UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 2011
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________________ to _____________________
Commission file number 0-11399
CINTAS CORPORATION
(Exact name of Registrant as specified in its charter)
WASHINGTON |
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31-1188630 |
(State or other jurisdiction of |
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(I.R.S. Employer |
incorporation or organization) |
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Identification No.) |
6800 CINTAS BOULEVARD
P.O. BOX 625737
CINCINNATI, OHIO 45262-5737
(Address of principal executive offices)(Zip Code)
(513) 459-1200
(Registrant's telephone number, including area code)
Indicate by checkmark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes Ö No ___
Indicate by a checkmark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes Ö No ___
Indicate by checkmark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer |
Ö Accelerated Filer ___ |
Smaller Reporting Company ___ |
Non-Accelerated Filer |
(Do not check if a smaller reporting company) |
Indicate by checkmark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ___ No Ö
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class |
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Outstanding March 31, 2011 |
Common Stock, no par value |
|
145,303,323 |
CINTAS CORPORATION
Part I. |
Financial Information |
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Page No. | ||
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3 | ||
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Consolidated Condensed Balance Sheets |
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4 | |
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Consolidated Condensed Statements of Cash Flows |
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5 | |
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Managements Discussion and Analysis of Financial |
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26 | ||
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35 | |||
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36 | |||
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37 | |||
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Unregistered Sales of Equity Securities and Use of Proceeds. |
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37 | ||
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37 | |||
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38 | ||
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Exhibits |
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CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In thousands except per share data)
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Three Months Ended |
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Nine Months Ended | ||||
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February 28, |
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February 28, | ||||
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2011 |
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2010 |
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2011 |
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2010 |
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Revenue: |
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Rental uniforms and ancillary products |
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$664,976 |
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$622,458 |
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$1,980,387 |
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$1,921,693 |
Other services |
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272,851 |
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239,354 |
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817,910 |
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716,197 |
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937,827 |
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861,812 |
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2,798,297 |
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2,637,890 |
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Costs and expenses: |
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Cost of rental uniforms and ancillary products |
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380,224 |
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356,750 |
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1,129,210 |
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1,083,407 |
Cost of other services |
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165,682 |
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145,455 |
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492,847 |
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442,234 |
Selling and administrative expenses |
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283,045 |
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275,596 |
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864,774 |
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799,429 |
Legal settlements, net of insurance proceeds |
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--- |
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--- |
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--- |
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23,529 |
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Operating income |
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108,876 |
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84,011 |
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311,466 |
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289,291 |
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Interest income |
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(280) |
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(422) |
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(1,252) |
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(1,095) |
Interest expense |
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12,520 |
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11,575 |
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36,955 |
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36,192 |
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Income before income taxes |
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96,636 |
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72,858 |
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275,763 |
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254,194 |
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Income taxes |
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37,566 |
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23,876 |
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99,550 |
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94,052 |
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Net income |
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$ 59,070 |
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$ 48,982 |
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$ 176,213 |
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$ 160,142 |
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Basic earnings per share |
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$ 0.41 |
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$ 0.32 |
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$ 1.19 |
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$ 1.04 |
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Diluted earnings per share |
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$ 0.41 |
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$ 0.32 |
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$ 1.19 |
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$ 1.04 |
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Dividends declared per share |
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$ ---- |
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$ 0.48 |
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$ 0.49 |
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$ 0.48 |
See accompanying notes.
CINTAS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands except share data)
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February 28, 2011 |
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May 31, 2010 |
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(Unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ 184,731 |
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$ 411,281 |
Marketable securities |
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31,974 |
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154,806 |
Accounts receivable, net |
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416,295 |
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366,301 |
Inventories, net |
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232,294 |
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169,484 |
Uniforms and other rental items in service |
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373,983 |
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332,106 |
Income taxes, current |
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13,026 |
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15,691 |
Deferred income tax asset |
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44,475 |
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52,415 |
Prepaid expenses and other |
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26,160 |
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22,860 |
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Total current assets |
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1,322,938 |
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1,524,944 |
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Property and equipment, at cost, net |
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941,773 |
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894,522 |
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Goodwill |
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1,491,116 |
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1,356,925 |
Service contracts, net |
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107,460 |
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103,445 |
Other assets, net |
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108,783 |
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89,900 |
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$3,972,070 |
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$3,969,736 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current liabilities: |
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Accounts payable |
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$ 101,935 |
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$ 71,747 |
Accrued compensation and related liabilities |
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67,396 |
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66,924 |
Accrued liabilities |
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220,674 |
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244,402 |
Long-term debt due within one year |
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1,631 |
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609 |
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Total current liabilities |
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391,636 |
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383,682 |
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Long-term liabilities: |
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Long-term debt due after one year |
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806,447 |
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785,444 |
Deferred income taxes |
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165,271 |
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150,560 |
Accrued liabilities |
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135,774 |
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116,021 |
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Total long-term liabilities |
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1,107,492 |
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1,052,025 |
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Shareholders equity: |
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Preferred stock, no par value: |
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100,000 shares authorized, none outstanding |
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---- |
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---- |
Common stock, no par value: |
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135,276 |
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132,058 |
425,000,000 shares authorized, |
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FY 2011: 173,342,049 issued and 145,301,823 outstanding |
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FY 2010: 173,207,493 issued and 152,869,848 outstanding |
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Paid-in capital |
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90,462 |
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84,616 |
Retained earnings |
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3,184,480 |
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3,080,079 |
Treasury stock: |
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(1,002,071) |
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(798,857) |
FY 2011: 28,040,226 shares |
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FY 2010: 20,337,645 shares |
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Other accumulated comprehensive income |
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64,795 |
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36,133 |
Total shareholders equity |
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2,472,942 |
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2,534,029 |
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$3,972,070 |
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$3,969,736 |
See accompanying notes.
CINTAS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
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Nine Months Ended | ||
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February 28, |
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February 28, |
Cash flows from operating activities: |
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Net income |
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$176,213 |
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$160,142 |
Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation |
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112,126 |
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113,834 |
Amortization of deferred charges |
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32,166 |
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30,606 |
Stock-based compensation |
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9,813 |
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11,323 |
Deferred income taxes |
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22,524 |
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11,945 |
Change in current assets and liabilities, net of acquisitions of businesses: |
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Accounts receivable, net |
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(32,844) |
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10,785 |
Inventories, net |
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(61,620) |
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31,900 |
Uniforms and other rental items in service |
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(38,433) |
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14,223 |
Prepaid expenses and other |
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(2,418) |
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(240) |
Accounts payable |
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26,974 |
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15,167 |
Accrued compensation and related liabilities |
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241 |
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8,414 |
Accrued liabilities |
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(40,663) |
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11,507 |
Income taxes payable |
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3,876 |
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9,583 |
Net cash provided by operating activities |
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207,955 |
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429,189 |
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Cash flows from investing activities: |
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Capital expenditures |
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(142,298) |
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(78,928) |
Proceeds from redemption of marketable securities |
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137,879 |
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34,011 |
Purchase of marketable securities and investments |
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(23,174) |
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(69,819) |
Acquisitions of businesses, net of cash acquired |
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(158,517) |
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(41,375) |
Other, net |
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(2,845) |
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3,804 |
Net cash used in investing activities |
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(188,955) |
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(152,307) |
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Cash flows from financing activities: |
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Proceeds from issuance of debt |
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304,781 |
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---- |
Repayment of debt |
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(282,755) |
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(464) |
Dividends paid |
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(71,812) |
|
---- |
Repurchase of common stock |
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(203,214) |
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(960) |
Other, net |
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930 |
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(394) |
Net cash used in financing activities |
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(252,070) |
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(1,818) |
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Effect of exchange rate changes on cash and cash equivalents |
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6,520 |
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1,694 |
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Net (decrease) increase in cash and cash equivalents |
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(226,550) |
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276,758 |
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Cash and cash equivalents at beginning of period |
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411,281 |
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129,745 |
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Cash and cash equivalents at end of period |
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$184,731 |
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$406,503 |
See accompanying notes.
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The consolidated condensed financial statements of Cintas Corporation (Cintas, the Company, we, us or our) included herein have been prepared by Cintas, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations. While we believe that the disclosures are adequately presented, it is suggested that these consolidated condensed financial statements be read in conjunction with the consolidated financial statements and notes included in our Form 10-K for the fiscal year ended May 31, 2010. A summary of our significant accounting policies is presented beginning on page 39 of that report. There have been no material changes in the accounting policies followed by Cintas during the current fiscal year.
Interim results are subject to variations and are not necessarily indicative of the results of operations for a full fiscal year. In the opinion of management, adjustments (which include only normal recurring adjustments) necessary for a fair statement of the consolidated results of the interim periods shown have been made.
2. Fair Value Measurements
Financial Accounting Standards Board (FASB) Accounting Standard Codification (ASC) Topic 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. It also establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
Level 1 Quoted prices in active markets for identical assets or liabilities.
Level 2 Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Cintas assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
All financial instruments that are measured at fair value on a recurring basis (at least annually) have been segregated into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the consolidated condensed balance sheet date.
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
These financial instruments measured at fair value on a recurring basis are summarized below (in thousands):
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As of February 28, 2011 |
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Level 1 |
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Level 2 |
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Level 3 |
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Fair Value |
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Cash and cash equivalents |
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$ |
184,731 |
|
$ |
---- |
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$ |
---- |
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$ |
184,731 |
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Marketable securities: |
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U.S. municipal bonds |
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100 |
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---- |
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---- |
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100 |
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Canadian treasury securities |
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23,703 |
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8,171 |
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---- |
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31,874 |
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Total assets at fair value |
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$ |
208,534 |
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$ |
8,171 |
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$ |
---- |
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$ |
216,705 |
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Current accrued liabilities |
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$ |
---- |
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$ |
575 |
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$ |
---- |
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$ |
575 |
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Total liabilities at fair value |
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$ |
---- |
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$ |
575 |
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$ |
---- |
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$ |
575 |
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As of May 31, 2010 |
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Level 1 |
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Level 2 |
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Level 3 |
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Fair Value |
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Cash and cash equivalents |
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$ |
411,281 |
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$ |
---- |
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$ |
---- |
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$ |
411,281 |
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Marketable securities: |
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U.S. municipal bonds |
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---- |
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21,954 |
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---- |
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21,954 |
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Canadian treasury securities |
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97,791 |
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35,061 |
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---- |
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132,852 |
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Accounts receivable, net |
|
---- |
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450 |
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---- |
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450 |
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Total assets at fair value |
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$ |
509,072 |
|
$ |
57,465 |
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$ |
---- |
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$ |
566,537 |
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Current accrued liabilities |
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$ |
---- |
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$ |
64 |
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$ |
---- |
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$ |
64 |
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Total liabilities at fair value |
|
$ |
---- |
|
$ |
64 |
|
$ |
---- |
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$ |
64 |
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Cintas cash and cash equivalents and marketable securities are generally classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. Cintas does not adjust the quoted market price or the broker or dealer quote for such financial instruments.
The funds invested in Canadian marketable securities are not expected to be repatriated, but instead are expected to be invested indefinitely in foreign subsidiaries. Interest, realized gains and losses and declines in value determined to be other than temporary on available-for-sale securities are included in interest income or expense. The cost of the securities sold is based on the specific identification method. The amortized cost basis of the marketable securities as of February 28, 2011 and May 31, 2010, is $32.0 million and $154.9 million, respectively. All contractual maturities are due within one year.
Accounts receivable, net and current accrued liabilities include foreign currency average rate options. The fair value of Cintas foreign currency average rate options are based on similar exchange traded derivatives and are, therefore, included within Level 2 of the fair value hierarchy.
The methods described above may produce a fair value that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while Cintas believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the consolidated condensed balance sheet date.
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Cintas non-financial assets and liabilities not permitted or required to be measured at fair value on a recurring basis primarily relate to assets and liabilities acquired in a business acquisition. Cintas is required to provide additional disclosures about fair value measurements as part of the consolidated condensed financial statements for each major category of assets and liabilities measured at fair value on a non-recurring basis (including business acquisitions). Based on the nature of Cintas business acquisitions, which occur regularly throughout the fiscal year, the majority of the assets acquired and liabilities assumed consist of working capital, primarily valued using Level 2 inputs, property and equipment, also primarily valued using Level 2 inputs and goodwill and other identified intangible assets valued using Level 3 inputs. In general, non-recurring fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities, which generally are not applicable to non-financial assets and liabilities. Fair values determined by Level 2 inputs utilize data points that are observable, such as definitive sales agreements, appraisals or established market values of comparable assets. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability and include situations where there is little, if any, market activity for the asset or liability, such as internal estimates of future cash flows.
3. Earnings per Share
The following table sets forth the computation of basic and diluted earnings per share using the two-class method for amounts attributable to Cintas common shares (in thousands except per share data):
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
|
|
Three Months Ended |
|
Nine Months Ended | ||||
|
|
February 28, |
|
February 28, | ||||
|
|
2011 |
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2010 |
|
2011 |
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2010 |
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|
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|
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Basic and Diluted Earnings per Share |
|
|
|
|
|
|
|
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Net income |
|
$ 59,070 |
|
$ 48,982 |
|
$176,213 |
|
$160,142 |
|
|
|
|
|
|
|
|
|
Less dividends to: |
|
|
|
|
|
|
|
|
Common shares |
|
$ --- |
|
$ 73,377 |
|
$ 71,197 |
|
$ 73,377 |
Unvested shares |
|
--- |
|
536 |
|
615 |
|
536 |
Total dividends |
|
$ --- |
|
$ 73,913 |
|
$ 71,812 |
|
$ 73,913 |
|
|
|
|
|
|
|
|
|
Undistributed net income (loss) |
|
$ 59,070 |
|
$(24,931) |
|
$104,401 |
|
$ 86,229 |
|
|
|
|
|
|
|
|
|
Less: net income (loss) allocated to participating unvested securities |
|
316 |
|
(94) |
|
564 |
|
347 |
|
|
|
|
|
|
|
|
|
Net income (loss) available to common shareholders |
|
$ 58,754 |
|
$(24,837) |
|
$103,837 |
|
$ 85,882 |
|
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding |
|
145,303 |
|
152,869 |
|
147,686 |
|
152,854 |
|
|
|
|
|
|
|
|
|
Effect of dilutive securities employee stock options |
|
---- |
|
---- |
|
---- |
|
---- |
|
|
|
|
|
|
|
|
|
Diluted weighted average common shares outstanding |
|
145,303 |
|
152,869 |
|
147,686 |
|
152,854 |
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share: |
|
|
|
|
|
|
|
|
Common shares distributed earnings |
|
$ 0.00 |
|
$ 0.48 |
|
$ 0.49 |
|
$ 0.48 |
Common shares undistributed earnings |
|
0.41 |
|
(0.16) |
|
0.70 |
|
0.56 |
Total common shares |
|
$ 0.41 |
|
$ 0.32 |
|
$ 1.19 |
|
$ 1.04 |
|
|
|
|
|
|
|
|
|
Unvested shares - distributed earnings |
|
$ 0.00 |
|
$ 0.48 |
|
$ 0.49 |
|
$ 0.48 |
Unvested shares - undistributed earnings |
|
0.41 |
|
(0.16) |
|
0.70 |
|
0.56 |
Total unvested shares |
|
$ 0.41 |
|
$ 0.32 |
|
$ 1.19 |
|
$ 1.04 |
During the nine months ended February 28, 2011, Cintas purchased 7,656,193 shares of Cintas common stock under a share buyback program authorized by the Board of Directors on May 2, 2005, and expanded in July 2006.
For the three months ended February 28, 2011 and 2010, 3.5 million and 4.7 million options granted to purchase shares of Cintas common stock, respectively, were excluded from the computation of diluted earnings per share. For the nine months ended February 28, 2011 and 2010, 3.6 million and 4.3 million options granted to purchase shares of Cintas common stock, respectively, were excluded from the computation of diluted earnings per share. The exercise prices of these options were greater than the average market price of the common shares (anti-dilutive).
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
4. Goodwill, Service Contracts and Other Assets
Changes in the carrying amount of goodwill and service contracts for the nine months ended February 28, 2011, by operating segment, are as follows (in thousands):
|
|
Rental |
|
|
|
First Aid, |
|
|
|
|
|
|
|
Uniforms & |
|
Uniform |
|
Safety & |
|
|
|
|
|
|
|
Ancillary |
|
Direct |
|
Fire |
|
Document |
|
|
|
|
|
Products |
|
Sales |
|
Protection |
|
Management |
|
Total |
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 1, 2010 |
|
$861,117 |
|
$23,928 |
|
$181,967 |
|
$289,913 |
|
$1,356,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill acquired |
|
75,740 |
|
---- |
|
10,866 |
|
42,391 |
|
128,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation |
|
1,337 |
|
72 |
|
---- |
|
3,785 |
|
5,194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of February 28, 2011 |
|
$938,194 |
|
$24,000 |
|
$192,833 |
|
$336,089 |
|
$1,491,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental |
|
|
|
First Aid, |
|
|
|
|
|
|
|
Uniforms & |
|
Uniform |
|
Safety & |
|
|
|
|
|
|
|
Ancillary |
|
Direct |
|
Fire |
|
Document |
|
|
|
|
|
Products |
|
Sales |
|
Protection |
|
Management |
|
Total |
|
Service Contracts |
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 1, 2010 |
|
$ 48,711 |
|
$ ---- |
|
$ 35,599 |
|
$ 19,135 |
|
$ 103,445 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Service contracts acquired |
|
13,090 |
|
---- |
|
7,498 |
|
7,200 |
|
27,788 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Service contracts amortization |
|
(14,739) |
|
---- |
|
(5,363) |
|
(6,081) |
|
(26,183) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation |
|
1,875 |
|
---- |
|
---- |
|
535 |
|
2,410 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of February 28, 2011 |
|
$ 48,937 |
|
$ ---- |
|
$ 37,734 |
|
$ 20,789 |
|
$ 107,460 |
|
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Information regarding Cintas service contracts and other assets is as follows (in thousands):
|
|
As of February 28, 2011 | ||||
|
|
Carrying |
|
Accumulated |
|
|
|
|
Amount |
|
Amortization |
|
Net |
|
|
|
|
|
|
|
Service contracts |
|
$376,798 |
|
$269,338 |
|
$107,460 |
|
|
|
|
|
|
|
Noncompete and consulting agreements |
|
$ 75,736 |
|
$ 61,825 |
|
$ 13,911 |
Investments(1) |
|
82,620 |
|
---- |
|
82,620 |
Other |
|
16,636 |
|
4,384 |
|
12,252 |
|
|
|
|
|
|
|
Total |
|
$174,992 |
|
$ 66,209 |
|
$108,783 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of May 31, 2010 | ||||
|
|
Carrying |
|
Accumulated |
|
|
|
|
Amount |
|
Amortization |
|
Net |
|
|
|
|
|
|
|
Service contracts |
|
$346,569 |
|
$243,124 |
|
$103,445 |
|
|
|
|
|
|
|
Noncompete and consulting agreements |
|
$ 68,435 |
|
$ 53,425 |
|
$ 15,010 |
Investments(1) |
|
68,616 |
|
---- |
|
68,616 |
Other |
|
10,516 |
|
4,242 |
|
6,274 |
|
|
|
|
|
|
|
Total |
|
$147,567 |
|
$ 57,667 |
|
$ 89,900 |
(1) Investments at February 28, 2011, include the cash surrender value of insurance policies of $50.1 million, equity method investments of $29.7 million and cost method investments of $2.8 million. Investments at May 31, 2010, include the cash surrender value of insurance policies of $34.3 million, equity method investments of $30.0 million and cost method investments of $4.3 million.
Amortization expense was $32.2 million and $30.6 million for the nine months ended February 28, 2011 and 2010, respectively. Estimated amortization expense, excluding any future acquisitions, for each of the next five years is $41.6 million, $36.1 million, $19.6 million, $16.4 million and $13.7 million, respectively.
Investments recorded using the cost method are evaluated for impairment on an annual basis or when indicators of impairment are identified. For the nine months ended February 28, 2011 and 2010, no losses due to impairment were recorded.
5. Debt, Derivatives and Hedging Activities
Cintas has a commercial paper program with a capacity of $300.0 million that is fully supported by a backup revolving credit facility through a credit agreement with its banking group. The revolving credit facility has an accordion feature that allows for a maximum borrowing capacity of $450.0 million and an expiration date of September 26, 2014. As of February 28, 2011, Cintas had $21.5 million of commercial paper outstanding, and at May 31, 2010, no commercial paper was outstanding.
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Cintas used interest rate lock agreements to hedge against movements in the treasury rates at the time Cintas issued its senior notes in fiscal 2002, fiscal 2007 and fiscal 2008. The amortization of the interest rate lock agreements resulted in an increase to other comprehensive income of $0.2 million for both of the three months ended February 28, 2011 and 2010, respectively, and $0.6 million for both of the nine months ended February 28, 2011 and 2010, respectively.
To hedge the exposure of movements in the foreign currency rates, Cintas at times uses foreign currency hedges. These hedges would reduce the impact on cash flows from movements in the foreign currency exchange rates. Examples of foreign currency hedge instruments that Cintas may use are average rate options and forward contracts. Cintas had no average rate options included in accounts receivable, net as of February 28, 2011, and $0.5 million included in accounts receivable, net as of May 31, 2010. Cintas had average rate options included in current accrued liabilities of $0.6 million and less than $0.1 million as of February 28, 2011 and May 31, 2010, respectively. The average rate options that settled during the third quarter increased foreign currency exchange costs by $0.1 million and $0.2 million during the three months ended February 28, 2011 and 2010, respectively. The average rate options increased foreign currency exchange costs by less than $0.1 million and by $0.3 million during the nine months ended February 28, 2011 and 2010, respectively.
Cintas has certain covenants related to debt agreements. These covenants limit Cintas ability to incur certain liens, to engage in sale-leaseback transactions and to merge, consolidate or sell all or substantially all of Cintas assets. These covenants also require Cintas to maintain certain debt to capitalization and interest coverage ratios. Cross-default provisions exist between certain debt instruments. If a default of a significant covenant were to occur, the default could result in an acceleration of the maturity of the indebtedness, impair liquidity and limit the ability to raise future capital. As of February 28, 2011, Cintas was in compliance with all significant debt covenants.
6. Income Taxes
In the normal course of business, Cintas provides for uncertain tax positions and the related interest and adjusts its unrecognized tax benefits and accrued interest accordingly. During the three months ended February 28, 2011, unrecognized tax benefits decreased by approximately $1.7 million and accrued interest increased by approximately $0.7 million due to the accrual of additional tax and interest and the reduction of reserves due to the closure of audits and expiration of statutes. During the nine months ended February 28, 2011, unrecognized tax benefits increased by approximately $0.8 million and accrued interest decreased by approximately $7.2 million due to the expiration of certain statutes.
All U.S. federal income tax returns are closed to audit through fiscal 2008. Cintas is currently in advanced stages of audits in certain foreign jurisdictions and certain domestic states. The years under audit cover fiscal years back to 2001. Based on the resolution of the various audits, it is reasonably possible that the balance of unrecognized tax benefits could decrease by $4.0 million for the fiscal year ending May 31, 2011.
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
7. Comprehensive Income
Total comprehensive income represents the net change in shareholders equity during a period from sources other than transactions with shareholders and, as such, includes net income. For Cintas, the only components of total comprehensive income are the change in cumulative foreign currency translation adjustments, the change in the fair value of derivatives, the amortization of interest rate lock agreements and the change in the fair value of available-for-sale securities. The components of comprehensive income for the three and nine month periods ended February 28, 2011 and 2010, are as follows (in thousands):
|
|
Three Months Ended |
|
Nine Months Ended | ||||
|
|
February 28, |
|
February 28, | ||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
|
|
|
|
|
|
|
|
Net income |
|
$59,070 |
|
$48,982 |
|
$176,213 |
|
$160,142 |
|
|
|
|
|
|
|
|
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
15,472 |
|
(94) |
|
28,846 |
|
10,432 |
Change in fair value of derivatives* |
|
(152) |
|
87 |
|
(777) |
|
64 |
Amortization of interest rate lock agreements |
|
192 |
|
192 |
|
575 |
|
575 |
Change in fair value of available-for-sale securities** |
|
(10) |
|
11 |
|
18 |
|
29 |
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
$74,572 |
|
$49,178 |
|
$204,875 |
|
$171,242 |
* Net of less than $(0.1) million and $0.1 million of tax (benefit) expense for the three months ended February 28, 2011 and 2010, respectively. Net of $(0.5) million and less than $0.1 million of tax (benefit) expense for the nine months ended February 28, 2011 and 2010, respectively.
