is publicly available relating to Cintas; (iii) analyzed
financial and other information that is publicly available relating to Unitog;
(iv) analyzed certain financial and operating data of Unitog that has been made
available to GAHS by Unitog; (v) visited certain facilities of Unitog and
discussed with management of Unitog the financial condition, operating results,
business outlook and prospects of Unitog; (vi) analyzed the valuations of
publicly traded companies that GAHS deemed comparable to Unitog; (vii) performed
a discounted cash flow analysis of Unitog based on financial projections that
Unitog management provided to GAHS; and (viii) analyzed the financial terms of
certain transactions GAHS deemed similar to the Merger that have recently been
effected.
GAHS relied upon and assumed the accuracy, completeness, and fairness of the
financial statements and other information furnished by, or publicly available
relating to, Unitog or Cintas, or otherwise made available to GAHS, and did not
assume responsibility independently to verify such information. GAHS further
relied upon assurances by Unitog that the information provided to GAHS had a
reasonable basis, and with respect to projections and other business outlook
information, reflected the best available estimates, and that Unitog was not
aware of any information or fact that would make the information provided to
GAHS incomplete or misleading. In arriving at its opinion, GAHS did not perform
any appraisals or valuations of specific assets or liabilities of Unitog or
Cintas and expressed no opinion regarding the liquidation value of Unitog or
Cintas or any of their respective assets. The GAHS opinion is based upon the
information available to GAHS and the facts and circumstances as they existed
and are subject to evaluation on the date of the opinion; events occurring after
the date of the opinion could materially affect the assumptions used in
preparing the opinion.
GAHS assumed that the Merger will be accounted for as a pooling of interests in
accordance with generally accepted accounting principles ("GAAP") and that the
Merger qualifies for such accounting treatment under GAAP. GAHS also assumed
that the Merger will constitute a reorganization under Section 368 of the
Internal
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Revenue Code of 1986, as amended (the "Code"). GAHS made no independent
investigation of any legal or accounting matter that may affect Unitog and
assumed the correctness of the legal and accounting advice provided to Unitog
and its Board of Directors.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. The summary
of the GAHS analyses set forth below does not purport to be a complete
description of the presentation by GAHS to Unitog's Board of Directors. In
arriving at its opinion, GAHS did not attribute any particular weight to any
analysis or factor considered by it, but rather made qualitative judgments as to
the significance and relevance of each analysis and factor. Accordingly, GAHS
believes that its analyses and the summary set forth below must be considered as
a whole and that selecting portions of its analyses, or of the summary, without
considering all factors and analyses, could create an incomplete view of the
processes underlying the analyses set forth in the GAHS presentation to the
Unitog Board of Directors and its opinion.
The analyses performed by GAHS (and summarized below) are not necessarily
indicative of actual values or actual future results, which may be significantly
more or less favorable than suggested by such analyses. Additionally, analyses
relating to the values of businesses do not purport to be appraisals or to
reflect the prices at which businesses actually may be acquired.
Discounted Cash Flow Analysis. GAHS analyzed the valuation of Unitog based on
the unlevered discounted cash flow of the projected five-year financial
performance estimates of Unitog prepared by Unitog management. Unitog's weighted
average cost of capital for purposes of this analysis was calculated to
approximate 10.6 percent. Terminal values were calculated by applying both an
earnings before interest, taxes, depreciation and amortization ("EBITDA")
multiple of 7.0x to the projected EBITDA of Unitog in fiscal year 2004 and by
applying a 5% perpetual growth rate to the projected free cash flow in fiscal
year 2004. Based on this analysis, Unitog's implied per share equity values
ranged from $26.07 to $27.23.
Analysis of Publicly Traded Comparable Companies. GAHS analyzed selected
historical and projected financial, operating, and stock market data of Unitog,
Cintas, and other publicly traded companies that GAHS deemed to be comparable to
Unitog and Cintas. The three companies deemed by GAHS to be reasonably
comparable to Unitog and Cintas in terms of products and services offered,
markets served and business prospects were 1) G&K Services, Inc., 2) UniFirst
Corporation, and 3) Angelica Corporation (the "Comparable Companies"). No
company utilized in the Comparable Company Analysis is identical to Unitog or
Cintas. Accordingly, an analysis of the results of the foregoing necessarily
involves complex considerations and judgments concerning the differences in
financial and operating characteristics of Unitog and Cintas and other factors
that could affect the public trading value of the comparable companies to which
they are being compared.
GAHS examined certain publicly available financial data of the Comparable
Companies including the ratio of firm value (equity value plus total debt less
cash and equivalents) to latest-12-month ("LTM") revenue; the ratio of firm
value to LTM EBITDA; the ratio of firm value to LTM earnings before interest and
taxes ("EBIT"); and the ratio of equity value to LTM and projected net income.
This analysis showed that the Comparable Companies had a multiple of firm value
to revenue ranging from 0.5x to 2.5x, with a mean of 1.4x and a median of 1.1x,
compared with 1.7x for Unitog based on a Merger value of $38.00; a multiple of
firm value to EBITDA ranging from 5.9x to 11.8x, with a mean of 7.9x and a
median of 5.9x, compared with 10.7x for Unitog based on a Merger value of
$38.00; a multiple of firm value to EBIT ranging from 8.8x to 17.5x, with a mean
of 12.0x and a median of 9.7x, compared with 18.5x for Unitog based on a Merger
value of $38.00; and a multiple of equity value to LTM net income ranging from
13.1x to 32.2x with a mean of 22.0x and a median of 20.8x, compared with 30.6x
for Unitog based on a Merger value of $38.00.
By applying the mean and median ratios derived from the Comparable Company
analysis to the historical and projected operating results of Unitog, Unitog's
implied equity value per share was calculated to be $15.20 to $29.10.
Analysis of Selected Merger and Acquisition Transactions. GAHS compared the
proposed Merger with selected comparable merger and acquisition transactions. No
transaction analyzed in the Comparable Transaction Analysis is identical to the
Merger. Accordingly, an analysis of the results of the foregoing necessarily
involves complex
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considerations and judgments concerning differences in financial and operating
characteristics of Unitog and Cintas and other factors that could affect the
acquisition value of the companies to which they are being compared.
GAHS performed an analysis of five merger and acquisition transactions involving
textile products and services companies that occurred between April 1, 1996 and
January 7, 1999. GAHS's analysis focused on multiples of transaction value to
revenue because other income statement measures were not publicly available for
most of the acquired companies. For the five merger and acquisition transactions
analyzed, transaction value to revenue multiples ranged from 0.6x to 1.3x, with
a mean of 1.0x and a median of 1.1x, compared with a firm value to revenue
multiple of x for Unitog based on a Merger value of $ . Based on the
analysis of selected merger and acquisition transactions, Unitog's implied
equity value per share ranged from $17.40 to $26.30.
Acquisition Premiums Analysis. GAHS analyzed the premiums paid for 130 recent
mergers and acquisitions of publicly traded companies with transaction values
ranging from $300 to $600 million that were executed in 1997 and 1998. The mean
and the median premium paid over targets' stock prices four weeks before the
announcement date, one week before the announcement date, and one day before the
announcement date were 39.3% and 32.9%, 32.6% and 29.4%, and 27.8% and 22.5%,
respectively. The premium of Unitog Share Price ($38.00) to be paid by Cintas
over the Unitog closing price on November 30, 1998 (the last trading day before
Unitog's public announcement of its retention of investment bankers), was 74.7%.
Historical Exchange Ratio Analysis. GAHS analyzed the historical exchange ratio
determined by comparing Unitog's Common Stock price and Cintas' Common Stock
price over a twelve-month period. During the twelve month period ended January
7, 1999, the exchange ratio reached a high of 0.5520 and a low of 0.3251. The
mean exchange ratio for this period was 0.4393 and the median was 0.4391. This
compares to an implied exchange ratio (Conversion Number) of 0.5518, based on
Cintas January 7, 1999 closing price, of $71.31.
Common Stock Trading History. GAHS' analysis of Unitog's and Cintas' Common
Stock trading history consisted of historical analyses of the trading prices and
volumes of Unitog and Cintas and the relative performance of Unitog, Cintas and
the S&P 500 Index.
GAHS' analysis considered the high and low closing prices for Unitog and Cintas
over the one year and three-year periods ended January 7, 1999. On December 30,
1998, Unitog's Common Stock reached a one-year high closing price of $29.13 and
on October 27, 1998, reached a one-year low closing price of $17.50. On October
17, 1996, Unitog's Common Stock reached a three year high closing price of
$32.06 and on October 27, 1998 reached a three year low closing price of $17.50.
On January 7, 1999, Cintas' Common Stock reached a one-year high closing price
of $71.31 and on February 5, 1998, reached a one year low closing price of
$40.00. On January 7, 1999, Cintas' common stock reached a three-year high
closing price of $71.31 and on January 15, 1996, reached a three-year low
closing price of $21.06. Calculating the Conversion Number based on the January
7, 1999 Cintas closing price of $71.31 and the $38.00 Unitog Share Price results
in an implied equity value per share of $39.35.
GAHS also analyzed the volume of shares traded at various prices. For Unitog's
Common Stock, the volume-weighted average price for the twelve months ending on
the trading day before the announcement that Unitog had hired investment bankers
to review strategic alternatives was $21.16. For Cintas, the volume-weighted
average price for the twelve months ending January 7, 1999 was $50.57.
GAHS was engaged to render an opinion to the Unitog Board in connection with the
Merger based upon its qualifications, expertise and reputation, including the
fact that GAHS is regularly engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, underwriting, sales and
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes.
Pursuant to a letter agreement with Unitog dated September 18, 1998, Goldsmith,
Agio, Helms and Company was entitled to a fee of $175,000 after delivering its
opinion. Upon consummation of the Merger, GAHS and its affiliate are entitled to
total cash compensation of approximately $ million, assuming a Unitog Share
Price of $ and a Cintas Share Price of between $52.00 and $66.43. GAHS and
its affiliate received a monthly retainer of $10,500 since being engaged by
Unitog. These retainers, as well as the $175,000 fee for the opinion, will be
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credited against the total fee to be paid at closing. Unitog has agreed to
reimburse GAHS and its affiliate for out-of-pocket expenses, including
reasonable fees and expenses of counsel, and to indemnify GAHS and its affiliate
for liabilities and expenses arising out of the Merger or transactions in
connection therewith, including liabilities under federal securities laws. The
terms of the fee agreement with GAHS and its affiliate, which are customary in
transactions of this nature, were negotiated at arm's length between Unitog and
GAHS and its affiliate, and the Unitog Board was aware of such arrangement.
George K. Baum & Company.
On January 9, 1999, George K. Baum & Company ("GKB") delivered certain of its
written analyses and its oral opinion to the Unitog Board of Directors to the
effect that, subject to the assumptions, procedures and limitations set forth
therein, as of such date, the proposed Merger Consideration to be received by
the holders of Unitog Common Stock pursuant to the Merger Agreement is fair from
a financial point of view to Unitog stockholders. No limitations were imposed by
Unitog's Board of Directors on GKB with respect to the investigation made or the
procedures followed by it in rendering its opinion.
A copy of GKB's opinion dated January 9, 1999, which sets forth the assumptions
made, matters considered, and limits on the review taken, is attached as
Appendix C to this Proxy Statement/Prospectus and is incorporated herein by
reference. Unitog stockholders are urged to read the GKB opinion in its
entirety. The description of the GKB opinion set forth herein is qualified in
its entirety by reference to the full text of such opinion. The GKB opinion is
rendered for the benefit and use of the Board of Directors of Unitog in
connection with the Board's consideration of the Merger and does not constitute
a recommendation to any holder of Unitog Common Stock as to how such stockholder
should vote with respect to the Merger.
In connection with its opinion, GKB reviewed, among other things, the Merger
Agreement; certain publicly available business and financial information
relating to Unitog and Cintas including Unitog's and Cintas' recent Annual
Reports, Forms 10-K, Forms 10-Q, and other filings with the Securities and
Exchange Commission ("SEC"); and certain internal financial analyses and
forecasts prepared by Unitog's management. GKB also has held discussions with
members of senior management of Unitog regarding the past and current business
operations, financial condition and future prospects of Unitog. In addition, GKB
reviewed the reported price and trading activity for Unitog Common Stock and
Cintas Common Stock, compared certain publicly available financial and stock
market information for Unitog with similar information for Cintas and certain
other companies that GKB believed to be comparable in certain respects to Unitog
and Cintas, reviewed the financial terms of certain business combinations that
GKB deemed to be similar to the Merger, reviewed certain recent historical data
relating to premiums paid in mergers and acquisitions of publicly traded
companies, and performed such other studies and analyses as GKB deemed
appropriate.
In preparing its opinion, GKB relied upon and assumed the accuracy and
completeness of all the financial and other information that was publicly
available or provided to GKB by or on behalf of Unitog and Cintas, and was not
engaged to independently verify any such information. GKB did not undertake nor
did it obtain any independent evaluations or appraisals of any of Unitog's or
Cintas' assets, properties, or liabilities, nor did GKB make any physical
inspection of the properties or assets of Unitog or Cintas. GKB has assumed that
the Merger will be accounted for as a pooling of interests in accordance with
GAAP and that such Merger qualifies for such accounting treatment under GAAP.
GKB has also assumed that the Merger will constitute a tax-free reorganization
pursuant to the Code. GKB was not engaged to independently verify any legal and
accounting matters relative to the Merger Agreement.
GKB's analysis and opinion were prepared for the information and assistance of
the Board of Directors of Unitog in connection with its consideration of the
Merger and such opinion does not constitute a recommendation as to how any
holder of Unitog Common Stock should vote with respect to such transaction.
GKB's opinion necessarily is based on the conditions and circumstances as they
existed on January 9, 1999 and can be evaluated as of such date; events
occurring after the date of the opinion could materially affect the assumptions
used in preparing the opinion. GKB was not asked to, nor did it, express an
opinion as to the relative merits of the Merger as compared to any alternative
business strategies that might exist for Unitog or the effect of any other
transaction in which Unitog might engage.
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The following is a summary of the principal analyses performed by GKB and
reported to the Unitog Board.
Common Stock Performance. GKB's analysis of Unitog's and Cintas' common stock
performance consisted of a historical analysis of the relative trading prices of
Unitog, Cintas, the S&P 500 Index, and a customized index of comparable textile
rental companies including G&K Services, Inc., UniFirst Corporation and Angelica
Corporation. GKB believes that the indexed companies were comparable to Unitog
and Cintas in terms of products and services offered, markets served and
prospects. During the three year period ending January 7, 1999, Unitog
underperformed both the S&P 500 Index and the comparable company index by 84.5%
and 26.2%, respectively. During the same period, Cintas outperformed both the
S&P 500 Index and the comparable company index by 117.0% and 175.3%,
respectively.
GKB's analysis also considered the high and low closing prices for Unitog Common
Stock and Cintas Common Stock over the one-year and three-year periods ended
January 7, 1999. On December 30,1998, Unitog Common Stock reached a one-year
high closing price of $29.13 and on October 27, 1998, reached a one-year low
closing price of $17.50. On October 17, 1996, Unitog Common Stock reached a
three-year high closing price of $32.06 and on October 27, 1998, reached a
three-year low closing price of $17.50. These compare to the implied price for
Unitog of $39.35, based on the Conversion Number, using the January 7, 1999
Cintas closing price of $71.31, and Unitog Share Price, as defined in the Merger
Agreement, of $38.00. The implied price is $ for Unitog based on a
Conversion Number using the February , 1999 Cintas closing price of $
and revised Unitog Share price of $ . On January 7, 1999, Cintas' Common
Stock reached a one-year high closing price of $71.31 and on February 5, 1998,
reached a one-year low closing price of $40.00. On January 7, 1999, Cintas
Common Stock reached a three-year high closing price of $71.31 and on January
15, 1996, reached a three-year low closing price of $21.06.
GKB also analyzed the volume of shares traded at various prices. For Unitog
Common Stock, the volume-weighted average price for the twelve months ending
November 27, 1998, on the trading day before the announcement, was $21.16. This
period was chosen to exclude shares traded after the announcement that Unitog
had hired investment bankers to review strategic alternatives. For Cintas, the
volume-weighted average price for the twelve months ending January 7, 1999 was
$50.57.
Historical Exchange Ratio Analysis. GKB's analysis of the historical exchange
ratio between Unitog Common Stock and Cintas Common Stock consisted of a twelve
month comparison. During the twelve-month period ended January 7, 1999, the
exchange ratio reached a high of 0.5520 and a low of 0.3251. The mean exchange
ratio for this period was 0.4393 and the median was 0.4391. This compares to an
implied exchange ratio (Conversion Number), based on Cintas January 7, 1999
closing price, of 0.5518.
Discounted Cash Flow Analysis. GKB performed a discounted cash flow analysis of
the unlevered free cash flows of Unitog's projected five-year financial
performance estimates, which were prepared by Unitog's management. For the
purposes of this analysis, GKB applied a weighted average cost of capital of
10%, 10.5% and 11%. GKB calculated terminal values both by applying an EBITDA
multiple of 7.0x to the projected EBITDA of Unitog in fiscal year 2004 and by
applying a 5% terminal growth rate to the projected free cash flow in fiscal
year 2004. From these assumptions, GKB calculated per share equity values for
Unitog ranging from $23.56 to $30.58 with an average value of $27.18.
Comparable Company Analysis. No company utilized in the comparable company
analysis is identical to Unitog or Cintas. Accordingly, an analysis of the
results of the foregoing necessarily involves complex considerations and
judgments concerning the differences in financial and operating characteristics
and other factors that could affect the public trading value of Unitog, Cintas
and other publicly traded companies that GKB deemed comparable to Unitog and
Cintas. Mathematical analysis is not in itself a meaningful method of using
comparable transaction data.
GKB analyzed selected financial, operating and stock market data of Unitog,
Cintas and three companies deemed by GKB to be reasonably comparable to Unitog
and Cintas in terms of products and services offered, markets served and
prospects: G&K Services, Inc., UniFirst Corporation and Angelica Corporation
(the "Comparable Companies").
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GKB examined certain publicly available financial and market trading data of the
Comparable Companies including firm value (equity value plus total net debt) as
a multiple of the latest-twelve-month ("LTM") revenues, EBITDA and EBIT and
price to earnings ratios ("P/E's") based on estimated and projected Earnings Per
Share ("EPS") for the calendar years ending 1998 and 1999. For purposes of
computing pricing multiples for Unitog implied in the Merger, the value of
Unitog was assumed to be $ per share. Latest-twelve-months financial data
for Unitog incorporates management's projection for the twelve months ended
January 31, 1999, excluding the results from certain operations which were sold
during this period.
This analysis resulted in (i) a range of multiples of firm value to LTM revenues
of 0.5x to 2.5x with a mean of 1.4x and a median of 1.1x for the Comparable
Companies, compared to 1.7x for Unitog under the Merger, (ii) a range of
multiples of firm value to LTM EBITDA of 5.9x to 11.8x with a mean of 7.9x and a
median of 5.9x, compared to 10.7x for Unitog under the Merger, (iii) a range of
firm value to LTM EBIT of 8.8x to 17.5x with a mean of 12.0x and a median of
9.7x, compared to 18.5x for Unitog under the Merger, (iv) a range of multiples
of 1998E EPS of 13.0x to 30.7x with a mean of 20.9x and a median of 19.0x,
compared to 30.6x for Unitog under the Merger, (v) a range of multiples of 1999E
EPS of 12.6x to 25.6x with a mean of 18.0x and a median of 15.7x, compared to
27.4x for Unitog under the Merger. EPS estimates for the Comparable Companies
were based on the Institutional Broker Estimate System (IBES).
Comparable Transaction Analysis. No merger or acquisition transaction utilized
in the comparable transaction analysis is identical to the Merger. Accordingly,
an analysis of the results of the foregoing necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics of Unitog and Cintas and other factors that could affect the
acquisition value of the companies to which they are being compared.
Mathematical analysis is not in itself a meaningful method of using comparable
transaction data.
GKB performed an analysis of five merger and acquisition transactions involving
companies in the textile services industry that occurred between April 1, 1996
and January 7, 1999. Multiples of firm value to revenue were calculated for
these transactions, which resulted in a range of multiples from 0.6x to 1.3x,
with a mean of 1.0x and a median of 1.1x, compared with a firm value to revenue
multiple of 1.7x for Unitog based on a Merger value of $38.00 per share.
Acquisition Premiums Analysis. GKB analyzed the premiums paid for 130 recent
mergers and acquisitions of publicly traded companies with transaction values in
the range of $300 million to $600 million that were executed between January 7,
1997 and January 7, 1999. The mean and median premium paid over the targets'
stock prices four weeks before the announcement date, one week before the
announcement date and one day before the announcement date were 39.3% and 32.9%,
32.6% and 29.4%, and 27.8% and 22.5%, respectively. The premiums of Unitog Share
Price ($ ) for Unitog over the Unitog stock prices four weeks, one week and
one day prior to January 8,1999 were 38.8%, 32.2% and 31.0%, respectively. The
premium of Unitog Share Price over the Unitog closing price on November 30,
1998, the last trading day before the announcement of the hiring of investment
bankers to evaluate strategic alternatives, was 74.7%.
The summary set forth above does not purport to be a complete description of the
analyses performed by GKB, but describes, in summary form, the principal
elements of the analyses performed by GKB in arriving at its opinion. The
preparation of a fairness opinion involves various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
these methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. GKB did not form a conclusion as
to whether any individual analysis, considered in isolation, supported or failed
to support an opinion as to fairness from a financial point of view. Rather, in
reaching its conclusion, GKB considered the results of the analyses in light of
each of the other analyses and the other information available and ultimately
reached its opinion based on the results of the analyses and other information
taken as a whole. GKB did not place particular reliance or weight on any
individual factor, but instead concluded that, taken as a whole, the analyses
and other information supported its opinion. Accordingly, notwithstanding the
separate factors summarized above, the analyses must be considered as a whole,
and selecting portions of the analysis and the factors considered by GKB,
without considering all analyses and factors, could create an incomplete or
misleading view of the evaluation process underlying GKB's opinion. The analyses
performed by GKB are not necessarily indicative of actual values or future
results, which may be materially more or less favorable than suggested by such
analyses.
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GKB was selected to render an opinion in connection with the Merger based upon
its knowledge and familiarity with Unitog and its industry as well as GKB's
qualifications, expertise and reputation, including the fact that it is
regularly engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, underwriting, sales and distributions of listed
and unlisted securities, private placements and valuations for corporate and
other purposes.
Pursuant to a letter agreement between Unitog and GKB dated September 18, 1998,
GKB was entitled to a fee of $75,000 upon delivering its opinion. Upon
consummation of the Merger, GKB is entitled to total cash compensation of
approximately $ million, assuming a Unitog Share Price of $ and a Cintas
Share Price between $52.00 and $66.43. GKB has received a monthly retainer of
$4,500 since being engaged by Unitog. These retainers, as well as the $75,000
fee for the opinion, will be credited against the total fee to be paid at
closing. Unitog has agreed to reimburse GKB for out-of-pocket expenses,
including reasonable fees and expenses of counsel, and to indemnify GKB for
liabilities and expenses arising out of the Merger or transactions in connection
therewith, including liabilities under federal securities laws. The terms of the
fee arrangement with GKB, which are customary in transactions of this nature,
were negotiated at arm's length between Unitog and GKB, and the Unitog Board was
aware of such arrangement.
GKB has previously rendered financial advisory and investment banking services
to Unitog for which it has received customary compensation. William D. Thomas, a
member of Unitog's Board of Directors, is a vice president of GKB and a director
and officer of George K. Baum Group, Inc., a holder of 661,870 shares of Unitog
Common Stock. G. Kenneth Baum, also a member of Unitog's Board of Directors, is
an employee of GKB and a director, officer and shareholder of George K. Baum
Group, Inc. See "Interests of Certain Persons in the Merger -- Affiliation with
Financial Advisor". In the ordinary course of securities business, GKB and its
affiliates may hold or actively trade the securities of Unitog or Cintas for its
own account and for the accounts of its customers and, accordingly, may at any
time hold a long or short position in such securities. Additionally, GKB makes a
market in Unitog Common Stock on the Nasdaq National Market.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the material federal income tax
consequences of the Merger to holders of Unitog Common Stock. The discussion is
based on the Code, proposed, temporary and final Treasury regulations
promulgated thereunder, published administrative rulings and pronouncements and
judicial decisions in effect as of the date of this Proxy Statement/Prospectus,
all of which are subject to change, possibly with retroactive effect.