** Net of less than $(0.1) million and less than $0.1 million of tax (benefit) expense for the three months ended February 28, 2011 and 2010, respectively. Net of less than $0.1 million of tax expense for both the nine months ended February 28, 2011 and 2010, respectively.
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
8. Litigation and Other Contingencies
Cintas is subject to legal proceedings, insurance receipts, legal settlements and claims arising from the ordinary course of its business, including personal injury, customer contract, environmental and employment claims. In the opinion of management, the aggregate liability, if any, with respect to such ordinary course of business actions will not have a material adverse effect on the financial position or results of operation of Cintas. Cintas is party to additional litigation not considered in the ordinary course of business, including the litigation discussed below.
Cintas is a defendant in a purported class action lawsuit, Mirna E. Serrano, et al. v. Cintas Corporation (Serrano), filed on May 10, 2004, and pending in the United States District Court, Eastern District of Michigan, Southern Division. The Serrano plaintiffs alleged that Cintas discriminated against women in hiring into various service sales representative positions across all divisions of Cintas. On November 15, 2005, the Equal Employment Opportunity Commission (EEOC) intervened in the Serrano lawsuit. The Serrano plaintiffs seek injunctive relief, compensatory damages, punitive damages, attorneys fees and other remedies. On October 27, 2008, the United States District Court in the Eastern District of Michigan granted summary judgment in favor of Cintas limiting the scope of the putative class in the Serrano lawsuit to female applicants for service sales representative positions at Cintas locations within the state of Michigan. Consequently, all claims brought by female applicants for service sales representative positions outside of the state of Michigan were dismissed. Similarly, any claims brought by the EEOC on behalf of similarly situated female applicants outside of the state of Michigan have also been dismissed from the Serrano lawsuit. Cintas is a defendant in another purported class action lawsuit, Blanca Nelly Avalos, et al. v. Cintas Corporation (Avalos), which was filed in the United States District Court, Eastern District of Michigan, Southern Division. The Avalos plaintiffs alleged that Cintas discriminated against women, African-Americans and Hispanics in hiring into various service sales representative positions in Cintas Rental division only throughout the United States. The Avalos plaintiffs sought injunctive relief, compensatory damages, punitive damages, attorneys fees and other remedies. The claims in Avalos originally were brought in the lawsuit captioned Robert Ramirez, et al. v. Cintas Corporation (Ramirez), filed on January 20, 2004, in the United States District Court, Northern District of California, San Francisco Division. On May 11, 2006, the Ramirez and Avalos African-American, Hispanic and female failure to hire into service sales representative positions claims and the EEOCs intervention were consolidated for pretrial purposes with the Serrano case and transferred to the United States District Court for the Eastern District of Michigan, Southern Division. The consolidated case was known as Mirna E. Serrano/Blanca Nelly Avalos, et al. v. Cintas Corporation (Serrano/Avalos). On March 31, 2009, the United States District Court, Eastern District of Michigan, Southern Division entered an order denying class certification to all plaintiffs in the Serrano/Avalos lawsuits. Following denial of class certification, the Court permitted the individual Avalos and Serrano plaintiffs to proceed separately. In the Avalos case, the court dismissed the remaining claims of the individual plaintiffs who remained in that case after the denial of class certification. On May 11, 2010, Plaintiff Tanesha Davis, on behalf of all similarly situated plaintiffs in the Avalos case, filed a notice of appeal of the District Courts summary judgment order in the United States Court of Appeals for the Sixth Circuit. The Appellate Court has made no determination regarding the merits of Davis appeal. In September 2010, the Court in Serrano dismissed all private individual claims and all claims of the EEOC and the 13 individuals it claimed to represent. The EEOC has appealed the District Courts summary judgment decisions and various other rulings to the United States Court of Appeals for the Sixth Circuit. The Court of Appeals has not yet ruled on the EEOCs appeal.
The litigation discussed above, if decided or settled adversely to Cintas, may, individually or in the aggregate, result in liability material to Cintas consolidated financial condition or results of operation and could increase costs of operations on an ongoing basis. Any estimated liability relating to these proceedings is not determinable at this time. Cintas may enter into discussions regarding settlement of
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
these and other lawsuits, and may enter into settlement agreements if it believes such settlement is in the best interest of Cintas shareholders.
Cintas is a defendant in a purported class action lawsuit, Paul Veliz, et al. v. Cintas Corporation (Veliz), filed on March 19, 2003, in the United States District Court, Northern District of California, Oakland Division, alleging that Cintas violated certain federal and state wage and hour laws applicable to its service sales representatives, whom Cintas considers exempt employees, and asserting additional related ERISA claims. On April 5, 2004 and February 14, 2006, the Court stayed the claims of all plaintiffs with valid arbitration agreements pending arbitration of those claims. Claims made in the Veliz action, therefore, are pending before the United States District Court, Northern District of California and Judge Bruce Meyerson (Ret.), an Arbitrator selected by the parties. On August 5, 2009, the parties in the Veliz action reached a settlement in principle. That settlement has been granted preliminary approval by the District Court. When the settlement is fully documented and approved by the Court, the settlement will resolve all claims now pending or that could have been brought relating to the subject matter of the case before the Court and the Arbitrator. The principal terms of the settlement provide for an aggregate cash payment of approximately $24.0 million. The pre-tax impact, net of insurance proceeds, was $19.5 million. Pursuant to the settlement agreement, on December 17, 2010, Cintas paid $22.8 million to a Court appointed settlement administrator to be held in escrow pending final approval of the settlement by the Court. Once final approval has been granted by the Court, the settlement administrator will distribute the $22.8 million to the class members under the Courts supervision. According to the terms of the settlement agreement, Cintas will pay the remaining settlement funds to satisfy the future income tax liabilities of the class members as they receive their respective shares of the settlement funds. The balance of the settlement funds will be used to pay the fees and expenses of the settlement administrator.
During the second quarter of fiscal 2010, Cintas had legal settlements that totaled $4.0 million, net of insurance proceeds. None of these settlements were significant individually. These settlements included litigation related to multiple subjects including employment practices and insurance coverage.
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
9. Segment Information
Cintas classifies its businesses into four operating segments. The Rental Uniforms and Ancillary Products operating segment consists of the rental and servicing of uniforms and other garments including flame resistant clothing, mats, mops and shop towels and other ancillary items. In addition to these rental items, restroom cleaning services and supplies and tile and carpet cleaning services are also provided within this operating segment. The Uniform Direct Sales operating segment consists of the direct sale of uniforms and related items and branded promotional products. The First Aid, Safety and Fire Protection Services operating segment consists of first aid, safety and fire protection products and services. The Document Management Services operating segment consists of document destruction, document imaging and document retention services.
Cintas evaluates the performance of each operating segment based on several factors of which the primary financial measures are operating segment revenue and income before income taxes. The accounting policies of the operating segments are the same as those described in Note 1 entitled Basis of Presentation. Information related to the operations of Cintas operating segments is set forth below (in thousands):
|
|
Rental |
|
|
|
First Aid, |
|
|
|
|
|
|
|
|
|
Uniforms & |
|
Uniform |
|
Safety & |
|
|
|
|
|
|
|
|
|
Ancillary |
|
Direct |
|
Fire |
|
Document |
|
|
|
|
|
|
|
Products |
|
Sales |
|
Protection |
|
Management |
|
Corporate |
|
Total |
|
For the three months ended February 28, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ 664,976 |
|
$102,598 |
|
$ 91,195 |
|
$ 79,058 |
|
$ ---- |
|
$ 937,827 |
|
Income (loss) before income taxes |
|
$ 85,558 |
|
$ 12,383 |
|
$ 4,628 |
|
$ 6,307 |
|
$ (12,240) |
|
$ 96,636 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended February 28, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ 622,458 |
|
$ 94,428 |
|
$ 79,210 |
|
$ 65,716 |
|
$ ---- |
|
$ 861,812 |
|
Income (loss) before income taxes |
|
$ 64,319 |
|
$ 8,208 |
|
$ 2,062 |
|
$ 9,422 |
|
$(11,153) |
|
$ 72,858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the nine months ended February 28, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$1,980,387 |
|
$310,167 |
|
$278,044 |
|
$229,699 |
|
$ ---- |
|
$2,798,297 |
|
Income (loss) before income taxes |
|
$ 241,888 |
|
$ 35,509 |
|
$ 13,513 |
|
$ 20,556 |
|
$ (35,703) |
|
$ 275,763 |
|
Total assets |
|
$2,508,299 |
|
$294,238 |
|
$358,536 |
|
$594,292 |
|
$ 216,705 |
|
$3,972,070 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the nine months ended February 28, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$1,921,693 |
|
$283,163 |
|
$250,768 |
|
$182,266 |
|
$ ---- |
|
$2,637,890 |
|
Income (loss) before income taxes |
|
$ 258,653 |
|
$ 26,772 |
|
$ 10,867 |
|
$ 16,528 |
|
$ (58,626) |
|
$ 254,194 |
|
Total assets |
|
$2,427,309 |
|
$158,229 |
|
$326,497 |
|
$495,778 |
|
$ 552,096 |
|
$3,959,909 |
|
CINTAS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
10. Supplemental Guarantor Information
Cintas Corporation No. 2 (Corp. 2) is the indirectly, wholly-owned principal operating subsidiary of Cintas. Corp. 2 is the issuer of the $775.0 million of long-term notes, which are unconditionally guaranteed, jointly and severally, by Cintas and its wholly-owned, direct and indirect domestic subsidiaries.
As allowed by SEC rules, the following condensed consolidating financial statements are provided as an alternative to filing separate financial statements of the guarantors. Each of the subsidiaries presented in the condensed consolidating financial statements has been fully consolidated in Cintas consolidated financial statements. The condensed consolidating financial statements should be read in conjunction with the consolidated financial statements of Cintas and notes thereto of which this note is an integral part.
Condensed consolidating financial statements for Cintas, Corp. 2, the subsidiary guarantors and non-guarantors are presented on the following pages.
CONDENSED CONSOLIDATING INCOME STATEMENT
THREE MONTHS ENDED FEBRUARY 28, 2011
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Cintas | ||||||
|
|
Cintas |
|
|
|
Subsidiary |
|
Non- |
|
|
|
Corporation | ||||||
|
|
Corporation |
|
Corp. 2 |
|
Guarantors |
|
Guarantors |
|
Eliminations |
|
Consolidated | ||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Rental uniforms and ancillary products |
|
$ |
---- |
|
$ |
509,321 |
|
$ |
129,038 |
|
$ |
49,677 |
|
$ |
(23,060) |
|
$ |
664,976 |
Other services |
|
---- |
|
330,075 |
|
98,708 |
|
27,289 |
|
(183,221) |
|
272,851 | ||||||
Equity in net income of affiliates |
|
59,070 |
|
---- |
|
---- |
|
---- |
|
(59,070) |
|
---- | ||||||
|
|
59,070 |
|
839,396 |
|
227,746 |
|
76,966 |
|
(265,351) |
|
937,827 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Costs and expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cost of rental uniforms and ancillary products |
|
---- |
|
326,000 |
|
75,562 |
|
33,991 |
|
(55,329) |
|
380,224 | ||||||
Cost of other services |
|
---- |
|
211,754 |
|
88,918 |
|
17,490 |
|
(152,480) |
|
165,682 | ||||||
Selling and administrative expenses |
|
---- |
|
264,019 |
|
(1,666) |
|
23,555 |
|
(2,863) |
|
283,045 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating income |
|
59,070 |
|
37,623 |
|
64,932 |
|
1,930 |
|
(54,679) |
|
108,876 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest income |
|
---- |
|
(140) |
|
(97) |
|
(43) |
|
---- |
|
(280) | ||||||
Interest expense (income) |
|
---- |
|
13,002 |
|
(498) |
|
16 |
|
---- |
|
12,520 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Income (loss) before income taxes |
|
59,070 |
|
24,761 |
|
65,527 |
|
1,957 |
|
(54,679) |
|
96,636 | ||||||
Income taxes (benefit) |
|
---- |
|
9,923 |
|
26,931 |
|
717 |
|
(5) |
|
37,566 | ||||||
Net income (loss) |
|
$ |
59,070 |
|
$ |
14,838 |
|
$ |
38,596 |
|
$ |
1,240 |
|
$ |
(54,674) |
|
$ |
59,070 |
CONDENSED CONSOLIDATING INCOME STATEMENT
THREE MONTHS ENDED FEBRUARY 28, 2010
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Cintas |
| |||||
|
|
Cintas |
|
|
|
Subsidiary |
|
Non- |
|
|
|
Corporation |
| |||||
|
|
Corporation |
|
Corp. 2 |
|
Guarantors |
|
Guarantors |
|
Eliminations |
|
Consolidated |
| |||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Rental uniforms and ancillary products |
$ |
---- |
|
$ |
474,757 |
|
$ |
124,523 |
|
$ |
45,472 |
|
$ |
(22,294) |
|
$ |
622,458 |
|
Other services |
|
---- |
|
288,303 |
|
89,416 |
|
17,179 |
|
(155,544) |
|
239,354 |
| |||||
Equity in net income of affiliates |
|
48,982 |
|
---- |
|
---- |
|
---- |
|
(48,982) |
|
---- |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
48,982 |
|
763,060 |
|
213,939 |
|
62,651 |
|
(226,820) |
|
861,812 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Costs and expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cost of rental uniforms and ancillary products |
|
---- |
|
299,516 |
|
78,344 |
|
28,399 |
|
(49,509) |
|
356,750 |
| |||||
Cost of other services |
|
---- |
|
188,941 |
|
73,467 |
|
10,943 |
|
(127,896) |
|
145,455 |
| |||||
Selling and administrative expenses |
|
---- |
|
159,910 |
|
98,029 |
|
18,339 |
|
(682) |
|
275,596 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating income |
|
48,982 |
|
114,693 |
|
(35,901) |
|
4,970 |
|
(48,733) |
|
84,011 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Interest income |
|
---- |
|
(80) |
|
(275) |
|
(67) |
|
---- |
|
(422) |
| |||||
Interest expense (income) |
|
---- |
|
12,578 |
|
(1,005) |
|
2 |
|
---- |
|
11,575 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Income (loss) before income taxes |
|
48,982 |
|
102,195 |
|
(34,621) |
|
5,035 |
|
(48,733) |
|
72,858 |
| |||||
Income taxes (benefit) |
|
---- |
|
46,690 |
|
(24,988) |
|
2,191 |
|
(17) |
|
23,876 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net income (loss) |
$ |
48,982 |
|
$ |
55,505 |
|
$ |
(9,633) |
|
$ |
2,844 |
|
$ |
(48,716) |
|
$ |
48,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATING INCOME STATEMENT
NINE MONTHS ENDED FEBRUARY 28, 2011
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Cintas |
| |||||
|
|
Cintas |
|
|
|
Subsidiary |
|
Non- |
|
|
|
Corporation |
| |||||
|
|
Corporation |
|
Corp. 2 |
|
Guarantors |
|
Guarantors |
|
Eliminations |
|
Consolidated |
| |||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Rental uniforms and ancillary products |
$ |
---- |
|
$ |
1,522,229 |
|
$ |
393,250 |
|
$ |
143,484 |
|
$ |
(78,576) |
|
$ |
1,980,387 |
|
Other services |
|
---- |
|
1,002,435 |
|
357,282 |
|
78,806 |
|
(620,613) |
|
817,910 |
| |||||
Equity in net income of affiliates |
|
176,213 |
|
---- |
|
---- |
|
---- |
|
(176,213) |
|
---- |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
176,213 |
|
2,524,664 |
|
750,532 |
|
222,290 |
|
(875,402) |
|
2,798,297 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Costs and expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cost of rental uniforms and ancillary products |
|
---- |
|
978,149 |
|
232,115 |
|
96,549 |
|
(177,603) |
|
1,129,210 |
| |||||
Cost of other services |
|
---- |
|
651,265 |
|
306,777 |
|
49,007 |
|
(514,202) |
|
492,847 |
| |||||
Selling and administrative expenses |
|
---- |
|
789,686 |
|
15,086 |
|
65,402 |
|
(5,400) |
|
864,774 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating income |
|
176,213 |
|
105,564 |
|
196,554 |
|
11,332 |
|
(178,197) |
|
311,466 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Interest income |
|
---- |
|
(494) |
|
(567) |
|
(100,222) |
|
100,031 |
|
(1,252) |
| |||||
Interest expense (income) |
|
---- |
|
38,413 |
|
(1,488) |
|
30 |
|
---- |
|
36,955 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Income (loss) before income taxes |
|
176,213 |
|
67,645 |
|
198,609 |
|
111,524 |
|
(278,228) |
|
275,763 |
| |||||
Income taxes (benefit) |
|
---- |
|
23,093 |
|
67,801 |
|
8,658 |
|
(2) |
|
99,550 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net income (loss) |
$ |
176,213 |
|
$ |
44,552 |
|
$ |
130,808 |
|
$ |
102,866 |
|
$ |
(278,226) |
|
$ |
176,213 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATING INCOME STATEMENT
NINE MONTHS ENDED FEBRUARY 28, 2010
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Cintas |
| ||||||
|
|
Cintas |
|
|
|
Subsidiary |
|
Non- |
|
|
|
Corporation |
| ||||||
|
|
Corporation |
|
Corp. 2 |
|
Guarantors |
|
Guarantors |
|
Eliminations |
|
Consolidated |
| ||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Rental uniforms and ancillary products |
|
$ |
---- |
|
$ |
1,473,440 |
|
$ |
389,227 |
|
$ |
133,925 |
|
$ |
(74,899) |
|
$ |
1,921,693 |
|
Other services |
|
---- |
|
887,147 |
|
244,239 |
|
47,559 |
|
(462,748) |
|
716,197 |
| ||||||
Equity in net income of affiliates |
|
160,142 |
|
---- |
|
---- |
|
---- |
|
(160,142) |
|
---- |
| ||||||
|
|
160,142 |
|
2,360,587 |
|
633,466 |
|
181,484 |
|
(697,789) |
|
2,637,890 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Costs and expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cost of rental uniforms and ancillary products |
|
---- |
|
925,918 |
|
238,015 |
|
81,722 |
|
(162,248) |
|
1,083,407 |
| ||||||
Cost of other services |
|
---- |
|
584,829 |
|
206,990 |
|
30,061 |
|
(379,646) |
|
442,234 |
| ||||||
Selling and administrative expenses |
|
---- |
|
757,038 |
|
(6,733) |
|
48,681 |
|
443 |
|
799,429 |
| ||||||
Legal settlements, net of insurance proceeds |
|
---- |
|
---- |
|
23,529 |
|
---- |
|
---- |
|
23,529 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating income |
|
160,142 |
|
92,802 |
|
171,665 |
|
21,020 |
|
(156,338) |
|
289,291 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest income |
|
---- |
|
(80) |
|
(806) |
|
(209) |
|
---- |
|
(1,095) |
| ||||||
Interest expense (income) |
|
---- |
|
38,060 |
|
(1,887) |
|
19 |
|
---- |
|
36,192 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Income (loss) before income taxes |
|
160,142 |
|
54,822 |
|
174,358 |
|
21,210 |
|
(156,338) |
|
254,194 |
| ||||||
Income taxes (benefit) |
|
---- |
|
20,676 |
|
65,759 |
|
7,634 |
|
(17) |
|
94,052 |
| ||||||
Net income (loss) |
|
$ |
160,142 |
|
$ |
34,146 |
|
$ |
108,599 |
|
$ |
13,576 |
|
$ |
(156,321) |
|
$ |
160,142 |
|
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF FEBRUARY 28, 2011
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Cintas |
| ||||||
|
|
Cintas |
|
|
|
Subsidiary |
|
Non- |
|
|
|
Corporation |
| ||||||
|
|
Corporation |
|
Corp. 2 |
|
Guarantors |
|
Guarantors |
|
Eliminations |
|
Consolidated |
| ||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash and cash equivalents |
|
$ |
---- |
|
$ |
48,871 |
|
$ |
5,663 |
|
$ |
130,197 |
|
$ |
---- |
|
$ |
184,731 |
|
Marketable securities |
|
---- |
|
---- |
|
100 |
|
31,874 |
|
---- |
|
31,974 |
| ||||||
Accounts receivable, net |
|
---- |
|
302,808 |
|
76,923 |
|
36,564 |
|
---- |
|
416,295 |
| ||||||
Inventories, net |
|
---- |
|
192,360 |
|
24,763 |
|
12,129 |
|
3,042 |
|
232,294 |
| ||||||
Uniforms and other rental items in service |
|
---- |
|
289,280 |
|
77,933 |
|
33,714 |
|
(26,944) |
|
373,983 |
| ||||||
Income taxes, current (payable) |
|
---- |
|
(7,657) |
|
(428) |
|
21,111 |
|
---- |
|
13,026 |
| ||||||
Deferred income tax asset (liability) |
|
---- |
|
---- |
|
47,103 |
|
(2,628) |
|
---- |
|
44,475 |
| ||||||
Prepaid expenses and other |
|
---- |
|
5,595 |
|
17,455 |
|
3,110 |
|
---- |
|
26,160 |
| ||||||
Total current assets |
|
---- |
|
831,257 |
|
249,512 |
|
266,071 |
|
(23,902) |
|
1,322,938 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Property and equipment, at cost, net |
|
---- |
|
586,408 |
|
274,503 |
|
80,862 |
|
---- |
|
941,773 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Goodwill |
|
---- |
|
---- |
|
1,408,983 |
|
82,133 |
|
---- |
|
1,491,116 |
| ||||||
Service contracts, net |
|
---- |
|
100,495 |
|
752 |
|
6,213 |
|
---- |
|
107,460 |
| ||||||
Other assets, net |
|
1,942,900 |
|
1,627,636 |
|
824,862 |
|
364,960 |
|
(4,651,575) |
|
108,783 |
| ||||||
|
|
$ |
1,942,900 |
|
$ |
3,145,796 |
|
$ |
2,758,612 |
|
$ |
800,239 |
|
$ |
(4,675,477) |
|
$ |
3,972,070 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Liabilities and Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Accounts (receivable) payable |
|
$ |
(465,247) |
|
$ |
174,856 |
|
$ |
350,822 |
|
$ |
3,485 |
|
$ |
38,019 |
|
$ |
101,935 |
|
Accrued compensation and related liabilities |
|
---- |
|
47,491 |
|
16,333 |
|
3,572 |
|
---- |
|
67,396 |
| ||||||
Accrued liabilities |
|
---- |
|
51,907 |
|
131,289 |
|
37,478 |
|
---- |
|
220,674 |
| ||||||
Long-term debt due within one year |
|
---- |
|
855 |
|
776 |
|
---- |
|
---- |
|
1,631 |
| ||||||
Total current liabilities |
|
(465,247) |
|
275,109 |
|
499,220 |
|
44,535 |
|
38,019 |
|
391,636 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Long-term liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Long-term debt due after one year |
|
---- |
|
816,331 |
|
(9,884) |
|
---- |
|
---- |
|
806,447 |
| ||||||
Deferred income taxes |
|
---- |
|
---- |
|
159,582 |
|
5,689 |
|
---- |
|
165,271 |
| ||||||
Accrued liabilities |
|
---- |
|
---- |
|
135,162 |
|
612 |
|
---- |
|
135,774 |
| ||||||
Total long-term liabilities |
|
---- |
|
816,331 |
|
284,860 |
|
6,301 |
|
---- |
|
1,107,492 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total shareholders equity |
|
2,408,147 |
|
2,054,356 |
|
1,974,532 |
|
749,403 |
|
(4,713,496) |
|
2,472,942 |
| ||||||
|
|
$ |
1,942,900 |
|
$ |
3,145,796 |
|
$ |
2,758,612 |
|
$ |
800,239 |
|
$ |
(4,675,477) |
|
$ |
3,972,070 |
|
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF MAY 31, 2010
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cintas |
| ||||||
|
|
|
Cintas |
|
|
|
Subsidiary |
|
|
|
|
|
Corporation |
| ||||||
|
|
|
Corporation |
|
Corp. 2 |
|
Guarantors |
|
Non-Guarantors |
|
Eliminations |
|
Consolidated |
| ||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash and cash equivalents |
|
|
$ |
---- |
|
$ |
34,905 |
|
$ |
339,702 |
|
$ |
36,674 |
|
$ |
---- |
|
$ |
411,281 |
|
Marketable securities |
|
|
---- |
|
---- |
|
21,954 |
|
132,852 |
|
---- |
|
154,806 |
| ||||||
Accounts receivable, net |
|
|
---- |
|
265,594 |
|
74,256 |
|
26,451 |
|
---- |
|
366,301 |
| ||||||
Inventories, net |
|
|
---- |
|
144,826 |
|
16,857 |
|
9,420 |
|
(1,619) |
|
169,484 |
| ||||||
Uniforms and other rental items in service |
|
|
---- |
|
256,398 |
|
70,489 |
|
25,514 |
|
(20,295) |
|
332,106 |
| ||||||
Income taxes, current (payable) |
|
|
---- |
|
5,306 |
|
(591) |
|
10,976 |
|