This discussion is for general information only and does not address every
aspect of the federal income tax laws that may be relevant to certain Unitog
stockholders in light of their personal investment circumstances, nor does it
address the effects of any state, local or foreign tax laws on the Merger. The
tax treatment of a Unitog stockholder may vary depending upon the stockholder's
particular situation, and certain stockholders (including, for example,
insurance companies, tax-exempt organizations, financial institutions and
broker-dealers, and individuals who received Unitog Common Stock pursuant to the
exercise of employee stock options or otherwise as compensation) may be subject
to special rules not discussed below. In addition, the discussion relates to
persons who hold Unitog Common Stock as capital assets.
Consummation of the Merger is conditioned upon the receipt by Cintas of an
opinion from Keating, Muething & Klekamp, P.L.L., its counsel, and by Unitog of
an opinion from Bryan Cave LLP, as its special tax counsel, to the effect that
the Merger will constitute a reorganization within the meaning of Section 368 of
the Internal Revenue Code. These opinions will be based on facts existing at the
time the Merger becomes effective and on certain representations as to factual
matters made by Cintas and Unitog. If the representations are incorrect in any
material respects, it could jeopardize the conclusions reached in the opinions.
Neither Cintas nor Unitog is aware of any facts or circumstances which would
cause any of its representations made to counsel to be untrue or incorrect in
any material respect. An opinion of counsel is not binding on the Internal
Revenue Service or the courts. Further, no ruling has been or will be sought
from the Internal Revenue Service as to the federal income tax consequences of
the Merger. As a result, the Internal Revenue Service may disagree with the
federal income tax consequences discussed below.
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Based on the opinions discussed above, the material federal income tax
consequences that will result from the Merger are:
1. A Unitog stockholder will not recognize any income, gain or loss as a
result of the receipt of Cintas Common Stock pursuant to the Merger,
except for cash received in lieu of a fractional share of Cintas Common
Stock.
2. The tax basis of a Unitog stockholder in the Cintas Common Stock
received pursuant to the Merger, including any fractional share interest
in Cintas Common Stock for which cash is received, will equal the Unitog
stockholder's tax basis in the Unitog Common Stock exchanged.
3. The holding period of a Unitog stockholder for the Cintas Common Stock
received pursuant to the Merger will include the holding period of the
Unitog Common Stock surrendered.
4. A Unitog stockholder who receives cash in lieu of a fractional share
interest in Cintas Common Stock pursuant to the Merger will be treated
as if the fractional shares were actually issued by Cintas as part of
the exchange and then redeemed by Cintas for cash. These cash payments
will be treated as having been received in exchange for the redeemed
fractional share interests under Section 302(a) of the Code. The receipt
of such cash payments will generally result in capital gain or loss in
an amount equal to the difference between the amount of cash received
and the basis of the fractional Cintas Common Stock.
5. No income, gain or loss will be recognized by Unitog, Cintas or its
subsidiary as a result of the Merger.
The foregoing discussion is only a summary and is not a complete analysis or
listing of all potential tax effects relevant to a decision whether to vote in
favor of approval of the Merger Agreement. You are urged to consult your own tax
advisor in determining the federal, state, local and foreign income tax
consequences, and any other tax consequences, of the Merger to you.
FEDERAL SECURITIES LAW CONSEQUENCES
All shares of Cintas Common Stock received by Unitog stockholders in the Merger
will be freely transferable. However, shares of Cintas Common Stock received by
any person who is deemed to be an "affiliate" (as such term is defined under the
Securities Act of 1933) of Unitog prior to the Merger or of Cintas after the
Merger may be resold by them only in compliance with the volume and
manner-of-sale requirements of Rules 144 and 145 under the Securities Act.
Affiliates of Cintas will be governed by additional provisions of Rule 144.
Affiliates of Cintas or Unitog generally include individuals or entities that
control, are controlled by, or are under common control with, such party and may
include certain officers and directors of such party as well as principal
stockholders of such party.
CERTAIN EFFECTS OF THE MERGER
Cintas' subsidiary will be merged with and into Unitog, with Unitog surviving
the Merger and becoming a wholly-owned subsidiary of Cintas. Stockholders of
Unitog will become stockholders of Cintas. As of the effective time of the
Merger, Unitog Common Stock will no longer be traded on Nasdaq, and the
registration of Unitog Common Stock under the Securities Exchange Act of 1934
will be terminated.
At the effective time of the Merger, the certificate of incorporation and bylaws
of Unitog shall be amended and Unitog's board of directors and executive
officers will become composed of individuals designated by Cintas who are not
expected to include current directors or executive officers of Unitog.
CONDUCT OF BUSINESS IF MERGER NOT CONSUMMATED
If the Merger is not consummated, Unitog will continue its current operations.
However, for reasons discussed under the caption, "THE MERGER -- Background of
the Merger," Unitog may continue to explore strategic alternatives, including a
business combination or sale of Unitog.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Unitog Board with respect to the
Merger, stockholders of Unitog should be aware that executive officers and
directors of Unitog have certain interests in the Merger, described below, that
are separate from and in addition to the interests of stockholders of Unitog
generally. The Unitog Board was aware of these interests and took them into
account in approving the Merger Agreement and the transactions contemplated
thereby.
Severance Agreements for Unitog Executive Officers
Unitog's executive officers are parties to severance agreements with Unitog
which provide that if their employment is terminated within two years after the
Merger for reasons other than misconduct, disability or death or they elect to
resign because of (i) a material adverse change of their responsibilities,
authority, status, position, offices, titles, duties or reporting requirements,
(ii) an adverse change in annual compensation or benefits or (iii) a requirement
to relocate in excess of fifty (50) miles from their current employment, they
shall receive, in addition to all compensation due and payable to or accrued as
of the date of the termination, a lump sum payment. The lump sum payable in such
circumstances to Unitog's Chairman, President and Chief Executive Officer,
Randolph K. Rolf, would equal 2.99 times his "base amount" of compensation (as
defined by Section 280(b)(3) of the Code), which is $313,817, and would result
in a lump sum payment of $938,313. The lump sum payable in such circumstances to
three other Unitog executive officers, Terence C. Shoreman, J. Craig Peterson
and Robert M. Barnes, is equal to two times their "annual compensation" (as
defined in their severance agreements), which is $325,094, $274,402 and
$184,503, respectively, and would result in lump sum payments (subject to
limitations relating to Code Section 280G applicable to Messrs. Shoreman and
Barnes) of $502,250, $548,804 and $319,322, respectively. The lump sum payable
in such circumstances to the remaining Unitog executive officers, G. Jay
Arrowsmith and Ronald J. Harden, is equal to their "annual compensation" (as
defined in their severance agreements), which is $179,601 and $136,163,
respectively, and would result in lump sum payments of such amounts.
Stock Option Plans
Under the terms of the Merger Agreement, all options outstanding and held by
executive officers and directors of Unitog, under the Unitog 1997 Stock Option
Plan vest immediately upon the consummation of the Merger which would result in
vesting of options for 21,750 Unitog shares held by executive officers and
directors. All options outstanding (including those held by executive officers
of Unitog) under the Unitog 1992 Stock Option Plan vest in full if the
participant's employment is voluntarily or involuntarily terminated within one
year after the Merger, which could result in vesting of options for 12,125
Unitog shares for the executive officers; additionally, to such executive
officers such options would be settled by the payment to each participant of an
amount equal to the excess, if any, of the aggregate fair market value of the
shares subject thereto on the date of Merger over the exercise price of the
option which, based upon an assumed fair market value of $ , could result in
maximum aggregate payments of approximately $ to the executive officers with
respect to previously unvested options.
Affiliation with Financial Advisor
Unitog directors G. Kenneth Baum and William D. Thomas have certain affiliations
with George K. Baum & Company ("GKB"), one of Unitog's financial advisors with
respect to the Merger. Mr. Baum is an employee and Mr. Thomas is a vice
president of GKB and both Mr. Baum and Mr. Thomas are affiliated with George K.
Baum Group, Inc., which holds 661,870 shares of Unitog Common Stock. In
connection with GKB's role as a financial advisor in the Merger, Unitog has
agreed to pay GKB a fee of approximately $1,750,000, of which approximately
$1,625,000 is contingent upon consummation of the Merger. See "THE
MERGER -- Opinions of Financial Advisors".
Outside Director Fee/Stock Program
Each outside director of Unitog, pursuant to the Outside Director Fee/Stock
Program, is given the opportunity to elect to take all or a portion of their
director fees in Unitog stock rather than in cash. Shares earned in a calendar
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year are issued after the end of the current calendar year. All six of Unitog's
outside directors participate in the program and one former director has
unissued shares accrued for his benefit under the Plan. The Merger would
constitute a "change of control" under such program, and would cause all accrued
but unissued shares to be issued immediately upon completion of the Merger. The
total number of shares of Unitog Common Stock subject to accelerated issuance
under such program is 910 shares.
Directors' and Officers' Indemnification and Insurance
The Merger Agreement provides that, after the Merger, Unitog, as the surviving
corporation, is obligated to indemnify each present and former director and
officer of Unitog and /or its subsidiaries against any liabilities arising out
of actions or omissions in their capacity as such at or prior to the effective
time of the Merger, to the full extent as permitted under applicable law. Unitog
is also obligated to maintain directors' and officers' liability insurance,
comparable to that maintained prior to the Merger for five years after the
Merger.
REGULATORY FILINGS AND APPROVALS
Under the HSR Act and the rules promulgated thereunder by the Federal Trade
Commission, the Merger may not be consummated until notifications have been
given and certain information has been furnished to the FTC and the Antitrust
Division of the Department of Justice (the "Antitrust Division"), and specified
waiting period requirements have been satisfied. Cintas and Unitog each filed
premerger notification and report forms with the FTC and Antitrust Division on
January 26, 1999, and early termination of the waiting period was granted on
February 5, 1999. At any time before or after consummation of the Merger, and
notwithstanding the satisfaction of the HSR Act requirements, the FTC or the
Antitrust Division or any state could take action under the federal or state
antitrust laws to seek to enjoin consummation of the Merger. Private parties may
also seek to take legal action under the antitrust laws. Based on the
information available to them, each of Cintas and Unitog believes that the
Merger can be effected in compliance with federal and state antitrust laws.
However, there can be no assurance that a challenge to the Merger on antitrust
grounds will not be made or that, if such challenge were made, Cintas and Unitog
would prevail.
THE MERGER AGREEMENT
The description of the Merger Agreement set forth below is not complete. For
full information, you should read the Merger Agreement, a copy of which is
attached to this Proxy Statement/Prospectus as Appendix A.
TERMS OF THE MERGER
The Merger. A subsidiary of Cintas will merge with and into Unitog, the separate
corporate existence of the subsidiary will cease, and Unitog will continue as
the surviving corporation and will be a wholly-owned subsidiary of Cintas.
Effective Time. As promptly as practicable after the satisfaction or waiver of
the conditions set forth in the Merger Agreement, Cintas and Unitog will
complete the Merger by filing a Certificate of Merger with the Secretary of
State of Delaware (the time of such filing being the "Effective Time").
Conversion of Unitog Common Stock in the Merger. At the Effective Time, shares
of Unitog Common Stock issued and outstanding immediately prior to the Effective
Time (excluding shares held by Cintas or any subsidiary of Cintas) will be
converted into the right to receive validly issued, fully paid and nonassessable
shares of Cintas Common Stock. The Conversion Number is determined by dividing
the "target" Unitog Share Price ("Unitog Share Price") of $38 (reduced to $
for certain environmental liability estimates described below) by the Cintas
Share Price, subject to certain adjustments to the Cintas Share Price if it is
less than $52 or more than $66.43.
Effect of Cintas Share Price Fluctuation
- If the Cintas Share Price is greater than $66.43, the Cintas Share Price
used to determine the Conversion Number is deemed to be $66.43 plus
one-half of the amount by which the Cintas share price is greater
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than $66.43 (and thereby results in a value of more than $ per Unitog share
based upon the Cintas Share Price).
- If the Cintas Share Price is equal to or between $52 and $66.43, each
Unitog share would be exchanged for Cintas Common Stock with a $
value (based upon the Cintas Share Price).
- If the Cintas Share Price is less than $52, the Cintas share price used
to determine the Conversion Number is deemed to be $52 (and thereby
results in a value of less than $38 per Unitog share based on the Cintas
Share Price), but in such event the Unitog Board has the right to
terminate the Merger Agreement as discussed under
" -- Termination -- Conditions to Termination" below. The Unitog Board is
not required to exercise this right and does not currently intend to
resolicit stockholder approval should it decide not to exercise such
right. THEREFORE, UNITOG STOCKHOLDERS COULD RECEIVE MERGER CONSIDERATION
VALUING THEIR SHARES OF UNITOG COMMON STOCK AT LESS THAN $38 PER SHARE.
Effect of Environmental Liability Reduction
- The "target" Unitog Share Price of $38 was subject to reduction if
certain environmental liability estimates, determined in accordance with
the Merger Agreement on an after tax, net present value basis, exceeded
$570,000 (any such reduction, an "Environmental Estimate Reduction"). The
Environmental Estimate Reduction reduces the "target" $38 Unitog Share
Price by $0.01 for each $100,000 of such excess, subject to certain
conditions.
- The Environmental Estimate Reduction has been determined to be $ ,
thereby reducing the $38 Unitog Share Price to $ .
Assumption of Outstanding Stock Options. After the Effective Time, each
outstanding stock option of Unitog Common Stock by virtue of the Merger
Agreement will become an option to acquire the number of shares of Cintas Common
Stock equal to the number of shares of Unitog Common Stock subject to the option
multiplied by the Conversion Number (rounded up or down to the nearest whole
share). The price per share of each option will equal the option price per share
of Unitog Common Stock subject to the option in effect immediately before the
Effective Time divided by the Conversion Number (rounded up to the nearest full
cent).
Fractional Shares. No fractional shares of Cintas Common Stock will be issued in
the Merger. Instead, Cintas will pay each Unitog stockholder who would otherwise
have been entitled to a fractional share of Cintas Common Stock an amount equal
to such fraction multiplied by the Cintas Share Price.
EXCHANGE OF CERTIFICATES
Exchange Agent. The Fifth Third Bank, Cincinnati, Ohio, the transfer agent for
Cintas Common Stock, will act as exchange agent for the Merger.
Exchange Procedures. As soon as reasonably practicable after the Effective Time,
Cintas will instruct the Exchange Agent to mail to each record holder of Unitog
Common Stock at the Effective Time a letter of transmittal and instructions for
exchanging certificates representing Unitog Common Stock for certificates
evidencing Cintas Common Stock. You will have to follow the instructions and
surrender your certificates for Unitog Common Stock, together with the properly
executed letter of transmittal, and any other required documents, to the
Exchange Agent. You then will be entitled to receive (i) certificates for that
number of whole shares of Cintas Common Stock which you have the right to
receive in the Merger, (ii) any dividends or other distributions on the Cintas
Common Stock declared or made after the Effective Time to which you may be
entitled, and (iii) cash in respect of any fractional share of Cintas Common
Stock. Until so surrendered, each outstanding certificate that, prior to the
Effective Time, represented shares of Unitog Common Stock will be deemed, for
all corporate purposes other than the payment of dividends, and subject to the
payment of cash in lieu of fractional shares, to evidence the ownership of the
number of whole shares of Cintas Common Stock into which such shares of Unitog
Common Stock have been converted.
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Distributions With Respect to Unexchanged Shares. If any dividends or other
distributions are declared or made after the Effective Time on shares of Cintas
Common Stock, you will not receive them until you surrender your Unitog stock
certificates. When you do surrender your certificates, Cintas will pay you,
without interest, any dividends or other distributions with a record date after
the Effective Time previously paid to holders of Cintas Common Stock.
Transfers of Ownership. If you want any certificate for shares of Cintas Common
Stock to be issued in a name other than that in which the Unitog certificate
surrendered in exchange is registered, your Unitog certificate must be properly
endorsed and otherwise in proper form for transfer. You also must pay to Cintas
or its agent any resulting transfer or other tax, or establish to the
satisfaction of Cintas that such tax has been paid or is not payable.
Escheat and Withholding. Neither Cintas nor Unitog will be liable to you for any
Merger Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. Cintas or the Exchange Agent will
deduct from the Merger Consideration paid to you any amounts that Cintas or the
Exchange Agent is required to withhold under any provision of federal, state,
local or foreign tax law.
Lost, Stolen or Destroyed Certificates. The Exchange Agent will issue Cintas
Common Stock in exchange for a lost, stolen or destroyed Unitog stock
certificate upon receipt of an affidavit of that fact by the owner of the
certificate. However, Cintas will require you to deliver a reasonable indemnity
bond against any claim that may be made against Cintas or the Exchange Agent
with respect to a certificate alleged to have been lost, stolen or destroyed.
DETAILED INSTRUCTIONS, INCLUDING A TRANSMITTAL LETTER, WILL BE MAILED TO UNITOG
STOCKHOLDERS PROMPTLY FOLLOWING THE EFFECTIVE TIME EXPLAINING HOW TO EXCHANGE
UNITOG CERTIFICATES FOR CINTAS CERTIFICATES. YOU SHOULD NOT SEND IN YOUR UNITOG
STOCK CERTIFICATES UNTIL YOU RECEIVE YOUR TRANSMITTAL LETTER.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of Unitog
and of Cintas. Those relate, among other things, to the following matters
(which, in certain cases, are subject to specified exceptions):
1. Corporate Status; Capital Stock. The organization, good standing,
qualification and capitalization are as described in the Merger Agreement and,
except as stated, there are no commitments by Unitog to issue capital stock;
2. Approvals and Filings. Certain governmental and regulatory approvals and
filings are required to complete the Merger including the following: compliance
with applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"); filings under federal securities laws; the
filing of a Certificate of Merger with the Secretary of State of Delaware and
other appropriate documents with those states where Unitog is authorized to do
business; filings or consents, if any, required under environmental, health or
safety laws; and filings or consents under state securities laws;
3. Absence of Conflict. The Merger will not conflict with charter
documents, laws or agreements to which such party is subject. The only consents
required for the completion of the Merger are as set forth except for those
which might not reasonably be expected to have a change, event, occurrence or
state of facts which is or which would reasonably be expected to lead to an
adverse change in the consolidated balance sheet or facilities of Unitog or any
of Unitog's subsidiaries, or Cintas and its subsidiaries, as the case may be,
which is material to Unitog and its subsidiaries, or Cintas and its
subsidiaries, taken as a whole, as the case may be, and except as disclosed to
the other party as described in the Merger Agreement (a "Material Adverse
Effect");
4. Accuracy of Reports and Financial Statements. Each party has filed its
required reports and documents with the Securities and Exchange Commission.
There are no material misstatements contained in those filings. Certain
financial statements included in those filings comply with applicable rules and
have been prepared in accordance with generally accepted accounting principles,
and there are no undisclosed liabilities that could reasonably be expected to
have a Material Adverse Effect;
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5. Conduct of Business. Since the beginning of fiscal year 1999 (as of the
date of the Merger Agreement) and until completion of the Merger, each party has
conducted its business in the ordinary course and there has been an absence of
certain changes or events, including the occurrence of a Material Adverse
Effect;
6. Absence of Material Untrue Statements. There are no material untrue
statements in this Proxy Statement/Prospectus or the Registration Statement
filed with the Securities and Exchange Commission of which it is a part; and
7. Other Matters. The Merger Agreement also includes representations and
warranties dealing with employee relations, benefit plans, title to properties
owned by Unitog, compliance with laws, the absence of litigation that would have
a Material Adverse Effect, insurance, intellectual property rights, contracts,
taxes, the validity and standing of any required permits and authorizations,
compliance with environmental laws, maintenance of books and records, Year 2000
compliance, state takeover statutes and customers.
CONDUCT OF BUSINESS PENDING THE MERGER
Conduct of Business of Cintas and Unitog. Prior to the Effective Time, each of
Cintas and Unitog will conduct its business and day to day operations in the
ordinary and usual course of business, consistent with past practice, and will
seek to preserve intact its business organization and goodwill and keep in full
force and effect all of its material rights. Specifically, the Merger Agreement
provides that neither Cintas nor Unitog will do the following without the
consent of the other:
1. Amend its Certificate or Articles of Incorporation or Bylaws;
2. Except under its employee and director stock option plans and, with
respect to Cintas only, except in connection with acquisitions of stock or
assets of other businesses, issue any of its capital stock or securities
convertible or exchangeable into its capital stock;
3. Except under existing employee benefit plans, redeem, repurchase or
acquire any of its outstanding capital stock;
4. Change its capital stock or declare, set aside or pay any dividend or
distribution, except with respect to regular dividends consistent with past
practice;
5. Take any action or fail to take any action that would prevent or impede
the Merger from qualifying for "pooling of interests" accounting treatment or
from qualifying as a tax-free reorganization under the Code;
6. Take any action that would render a representation or warranty in the
Merger Agreement to be untrue;
7. Take any action that would cause any condition of the Merger Agreement
to not be satisfied; or
8. Propose to or announce an intention to do any of the foregoing.
Limitations on Conduct of Business Applicable to Unitog. Unitog will not,
without the prior written consent of Cintas:
1. Except for the Merger, adopt a plan of liquidation, dissolution or
merger;
2. Make new grants or awards under its benefit plans or increase the
salaries of directors, officers or key employees (other than customary increases
to key employees in amounts not in excess of 5%);
3. Except in the ordinary course of business, consistent with past
practice, incur or guarantee debt or make loans, advances or capital
contributions to any person other than a wholly-owned subsidiary;
4. Make any acquisition, through merger, consolidation or otherwise;
5. Make any capital expenditure or commitment in excess of $100,000; or
6. Purchase any shares of Unitog Common Stock under any current stock
repurchase plan or otherwise purchase any Unitog Common Stock.
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No Solicitation. The Merger Agreement provides that Unitog will not, directly or
indirectly, take any actions designed to facilitate a proposal from any person
to acquire 51% or more of Unitog's common stock or Unitog's assets or any
proposal or offer for a merger or other business combination with Unitog, other
than the Merger (an "Acquisition Proposal"), or participate in discussions or
negotiations regarding an Acquisition Proposal. However, if the Board of
Directors of Unitog, after consultation with financial and legal advisors,
reasonably believes that it has received a bona fide proposal which is more
favorable financially to Unitog than the Merger (a "Superior Proposal"), Unitog
may furnish information and access to the person submitting the Superior
Proposal and may negotiate with such person.
ADDITIONAL AGREEMENTS
Access to Information; Confidentiality. Upon reasonable notice and subject to
any other agreement by which it is bound, each of Unitog and Cintas will afford
the other reasonable access to its properties, books, contracts, commitments and
records and will furnish promptly to the other all information concerning its
business, properties and personnel as the other may reasonably request. Each
party has agreed to keep such information confidential.
Indemnification; Insurance. After the Effective Time, Cintas will, and will
cause Unitog to, indemnify and hold harmless each present and former director of
Unitog or any of its subsidiaries against any costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages or
liabilities incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring prior to the Effective
Time. No indemnification is required where a judgment or final adjudication
established that his or her acts or omissions (i) were committed in bad faith or
were the result of active and deliberate dishonesty and were material to the
cause of action or (ii) arose out of, were based upon or were attributable to
the gaining in fact of any financial profit or other advantage to which he or
she was not entitled. Unitog will maintain directors' and officers' liability
insurance comparable to that maintained prior to the Merger for five years after
the Merger.
Employees. Except as stated, for two years after the Effective Time, Cintas will
maintain all programs and benefits for employees of Unitog and its subsidiaries
who are not subject to collective bargaining. Such programs and benefits will be
on terms no less favorable in the aggregate than those of Unitog at the
Effective Time. Cintas will recognize the length of service of Unitog employees
with Unitog or its subsidiaries with respect to all of Cintas' benefit plans
except for the Cintas Partners' Plan. Cintas and Unitog will also honor and
assume all stated retention programs, severance plans and noncompetition and
severance agreements of Unitog.
Further Action/Tax Treatment. Cintas and Unitog will use all commercially
reasonable efforts to consummate as promptly as practicable the transactions
contemplated by the Merger Agreement, to obtain in a timely manner all necessary
waivers, consents and approvals and to effect all necessary registrations and
filings, and otherwise to satisfy or cause to be satisfied all conditions
precedent to their obligations under the Merger Agreement. In addition, each of
the parties has agreed to use its commercially reasonable efforts to cause the
Merger to qualify as a reorganization under the provisions of Section 368 of the
Code and will not (both before and after consummation of the Merger) take any
actions which to its knowledge could reasonably be expected to prevent the
Merger from so qualifying.
Treatment of Options. Options to purchase Unitog Common Stock become rights to
purchase shares of Cintas Common Stock as discussed under "-- Terms of the
Merger -- Outstanding Stock Options" above.
Accountants' Letters. Each of Unitog and Cintas will use its best efforts to
cause KPMG LLP and Ernst & Young LLP, respectively, to deliver letters to Cintas
and Unitog, respectively, covering such matters as are requested by Cintas or
Unitog, as the case may be, and as are customarily addressed in accountants'
"comfort" letters.
Pooling Accounting Treatment. Cintas and Unitog have each agreed not to take any
action that would reasonably be expected to adversely affect the ability of
Cintas to treat the Merger as a pooling of interests.
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CONDITIONS TO THE MERGER
Conditions to Obligation of Each Party to Effect the Merger. The obligations of
Unitog to complete the Merger are subject to the satisfaction, at or prior to
the Effective Time, of various conditions, including:
1. Stockholder Approval. The Merger Agreement must have been approved by
the requisite vote of the stockholders of Unitog;
2. Listing. The Cintas Common Stock issuable in the Merger must be listed
on Nasdaq, upon official notice of issuance;
3. Injunction. There must not be in effect any law or any judgment
directing that the Merger not be consummated;
4. Registration Statement. The Registration Statement of which this Proxy
Statement/Prospectus forms a part must be effective under the Securities Act of
1933 and must not be subject to any stop order;
5. Accountants Letters. Cintas and Unitog must each have received a letter
from their respective independent accountants that the Merger will qualify for
"pooling of interests" accounting treatment; and
6. Financial Advisors' Opinions. Unitog must receive letters from its
financial advisors to the effect that their opinions that the Merger
Consideration is fair to Unitog's stockholders, other than Cintas, are in full
force and effect.
Additional Conditions to Obligations of Cintas to Effect the Merger. The
obligations of Cintas to complete the Merger are subject to the satisfaction, at
or prior to the Effective Time, of various conditions, including:
1. Representations and Warranties True. The representations and warranties
of Unitog contained in the Merger Agreement must be true and correct in all
respects on and as of the Effective Time, except where the failure to be true
and correct could not reasonably be expected to have a Material Adverse Effect;
2. Covenants Performed. Unitog must have performed or complied in all
material respects with all agreements and covenants required by the Merger
Agreement;
3. Consents and Filings Made. Unitog must have obtained all material
required consents, waivers, approvals, authorizations or orders from
governmental authorities, and made all material required filings, except where
the failure to do so would not reasonably be expected to have a Material Adverse
Effect on Unitog or Cintas; and
4. Tax Opinion Received. Cintas must receive an opinion from Keating,
Muething & Klekamp, P.L.L. dated the Effective Time to the effect that the
Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code.
Additional Conditions to Obligation of Unitog to Effect the Merger. The
obligation of Unitog to effect the Merger is subject to additional conditions,
including:
1. Representations and Warranties True. The representations and warranties
of Cintas contained in the Merger Agreement must be true and correct in all
respects on and as of the Effective Time, except where the failure could not
reasonably be expected to have a Material Adverse Effect;
2. Covenants Performed. Cintas must have performed or complied in all
material respects with all agreements and covenants required by the Merger
Agreement;
3. Consents and Filings Made. Cintas must have obtained all material
required consents, waivers, approvals, authorizations or orders, and made all
material required filings, except where the failure to do so would not
reasonably be expected to have a Material Adverse Effect on Cintas; and
4. Tax Opinion Received. Unitog must receive an opinion from Bryan Cave LLP
dated the Effective Time to the effect that the Merger will be treated for
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code.
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TERMINATION
Conditions to Termination. Subject to notice requirements and rights to cure
defaults or breaches, the Merger Agreement may be terminated at any time prior
to the Effective Time, notwithstanding its approval by the stockholders of
Unitog:
1. by mutual written consent authorized by the Boards of Directors of
Cintas and Unitog; or
2. by Cintas or Unitog if the Merger is not completed by June 30, 1999; or
3. by Cintas or Unitog if there is a nonappealable final order, decree or
ruling or other action having the effect of permanently restraining, enjoining
or otherwise prohibiting the Merger; or
4. by Cintas or Unitog if the requisite vote of the stockholders of Unitog
is not obtained; or
5. by Cintas for any misrepresentation, breach of warranty or failure to
perform a covenant by Unitog which misrepresentation, breach of warranty or
failure to perform a covenant, together with all other misrepresentations,
breaches and failures to perform, would have a material adverse effect on the
value of Cintas; or
6. by Cintas if Unitog's Board of Directors materially modifies or changes
its recommendation regarding the Agreement or the Merger in a manner adverse to
Cintas; or
7. by Unitog for any misrepresentation, breach of warranty or failure to
perform a covenant by Cintas which misrepresentation, breach of warranty or
failure to perform a covenant, together with all other misrepresentations,
breaches and failures to perform, would have a material adverse effect on the
value of Unitog; or
8. by Unitog if Unitog's Board of Directors in its exercise of good faith
judgment as to its fiduciary duties to Unitog stockholders and after
consultation with legal counsel determines that termination is required because
it has received a Superior Proposal, and Cintas has, after five business days'
notice, failed to make a proposal that meets or is more favorable than such
Superior Proposal; or
9. by Unitog if the Cintas Share Price is less than $52.00.
Termination Fees. If (i) there is a termination by Unitog resulting from its
receipt of a Superior Proposal which is not met or exceeded by Cintas, or (ii)
there is an acquisition proposal and either there is a termination (A) by Unitog
or Cintas due to the failure of Unitog's stockholders to approve the Merger or
(B) by Cintas because Unitog's Board of Directors withdraws or materially
modifies or changes its recommendation of the Merger Agreement in a manner
adverse to Cintas, Unitog is obligated to pay Cintas a termination fee of
$10,960,867.
AMENDMENT AND WAIVER
The Merger Agreement may be amended in writing by the parties at any time prior
to the Effective Time. After approval of the Merger by the stockholders of
Unitog, no amendment may be made which changes the consideration to be received
by Unitog stockholders in exchange for Unitog common stock or which changes any
terms and conditions of the Merger Agreement in a manner which would adversely
affect Unitog stockholders without further stockholder approval.
At any time prior to the Effective Time, any party to the Merger Agreement may
extend the time for the performance of any of the obligations or other acts of
another party, waive any inaccuracies in the representations and warranties of
another party contained in the Merger Agreement or in any document delivered
pursuant to the Merger Agreement, or waive compliance with any of the agreements
or conditions of another party contained in the Merger Agreement. Any such
extension or waiver will be valid only if set forth in an instrument in writing
signed by the party or parties to be bound.
COMPARISON OF STOCKHOLDER RIGHTS
The rights of Cintas stockholders are governed by the Washington Business
Corporation Act, the Restated Articles of Incorporation (the "Cintas Articles")
and Bylaws of Cintas (the "Cintas Bylaws"). The rights of Unitog stockholders
are governed by the Delaware General Corporation Law, the Second Restated
Certificate of
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Incorporation of Unitog (the "Unitog Certificate") and the Fourth Amended and
Restated Bylaws of Unitog (the "Unitog Bylaws"). Upon completion of the Merger,
Unitog stockholders will become Cintas stockholders. The following is a summary
of the principal differences between the current rights of the Unitog
stockholders and those of Cintas stockholders following the Merger.
The following summary is qualified in its entirety by reference to the
Washington Business Corporation Act, the Delaware General Corporation Law, the
Cintas Articles, the Cintas Bylaws, the Unitog Certificate and the Unitog
Bylaws. Copies of the Cintas Articles and the Cintas Bylaws are incorporated by
reference herein and will be sent to holders of shares of Cintas Common Stock
and Unitog Common Stock upon request to Cintas. See "Where You Can Find More
Information".
AUTHORIZED CAPITAL STOCK
Cintas
The authorized capital stock of Cintas consists of 300,000,000 shares of common
stock, of which 105,605,319 shares were outstanding at February 1, 1999 and
100,000 shares of preferred stock, none of which are outstanding.
Unitog
The authorized capital stock of Unitog consists of 30,000,000 shares of common
stock, of which 9,406,623 shares were issued and outstanding as of February 1,
1999 and 150,000 shares of preferred stock, none of which are outstanding.
BOARD OF DIRECTORS
Cintas
Cintas has eight directors, all elected at each annual shareholders' meeting for
a one year term. Cumulative voting in the election of directors is not provided.
Nominations are made by the Board or by stockholders in accordance with
procedures described in the Cintas Bylaws.
Unitog
The Unitog Bylaws provide that the number of directors shall be no less than
three nor exceed twelve with the precise number to be determined by the Board of
Directors. Unitog's Board is divided into three classes of equal number as
possible. Unitog has seven directors at the present time. Cumulative voting in
the election of directors is not provided. Nominations for election to the
Unitog Board may be made only by or at the direction of the Board of Directors
or by a stockholder of record entitled to vote at stockholder meetings in
accordance with nominating provisions found in the Unitog Bylaws.
REMOVAL OF DIRECTORS
Cintas
Directors may be removed only for cause by the affirmative vote of two-thirds of
outstanding shares.
Unitog
Directors may be removed for cause by the affirmative vote of a majority of
outstanding shares and without cause by the affirmative vote of two-thirds of
outstanding shares.
AMENDMENT OF GOVERNING DOCUMENTS
Cintas
The Cintas Articles may be amended by the affirmative vote of a majority of
outstanding shares. The Cintas Bylaws may be amended by the Board of Directors
or by the affirmative vote of a majority of outstanding shares.
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Unitog
The Unitog Certificate may be amended by an affirmative vote of a majority of
the outstanding shares for each class entitled to vote and the authorization of
a majority of directors. Any amendments concerning the authorized preferred
stock requires an affirmative vote of at least two-thirds of all outstanding
shares. The Unitog Bylaws may be amended by a resolution of the Board of
Directors or by the affirmative vote of two-thirds of all outstanding shares.
SPECIAL MEETING OF SHAREHOLDERS
Cintas
Special meetings may be called by the Board of Directors, Chairman of the Board,
President or by stockholders holding at least 50% of all shares outstanding and
entitled to vote.
Unitog
Special meetings may be called by the Board of Directors or by stockholders
holding at least 10% of the outstanding common stock.
ANTI-TAKEOVER PROVISIONS
Cintas
The Cintas Articles require that a person acquiring 15% or more of Cintas'
outstanding common stock without prior Board approval must offer to purchase all
outstanding shares at the higher of the highest price paid by that person,
adjusted for a control premium, or the highest recent market price. The Cintas
Articles also provide that if a person acquires more than 15% of the stock, any
transaction in which that person is involved with Cintas, such as a merger or
sale of assets, requires approval by two-thirds of all disinterested shares.
Disinterested shares are all outstanding shares other than those owned by the
15% party. The Board of Directors may waive this provision. Washington law
provides that significant business transactions, such as mergers and sales of
more than 5% of assets, termination of more than 5% of employees, certain
issuances of shares, reclassifications and similar matters, cannot be effected
with a person who acquires 10% or more of the outstanding stock for a period of
five years after the acquisition of that position unless the 10% acquisition is
first approved by the Board of Directors.
These provisions may make it more difficult for other persons, without prior
approval of Cintas' Board of Directors, to make a tender offer for acquisitions
of substantial amounts of Cintas' Common Stock or to initiate other takeover
attempts that shareholders might consider to be in their best interest.
Unitog
The Unitog Certificate requires the affirmative vote of at least two-thirds of
all classes of stock entitled to vote in an election of directors voting as one
class to approve mergers and similar transactions with persons who beneficially
own 5% or more of Unitog's outstanding shares.
Delaware corporate law prohibits business combinations with persons who acquire
15% or more of the outstanding voting stock without prior approval of the Board
of Directors for a period of three years after the date of acquisition. Business
combinations are mergers, sales of assets and other extraordinary corporate
transactions. The restriction does not apply if the transaction which causes a
person to become an interested stockholder results in that person owning at
least 85% of the voting stock or if the business combination is approved by the
Board of Directors and authorized by the affirmative vote of at least two-thirds
of the outstanding voting stock not owned by the interested stockholder.
INDEMNIFICATION
Cintas
Washington Business Corporation Act, Section 23A.08.025, allows indemnification
by Cintas to any person made or threatened to be made a party to any
proceedings, other than a proceeding by or in the right of Cintas, by
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56
reason of the fact that he is or was a director, officer, employee or agent of
Cintas, against expenses, including judgments and fines, if he acted in good
faith and in a manner reasonably believed to be in or not opposed to the best
interests of Cintas and, with respect to criminal actions, in which he had no
reasonable cause to believe that his conduct was unlawful. Similar provisions
apply to actions brought by or in the right of Cintas, except that no
indemnification shall be made in proceedings in which the person shall have been
adjudged to be liable to Cintas. Indemnifications are to be made by a majority
vote of a quorum of disinterested directors or the written opinion of
independent counsel or by the stockholders.
Article V of the Cintas Bylaws provides that indemnification shall be extended
to any of the persons described above to the full extent permitted by the
Washington Business Corporation Act.
Unitog
The Unitog Certificate provides that, except as limited by Delaware law, no
director shall be liable to Unitog or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (a) for breaches of
the director's duty of loyalty to the Company or its stockholders, (b) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) pursuant to Section 174 of the Delaware General
Corporation Law, or (d) for any transactions from which the director derived an
improper personal benefit. The effect of these provisions is to eliminate the
right of Unitog and its stockholders (through stockholders derivative suits on
behalf of Unitog) to recover monetary damages against a director for breach of
certain fiduciary duties as director (including breaches resulting from grossly
negligent behavior), except in the situations described above. These provisions
may not limit the liability of directors under federal securities laws.
Under Delaware law, directors also have a duty of loyalty to the corporation and
its stockholders. The duty of loyalty requires that, in making a business
decision, directors act in good faith and in the honest belief that the action
taken was in the best interest of the corporation.
Pursuant to the Unitog Bylaws and consistent with Delaware law and the Unitog
Certificate, the Unitog Board has the power on behalf of Unitog to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit, or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, by reason of the fact that he is or was an officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee, agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with the defense or settlement of such action, suit or
proceeding, including attorneys fees to the full extent permitted by Delaware
law.
APPRAISAL OR DISSENTER RIGHTS
Cintas
Under the Washington Business Corporations Act, a stockholder is entitled to
dissent from and, upon perfection of his or her appraisal rights, to obtain fair
value of his or her shares in the event of certain corporate actions, including
certain mergers, consolidations, share exchanges, sales of substantially all of
the assets of the corporation and amendments to the corporation's articles of
incorporation that materially and adversely affects stockholder rights.
Unitog
Rights of appraisal provided under Delaware law do not apply to Unitog pursuant
to a statutory exception for corporations whose shares are listed on a national
securities exchange.
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57
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 1, 1999, information with respect
to the beneficial ownership of Unitog Common Stock by each person known by
Unitog to be the beneficial owner of more than five percent of the Common Stock,
by each present director of Unitog, by certain executive officers of Unitog and
by all directors and executive officers of Unitog as a group. Unless otherwise
indicated in the notes to this table, the stockholders listed in the table have
sole voting and investment power with respect to shares beneficially owned by
them.
VOTING AND INVESTMENT POWER
------------------------------------- PERCENT OF
NAME OF BENEFICIAL OWNER SOLE SHARED OTHER CLASS (1)
------------------------ --------- --------- ----------- ----------
T. Rowe Price Associates, Inc.
100 E. Pratt Street
Baltimore, Maryland 21202 193,000 -- 1,089,100 11.3%
Fleet Financial Group, Inc.
One Federal Street
Boston, Massachusetts 02110 510,900 7,891 675,500(3) 7.27%
William D. Thomas
120 West 12th Street
Kansas City, Missouri 64105 39,151(7) 661,870(4) -- 7.5%
G. Kenneth Baum
120 West 12th Street
Kansas City, Missouri 64105 4,225(7) 661,870(4) -- 7.1%
George K. Baum Group, Inc.
120 West 12th Street
Kansas City, Missouri 64105 661,870(4) -- -- 7.0%
Randolph K. Rolf
1300 Washington Street
Kansas City, Missouri 64105 507,000 75,150 -- 5.5%
T. Rowe Price Small Cap Value Fund, Inc.
100 E. Pratt Street
Baltimore, Maryland 21202 -- -- 575,000 6.1%
Stein Roe & Farnham Incorporated
One South Wacker Drive
Chicago, Illinois 60606 -- -- 389,950(5) 4.15%
SR&F Special Portfolio
One South Wacker Drive
Chicago, Illinois 60606 -- -- 389,950 4.15%
J. Craig Peterson 65,950(6) -- -- *
Terence C. Shoreman 54,500(6) -- -- 1.0%
D. Patrick Curran 29,377(7) 750 -- *
Robert M. Barnes 27,500(6) 750 -- *
John W. Caffry 7,372(7) 1,500 -- *
Gerald J. Arrowsmith 10,250(6) -- -- *
Andrew B. Schmitt 2,652(7) -- -- *
Michael R. Boyce 2,152(7) -- -- *
All executive officers and directors as a group
(12 persons) 759,854(7) 687,670 -- 16.6%
- ---------------
* Denotes less than 1%
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58
(1) Applicable percentage of beneficial ownership is based on 9,406,623 shares
of Unitog common stock outstanding as of February 1, 1999, together with
applicable options for such stockholder. Beneficial ownership is determined
in accordance with the rules of the Commission. The number of shares
beneficially owned by a person include shares of Unitog common stock subject
to options held by that person that are currently exercisable or exercisable
within 60 days of February 1, 1999. Such shares issuable pursuant to such
options are deemed outstanding for computing the percentage ownership of the
person holding such options but are not deemed outstanding for the purposes
of computing the percentage ownership of each other person.
(2) According to a Schedule 13G, dated February 12, 1999, T. Rowe Price
Associates, Inc. ("Price Associates") beneficially owned 1,069,100 Shares as
of December 31, 1997. Price Associates has sole investment power as to all
such shares and has sole voting power as to 193,000 of such shares. These
securities are owned by various individual and institutional investors,
including T. Rowe Price Small Cap Value Fund, Inc. (which has sole voting
power as to 575,000 of such shares, representing 6.1% of the shares
outstanding), for which Price Associates serves as investment adviser with
power to direct investments and/or sole power to vote the securities. For
purposes of the reporting requirements of the Securities Exchange Act of
1934, Price Associates is deemed to be a beneficial owner of such
securities; however, Price Associates expressly disclaims that it is, in
fact, the beneficial owner of such securities.
(3) According to a Schedule 13G, dated February 12, 1998, Fleet Financial Group,
Inc. ("Fleet") beneficially owned 675,500 shares as of December 31, 1998.
Based on the Schedule 13G, Fleet has sole voting power as to 510,900 shares;
shared voting power as to 7,891 shares; sole investment power as to 675,500
shares; and shared investment power as to 2,000 shares.
(4) Shares are owned directly by George K. Baum Group, Inc., of which Mr. Baum
is a director, officer and stockholder and of which Mr. Thomas is a director
and officer. See "THE MERGER -- Opinions of Financial Advisors."
(5) Information as of December 31, 1998 based on a joint Schedule 13G, dated
February 11, 1999. Stein Roe & Farnham Incorporated has shared investment
power as to 389,500 shares and SR&F Special Portfolio has sole voting power
as to 289,950 of such shares.
(6) These executive officers hold options which will become exercisable within
60 days of February 1, 1999 or upon the closing of the Merger, as follows:
Mr. Peterson, 43,500 shares; Mr. Shoreman, 54,500 shares; Mr. Barnes, 26,000
shares; Mr. Arrowsmith, 10,250 shares; all executive officers as a group,
137,875 shares.
(7) These six outside directors each hold options for 2,000 shares which will
become exercisable within 60 days of February 1, 1999 or upon the closing of
the Merger, and have accrued shares under the Outside Director Fee/Stock
Program, the issuances of which will be accelerated upon the closing of the
Merger, as follows: Mr. Baum, 114 shares; Mr. Boyce, 452 shares; Mr. Caffry,
114 shares; Mr. Curran, 189 shares; Mr. Schmitt, 152 shares; Mr. Thomas, 189
shares; all directors as a group, 910 shares.
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed upon for Cintas
by Keating, Muething & Klekamp, P.L.L., Cincinnati, Ohio, of which Donald P.
Klekamp, a Director of Cintas, is a partner. Members of that firm participating
in the matter beneficially own 174,488 shares of Cintas Common Stock. Keating,
Muething & Klekamp, P.L.L. and Bryan Cave L.L.P., Kansas City, Missouri, have
also delivered opinions to Cintas and Unitog, respectively, as to certain tax
matters.
EXPERTS
The consolidated financial statements of Cintas incorporated by reference in
Cintas' Annual Report on Form 10-K as of May 31, 1997 and 1998 and for each of
the three years in the period ended May 31, 1998, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon
incorporated by reference therein and incorporated herein by reference in
reliance upon such report, given upon the authority of such firm as experts in
accounting and auditing.
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59
The consolidated financial statements of Unitog Company and subsidiaries as of
January 25, 1998 and January 26, 1997 and for each of the years in the three
year period ended January 25, 1998 have been incorporated by reference in this
Proxy Statement/Prospectus in reliance upon the report of KPMG LLP, independent
public accountants, incorporated by reference herein, and upon the authority of
said firm as experts in accounting and auditing.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
In the event the Merger is not consummated and Unitog's 1999 Annual Meeting of
Stockholders is held by or before June 20, 1999, any stockholder proposal
intended to be presented at the 1999 Annual Meeting must have been received by
Unitog prior to December 22, 1998 in order to be considered in the proxy
materials for such meeting.
WHERE YOU CAN FIND MORE INFORMATION
Unitog and Cintas each file reports, proxy statements and other information with
the SEC. You may read and copy any reports, statements or other information that
Unitog and Cintas file at the SEC's public reference rooms in Washington, D.C.,
New York, New York and Chicago, Illinois. (The address of the public reference
room in Washington, D.C. is 450 Fifth Street, N.W., Washington, D.C. 20549).
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Unitog's and Cintas' public filings are also available to the
public from commercial document retrieval services and at the Internet World
Wide Web site maintained by the SEC at "http://www.sec.gov." Reports, proxy
statements and other information regarding Unitog and Cintas also may be
inspected at the offices of Nasdaq National Market, 9801 Washingtonian
Boulevard, Gaithersburg, Maryland 20878.
Cintas has filed a Registration Statement with the SEC to register the shares of
Cintas Common Stock to be issued to Unitog stockholders in the Merger. This
Proxy Statement/Prospectus is a part of the Registration Statement and
constitutes a prospectus of Cintas, as well as a proxy statement of Unitog for
the Unitog Special Meeting.
As allowed by SEC rules, this Proxy Statement/Prospectus does not contain all
information that stockholders can find in the Registration Statement or the
exhibits to the Registration Statement.
The SEC allows Unitog and Cintas to "incorporate by reference" information into
this Proxy Statement/ Prospectus, which means that Unitog and Cintas can
disclose important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is deemed to
be part of this Proxy Statement/Prospectus, except for any information
superseded by information contained directly in the Proxy Statement/Prospectus.
This Proxy Statement/Prospectus incorporates by reference the documents set
forth below that Unitog and Cintas have previously filed with the SEC. These
documents contain important information about Unitog and Cintas and their
respective financial condition.
UNITOG SEC FILINGS:
1. Annual Report on Form 10-K for the fiscal year ended January 25, 1998
2. Quarterly Reports on Form 10-Q for the fiscal quarters ended October 25,
1998, July 26, 1998 and April 26, 1998
3. Current Report on Form 8-K filed on January 14, 1999
4. The description of the Unitog Common Stock contained in the Registration
Statement on Form 8-A dated May 14, 1989, as amended under cover of Form
8 dated May 17, 1989.
CINTAS SEC FILINGS
1. Annual Report on Form 10-K for the fiscal year ended May 31, 1998
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60
2. Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31,
1998 and November 30, 1998
3. Current Reports on Form 8-K filed on June 1, 1998 and January 14, 1999.
Unitog and Cintas are also incorporating by reference additional documents that
they may respectively file with the SEC between the date of this Proxy
Statement/Prospectus and the date of the Unitog Special Meeting. These include
periodic reports, such as an Annual Report on Form 10-K, Quarterly Report on
Form 10-Q and Current Reports on Form 8-K, and any amendments to these reports,
as well as proxy statements.