---- |
|
15,691 |
| ||||||
Deferred tax asset (liability) |
|
|
---- |
|
---- |
|
54,474 |
|
(2,059) |
|
---- |
|
52,415 |
| ||||||
Prepaid expenses and other |
|
|
---- |
|
5,565 |
|
15,808 |
|
1,487 |
|
---- |
|
22,860 |
| ||||||
Total current assets |
|
|
---- |
|
712,594 |
|
592,949 |
|
241,315 |
|
(21,914) |
|
1,524,944 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Property and equipment, at cost, net |
|
|
---- |
|
591,040 |
|
240,462 |
|
63,020 |
|
---- |
|
894,522 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Goodwill |
|
|
---- |
|
---- |
|
1,310,675 |
|
46,250 |
|
---- |
|
1,356,925 |
| ||||||
Service contracts, net |
|
|
---- |
|
98,335 |
|
880 |
|
4,230 |
|
---- |
|
103,445 |
| ||||||
Other assets, net |
|
|
2,032,649 |
|
1,608,188 |
|
814,657 |
|
322,707 |
|
(4,688,301) |
|
89,900 |
| ||||||
|
|
|
$ |
2,032,649 |
|
$ |
3,010,157 |
|
$ |
2,959,623 |
|
$ |
677,522 |
|
$ |
(4,710,215) |
|
$ |
3,969,736 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Liabilities and Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Accounts (receivable) payable |
|
|
$ |
(465,247) |
|
$ |
164,131 |
|
$ |
343,454 |
|
$ |
(8,614) |
|
$ |
38,023 |
|
$ |
71,747 |
|
Accrued compensation and related liabilities |
|
|
---- |
|
42,181 |
|
21,730 |
|
3,013 |
|
---- |
|
66,924 |
| ||||||
Accrued liabilities |
|
|
---- |
|
53,432 |
|
178,698 |
|
13,092 |
|
(820) |
|
244,402 |
| ||||||
Long-term debt due within one year |
|
|
---- |
|
805 |
|
(196) |
|
---- |
|
---- |
|
609 |
| ||||||
Total current liabilities |
|
|
(465,247) |
|
260,549 |
|
543,686 |
|
7,491 |
|
37,203 |
|
383,682 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Long-term liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Long-term debt due after one year |
|
|
---- |
|
795,541 |
|
(10,917) |
|
---- |
|
820 |
|
785,444 |
| ||||||
Deferred income taxes |
|
|
---- |
|
---- |
|
145,563 |
|
4,997 |
|
---- |
|
150,560 |
| ||||||
Accrued liabilities |
|
|
---- |
|
---- |
|
115,549 |
|
472 |
|
---- |
|
116,021 |
| ||||||
Total long-term liabilities |
|
|
---- |
|
795,541 |
|
250,195 |
|
5,469 |
|
820 |
|
1,052,025 |
| ||||||
Total shareholders equity |
|
|
2,497,896 |
|
1,954,067 |
|
2,165,742 |
|
664,562 |
|
(4,748,238) |
|
2,534,029 |
| ||||||
|
|
|
$ |
2,032,649 |
|
$ |
3,010,157 |
|
$ |
2,959,623 |
|
$ |
677,522 |
|
$ |
(4,710,215) |
|
$ |
3,969,736 |
|
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED FEBRUARY 28, 2011
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cintas |
| ||||||
|
|
|
Cintas |
|
|
|
Subsidiary |
|
Non- |
|
|
|
Corporation |
| ||||||
|
|
|
Corporation |
|
Corp. 2 |
|
Guarantors |
|
Guarantors |
|
Eliminations |
|
Consolidated |
| ||||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net income |
|
|
$ |
176,213 |
|
$ |
44,552 |
|
$ |
130,808 |
|
$ |
102,866 |
|
$ |
(278,226) |
|
$ |
176,213 |
|
Adjustments to reconcile net income to net |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Depreciation |
|
|
---- |
|
69,852 |
|
33,635 |
|
8,639 |
|
---- |
|
112,126 |
| ||||||
Amortization of deferred charges |
|
|
---- |
|
28,627 |
|
440 |
|
3,099 |
|
---- |
|
32,166 |
| ||||||
Stock-based compensation |
|
|
9,813 |
|
---- |
|
---- |
|
---- |
|
---- |
|
9,813 |
| ||||||
Deferred income taxes |
|
|
---- |
|
---- |
|
21,765 |
|
759 |
|
---- |
|
22,524 |
| ||||||
Changes in current assets and liabilities, |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Accounts receivable, net |
|
|
---- |
|
(25,663) |
|
(2,628) |
|
(4,553) |
|
---- |
|
(32,844) |
| ||||||
Inventories, net |
|
|
---- |
|
(47,047) |
|
(7,932) |
|
(1,980) |
|
(4,661) |
|
(61,620) |
| ||||||
Uniforms and other rental items in service |
|
|
---- |
|
(31,532) |
|
(7,456) |
|
(6,094) |
|
6,649 |
|
(38,433) |
| ||||||
Prepaid expenses and other |
|
|
---- |
|
380 |
|
(1,645) |
|
(1,153) |
|
---- |
|
(2,418) |
| ||||||
Accounts payable |
|
|
---- |
|
106,371 |
|
(103,373) |
|
23,980 |
|
(4) |
|
26,974 |
| ||||||
Accrued compensation and related liabilities |
|
|
---- |
|
5,310 |
|
(5,397) |
|
328 |
|
---- |
|
241 |
| ||||||
Accrued liabilities and other |
|
|
---- |
|
(17,146) |
|
(27,601) |
|
3,264 |
|
820 |
|
(40,663) |
| ||||||
Income taxes payable (receivable) |
|
|
---- |
|
13,019 |
|
(162) |
|
(8,981) |
|
---- |
|
3,876 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net cash provided by (used in) operating activities |
|
|
186,026 |
|
146,723 |
|
30,454 |
|
120,174 |
|
(275,422) |
|
207,955 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Capital expenditures |
|
|
---- |
|
(65,579) |
|
(67,560) |
|
(9,159) |
|
---- |
|
(142,298) |
| ||||||
Proceeds from redemption of marketable securities |
|
|
---- |
|
---- |
|
23,106 |
|
114,773 |
|
---- |
|
137,879 |
| ||||||
Purchase of marketable securities and investments |
|
|
---- |
|
(17,645) |
|
(49,287) |
|
(7,882) |
|
51,640 |
|
(23,174) |
| ||||||
Acquisitions of businesses, net of cash acquired |
|
|
---- |
|
(126,371) |
|
---- |
|
(32,146) |
|
---- |
|
(158,517) |
| ||||||
Other, net |
|
|
89,738 |
|
55,099 |
|
(272,758) |
|
(99,526) |
|
224,602 |
|
(2,845) |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net cash provided by (used in) investing activities |
|
|
89,738 |
|
(154,496) |
|
(366,499) |
|
(33,940) |
|
276,242 |
|
(188,955) |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Proceeds from issuance of debt |
|
|
---- |
|
303,000 |
|
1,781 |
|
---- |
|
---- |
|
304,781 |
| ||||||
Repayment of debt |
|
|
---- |
|
(282,160) |
|
225 |
|
---- |
|
(820) |
|
(282,755) |
| ||||||
Dividends paid |
|
|
(71,801) |
|
---- |
|
---- |
|
(11) |
|
---- |
|
(71,812) |
| ||||||
Repurchase of common stock |
|
|
(203,214) |
|
---- |
|
---- |
|
---- |
|
---- |
|
(203,214) |
| ||||||
Other, net |
|
|
(749) |
|
575 |
|
---- |
|
1,104 |
|
---- |
|
930 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net cash (used in) provided by financing activities |
|
|
(275,764) |
|
21,415 |
|
2,006 |
|
1,093 |
|
(820) |
|
(252,070) |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Effect of exchange rate changes on cash and cash equivalents |
|
|
---- |
|
324 |
|
---- |
|
6,196 |
|
---- |
|
6,520 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net increase (decrease) in cash and cash equivalents |
|
|
---- |
|
13,966 |
|
(334,039) |
|
93,523 |
|
---- |
|
(226,550) |
| ||||||
Cash and cash equivalents at beginning of period |
|
|
---- |
|
34,905 |
|
339,702 |
|
36,674 |
|
---- |
|
411,281 |
| ||||||
Cash and cash equivalents at end of period |
|
|
$ |
---- |
|
$ |
48,871 |
|
$ |
5,663 |
|
$ |
130,197 |
|
$ |
---- |
|
$ |
184,731 |
|
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED FEBRUARY 28, 2010
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cintas |
| ||||||
|
|
|
Cintas |
|
|
|
Subsidiary |
|
Non- |
|
|
|
Corporation |
| ||||||
|
|
|
Corporation |
|
Corp. 2 |
|
Guarantors |
|
Guarantors |
|
Eliminations |
|
Consolidated |
| ||||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net income |
|
|
$ |
160,142 |
|
$ |
34,146 |
|
$ |
108,599 |
|
$ |
13,576 |
|
$ |
(156,321) |
|
$ |
160,142 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Depreciation |
|
|
---- |
|
72,271 |
|
36,008 |
|
5,555 |
|
---- |
|
113,834 |
| ||||||
Amortization of deferred charges |
|
|
---- |
|
28,334 |
|
675 |
|
1,597 |
|
---- |
|
30,606 |
| ||||||
Stock-based compensation |
|
|
11,323 |
|
---- |
|
---- |
|
---- |
|
---- |
|
11,323 |
| ||||||
Deferred income taxes |
|
|
---- |
|
---- |
|
11,444 |
|
501 |
|
---- |
|
11,945 |
| ||||||
Changes in current assets and liabilities, net of acquisitions of businesses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Accounts receivable, net |
|
|
---- |
|
22,375 |
|
15,617 |
|
1,095 |
|
(28,302) |
|
10,785 |
| ||||||
Inventories, net |
|
|
---- |
|
43,463 |
|
(9,991) |
|
(284) |
|
(1,288) |
|
31,900 |
| ||||||
Uniforms and other rental items in service |
|
|
---- |
|
12,047 |
|
7,648 |
|
(2,940) |
|
(2,532) |
|
14,223 |
| ||||||
Prepaid expenses and other |
|
|
---- |
|
513 |
|
(1,086) |
|
333 |
|
---- |
|
(240) |
| ||||||
Accounts payable |
|
|
---- |
|
29,435 |
|
(47,745) |
|
16,786 |
|
16,691 |
|
15,167 |
| ||||||
Accrued compensation and related liabilities |
|
|
---- |
|
3,277 |
|
3,618 |
|
1,519 |
|
---- |
|
8,414 |
| ||||||
Accrued liabilities and other |
|
|
---- |
|
(15,704) |
|
27,848 |
|
(1,495) |
|
858 |
|
11,507 |
| ||||||
Income taxes payable (receivable) |
|
|
---- |
|
9,823 |
|
(384) |
|
144 |
|
---- |
|
9,583 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net cash provided by (used in) operating activities |
|
|
171,465 |
|
239,980 |
|
152,251 |
|
36,387 |
|
(170,894) |
|
429,189 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Capital expenditures |
|
|
---- |
|
(37,215) |
|
(36,011) |
|
(5,702) |
|
---- |
|
(78,928) |
| ||||||
Proceeds from sale or redemption of marketable securities |
|
|
---- |
|
---- |
|
7,986 |
|
26,025 |
|
---- |
|
34,011 |
| ||||||
Purchase of marketable securities and investments |
|
|
---- |
|
(1,879) |
|
218,340 |
|
(25,282) |
|
(260,998) |
|
(69,819) |
| ||||||
Acquisitions of businesses, net of cash acquired |
|
|
---- |
|
(18,829) |
|
---- |
|
(22,546) |
|
---- |
|
(41,375) |
| ||||||
Other |
|
|
(170,639) |
|
(182,120) |
|
(40,072) |
|
7 |
|
396,628 |
|
3,804 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net cash (used in) provided by investing activities |
|
|
(170,639) |
|
(240,043) |
|
150,243 |
|
(27,498) |
|
135,630 |
|
(152,307) |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Repayment of debt |
|
|
---- |
|
(615) |
|
(35,113) |
|
---- |
|
35,264 |
|
(464) |
| ||||||
Repurchase of common stock |
|
|
(960) |
|
---- |
|
---- |
|
---- |
|
---- |
|
(960) |
| ||||||
Other |
|
|
134 |
|
575 |
|
---- |
|
(1,103) |
|
---- |
|
(394) |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net cash (used in) provided by financing activities |
|
|
(826) |
|
(40) |
|
(35,113) |
|
(1,103) |
|
35,264 |
|
(1,818) |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Effect of exchange rate changes on cash and cash equivalents |
|
|
---- |
|
186 |
|
---- |
|
1,508 |
|
---- |
|
1,694 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net increase in cash and cash equivalents |
|
|
---- |
|
83 |
|
267,381 |
|
9,294 |
|
---- |
|
276,758 |
| ||||||
Cash and cash equivalents at beginning of period |
|
|
---- |
|
39,397 |
|
76,979 |
|
13,369 |
|
---- |
|
129,745 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash and cash equivalents at end of period |
|
|
$ |
---- |
|
$ |
39,480 |
|
$ |
344,360 |
|
$ |
22,663 |
|
$ |
---- |
|
$ |
406,503 |
|
CINTAS CORPORATION
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
BUSINESS STRATEGY
Cintas provides highly specialized products and services to businesses of all types primarily throughout North America and Latin America, Europe and Asia. We bring value to our customers by helping them provide a cleaner, safer and more pleasant atmosphere for their customers and employees. Our products and services are designed to improve our customers images. We also help our customers protect their employees and their company by enhancing workplace safety and helping to ensure legal compliance in key areas of their business.
We are North Americas leading provider of corporate identity uniforms through rental and sales programs, as well as a significant provider of related business services, including entrance mats, restroom cleaning services and supplies, tile and carpet cleaning services, first aid, safety and fire protection products and services, document management services and branded promotional products.
Cintas principal objective is to exceed customers expectations in order to maximize the long-term value of Cintas for shareholders and working partners, and it provides the framework and focus for Cintas business strategy. This strategy is to achieve revenue growth for all of our products and services by increasing our penetration at existing customers and by broadening our customer base to include business segments to which Cintas has not historically served. We will also continue to identify additional product and service opportunities for our current and future customers.
To pursue the strategy of increasing penetration, we have a highly talented and diverse team of service professionals visiting our customers on a regular basis. This frequent contact with our customers enables us to develop close personal relationships. The combination of our distribution system and these strong customer relationships provides a platform from which we launch additional products and services.
We pursue the strategy of broadening our customer base in several ways. Cintas has a national sales organization introducing all of its products and services to prospects in all business segments. Our broad range of products and services allows our sales organization to consider any type of business a prospect. We also broaden our customer base through geographic expansion, especially in our emerging businesses of first aid and safety, fire protection and document management. Finally, we evaluate strategic acquisitions as opportunities arise.
RESULTS OF OPERATIONS
Cintas classifies its businesses into four operating segments. The Rental Uniforms and Ancillary Products operating segment consists of the rental and servicing of uniforms and other garments including flame resistant clothing, mats, mops and shop towels and other ancillary items. In addition to these rental items, restroom cleaning services and supplies and tile and carpet cleaning services are also provided within this operating segment. The Uniform Direct Sales operating segment consists of the direct sale of uniforms and related items and branded promotional products. The First Aid, Safety and Fire Protection Services operating segment consists of first aid, safety and fire protection products and services. The Document Management Services operating segment consists of document destruction, document imaging and document retention services. Revenue and income before income taxes for each of these operating segments for the three and nine month periods ended February 28, 2011 and 2010, are presented in Note 9 entitled Segment Information of Notes to Consolidated Condensed Financial Statements.
Consolidated Results
Three Months Ended February 28, 2011 Compared to Three Months Ended February 28, 2010
Total revenue increased 8.8% for the three months ended February 28, 2011, over the same period in the prior fiscal year from $861.8 million to $937.8 million. The increase primarily resulted from an organic growth increase of 5.5%. The remaining 3.3% represents growth derived through acquisitions in our Document Management Services operating segment, our First Aid, Safety and Fire Protection Services operating segment and our Rental Uniforms and Ancillary Products operating segment during the quarter.
Rental Uniforms and Ancillary Products operating segment revenue increased 6.8% for the three months ended February 28, 2011, over the same period in the prior fiscal year from $622.5 million to $665.0 million. Other Services revenue, consisting of revenue from the reportable operating segments of Uniform Direct Sales, First Aid, Safety and Fire Protection Services and Document Management Services, increased 14.0% for the three months ended February 28, 2011, over the same period in the prior fiscal year from $239.4 million to $272.9 million. The increase primarily resulted from an organic growth increase of 8.6%. The remaining 5.4% represents growth derived through acquisitions in our Document Management Services operating segment and our First Aid, Safety and Fire Protection Services operating segment during the quarter. The organic growth rate for Other Services revenue for the quarter was due to organic growth in each operating segment making up Other Services. The organic growth for these operating segments was 8.7% in Uniform Direct Sales, 9.3% in First Aid, Safety and Protection Services and 7.8% in Document Management Services.
Cost of rental uniforms and ancillary products consists primarily of production expenses, delivery expenses and the amortization of in service inventory, including uniforms, mats, shop towels and other ancillary items. Cost of rental uniforms and ancillary products increased $23.5 million, or 6.6%, for the three months ended February 28, 2011, compared to the three months ended February 28, 2010. This increase was due to higher Rental Uniforms and Ancillary Products operating segment sales volume.
Cost of other services consists primarily of cost of goods sold (predominantly uniforms and first aid products), delivery expenses and distribution expenses in the Uniform Direct Sales operating segment, the First Aid, Safety and Fire Protection Services operating segment and the Document Management Services operating segment. Cost of other services increased $20.2 million, or 13.9%, for the three months ended February 28, 2011, compared to the three months ended February 28, 2010. This increase was primarily due to increased Other Services sales volume.
Selling and administrative expenses increased $7.4 million, or 2.7%, for the three months ended February 28, 2011, compared to the three months ended February 28, 2010. This increase was due to numerous items including increases in labor and professional services expenses.
Net interest expense (interest expense less interest income) was $12.2 million for the three months ended February 28, 2011, compared to $11.2 million for the three months ended February 28, 2010. This increase was due to the use of the commercial paper program.
Cintas effective tax rate increased to 38.9% for the three months ended February 28, 2011, compared to 32.8% for the prior fiscal year period. The lower rate during the prior fiscal year period was due to the impact of the closure of certain tax audits during the three months ended February 28, 2010.
Net income increased $10.1 million, or 20.6%, for the three months ended February 28, 2011, from the same period in the prior fiscal year. This increase was primarily due to revenue increasing at a faster rate of 8.8% compared to a 6.6% increase in operating expenses. Revenue grew at a faster rate due primarily to improvements in sales representative productivity, improved customer retention and improved capacity utilization from the higher revenue levels. Diluted earnings per share were $0.41 for the three months ended February 28, 2011, which was an increase of 28.1% compared to the same period in the prior fiscal year. The increase in diluted earnings per share is higher than the increase in net income due to Cintas purchasing 7.7 million shares under the share buyback program this fiscal year.
Rental Uniforms and Ancillary Products Operating Segment
Three Months Ended February 28, 2011 Compared to Three Months Ended February 28, 2010
As discussed above, Rental Uniforms and Ancillary Products operating segment revenue increased from $622.5 million to $665.0 million, or 6.8%, due to improvements in sales representative productivity and improved customer retention. The operating segments gross margin was $284.8 million, or 42.8% of revenue. This gross margin percent of revenue of 42.8% was relatively consistent with the prior fiscal years third quarter of 42.7%.
Selling and administrative expenses were $199.2 million, or 30.0% of revenue. This is a decrease of $2.2 million compared to last fiscal year primarily due to a decrease of $1.5 million in amortization expense.
Income before income taxes increased $21.2 million to $85.6 million for the Rental Uniforms and Ancillary Products operating segment for the quarter compared to the same quarter last fiscal year. Income before income taxes was 12.9% of the operating segments revenue, an improvement compared to the 10.3% in the third quarter of the prior fiscal year. This improvement is primarily due to revenue increasing at a faster rate of 6.8% compared to a 3.8% increase in operating expenses. Revenue grew at a faster rate due primarily to improvements in sales representative productivity, improved customer retention and improved capacity utilization from the higher revenue levels.
Uniform Direct Sales Operating Segment
Three Months Ended February 28, 2011 Compared to Three Months Ended February 28, 2010
Uniform Direct Sales operating segment revenue increased from $94.4 million to $102.6 million, or 8.7%, for the three months ended February 28, 2011, over the same quarter in the prior fiscal year due to increased customer orders for uniforms.
Cost of uniform direct sales increased $5.9 million, or 8.8%, for the three months ended February 28, 2011, due to increased Uniform Direct Sales operating segment sales volume. The gross margin as a percent of revenue was 29.5% for the quarter ended February 28, 2011, which is comparable to the 29.6% in the same quarter in the prior fiscal year.
Selling and administrative expenses decreased $1.9 million compared to the same quarter last fiscal year. This decrease in selling and administrative expenses was due to numerous items including medical expenses and bad debt expense.
Income before income taxes increased $4.2 million to $12.4 million for the Uniform Direct Sales operating segment for the quarter ended February 28, 2011. Income before income taxes was 12.1% of the operating segments revenue compared to 8.7% for the same quarter last fiscal year. This increase in income before income taxes is primarily due to the increase in revenue and improved capacity utilization from the higher revenue levels.
First Aid, Safety and Fire Protection Services Operating Segment
Three Months Ended February 28, 2011 Compared to Three Months Ended February 28, 2010
First Aid, Safety and Fire Protection Services operating segment revenue increased from $79.2 million to $91.2 million, or 15.1%, for the three months ended February 28, 2011. The increase primarily resulted from organic growth of 9.3% due to improvements in sales representative productivity and improved customer retention. The remaining 5.8% represents growth derived mainly through acquisitions.
Cost of first aid, safety and fire protection services increased $5.4 million, or 11.3%, for the three months ended February 28, 2011. Gross margin for the First Aid, Safety and Fire Protection Services operating segment is defined as revenue less cost of goods, warehouse expenses, service expenses and training expenses. The gross margin as a percent of revenue was 41.5% for the quarter ended February 28,
2011, which is a 200 basis point increase compared to the gross margin percentage in the third quarter of the prior fiscal year. This increase is due to an increase in revenue and improved capacity utilization from the higher revenue levels.
Selling and administrative expenses increased $4.0 million compared to the third quarter of the prior fiscal year. This increase is primarily due to an increase in labor and payroll taxes of $2.5 million.
Income before income taxes for the First Aid, Safety and Fire Protection Services operating segment increased $2.6 million to $4.6 million for the three months ended February 28, 2011. Income before income taxes was 5.1% of the operating segments revenue, compared to 2.6% in last fiscal years third quarter. This increase is primarily due to the increase in revenue and improved capacity utilization from the higher revenue levels.
Document Management Services Operating Segment
Three Months Ended February 28, 2011 Compared to Three Months Ended February 28, 2010
Document Management Services operating segment revenue increased from $65.7 million to $79.1 million, or 20.3%, for the quarter ended February 28, 2011, over the same quarter in the prior fiscal year. The increase resulted from an organic growth increase of 7.8% primarily due to new accounts sold by our sales representatives. The remaining 12.5% represents growth derived mainly through acquisitions. This operating segment derives a portion of its revenue from the sale of shredded paper to paper recyclers. Recycled paper prices remained at relatively high levels, but are consistent with the prices in the same quarter last fiscal year. As a result, the change in recycled paper prices did not significantly impact the revenue growth rate.
Cost of document management services increased $8.9 million, or 28.8%, for the three months ended February 28, 2011, due to increased Document Management Services operating segment sales volume. Gross margin for the Document Management Services operating segment is defined as revenue less production and service costs. The gross margin as a percent of revenue decreased from 52.7% in last years third quarter to 49.4% for the quarter ended February 28, 2011. This decrease is primarily due to start-ups in the storage business as well as a 65 basis point increase in energy related costs.
Selling and administrative expenses increased $7.5 million compared to the same quarter last fiscal year primarily due to an increase in labor and payroll taxes of $4.3 million.
Income before income taxes for the Document Management Services operating segment decreased $3.1 million to $6.3 million for the period compared to the same period in the prior fiscal year. Income before income taxes as a percentage of the operating segments revenue decreased from 14.3% in last years third quarter to 8.0% for the quarter ended February 28, 2011. The decrease in income before income taxes is due to the costs associated with the start-ups in the storage business, the increase in energy related costs and the increase in selling and administrative expenses.
Consolidated Results
Nine Months Ended February 28, 2011 Compared to Nine Months Ended February 28, 2010
Total revenue increased 6.1% for the nine months ended February 28, 2011, over the same period in the prior fiscal year from $2.6 billion to $2.8 billion. The increase primarily resulted from an organic growth increase of 4.2%. The remaining 1.9% represents growth derived through acquisitions in our Document Management Services operating segment, our First Aid, Safety and Fire Protection Services operating segment and our Rental Uniforms and Ancillary Products operating segment during the period.
Rental Uniforms and Ancillary Products operating segment revenue increased 3.1% for the nine months ended February 28, 2011, over the same period in the prior fiscal year from $1.9 billion to $2.0 billion. Other Services revenue, consisting of revenue from the reportable operating segments of Uniform Direct Sales, First Aid, Safety and Fire Protection Services and Document Management Services, increased
14.2% for the nine months ended February 28, 2011, over the same period in the prior fiscal year from $716.2 million to $817.9 million. The increase primarily resulted from an organic increase of 9.8%. The remaining 4.4% represents growth derived through acquisitions in our Document Management Services operating segment and our First Aid, Safety and Fire Protection Services operating segment during the period. The organic growth rate for the quarter was the result of a 14.9% organic increase in Document Management Services operating segment revenue, a 9.5% organic increase in Uniform Direct Sales operating segment revenue and a 6.4% organic increase in First Aid, Safety and Fire Protection Services operating segment revenue.
Cost of rental uniforms and ancillary products consists primarily of production expenses, delivery expenses and the amortization of in service inventory, including uniforms, mats, shop towels and other ancillary items. Cost of rental uniforms and ancillary products increased $45.8 million, or 4.2%, for the nine months ended February 28, 2011, compared to the nine months ended February 28, 2010. This increase was due to higher Rental Uniforms and Ancillary Products operating segment sales volume. In addition, maintenance costs increased $7.0 million and energy related costs increased $3.8 million compared to the nine months ended February 28, 2011.
Cost of other services consists primarily of cost of goods sold (predominantly uniforms and first aid products), delivery expenses and distribution expenses in the Uniform Direct Sales operating segment, the First Aid, Safety and Fire Protection Services operating segment and the Document Management Services operating segment. Cost of other services increased $50.6 million, or 11.4%, for the nine months ended February 28, 2011, compared to the nine months ended February 28, 2010. This increase was primarily due to increased Other Services sales volume.
Selling and administrative expenses increased $65.3 million, or 8.2%, for the nine months ended February 28, 2011, compared to the nine months ended February 28, 2010. Labor and payroll tax expenses increased by $41.0 million compared to the same period in the prior fiscal year primarily as a result of an increase in the number of sales representatives. In addition, bad debt expense increased $5.7 million due to a slight deterioration in the aging in part resulting from an ongoing accounts receivable consolidation project, and professional services increased $8.3 million due to costs related to our enterprise-wide system conversion.
During the first quarter of fiscal 2010, Cintas and the plaintiffs involved in the litigation, Paul Veliz, et al. v. Cintas Corporation, reached a settlement in principle. The pre-tax impact, net of insurance proceeds, was approximately $19.5 million. This settlement is more fully described in Note 8 entitled Litigation and Other Contingencies in Notes to Consolidated Condensed Financial Statements. During the second quarter of fiscal 2010, Cintas had legal settlements that totaled $4.0 million, net of insurance proceeds. None of these settlements were significant individually. These settlements included litigation related to multiple subjects including employment practices and insurance coverage.
Net interest expense (interest expense less interest income) was $35.7 million the nine months ended February 28, 2011, compared to $35.1 million for the nine months ended February 28, 2010.
Cintas effective tax rate decreased to 36.1% for the nine months ended February 28, 2011, compared to 37.0% for the prior year period. This decrease was due to the impact of the closure of certain tax audits during the nine months ended February 28, 2011.
Net income increased $16.1 million, or 10.0%, for the nine months ended February 28, 2011, from the same period in the prior fiscal year. This increase was primarily due to increased revenue for the period, improved capacity utilization from the higher revenue levels and the legal settlements which occurred last fiscal year. Diluted earnings per share were $1.19 for the nine months ended February 28, 2011, which was an increase of 14.4% compared to the same period in the prior fiscal year. The increase in diluted earnings per share is higher than the increase in net income due to Cintas purchasing 7.7 million shares under the share buyback program this fiscal year.
Rental Uniforms and Ancillary Products Operating Segment
Nine Months Ended February 28, 2011 Compared to Nine Months Ended February 28, 2010
As discussed above, Rental Uniforms and Ancillary Products operating segment revenue increased from $1.9 billion to $2.0 billion, or 3.1%, and the cost of rental uniforms and ancillary products increased $45.8 million, or 4.2%. The operating segments gross margin was $851.2 million, or 43.0% of revenue. This gross margin percent of revenue of 43.0% was 60 basis points lower than the prior fiscal years 43.6%. Maintenance costs increased $7.0 million, or approximately 30 basis points, and energy related costs, which include natural gas, electric and gas, increased $3.8 million, or 10 basis points, from the prior fiscal year period.
Selling and administrative expenses as a percent of revenue, at 30.8%, increased 60 basis points compared to the same period of the prior fiscal year. This increase is primarily due to an increase in selling labor due to the addition of sales representatives. The sales representatives were added to grow revenue in the operating segment.
Income before income taxes decreased $16.8 million to $241.9 million for the Rental Uniforms and Ancillary Products operating segment compared to the same period last fiscal year. Income before income taxes was 12.2% of the operating segments revenue, which is a 130 basis point decrease compared to the same period of the prior fiscal year. This is primarily due to the increase in selling and administrative expenses and the lower gross margin as a percent of revenue.
Uniform Direct Sales Operating Segment
Nine Months Ended February 28, 2011 Compared to Nine Months Ended February 28, 2010
Uniform Direct Sales operating segment revenue increased from $283.2 million to $310.2 million, or 9.5%, for the nine months ended February 28, 2011, over the same period in the prior fiscal year due to increased customer orders for uniforms.
Cost of uniform direct sales increased $18.6 million, or 9.4%, for the nine months ended February 28, 2011, due to increased Uniform Direct Sales operating segment sales volume. The gross margin as a percent of revenue was 29.9% for the nine months ended February 28, 2011, which is relatively consistent with the 29.8% in the same period of the prior fiscal year.
Selling and administrative expenses decreased $0.4 million compared to last fiscal year. Selling and administrative expenses decreased as a percent of revenue from 20.3% in the first nine months last fiscal year to 18.4% in this fiscal years first nine months. This decrease in selling and administrative expenses as a percent of revenue was due to the selling and administrative expenses being relatively consistent with last fiscal year while revenue increased by 9.5%.
Income before income taxes increased $8.7 million to $35.5 million for the Uniform Direct Sales operating segment for the nine months ended February 28, 2011. Income before income taxes was 11.4% of the operating segments revenue compared to 9.5% for the same period last fiscal year. This increase in income before income taxes is primarily due to the increase in revenue while keeping selling and administrative expenses relatively consistent.
First Aid, Safety and Fire Protection Services Operating Segment
Nine Months Ended February 28, 2011 Compared to Nine Months Ended February 28, 2010
First Aid, Safety and Fire Protection Services operating segment revenue increased from $250.8 million to $278.0 million, or 10.9%, for the nine months ended February 28, 2011. The increase primarily resulted from an organic growth of 6.4%. The remaining 4.5% represents growth derived mainly through acquisitions.
Cost of first aid, safety and fire protection services increased $9.9 million, or 6.5%, for the nine months ended February 28, 2011. Gross margin for the First Aid, Safety and Fire Protection Services operating segment is defined as revenue less cost of goods, warehouse expenses, service expenses and training expenses. The gross margin as a percent of revenue was 41.2% for the nine months ended February 28, 2011, which is a 250 basis point increase compared to the gross margin percentage for the nine months ended February 28, 2010. This increase is due to an increase in revenue and improved capacity utilization from the higher revenue levels.
Selling and administrative expenses as a percent of revenue, at 36.3%, increased 190 basis points compared to the first nine months of the prior fiscal year. Selling and administrative expenses increased from $86.3 million in last fiscal years first nine months to $101.0 million in the first nine months of this fiscal year due to an increase in the number of sales representatives and a $2.7 million increase in bad debt expense.
Income before income taxes for the First Aid, Safety and Fire Protection Services operating segment increased $2.6 million to $13.5 million for the nine months ended February 28, 2011. Income before income taxes was 4.9% of the operating segments revenue, compared to 4.3% in last fiscal years first nine months. This increase in income before income taxes as a percent of revenue is primarily due to the increase in revenue and improved capacity utilization from the higher revenue levels.
Document Management Services Operating Segment
Nine Months Ended February 28, 2011 Compared to Nine Months Ended February 28, 2010
Document Management Services operating segment revenue increased from $182.3 million to $229.7 million, or 26.0%, for the nine months ended February 28, 2011, over the same period in the prior fiscal year. The increase primarily resulted from an organic growth increase of 14.9%. The remaining 11.1% represents growth derived mainly through acquisitions. This operating segment derives a portion of its revenue from the sale of shredded paper to paper recyclers. The average price from these paper sales increased by approximately 33% in the nine months ended February 28, 2011, compared to the nine months ended February 28, 2010, due to increased volume and increases in recycled paper prices. This increase resulted in higher recycled paper revenue. Excluding recycled paper revenue, segment revenue grew 7.1% organically compared to last fiscal years first nine months.
Cost of document management services increased $22.1 million, or 24.6%, for the nine months ended February 28, 2011, due to increased Document Management Services operating segment volume. Gross margin for the Document Management Services operating segment is defined as revenue less production and service costs. The gross margin as a percent of revenue increased from 50.7% for the nine months ended February 28, 2010, to 51.3% for the nine months ended February 28, 2011. This increase is due to the increase in the recycled paper prices which increased revenue.
Selling and administrative expenses increased $21.4 million compared to last fiscal year. These expenses as a percent of revenue, at 42.4%, increased 70 basis points compared to the first nine months of the prior fiscal year. This increase is primarily due to an increase in the number of sales representatives.
Income before income taxes for the Document Management Services operating segment increased $4.0 million to $20.6 million for the period compared to the same period in the prior fiscal year. However, income before income taxes as a percentage of the operating segments revenue was 8.9% which is relatively consistent with the 9.1% from last fiscal year.
Liquidity and Capital Resources
The following is a summary of our cash flows and cash and cash equivalents and marketable securities as of and for the nine months ended February 28, 2011 (in thousands):
|
|
2011 |
|
2010 |
| ||
|
|
|
|
|
| ||
Net cash provided by operating activities |
|
$ |
207,955 |
|
$ |
429,189 |
|
Net cash used in investing activities |
|
$ |
(188,955 |
) |
$ |
(152,307 |
) |
Net cash used in financing activities |
|
$ |
(252,070 |
) |
$ |
(1,818 |
) |
|
|
|
|
|
| ||
Cash and cash equivalents and marketable securities at the end of the period |
|
$ |
216,705 |
|
$ |
552,096 |
|
The cash and cash equivalents and marketable securities as of February 28, 2011, include $165.1 million that is located outside of the United States. We expect to use these amounts to fund our international operations and expansion activities. The marketable securities at February 28, 2011, consist of United States municipal bonds and primarily Canadian treasury securities. We believe that our investment policy pertaining to marketable securities is conservative. The criterion used in making investment decisions is the preservation of principal, while earning an attractive yield.
Cash flows provided by operating activities have historically supplied us with a significant source of liquidity. We generally use these cash flows to fund most, if not all, of our operations and expansion activities and dividends on our common stock. We may also use cash flows provided by operating activities, as well as proceeds from long-term debt and short-term borrowings, to fund growth and expansion opportunities, as well as other cash requirements such as share buybacks.
Net cash provided by operating activities was $208.0 million for the nine months ended February 28, 2011, a decrease of $221.2 million compared to the same period last fiscal year. Last fiscal years net cash provided by operating activities benefited from lower working capital needs associated with our decreasing sales volumes and the accrual of approximately $28.0 million in legal settlements. As sales volumes have increased this fiscal year, our working capital needs have increased. Our operating cash flows were negatively impacted by the accounts receivable increase of $32.8 million, and the inventories, net and uniforms and other rental items in service increase of $100.1 million, both due to the higher sales volume and an intentional increase in inventory in anticipation of and as a precaution to a planned enterprise-wide system conversion of the Cintas Global Supply Chain division.
Net cash used in investing activities includes capital expenditures and cash paid for acquisitions of businesses. Capital expenditures were $142.3 million and $78.9 million for the nine months ended February 28, 2011 and 2010, respectively. These capital expenditures primarily relate to expansion efforts in Rental Uniforms and Ancillary Products and Document Management Services operating segments and to an enterprise-wide system conversion. Capital expenditures increased during the nine months ended February 28, 2011, compared to the same period last fiscal year as economic conditions in the United States and Canada stabilized in 2010, providing better revenue growth opportunities. Cash paid for acquisitions of businesses was $158.5 million and $41.4 million for the nine months ended February 28, 2011 and 2010, respectively. The acquisitions this fiscal year occurred in our Document Management Services, First Aid, Safety and Fire Protection Services and Rental Uniforms and Ancillary Products operating segments. The cash used for capital expenditures and acquisitions was offset by net proceeds from the sale or redemption of marketable securities.
Net cash used in financing activities was $252.1 million and $1.8 million for the nine months ended February 28, 2011 and 2010, respectively. We completed our share buyback program by purchasing $203.2 million of Cintas common stock during the nine months ended February 28, 2011. We also paid an annual cash dividend of $71.8 million in December 2010. Throughout our third quarter, we issued various levels of commercial paper in order to fund the dividend payment and other cash requirements. The maximum amount of commercial paper outstanding at any one time was approximately $90 million, and the amount outstanding at February 28, 2011, was $21.5 million.
On October 26, 2010, we announced that the Board of Directors authorized an additional $500.0 million share buyback program at market prices. No purchases have been made under this new program.
As of February 28, 2011, we had $775.0 million in fixed rate notes outstanding with maturities ranging from 2012 to 2036. Cintas has a commercial paper program with capacity of $300.0 million that is fully supported by a backup revolving credit facility through a credit agreement with its banking group. This revolving credit facility has an accordion feature that allows for a maximum borrowing capacity of $450.0 million and an expiration date of September 26, 2014. We believe this program will be adequate to provide necessary funding for our cash requirements. As of February 28, 2011, we had $21.5 million of commercial paper outstanding. No commercial paper outstanding and no outstanding borrowings on our revolving credit facility were outstanding as of May 31, 2010.
Cintas has certain covenants related to debt agreements. These covenants limit Cintas ability to incur certain liens, to engage in sale-leaseback transactions and to merge, consolidate or sell all or substantially all of Cintas assets. These covenants also require Cintas to maintain certain debt to capitalization and interest coverage ratios. Cross-default provisions exist between certain debt instruments. If a default of a significant covenant were to occur, the default could result in an acceleration of the maturity of the indebtedness, impair liquidity and limit the ability to raise future capital. As of February 28, 2011, Cintas was in compliance with all significant debt covenants.
Our access to the commercial paper and long-term debt markets has historically provided us with sources of liquidity. We do not anticipate having difficulty in obtaining financing from those markets in the future in view of our favorable experiences in the debt markets in the recent past. Our ability to continue to access the commercial paper and long-term debt markets on favorable interest rate and other terms will depend, to a significant degree, on the ratings assigned by the credit rating agencies to our indebtedness. As of February 28, 2011, our ratings were as follows:
Rating Agency |
|
Outlook |
|
Commercial Paper |
|
Long-term Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standard & Poors |
|
Stable |
|
A-2 |
|
A- |
Moodys Investors Service |
|
Stable |
|
P-1 |
|
A2 |
In the event that the ratings of our commercial paper or our outstanding long-term debt issues were substantially lowered or withdrawn for any reason, or if the ratings assigned to any new issue of long-term debt securities were significantly lower than those noted above, particularly if we no longer had investment grade ratings, our ability to access the debt markets may be adversely affected. In addition, in such a case, our cost of funds for new issues of commercial paper and long-term debt would be higher than our cost of funds would have been had the ratings of those new issues been at or above the level of the ratings noted above. The rating agency ratings are not recommendations to buy, sell or hold our commercial paper or debt securities. Each rating may be subject to revision or withdrawal at any time by the assigning rating organization and should be evaluated independently of any other rating. Moreover, each credit rating is specific to the security to which it applies.
To monitor our credit rating and our capacity for long-term financing, we consider various qualitative and quantitative factors. One such factor is the ratio of our total debt to capitalization. For the purpose of this calculation, debt is defined as the sum of short-term borrowings, long-term debt due within one year, obligations under capital leases due in one year, long-term debt and long-term obligations under capital leases. Total capitalization is defined as debt plus shareholders equity. At February 28, 2011 and May 31, 2010, the ratio of our total debt to capitalization was 24.6% and 23.7%, respectively. We believe these levels are reasonable and allow for additional funding if the need arises.
Litigation and Other Contingencies
Cintas is subject to legal proceedings and claims arising from the ordinary course of its business, including personal injury, customer contract, environmental and employment claims. In the opinion of management, the aggregate liability, if any, with respect to such ordinary course of business actions will not have a material adverse effect on the financial position or results of operations of Cintas. Cintas is party to additional litigation not considered in the ordinary course of business. Please refer to Note 8 entitled Litigation and Other Contingencies of Notes to Consolidated Condensed Financial Statements for a detailed discussion of certain specific litigation.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a safe harbor from civil litigation for forward-looking statements. Forward-looking statements may be identified by words such as estimates, anticipates, predicts, projects, plans, expects, intends, target, forecast, believes, seeks, could, should, may and will or the negative versions thereof and similar words, terms and expressions and by the context in which they are used. Such statements are based upon current expectations of Cintas and speak only as of the date made. You should not place undue reliance on any forward-looking statement. We cannot guarantee that any forward-looking statement will be realized. These statements are subject to various risks, uncertainties, potentially inaccurate assumptions and other factors that could cause actual results to differ from those set forth in or implied by this Quarterly Report. Factors that might cause such a difference include, but are not limited to, the possibility of greater than anticipated operating costs including energy costs, lower sales volumes, loss of customers due to outsourcing trends, the performance and costs of integration of acquisitions, fluctuations in costs of materials and labor including increased medical costs, costs and possible effects of union organizing activities, failure to comply with government regulations concerning employment discrimination, employee pay and benefits and employee health and safety, uncertainties regarding any existing or newly-discovered expenses and liabilities related to environmental compliance and remediation, the cost, results and ongoing assessment of internal controls for financial reporting required by the Sarbanes-Oxley Act of 2002, disruptions caused by the unaccessibility of computer systems data, the initiation or outcome of litigation, investigations or other proceedings, higher assumed sourcing or distribution costs of products, the disruption of operations from catastrophic or extraordinary events, the amount and timing of repurchases of our Common Stock, if any, changes in federal and state tax and labor laws and the reactions of competitors in terms of price and service. Cintas undertakes no obligation to publicly release any revisions to any forward-looking statements or to otherwise update any forward-looking statements whether as a result of new information or to reflect events, circumstances or any other unanticipated developments arising after the date on which such statements are made. A further list and description of risks, uncertainties and other matters can be found in our Annual Report on Form 10-K for the year ended May 31, 2010 and in our reports on Forms 10-Q and 8-K. The risks and uncertainties described herein are not the only ones we may face. Additional risks and uncertainties presently not known to us or that we currently believe to be immaterial may also harm our business.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
In our normal operations, Cintas has market risk exposure to interest rates. There has been no material change to this market risk exposure to interest rates from that which was previously disclosed on page 30 of our Form 10-K for the year ended May 31, 2010.
Through its foreign operations, Cintas is exposed to foreign currency risk. Foreign currency exposures arise from transactions denominated in a currency other than the functional currency and from foreign currency denominated revenue and profit translated into U.S. dollars. The primary foreign currency to which Cintas is exposed is the Canadian dollar. Cintas has average rate options in place to limit a portion of the risks of the revenue translation from Canadian foreign currency exchange rate movements during the remainder of the fiscal year; however, the amount of these options is not significant.
ITEM 4.
Disclosure Controls and Procedures
With the participation of Cintas management, including Cintas Chief Executive Officer, Chief Financial Officer, General Counsel and Controllers, Cintas has evaluated the effectiveness of the disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (Exchange Act)) as of February 28, 2011. Based on such evaluation, Cintas management, including Cintas Chief Executive Officer, Chief Financial Officer, General Counsel and Controllers, has concluded that Cintas disclosure controls and procedures were effective as of February 28, 2011, in ensuring (i) information required to be disclosed by Cintas in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SECs rules and forms and (ii) information required to be disclosed by Cintas in the reports that it files or submits under the Exchange Act is accumulated and communicated to Cintas management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Internal Control over Financial Reporting
There were no changes in Cintas internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended February 28, 2011, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. See Managements Report on Internal Control over Financial Reporting and Report of Independent Registered Public Accounting Firm on pages 32 and 33 of our Form 10-K for the fiscal year ended May 31, 2010.
I. Supplemental Information: We discuss material legal proceedings (other than ordinary routine litigation incidental to our business) pending against us in Item 1. Financial Statements, in Note 8 entitled Litigation and Other Contingencies of Notes to Consolidated Condensed Financial Statements. We refer you to and incorporate by reference into this Part II, Item 1 that discussion for important information concerning those legal proceedings.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On May 2, 2005, Cintas announced that the Board of Directors authorized a $500.0 million share buyback program at market prices. In July 2006, Cintas announced that the Board of Directors approved the expansion of its share buyback program by an additional $500.0 million. The Board did not specify an expiration date for this program.
From the inception of the share buyback program through March 31, 2011, Cintas has purchased a total of approximately 28.0 million shares of Cintas stock at an average price of $35.78 per share for a total purchase price of $1 billion. The existing share buyback program has been completed. On October 26, 2010, Cintas announced that the Board of Directors authorized an additional $500.0 million share buyback program at market prices. No purchases have been made under this new program.