If you are a stockholder of Unitog or Cintas, you can obtain any of the
documents incorporated by reference through Unitog and Cintas, respectively, or
from the SEC or the SEC's Internet World Wide Web site described above.
Documents incorporated by reference are available from Unitog and Cintas without
charge, excluding all exhibits. Stockholders may obtain documents incorporated
by reference in this Proxy Statement/Prospectus by requesting them in writing or
by telephone from Unitog and Cintas at the following address:
Unitog Company
1300 Washington Street
Kansas City, Missouri 64105
Attn: Robert M. Barnes, Vice President,
General Counsel and Secretary
(816) 474-7000
Cintas Corporation
6800 Cintas Blvd.
Cincinnati, Ohio 45262
Attn: William C. Gale
Vice President and Chief Financial Officer
(513) 459-1200
If you would like to request documents from Unitog or Cintas, please do so by
March 14, 1999 to receive them before the Unitog Special Meeting. If you request
any such documents, the companies will mail them to you by first-class mail, or
other equally prompt means, within one business day of receipt of your request.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROXY STATEMENT/ PROSPECTUS TO VOTE YOUR SHARES AT THE UNITOG SPECIAL
MEETING. UNITOG AND CINTAS HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT/
PROSPECTUS. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THE PROXY
STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE OF THIS
PROXY STATEMENT/PROSPECTUS, AND NEITHER THE MAILING OF THIS PROXY
STATEMENT/PROSPECTUS TO SHAREHOLDERS NOR THE ISSUANCE OF CINTAS' SECURITIES IN
THE MERGER SHALL CREATE ANY IMPLICATION TO THE CONTRARY.
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61
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CINTAS CORPORATION,
CINTAS IMAGE ACQUISITION COMPANY
AND
UNITOG COMPANY
JANUARY 9, 1999
62
TABLE OF CONTENTS
PAGE
------
ARTICLE 1 DEFINITIONS................................................. -1 -
1.1 Defined Terms............................................... -1 -
1.2 Additional Terms............................................ -6 -
ARTICLE 2 TERMS OF THE MERGER......................................... -6 -
2.1 The Merger.................................................. -6 -
2.2 Effective Time.............................................. -7 -
2.3 Closing..................................................... -7 -
ARTICLE 3 CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING
COMPANY..................................................... -7 -
3.1 Certificate of Incorporation................................ -7 -
3.2 The Bylaws.................................................. -7 -
ARTICLE 4 DIRECTORS AND OFFICERS OF THE SURVIVING COMPANY............. -7 -
4.1 Directors................................................... -7 -
4.2 Officers.................................................... -7 -
ARTICLE 5 MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF COMPANY
SHARES IN THE MERGER........................................ -8 -
5.1 Merger Consideration........................................ -8 -
5.2 Cancellation of Company Shares.............................. -8 -
5.3 Payment for Company Shares in the Merger.................... -8 -
5.4 Transfer of Company Shares After the Effective Time......... -9 -
5.5 Fractional Shares........................................... -9 -
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... -10 -
6.1 Company Shares.............................................. -10 -
6.2 Capitalization.............................................. -10 -
6.3 Corporate Organization, Qualification and Power............. -10 -
6.4 Authorization of Agreement and Merger....................... -11 -
6.5 Enforceable Agreement....................................... -11 -
6.6 No Conflicts, Violations, Breaches or Defaults.............. -11 -
6.7 Company SEC Reports......................................... -12 -
6.8 Financial Statements; Accounting Matters.................... -12 -
6.9 Proxy Statement; S-4 Registration Statement................. -12 -
6.10 Litigation.................................................. -13 -
6.11 Taxes....................................................... -13 -
6.12 Environmental Laws and Regulations.......................... -13 -
6.13 Compliance with Applicable Laws............................. -14 -
6.14 Title to Properties......................................... -14 -
6.15 Insurance................................................... -14 -
6.16 Employee Benefit Matters.................................... -14 -
6.17 Broker's Fees............................................... -15 -
6.18 Opinions of Financial Advisors.............................. -15 -
6.19 Absence of Certain Changes or Events........................ -16 -
6.20 Intellectual Property....................................... -16 -
6.21 Contracts................................................... -16 -
6.22 Labor Matters............................................... -16 -
6.23 State Takeover Statutes..................................... -16 -
6.24 Year 2000 Compatibility..................................... -16 -
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PAGE
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ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..... -17 -
7.1 Capitalization.............................................. -17 -
7.2 Corporate Organization, Qualification and Power............. -18 -
7.3 Authorization of Agreement and Merger....................... -18 -
7.4 Enforceable Agreement....................................... -18 -
7.5 No Conflicts, Violations, Breaches or Defaults.............. -18 -
7.6 Parent SEC Reports.......................................... -19 -
7.7 Financial Statements; Accounting Matters.................... -19 -
7.8 Proxy Statement; S-4 Registration Statement................. -20 -
7.9 Litigation.................................................. -20 -
7.10 Taxes....................................................... -20 -
7.11 Environmental Laws and Regulations.......................... -21 -
7.12 Compliance with Applicable Laws............................. -21 -
7.13 Broker's Fees............................................... -21 -
7.14 Interim Operations of Merger Sub............................ -21 -
7.15 Authorization for Parent Common Stock....................... -21 -
ARTICLE 8 CONDUCT PENDING THE CLOSING AND COVENANTS................... -21 -
8.1 Conduct of Business by Company and Parent................... -21 -
8.2 Conduct of Business of Merger Sub........................... -22 -
8.3 Environmental Consultants, Adjustment to Company Share Price
and Merger Consideration.................................... -22 -
8.4 Additional Covenants of the Company......................... -24 -
8.5 Acquisition Proposals....................................... -24 -
8.6 Stockholders' Approval...................................... -25 -
8.7 All Reasonable Efforts...................................... -26 -
8.8 Access to/Confidentiality of Information.................... -26 -
8.9 Publicity................................................... -26 -
8.10 Indemnification of Directors and Officers................... -26 -
8.11 Employees................................................... -27 -
8.12 Registration Statement...................................... -28 -
8.13 Exchange Listing............................................ -28 -
8.14 Affiliates.................................................. -28 -
8.15 Letters of Accountants...................................... -29 -
8.16 Reorganization.............................................. -29 -
8.17 Stock Options............................................... -29 -
8.18 Pooling of Interests........................................ -30 -
8.19 Standstill Agreements; Confidentiality Agreements........... -30 -
8.20 Company Stock Repurchase Plan............................... -30 -
ARTICLE 9 CONDITIONS.................................................. -31 -
9.1 Conditions to Each Party's Obligation to Close.............. -31 -
9.2 Additional Conditions to the Obligations of Parent and
Merger Sub to Close......................................... -31 -
9.3 Additional Conditions to the Company's Obligation to
Close....................................................... -33 -
9.4 Frustration of Closing Conditions........................... -34 -
ARTICLE 10 TERMINATION AND REMEDIES.................................... -34 -
10.1 Termination................................................. -34 -
10.2 Effect of Termination....................................... -36 -
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PAGE
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ARTICLE 11 GENERAL PROVISIONS.......................................... -36 -
11.1 Expenses.................................................... -36 -
11.2 Nonsurvival................................................. -36 -
11.3 Modification or Amendment................................... -36 -
11.4 Waiver...................................................... -36 -
11.5 Notices..................................................... -37 -
11.6 Publishing of Financial Results............................. -38 -
11.7 Governing Law............................................... -38 -
11.8 Entire Agreement............................................ -38 -
11.9 Construction................................................ -38 -
11.10 Binding Effect.............................................. -38 -
11.11 Assignment.................................................. -39 -
11.12 Counterparts................................................ -39 -
11.13 Obligations of Subsidiaries................................. -39 -
11.14 Severability................................................ -39 -
LIST OF EXHIBITS
Exhibit 2.2 Certificate of Merger (To be delivered at Closing)
Exhibit 3.1 Certificate of Incorporation of the Surviving Company
Exhibit 5.1 Illustration of Calculation of Conversion Number
Exhibit 5.3 Exchange Agent Agreement
Exhibit 8.3(a)(1) Specified Plants
Exhibit 8.3(a)(2) Procedures Regarding Specified Plants
Exhibit 8.14 Affiliate Letter
Exhibit 9.2 Opinion of Company's Counsel
Exhibit 9.3 Opinion of Parent's Counsel
LIST OF SCHEDULES
Company Disclosure Schedule
Parent Disclosure Schedule
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65
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of January 9,
1999, by and among CINTAS CORPORATION, a Washington corporation ("Parent"),
CINTAS IMAGE ACQUISITION COMPANY, a Delaware corporation, which is a wholly
owned direct subsidiary of Parent ("Merger Sub"), and UNITOG COMPANY, a Delaware
corporation (the "Company").
RECITALS
A. The respective Boards of Directors of Parent, Merger Sub and the Company each
have determined that it is in the best interests of their respective
stockholders that Merger Sub be merged with and into the Company, and, to that
end, have approved the merger of Merger Sub with and into the Company in
accordance with the laws of the State of Delaware and the provisions of this
Agreement and Plan of Merger.
B. Parent, Merger Sub and the Company desire to make certain representations,
warranties and agreements in connection with, and establish certain conditions
precedent to, the Merger.
AGREEMENT
In consideration of the mutual agreements, promises and covenants set forth
herein and the recitals set forth above, and other good and valuable
consideration, the receipt and adequacy of which are acknowledged, the parties
hereto, intending to be legally bound, agree as follows.
ARTICLE 1
DEFINITIONS
1.1 DEFINED TERMS. As used herein the following terms shall have the following
meanings:
Acquisition Proposal: Any proposal or offer from any Person relating to the
direct or indirect acquisition of a business that constitutes 51% or more of the
net revenues, income or assets of the Company or 51% or more of the Company
Stock or any proposal or offer for a merger or other business combination with
the Company, other than the Transactions.
Additional Agreements: Those agreements listed in this Agreement and attached
hereto, either as of the date hereof or, subject to the mutual agreement of the
parties, prior to Closing, as exhibits and incorporated herein by reference,
including but not limited to the Exchange Agent Agreement, as well as all
assignments and ancillary agreements necessary to effectuate the Merger.
Agreement: This Agreement and Plan of Merger, including the preamble, recitals,
exhibits and schedules hereto, all of which are hereby incorporated herein by
reference and made a part hereof.
Certificates: The certificates representing Company Shares to be surrendered
pursuant to Section 5.3 in exchange for the Merger Consideration.
Certificate of Merger: The document to be prepared by the parties hereto, in
substantially the form attached hereto as Exhibit 2.2, in compliance in all
respects with the requirements of the DGCL and the provisions of this Agreement
and which shall be filed with the Secretary of State of the State of Delaware.
Closing: A meeting for the purpose of concluding the Transactions to be held at
the place and on the date fixed in accordance with Section 2.3.
Code: The Internal Revenue Code of 1986, as amended.
Company: Unitog Company, a Delaware corporation, which will merge with Merger
Sub and continue after the Merger as the Surviving Company, as set forth in
Section 2.1.
66
Company Disclosure Schedule: That schedule from the Company to Parent to be
delivered upon the execution of this Agreement, and updated, subject to approval
of Parent, and redelivered at the Closing, which sets forth certain disclosures
concerning the Company and its business.
Company SEC Reports: The forms, reports and documents filed by the Company with
the SEC since January 1, 1996.
Company Shares: The Company Stock issued and outstanding immediately prior to
the Effective Time.
Company Share Price: Thirty-eight dollars ($38.00), as adjusted pursuant to
Section 8.3.
Company Stock: The shares of common stock, $.01 par value per share, of the
Company.
Company's Stockholder Meeting: The meeting of the stockholders of the Company to
be held in connection with the vote of such stockholders with respect to the
Merger.
Conversion Number: The Conversion Number shall be equal to the quotient (rounded
to the nearest 1/10,000) determined by dividing the Company Share Price by the
amount determined by calculating the average of the high and low sales prices of
Parent Common Stock as reported on the Exchange for the twenty (20) consecutive
trading days ending on the third trading day preceding the date of the meeting
of the Company's stockholders for the purpose of voting on the adoption of this
Agreement ("Parent Share Price"). Notwithstanding the foregoing, if the Parent
Share Price is less than $52.00, the Parent Share Price shall be deemed to be
$52.00 (for purposes of determining the Conversion Number) and, if the Parent
Share Price is greater than $66.43, the Parent Share Price shall be deemed to be
$66.43 plus fifty percent (50%) of the difference between the Parent Share Price
and $66.43. In the event that prior to the Effective Time there is a change in
the number of Company Shares or shares of Parent Common Stock or securities
convertible or exchangeable into or exercisable for Company Shares or shares of
Parent Common Stock issued and outstanding as a result of a distribution,
reclassification, stock split (including reverse stock split), stock dividend or
distribution, or other similar transaction, the Conversion Number shall be
equitably adjusted to eliminate the effects of such event. Exhibit 5.1
illustrates the calculation of the Conversion Number under varying
circumstances.
DGCL: The General Corporation Law of the State of Delaware.
Director Plan: The Company's Outside Director Fee/Stock Program.
Effective Time: The date and time at which the Certificate of Merger has been
duly filed with the Secretary of State of the State of Delaware or such other
time as is agreed upon by the parties and specified in the Certificate of
Merger.
Environmental Claim: Any action, cause of action, claim, investigation, demand
or notice by any Person alleging liability under or non-compliance with any
environmental Law.
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
Exchange: The NASDAQ Stock Market, on which the Parent Common Stock is listed.
Exchange Act: The Securities Exchange Act of 1934, as amended (15 U.S.C. ss. 78a
et seq.).
Exchange Agent: The Fifth Third Bank, Cincinnati, Ohio, which shall act as
exchange agent in connection with payment of the Merger Consideration pursuant
to Section 5.3(a), or such other exchange agent selected by Parent and
reasonably acceptable to the Company for the benefit of the holders of Company
Shares and vested Options.
Exchange Agent Agreement: The agreement between Parent and the Exchange Agent
entered into for the benefit of the stockholders of the Company to provide for
the payment of the Merger Consideration and the management of the Merger Payment
Fund, pursuant to Section 5.3.
Facilities: The real property, plant and equipment owned or leased by the
Company and its Subsidiaries.
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Governmental Authority: The Federal government, any state, county, municipal,
local or foreign government and any governmental agency, bureau, commission,
authority or body.
HSR Act: The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
Judgment: Any judgment, writ, injunction, order or decree of or by any court,
judge, justice or magistrate, including any bankruptcy court or judge, having
appropriate jurisdiction, and any adjudicative order of or by a Governmental
Authority.
Law: The common law and any statute, ordinance, code or other law, rule,
regulation, order, requirement or procedure enacted, adopted, promulgated,
applied or followed by any Governmental Authority or court.
Lien: Any mortgage, lien or encumbrance, which (i) creates or confers an
interest in property to secure payment or performance of a liability, obligation
or claim, or which retains or reserves such an interest for such purpose; (ii)
grants to any Person the right to purchase or otherwise acquire, or obligates
any Person to sell or otherwise dispose of, or otherwise results or may result
in any Person acquiring, any property or interest in property; (iii) restricts
the transfer of, or the exercise of any rights in or the enjoyment of any
benefits arising by reason of ownership of, any property; or (iv) otherwise
constitutes an interest in, or claim against, property, whether arising pursuant
to any Law, Judgment or any binding contract.
Material Adverse Effect: Any change, event, occurrence or state of facts which
is or which would reasonably be expected to lead to an adverse change in the
consolidated balance sheet or Facilities of the Company or any of the Company's
Subsidiaries, or Parent or any of Parent's Subsidiaries, as the case may be,
which is material to the Company and its Subsidiaries, or Parent and its
Subsidiaries, taken as a whole, as the case may be, other than any change or
effect (i) arising out of general economic conditions, (ii) arising with respect
to the industry in which Parent and the Company compete, but not specifically
relating to Parent or the Company, (iii) arising out of or as a result of the
public announcement of the Transactions, or (iv) arising out of events or facts
set forth on the Company Disclosure Schedule or the Parent Disclosure Schedule.
Merger: The merger of Merger Sub into and with the Company at Closing, as set
forth in Section 2.1.
Merger Consideration: The Parent Common Stock to be paid to the holders of
Company Shares upon the effectiveness of the Merger, pursuant to Section 5.1.
Merger Payment Fund: The aggregate number of shares of Parent Common Stock
constituting the Merger Consideration payable pursuant to Section 5.1, which
shall be delivered by Parent to the Exchange Agent pursuant to the Exchange
Agent Agreement.
Merger Sub: Cintas Image Acquisition Company, a Delaware corporation, which is
the wholly owned direct subsidiary of Parent and which will be merged into and
with the Company pursuant to the Merger.
Option: Each option to purchase Company Stock issued pursuant to any of the
Company's Option Plans, or otherwise granted by agreement to the Company's
directors or employees, outstanding immediately prior to the Effective Time,
whether or not vested.
Option Plans: The Company's 1992 Stock Option Plan, as amended, and the
Company's 1997 Stock Option Plan.
Parent: Cintas Corporation, a Washington corporation.
Parent Common Stock: Duly authorized shares of common stock, no par value per
share, of Parent.
Parent Disclosure Schedule: That schedule from Parent to the Company to be
delivered upon the execution of this Agreement, and updated, subject to the
approval of the Company, and redelivered at Closing, which sets forth certain
disclosures concerning Parent and Merger Sub and their businesses.
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Parent Option Plans: Parent's Amended and Restated 1992 Stock Option Plan, all
predecessor stock option plans and the Parent's 1994 Directors' Stock Option
Plan.
Parent Preferred Stock: Duly authorized shares of preferred stock, no par value
per share, of Parent.
Parent Share Price: The amount calculated pursuant to the definition of
Conversion Number.
Parent SEC Reports: The forms, reports and documents filed by Parent with the
SEC since June 1, 1996.
Person: Any natural person, corporation, limited liability company, general or
limited partnership, joint venture, trust, association, unincorporated entity of
any kind or Governmental Authority.
Proxy Statement: The proxy statement and prospectus and forms of proxy in
connection with the votes of the stockholders of the Company with respect to the
Merger, this Agreement and the issuance of the Parent Common Stock pursuant to
the Merger, respectively, together with any amendments thereof or supplements
thereto, in each case in the form or forms mailed to the Company's stockholders.
Representatives: Officers, employees, legal counsel, financial advisors,
accountants or other authorized representatives of any of the parties hereto, to
be provided access to information pursuant to Section 8.8.
S-4 Registration Statement: A registration statement on Form S-4, as amended or
supplemented, containing the Proxy Statement, in connection with the
registration under the Securities Act of Parent Common Stock issuable upon
conversion of the Company Shares.
SEC: The United States Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended (15 U.S.C. Sec. 77a et
seq.).
Subsidiary: In reference to any entity, any corporation, or limited liability
company a majority of the outstanding voting securities of which are owned
directly or indirectly by such entity.
Substitute Option: An Option assumed by Parent as of the Effective Time,
pursuant to Section 8.17.
Superior Proposal: A bona fide Acquisition Proposal made by a third party, in
each case on terms which the Board of Directors of the Company determines in its
good faith reasonable judgment after consultation with its financial and legal
advisors to be more favorable financially to the Company and its stockholders
than the Transactions.
Surviving Company: The Company, which shall be the survivor of the Merger, as
set forth in Section 2.1.
Taxes: All Federal, state, local, foreign and other taxes of any kind, including
without limitation, those on or measured by or referred to as income, gross
receipts, sales, use, ad valorem, franchise, profits, withholding, payroll,
employment, excise, severance, stamp, occupation, value added, windfall profits
taxes, customs duties or similar fees and assessments of any kind, including
interest, penalties and additions to tax or additional amounts imposed by any
governmental authority with respect thereto.
Tax Returns: All returns, declarations, reports, information returns and
statements with respect to Taxes of whatsoever kind.
Transactions: The transactions contemplated by this Agreement, including the
Merger and those contemplated by the Additional Agreements.
1.2 ADDITIONAL TERMS. Terms not set forth in Section 1.1, but otherwise defined
in the body of this Agreement, shall have the specific meanings attributed to
them in the text. Terms in the singular shall have the same meanings when used
in the plural and vice versa.
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ARTICLE 2
TERMS OF THE MERGER
2.1 THE MERGER. Upon the terms and subject to the conditions of this Agreement,
at the Effective Time, the Company and Merger Sub shall consummate the Merger in
which (a) Merger Sub shall be merged into and with the Company in accordance
with the DGCL, (b) the separate existence of the Merger Sub shall thereupon
cease, (c) the Company shall be the survivor to the Merger and, as the Surviving
Company, shall continue its corporate existence under the DGCL as a wholly owned
subsidiary of Parent, retaining its corporate name, and its other rights,
privileges, immunities, powers and franchises, unaffected by the Merger, and
shall assume all the rights and obligations of Merger Sub. The Merger shall have
the effects set forth in the DGCL.
2.2 EFFECTIVE TIME. Subject to the terms and conditions of the Agreement, the
parties hereto shall prepare and execute a Certificate of Merger substantially
in the form of Exhibit 2.2, attached hereto. The Certificate of Merger shall be
filed on the date of Closing (or such other date as agreed by Parent and the
Company) with the Secretary of State of the State of Delaware in the manner
provided in the DGCL and the Merger shall be effective at the Effective Time.
2.3 CLOSING. The Closing of the Merger shall occur at the offices of Bryan Cave
LLP, 1200 Main, Suite 3500, Kansas City, MO 64105, commencing at 10:00 A.M.,
local time, on or before the third business day following the date on which the
last of the conditions set forth in Article 9 hereof shall have been fulfilled
or waived (other than those conditions that by their nature are to be satisfied
at the Closing, but subject to the fulfillment or waiver of those conditions),
or at such other place, time and date as Parent and the Company may agree.
ARTICLE 3
CERTIFICATE OF INCORPORATION AND
BYLAWS OF THE SURVIVING COMPANY
3.1 CERTIFICATE OF INCORPORATION. At the Effective Time and in accordance with
the DGCL, the Certificate of Incorporation of the Company shall be amended and
restated in its entirety in the Merger by adoption of the Certificate of
Incorporation attached as Exhibit 3.1 hereto, and such Certificate of
Incorporation shall become the Certificate of Incorporation of the Surviving
Company.
3.2 THE BYLAWS. At the Effective Time and without any further action on the part
of the Surviving Company, Parent, or the Merger Sub, the Bylaws of the Merger
Sub shall be the Bylaws of the Surviving Company and thereafter may be amended
or repealed in accordance with their terms, the Certificate of Incorporation of
the Surviving Company and as provided by law.
ARTICLE 4
DIRECTORS AND OFFICERS OF
THE SURVIVING COMPANY
4.1 DIRECTORS. The directors of Merger Sub at the Effective Time shall, from and
after the Effective Time, be the directors of the Surviving Company until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Surviving Company's
Certificate of Incorporation and Bylaws.
4.2 OFFICERS. The officers of the Merger Sub at the Effective Time shall, from
and after the Effective Time, be the officers of the Surviving Company until
their successors have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the Surviving
Company's Certificate of Incorporation and Bylaws.
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ARTICLE 5
MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF COMPANY SHARES IN THE MERGER
5.1 MERGER CONSIDERATION. Subject to the provisions of this Agreement, at the
Effective Time, each Company Share, by virtue of the Merger and without any
action on the part of the holder thereof, other than Company Shares owned by
Parent, Merger Sub, or any direct or indirect wholly owned Subsidiary of Parent,
shall be converted into the right to receive as Merger Consideration, that
number of shares of Parent Common Stock equal to the Conversion Number upon
surrender of the Certificate representing such Company Share, in accordance with
Section 5.3. Exhibit 5.1 illustrates the calculation of the Conversion Number
under varying circumstances.
5.2 CANCELLATION OF COMPANY SHARES.
(a) All Company Shares to be converted into Parent Common Stock pursuant to
Section 5.1 shall, by virtue of the Merger and without any action on the part of
the holders thereof, cease to be outstanding, be canceled and cease to exist,
and each holder of a Certificate shall thereafter cease to have any rights with
respect to such Company Shares, except the right to receive for each of the
Company Shares, upon the surrender of such Certificate in accordance with
Section 5.3, the Merger Consideration.
(b) At the Effective Time, each Company Share issued and outstanding and owned
by Parent, Merger Sub or any direct or indirect wholly owned Subsidiary of
Parent, immediately prior to the Effective Time shall, by virtue of the Merger
and without any action on the part of the holder thereof, cease to be
outstanding, be canceled and cease to exist without payment of any consideration
therefor.