10.1 Credit Agreement dated as of May 28, 2004 by and among Cintas Corporation No. 2, as Borrower, the lenders named in such Credit Agreement and KeyBank National Association, as agent for the lenders
10.2 Fourth Amendment Agreement to Credit Agreement dated as of September 27, 2010
31.1 Certification of Principal Executive Officer required by Rule 13a-14(a)
31.2 Certification of Principal Financial Officer required by Rule 13a-14(a)
32.1 Section 1350 Certification of Chief Executive Officer
32.2 Section 1350 Certification of Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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CINTAS CORPORATION |
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(Registrant) |
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Date: April 8, 2011 |
By: /s/ William C. Gale | |
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William C. Gale | |
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Senior Vice President and Chief Financial Officer | |
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(Chief Accounting Officer) |
EXHIBIT INDEX
10.1 Credit Agreement dated as of May 28, 2004 by and among Cintas Corporation No. 2, as Borrower, the lenders named in such Credit Agreement and KeyBank National Association, as agent for the lenders
10.2 Fourth Amendment Agreement to Credit Agreement dated as of September 27, 2010
31.1 Certification of Principal Executive Officer required by Rule 13a-14(a)
31.2 Certification of Principal Financial Officer required by Rule 13a-14(a)
32.1 Section 1350 Certification of Chief Executive Officer
32.2 Section 1350 Certification of Chief Financial Officer
Exhibit 10.1
CREDIT AGREEMENT
among
CINTAS CORPORATION NO. 2,
as Borrower,
THE LENDERS NAMED HEREIN,
as Lenders,
and
KEYBANK NATIONAL ASSOCIATION,
as Joint Lead Arranger and Administrative Agent,
BANC ONE CAPITAL MARKETS, INC.,
as Joint Lead Arranger,
BANK ONE, NA,
as Syndication Agent,
and
FIFTH THIRD BANK,
US BANK NATIONAL ASSOCIATION,
and
THE BANK OF TOKYO-MITSUBISHI, LTD.,
as Co-Documentation Agents
dated as of
May 28, 2004
TABLE OF CONTENTS
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Page |
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ARTICLE I. DEFINITIONS |
1 | |
Section 1.1. Definitions |
1 | |
Section 1.2. Accounting Terms |
18 | |
Section 1.3. Terms Generally |
18 | |
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ARTICLE II. AMOUNT AND TERMS OF CREDIT |
18 | |
Section 2.1. Amount and Nature of Credit |
18 | |
Section 2.2. Revolving Credit |
19 | |
Section 2.3. Interest |
23 | |
Section 2.4. Evidence of Indebtedness |
24 | |
Section 2.5. Notice of Credit Event; Funding of Loans |
25 | |
Section 2.6. Payment on Loans and Other Obligations |
26 | |
Section 2.7. Prepayment |
27 | |
Section 2.8. Facility and Other Fees |
27 | |
Section 2.9. Modification of Commitment |
28 | |
Section 2.10. Computation of Interest and Fees |
29 | |
Section 2.11. Mandatory Payment |
29 | |
Section 2.12. Extension of Commitment |
29 | |
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ARTICLE III. ADDITIONAL PROVISIONS RELATING TO EURODOLLAR LOANS; INCREASED CAPITAL; TAXES |
30 | |
Section 3.1. Requirements of Law |
30 | |
Section 3.2. Taxes |
31 | |
Section 3.3. Funding Losses |
32 | |
Section 3.4. Eurodollar Rate Lending Unlawful; Inability to Determine Rate |
33 | |
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ARTICLE IV. CONDITIONS PRECEDENT |
33 | |
Section 4.1. Conditions to Each Credit Event |
34 | |
Section 4.2. Conditions to the First Credit Event |
34 | |
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ARTICLE V. COVENANTS |
36 | |
Section 5.1. Insurance |
36 | |
Section 5.2. Money Obligations |
36 | |
Section 5.3. Financial Statements and Information |
36 | |
Section 5.4. Financial Records |
37 | |
Section 5.5. Franchises; Change in Business |
37 | |
Section 5.6. ERISA Compliance |
37 | |
Section 5.7. Financial Covenants |
37 | |
Section 5.8. Borrowing |
38 | |
Section 5.9. Liens |
38 | |
Section 5.10. Regulations T, U and X |
39 | |
Section 5.11. Investments and Loans |
39 | |
Section 5.12. Merger and Sale of Assets |
39 | |
Section 5.13. Acquisitions |
40 | |
Section 5.14. Notice |
40 | |
Section 5.15. Environmental Compliance |
40 | |
Section 5.16. Affiliate Transactions |
41 | |
TABLE OF CONTENTS
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Page | |
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Section 5.17. Use of Proceeds |
41 | |
Section 5.18. Subsidiary Guaranties |
41 | |
Section 5.19. Restrictive Agreements |
42 | |
Section 5.20. Pari Passu Ranking |
43 | |
Section 5.21. Amendment of Organizational Documents |
43 | |
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ARTICLE VI. REPRESENTATIONS AND WARRANTIES |
43 | |
Section 6.1. Corporate Existence; Subsidiaries; Foreign Qualification |
43 | |
Section 6.2. Corporate Authority |
43 | |
Section 6.3. Compliance with Laws and Contracts |
44 | |
Section 6.4. Litigation and Administrative Proceedings |
44 | |
Section 6.5. Title to Assets |
44 | |
Section 6.6. Tax Returns |
44 | |
Section 6.7. Environmental Matters |
44 | |
Section 6.8. Continued Business |
45 | |
Section 6.9. Employee Benefits Plans |
45 | |
Section 6.10. Consents or Approvals |
46 | |
Section 6.11. Solvency |
46 | |
Section 6.12. Financial Statements |
46 | |
Section 6.13. Regulations T, U and X |
46 | |
Section 6.14. Material Agreements |
46 | |
Section 6.15. Intellectual Property |
46 | |
Section 6.16. Insurance |
47 | |
Section 6.17. Accurate and Complete Statements |
47 | |
Section 6.18. Investment Company; Holding Company |
47 | |
Section 6.19. Defaults |
47 | |
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ARTICLE VII. EVENTS OF DEFAULT |
47 | |
Section 7.1. Payments |
47 | |
Section 7.2. Special Covenants |
47 | |
Section 7.3. Other Covenants |
47 | |
Section 7.4. Representations and Warranties |
48 | |
Section 7.5. Cross Default |
48 | |
Section 7.6. ERISA Default |
48 | |
Section 7.7. Change in Control |
48 | |
Section 7.8. Money Judgment |
48 | |
Section 7.9. Validity of Loan Documents |
48 | |
Section 7.10. Solvency |
48 | |
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ARTICLE VIII. REMEDIES UPON DEFAULT |
49 | |
Section 8.1. Optional Defaults |
49 | |
Section 8.2. Automatic Defaults |
49 | |
Section 8.3. Letters of Credit |
49 | |
Section 8.4. Offsets |
50 | |
Section 8.5. Equalization Provision |
50 | |
Section 8.6. Other Remedies |
50 | |
TABLE OF CONTENTS
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Page | ||
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ARTICLE IX. THE AGENT |
51 | ||
Section 9.1. Appointment and Authorization |
51 | ||
Section 9.2. Note Holders |
51 | ||
Section 9.3. Consultation With Counsel |
51 | ||
Section 9.4. Documents |
51 | ||
Section 9.5. Agent and Affiliates |
51 | ||
Section 9.6. Knowledge of Default |
51 | ||
Section 9.7. Action by Agent |
52 | ||
Section 9.8. Notice of Default |
52 | ||
Section 9.9. Indemnification of Agent |
52 | ||
Section 9.10. Successor Agent |
52 | ||
Section 9.11. Other Agents |
53 | ||
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ARTICLE X. MISCELLANEOUS |
53 | ||
Section 10.1. Lenders Independent Investigation |
53 | ||
Section 10.2. No Waiver; Cumulative Remedies |
53 | ||
Section 10.3. Amendments, Consents |
53 | ||
Section 10.4. Notices |
54 | ||
Section 10.5. Costs, Expenses and Taxes |
54 | ||
Section 10.6. Indemnification |
54 | ||
Section 10.7. Obligations Several; No Fiduciary Obligations |
55 | ||
Section 10.8. Execution in Counterparts |
55 | ||
Section 10.9. Binding Effect; Borrowers Assignment |
55 | ||
Section 10.10. Lender Assignments |
55 | ||
Section 10.11. Sale of Participations |
57 | ||
Section 10.12. Severability of Provisions; Captions; Attachments |
58 | ||
Section 10.13. Investment Purpose |
58 | ||
Section 10.14. Entire Agreement |
58 | ||
Section 10.15. Legal Representation of Parties |
58 | ||
Section 10.16. Governing Law; Submission to Jurisdiction |
58 | ||
Section 10.17. Jury Trial Waiver |
1 | ||
Exhibit A |
Form of Revolving Credit Note |
Exhibit B |
Form of Swing Line Note |
Exhibit C |
Form of Notice of Loan |
Exhibit D |
Form of Compliance Certificate |
Exhibit E |
Form of Assignment and Acceptance Agreement |
Exhibit F |
Form of Request for Extension |
Exhibit G |
Form of Parent Guaranty of Payment |
Exhibit H |
Form of Subsidiary Guaranty of Payment |
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Schedule 1 |
Commitments of Lenders |
Schedule 2 |
Guarantors of Payment |
Schedule 2.2 |
Existing Letters of Credit |
Schedule 5.8 |
Indebtedness |
Schedule 5.9 |
Liens |
TABLE OF CONTENTS
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Page |
Schedule 6.1 |
Corporate Existence; Subsidiaries; Foreign Qualification |
Schedule 6.4 |
Litigation and Administrative Proceedings |
This CREDIT AGREEMENT (as the same may from time to time be amended, restated or otherwise modified, this Agreement) is made effective as of the 28th day of May, 2004, among:
(a) CINTAS CORPORATION NO. 2, a Nevada corporation (Borrower);
(b) the lenders listed on Schedule 1 hereto and each other Eligible Transferee, as hereinafter defined, that becomes a party hereto pursuant to Section 10.10 hereof (collectively, the Lenders and, individually, each a Lender);
(c) KEYBANK NATIONAL ASSOCIATION, as joint lead arranger and administrative agent for the Lenders under this Agreement (Agent);
(d) BANC ONE CAPITAL MARKETS, INC., as joint lead arranger under this Agreement (Joint Lead Arranger);
(e) BANK ONE, NA, as syndication agent under this Agreement (Syndication Agent);
(f) FIFTH THIRD BANK, as co-documentation agent under this Agreement (Co-Documentation Agent);
(g) US BANK NATIONAL ASSOCIATION, as co-documentation agent under this Agreement (Co-Documentation Agent); and
(f) THE BANK OF TOKYO-MITSUBISHI, LTD., as co-documentation agent under this Agreement (Co-Documentation Agent).
WITNESSETH:
WHEREAS, Borrower, Agent and the Lenders desire to contract for the establishment of credits in the aggregate principal amounts hereinafter set forth, to be made available to Borrower upon the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, it is mutually agreed as follows:
ARTICLE I. DEFINITIONS
Section 1.1. Definitions. As used in this Agreement, the following terms shall have the following meanings:
Acquisition shall mean any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of any Person (other than a Company), or any business or division of any Person (other than a
Company), (b) the acquisition of in excess of fifty percent (50%) of the stock (or other equity interest) of any Person (other than a Company), or (c) the acquisition of another Person (other than a Company) by a merger, amalgamation or consolidation or any other combination with such Person.
Additional Commitment shall mean that term as defined in Section 2.9(b) hereof.
Additional Lender shall mean an Eligible Transferee that shall become a Lender during the Commitment Increase Period pursuant to Section 2.9(b) hereof.
Additional Lender Assumption Agreement shall mean an additional lender assumption agreement, in form and substance satisfactory to Agent, wherein an Additional Lender shall become a Lender.
Additional Lender Assumption Effective Date shall mean that term as defined in Section 2.9(b) hereof.
Advantage shall mean any payment (whether made voluntarily or involuntarily, by offset of any deposit or other indebtedness or otherwise) received by any Lender in respect of the Obligations, if such payment results in that Lender having less than its pro rata share of the Obligations then outstanding, than was the case immediately before such payment.
Affiliate shall mean any Person, directly or indirectly, controlling, controlled by or under common control with a Company and control (including the correlative meanings, the terms controlling, controlled by and under common control with) shall mean the power, directly or indirectly, to direct or cause the direction of the management and policies of a Company, whether through the ownership of voting securities, by contract or otherwise.
Agent Fee Letter shall mean the Agent Fee Letter between Borrower and Agent, dated as of the Closing Date, as the same may from time to time be amended, restated or otherwise modified.
Applicable Facility Fee Rate shall mean:
(a) for the period from the Closing Date until the first Margin Adjustment Date after the Closing Date, eight basis points; and
(b) commencing on the first Margin Adjustment Date after the Closing Date and on each Margin Adjustment Date thereafter, the number of basis points set forth in the following matrix, based upon the S&P Rating or the Moodys Rating in effect at such time:
Level |
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S&P Rating |
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Moodys Rating |
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Applicable Basis Points for |
1 |
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A+ or higher |
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A1 or higher |
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7.00 |
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2 |
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A |
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A2 |
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8.00 |
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3 |
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A- |
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A3 |
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10.00 |
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4 |
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BBB+ |
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Baa1 |
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12.50 |
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5 |
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less than BBB+ |
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less than Baa1 |
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15.00 |
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provided that, notwithstanding anything above to the contrary, (i) if the S&P Rating and the Moodys Rating shall at any time be at different Levels in the above chart, and the difference in Levels is only one Level, then the Applicable Facility Fee Rate shall be based upon the higher of the applicable S&P Rating and Moodys Rating, (ii) if the S&P Rating and the Moodys Rating shall at any time be at different Levels in the above chart, and such difference is two Levels or more, then the Applicable Facility Fee Rate shall be based upon the Level immediately below the Level determined based on the higher of the S&P Rating and the Moodys Rating, (iii) if only one of the two ratings (S&P Rating or Moodys Rating) shall exist, then the existing rating shall determine the Level of the Applicable Facility Fee Rate, and (iv) if neither the S&P Rating nor the Moodys Rating shall exist, then the Applicable Facility Fee Rate shall be set at Level 5. Changes to the Applicable Facility Fee Rate shall be immediately effective on each Margin Adjustment Date. The above matrix does not modify or waive, in any respect, the rights of Agent and the Lenders to charge the Default Rate, or the rights and remedies of Agent and the Lenders pursuant to Articles VII and VIII hereof.
Applicable Margin shall mean:
(a) for the period from the Closing Date until the first Margin Adjustment Date after the Closing Date, twenty-seven (27) basis points for Eurodollar Loans; and
(b) commencing on the first Margin Adjustment Date after the Closing Date and on each Margin Adjustment Date thereafter, the number of basis points set forth in the following matrix, based upon the S&P Rating or the Moodys Rating in effect at such time:
Level |
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S&P Rating |
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Moodys Rating |
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Applicable Basis Points for |
1 |
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A+ or higher |
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A1 or higher |
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23.00 |
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2 |
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A |
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A2 |
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27.00 |
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3 |
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A- |
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A3 |
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30.00 |
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4 |
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BBB+ |
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Baa1 |
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37.50 |
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5 |
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less than BBB+ |
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less than Baa1 |
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60.00 |
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provided that, notwithstanding anything above to the contrary, (i) if the S&P Rating and the Moodys Rating shall at any time be at different Levels in the above chart, and the difference in Levels is only one Level, then the Applicable Margin shall be based upon the higher of the applicable S&P Rating and Moodys Rating, (ii) if the S&P Rating and the Moodys Rating shall at any time be at different Levels in the above chart, and such difference is two Levels or more, then the Applicable Margin shall be based upon the Level immediately below the Level
determined based on the higher of the S&P Rating and the Moodys Rating, (iii) if only one of the two ratings (S&P Rating or Moodys Rating) shall exist, then the existing rating shall determine the Level of the Applicable Margin, and (iv) if neither the S&P Rating nor the Moodys Rating shall exist, then the Applicable Margin shall be set at Level 5. Changes to the Applicable Margin shall be immediately effective on each Margin Adjustment Date. The above matrix does not modify or waive, in any respect, the rights of Agent and the Lenders to charge the Default Rate, or the rights and remedies of Agent and the Lenders pursuant to Articles VII and VIII hereof.
Applicable Utilization Fee Rate shall mean:
(a) for the period from the Closing Date until the first Margin Adjustment Date after the Closing Date, five basis points; and
(b) commencing on the first Margin Adjustment Date after the Closing Date and on each Margin Adjustment Date thereafter, the number of basis points set forth in the following matrix, based upon the S&P Rating or the Moodys Rating in effect at such time:
Level |
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S&P Rating |
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Moodys Rating |
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Applicable Basis Points for |
1 |
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A or higher |
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A2 or higher |
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5.00 |
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2 |
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A- |
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A3 |
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10.00 |
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3 |
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less than A- |
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less than A3 |
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12.50 |
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provided that, notwithstanding anything above to the contrary, (i) if the S&P Rating and the Moodys Rating shall at any time be at different Levels in the above chart, and the difference in Levels is only one Level, then the Applicable Utilization Fee Rate shall be based upon the higher of the applicable S&P Rating and Moodys Rating, (ii) if the S&P Rating and the Moodys Rating shall at any time be at different Levels in the above charts, and such difference is two Levels or more, then the Applicable Utilization Fee Rate shall be based upon the Level immediately below the Level determined based on the higher of the S&P Rating and the Moodys Rating, (iii) if only one of the two ratings (S&P Rating or Moodys Rating) shall exist, then the existing rating shall determine the Level of the Applicable Utilization Fee Rate, and (iv) if neither the S&P Rating nor the Moodys Rating shall exist, then the Applicable Utilization Fee Rate shall be set at Level 3. Changes to the Applicable Utilization Fee Rate shall be immediately effective on each Margin Adjustment Date. The above matrix does not modify or waive, in any respect, the rights of Agent and the Lenders to charge the Default Rate, or the rights and remedies of Agent and the Lenders pursuant to Articles VII and VIII hereof.
Assignment Agreement shall mean an Assignment and Acceptance Agreement in the form of the attached Exhibit E.
Authorized Officer shall mean a Financial Officer or any other individual authorized by a Financial Officer in writing (with a copy to Agent) to handle certain administrative matters in connection with this Agreement.
Base Rate shall mean a rate per annum equal to the greater of (a) the Prime Rate or (b) one-half of one percent (.50%) in excess of the Federal Funds Effective Rate. Any change in the Base Rate shall be effective immediately from and after such change in the Base Rate.
Base Rate Loan shall mean a Revolving Loan described in Section 2.2(a) hereof on which Borrower shall pay interest at a rate based on the Base Rate.
BOCM Fee Letter shall mean the BOCM Fee Letter between Borrower and BOCM, dated as of the Closing Date.
Business Day shall mean any day that is not a Saturday, Sunday or other day on which national banks are authorized or required to close, and, if the applicable Business Day shall relate to a Eurodollar Loan, a day of the year on which dealings in deposits are carried on in the London interbank Eurodollar market.
Capital Distribution shall mean a payment made, liability incurred or other consideration given by a Company to any Person that is not a Company, for the purchase, acquisition, redemption, repurchase or retirement of any capital stock or other equity interest of such Company or as a dividend, return of capital or other distribution (other than any stock dividend, stock split or other equity distribution payable only in capital stock or other equity of such Company) in respect of such Companys capital stock or other equity interest.
Capitalization Ratio shall mean, as determined for the most recently completed fiscal quarter of Parent, on a Consolidated basis and in accordance with GAAP, the ratio of (a) Consolidated Net Funded Indebtedness to (b) Consolidated Total Capitalization.
Capitalized Lease of a Person shall mean any lease of assets by such Person as lessee that would be capitalized on a balance sheet of such Person prepared in accordance with GAAP.
Capitalized Lease Obligations of a Person shall mean the amount of the obligations of such Person under Capitalized Leases that would be shown as a liability on a balance sheet of such Person prepared in accordance with GAAP.
Cash Equivalents shall mean (a) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than one year from the date of acquisition; (b) U.S. dollar denominated time deposits, certificates of deposit and bankers acceptances of any bank whose short-term commercial paper rating from Standard & Poors is at least A-2, or the equivalent thereof, or from Moodys is at least P-2, or the equivalent thereof (any such bank, an Approved Depository); (c) commercial paper issued by any Approved Depository or by the parent company of any Approved Depository and commercial paper issued by, or guaranteed by, any company with a short-term commercial paper rating of at least A-2 or the equivalent thereof by Standard & Poors or at least P-2 or the equivalent thereof by Moodys; (d) bonds and preferred stock of investment grade companies or issuers including, without limitation, municipal bonds,
corporate bonds and treasury bonds; (e) investments in money market funds substantially all the assets of which are comprised of securities of the types described in subparts (a) through (d) above; and (f) investments in money market funds access to which is provided as part of sweep accounts maintained with an Approved Depository.
Change in Control shall mean (a) the acquisition of, or, if earlier, the shareholder or director approval of the acquisition of, ownership or voting control, directly or indirectly, beneficially or of record, on or after the Closing Date, by any Person (other than members of the Current Holder Group) or group (within the meaning of Rule 13d-3 of the SEC under the Securities Exchange Act of 1934, as then in effect), of shares representing more than thirty percent (30%) of the aggregate ordinary Voting Power represented by the issued and outstanding capital stock of Parent; (b) the occupation of a majority of the seats (other than vacant seats) on the board of directors or other governing body of Parent by Persons who were neither (i) nominated by the board of directors or other governing body of Borrower nor (ii) appointed by directors so nominated; or (c) the failure of Parent to own one hundred percent (100%), directly or indirectly, of the outstanding common stock of Borrower.
Closing Commitment Amount shall mean Three Hundred Million Dollars ($300,000,000).
Closing Date shall mean the effective date of this Agreement as set forth in the first paragraph of this Agreement.
Closing Fee Letter shall mean the Closing Fee Letter between Borrower and Agent, dated as of the Closing Date.
Code shall mean the Internal Revenue Code of 1986, as amended, together with the rules and regulations promulgated thereunder.
Commitment shall mean the obligation hereunder of the Lenders, during the Commitment Period, to make Loans, to issue Letters of Credit and to participate in Swing Loans and Letters of Credit pursuant to the Revolving Credit Commitments, up to the Total Commitment Amount.
Commitment Increase Period shall mean the period from the Closing Date to the date that is thirty (30) days prior to the last day of the Commitment Period, or such later date as shall be agreed to in writing by Agent.
Commitment Percentage shall mean, for each Lender, the percentage set forth opposite such Lenders name under the column headed Commitment Percentage, as listed in Schedule 1 hereto.
Commitment Period shall mean the period from the Closing Date to May 27, 2009, or such earlier date on which the Commitment shall have been terminated pursuant to Article VIII hereof.
Companies shall mean Parent, Borrower and all Subsidiaries of Parent.
Company shall mean Parent, Borrower or a Subsidiary of Parent.
Compliance Certificate shall mean a certificate, substantially in the form of the attached Exhibit D.
Consideration shall mean, in connection with an Acquisition, the aggregate consideration paid, including cash, securities or notes, the assumption or incurring of liabilities (direct or contingent) valued on a GAAP basis, the payment of fees for a covenant not to compete and any other consideration paid for such Acquisition.
Consolidated shall mean the resultant consolidation of the financial statements of Parent and its Subsidiaries in accordance with GAAP, including principles of consolidation specified by GAAP.
Consolidated EBIT shall mean, for any period, on a Consolidated basis and in accordance with GAAP, Consolidated Net Earnings for such period plus the aggregate amounts deducted in determining such Consolidated Net Earnings in respect of (a) Consolidated Interest Expense, (b) Consolidated Income Tax Expense, and (c) extraordinary and non-recurring losses and non-cash charges and related tax effects in accordance with GAAP, minus the aggregate amounts added in determining such Consolidated Net Earnings in respect of extraordinary and non-recurring gains and related tax effects in accordance with GAAP.
Consolidated Funded Indebtedness shall mean, at any date, all Indebtedness (including, but not limited to, current, long-term and Subordinated Indebtedness, if any) of Parent, as determined on a Consolidated basis and in accordance with GAAP.
Consolidated Income Tax Expense shall mean, for any period, all provisions for taxes based on the gross or net income of Parent (including, without limitation, any additions to such taxes, and any penalties and interest with respect thereto), and all franchise taxes of Parent, as determined on a Consolidated basis and in accordance with GAAP.
Consolidated Interest Expense shall mean, for any period, the interest expense of Parent for such period, as determined on a Consolidated basis and in accordance with GAAP.
Consolidated Net Earnings shall mean, for any period, the net income (loss) of Parent for such period, as determined on a Consolidated basis and in accordance with GAAP.
Consolidated Net Funded Indebtedness shall mean, at any date, (a) Consolidated Funded Indebtedness, minus (b) cash and Cash Equivalents of the Companies, as determined on a Consolidated basis and in accordance with GAAP.
Consolidated Net Worth shall mean, at any date, the stockholders equity of Parent, as determined on a Consolidated basis and in accordance with GAAP.
Consolidated Total Capitalization shall mean, at any date, as determined on a Consolidated basis and in accordance with GAAP, Consolidated Net Worth plus Consolidated Funded Indebtedness.
Controlled Group shall mean a Company and each Person required to be aggregated with a Company under Code Section 414(b), (c), (m) or (o).
Credit Event shall mean the making by the Lenders of a Loan, the conversion by the Lenders of a Base Rate Loan to a Eurodollar Loan, the continuation by the Lenders of a Eurodollar Loan after the end of the applicable Interest Period, the making by the Swing Line Lender of a Swing Loan, or the issuance by the Fronting Lender of a Letter of Credit.
Credit Party shall mean Borrower, Parent and any Subsidiary that is a Guarantor of Payment.
Current Holder Group shall mean (a) Richard T. Farmer and Joyce E. Farmer and the lineal descendants of Richard T. Farmer, and (b) James J. Gardner and Joan A. Gardner and the lineal descendants of James J. Gardner.
Default shall mean an event or condition that constitutes, or with the lapse of any applicable grace period or the giving of notice or both would constitute, an Event of Default, and that has not been waived by the Required Lenders in writing.
Default Rate shall mean (a) with respect to any Loan, a rate per annum equal to two percent (2%) in excess of the rate otherwise applicable thereto, and (b) with respect to any other amount, if no rate is specified or available, a rate per annum equal to two percent (2%) in excess of the Base Rate from time to time in effect.
Derived Eurodollar Rate shall mean a rate per annum equal to the sum of the Applicable Margin (from time to time in effect) plus the Eurodollar Rate.
Dollar or the sign $ shall mean lawful money of the United States of America.
Domestic Subsidiary shall mean a Subsidiary that is not a Foreign Subsidiary.
Dormant Subsidiary shall mean a Company that (a) is not a Credit Party, (b) has aggregate assets of less than Five Hundred Thousand Dollars ($500,000), and (c) has no direct or indirect Subsidiaries with aggregate assets for all such Subsidiaries of more than Five Hundred Thousand Dollars ($500,000).
Eligible Transferee shall mean a commercial bank or financial institution that is not Borrower, a Subsidiary or an Affiliate; provided, however, that (a) in the case of a commercial bank, such bank (i) has a combined capital and surplus of not less than One Hundred Million Dollars ($100,000,000), and (ii) either is organized under the laws of the United States or any state thereof or the District of Columbia or is organized under the laws of a country that is a member of the Organization for Economic Co-Operation and Development (OECD) or a
political subdivision of such country and is acting through a branch or agency located in the United States, and (b) in the case of any other financial institution, such financial institution is engaged in the making and purchasing of commercial loans in the ordinary course of its business and has a total net worth of not less than One Hundred Million Dollars ($100,000,000) (or its obligations are guaranteed by an entity with such a net worth).
Environmental Laws shall mean all provisions of law, statutes, ordinances, rules, regulations, permits, licenses, judgments, writs, injunctions, decrees, orders, awards and standards promulgated by the government of the United States of America or by any state or municipality thereof or any foreign jurisdiction, or by any court, agency, instrumentality, regulatory authority or commission of any of the foregoing concerning health, safety and protection of, or regulation of the discharge of substances into, the environment.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated pursuant thereto.
ERISA Event shall mean (a) the engagement by a Controlled Group member in a non-exempt prohibited transaction (as defined under ERISA Section 406 or Code Section 4975); (b) the application by a Controlled Group member for a waiver from the minimum funding requirements of Code Section 412 or ERISA Section 302 or a Controlled Group member is required to provide security under Code Section 401(a)(29) or ERISA Section 307; (c) the occurrence of a Reportable Event with respect to any Pension Plan as to which notice is required to be provided to the PBGC; (d) the withdrawal by a Controlled Group member from a Multiemployer Plan in a complete withdrawal or a partial withdrawal (as such terms are defined in ERISA Sections 4203 and 4205, respectively); (e) the involvement of, or occurrence or existence of any event or condition that makes likely the involvement of, a Multiemployer Plan in any reorganization under ERISA Section 4241; (f) the failure of an ERISA Plan (and any related trust) that is intended to be qualified under Code Sections 401 and 501 to be so qualified or the failure of any cash or deferred arrangement under any such ERISA Plan to meet the requirements of Code Section 401(k); (g) the taking by the PBGC of any steps to terminate a Pension Plan or appoint a trustee to administer a Pension Plan; (h) the commencement or existence of a claim, action, suit, audit or investigation with respect to an ERISA Plan, other than a routine claim for benefits; or (i) any incurrence by or any expectation of the incurrence by a Controlled Group member of any liability for post-retirement benefits under any Welfare Plan, other than as required by ERISA Section 601, et. seq. or Code Section 4980B.
ERISA Plan shall mean an employee benefit plan (within the meaning of ERISA Section 3(3)) that a Controlled Group member at any time sponsors, maintains, contributes to, has liability with respect to or has an obligation to contribute to such plan.
Eurocurrency Liabilities shall have the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.
Eurodollar shall mean a Dollar denominated deposit in a bank or branch outside of the United States.
Eurodollar Loan shall mean a Revolving Loan described in Section 2.2(a) hereof that shall be denominated in Dollars and on which Borrower shall pay interest at a rate based upon the Derived Eurodollar Rate.
Eurodollar Rate shall mean, with respect to a Eurodollar Loan, for any Interest Period, a rate per annum equal to the quotient obtained by dividing (a) the rate of interest, determined by Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) as of approximately 11:00 A.M. (London time) two Business Days prior to the beginning of such Interest Period pertaining to such Eurodollar Loan, as listed on British Bankers Association Interest Rate LIBOR 01 or 02 as provided by Reuters (or, if for any reason such rate is unavailable from Reuters, from any other similar company or service that provides rate quotations comparable to those currently provided by Reuters) as the rate in the London interbank market for Dollar deposits in immediately available funds with a maturity comparable to such Interest Period, provided that, in the event that such rate quotation is not available for any reason, then the Eurodollar Rate shall be the average of the per annum rates at which deposits in immediately available funds in Dollars for the relevant Interest Period and in the amount of the Eurodollar Loan to be disbursed or to remain outstanding during such Interest Period, as the case may be, are offered to Agent (or an affiliate of Agent, in Agents discretion) by at least three prime banks in any Eurodollar market reasonably selected by Agent, determined as of 11:00 A.M. (London time) (or as soon thereafter as practicable), two Business Days prior to the beginning of the relevant Interest Period pertaining to such Eurodollar Loan hereunder; by (b) 1.00 minus the Reserve Percentage.
Event of Default shall mean an event or condition that shall constitute an event of default as defined in Article VII hereof.
Excluded Taxes shall mean net income taxes (and franchise taxes imposed in lieu of net income taxes) imposed on Agent or any Lender by the Governmental Authority located in any jurisdiction, as a result of Agent or Lender, as applicable, having been a citizen or resident of the jurisdiction of such taxing authority or being or having been engaged in a trade or business in such jurisdiction (but excluding any connection arising solely from Agents or any Lenders execution or enforcement of, or performance of, its obligations hereunder or under any of the other Loan Documents).
Existing Letter of Credit shall mean that term as defined in Section 2.2(b)(vii) hereof.
Federal Funds Effective Rate shall mean, for any day, the rate per annum (rounded upward (if necessary) to the nearest one one-hundredth of one percent (1/100 of 1%)) announced by the Federal Reserve Bank of New York (or any successor) on such day as being the weighted average of the rates on overnight federal funds transactions arranged by federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank (or any successor) in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the Federal Funds Effective Rate as of the Closing Date.
Financial Officer shall mean any of the following officers: chief executive officer, president, chief financial officer, treasurer or controller. Unless otherwise qualified, all references to a Financial Officer in this Agreement shall refer to a Financial Officer of Parent.
Foreign Subsidiary shall mean a Subsidiary that is organized under the laws of a jurisdiction located outside of the United States.
Fronting Lender shall mean, (a) as to any Letter of Credit transaction hereunder, KeyBank National Association as issuer of the Letter of Credit, or, with the prior consent of Borrower, in the event that KeyBank National Association either shall be unable to issue or shall agree that another Lender may issue a Letter of Credit, such other Lender as shall agree to issue the Letter of Credit in its own name, but on behalf of the Lenders hereunder; or (b) as to any Existing Letter of Credit, Bank One, NA.
GAAP shall mean generally accepted accounting principles in the United States as then in effect, which shall include the official interpretations thereof by the Financial Accounting Standards Board.
Governmental Authority shall mean any nation or government, any state, province or territory or other political subdivision thereof, any governmental agency, authority, instrumentality, regulatory body, court, central bank or other governmental entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.
Guarantor shall mean a Person that shall have pledged its credit or property in any manner for the payment or other performance of the indebtedness, contract or other obligation of another and includes (without limitation) any guarantor (whether of payment or of collection), surety, co-maker, endorser or Person that shall have agreed conditionally or otherwise to make any purchase, loan or investment in order thereby to enable another to prevent or correct a default of any kind.
Guarantor of Payment shall mean Parent and each of the Companies set forth on Schedule 2 hereto, that are each executing and delivering a Guaranty of Payment, or any other Person that shall deliver a Guaranty of Payment to Agent subsequent to the Closing Date.
Guaranty of Payment shall mean the Parent Guaranty of Payment and each other Guaranty of Payment executed and delivered on or after the Closing Date in connection with this Agreement by the Guarantors of Payment, as the same may from time to time be amended, restated or otherwise modified.
Hedge Agreement shall mean any (a) hedge agreement, interest rate swap, cap, collar or floor agreement, or other interest rate management device entered into by a Company with any Person, or (b) currency swap agreement, forward currency purchase agreement or similar arrangement or agreement designed to protect against fluctuations in currency exchange rates entered into by a Company with any Person.
Indebtedness shall mean, for any Company (excluding in all cases trade payables payable in the ordinary course of business by such Company), without duplication, (a) all obligations to repay borrowed money, direct or indirect, incurred, assumed, or guaranteed, (b) all obligations for the deferred purchase price of capital assets, (c) all obligations under conditional sales or other title retention agreements, (d) all obligations (contingent or otherwise) under any letter of credit or bankers acceptance, (e) all net obligations under any currency swap agreement, interest rate swap, cap, collar or floor agreement or other interest rate management device or any Hedge Agreement, (f) all Off-Balance Sheet Liabilities, (g) all Capitalized Lease Obligations, (h) all obligations of such Company with respect to asset securitization financing programs to the extent required to be capitalized on the books of such Company in accordance with GAAP, (i) all obligations to advance funds to, or to purchase assets, property or services from, any other Person in order to maintain the financial condition of such Person, and (j) any guarantee of any obligation described in subpart (a) through (i) hereof.
Interest Adjustment Date shall mean the last day of each Interest Period.
Interest Coverage Ratio shall mean, for the most recently completed four fiscal quarters of Parent, as determined on a Consolidated basis and in accordance with GAAP, the ratio of (a) Consolidated EBIT to (b) Consolidated Interest Expense.
Interest Period shall mean, with respect to Eurodollar Loan, the period commencing on the date such Eurodollar Loan is made and ending on the last day of such period, as selected by Borrower pursuant to the provisions hereof, and, thereafter (unless such Eurodollar Loan is converted to a Base Rate Loan), each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of such period, as selected by Borrower pursuant to the provisions hereof. The duration of each Interest Period for a Eurodollar Loan shall be one month, two months, three months or six months, in each case as Borrower may select upon notice, as set forth in Section 2.5 hereof; provided that, if Borrower shall fail to so select the duration of any Interest Period at least three Business Days prior to the Interest Adjustment Date applicable to such Eurodollar Loan, Borrower shall be deemed to have converted such Eurodollar Loan to a Base Rate Loan at the end of the then current Interest Period.
Letter of Credit shall mean a commercial documentary letter of credit or standby letter of credit that shall be issued by the Fronting Lender for the account of Borrower or a Guarantor of Payment, including amendments thereto, if any, and shall have an expiration date no later than the earlier of (a) two years after its date of issuance or (b) five Business Days prior to the last day of the Commitment Period.
Letter of Credit Commitment shall mean the commitment of the Fronting Lender, on behalf of the Lenders, to issue Letters of Credit in an aggregate face amount of up to One Hundred Million Dollars ($100,000,000).
Letter of Credit Exposure shall mean, at any time, the sum of (a) the aggregate undrawn face amount of all issued and outstanding Letters of Credit, and (b) the aggregate of the
draws made on Letters of Credit that have not been reimbursed by Borrower or converted to a Revolving Loan pursuant to Section 2.2(b)(v) hereof.
Lien shall mean any mortgage, deed of trust, security interest, lien (statutory or other), charge, encumbrance on, pledge or deposit of, or conditional sale, leasing, sale with a right of redemption or other title retention agreement and any capitalized lease with respect to any property (real or personal) or asset.
Loan shall mean a Revolving Loan or a Swing Loan granted to Borrower by the Lenders in accordance with Section 2.2(a) or 2.2(c) hereof.
Loan Documents shall mean, collectively, this Agreement, each Note, each Guaranty of Payment, each Letter of Credit and any letter of credit agreement between Borrower and the Fronting Lender, the Agent Fee Letter, the BOCM Fee Letter and the Closing Fee Letter, as any of the foregoing may from time to time be amended, restated or otherwise modified or replaced, and any other document delivered pursuant thereto.
Margin Adjustment Date shall mean any date when a new Moodys Rating or S&P Rating is issued, by either announcement or publication.
Material Adverse Effect shall mean a material adverse effect on (a) the business, operations, property, condition (financial or otherwise) or prospects of Borrower, (b) the business, operations, property, condition (financial or otherwise) or prospects of the Companies taken as a whole, or (c) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights and remedies of Agent or the Lenders hereunder or thereunder.
Material Indebtedness Agreement shall mean any debt instrument, lease (capital, operating or otherwise), guaranty, contract, commitment, agreement or other arrangement evidencing any Indebtedness of a Company (or the Companies) then in excess of the amount of Fifteen Million Dollars ($15,000,000).
Maximum Amount shall mean, for each Lender, the amount set forth opposite such Lenders name under the column headed Maximum Amount as set forth on Schedule 1 hereto, subject to decreases determined pursuant to Section 2.9(a) hereof, increases pursuant to Section 2.9(b) hereof and assignments of interests pursuant to Section 10.10 hereof; provided, however, that the Maximum Amount for the Swing Line Lender shall exclude the Swing Line Commitment (other than its pro rata share), and the Maximum Amount of the Fronting Lender shall exclude the Letter of Credit Commitment (other than its pro rata share).
Maximum Commitment Amount shall mean Four Hundred Million Dollars ($400,000,000).
Moodys shall mean Moodys Investors Service, Inc., or any successor to such company.
Moodys Rating shall mean the rating assigned by Moodys to the senior unsecured long-term indebtedness of Parent or of Borrower with a Parent guaranty.
Multiemployer Plan shall mean a Pension Plan that is subject to the requirements of Subtitle E of Title IV of ERISA.
Note shall mean a Revolving Credit Note or the Swing Line Note, or any other promissory note delivered pursuant to this Agreement.
Notice of Loan shall mean a Notice of Loan in the form of the attached Exhibit C.
Obligations shall mean, collectively, (a) all Indebtedness and other obligations incurred by Borrower or any Guarantor of Payment to Agent, the Fronting Lender, the Swing Line Lender or any Lender pursuant to this Agreement, and includes the principal of and interest on all Loans and all obligations pursuant to Letters of Credit, (b) each extension, renewal or refinancing thereof in whole or in part, and (c) the commitment fees, the other fees and any prepayment fees payable hereunder, and all fees and charges in connection with the Letters of Credit.
Off-Balance Sheet Liability of a Person shall mean (a) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, (b) any liability under any sale and leaseback transaction which is not a Capitalized Lease, or (c) any obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheets of such Person, but excluding from this subpart (c) Operating Leases.
Operating Lease of a Person shall mean any lease of assets (other than a Capitalized Lease) by such Person as lessee that has an original term (including any required renewals and any renewals effective at the option of the lessor) of one year or more.
Organizational Documents shall mean, with respect to any Person (other than an individual), such Persons Articles (Certificate) of Incorporation, operating agreement or equivalent formation documents, and Regulations (Bylaws), or equivalent governing documents, and any amendments to any of the foregoing.
Other Taxes shall mean any and all present or future stamp or documentary taxes or any other excise or property taxes, goods and services taxes, harmonized sales taxes and other sales taxes, charges or similar levies (other than Excluded Taxes) arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.
Parent shall mean Cintas Corporation, a Washington corporation, and its successors.
Parent Guaranty of Payment shall mean a Guaranty of Payment, substantially in the form of the attached Exhibit G, executed and delivered by Parent with respect to the Obligations, as the same may from time to time be amended, restated or otherwise modified.
PBGC shall mean the Pension Benefit Guaranty Corporation, or its successor.
Pension Plan shall mean an ERISA Plan that is a pension plan (within the meaning of ERISA Section 3(2)).
Person shall mean any individual, sole proprietorship, partnership, joint venture, unincorporated organization, corporation, limited liability company, institution, trust, estate, government or other agency or political subdivision thereof or any other entity.
Prime Rate shall mean the interest rate established from time to time by Agent as Agents prime rate, whether or not such rate shall be publicly announced; the Prime Rate may not be the lowest interest rate charged by Agent for commercial or other extensions of credit. Each change in the Prime Rate shall be effective immediately from and after such change.
Regularly Scheduled Payment Date shall mean the last day of each February, May, August and November of each year.
Related Writing shall mean each Loan Document and any other guaranty agreement, subordination agreement, financial statement, audit report or other writing furnished by any Credit Party, or any of its officers, to Agent or the Lenders pursuant to or otherwise in connection with this Agreement.
Reportable Event shall mean any of the events described in Section 4043 of ERISA except where notice is waived by the PBGC.
Request for Extension shall mean a notice, substantially in the form of the attached Exhibit F.
Required Lenders shall mean the holders of at least fifty-one percent (51%) of the Total Commitment Amount, or, if there is any borrowing hereunder, the holders of at least fifty-one percent (51%) of the Revolving Credit Exposure.
Requirement of Law shall mean, as to any Person, any law, treaty, rule or regulation or determination or policy statement or interpretation of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
Reserve Percentage shall mean for any day that percentage (expressed as a decimal) that is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, all basic, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) for a member bank of the Federal Reserve System in Cleveland, Ohio, in respect of Eurocurrency Liabilities. The Derived Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Reserve Percentage.
Revolving Credit Commitment shall mean the obligation hereunder, during the Commitment Period, of (a) each Lender to make Revolving Loans and participate in Swing Loans and Letters of Credit up to the Maximum Amount for such Lender, (b) the Fronting Lender to issue Letters of Credit pursuant to the Letter of Credit Commitment, and (c) the Swing Line Lender to make Swing Loans pursuant to the Swing Line Commitment.
Revolving Credit Exposure shall mean, at any time, the sum of (a) the aggregate principal amount of all Revolving Loans outstanding, (b) the Swing Line Exposure, and (c) the Letter of Credit Exposure.
Revolving Credit Note shall mean a Revolving Credit Note executed and delivered pursuant to Section 2.4(a) hereof.
Revolving Loan shall mean a Loan granted to Borrower by the Lenders in accordance with Section 2.2(a) hereof.
SEC shall mean the United States Securities and Exchange Commission, or any governmental body or agency succeeding to any of its principle functions.
Senior Note Indebtedness shall mean the Indebtedness evidenced by the 5 1/8% Senior Notes due 2007 and the 6% Senior Notes due 2012, in each case issued by Borrower, or any replacement or refinancing of such Indebtedness.
Significant Subsidiary shall mean a Domestic Subsidiary of Parent that, at any time of determination, (a) accounts for more than fifteen percent (15%) of the consolidated revenues (calculated for the most recent fiscal quarter of Parent) of Parent and its Subsidiaries, or (b) is the owner of more than twenty-five percent (25%) of the consolidated assets (calculated as of the end of the most recent fiscal quarter of Parent) of Parent and its Subsidiaries.
Standard & Poors shall mean Standard & Poors Ratings Group, a division of McGraw-Hill, Inc., or any successor to such company.
S&P Rating shall mean the rating assigned by Standard & Poors to the senior unsecured long-term indebtedness of Parent or of Borrower with a Parent guaranty.
Subordinated shall mean, as applied to Indebtedness, Indebtedness that shall have been subordinated (by written terms or written agreement being, in either case, in form and substance satisfactory to Agent and the Required Lenders) in favor of the prior payment in full of the Obligations.
Subsidiary of a Company shall mean (a) a corporation more than fifty percent (50%) of the Voting Power of which is owned, directly or indirectly, by such Company or by one or more other subsidiaries of such Company or by such Company and one or more subsidiaries of such Company, (b) a partnership or limited liability company of which such Company, one or more other subsidiaries of such Company or such Company and one or more subsidiaries of such Company, directly or indirectly, is a general partner or managing member, as the case may be, or
otherwise has an ownership interest greater than fifty percent (50%) of all of the ownership interests in such partnership or limited liability company, or (c) any other Person (other than a corporation, partnership or limited liability company) in which such Company, one or more other subsidiaries of such Company or such Company and one or more subsidiaries of such Company, directly or indirectly, has at least a majority interest in the Voting Power or the power to elect or direct the election of a majority of directors or other governing body of such Person.
Substantial Portion shall mean, with respect to any assets of Parent and its Subsidiaries, assets which (a) represent more than twenty-five percent (25%) of the Consolidated assets of Parent and its Subsidiaries as would be shown in the Consolidated financial statements of Parent and its Subsidiaries at the beginning of the twelve (12) month period ending with the month in which such determination is made; (b) are responsible for more than twenty-five percent (25%) of the Consolidated net sales or the Consolidated net income of Parent and its Subsidiaries as reflected in the financial statements referred to in subpart (a) above; (c) represent more than thirty percent (30%) of the Consolidated assets of Parent and its Subsidiaries as would be shown in the most recent Consolidated financial statements of Parent and its Subsidiaries delivered to Agent under Section 5.3(a) or (b) hereof; or (d) are responsible for more than thirty percent (30%) of the Consolidated net sales or of the consolidated Net financial statements referred to in subpart (c) above. For purposes of determining Consolidated assets and net sales under this definition, any Acquisition consummated after the date of the relevant financial statement but before the relevant determination date shall be deemed to have occurred on the first day of the relevant period for which such Consolidated assets and net sales were calculated on a pro rata basis acceptable to Agent.
Swing Line shall mean the credit facility established by the Swing Line Lender for Borrower in accordance with Section 2.2(c) hereof.
Swing Line Commitment shall mean the commitment of the Swing Line Lender to make Swing Loans to Borrower up to the aggregate amount at any time outstanding of Twenty Five Million Dollars ($25,000,000).
Swing Line Exposure shall mean, at any time, the aggregate principal amount of all Swing Loans outstanding.
Swing Line Lender shall mean KeyBank National Association, as holder of the Swing Line Commitment and each other Eligible Transferee to which all of the Swing Line Commitment is assigned pursuant to Section 10.10 hereof.
Swing Line Note shall mean the Swing Line Note executed and delivered pursuant to Section 2.4(b) hereof.
Swing Loan shall mean a loan granted to Borrower by the Swing Line Lender under the Swing Line.
Swing Loan Maturity Date shall mean, with respect to any Swing Loan, the earlier of (a) fifteen (15) days after the date such Swing Loan is made, or (b) the last day of the Commitment Period.
Taxes shall mean any present or future taxes, levies, imposts, duties, charges, fees, deductions or withholdings now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority (together with any interest, penalties or similar liabilities with respect thereto) other than Excluded Taxes.
Total Commitment Amount shall mean the Closing Commitment Amount, as such amount may be increased up to the Maximum Commitment Amount pursuant to Section 2.9(b) hereof, or decreased pursuant to Section 2.9(a) hereof.
Voting Power shall mean, with respect to any Person, the exclusive ability to control, through the ownership of shares of capital stock, partnership interests, membership interests or otherwise, the election of members of the board of directors or other similar governing body of such Person. The holding of a designated percentage of Voting Power of a Person means the ownership of shares of capital stock, partnership interests, membership interests or other interests of such Person sufficient to control exclusively the election of that percentage of the members of the board of directors or similar governing body of such Person.
Welfare Plan shall mean an ERISA Plan that is a welfare plan within the meaning of ERISA Section 3(l).
Section 1.2. Accounting Terms. Any accounting term not specifically defined in this Article I shall have the meaning ascribed thereto by GAAP.