(c) At the Effective Time, each share of common stock of Merger Sub issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of Merger Sub or the holder thereof,
be converted into shares of common stock of the Surviving Company pursuant to
the Certificate of Merger.
5.3 PAYMENT FOR COMPANY SHARES IN THE MERGER. The manner of making payment for
Company Shares in the Merger shall be as follows:
(a) At the Effective Time, pursuant to the Exchange Agent Agreement,
attached hereto as Exhibit 5.3, Parent shall make available to the Exchange
Agent, the aggregate number of shares of Parent Common Stock constituting
the Merger Consideration payable pursuant to Section 5.1, which shall
constitute the Merger Payment Fund. The Exchange Agent shall, pursuant to
irrevocable instructions, make the payments provided for in this Section
5.3 out of the Merger Payment Fund. The Merger Payment Fund shall not be
used for any purpose other than as described herein.
(b) Promptly after the Effective Time, the Exchange Agent shall mail
to each holder of record of a Certificate or Certificates (i) a form of
letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon proper
delivery of the Certificates to the Exchange Agent) and (ii) instructions
for use in effecting the surrender of the Certificates for payment
therefor. Upon surrender of Certificates to the Exchange Agent, together
with such letter of transmittal duly executed and any other required
documents, the holder of such Certificates shall be entitled to receive for
each of the Company Shares represented by such Certificates the Merger
Consideration. Until so surrendered, such Certificates shall represent
solely the right to receive the Merger Consideration with respect to each
of the Company Shares represented thereby. No interest shall be paid or
accrue on the Merger Consideration payable upon surrender of the
Certificates. If any payment of the Merger Consideration is to be made to a
Person other than the one in whose name the Certificate surrendered in
exchange therefor is registered, it shall be a condition of such payment
that the Certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and that the Person requesting such
payment shall pay to the Exchange Agent any applicable transfer or other
similar Taxes, or shall establish to the satisfaction of the Exchange Agent
that any such Tax has been paid or is not applicable. Notwithstanding the
foregoing, neither the Exchange Agent nor any party hereto shall be liable
to a holder of Company Shares for any Merger Consideration delivered to a
public official pursuant to applicable escheat law.
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(c) Pursuant to the Exchange Agent Agreement, any portion of the
Merger Payment Fund (including any dividends thereon or earnings or profits
with respect thereto on Parent Common Stock) which remains unclaimed by the
former stockholders of the Company for six months after the Effective Time
shall be delivered to the Surviving Company, upon demand of the Surviving
Company, and any former stockholders of the Company shall thereafter look
only to the Surviving Company for payment of their claim for the Merger
Consideration for the Company Shares. The Surviving Company's obligations
to former stockholders of the Company with respect to the payment of Merger
Consideration shall be guaranteed by Parent.
5.4 TRANSFER OF COMPANY SHARES AFTER THE EFFECTIVE TIME. No transfers of Company
Shares shall be made on the stock transfer books of the Company after the close
of business on the business day preceding the date of the Effective Time.
5.5 FRACTIONAL SHARES. No fractional shares of Parent Common Stock shall be
issued in the Merger. Each holder of Company Shares shall be entitled to receive
in lieu of any fractional shares of Parent Common Stock to which such holder
otherwise would have been entitled pursuant to Section 5.1 (after taking into
account all Company Shares then held of record by such holder) a cash payment in
an amount equal to the product of (i) the fractional interest of a share of
Parent Common Stock to which such holder otherwise would have been entitled and
(ii) the Parent Share Price. Parent shall timely make available to the Exchange
Agent cash in an amount sufficient to make the payments in lieu of fractional
shares as aforesaid.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company SEC Reports filed prior to the date of this
Agreement and except as set forth in the Company Disclosure Schedule (each
section of which qualifies the correspondingly numbered representation or
warranty), the Company hereby represents and warrants to Parent and Merger Sub
as follows:
6.1 COMPANY SHARES. The Company Shares, at the Effective Time, will constitute
all of the issued and outstanding capital stock of the Company and all such
shares of Company Shares will have been duly authorized, validly issued and
shall be fully paid and non-assessable.
6.2 CAPITALIZATION. The entire authorized capital stock of the Company consists
of 30,000,000 shares of common stock, having a per share par value of $.01 per
share, and 150,000 shares of serial preferred stock, having a per share par
value of $.01 per share. As of the date hereof, 9,659,305 shares of such common
stock are issued (including treasury shares) and zero (0) shares of such serial
preferred stock are issued and 255,909 shares of common stock are held in
treasury. As of the date hereof, such shares constitute all of the issued and
outstanding capital stock of the Company, all of which have been duly
authorized, validly issued and are fully paid and non-assessable. All the
outstanding shares of capital stock of each Subsidiary of the Company are owned
by the Company, or by another wholly owned subsidiary of the Company, free and
clear of all Liens, and are duly authorized, validly issued, fully paid and
nonassessable. There are not as of the date hereof, and there will not be at the
Effective Time, any stockholder agreements, voting trusts or other agreements or
understandings to which the Company is a party or to which it is bound relating
to the voting of any shares of the capital stock of the Company, or the capital
stock of any of its Subsidiaries. There are no outstanding or authorized
options, warrants, subscriptions, calls, demands or rights of any character
relating to the Company's capital stock, or the capital stock of its
Subsidiaries, whether or not issued, which the Company, or any of its
Subsidiaries, is a party to, including without limitation, securities
convertible into or evidencing the right to purchase any capital stock or other
securities of the Company or any of its Subsidiaries.
6.3 CORPORATE ORGANIZATION, QUALIFICATION AND POWER. Each of the Company and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation and is duly
qualified to conduct its business and in good standing in every other
jurisdiction in which its business is conducted, except where failure to be so
qualified, licensed or to be in good standing would
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not, individually or in the aggregate, have a Material Adverse Effect. Each of
the Company and its Subsidiaries has the corporate power to own or lease its
respective properties and to carry on its business as now being conducted,
wherever located. The Company's Subsidiaries are listed on the Company
Disclosure Schedule and the Company owns no other interest in any corporation,
partnership, limited liability company, proprietorship or any other business
entity. The Company has heretofore made available to Parent complete and correct
copies of its Certificate of Incorporation, as amended, and Bylaws, as amended,
and the Articles of Incorporation and Bylaws, or other comparable charter or
organizational documents, of its Subsidiaries, in each case as amended to the
date of this Agreement.
6.4 AUTHORIZATION OF AGREEMENT AND MERGER. The Company has the requisite
corporate power and authority to approve, authorize, execute and deliver this
Agreement and to consummate the Transactions (subject to the requisite approval
of the Merger by stockholders of the Company holding a majority of the
outstanding voting stock of the Company, pursuant to Section 251(c) of the
DGCL). This Agreement, and the consummation by the Company of the Transactions
have been duly and validly authorized by the Board of Directors of the Company
and no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the Transactions (other than the
requisite approval of the Merger by the stockholders of the Company and other
than in connection with the actions to be taken pursuant to Section 8.6).
6.5 ENFORCEABLE AGREEMENT. This Agreement has been duly and validly executed and
delivered by the Company and, assuming it constitutes the valid and binding
agreement of Parent and Merger Sub, constitutes a valid and binding obligation
of the Company, enforceable against the Company according to its terms, subject
to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar Laws affecting the enforceability of contractual obligations and
creditor's rights generally and by the application of equitable principles by
courts of competent jurisdiction, sitting at law or in equity.
6.6 NO CONFLICTS, VIOLATIONS, BREACHES OR DEFAULTS. The execution and delivery
of this Agreement by the Company and its performance of the obligations
hereunder, including its execution, delivery and performance of any Additional
Agreements to which it is a party and the consummation of the Transactions, do
not (a) conflict with or result in any breach of any provision of the
Certificate of Incorporation, as amended, or Bylaws, as amended, of the Company
or the comparable charter or organizational documents of any of its
Subsidiaries; (b) require any consent, approval, authorization or permit of, or
filing with, or notification to, any Governmental Authority, except (i) in
connection with the applicable requirements, if any, of the HSR Act; (ii)
pursuant to the applicable requirements of the Securities Act and the Exchange
Act, and the rules and regulations promulgated thereunder; (iii) the filing of
the Certificate of Merger pursuant to the DGCL and appropriate documents with
the relevant authorities of other states in which the Company is authorized to
do business; (iv) such filing or consent as may be required under any
environmental, health or safety Law; (v) such filing or consent as may be
required by applicable state securities, or "blue sky" Laws; (vi) approvals, if
any, required of state Governmental Authorities having jurisdiction over the
Company (identified on the Company Disclosure Schedule); (vii) such filings,
consents, approvals, orders, registrations, declarations and filings as may be
required under the laws of any foreign country in which the Company or any of
its Subsidiaries conducts any business or owns any assets; (viii) filings with,
and approval of, the Exchange; or (ix) where the failure to obtain such consent,
approval, authorization or permit, or to make such filing or notification, would
not, individually or in the aggregate, have a Material Adverse Effect or
materially adversely affect the ability of the Company to consummate the
Transactions; (c) except as would not, individually or in the aggregate, have a
Material Adverse Effect, conflict with or result in a breach or violation of, or
constitute a default under, or result in (or create in any party the right to
cause) the acceleration of any performance required by the Company or its
Subsidiaries under, (i) any Judgment or Law to which they are subject or bound
(subject to any consents, approvals, authorizations, permits, filings or
notifications required under (b) above), or (ii) any mortgage, bond, indenture,
agreement, contract, license or other instrument or obligation to which the
Company and/or its Subsidiaries are subject or bound; or (d) result in the
creation of any Lien on any of the assets of the Company or its Subsidiaries
which, individually or in the aggregate, would have a Material Adverse Effect.
6.7 COMPANY SEC REPORTS. Since January 1, 1996, the Company has filed all forms,
reports and documents with the SEC required to be filed by it pursuant to the
federal securities Laws, all of which complied as of their
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respective dates in all material respects with all applicable requirements of
the Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder. None of the Company SEC Reports, at the time filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
6.8 FINANCIAL STATEMENTS; ACCOUNTING MATTERS.
(a) The consolidated balance sheets and the related consolidated
statements of earnings, stockholders' equity and cash flows (including the
related notes thereto) of the Company included in the Company SEC Reports
complied as to form in all material respects with the published rules and
regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with prior periods (except as otherwise noted therein), and
present fairly the financial position of the Company and its Subsidiaries
as of their respective dates, and the consolidated results of its
operations and its cash flows for the periods presented therein (subject,
in the case of the unaudited interim financial statements, to normal
year-end adjustments and except that the unaudited interim financial
statements do not contain all of the footnote disclosure required by
generally accepted accounting principles).
(b) Neither the Company nor, to the actual knowledge of the Company's
officers, any of its affiliates, has taken or agreed to take any action
that would jeopardize the qualification of the Merger as a reorganization
within the meaning of Section 368(a) of the Code and the Company has no
reason to believe that the Merger will not qualify as "pooling of
interests" for accounting purposes.
6.9 PROXY STATEMENT; S-4 REGISTRATION STATEMENT. None of the information
supplied or to be supplied by the Company for inclusion or incorporation by
reference in the Proxy Statement or inclusion in the S-4 Registration Statement
required to be filed in connection with the Transactions (or any amendment or
supplement thereto) will, (a) in the case of the Proxy Statement, at the time of
the mailing of the Proxy Statement and at the times of the Company's Stockholder
Meeting, and (b) in the case of the S-4 Registration Statement, at the time it
becomes effective and at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Company shall
promptly notify Parent if at any time prior to the Effective Time any event
occurs with respect to the Company which is required to be described in an
amendment of, or a supplement to, the S-4 Registration Statement, so that Parent
can promptly file such with the SEC and disseminate it as required by Law. If at
any time prior to the Company's Stockholder Meeting any event occurs with
respect to the Company which is required to be described in an amendment of, or
a supplement to, the Proxy Statement, the Company shall promptly notify Parent,
file such with the SEC and disseminate it to the Company's stockholders as
required by Law. The Proxy Statement will (with respect to the Company and other
information supplied by the Company for inclusion therein) comply as to form in
all material respects with the requirements of the Exchange Act and the rules
and regulations thereunder.
6.10 LITIGATION. Except as appropriately reserved for in the financial
statements included within the Company SEC Reports, there is no action, suit,
claim, governmental investigation, arbitration or other proceeding pending, or,
to the actual knowledge of the Company's officers, threatened in writing,
against the Company or any of its Subsidiaries which, if adversely determined,
individually or in the aggregate, would have a Material Adverse Effect.
6.11 TAXES. The Company and each of its Subsidiaries has timely filed (or, as to
its Subsidiaries, the Company has timely filed on their behalf) all material Tax
Returns required to be filed by it, has paid (or, as to its Subsidiaries, the
Company has paid on their behalf) all Taxes shown thereon to be due and has
provided (or, as to its Subsidiaries, the Company has made provision on their
behalf) reserves in accordance with generally accepted accounting principles in
its financial statements for any Taxes that have not been paid, whether or not
shown as being due on any Tax Returns, except where the failure to pay or
provide for such Taxes would not, individually or in the aggregate, have a
Material Adverse Effect, and (i) no material claim for unpaid Taxes has been
asserted against the Company or any of its Subsidiaries in writing by a tax
authority or has become a Lien (except for
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Liens for Taxes not yet due and payable or for Taxes that are being disputed in
good faith by appropriate proceedings and that have been reserved against in
accordance with generally accepted accounting principles) against the property
of the Company or any of its Subsidiaries, except as to such matters as would
not, individually or in the aggregate, have a Material Adverse Effect, (ii) as
of the date of this Agreement, no audit of any Tax Return of the Company or any
of its Subsidiaries is being conducted by a tax authority, and (iii) as of the
date of this Agreement, no extension of the statute of limitations on the
assessment of any Taxes has been granted by Company or any of its Subsidiaries
and is currently in effect. Neither the Company nor any of its Subsidiaries is
or has been a member of any consolidated, combined, unitary or aggregate group
for tax purposes except such a group consisting only of the Company and its
Subsidiaries.
6.12 ENVIRONMENTAL LAWS AND REGULATIONS. The Company and each of its
Subsidiaries are in compliance with Environmental Laws (as defined below),
except for non-compliance that would not, individually or in the aggregate, have
or could reasonably be expected to have a Material Adverse Effect. There are no
legal, administrative, arbitral or other proceedings, claims, actions, causes of
action, private environmental investigations or remediation activities or
governmental investigations of any nature that reasonably could be expected to
result in the imposition, on the Company or any of its Subsidiaries, of any
liability or obligation arising under common law standards relating to
environmental protection, human health or safety, or under any local, state,
federal, national or supernational environmental statute, regulation or
ordinance, including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (collectively, "Environmental Laws"), pending
or, to the knowledge of the Company, threatened, against the Company or any of
its Subsidiaries, which liability or obligation would have a Material Adverse
Effect. To the knowledge of the Company, during or prior to the period of (i)
its or any of its Subsidiaries' ownership or operation of any of their
respective properties, (ii) its or any of its Subsidiaries' participation in the
management of any property, or (iii) its or any of its Subsidiaries' holding of
a security interest or other interest in any property, there was no release of
hazardous, toxic, radioactive or dangerous materials or other materials
regulated under Environmental Laws in, on, under or affecting any such property
which would reasonably be expected to have a Material Adverse Effect. Neither
the Company nor any of its Subsidiaries is subject to any agreement, order,
judgment or decree by or with any court, Governmental Authority, regulatory
agency or third party imposing any material liability or obligations pursuant to
or under any Environmental Law that would have a Material Adverse Effect.
6.13 COMPLIANCE WITH APPLICABLE LAWS. The businesses of the Company and its
Subsidiaries are not being conducted in violation of any Law, except for
possible violations which, individually or in the aggregate, would not have a
Material Adverse Effect.
6.14 TITLE TO PROPERTIES. The Company and each of its Subsidiaries has good and
marketable title to, or valid leasehold interests in, all their respective
properties and assets except for such as are no longer used or useful in the
conduct of their respective businesses or as have been disposed of in the
ordinary course of business and except for defects in title, easements,
encroachments, restrictive covenants and similar encumbrances or impediments
that would not, individually or in the aggregate, have a Material Adverse
Effect. All such assets and properties, other than assets and properties in
which the Company or any of its Subsidiaries has leasehold interests, are free
and clear of all Liens except for Liens that would not, individually or in the
aggregate, have a Material Adverse Effect.
6.15 INSURANCE. The Company and its Subsidiaries have obtained and currently
maintain in full force and effect insurance with responsible and reputable
insurance companies or associations in such amounts, on such terms and covering
such risks, including fire and other risks insured against by extended coverage,
as is reasonably prudent, and each is maintaining in full force and effect
public liability insurance, insurance against claims for personal injury or
death or property damage occurring in connection with the activities of the
Company or its Subsidiaries or any properties owned, occupied or controlled by
the Company or its Subsidiaries, in such amount as reasonably deemed necessary
by the Company or its Subsidiaries.
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6.16 EMPLOYEE BENEFIT MATTERS.
(a) The Company has furnished to Parent true and complete copies of
all material employee benefit plans within the meaning of Section 3(3) of
ERISA that covers employees, directors, former employees or former
directors of the Company and its Subsidiaries, all as listed in the Company
Disclosure Schedule. In addition, the Company has furnished any trust
agreements or insurance contracts forming a part of any such employee
benefit plans maintained by the Company, a copy of the most recent
determination letter for any such employee benefit plan which is an
employee pension benefit plan within the meaning of Section 3(2) of ERISA
and is intended to comply with Section 401(a) of the Code, and a copy of
the most recent Form 5500, if applicable.
(b) Each of the employee benefit plans maintained by the Company and
its Subsidiaries is in substantial compliance with all applicable Laws
including ERISA and the Code, except for any noncompliance that would not
have a Material Adverse Effect. The Company is not aware of any event (i)
that would adversely affect any determination letter issued for any such
employee benefit plan that is an employee pension benefit plan within the
meaning of Section 3(2) of ERISA and is intended to comply with Section
401(a) of the Code or (ii) that has occurred to cause the basis for
imposition of an excise or penalty tax.
(c) All contributions required to be made under the terms of any such
employee benefit plan have been timely made or have been reflected on the
latest consolidated balance sheet of the Company in accordance with
generally accepted accounting principles applied on a consistent basis. No
condition exists that is reasonably likely to subject the Company or any of
its Subsidiaries to any direct or indirect liability under Title IV of
ERISA or to a civil penalty under Section 502 of ERISA or liability under
Sections 4975, 4976, or 4980B of the Code or the loss of a federal tax
deduction under Section 280G of the Code or other liability with respect to
such employee benefit plans that would have a Material Adverse Effect.
(d) No employee benefit plan is a "multiemployer plan" as such term is
defined in Section 4001(a)(3) of ERISA or Section 414(f) of the Code or a
multiemployer plan described in clauses (i) or (ii) of Section 3(37)(A) of
ERISA; is subject to Title IV of ERISA; or is a part of a "multiple
employer welfare arrangement" within the meaning of Section 3(40) of ERISA.
(e) There are no pending, threatened, or anticipated claims (other
than routine claims for benefits or immaterial claims) by, on behalf of or
against any of the employee benefit plans or any trusts related thereto
that would have a Material Adverse Effect.
6.17 BROKER'S FEES. Except for the fees and expenses payable to Goldsmith, Agio,
Helms and Company and George K. Baum & Company, the Company's financial
advisors, which are reflected in their agreements with the Company, true and
correct copies of which have been furnished to Parent, the Company has not
employed any investment bank, broker, finder, consultant or other intermediary,
which would be entitled to any fee or commission from the Company in connection
with the Transactions.
6.18 OPINIONS OF FINANCIAL ADVISORS. The Board of Directors of the Company has
received the opinions of Goldsmith, Agio, Helms and Company and George K. Baum &
Company, the Company's financial advisors, to the effect that the Merger
Consideration is fair to the stockholders of the Company other than Parent, from
a financial point of view.
6.19 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the Company
SEC Reports, since January 28, 1998, the Company has conducted its business only
in the ordinary course consistent with past practice, and there is not and has
not been: (i) any change which has had a Material Adverse Effect, or (ii) any
condition, event or occurrence which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
6.20 INTELLECTUAL PROPERTY. The Company and its Subsidiaries own or have a valid
and enforceable license to use all trademarks, service marks, trade names,
patents and copyrights (in each case, free and clear of any material Liens)
(collectively, "Company Intellectual Property") necessary to carry on its
business substantially as
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currently conducted, except for such Company Intellectual Property the failure
of which to own or validly license individually or in the aggregate would not
have a Material Adverse Effect and the consummation of the Merger and the other
Transactions will not result in the loss of any such rights (or require the
payment of any material additional fees or royalties in order to maintain such
rights). Neither the Company nor any Subsidiary has received any notices of
infringement of or conflict with, and, to the knowledge of the Company, there
are no infringements of or conflicts with the rights of others with respect to,
any Company Intellectual Property that individually or in the aggregate, in
either such case, would have a Material Adverse Effect.
6.21 CONTRACTS. Neither the Company nor any of its Subsidiaries is a party to or
bound by any agreement (i) which would prohibit or materially delay the
consummation of the Merger or any of the Transactions contemplated thereby or
(ii) the performance of which, in accordance with the terms thereof, would have
a Material Adverse Effect.
6.22 LABOR MATTERS. As of the date of this Agreement, neither the Company nor
any of its Subsidiaries is a party to or bound by, and none of their employees
is subject to, any collective bargaining agreement relating to the term and
conditions of employment for any group of employees (any such agreement,
memorandum or document, a "Collective Bargaining Agreement"), and as of the date
of this Agreement there are no labor unions or other organizations representing
or, to the knowledge of the Company, purporting to represent, any employees
employed by any of the Company and its Subsidiaries. As of the date of this
Agreement, no labor union is currently engaged in or, to the knowledge of the
Company, threatening, organizational efforts with respect to any employees of
the Company or any of its Subsidiaries.
6.23 STATE TAKEOVER STATUTES. The Board of Directors of the Company has approved
this Agreement and the Transactions contemplated hereby and such approval
constitutes approval of the Merger and Transactions by the Company Board of
Directors under the provisions of Section 203 of the DGCL such that Section 203
of the DGCL does not apply to this Agreement and the Transactions. No other
state takeover statute is applicable to the Merger or the Transactions
contemplated hereby.
6.24 YEAR 2000 COMPATIBILITY. The Company has developed and is executing a plan
(the "Y2K Plan") to address significant year 2000 compatibility issues. In the
case of certain equipment with imbedded chips where testing for year 2000
compliance is impossible or impractical, the Y2K Plan may include plans and
strategies for replacing such capability with redundant capacity within the
Company or with alternative third party sourcing with comparable quality and
pricing, excluding any provider of basic services and utilities. The Company
represents and warrants that: (i) significant date-sensitive hardware, software,
processes, procedures, interfaces and similar operating systems used within the
Company's operations contain acceptable design and performance specifications so
that such systems will not abruptly end or provide invalid or incorrect results
during the operation of the Company's business on or after January 1, 2000 or
the Company's Y2K Plan makes reasonable provision for addressing any
noncompliant specifications; (ii) all such operating systems have been designed
to ensure year 2000 compatibility including, but not limited to: date data
century recognition, calculations that accommodate same century and
multi-century formulas and date values, date data interface values that reflect
the century, and which include year 2000 leap year calculations or the Company's
Y2K Plan makes reasonable provision for modifying the design and/or replacing
such systems; (iii) the Company is making all reasonable efforts to confirm with
all of its material suppliers that all date-sensitive hardware, software,
processes, procedures, interfaces and similar operating systems used within such
supplier's operations contain acceptable design and performance specifications
so that such systems will not abruptly end or provide invalid or incorrect
results during the operation of the Company's business on or after January 1,
2000 and that all such operating systems have been designed to ensure year 2000
compatibility including, but not limited to: date data century recognition,
calculations that accommodate same century and multi-century formulas and date
values, date data interface values that reflect the century, and which include
year 2000 leap year calculations, so that such material suppliers' operations
will not cause a disruption in the Company's supply, except to the extent that
the failure of such representation or warranty as set forth in this Section 6.24
to be true would not have a Material Adverse Effect.