Section 1.3. Terms Generally. The foregoing definitions shall be applicable to the singular and plurals of the foregoing defined terms.
ARTICLE II. AMOUNT AND TERMS OF CREDIT
Section 2.1. Amount and Nature of Credit.
(a) Subject to the terms and conditions of this Agreement, the Lenders, during the Commitment Period and to the extent hereinafter provided, shall make Loans to Borrower, participate in Swing Loans made by the Swing Line Lender to Borrower, and issue or participate in Letters of Credit at the request of Borrower, in such aggregate amount as Borrower shall request pursuant to the Commitment; provided, however, that in no event shall the Revolving Credit Exposure be in excess of the Total Commitment Amount.
(b) Each Lender, for itself and not one for any other, agrees to make Loans, participate in Swing Loans, and issue or participate in Letters of Credit, during the Commitment Period, on such basis that, immediately after the completion of any borrowing by Borrower or the issuance of a Letter of Credit:
(i) the aggregate outstanding principal amount of Loans made by such Lender (other than Swing Loans made by the Swing Line Lender), when combined with such Lenders pro rata share, if any, of the Letter of Credit Exposure and the Swing Line Exposure, shall not be in excess of the Maximum Amount for such Lender; and
(ii) the aggregate outstanding principal amount of Loans (other than Swing Loans) made by such Lender shall represent that percentage of the aggregate principal amount then outstanding on all Loans (other than Swing Loans) together with such Lenders interest in the Letter of Credit Exposure and the Swing Line Exposure that shall be such Lenders Commitment Percentage.
Each borrowing (other than Swing Loans) from the Lenders hereunder shall be made pro rata according to the respective Commitment Percentages of the Lenders.
(c) The Loans may be made as Revolving Loans as described in Section 2.2(a) hereof and Swing Loans as described in Section 2.2(c) hereof, and Letters of Credit may be issued in accordance with Section 2.2(b) hereof.
Section 2.2. Revolving Credit.
(a) Revolving Loans. Subject to the terms and conditions of this Agreement, during the Commitment Period, the Lenders shall make a Revolving Loan or Revolving Loans to Borrower in such amount or amounts as Borrower may from time to time request, but not exceeding in aggregate principal amount at any time outstanding hereunder the Total Commitment Amount, when such Revolving Loans are combined with the Letter of Credit Exposure and the Swing Line Exposure. Borrower shall have the option, subject to the terms and conditions set forth herein, to borrow Revolving Loans, maturing on the last day of the Commitment Period, by means of any combination of Base Rate Loans or Eurodollar Loans. Subject to the provisions of this Agreement, Borrower shall be entitled under this Section 2.2(a) to borrow funds, repay the same in whole or in part and re-borrow hereunder at any time and from time to time during the Commitment Period.
(b) Letters of Credit.
(i) Generally. Subject to the terms and conditions of this Agreement, during the Commitment Period, the Fronting Lender shall, in its own name, on behalf of the Lenders, issue such Letters of Credit for the account of a Credit Party, as Borrower may from time to time request. Borrower shall not request any Letter of Credit (and the Fronting Lender shall not be obligated to issue any Letter of Credit) if, after giving effect thereto, (A) the Letter of Credit Exposure would exceed the Letter of Credit Commitment or (B) the Revolving Credit Exposure would exceed the Total Commitment Amount. The issuance of each Letter of Credit shall confer upon each Lender the benefits and liabilities of a participation consisting of an undivided pro rata interest in the Letter of Credit to the extent of such Lenders Commitment Percentage.
(ii) Request for Letter of Credit. Each request for a Letter of Credit shall be delivered to Agent (and to the Fronting Lender, if the Fronting Lender is a Lender other than Agent) by an Authorized Officer not later than 11:00 A.M. (Eastern time) three Business Days prior to the day upon which the Letter of Credit is to be issued. Each such request shall be in a form acceptable to Agent (and the Fronting Lender, if the Fronting Lender is a Lender other than Agent) and shall specify the face amount thereof, whether such Letter of Credit shall be a commercial documentary or a standby Letter of Credit, the account party, the beneficiary, the intended date of issuance, the expiry date thereof, and the nature of the transaction to be supported thereby. Concurrently with each such request, Borrower, and any Credit Party for whose account the Letter of Credit is to be issued, shall execute and deliver to the Fronting Lender an appropriate application and agreement, being in the standard form of the Fronting Lender for such letters of credit, as amended to conform to the provisions of this Agreement if required by Agent; provided, however, that, in the event Fronting Lenders usual and customary practices for issuing Letters of Credit, or the terms and conditions of any agreement relating to any such Letter of Credit between Borrower and the Fronting Lender, conflict with the terms and conditions of this Agreement, the terms of this Agreement shall control. Agent shall give the Fronting Lender and each Lender notice of each such request for a Letter of Credit.
(iii) Commercial Documentary Letters of Credit. With respect to each Letter of Credit that shall be a commercial documentary letter of credit and the drafts thereunder, whether issued for the account of Borrower or any other Credit Party, Borrower agrees to (A) pay to Agent, for the pro rata benefit of the Lenders, a non-refundable commission based upon the face amount of the Letter of Credit, which shall be paid quarterly in arrears, on each Regularly Scheduled Payment Date, at the rate of (1) the Applicable Margin (as in effect from time to time) multiplied by (2) the face amount of such Letter of Credit; (B) pay to Agent, for the sole benefit of the Fronting Lender, an additional Letter of Credit fee, which shall be paid on the date that any draw shall be made on such Letter of Credit, at the rate of one-tenth percent (1/10%) of the amount drawn under such Letter of Credit; and (C) pay to Agent, for the sole benefit of the Fronting Lender, such other issuance, amendment, negotiation, draw, acceptance, telex, courier, postage and similar transactional fees as are generally charged by the Fronting Lender under its fee schedule as in effect from time to time.
(iv) Standby Letters of Credit. With respect to each Letter of Credit that shall be a standby letter of credit and the drafts thereunder, if any, whether issued for the account of Borrower or any other Credit Party, Borrower agrees to (A) pay to Agent, for the pro rata benefit of the Lenders, a non-refundable commission based upon the face amount of such Letter of Credit, which shall be paid quarterly in arrears, on each Regularly Scheduled Payment Date, at the rate of (1) the Applicable Margin (as in effect from time to time) multiplied by (2) the face amount of such Letter of Credit; (B) pay to Agent, for the sole benefit of the Fronting Lender, an additional Letter of Credit fee, which shall be paid on each date that such Letter of Credit shall be issued, amended or renewed at the rate of one-tenth percent (1/10%) of the face amount of such Letter of Credit; and (C) pay to Agent, for the sole benefit of the Fronting Lender, such other issuance, amendment, negotiation, draw, acceptance, telex, courier, postage and similar
transactional fees as are generally charged by the Fronting Lender under its fee schedule as in effect from time to time.
(v) Refunding of Letters of Credit with Revolving Loans. Whenever a Letter of Credit shall be drawn, Borrower shall, within one Business Day, reimburse the Fronting Lender for the amount drawn. In the event that the amount drawn shall not have been reimbursed by Borrower on the date of the drawing of such Letter of Credit, at the sole option of Agent (and the Fronting Lender, if the Fronting Lender is a Lender other than Agent), Borrower shall be deemed to have requested a Revolving Loan, subject to the provisions of Sections 2.2(a) and 2.5 hereof (other than the requirement set forth in Section 2.5(d) hereof), in the amount drawn. Such Revolving Loan shall be evidenced by the Revolving Credit Notes (or, if a Lender has not requested a Revolving Credit Note, by the records of Agent and such Lender). Each Lender agrees to make a Revolving Loan on the date of such notice, subject to no conditions precedent whatsoever. Each Lender acknowledges and agrees that its obligation to make a Revolving Loan pursuant to Section 2.2(a) hereof when required by this subsection (v) shall be absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, the occurrence and continuance of a Default or Event of Default, and that its payment to Agent, for the account of the Fronting Lender, of the proceeds of such Revolving Loan shall be made without any offset, abatement, recoupment, counterclaim, withholding or reduction whatsoever and whether or not such Lenders Revolving Credit Commitment shall have been reduced or terminated. Borrower irrevocably authorizes and instructs Agent to apply the proceeds of any borrowing pursuant to this subsection to reimburse, in full, the Fronting Lender for the amount drawn on such Letter of Credit. Each such Revolving Loan shall be deemed to be a Base Rate Loan unless otherwise requested by and available to Borrower hereunder. Each Lender is hereby authorized to record on its records relating to its Revolving Credit Note (or, if such Lender has not requested a Revolving Credit Note, its records relating to Revolving Loans) such Lenders pro rata share of the amounts paid and not reimbursed on the Letters of Credit.
(vi) Participation in Letters of Credit. If, for any reason, Agent (or the Fronting Lender if the Fronting Lender shall be a Lender other than Agent) shall be unable to or, in the opinion of Agent, it shall be impracticable to, convert any Letter of Credit to a Revolving Loan pursuant to the preceding subsection, Agent (or the Fronting Lender if the Fronting Lender is a Lender other than Agent) shall have the right to request that each Lender purchase a participation in the amount due with respect to such Letter of Credit, and Agent shall promptly notify each Lender thereof (by facsimile or telephone, confirmed in writing). Upon such notice, but without further action, the Fronting Lender hereby agrees to grant to each Lender, and each Lender hereby agrees to acquire from the Fronting Lender, an undivided participation interest in the amount due with respect to such Letter of Credit in an amount equal to such Lenders Commitment Percentage of the principal amount due with respect to such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to Agent, for the account of the Fronting Lender, such Lenders ratable share of the amount due with respect to such Letter of Credit (determined in accordance with such Lenders Commitment Percentage). Each
Lender acknowledges and agrees that its obligation to acquire participations in the amount due under any Letter of Credit that is drawn but not reimbursed by Borrower pursuant to this subsection (vi) shall be absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, the occurrence and continuance of a Default or Event of Default, and that each such payment shall be made without any offset, abatement, recoupment, counterclaim, withholding or reduction whatsoever and whether or not such Lenders Revolving Credit Commitment shall have been reduced or terminated. Each Lender shall comply with its obligation under this subsection (vi) by wire transfer of immediately available funds, in the same manner as provided in Section 2.5 hereof with respect to Revolving Loans. Each Lender is hereby authorized to record on its records such Lenders pro rata share of the amounts paid and not reimbursed on the Letters of Credit. In addition, each Lender agrees to risk participate in the Existing Letters of Credit as provided in subsection (vii) below.
(vii) Existing Letters of Credit. Schedule 2.2 hereto contains a description of all letters of credit outstanding on, and to continue in effect after, the Closing Date. Each such letter of credit issued by a bank that is or becomes a Lender under this Agreement on the Closing Date (each an Existing Letter of Credit) shall constitute a Letter of Credit for all purposes of this Agreement, issued, for purposes of subsection (vi) above, on the Closing Date. Borrower, Agent and the Lenders hereby agree that, from and after such date, the terms of this Agreement shall apply to the Existing Letters of Credit, superseding any other agreement theretofore applicable to them to the extent inconsistent with the terms hereof. Notwithstanding anything to the contrary in any reimbursement or other agreement applicable to the Existing Letters of Credit, the fees payable in connection with each Existing Letter of Credit to be shared with the Lenders, or paid to the Fronting Lender for its own account, shall accrue from the Closing Date at the rate provided in this Section 2.2(b).
(c) Swing Loans.
(i) Generally. Subject to the terms and conditions of this Agreement, during the Commitment Period, the Swing Line Lender shall make a Swing Loan or Swing Loans to Borrower in such amount or amounts as Borrower, through an Authorized Officer, may from time to time request; provided that Borrower shall not request any Swing Loan if, after giving effect thereto, (A) the Revolving Credit Exposure would exceed the Total Commitment Amount, or (B) the Swing Line Exposure would exceed the Swing Line Commitment. Each Swing Loan shall be due and payable on the Swing Loan Maturity Date applicable thereto.
(ii) Refunding of Swing Loans. If the Swing Line Lender so elects, by giving notice to Borrower and the Lenders, Borrower agrees that the Swing Line Lender shall have the right, in its sole discretion, to require that any Swing Loan be refinanced as a Revolving Loan. Such Revolving Loan shall be a Base Rate Loan unless otherwise requested by and available to Borrower hereunder. Upon receipt of such notice by Borrower and the Lenders, Borrower shall be deemed, on such day, to have requested a Revolving Loan in the principal amount of the Swing Loan in accordance with Sections
2.2(a) and 2.5 hereof (other than the requirement set forth in Section 2.5(d) hereof). Such Revolving Loan shall be evidenced by the Revolving Credit Notes (or, if a Lender has not requested a Revolving Credit Note, by the records of Agent and such Lender). Each Lender agrees to make a Revolving Loan on the date of such notice, subject to no conditions precedent whatsoever. Each Lender acknowledges and agrees that such Lenders obligation to make a Revolving Loan pursuant to Section 2.2(a) hereof when required by this subsection (ii) is absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, the occurrence and continuance of a Default or Event of Default, and that its payment to Agent, for the account of the Swing Line Lender, of the proceeds of such Revolving Loan shall be made without any offset, abatement, recoupment, counterclaim, withholding or reduction whatsoever and whether or not such Lenders Revolving Credit Commitment shall have been reduced or terminated. Borrower irrevocably authorizes and instructs Agent to apply the proceeds of any borrowing pursuant to this subsection (ii) to repay in full such Swing Loan. Each Lender is hereby authorized to record on its records relating to its Revolving Credit Note (or, if such Lender has not requested a Revolving Credit Note, its records relating to Revolving Loans) such Lenders pro rata share of the amounts paid to refund such Swing Loan.
(iii) Participation in Swing Loans. If, for any reason, Agent is unable to or, in the opinion of Agent, it is impracticable to, convert any Swing Loan to a Revolving Loan pursuant to the preceding subsection (ii), then on any day that a Swing Loan is outstanding (whether before or after the maturity thereof), Agent shall have the right to request that each Lender purchase a participation in such Swing Loan, and Agent shall promptly notify each Lender thereof (by facsimile or telephone, confirmed in writing). Upon such notice, but without further action, the Swing Line Lender hereby agrees to grant to each Lender, and each Lender hereby agrees to acquire from the Swing Line Lender, an undivided participation interest in such Swing Loan in an amount equal to such Lenders Commitment Percentage of the principal amount of such Swing Loan. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to Agent, for the benefit of the Swing Line Lender, such Lenders ratable share of such Swing Loan (determined in accordance with such Lenders Commitment Percentage). Each Lender acknowledges and agrees that its obligation to acquire participations in Swing Loans pursuant to this subsection (iii) is absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, the occurrence and continuance of a Default or an Event of Default, and that each such payment shall be made without any offset, abatement, recoupment, counterclaim, withholding or reduction whatsoever and whether or not such Lenders Revolving Credit Commitment shall have been reduced or terminated. Each Lender shall comply with its obligation under this subsection (iii) by wire transfer of immediately available funds, in the same manner as provided in Section 2.5 hereof with respect to Revolving Loans to be made by such Lender.
Section 2.3. Interest.
(a) Revolving Loans.
(i) Base Rate Loan. Borrower shall pay interest on the unpaid principal amount of a Base Rate Loan outstanding from time to time from the date thereof until paid at the Base Rate from time to time in effect. Interest on such Base Rate Loan shall be payable, commencing August 31, 2004, and on each Regularly Scheduled Payment Date thereafter and at the maturity thereof.
(ii) Eurodollar Loans. Borrower shall pay interest on the unpaid principal amount of each Eurodollar Loan outstanding from time to time, fixed in advance on the first day of the Interest Period applicable thereto through the last day of the Interest Period applicable thereto (but subject to changes in the Applicable Margin), at the Derived Eurodollar Rate. Interest on such Eurodollar Loan shall be payable on each Interest Adjustment Date with respect to an Interest Period (provided that if an Interest Period shall exceed three months, the interest must be paid every three months, commencing three months from the beginning of such Interest Period).
(b) Swing Loans. Borrower shall pay interest to Agent, for the sole benefit of the Swing Line Lender (and any Lender that shall have purchased a participation in such Swing Loan), on the unpaid principal amount of each Swing Loan outstanding from time to time from the date thereof until paid at the Base Rate. Interest on each Swing Loan shall be payable on the Swing Loan Maturity Date applicable thereto. Each Swing Loan shall bear interest for a minimum of one day.
(c) Default Rate. Anything herein to the contrary notwithstanding, if an Event of Default shall occur, (i) the principal of each Loan and the unpaid interest thereon shall bear interest, until paid, at the Default Rate, and (ii) in the case of any other amount due from Borrower hereunder or under any other Loan Document, such amount shall bear interest at the Default Rate.
(d) Limitation on Interest. In no event shall the rate of interest hereunder exceed the maximum rate allowable by law. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the Maximum Rate). If Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to Borrower. In determining whether the interest contracted for, charged, or received by Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable law, (i) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations.
Section 2.4. Evidence of Indebtedness.
(a) Revolving Loans. To evidence the obligation of Borrower to a Lender, upon the request of such Lender to Agent and Agent to Borrower, Borrower shall execute a Revolving Credit Note in the form of the attached Exhibit A, payable to the order of such Lender in the principal amount of its Revolving Credit Commitment, or, if less, the aggregate unpaid principal amount of Revolving Loans made by such Lender; provided, however, that the provision of a Revolving Credit Note shall be at the option of each Lender and the failure of a Lender to request a Revolving Credit Note shall in no way detract from Borrowers obligations to such Lender hereunder.
(b) Swing Loan. The obligation of Borrower to repay the Swing Loans and to pay interest thereon shall be evidenced by a Swing Line Note of Borrower in the form of the attached Exhibit B, and payable to the order of the Swing Line Lender in the principal amount of the Swing Line Commitment, or, if less, the aggregate unpaid principal amount of Swing Loans made by the Swing Line Lender.
Section 2.5. Notice of Credit Event; Funding of Loans.
(a) Notice of Credit Event. Borrower, through an Authorized Officer, shall provide to Agent a Notice of Loan prior to (i) 11:00 A.M. (Eastern time) on the proposed date of borrowing or conversion of any Base Rate Loan, (ii) 11:00 A.M. (Eastern time) three Business Days prior to the proposed date of borrowing, conversion or continuation of any Eurodollar Loan, and (iii) 2:00 P.M. (Eastern time) on the proposed date of borrowing of any Swing Loan. Borrower shall comply with the notice provisions set forth in Section 2.2(b) hereof with respect to Letters of Credit.
(b) Funding of Loans. Agent shall notify each Lender of the date, amount and Interest Period (if applicable) promptly upon the receipt of a Notice of Loan, and, in any event, by 2:00 P.M. (Eastern time) on the date such notice is received. On the date that the Credit Event set forth in such notice is to occur, each such Lender shall provide to Agent, not later than 3:00 P.M. (Eastern time), the amount in Dollars, in federal or other immediately available funds, required of it. If Agent receives the funds from the Lenders by 3:00 P.M. (Eastern time), then Agent shall make the Loan to Borrower on or before 4:00 P.M. (Eastern time). If Agent shall elect to advance the proceeds of such Loan prior to receiving funds from such Lender, Agent shall have the right, upon prior notice to Borrower, to debit any account of Borrower or otherwise receive such amount from Borrower, on demand, in the event that such Lender shall fail to reimburse Agent in accordance with this subsection. Agent shall also have the right to receive interest from such Lender at the Federal Funds Effective Rate in the event that such Lender shall fail to provide its portion of the Loan on the date requested and Agent shall elect to provide such funds.
(c) Conversion of Loans. At the request of Borrower to Agent, subject to the notice and other provisions of this Section 2.5, the Lenders shall convert a Base Rate Loan to one or more Eurodollar Loans at any time and shall convert a Eurodollar Loan to a Base Rate Loan on any Interest Adjustment Date applicable thereto. Swing Loans may be converted by the Swing Line Lender to Revolving Loans in accordance with Section 2.2(c)(ii) hereof.
(d) Minimum Amount. Each request for:
(i) a Base Rate Loan shall be in an amount of not less than One Million Dollars ($1,000,000), increased by increments of Five Hundred Thousand Dollars ($500,000) (provided, however, that a Base Rate Loan may be in an amount equal to the Total Commitment Amount minus the Revolving Credit Exposure);
(ii) a Eurodollar Loan shall be in an amount of not less than Five Million Dollars ($5,000,000), increased by increments of One Million Dollars ($1,000,000); and
(iii) a Swing Loan shall be in an amount not less than Five Hundred Thousand Dollars ($500,000).
Section 2.6. Payment on Loans and Other Obligations.
(a) Payments Generally. Each payment made hereunder by a Credit Party shall be made without any offset, abatement, recoupment, counterclaim, withholding or reduction whatsoever.
(b) Payments from Borrower. All payments (including prepayments) of the principal of or interest on any Loan or other payment, including but not limited to principal, interest or fees, or any other amount owed by Borrower under this Agreement, shall be made to Agent and shall be made in Dollars. All payments described in this subsection (b) shall be remitted to Agent at the address of Agent for notices referred to in Section 10.4 hereof, for the account of the Lenders (or the Fronting Lender or the Swing Line Lender, as appropriate) not later than 1:00 P.M. (Eastern time) on the due date thereof in immediately available funds. Any such payments received by Agent after 1:00 P.M. (Eastern time) shall be deemed to have been made and received on the next Business Day.
(c) Payments to Lenders. Upon Agents receipt of payments hereunder, Agent shall immediately distribute to each Lender (except with respect to Swing Loans, which shall be paid to the Swing Line Lender) its ratable share, if any, of the amount of principal, interest, and facility, utilization and other fees received by Agent for the account of such Lender. Each Lender shall record any principal, interest or other payment, the principal amounts of Base Rate Loans, Eurodollar Loans and Swing Loans, prepayments, and the applicable dates, including Interest Periods, with respect to the Loans made, and payments received by such Lender, by such method as such Lender may generally employ; provided, however, that failure to make any such entry shall in no way detract from the obligations of Borrower under this Agreement or any Note. The aggregate unpaid amount of Loans, types of Loans, Interest Periods and similar information with respect to the Loans and Letters of Credit set forth on the records of Agent shall be rebuttably presumptive evidence with respect to such information, including the amounts of principal and interest owing to each Lender.
(d) Timing of Payments. Whenever any payment to be made hereunder, including, without limitation, any payment to be made on any Loan, shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next Business Day and such extension
of time shall in each case be included in the computation of the interest payable on such Loan; provided, however, that, with respect to any Eurodollar Loan, if the next Business Day shall fall in the succeeding calendar month, such payment shall be made on the preceding Business Day and the relevant Interest Period shall be adjusted accordingly.
Section 2.7. Prepayment.
(a) Right to Prepay. Borrower shall have the right at any time or from time to time to prepay, on a pro rata basis for all of the Lenders (except with respect to Swing Loans, which shall be paid to the Swing Line Lender), all or any part of the principal amount of the Loans, as designated by Borrower. Such payment shall include interest accrued on the amount so prepaid to the date of such prepayment and any amount payable under Article III hereof with respect to the amount being prepaid. Borrower shall have the right, at any time or from time to time, to prepay, for the benefit of the Swing Line Lender (and any Lender that has purchased a participation in such Swing Loan), all or any part of the principal amount of the Swing Loans then outstanding, as designated by Borrower, plus interest accrued on the amount so prepaid to the date of such prepayment.
(b) Notice of Prepayment. Borrower shall give Agent notice of prepayment of a Base Rate Loan or Swing Loan by not later than 1:00 P.M. (Eastern time) one Business Day before the Business Day on which such prepayment is to be made and written notice of the prepayment of any Eurodollar Loan not later than 1:00 P.M. (Eastern time) three Business Days before the Business Day on which such prepayment is to be made.
(c) Minimum Amount. Each prepayment of a Eurodollar Loan by Borrower shall be in the aggregate principal amount of not less than Five Million Dollars ($5,000,000), except in the case of a mandatory prepayment in connection with Section 2.11 or Article III hereof.
Section 2.8. Facility and Other Fees.
(a) Facility Fee. Borrower shall pay to Agent, for the ratable account of the Lenders, as a consideration for the Commitment, a facility fee from the Closing Date to and including the last day of the Commitment Period, payable quarterly, at a rate per annum equal to (i) the Applicable Facility Fee Rate as in effect from time to time, times (ii) the average daily Total Commitment Amount in effect during such quarter. The facility fee shall be payable in arrears, on August 31, 2004 and on each Regularly Scheduled Payment Date thereafter, and on the last day of the Commitment Period.