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ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the Parent SEC Reports filed prior to the date of this
Agreement and except as set forth in the Parent Disclosure Schedule (each
section of which qualifies the correspondingly numbered representation or
warranty), Parent and Merger Sub hereby jointly and severally represent and
warrant to the Company as follows:
7.1 CAPITALIZATION. The entire authorized capital stock of the Parent consists
of 300,000,000 shares of Parent Common Stock, no par value per share and 100,000
shares of Parent Preferred Stock no par value. As of the date hereof,
105,596,357 shares of Parent Common Stock and no shares of Parent Preferred
Stock are issued and outstanding and no shares of Parent Common Stock or Parent
Preferred Stock are held in treasury. As of the date hereof, such shares
constitute all of the issued and outstanding capital stock of the Parent, all of
which have been duly authorized, validly issued and are fully paid and
non-assessable. All outstanding shares of capital stock of Parent's Subsidiaries
are owned by Parent or a direct or indirect wholly owned subsidiary of Parent,
free and clear of all Liens, and are duly authorized, validly issued, fully paid
and nonassessable. There are not as of the date hereof, and there will not be at
the Effective Time, any stockholder agreements, voting trusts or other
agreements or understandings to which Parent is a party or to which it is bound
relating to the voting of any shares of the capital stock of Parent. As of the
date hereof, 925,050 shares of Parent Common Stock were reserved for issuance
upon exercise of outstanding options under the Parent Option Plans. Except
pursuant to the Parent Option Plans, and as set forth in the Parent Disclosure
Schedule, there are no outstanding or authorized options, warrants, agreements,
subscriptions, calls, demands or rights of any character relating to the
Parent's, or Parent's Subsidiaries' capital stock, whether or not issued,
including without limitation, securities convertible into or evidencing the
right to purchase any capital stock or other securities of Parent or any of its
Subsidiaries. Parent does not own, directly or indirectly, any capital stock of
the Company.
7.2 CORPORATE ORGANIZATION, QUALIFICATION AND POWER. Each of Parent, its
Subsidiaries and Merger Sub is a corporation duly organized, validly existing
and in good standing under the Laws of the jurisdiction of its incorporation and
is duly qualified to conduct its business in every other jurisdiction in which
its business is conducted, except where failure to be so qualified or licensed
would not, individually or in the aggregate, have a Material Adverse Effect on
Parent. Each of Parent and its Subsidiaries has the corporate power to own or
lease its respective properties and to carry on its business as now being
conducted, wherever located. Neither Parent nor Merger Sub owns any material
interest in any corporation, partnership, proprietorship or any other business
entity. Each of Parent and Merger Sub has heretofore made available to the
Company complete and correct copies of their respective Articles of
Incorporation, Certificate of Incorporation and Bylaws.
7.3 AUTHORIZATION OF AGREEMENT AND MERGER. Each of Parent and Merger Sub has the
requisite corporate power and authority to approve, authorize, execute and
deliver this Agreement and to consummate the Transactions. This Agreement, and
the consummation by Parent and Merger Sub of the Merger and the other
Transactions have been duly and validly authorized by the respective Boards of
Directors of Parent and Merger Sub and the sole stockholder of Merger Sub and no
other corporate proceedings on the part of Parent and Merger Sub are necessary
to authorize this Agreement or to consummate the Transactions (other than in
connection with the actions to be taken pursuant to Section 8.6).
7.4 ENFORCEABLE AGREEMENT. This Agreement has been duly and validly executed and
delivered by Parent and Merger Sub and, assuming it constitutes the valid and
binding agreement of the Company, constitutes a valid and binding obligation of
each of Parent and Merger Sub, enforceable against each of them according to its
terms, subject to bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar Laws affecting the enforceability of contractual
obligations and creditor's rights generally and by the application of equitable
principles by courts of competent jurisdiction, sitting at law or in equity.
7.5 NO CONFLICTS, VIOLATIONS, BREACHES OR DEFAULTS. The execution and delivery
of this Agreement by each of Parent and Merger Sub and its performance of the
obligations hereunder, including its execution, delivery and performance of any
Additional Agreements to which it is a party and the consummation of the
Transactions, do not (a) conflict with or result in any breach of any provision
of the respective Articles of Incorporation, Certificate
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of Incorporation or Bylaws of Parent or Merger Sub; (b) require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Authority, except (i) in connection with the applicable
requirements, if any, of the HSR Act; (ii) pursuant to the applicable
requirements of the Securities Act and the Exchange Act, and the rules and
regulations promulgated thereunder; (iii) the filing of the Certificate of
Merger pursuant to the DGCL and appropriate documents with the relevant
authorities of other states in which Parent or any of its Subsidiaries is
authorized to do business; (iv) such filing or consent as may be required under
any environmental, health or safety Law; (v) such filing or consent as may be
required by applicable state securities, or "blue sky" Laws; (vi) approvals, if
any, required of state Governmental Authorities having jurisdiction over Parent
or any of its Subsidiaries; (vii) such filings, consents, approvals, orders,
registrations, declarations and filings as may be required under the laws of any
foreign country in which Parent or any of its Subsidiaries conducts any business
or owns any assets; (viii) filings with, and approval of the Exchange; or (ix)
where the failure to obtain such consent, approval, authorization or permit, or
to make such filing or notification, would not, individually or in the
aggregate, have a Material Adverse Effect on Parent or its Subsidiaries or
materially adversely affect the ability of Parent to consummate the
Transactions; (c) except as would not, individually or in the aggregate, have a
Material Adverse Effect on Parent, conflict with or result in a breach or
violation of, or constitute a default under, or result in (or create in any
party the right to cause) the acceleration of any performance of the Parent or
its Subsidiaries under, (i) any Judgment or Law to which they are subject or
bound (subject to any consents, approvals, authorizations, permits, filings or
notifications required under (b) above), or (ii) any mortgage, bond, indenture,
agreement, contract, license or other instrument or obligations to which Parent
and/or its Subsidiaries are subject or bound; or (d) result in the creation of
any Lien on any of the assets of Parent or its Subsidiaries which, individually
or in the aggregate, would have a Material Adverse Effect on Parent or Merger
Sub.
7.6 PARENT SEC REPORTS. Since June 1, 1996, Parent has filed all forms, reports
and documents with the SEC required to be filed by it pursuant to the federal
securities Laws, all of which complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act and the rules
and regulations promulgated thereunder. None of the Parent SEC Reports, at the
time filed, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
7.7 FINANCIAL STATEMENTS; ACCOUNTING MATTERS.
(a) The consolidated balance sheets and the related consolidated
statements of income, stockholders' equity and cash flows (including the
related notes thereto) of Parent included in the Parent SEC Reports
complied as to form in all material respects with the published rules and
regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with prior periods (except as otherwise noted therein), and
present fairly the financial position of Parent and its Subsidiaries as of
their respective dates, and the consolidated results of its operations and
its cash flows for the periods presented therein (subject, in the case of
the unaudited interim financial statements, to normal year-end adjustments
and except that the unaudited interim financial statements do not contain
all of the footnote disclosure required by generally accepted accounting
principles).
(b) Neither Parent, Merger Sub nor, to the actual knowledge of
Parent's officers, any of their affiliates, have taken or agreed to take
any action that would jeopardize the qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code, and Parent
has no reason to believe that the Merger will not qualify as "pooling of
interests" for accounting purposes.
7.8 PROXY STATEMENT; S-4 REGISTRATION STATEMENT. None of the information
supplied or to be supplied by Parent or Merger Sub for inclusion or
incorporation by reference in the Proxy Statement or inclusion in the S-4
Registration Statement required to be filed in connection with the Transactions
(or any amendment or supplement thereto) will, (a) in the case of the Proxy
Statement, at the time of the mailing of the Proxy Statement and at the time of
the Company's Stockholder Meeting and (b) in the case of the S-4 Registration
Statement, at the time it becomes effective and at the Effective Time, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the
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circumstances under which they are made, not misleading. If at any time prior to
the Effective Time any event occurs with respect to Parent, its officers and
directors, or any of its Subsidiaries, which is required to be described in an
amendment of, or a supplement to, the S-4 Registration Statement, Parent will
promptly file such with the SEC and disseminate it as required by Law to the
stockholders of Parent. If at any time prior to the Company's Stockholder
Meeting any event occurs with respect to Parent which is required to be
described in an amendment of, or a supplement to, the Proxy Statement, Parent
shall promptly notify the Company, file such with the SEC and disseminate it to
Parent's stockholders as required by Law. The Proxy Statement will (except with
respect to information relating to the Company) comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations thereunder, and the S-4 Registration Statement (except for
information relating to the Company) will comply as to form in all material
respects with the provisions of the Securities Act.
7.9 LITIGATION. Except as disclosed in or appropriately reserved for in the
financial statements included within the Parent SEC Reports, there is no action,
suit, claim, governmental investigation, arbitration or other proceeding
pending, or, to the actual knowledge of Parent's officers, threatened in
writing, against Parent which, if adversely determined, individually or in the
aggregate, would have a Material Adverse Effect on Parent.
7.10 TAXES. Each of Parent and its Subsidiaries has (a) filed all material Tax
Returns that they are required to file through the date hereof and shall prepare
and file all material Tax Returns required to be filed after the date hereof and
on or before the Effective Time and (b) paid or provided for the payment of all
Taxes due and owing for the periods covered by such Tax Returns and all Taxes,
if any, required to be paid for which no return is required, except in either
case where the failure to file such returns or to pay or provide for such Taxes
would not, individually or in the aggregate, have a Material Adverse Effect on
Parent.
7.11 ENVIRONMENTAL LAWS AND REGULATIONS. Parent and each of its Subsidiaries (a)
are in compliance with Environmental Laws, except for non-compliance that would
not, individually or in the aggregate, have a Material Adverse Effect on Parent,
and (b) have not received written notice of, or, to the actual knowledge of
Parent's officers, is the subject of an Environmental Claim which, individually
or in the aggregate, would have a Material Adverse Effect on Parent.
7.12 COMPLIANCE WITH APPLICABLE LAWS. The businesses of Parent and its
Subsidiaries are not being conducted in violation of any Law, except for
violations which, individually or in the aggregate, would not have a Material
Adverse Effect on the Parent.
7.13 BROKER'S FEES. Parent has not employed any investment bank, broker, finder,
consultant or other intermediary, which would be entitled to any fee or
commission from Parent in connection with the Transactions.
7.14 INTERIM OPERATIONS OF MERGER SUB. Merger Sub was formed solely for the
purpose of engaging in the Transactions and has not engaged in any business
activities or conducted any operations other than in connection with the
Transactions. Merger Sub has no Subsidiaries.
7.15 AUTHORIZATION FOR PARENT COMMON STOCK. Prior to the Effective Time, Parent
will have taken all necessary action to permit it to issue the number of shares
of Parent Common Stock required to be issued pursuant to Article 5. Parent
Common Stock issued pursuant to Article 5 will, when issued, be validly issued,
fully paid and nonassessable and no Person will have any preemptive right of
subscription or purchase in respect thereof. Such Parent Common Stock will, when
issued, be registered under the Securities Act and the Exchange Act and
registered or exempt from registration under any applicable state securities
laws and will, when issued, be listed on the Exchange, subject to notice of
official issuance.
ARTICLE 8
CONDUCT PENDING THE CLOSING AND COVENANTS
8.1 CONDUCT OF BUSINESS BY COMPANY AND PARENT. Each of the Company and Parent
covenants and agrees that prior to the Effective Time, unless the other party
agrees in writing or as otherwise contemplated by this
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Agreement, it will conduct its business and day to day operations (including
those of any Subsidiary) in the ordinary and usual course of business,
consistent with its past custom and practice, and will seek to preserve intact
its business organization and goodwill, keep in full force and effect all
material rights, licenses, permits and franchises relating to such business, and
maintain satisfactory relationships with suppliers, customers and others having
business relationships with it. Each of the Company and Parent specifically
agrees that, prior to the Effective Time, unless the other party otherwise
agrees in writing or as otherwise contemplated by this Agreement, neither the
Company nor Parent, nor any of the Company's Subsidiaries or Parent's
Subsidiaries, will:
(a) except pursuant to the Option Plans, the Directors Plan or the
other obligations set forth on the Company Disclosure Schedule or Parent
Disclosure Schedule or pursuant to the Parent Option Plans, or in
connection with acquisitions of stock or assets of other businesses by
Parent or its Subsidiaries, issue, deliver, sell or dispose of, pledge or
otherwise encumber (i) any additional shares of capital stock of any class,
or any securities or rights convertible into, exchangeable for or creating
the right to subscribe for any share of capital stock, or any rights,
warrants, options, calls, or any other agreement of any kind to purchase or
acquire any share of capital stock or such securities, or (ii) any
securities exchangeable for, in respect of, or in substitution for Company
Stock or Parent Common Stock currently outstanding;
(b) except pursuant to existing employee benefit plans, redeem,
purchase or otherwise acquire any of its outstanding capital stock;
(c) split, combine, subdivide or reclassify any share of its capital
stock, or declare, set aside or pay any dividend, or make any distribution,
on its capital stock, except the declaration and payment of regular
quarterly, semi-annual or annual cash dividends in accordance with past
dividend policy (or dividends by a wholly owned Subsidiary);
(d) amend its respective Certificate/Articles of Incorporation or
Bylaws;
(e) take any action, or fail to take any necessary action that would
prevent or impede the Merger from qualifying (i) for "pooling of interests"
accounting treatment or (ii) as a reorganization within the meaning of
Section 368 of the Code;
(f) except as contemplated by this Agreement, take any action which
would render, or which reasonably may be expected to render, any
representation or warranty made by it in this Agreement untrue in any
material respect at the Effective Time;
(g) except as permitted by Section 8.5, take any action that would, or
that could reasonably be expected to, cause any condition to Closing, as
set forth in Article 9 hereof, to not be satisfied; or
(h) authorize, propose or announce an intention to do any of the
foregoing, or enter into any contract or agreement to do any of the
foregoing.
8.2 CONDUCT OF BUSINESS OF MERGER SUB. During the period of time from the date
of this Agreement to the Effective Time, Merger Sub shall not engage in any
activities of any nature except as provided in or contemplated by this
Agreement.
8.3 ENVIRONMENTAL CONSULTANTS, ADJUSTMENT TO COMPANY SHARE PRICE AND MERGER
CONSIDERATION.
(a) Counsel to Parent or Merger Sub has engaged the services of
Environ Corporation to perform specified environmental investigation and
testing with respect to the specified plants listed on Exhibit 8.3(a)(1)
(the "Specified Plants"). The scope of the investigation and testing to be
conducted will be subject to the terms of Exhibit 8.3(a)(2). All such
investigation and testing shall be completed as soon as reasonably
practicable after the date hereof.
(b) Counsel to Parent and the Company will each engage an
environmental expert (the selection of each expert will be subject to the
reasonable approval of the other party) (the "Parties' Experts"), and
counsel to Parent and the Company will jointly engage a third environmental
expert, to be mutually selected by Parent and the Company (if Parent and
the Company are unable to agree on the third expert, the Parties' Experts
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shall select the third expert) (the "Independent Expert"). Using the test
results and information developed pursuant to Section 8.3(a), the Parties'
Experts and the Independent Expert will each prepare an estimate (the
"Environmental Liability Estimates") of the most likely out of pocket cost
(including, without limitation, environmental testing, remediation
expenses, environmental consulting fees, legal fees and government agency
costs) that will be incurred by the Company in connection with any required
remediation of the soil and groundwater at the Specified Plants (the
"Environmental Liability"). Such estimates shall be computed in accordance
with the specifications and assumptions set forth on Exhibit 8.3(a)(2).
(c) As soon as the Parties' Experts have completed their Environmental
Liability Estimates, each of the Parties' Experts shall submit its
Environmental Liability Estimates to the Company and Parent, which
estimates shall be on a per plant basis and in such detail so as to confirm
that such estimates were prepared in accordance with the provisions of this
Agreement. If the difference between such Environmental Liability Estimates
is in the aggregate less than twenty-five percent (25%) of the higher of
the two estimates, then the Company Share Price shall be adjusted pursuant
to Section 8.3(d) using the average of the two Environmental Liability
Estimates; provided, however, if the higher of the two Environmental
Liability Estimates is less than or equal to $570,000, then no adjustment
shall be made to the Company Share Price. If the difference between the
Environmental Liability Estimates is equal to or greater than twenty-five
percent (25%) of the higher of the two estimates and if the higher of the
two estimates is more than $570,000, representatives of the Company and
Parent shall meet as soon as practicable, but not later than February 17,
1999, to attempt to reach agreement as to the Estimate Average (as defined
below), and such amount, if determined, shall be used to calculate the
reduction in Company Share Price, if any, pursuant to Section 8.3(d). If
the Company and Parent are unable to reach agreement by February 19, 1999,
(i) the Independent Environmental Expert shall, as soon as practical,
deliver its Environmental Liability Estimate to the Company and Parent, and
(ii) the average of the two Estimates closest in amount (among those
prepared by the three (3) environmental experts) shall equal the Estimate
Average for purposes of determining the reduction in Company Share Price,
pursuant to Section 8.3(d). In all instances, the Estimate Average and the
calculation of the reduction, if any, in the Company Share Price shall be
determined no later than February 23, 1999.
(d) (i) If the average of the Environmental Liability Estimates
calculated pursuant to Section 8.3(c) (the "Estimate Average") is less than
or equal to the $570,000, then no adjustment shall be made to the Company
Share Price;
(ii) If the Estimate Average exceeds $570,000, the Company Share
Price shall be reduced by $.01 for each $100,000 (rounded to the nearest
$100,000) by which the Estimate Average exceeds $570,000.
(e) Notwithstanding the foregoing, no adjustment shall be made to the
Company Share Price to the extent the Company, prior to the determination
of the Estimate Average, has obtained a new insurance policy or policies
and/or has entered into a new contractual arrangement whereby the Company
shall be indemnified for or relieved of responsibility for payment of the
particular Environmental Liability, which insurance and/or contract are
acceptable to Parent in its reasonable discretion. Any premiums required to
be paid in connection with such insurance shall be included in the Estimate
Average.
(f) Parent or Merger Sub shall pay for all costs under Section
8.3(a)-(c), except (i) the Company will pay for the fees and expenses of
the environmental expert it selected pursuant to Section 8.3(b), and (ii)
the Company shall pay one-half of the fees and expenses of the Independent
Expert.
(g) All costs incurred pursuant to this Section 8.3 shall be included
in the Estimate Average.
8.4 ADDITIONAL COVENANTS OF THE COMPANY. The Company agrees, in addition to the
covenants set forth in Section 8.1, that prior to the Effective Time, without
the express written consent of Parent, neither the Company nor any of the
Company's Subsidiaries will:
(a) adopt a plan of liquidation dissolution, merger (other than the
Merger), consolidation, restructuring, or other reorganization of the
Company or any Subsidiary, except as set forth on the Company Disclosure
Schedule;
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(b) terminate, establish, adopt, enter into, or make any new grants or
awards of stock based compensation or other benefits under, amend or
otherwise modify the Option Plans, the Directors Plan or any Company
benefit plan or arrangement or, increase the salary, wage, bonus or other
compensation of directors, officers or key employees (except the Company
may increase compensation for key employees in customary amounts, but not
in excess of 5%);
(c) except in the ordinary course of business, consistent with past
practice, incur any debt for borrowed money or guarantee any such debt or
encumber any asset in connection with any such debt, or make any loans,
advances or capital contributions to, or investments in any other Person,
other than a wholly owned Subsidiary;
(d) make any acquisition, through merger, consolidation or otherwise,
except as set forth on the Company Disclosure Schedule;
(e) make any capital expenditure or commitment in excess of $100,000;
or
(f) purchase any shares of Company Stock pursuant to any existing or
hereinafter enacted stock repurchase plan or otherwise purchase any shares
of Company Stock.
8.5 ACQUISITION PROPOSALS. The Company shall not, nor shall it permit any of its
Subsidiaries to, nor shall it authorize or permit any of its directors, officers
or employees or any investment banker, financial advisor, attorney, accountant
or other representative retained by it or any of its Subsidiaries to, directly
or indirectly through another person, (i) solicit, initiate or encourage, or
take any other actions designed to facilitate, any inquiries or the making of
any proposal which constitutes an Acquisition Proposal or (ii) participate in
any discussions or negotiations regarding any Acquisition Proposal. Further, the
Company and its officers and directors will cease any existing discussions or
negotiations, if any, with any parties conducted heretofore with respect to any
Acquisition Proposal. Notwithstanding the foregoing, if the Board of Directors
of the Company reasonably determines that it has received a Superior Proposal,
the Company may furnish information and access to the Person who has submitted
such Superior Proposal pursuant to confidentiality agreements, and may
participate in discussions and negotiate with such Person concerning any
proposed merger, sale of assets, sale of shares of capital stock or similar
transaction involving the Company. Notwithstanding the foregoing, nothing herein
shall require the Company's Board of Directors on behalf of the Company (a) to
act, or refrain from acting, in any manner which, in the opinion of such Board
of Directors after consultation with its legal counsel, would be inconsistent
with its fiduciary duties to the Company's stockholders under applicable Law,
(b) to fail to comply with Rule 14d-9 or Rule 14e-2 promulgated under the
Exchange Act with regard to an Acquisition Proposal, or (c) to fail to make any
public statement required by Law or the requirements of the Exchange. If the
Company receives a Superior Proposal, the Company shall immediately advise
Parent in writing of the terms of the Superior Proposal and the identity of the
Person making the Superior Proposal.
8.6 STOCKHOLDERS' APPROVAL.
(a) The Company shall promptly submit this Agreement and the
Transactions for the approval of its stockholders at the Company's
Stockholder Meeting. The Company shall use all reasonable efforts to obtain
stockholder approval and adoption of this Agreement and the Transactions
(including the recommendation by the Company, through its Board of
Directors, to its stockholders of the approval of the Transactions)
subject, in each case, to the determination of the Board of Directors of
the Company after consultation with its counsel that the foregoing actions
would not be inconsistent with its fiduciary duties to the Company's
stockholders under applicable Law. The Company will use all reasonable
efforts to hold the Company's Stockholder Meeting as soon as practicable
following the date upon which the S-4 Registration Statement becomes
effective. Without limiting the generality of the foregoing, but subject to
its right to terminate this Agreement as set forth herein, the Company
agrees that its obligations pursuant to the first sentence of this Section
8.6(a) shall not be affected by an Acquisition Proposal, including any
Superior Proposal.
(b) Notwithstanding the foregoing, the Board of Directors of the
Company may at any time prior to the Effective Time withdraw, modify or
change any recommendation and declaration regarding this Agreement, the
Merger, or the other Transactions, or recommend and declare advisable a
Superior Proposal, if in the
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opinion of such Board of Directors, after consultation with its counsel,
the failure to so withdraw, modify or change its recommendation and
declaration would reasonably likely be inconsistent with its fiduciary
duties to the Company's stockholders under applicable Law.
8.7 ALL REASONABLE EFFORTS.
(a) Subject to the terms and conditions herein, each of the parties
hereto shall use all reasonable efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper or
advisable under applicable Laws to consummate and make effective the
Transactions, including using all reasonable efforts to obtain all
necessary or appropriate waivers, consents and approvals, to effect all
necessary registrations, filings and submissions, including, but not
limited to, (i) filings under the HSR Act and any other submissions
requested by any Governmental Authority and (ii) required approvals under
the applicable state Laws and to lift any injunction or other legal bar to
the Merger (and, in such case, to proceed with the Merger as expeditiously
as possible), subject, however, to the requisite votes of the stockholders
of the Company, and Merger Sub.
(b) Notwithstanding the foregoing, the Company shall not be obligated
to use all reasonable efforts to take any action pursuant to this Section
8.7 if in the opinion of its Board of Directors after consultation with its
counsel such actions would be reasonably likely to be inconsistent with its
fiduciary duties to the Company's stockholders under applicable Law.
8.8 ACCESS TO/CONFIDENTIALITY OF INFORMATION. Upon reasonable notice, each of
the Company and Parent shall (and shall cause its Subsidiaries to) afford to
each other's Representatives, so that they may evaluate the Transactions,
reasonable access during normal business hours throughout the period prior to
the Effective Time, to its properties, personnel, books and records and other
information as reasonably requested under the circumstances, and, during such
period, furnish promptly to such Representatives the specific information
concerning its business, properties and personnel as listed on the Parent
Disclosure Schedule. Each of the Company and Parent agrees that it will not, and
will cause its Representatives not to, use any information obtained pursuant to
this Section 8.8 for any purpose unrelated to the consummation of the
Transactions.
8.9 PUBLICITY. The parties will consult with each other and will mutually agree
upon any press releases or public announcement pertaining to the Merger and the
other Transactions and shall not issue any such press releases or make any such
public announcements prior to such consultation and agreement, except as may be
required by applicable Law or by obligations pursuant to any listing agreement
with the Exchange, in which case the party proposing to issue such press release
or make such public announcement shall use all reasonable efforts to consult in
good faith with the other party before any such issuance or announcement.
8.10 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) From and after the Effective Time, Parent shall, and shall cause
the Surviving Company to, indemnify and hold harmless each present and
former director and officer of the Company and/or its Subsidiaries (when
acting in such capacity) determined as of the Effective Time, against any
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities, incurred in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to matters
existing or occurring at or prior to the Effective Time, whether asserted
or claimed prior to, at or after the Effective Time, to the fullest extent
permitted under the DGCL (and the Surviving Company shall also advance
expenses as incurred to the fullest extent permitted under applicable law,
provided the Person to whom expenses are advanced provides an undertaking
to repay such advances if it is ultimately determined that such Person is
not entitled to indemnification). Notwithstanding the above, such
indemnification shall not be applicable to any claims made against any
Indemnified Party if a judgment or other final adjudication established
that his or her acts or omissions (A) were committed in bad faith or were
the result of active and deliberate dishonesty and were material to the
cause of action so deliberated or (B) arose out of, were based upon or were
attributable to the gaining in fact of any financial profit or other
advantage to which he or she was not legally entitled.
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(b) Any Person wishing to claim indemnification under Section 8.10(a),
upon learning of any such claim, action, suit, proceeding or investigation,
shall promptly notify the Surviving Company thereof, but the failure to so
notify shall not relieve the Surviving Company of any liability it may have
to such Person if such failure does not materially prejudice the Surviving
Company. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) the
Surviving Company shall have the right to assume the defense thereof and
the Surviving Company shall not be liable to any Person seeking
indemnification under Section 8.10(a) for any legal expenses of other
counsel or any other expenses subsequently incurred by such Person in
connection with the defense thereof, except that if the Surviving Company
elects not to assume such defense or counsel for such Person advises that
there are issues which raise conflicts of interest between the Surviving
Company and such Person, such Person may retain counsel satisfactory to
them, and the Surviving Company shall pay all reasonable expenses of such
counsel for such Person promptly as statements therefor are received, (ii)
such Persons will cooperate in the defense of any such matter, and (iii)
the Surviving Company shall not be liable for any settlement effected
without its prior written consent.
(c) The Surviving Company shall maintain a policy of officers' and
directors' liability insurance for acts and omissions occurring prior to
the Effective Time with coverage in amount and scope at least as favorable
as the Company's existing directors' and officers' liability insurance
coverage for a period of five years after the Effective Time.
(d) If Parent, the Surviving Company or any of their successors or
assigns (i) shall consolidate with or merge into any other corporation or
entity and shall not be the continuing or surviving corporation or entity
of such consolidation or merger or (ii) shall transfer all or substantially
all of its properties and assets to any individual, corporation or other
entity, then and in each such case, proper provisions shall be made so that
the successors and assigns of Parent or the Surviving Company shall assume
all of the obligations set forth in this Section 8.10.
(e) The provisions of this Section 8.10 are intended for the benefit
of, and shall be enforceable by, the Persons with rights of
indemnification, their heirs and their representatives.
8.11 EMPLOYEES.
(a) Except as set forth on the Parent Disclosure Schedule, for a
period of two years following the Effective Time, Parent agrees to provide
employee benefit plans, programs, arrangements and policies for the benefit
of employees of the Company and its Subsidiaries not subject to collective
bargaining that in the aggregate as determined by Parent acting reasonably,
are no less favorable than those of the Company plans, programs,
arrangements or policies prior to the Effective Time. All service credited
to each employee by the Company or its Subsidiaries through the Effective
Time shall be recognized by Parent for all purposes, including for purposes
of eligibility, vesting and benefit accruals under any employee benefit
plan provided by Parent for the benefit of the employees except that
employees will not be credited with their years of service with the Company
for purposes of determining benefits accruals pursuant to the Parent's
Partners Plan.
(b) Parent and the Surviving Company hereby agree to honor (without
modification) and assume the retention program, enhanced severance plan and
noncompetition and severance agreements listed on the Company Disclosure
Schedule, all as in effect at the Effective Time. The Company agrees not to
amend or modify such programs, plans and agreements prior to the Effective
Time without Parent's written consent. Anything in this Agreement to the
contrary notwithstanding, the Company may establish an escrow arrangement
and fund such escrow as contemplated under the Severance and Noncompetition
Agreements listed in the Company Disclosure Schedule and Parent and the
Company hereby agree to honor and assume such escrow arrangement without
modification.
(c) Notwithstanding any other provision set forth in Section 8.11,
with respect to employees who are subject to a collective bargaining
agreement, all benefits shall be provided only in accordance with the
applicable collective bargaining agreement.
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8.12 REGISTRATION STATEMENT. Parent and the Company will, as promptly as
practicable, prepare and file with the SEC the Proxy Statement, with form of
proxy in connection with the vote of Company stockholders with respect to the
Merger, this Agreement and the issuance of the Parent Common Stock pursuant to
the Merger, respectively. Parent will, as promptly as practicable, prepare and
file with the SEC the S-4 Registration Statement, containing the Proxy
Statement, in connection with the registration under the Securities Act of
Parent Common Stock issuable upon conversion of the Company Shares. Parent and
the Company will each use all reasonable efforts to have or cause the S-4
Registration Statement declared effective as promptly as practicable, including,
without limitation, causing their accountants to deliver necessary or required
instruments such as opinions and certificates, and will take any other action
required or necessary to be taken under federal or state securities Laws or
otherwise in connection with the registration process. The Company will use all
reasonable efforts to cause the Proxy Statement to be mailed to its stockholders
at the earliest practicable date. The Company and Parent will cooperate with
respect to the Company's Stockholders Meeting and the Company shall use all
reasonable efforts to hold such meeting as soon as practicable after the date
hereof.
8.13 EXCHANGE LISTING. Parent shall cause the Parent Common Stock constituting
the Merger Consideration to be listed on the Exchange, subject to notice of
official issuance thereof.
8.14 AFFILIATES.
(a) Company shall deliver to Parent a letter identifying all Persons
whom the Company believes to be, at the date of the Company's Stockholders
Meeting, "affiliates" of such party for purposes of applicable
interpretations regarding use of the pooling-of-interests accounting method
and for purposes of Rule 145 under the Securities Act. The Company shall
use all reasonable best efforts to cause each Person who is identified as
an "affiliate" in the letter referred to above to deliver to Parent on or
prior to the date of the Company's Stockholders Meeting a written
agreement, in the form attached hereto as Exhibit 8.14.
(b) The shares of Parent Common Stock issued to affiliates of the
Company in exchange for Company Shares shall not be transferable until such
time as financial results covering at least 30 days of combined operations
of Parent and the Company shall have been published within the meaning of
Section 201.01 of the SEC's Codification of Financial Reporting Policies,
regardless of whether each such affiliate has provided the written
agreement referred to in this Section, except to the extent permitted by,
and in accordance with SEC Accounting Series Release 135 and SEC Staff
Accounting Bulletins 65 and 76. Any Company Shares held by any such
affiliate shall not be transferable, regardless of whether such affiliate
has provided the applicable written agreement referred to in this Section,
if such transfer, either alone or in the aggregate with other transfers by
affiliates, would preclude Parent's ability to account for the business
combination to be effected by the Merger as a pooling of interests. Parent
shall not register the transfer of any Certificate unless such transfer is
made in compliance with the foregoing.
8.15 LETTERS OF ACCOUNTANTS. Each of the Company and Parent shall use their
reasonable efforts to cause to be delivered to the other the "comfort" letters
of KPMG Peat Marwick LLP and Ernst & Young LLP, independent accountants to each
such party, respectively, dated a date within two business days before the date
on which the S-4 Registration Statement shall become effective and addressed to
the other, in form and substance reasonably satisfactory to the other and
customary in scope and substance for "comfort" letters delivered by independent
public accountants in connection with registration statements and proxy
statements similar to the S-4 Registration Statement and Proxy Statement.
8.16 REORGANIZATION. Neither the Company nor Parent and its Subsidiaries will
take any action that would jeopardize the qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
8.17 STOCK OPTIONS.
(a) All Options outstanding at the Effective Time, shall remain
outstanding following the Effective Time and will continue in accordance
with their current terms (except to the extent such terms and conditions
are altered in accordance with their terms as a result of the consummation
of the Transactions including the terms which apply in the event of a
"change of control" of the Company). A listing of
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outstanding Options as of the date hereof, showing what portions of such
Options are exercisable as of such date, the dates upon which such Options
expire, the exercise prices of such Options, and whether such Options are
intended to qualify as "incentive stock options" within the meaning of
Section 422 of the Code, is set forth on the Company Disclosure Schedule.
At the Effective Time, the Options shall, by virtue of the Merger and
without any further action on the part of the Company or the holder
thereof, be assumed by Parent in such manner that Parent (i) is a
corporation "assuming a stock option in a transaction to which Section
424(a) applies" within the meaning of Section 424 of the Code or (ii) to
the extent that Section 424 of the Code does not apply to any such Options,
would be such a corporation were Section 424 of the Code applicable to such
Options. From and after the Effective Time, all references to the Company
in the Option Plans and the applicable stock option agreements issued
thereunder shall be deemed to refer to Parent which shall have assumed the
Option Plans as of the Effective Time by virtue of this Agreement and
without any further action. Each Substitute Option assumed by Parent shall
be exercisable upon the same terms and conditions as under the applicable
Option Plan and/or the applicable agreement, except that (A) each such
Substitute Option shall be exercisable for, and represent the right to
acquire, that whole number of shares of Parent Common Stock (rounded up or
down to the nearest whole share) equal to the number of shares of Company
Common Stock subject to such Option multiplied by the Conversion Number;
and (B) the option price per share of Parent Common Stock shall be an
amount equal to the option price per share of Company Common Stock subject
to such Company Stock Option in effect immediately prior to the Effective
Time divided by the Conversion Number (the option price per share, as so
determined, being rounded upward to the nearest full cent). Such Substitute
Option shall otherwise be subject to the same terms and conditions as such
Option, which is in accordance with the terms thereof.
(b) As soon as practicable after the Effective Time, Parent shall
deliver to each holder of an Option an appropriate notice setting forth
such holder's rights pursuant thereto and such Option shall continue in
effect on the same terms and conditions (including any antidilution
provisions, and subject to the adjustments required by this Section 8.17
after giving effect to the Merger). Parent shall comply with the terms of
all such Options and ensure, to the extent required by, and subject to the
provisions of, the Option Plans, that Options which qualified as incentive
stock options under Section 422 of the Code prior to the Effective Time
continue to qualify as incentive stock options after the Effective Time.
Parent shall take all corporate action necessary to reserve for issuance,
prior to the Effective Time, a sufficient number of shares of Parent Common
Stock for delivery upon exercise of Substitute Options pursuant to the
terms set forth in this Section 8.17. As soon as practicable after the
Effective Time, the shares of Parent Common Stock subject to Options will
be covered by an effective registration statement on Form S-8 (or any
successor form) or another appropriate form and Parent shall use its best
efforts to maintain the effectiveness of such registration statement or
registration statements for so long as Substitute Options remain
outstanding. In addition, Parent shall use all reasonable efforts to cause
the shares of Parent Common Stock subject to Options to be listed on the
Exchange.
8.18 POOLING OF INTERESTS. The Company shall cooperate with Parent in its
efforts to cause the transactions contemplated by the Agreement, including the
Merger, to be accounted for as a pooling of interests under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations, and such
accounting treatment to be accepted by the SEC. Neither Parent nor Company shall
take any action that would cause such accounting treatment not to be obtained.
8.19 STANDSTILL AGREEMENTS; CONFIDENTIALITY AGREEMENTS. During the period from
the date of this Agreement through the Effective Time, the Company shall not
terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement to which it or any of its respective Subsidiaries is a
party. During such period, the Company shall enforce, to the fullest extent
permitted under applicable law, the provisions of any such agreement, including
by obtaining injunctions to prevent any breaches of such agreements and to
enforce specifically the terms and provisions thereof in any court of the United
States of America or of any state having jurisdiction.
8.20 COMPANY STOCK REPURCHASE PLAN. The Company agrees, prior to the Effective
Time, to rescind and terminate its stock repurchase plan.
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ARTICLE 9
CONDITIONS
9.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO CLOSE. The obligations of each of
the parties to consummate the Transactions are subject to satisfaction, or, to
the extent permitted by Law, mutual waiver, on or prior to the Effective Time of
each of the following conditions:
(a) Injunction. There shall not be in effect any Law or any Judgment
directing that the Transactions not be consummated; provided, however, that
prior to invoking this condition each party shall use all reasonable
efforts to have any such Judgment vacated; and there shall have been no Law
enacted or promulgated which would make consummation of the Transactions
illegal or which would have or reasonably be expected to have a Material
Adverse Effect.
(b) Stockholder Approval. This Agreement and the Merger shall have
been duly approved by the stockholders of the Company in accordance with
applicable Law and the Certificate of Incorporation, as amended, of the
Company at the Company's Stockholder Meeting. Parent represents that the
issuance of Parent Common Stock in connection with the Merger does not
require shareholder approval under applicable law.
(c) HSR Act. Any waiting period (and any extension thereof) applicable
to the consummation of the Merger under the HSR Act shall have expired or
shall have been earlier terminated.
(d) S-4 Registration Statement; "Blue Sky" Approvals. The S-4
Registration Statement shall have become effective and no stop order
suspending its effectiveness shall have been issued and no proceedings for
such purpose shall have been initiated and be continuing by the SEC. Parent
shall have received all state securities Law or "blue sky" permits and
authorizations necessary to issue Parent Common Stock in exchange for the
Company Shares in the Merger.
(e) Listing of Parent Common Stock. The shares of Parent Common Stock
constituting the aggregate stock portion of the Merger Consideration and
the other such shares required to be reserved for issuance in connection
with the Merger shall have been authorized for listing on the Exchange,
subject to notice of official issuance.
(f) Pooling. Parent and the Company shall each have received an
opinion of their respective independent accounting firms to the effect that
the Merger will be accounted for as a pooling of interests under Opinion 16
of the Accounting Principles Board and applicable SEC rules and
regulations.
(g) Financial Advisors' Opinions. The Company shall have received
letters from its financial advisors, dated the Closing Date, to the effect
that the letters previously delivered by such advisors which provide that
the Merger consideration is fair to the stockholders of the Company other
than the Parent are in full force and effect.
9.2 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB TO
CLOSE. The obligations of Parent and Merger Sub to consummate the Transactions
are subject to satisfaction, or, to the extent permitted by Law, waiver on or
prior to the Effective Time of each of the following conditions:
(a) Performance. The Company shall have performed, in all material
respects, all the obligations required to be performed by it under this
Agreement at or prior to the Effective Time.
(b) Representations and Warranties. The representations and warranties
of the Company shall be true and correct, in each such case as of the date
of this Agreement and as of the Effective Time as though made on the
Effective Time (except that representations and warranties that speak as of
a specific date shall be true and correct as of such date), provided that
for purposes of determining the satisfaction of the foregoing, such
representations and warranties shall be deemed true and correct if the
failure or failures of such representations and warranties to be so true
and correct (excluding the effect of any qualification set forth
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therein relating to "materiality" or a "Material Adverse Effect") have not
had and could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(c) Deliveries. Parent shall have received at the Effective Time:
(i) a certificate dated the Effective Time and executed by the
Chief Executive Officer and the Chief Financial Officer of the Company
certifying to the fulfillment of the conditions specified in Sections
9.2(a) and (b) and, as to the Company, fulfillment of the conditions
specified in Section 9.1(b); and
(ii) certified or verified copies of the Company's Certificate of
Incorporation, as amended, its Bylaws, as amended, and certificates of
good standing for the Company, as Parent may reasonably request.
(d) Consents and Approvals. All consents, approvals and authorizations
legally required to be obtained to consummate the Merger shall have been
obtained from all Governmental Entities, except for such consents,
approvals and authorizations the failure of which to obtain would not have
a Material Adverse Effect on Parent (assuming for purposes of this Section
9.2(d) that the Merger shall have been effected).
(e) Tax Opinion. Parent shall have received an opinion, based on
appropriate representations contained in certificates of the Company,
Parent, Merger Sub, their respective officers and others, of Keating,
Muething & Klekamp, P.L.L., dated the Effective Time, to the effect that
(i) the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code; (ii) each
of Parent, Merger Sub and the Company will be a party to the reorganization
within the meaning of Section 368(b) of the Code; and (iii) no gain or loss
will be recognized by a stockholder of the Company as a result of the
conversion of the Company Shares into Parent Common Stock pursuant to the
terms of the Merger (except with respect to cash received in lieu of
fractional share interests in Parent). Such counsel may rely on
representations made herein and customary certifications from officers of
Company and Parent in issuing such opinion.
(f) Legal Opinion. Parent shall have received from counsel to the
Company an opinion in form and substance substantially as set forth in
Exhibit 9.2 attached hereto addressed to Parent and Merger Sub, and dated
as of the date of Closing.
9.3 ADDITIONAL CONDITIONS TO THE COMPANY'S OBLIGATION TO CLOSE. The obligation
of the Company to consummate the Transactions is subject to satisfaction, or, to
the extent permitted by Law, waiver on or prior to the Effective Time of each of
the following conditions:
(a) Performance. Parent and Merger Sub shall have performed in all
material respects, all the obligations required to be performed by them
under this Agreement at or prior to the Effective Time.
(b) Representations and Warranties. The representations and warranties
of Parent and Merger Sub shall be true and correct, in each such case as of
the date of this Agreement and as of the Effective Time as though made on
the Effective Time (except that representations and warranties that speak
as of a specific date shall be true and correct as of such date), provided
that for purposes of determining the satisfaction of the foregoing, such
representations and warranties shall be deemed true and correct if the
failure or failures of such representations and warranties to be so true
and correct (excluding the effect of any qualification set forth therein
relating to "materiality" or a "Material Adverse Effect") have not had and
could not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect.
(c) Deliveries. The Company shall have received at the Effective Time:
(i) a certificate dated the Effective Time and executed by the
Chief Executive Officer or President of Parent certifying to the
fulfillment of the conditions specified in Sections 9.3(a) and (b), and
as to Parent and Merger Sub, fulfillment of the conditions specified in
Sections 9.1(b), (d) and (e);
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(ii) certified or verified copies of Parent and Merger Sub's
respective Articles of Incorporation and Certificate of Incorporation,
as currently amended, and certificates of good standing for Parent and
Merger Sub, as the Company may reasonably request; and
(iii) a copy of the Exchange Agent Agreement pursuant to Section
5.3.
(d) Consents and Approvals. All consents, approvals and authorizations
legally required to be obtained to consummate the Merger shall have been
obtained from all Governmental Entities, except for such consents,
approvals and authorizations the failure of which to obtain would not have
a Material Adverse Effect (assuming for purposes of this Section 9.3(d)
that the Merger shall have been effected).
(e) Tax Opinion. The Company shall have received an opinion, based on
appropriate representations contained in certificates of the Company,
Parent, Merger Sub, their respective officers and others, of Bryan Cave
LLP, dated the Effective Time, to the effect that (i) the Merger will be
treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code; (ii) each of Parent, Merger Sub and
the Company will be a party to the reorganization within the meaning of
Section 368(b) of the Code; and (iii) no gain or loss will be recognized by
a stockholder of the Company as a result of the conversion of the Company
Shares into Parent Common Stock pursuant to the terms of the Merger (except
with respect to cash received in lieu of fractional share interests in
Parent). Such counsel may rely on representations made herein and customary
certifications from officers of Company and Parent in issuing such opinion.
(f) Legal Opinion. The Company shall have received from counsel to
Parent and Merger Sub an opinion in form and substance substantially as set
forth in Exhibit 9.3 attached hereto, addressed to the Company and dated as
of the date of Closing.
9.4 FRUSTRATION OF CLOSING CONDITIONS. Neither Parent nor the Company may rely
on the failure of any condition set forth in Section 9.1, 9.2 or 9.3, as the
case may be, to be satisfied if such failure was caused by such party's failure
to use reasonable best efforts to consummate the Merger and the other
transactions contemplated by this Agreement.
ARTICLE 10
TERMINATION AND REMEDIES
10.1 TERMINATION. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, before or after the approval
by stockholders of either or both of the Company and Parent,
(a) by the mutual written consent of Parent and the Company;
(b) by either Parent or the Company, if:
(i) any court of competent jurisdiction in the United States, or some
other Governmental Authority, shall have issued an order, decree or ruling
or taken any other action permanently restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall
have become final and nonappealable; provided, however, that the party
seeking to terminate this Agreement under this Section 10.1(b)(i) shall
have used its best efforts to remove such injunction, order or decree; or
(ii) the Merger shall not have been consummated by June 30, 1999;
provided, that the right to terminate this Agreement pursuant to this
Section 10.1(b)(ii) shall not be available to any party whose failure to
fulfill any of its obligations under this Agreement results in the failure
of the Merger to occur on or before such date; provided further Parent
shall not have the right to terminate this Agreement under this Section
10.1(b)(ii) until July 31, 1999, if the Merger shall not have been
consummated as a result of (A) all required regulatory approvals or
consents necessary to satisfy the conditions set forth in Section 9.2(d)
shall not have been received by July 31, 1999; (B) the entering of an order
or any pending action commenced by any applicable federal governmental
antitrust authority seeking an order which would have the effect of making
the Merger illegal or otherwise materially and adversely affecting the
value of the Company or
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prohibiting consummation of the Merger, or (C) the failure of the
conditions set forth in Section 9.1(c) to be satisfied;
(iii) to the extent required by applicable Law, this Agreement and the
Merger shall have been voted on by stockholders of the Company at the
Company's Stockholder Meeting and the vote shall not have been sufficient
to satisfy the condition set forth in Section 9.1(b); or
(iv) if the aggregate adjustment to the Company Share Price pursuant
to Section 8.3(d)(ii) is more than $2.00.
(c) by Parent, if:
(i) there has been a misrepresentation or breach of warranty or a
failure to perform a covenant on the part of the Company with respect to
its representations, warranties and covenants set forth in this Agreement
(excluding the effect of any qualification set forth therein relating to
"materiality" or a "Material Adverse Effect") of which the Company has been
given notice in writing by Parent and which has not been cured by the
Company within thirty (30) days of such notice and which misrepresentation,
breach or failure to perform would, in the aggregate with all other
misrepresentations, breaches or failures to perform, have a Material
Adverse Effect; or
(ii) the Board of Directors of the Company withdraws or materially
modifies or changes its recommendation of this Agreement or the Merger in a
manner adverse to Parent or Merger Sub.
(d) by the Company, if:
(i) there has been a misrepresentation or breach of warranty or
failure to perform a covenant on the part of the Parent or Merger Sub with
respect to its or their representations, warranties and covenants set forth
in this Agreement (excluding the effect of any qualification set forth
therein relating to "materiality" or a "Material Adverse Effect") of which
the Parent and/or Merger Sub, as the case may be, has been given notice in
writing by the Company and which has not been cured by Parent or Merger
Sub, as the case may be, within thirty (30) days of such notice and which
misrepresentation, breach or failure to perform would have a Material
Adverse Effect;
(ii) in the exercise of good faith judgment as to its fiduciary duties
to the Company's stockholders as imposed by applicable Law and, after
consultation with legal counsel, the Company's Board of Directors
determines that such termination is required by reason of any Acquisition
Proposal being made and the Company's Board of Directors withdraws or
materially modifies or changes its recommendation of this Agreement or the
Merger if there exists at such time an Acquisition Proposal for the Company
deemed to be a Superior Proposal and after written notice is given to
Parent of the intent to accept a competing Acquisition Proposal and Parent
has not communicated in writing within five (5) business days after receipt
of such notice an Acquisition Proposal that matches or is more favorable
than the third party Acquisition Proposal from a financial point of view;
or
(iii) the Parent Share Price is less than $52.00.
10.2 EFFECT OF TERMINATION.
(a) In the event of the termination and abandonment of this Agreement
pursuant to Section 10.1, this Agreement shall become void and have no
effect, without any liability on the part of any party hereto or its
affiliates, directors, officers or stockholders, provided that,
notwithstanding the foregoing, if this Agreement has been terminated, the
provisions of Sections 6.17, 7.13 and 10.2; the last sentence of Section
8.8; and Article 11, in its entirety, shall survive such termination and
shall continue to be of binding effect.
(b) In the event of the termination of this Agreement by (A) the
Company pursuant to Section 10.1(d)(ii), or (B) the Company or Parent
pursuant to Section 10.1(b)(iii) due to the failure of the Company's
stockholders to approve and adopt this Agreement, or (C) Parent pursuant to
Section 10.1(c)(ii) and in the case of (B) or (C) above there exists an
Acquisition Proposal for the Company, then the Company shall pay Parent
$10,960,867. Any payment required to be paid pursuant to Section 10.2(b)(A)
shall be made
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prior to, and shall be a pre-condition to the effectiveness of the
termination of this Agreement pursuant to such Section. Any payment
required to be paid pursuant to Section 10.2(b)(B) or Section 10.2(b)(C)
shall be made to Parent not later than ten (10) days after the entering of
a definitive agreement with respect to an Acquisition Proposal.
ARTICLE 11
GENERAL PROVISIONS
11.1 EXPENSES. Whether or not the Merger is consummated, all costs and expenses,
incurred in connection with this Agreement and the Merger and the other
transactions contemplated by this Agreement shall be paid by the party incurring
such expense, except that expenses incurred in connection with the filing fee
for the S-4 Registration Statement and printing and mailing the Prospectus/Proxy
Statement and the S-4 Registration Statement and the filing fee under the HSR
Act shall be shared equally by Parent and the Company.
11.2 NONSURVIVAL. None of the representations, warranties, covenants and other
agreements in this Agreement or in any instrument delivered pursuant to this
Agreement, including any rights arising out of any breach of such
representations, warranties, covenants and other agreements, shall survive the
Effective Time, except for those covenants and agreements contained herein and
therein that by their terms apply or are to be performed in whole or in part
after the Effective Time and this Article 11. Nothing in this Section 11.2 shall
relieve any party for any breach of any representation, warranty, covenant or
other agreement in this Agreement occurring prior to termination.
11.3 MODIFICATION OR AMENDMENT. This Agreement may be amended by an instrument
in writing executed and delivered on behalf of each of the parties hereto, at
any time prior to the Effective Time, subject to the provisions of the DGCL;
provided, however, that after approval of this Agreement by the stockholders of
the Company, no amendment shall be made which by Law requires further approval
by such stockholders without such further approval.
11.4 WAIVER. The conditions to each of the parties' obligations to consummate
the Merger are for the sole benefit of such party and may be waived, at any time
prior to the Effective Time, by such party in whole or in part 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 writing signed on behalf of such
party, and shall not be inferred by the failure of any such party to assert any
of its rights hereunder. Waiver of any provision of this Agreement or of any
breach hereof shall be a waiver of only said specific provision or breach and
shall not be deemed a waiver of any other provision or any future breach hereof.
11.5 NOTICES. All notices, documents, or other communications to be given
hereunder shall be in writing and shall be deemed validly given if delivered by
messenger, facsimile transmission (with a confirming copy sent by overnight
courier), or express overnight delivery, or sent by certified mail, return
receipt requested, as follows:
(a) If to the Company, to
Randolph K. Rolf
Chairman of the Board, President
and Chief Executive Officer
Unitog Company
1300 Washington Street
Kansas City, Missouri 64105
Telephone: (816) 474-7000
Telecopier: (816) 474-0699
with a copy to:
Thomas W. Van Dyke, Esq.
Bryan Cave LLP
7500 College Boulevard, Suite 1100
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Overland Park, Kansas 66210
Telephone: (913) 338-7700
Telecopier: (913) 338-7777
(b) If to Parent or Merger Sub, to
Robert J. Kohlhepp
Chief Executive Officer
Cintas Corporation
6800 Cintas Blvd.
Mason, Ohio 45040
Telephone: (513) 573-4001
Telecopier: (513) 573-4030
with a copy to:
Robert E. Coletti, Esq.
Keating, Muething & Klekamp, P.L.L.
1400 Provident Tower
One East Fourth Street
Cincinnati, Ohio 45202
Telephone: (513) 579-6560
Telecopier: (513) 579-6956
or such other Persons or addresses as may be designated in writing by the party
to receive such notice. Any notice delivered by messenger shall be deemed
received when such delivery is tendered; notices sent by facsimile transmission
shall be deemed received upon faxed confirmation of receipt; notices mailed in
the manner provided above, shall be deemed received on the third day after such
are postmarked; and notices delivered by other methods shall be deemed received
when actually received by the addressee or its authorized agent.
11.6 PUBLISHING OF FINANCIAL RESULTS. In the event the Closing occurs after May
1, 1999 and on or before June 1, 1999, Parent agrees to publish, within the
meaning of Section 2.01.01 of the SEC's Codification of Financial Reporting
Policies, results covering at least 30 days of combined operations of Parent and
the Company, within ten (10) business days of Parent's public disclosure of
results for its fiscal year end of May 31, 1999. In the event the Closing occurs
after June 1, 1999, Parent agrees to publish such 30 days' combined operating
results covering the first full calendar month after Closing as soon as possible
and in no event later than the 20th day after the conclusion of the first such
full calendar month.
11.7 GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, the Laws of the State of Delaware, without giving
effect to the principles of the conflicts of law thereof.
11.8 ENTIRE AGREEMENT. This Agreement, including the Additional Agreements,
constitute the entire agreement and understanding of the parties with respect to
the Transactions and supersedes any and all prior agreements and understandings
relating to the subject matter hereof.
11.9 CONSTRUCTION. The section and article headings contained in this Agreement
are inserted for convenience of reference only and shall not affect the meaning
or interpretation of this Agreement. The preamble hereof, the recitals hereto,
and all exhibits and schedules attached hereto are hereby incorporated herein by
reference and made a part hereof.
11.10 BINDING EFFECT. This Agreement shall be binding upon and inure solely to
the benefit of the parties, and their respective successors and assigns, to the
extent allowed hereby. Nothing in this Agreement, express or implied, other than
the right to receive the Merger Consideration payable pursuant to Article 5
hereof is intended to or shall confer upon any other Person any rights, benefits
or remedies of any nature whatsoever under or by reason of this Agreement;
provided, however, that the provisions of Sections 8.10, 8.11 and 8.18 shall
inure to the
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benefit of and be enforceable by the indemnified parties or the employees and
directors of the Company, respectively.
11.11 ASSIGNMENT. None of the parties hereto may assign any rights or delegate
any obligations provided for in this Agreement without the prior written consent
of all the other parties. Any assignment in violation of the preceding sentence
shall be void. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
11.12 COUNTERPARTS. This Agreement may be executed in any number of separate
counterparts, each of which shall be deemed to be an original, but which
together shall constitute one and the same instrument.
11.13 OBLIGATIONS OF SUBSIDIARIES. Whenever this Agreement requires Merger Sub
to take any action, such requirement shall be deemed to include an undertaking
on the part of Parent to cause Merger Sub to take such action and a guarantee of
the performance thereof. Whenever this Agreement requires a Subsidiary of the
Company to take any action, such requirement shall be deemed to include an
undertaking on the part of the Company to cause such Subsidiary to take such
action.
11.14 SEVERABILITY. The provisions of this Agreement shall be deemed severable
and the invalidity or unenforceability of any provision shall not affect the
validity or enforceability or the other provisions hereof. If any provision of
this Agreement, or the application thereof to any Person or any circumstance, is
invalid or unenforceable, (a) a suitable or equitable provision shall be
substituted therefor in order to carry out, so far as may be valid or
enforceable, the intent and purpose of such invalid or unenforceable provision
and (b) the remainder of this Agreement and the application of such provision to
other Persons or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect the
validity or enforceability of such provision, or the application thereof, in any
other jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective duly authorized officers as of the date first above written.
UNITOG COMPANY
By: /s/ RANDOLPH K. ROLF
------------------------------------
Name: Randolph K. Rolf
Title: Chairman, President and Chief
Executive Officer
CINTAS CORPORATION
By: /s/ ROBERT J. KOHLHEPP
------------------------------------
Name: Robert J. Kohlhepp
Title: Chief Executive Officer
CINTAS IMAGE ACQUISITION COMPANY
By: /s/ ROBERT J. KOHLHEPP
------------------------------------
Name: Robert J. Kohlhepp
Title: Chief Executive Officer
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APPENDIX B
January 9, 1999
PERSONAL AND CONFIDENTIAL
Board of Directors
Unitog Company
1300 Washington Street
Kansas City, MO 64105
Re: Fairness Opinion
Gentlemen:
In connection with the proposed acquisition through a merger (the "Merger") by
Cintas Corporation ("Cintas" or "Parent") of Unitog Company ("Unitog" or the
"Company"), pursuant to the Agreement and Plan of Merger dated January 9, 1999
(the "Agreement") between Cintas, Cintas Image Acquisition Company ("Merger
Sub"), and Unitog you have requested our opinion as to the fairness, from a
financial point of view, to the Company's shareholders of the Merger
Consideration to be received by such shareholders for their common stock in the
proposed Merger pursuant to the Agreement.
Subject to the provisions of the Agreement, at the Effective Time, each issued
and outstanding share of common stock of the Company ("Company Shares"), by
virtue of the Merger and without any action on the part of the holder thereof,
other than Company Shares owned by Parent, Merger Sub, or any direct or indirect
wholly owned subsidiary of Parent, shall be converted into the right to receive
as Merger Consideration, that number of shares of Parent Common Stock equal to
the Conversion Number upon surrender of the Certificate representing such
Company Share.
The Conversion Number shall be equal to the quotient (rounded to the nearest
1/10,000) determined by dividing $38.00, as adjusted pursuant to Section 8.3 of
the Agreement ("Company Share Price"), by the amount determined by calculating
the average of the high and low sales prices of Parent Common Stock as reported
on the NASDAQ Stock Market for the twenty (20) consecutive trading days ending
on the third trading day preceding the date of the meeting of the Company's
stockholders for the purpose of voting on the adoption of this Agreement
("Parent Share Price"). Notwithstanding the foregoing, if the Parent Share Price
is less than $52.00, the Parent Share Price shall be deemed to be $52.00 (for
purposes of determining the Conversion Number) and, if the Parent Share Price is
greater than $66.43, the Parent Share Price shall be deemed to be $66.43 plus
fifty percent (50%) of the difference between the Parent Share Price and $66.43.
As a customary part of its investment banking business, Goldsmith, Agio, Helms
Securities, Inc. ("GAHS") is engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, private placements, and
valuations for estate, corporate, and other purposes. In return for our services
in connection with providing this opinion, the Company will pay us a fee, which
fee is not contingent upon the consummation of the Merger, and indemnify us
against certain liabilities. We are also acting as a financial advisor to the
Company in connection with the Merger for which we will receive certain other
fees, a significant portion of which is contingent upon the consummation of the
Merger.
In arriving at our opinion, we have undertaken such reviews, analyses and
inquiries as we deemed necessary and appropriate under the circumstances. Among
other things, we have (i) reviewed the Agreement; (ii) analyzed financial and
other information that is publicly available relating to Cintas; (iii) analyzed
financial and other information that is publicly available relating to the
Company; (iv) analyzed certain financial and operating data of the Company that
has been made available to us by Unitog; (v) visited certain facilities of the
Company and discussed with management of the Company the financial condition,
operating results, business outlook and
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Unitog Company
January 9, 1999
Page 2
prospects of the Company; (vi) analyzed the valuations of publicly traded
companies that we deemed comparable to the Company; (vii) performed a discounted
cash flow analysis of the Company based on financial projections that Unitog
management provided to us; and (viii) analyzed the financial terms of certain
transactions we deemed similar to the Merger that have recently been effected.
We have relied upon and assume the accuracy, completeness, and fairness of the
financial statements and other information furnished by, or publicly available
relating to, the Company or Cintas, or otherwise made available to us, and have
not assumed responsibility independently to verify such information. We have
further relied upon assurances by the Company that the information provided to
us has a reasonable basis, and with respect to projections and other business
outlook information, reflects the best currently available estimates, and that
the Company is not aware of any information or fact that would make the
information provided to us incomplete or misleading. In arriving at our opinion,
we have not performed any appraisals or valuations of specific assets or
liabilities of the Company or Cintas and express no opinion regarding the
liquidation value of the Company or Cintas or any of its assets. Our opinion is
based upon the information available to us and the facts and circumstances as
they exist and are subject to evaluation on the date hereof; events occurring
after the date hereof could materially affect the assumptions used in preparing
this opinion.
We have assumed that the Merger will be accounted for as a pooling of interests
in accordance with generally accepted accounting principles ("GAAP") and that
such Merger qualifies for such accounting treatment under GAAP. We have also
assumed that the Merger will constitute a reorganization under Section 368 of
the Internal Revenue Code of 1986, as amended. We have relied, with respect to
legal and accounting matters related to the Agreement, on the advice of the
Company's legal and accounting advisors. We have made no independent
investigation of any legal or accounting matters that may affect the Company and
have assumed the correctness of the legal and accounting advice provided to the
Company and its Board of Directors.
Our opinion is rendered for the benefit and use of the Board of Directors of the
Company in connection with the Board's consideration of the Merger and does not
constitute a recommendation to any holder of Company Common Stock as to how such
stockholder should vote with respect to the Agreement. We have not been asked
to, nor do we, express an opinion as to the relative merits of the Merger as
compared to any alternative business strategies that might exist for the Company
or the effect of any other transaction in which the Company might engage. This
opinion may not be published or otherwise used or referred to publicly without
our written consent; provided, however, that this opinion may be included in its
entirety in any filing with the Securities and Exchange Commission with respect
to the Merger.
Based upon and subject to the foregoing, and based upon such other facts as we
consider relevant, it is our opinion that, as of the date hereof, the Merger
Consideration to be received by the Company's shareholders for their common
stock in the proposed Merger pursuant to the Agreement is fair to such
shareholders from a financial point of view.
Sincerely,
Goldsmith, Agio, Helms Securities, Inc.
By:
----------------------------------------
97
APPENDIX C
January 9, 1999
PERSONAL AND CONFIDENTIAL
Board of Directors
Unitog Company
1300 Washington Street
Kansas City, Missouri 64105
Gentlemen:
You have requested our opinion as to the fairness from a financial point of view
to the holders of common stock of Unitog Company (the "Company") of the
consideration to be received by such holders pursuant the terms and conditions
set forth in the Agreement and Plan of Merger by and among Cintas Corporation
("Cintas"), Cintas Image Acquisition Company ("Merger Sub") and the Company,
dated January 9, 1999 (the "Agreement"). Pursuant to the Agreement, Merger Sub
will be merged with and into the Company (the "Merger") and each outstanding
share of the common stock, par value $0.01 per share, of the Company (the
"Company Common Stock") will be converted into the right to receive as merger
consideration (the "Merger Consideration") that number of shares of Cintas
common stock, no par value per share, (the "Cintas Common Stock") equal to the
conversion number (the "Conversion Number"), as hereinafter defined.
The Conversion Number means the quotient (rounded to the nearest 1/10,000th)
determined by dividing $38.00, as adjusted pursuant to Section 8.3 of the
Agreement ("Company Share Price"), by the amount determined by calculating the
average of the high and low sales prices of Cintas Common Stock as reported on
the NASDAQ Stock Market for the 20 consecutive trading days ending on the third
day preceding the date of the meeting of the Company's stockholders for the
purpose of voting on the adoption of the Agreement ("Cintas Share Price").
Notwithstanding the foregoing, if Cintas Share Price is less than $52.00, the
Cintas Share Price shall be deemed to be $52.00 (for purposes of determining the
Conversion Number) and, if the Cintas Share Price is greater than $66.43, the
Cintas Share Price shall be deemed to be $66.43 plus fifty percent (50%) of the
difference between the Cintas Share Price and $66.43 (for purposes of
determining the Conversion Number).
George K. Baum & Company ("Baum"), as part of its investment banking business,
is engaged in the valuation of businesses and their securities in connection
with mergers and acquisitions, negotiated underwritings, secondary distributions
of listed and unlisted securities, private placements and valuations for estate,
corporate and other purposes.
In connection with this opinion, we have reviewed, among other things, the
Agreement; certain publicly available business and financial information
relating to the Company and Cintas including the Company's and Cintas's recent
Annual Reports, Forms 10-K, Forms 10-Q, and other filings with the Securities
and Exchange Commission ("SEC"); and certain internal financial analyses and
forecasts prepared by the Company's management. We also have held discussions
with members of senior management of the Company regarding the past and current
business operations, financial condition and future prospects of the Company. In
addition, we have reviewed the reported price and trading activity for the
Company Common Stock and Cintas Common Stock, compared certain publicly
available financial and stock market information for the Company with similar
information for Cintas and certain other companies that we believe to be
comparable in certain respects to the Company and Cintas, reviewed the financial
terms of certain business combinations that we deemed to be similar to the
Merger, reviewed certain recent historical data relating to premiums paid in
mergers and acquisitions of publicly traded companies, and performed such other
studies and analyses as we deemed appropriate.
In preparing our opinion, we have relied upon and assumed the accuracy and
completeness of all the financial and other information that was publicly
available or provided to us by or on behalf of the Company and Cintas, and
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Unitog Company
January 9, 1999
Page 2
have not been engaged to independently verify any such information. We have not
undertaken nor obtained any independent evaluations or appraisals of any of the
Company's or Cintas's assets, properties, or liabilities, nor have we made any
physical inspection of the properties or assets of the Company or Cintas. We
have assumed that the Merger will be accounted for as a pooling of interests in
accordance with generally accepted accounting principles ("GAAP") and that such
Merger qualifies for such accounting treatment under GAAP. We have also assumed
that the Merger will constitute a tax-deferred reorganization pursuant to the
Internal Revenue Code of 1986, as amended. We have not been engaged to
independently verify any legal and accounting matters relative to the Agreement,
but instead have relied on the advice of the Company's legal and accounting
advisors.
We are acting as a financial advisor to the Company in connection with the
Merger for which we will receive certain fees, a significant portion of which,
but none of the fee relating to this opinion, is contingent upon the
consummation of the Merger. Additionally, Baum has previously rendered financial
advisory and investment banking services to the Company for which we have
received customary compensation. A member of the Company's Board of Directors is
a vice president of Baum and a director and officer of George K. Baum Group,
Inc., a holder of 661,870 shares of Company Common Stock, and another member of
the Company's Board of Directors is an employee of Baum and a director, officer
and shareholder of George K. Baum Group, Inc. In the ordinary course of
securities business, we and our affiliates may hold or actively trade the
securities of the Company or Cintas for our own account and for the accounts of
our customers and, accordingly, may at any time hold a long or short position in
such securities. Additionally, Baum makes a market in the Company's Common Stock
on the NASDAQ Stock Market.
Our advisory services and the opinion expressed herein are provided for the
information and assistance of the Board of Directors of the Company in
connection with its consideration of the Merger and such opinion does not
constitute a recommendation as to how any holder of Company Common Stock should
vote with respect to such transaction. This opinion is for the information of
the Board of Directors of the Company only in connection with its consideration
of the Agreement and may not be published or otherwise used by the Company
without our prior written consent; provided, however, that this opinion may be
included in its entirety in any filing with the SEC with respect to the Merger.
Our opinion necessarily is based on the conditions and circumstances as they
exist and can be evaluated as of the date hereof. We have not been asked to, nor
do we, express an opinion as to the relative merits of the Merger as compared to
any alternative business strategies that might exist for the Company or the
effect of any other transaction in which the Company might engage.
Based upon and subject to the foregoing, we are of the opinion that, as of the
date hereof, the proposed Merger Consideration to be received by the holders of
the Company Common Stock pursuant to the Agreement is fair from a financial
point of view to such holders.
Very truly yours,
GEORGE K. BAUM & COMPANY
By:
----------------------------------------
John R. Martin
Vice President
99
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Washington Business Corporation Act, Section 23A.08.025, allows
indemnification by the Registrant to any person made or threatened to be made a
party to any proceedings, other than a proceeding by or in the right of the
Registrant, by reason of the fact that he is or was a director, officer,
employee or agent of the Registrant, against expenses, including judgments and
fines, if he acted in good faith and in a manner reasonably believed to be in or
not opposed to the best interests of the Registrant and, with respect to
criminal actions, in which he had no reasonable cause to believe that his
conduct was unlawful. Similar provisions apply to actions brought by or in the
right of the Registrant, except that no indemnification shall be made in
proceedings in which the person shall have been adjudged to be liable to the
Corporation. Indemnifications are to be made by a majority vote of a quorum of
disinterested directors or the written opinion of independent counsel or by the
Shareholders.
Article V of the Registrant's By-Laws provides that indemnification shall
be extended to any of the persons described above to the full extent permitted
by the Washington Business Corporation Act.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
- -------------- -----------------------
2 Agreement and Plan of Merger dated January 9, 1999 by and
among Cintas Corporation, Cintas Image Acquisition Company
and Unitog Company (incorporated by reference to the Current
Report on Form 8-K dated January 9, 1999 of Unitog Company)
5 Opinion of Keating, Muething & Klekamp, P.L.L
8.1 Opinion of Keating, Muething & Klekamp, P.L.L. on tax
matters
8.2 Opinion of Bryan Cave LLP on tax matters
23.1 Consent of KPMG LLP
23.2 Consent of Ernst & Young LLP
23.3 Consents of Keating, Muething & Klekamp, P.L.L. (contained
in Exhibits 5 and 8.1)
23.4 Consent of Financial Advisor (contained in Exhibit 99)
23.5 Consent of Bryan Cave LLP (contained in Exhibit 8.2)
24 Powers of Attorney (contained on the signature page)
99.1 Opinion of Goldsmith, Agio, Helms Securities, Inc.
99.2 Opinion of George K. Baum & Company
99.3 Form of Proxy
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes as follows:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act,
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement for the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total value of securities
offered would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to
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Rule 424(b) if, in the aggregate, the changes in volume and price represent
no more than 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" taking the effective
registration statement.
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
2. That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
3. To remove from registration by means of post-effective amendment any of
the securities being registered which remain unsold in the termination of the
offering.
4. To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one
business day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
5. To supply by means of a post-effective amendment all information
concerning a transaction, and the Company being acquired involved therein, that
was not the subject of and included in the Registration Statement when it became
effective.
6. That for purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
7. Prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration statement, by
any person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
8. That every prospectus (i) that is filed pursuant to paragraph 7
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
9. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions described under Item 20 above, or
otherwise (other than insurance), the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the Securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it, other than indemnification pursuant to court order
and not including any coverage under, or agreement to pay premiums for, any
policy of insurance, is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS
DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF CINCINNATI, STATE OF
OHIO, ON FEBRUARY 16, 1999.
CINTAS CORPORATION
By: /s/ ROBERT J. KOHLHEPP
------------------------------------
Robert J. Kohlhepp, Chief Executive
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED. THE PERSONS WHOSE NAMES APPEAR WITH AN ASTERISK (*) BELOW
HEREBY DESIGNATE ROBERT J. KOHLHEPP OR WILLIAM C. GALE, OR EITHER OF THEM, AS
ATTORNEY-IN-FACT TO SIGN ALL AMENDMENTS INCLUDING ANY POST-EFFECTIVE AMENDMENTS
TO THIS REGISTRATION STATEMENT AS WELL AS ANY RELATED REGISTRATION STATEMENT (OR
AMENDMENT THERETO) FILED PURSUANT TO RULE 462(B) PROMULGATED UNDER THE
SECURITIES ACT OF 1933.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ RICHARD T. FARMER Chairman of the Board of Directors February 16, 1999
- ------------------------------------------
*Richard T. Farmer
/s/ ROBERT J. KOHLHEPP Chief Executive Officer and Director February 16, 1999
- ------------------------------------------ (Principal Executive Officer)
*Robert J. Kohlhepp
/s/ SCOTT D. FARMER President, Chief Operating Officer and February 16, 1999
- ------------------------------------------ Director
*Scott D. Farmer
/s/ ROGER L. HOWE Director February 16, 1999
- ------------------------------------------
*Roger L. Howe
Director February 16, 1999
- ------------------------------------------
*John S. Lillard
/s/ JAMES J. GARDNER Director February 16, 1999
- ------------------------------------------
*James J. Gardner
Director February 16, 1999
- ------------------------------------------
*Donald P. Klekamp
Director February 16, 1999
- ------------------------------------------
*Gerald V. Dirvin
/s/ WILLIAM C. GALE Vice President of Finance (Principal February 16, 1999
- ------------------------------------------ Financial Officer and Principal Accounting
*William C. Gale Officer)
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