(b) Utilization Fee. For each day that the Revolving Credit Exposure exceeds an amount equal to fifty percent (50%) of the Total Commitment Amount in effect on that day, Borrower shall pay to Agent, for the ratable account of the Lenders, a utilization fee at the rate per annum equal to (i) the Applicable Utilization Fee Rate as in effect from time to time, times (ii) the Revolving Credit Exposure on that day. The utilization fee shall be payable in arrears for any fiscal quarter for which a utilization fee is payable, commencing August 31, 2004, and on each Regularly Scheduled Payment Date thereafter, and on the last day of the Commitment Period.
(c) Agent Fee. Borrower shall pay to Agent, for its sole benefit, the fees set forth in the Agent Fee Letter.
Section 2.9. Modification of Commitment.
(a) Optional Reduction of Commitment. Borrower may at any time and from time to time permanently reduce in whole or ratably in part the Total Commitment Amount to an amount not less than the then existing Revolving Credit Exposure, by giving Agent not fewer than three Business Days written notice of such reduction, provided that any such partial reduction shall be in an aggregate amount, for all of the Lenders, of not less than Five Million Dollars ($5,000,000), increased by increments of One Million Dollars ($1,000,000). Agent shall promptly notify each Lender of the date of each such reduction and such Lenders proportionate share thereof. After each such reduction, the facility fees payable hereunder shall be calculated upon the Total Commitment Amount as so reduced. If Borrower reduces in whole the Commitment, on the effective date of such reduction (Borrower having prepaid in full the unpaid principal balance, if any, of the Loans, together with all interest and facility, utilization and other fees accrued and unpaid, and provided that no Letter of Credit Exposure or Swing Line Exposure shall exist), all of the Notes shall be delivered to Agent marked Canceled and Agent shall redeliver such Notes to Borrower. Any partial reduction in the Total Commitment Amount shall be effective during the remainder of the Commitment Period.
(b) Increase in Commitment. At any time during the Commitment Increase Period, Borrower may request that Agent increase the Total Commitment Amount from the Closing Commitment Amount up to an amount that shall not exceed the Maximum Commitment Amount. Each such increase shall be in an amount of at least Ten Million Dollars ($10,000,000), increased by increments of One Million Dollars ($1,000,000), and may be made by either (i) proportionally increasing, for one or more Lenders, with their prior written consent, their respective Revolving Credit Commitments, or (ii) including one or more Additional Lenders, each with a new Revolving Credit Commitment, as a party to this Agreement (collectively, the Additional Commitment). During the Commitment Increase Period, the Lenders agree that Agent, in its sole discretion, may permit one or more Additional Commitments upon satisfaction of the following requirements: (A) each Additional Lender, if any, shall be an Eligible Transferee and shall execute an Additional Lender Assumption Agreement, (B) Agent shall provide to Borrower and each Lender a revised Schedule 1 to this Agreement, including revised Commitment Percentages for each of the Lenders, if appropriate, at least three Business Days prior to the effectiveness of such Additional Commitments (each an Additional Lender Assumption Effective Date), and (C) Borrower shall execute and deliver to Agent and the Lenders such replacement or additional Revolving Credit Notes as shall be required by Agent (and requested by the Lenders). The Lenders hereby authorize Agent to execute each Additional Lender Assumption Agreement on behalf of the Lenders. On each Additional Lender Assumption Effective Date, the Lenders shall make adjustments among themselves with respect to the Revolving Loans then outstanding and amounts of principal, interest, facility fees, utilization fees and other amounts paid or payable with respect thereto as shall be necessary, in the opinion of Agent, in order to reallocate among such Lenders such outstanding amounts, based on the revised Commitment Percentages and to otherwise carry out fully the intent and
terms of this Section 2.9(b). Borrower shall not request any increase in the Commitment pursuant to this Section 2.9(b) if a Default or an Event of Default shall then exist, or immediately after giving effect to any such increase would exist.
Section 2.10. Computation of Interest and Fees. With the exception of Base Rate Loans, interest on Loans and facility, utilization and other fees and charges hereunder shall be computed on the basis of a year having three hundred sixty (360) days and calculated for the actual number of days elapsed. With respect to Base Rate Loans, interest shall be computed on the basis of a year having three hundred sixty-five (365) days or three hundred sixty-six (366) days, as the case may be, and calculated for the actual number of days elapsed.
Section 2.11. Mandatory Payment.
(a) If, at any time, the Revolving Credit Exposure shall exceed the Total Commitment Amount as then in effect, Borrower shall, as promptly as practicable, but in no event later than the next Business Day, prepay an aggregate principal amount of the Revolving Loans sufficient to bring the Revolving Credit Exposure within the Total Commitment Amount.
(b) If, at any time, the Swing Line Exposure shall exceed the Swing Line Commitment, Borrower shall, as promptly as practicable, but in no event later than the next Business Day, prepay an aggregate principal amount of the Swing Loans sufficient to bring the Swing Line Exposure within the Swing Line Commitment.
(c) Unless otherwise designated by Borrower, each prepayment pursuant to Section 2.11(a) hereof shall be applied in the following order (i) first, on a pro rata basis among the outstanding Base Rate Loans, and (ii) second, among the outstanding Eurodollar Loans in such manner as Borrower may specify (but pro rata among the Lenders), provided that, if the outstanding principal amount of any Eurodollar Loan shall be reduced to an amount less than the minimum amount set forth in Section 2.5(d) hereof as a result of such prepayment, then such Eurodollar Loan shall be converted into a Base Rate Loan on the date of such prepayment. Any prepayment of a Eurodollar Loan pursuant to this Section 2.11 shall be subject to the prepayment provisions set forth in Article III hereof.
Section 2.12. Extension of Commitment. Contemporaneously with the delivery of the financial statements required pursuant to Section 5.3(b) hereof (beginning with the financial statements for the fiscal year of Borrower ending May 31, 2005), Borrower may deliver a Request for Extension, requesting that the Lenders extend the maturity of the Revolving Credit Commitments for one additional year. Each such extension shall require the unanimous written consent of all of the Lenders and shall be upon such terms and conditions as may be agreed to by Agent, Borrower and the Lenders. Borrower shall pay any attorneys fees or other expenses of Agent in connection with the documentation of any such extension, as well as such other fees as may be agreed upon between Borrower and Agent.
ARTICLE III. ADDITIONAL PROVISIONS RELATING TO
EURODOLLAR LOANS; INCREASED CAPITAL; TAXES
Section 3.1. Requirements of Law.
(a) If, after the Closing Date (i) the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or (ii) the compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority:
(A) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Taxes and Excluded Taxes which are governed by Section 3.2 hereof);
(B) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender that is not otherwise included in the determination of the Eurodollar Rate; or
(C) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender of making, converting into, continuing or maintaining Eurodollar Loans or issuing or participating in Letters of Credit, or to reduce any amount receivable hereunder in respect thereof, then, in any such case, Borrower shall pay to such Lender, promptly after receipt of a written request therefor, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable. If any Lender becomes entitled to claim any additional amounts pursuant to this subsection (a), such Lender shall promptly notify Borrower (with a copy to Agent) of the event by reason of which it has become so entitled.
(b) If any Lender shall have determined that, after the Closing Date, the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority shall have the effect of reducing the rate of return on such Lenders or such corporations capital as a consequence of its obligations hereunder, or under or in respect of any Letter of Credit, to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration the policies of such Lender or corporation with respect to capital adequacy), then from time to time, upon submission by such Lender to Borrower (with a copy to Agent) of a written request therefor (which shall include the method for calculating such amount), Borrower shall promptly pay or cause to be paid to such Lender such additional amount or amounts as will compensate such Lender for such reduction.
(c) A certificate as to any additional amounts payable pursuant to this Section 3.1 submitted by any Lender to Borrower (with a copy to Agent) shall be conclusive absent manifest error. In determining any such additional amounts, such Lender may use any reasonable method of averaging and attribution that it shall deem applicable. The obligations of Borrower pursuant to this Section 3.1 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.
(d) No Lender shall demand compensation pursuant to this Section 3.1 unless such Lender is seeking similar compensation under comparable provisions of the documents and agreements governing its loans for similarly situated borrowers.
Section 3.2. Taxes.
(a) All payments made by any Credit Party under any Loan Document shall be made free and clear of, and without deduction or withholding for or on account of any Taxes or Other Taxes. If any Taxes or Other Taxes are required to be withheld from any amounts payable to Agent or any Lender thereunder, the amounts so payable to Agent or such Lender shall be increased to the extent necessary to yield to Agent or such Lender (after payment of all Taxes and Other Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in the Loan Documents.
(b) In addition, the Credit Parties shall pay Other Taxes to the relevant Governmental Authority in accordance with applicable law.
(c) Whenever any Taxes or Other Taxes are required to be withheld and paid by a Credit Party, such Credit Party shall timely withhold and pay such taxes to the relevant Governmental Authorities. As promptly as possible thereafter, Borrower shall send to Agent for its own account or for the account of the relevant Lender, as the case may be, a certified copy of an original official receipt received by such Credit Party showing payment thereof. If such Credit Party shall fail to pay any Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to Agent the required receipts or other required documentary evidence, Borrower shall indemnify Agent and the appropriate Lenders on demand for any incremental taxes, interest or penalties that may become payable by Agent or such Lender as a result of any such failure.
(d) If any Lender shall be so indemnified by a Credit Party, such Lender shall use reasonable efforts to obtain the benefits of any refund, deduction or credit for any taxes or other amounts with respect to the amount paid by such Credit Party and shall reimburse such Credit Party to the extent, but only to the extent, that such Lender shall receive a refund with respect to the amount paid by such Credit Party or an effective net reduction in taxes or other governmental charges (including any taxes imposed on or measured by the total net income of such Lender) of the United States or any state or subdivision or any other Governmental Authority thereof by virtue of any such deduction or credit, after first giving effect to all other deductions and credits otherwise available to such Lender. If, at the time any audit of such Lenders income tax return is completed, such Lender determines, based on such audit, that it shall not have been entitled to the full amount of any refund reimbursed to such Credit Party as aforesaid or that its net income
taxes shall not have been reduced by a credit or deduction for the full amount reimbursed to such Credit Party as aforesaid, such Credit Party, upon request of such Lender, shall promptly pay to such Lender the amount so refunded to which such Lender shall not have been so entitled, or the amount by which the net income taxes of such Lender shall not have been so reduced, as the case may be.
(e) Each Lender that is not (i) a citizen or resident of the United States of America, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States of America (or any jurisdiction thereof), or (iii) an estate or trust that is subject to federal income taxation regardless of the source of its income (any such Person, a Non-U.S. Lender) shall deliver to Borrower and Agent two copies of either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of portfolio interest, a statement with respect to such interest and a Form W-8BEN, or any subsequent versions thereof or successors thereto, properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on all payments by Credit Parties under this Agreement and the other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement or such other Loan Document. In addition, each Non-U.S. Lender shall deliver such forms or appropriate replacements promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify Borrower at any time it determines that such Lender is no longer in a position to provide any previously delivered certificate to Borrower (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Notwithstanding any other provision of this subsection (e), a Non-U.S. Lender shall not be required to deliver any form pursuant to this subsection (e) that such Non-U.S. Lender is not legally able to deliver.
(f) The agreements in this Section 3.2 shall survive the termination of the Loan Documents and the payment of the Loans and all other amounts payable hereunder.
(g) For any period with respect to which a Non-U.S. Lender has failed to provide Borrower with the appropriate form, statement or other document described in subsection (e) above (other than if such failure is due to a change in law, or in the interpretation or application thereof, occuring subsequent to the date on which a form, certificate or other document originally was required to be provided, or if such form otherwise is not required under subsection (e) above), such Non-U.S. Lender shall not be entitled to indemnification under Section 3.2(a), (b) or (c) with respect to any additional Taxes imposed by the United States by reason of such failure.
Section 3.3. Funding Losses. Borrower agrees to indemnify each Lender, promptly after receipt of a written request therefor, and to hold each Lender harmless from, any loss or expense that such Lender may sustain or incur as a consequence of (a) default by Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by Borrower in making any prepayment of or conversion from Eurodollar Loans after Borrower has given a notice thereof in accordance with the provisions of this Agreement, (c) the making of a
prepayment of a Eurodollar Loan on a day that is not the last day of an Interest Period applicable thereto, or (d) any conversion of a Eurodollar Loan to a Base Rate Loan pursuant to Section 3.4 hereof on a day that is not the last day of an Interest Period applicable thereto. Such indemnification shall be in an amount equal to the excess, if any, of (i) the amount of interest that would have accrued on the amounts so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) at the applicable rate of interest for such Loans provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) that would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the appropriate London interbank market. A certificate as to any amounts payable pursuant to this Section 3.3 submitted to Borrower (with a copy to Agent) by any Lender shall be conclusive absent manifest error. The obligations of Borrower pursuant to this Section 3.3 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.
Section 3.4. Eurodollar Rate Lending Unlawful; Inability to Determine Rate.
(a) If any Lender shall determine that, after the Closing Date, (i) the introduction of or any change in or in the interpretation of any law makes it unlawful, or (ii) any Governmental Authority asserts that it is unlawful, for such Lender to make or continue any Loan as, or to convert (if permitted pursuant to this Agreement) any Loan into, a Eurodollar Loan, the obligations of such Lender to make, continue or convert any such Eurodollar Loan shall, upon such determination, be suspended until such Lender shall notify Agent that the circumstances causing such suspension no longer exist, and all outstanding Eurodollar Loans payable to such Lender shall automatically convert (if conversion is permitted under this Agreement) into a Base Rate Loan, or be repaid (if no conversion is permitted) at the end of the then current Interest Periods with respect thereto or sooner, if required by law or such assertion.
(b) If Agent or the Required Lenders determine that for any reason adequate and reasonable means do not exist for determining the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Loan, or that the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Loan does not adequately and fairly reflect the cost to the Lenders of funding such Loan, Agent will promptly so notify Borrower and each Lender. Thereafter, the obligation of the Lenders to make or maintain such Eurodollar Loan shall be suspended until Agent (upon the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, Borrower may revoke any pending request for a borrowing of, conversion to or continuation of such Eurodollar Loan or, failing that, will be deemed to have converted such request into a request for a borrowing of a Base Rate Loan in the amount specified therein.
ARTICLE IV. CONDITIONS PRECEDENT
Section 4.1. Conditions to Each Credit Event. The obligation of the Lenders, the Fronting Lender and the Swing Line Lender to participate in any Credit Event (other than (a) the conversion of a Base Rate Loan to a Eurodollar Loan, (b) the conversion of a Eurodollar Loan to a Base Rate Loan, (c) the continuation of a Eurodollar Loan on any Interest Adjustment Date, (d) the prepayment of a Eurodollar Loan prior to the end of an Interest Period (subject to any amount payable under Article III hereof) and the borrowing on the same day of a Base Rate Loan for the same amount, and (e) the payment of a Swing Loan and the borrowing on the same day of a Base Rate Loan or Eurodollar Loan for the same amount) shall be conditioned, in the case of each such Credit Event, upon the following:
(i) Borrower shall have submitted a Notice of Loan (or with respect to a Letter of Credit, complied with the provisions of Section 2.2(b) hereof) and otherwise complied with Section 2.5 hereof;
(ii) no Default or Event of Default shall then exist or immediately after such Credit Event would exist; and
(iii) each of the representations and warranties contained in Article VI hereof shall be true in all material respects as if made on and as of the date of such Credit Event, except to the extent that any thereof expressly relate to an earlier date.
Each request by Borrower for a Credit Event shall be deemed to be a representation and warranty by Borrower as of the date of such request as to the satisfaction of the conditions precedent specified in subsections (ii) and (iii) above.
Section 4.2. Conditions to the First Credit Event. The obligation of the Lenders, the Fronting Lender and the Swing Line Lender to participate in the first Credit Event is subject to Borrower satisfying each of the following conditions prior to or concurrently with such Credit Event:
(a) Notes. Borrower shall have executed and delivered to each Lender requesting a Revolving Credit Note its Revolving Credit Note and shall have executed and delivered to the Swing Line Lender the Swing Line Note.
(b) Guaranties of Payment. Each Guarantor of Payment shall have executed and delivered to Agent a Guaranty of Payment.
(c) Officers Certificate, Resolutions, Organizational Documents. Each Credit Party shall have delivered to Agent an officers certificate (or comparable domestic or foreign documents) certifying the names of the officers of such Credit Party authorized to sign the Loan Documents, together with the true signatures of such officers and certified copies of (i) the resolutions of the board of directors (or comparable domestic or foreign documents) of such Credit Party evidencing approval of the execution and delivery of the Loan Documents and the execution of other Related Writings to which such Credit Party is a party, and (ii) the Organizational Documents of such Credit Party.
(d) Good Standing and Full Force and Effect Certificates. Borrower shall have delivered to Agent a good standing certificate or full force and effect certificate, as the case may be, for each Credit Party, issued on or about the Closing Date by the Secretary of State in the state or states where such Credit Party is incorporated or formed.
(e) Legal Opinion. Borrower shall have delivered to Agent an opinion of counsel for Parent, Borrower and each Significant Subsidiary, in form and substance satisfactory to Agent and the Lenders.
(f) Agent Fee Letter, Closing Fee Letter and Other Fees. Borrower shall have (i) executed and delivered to Agent the Agent Fee Letter and paid the fees stated therein, (ii) executed and delivered to Agent, for delivery to BOCM, the BOCM Fee Letter and paid the fees stated therein, (iii) executed and delivered to Agent the Closing Fee Letter and paid to Agent, for the benefit of the Lenders, the fees stated therein, and (iv) paid all legal fees and expenses of Agent for which Borrower has been invoiced in connection with the preparation and negotiation of the Loan Documents.
(g) Existing Credit Agreement. Borrower shall have terminated (i) the Three-Year Credit Agreement among Borrower, Parent, the lenders party thereto, and Bank One, NA, as agent, dated as of January 31, 2002, as amended, and (ii) the Twenty-One Month Credit Agreement among Borrower, Parent, the lenders party thereto, and Bank One, NA, as agent, dated as of April 30, 2003, as amended, which terminations shall be deemed to have occurred upon payment in full of all of the Indebtedness outstanding thereunder (other than Existing Letters of Credit or letters of credit thereunder that are collateralized in a manner acceptable to Agent) and termination of the commitments established therein.
(h) Closing Certificate. Borrower shall have delivered to Agent and the Lenders an officers certificate certifying that, as of the Closing Date, (i) no Default or Event of Default exists nor immediately after the making of the first Loan or the issuance of the first Letter of Credit will exist, and (ii) each of the representations and warranties contained in Article VI hereof are true and correct as of the Closing Date.
(i) Letter of Direction. To the extent a Loan is requested on the Closing Date, Borrower shall have delivered to Agent a letter of direction authorizing Agent, on behalf of the Lenders, to disburse the proceeds of the Loans, which includes the transfer of funds under this Agreement and wire instructions setting forth the locations to which such funds shall be sent.
(j) No Material Adverse Change. No material adverse change, in the opinion of Agent, shall have occurred in the financial condition or operations of the Companies taken as a whole since February 29, 2004.
(k) Miscellaneous. Borrower shall have provided to Agent and the Lenders such other items and shall have satisfied such other conditions as may be reasonably required by Agent or the Lenders.
ARTICLE V. COVENANTS
Section 5.1. Insurance. Each Company shall (a) maintain with financially sound and reputable insurers insurance with coverage and limits as required by law and as is customary with Persons engaged in the same businesses as the Companies; and (b) within ten days of any Lenders written request, furnish to such Lender such information about such Companys insurance as that Lender may from time to time reasonably request, which information shall be prepared in form and detail satisfactory to such Lender and certified by a Financial Officer of such Company, as appropriate.
Section 5.2. Money Obligations. Each Company shall pay in full (a) prior in each case to the date when penalties would attach, all taxes, assessments and governmental charges and levies (except only those so long as and to the extent that the same shall be contested in good faith by appropriate and timely proceedings and for which adequate provisions have been established in accordance with GAAP) for which it may be or become liable or to which any or all of its properties may be or become subject; and (b) all of its wage obligations to its employees in compliance with the Fair Labor Standards Act (29 U.S.C. §§ 206-207) or any comparable provisions.
Section 5.3. Financial Statements and Information.
(a) Quarterly Financials. Borrower shall deliver to Agent, within forty-five (45) days after the end of each of the first three quarter-annual periods of each fiscal year of Parent, balance sheets of the Companies as of the end of such period and statements of income (loss), stockholders equity and cash flow for the quarter and fiscal year to date periods, all prepared on a Consolidated basis, in accordance with GAAP, and in form and detail satisfactory to Agent and the Lenders and certified by a Financial Officer of Parent.
(b) Annual Audit Report. Borrower shall deliver to Agent, within ninety (90) days after the end of each fiscal year of Parent, an annual audit report of the Companies for that year prepared on a Consolidated and condensed consolidating basis (provided that consolidating statements need not be certified by an independent public accountant), in accordance with GAAP, and in form and detail satisfactory to Agent and the Lenders and certified by an independent public accountant satisfactory to Agent, which report shall include balance sheets and statements of income (loss), stockholders equity and cash-flow for that period.
(c) Compliance Certificate. Borrower shall deliver to Agent and the Lenders, concurrently with the delivery of the financial statements set forth in subsections (a) and (b) above, a Compliance Certificate.
(d) Shareholder and SEC Documents. Borrower shall deliver to Agent, as soon as available, copies of all registration statements and annual and quarterly reports sent by Parent (in final form) to the SEC.
(f) Financial Information of Companies. Borrower shall deliver to Agent and the Lenders, within ten days of the written request of Agent or any Lender, such other information
about the financial condition, properties and operations of any Company as Agent or such Lender may from time to time reasonably request, which information shall be submitted in form and detail satisfactory to Agent or such Lender and certified by a Financial Officer of the Company in question, as appropriate.
Section 5.4. Financial Records. Each Company shall at all times maintain true and complete records and books of account, including, without limiting the generality of the foregoing, appropriate provisions for possible losses and liabilities, all in accordance with GAAP, and at all reasonable times (during normal business hours and upon notice to such Company) permit Agent, or any representative of Agent, to examine the books and records of such Company, as requested, and to make excerpts therefrom and transcripts thereof.
Section 5.5. Franchises; Change in Business. Except as otherwise permitted pursuant to Section 5.12 hereof, each Credit Party shall preserve and maintain at all times its existence, and its rights and franchises necessary for its business.
Section 5.6. ERISA Compliance. No Company shall incur any material accumulated funding deficiency within the meaning of ERISA, or any material liability to the PBGC, established thereunder in connection with any ERISA Plan. Borrower shall furnish to the Lenders (a) as soon as possible and in any event within thirty (30) days after any Company knows or has reason to know that any Reportable Event with respect to any ERISA Plan has occurred, a statement of a Financial Officer of such Company, setting forth details as to such Reportable Event and the action that such Company proposes to take with respect thereto, together with a copy of the notice of such Reportable Event given to the PBGC if a copy of such notice is available to such Company, and (b) promptly after receipt thereof a copy of any notice such Company, or any member of the Controlled Group may receive from the PBGC or the Internal Revenue Service with respect to any ERISA Plan administered by such Company; provided, that this latter clause shall not apply to notices of general application promulgated by the PBGC or the Internal Revenue Service. Borrower shall promptly notify the Lenders of any material taxes assessed, proposed to be assessed or that Borrower has reason to believe may be assessed against a Company by the Internal Revenue Service with respect to any ERISA Plan. As used in this Section 5.6, material means the measure of a matter of significance that shall be determined as being an amount equal to five percent (5%) of Consolidated Net Worth. As soon as practicable, and in any event within thirty (30) days, after any Company shall become aware that an ERISA Event shall have occurred, such Company shall provide Agent with notice of such ERISA Event with a certificate by a Financial Officer of such Company setting forth the details of the event and the action such Company or another Controlled Group member proposes to take with respect thereto. Borrower shall, at the request of Agent or any Lender after the occurrence and during the continuance of an Event of Default, deliver or cause to be delivered to Agent or such Lender, as the case may be, true and correct copies of any documents relating to the ERISA Plan of any Company.
Section 5.7. Financial Covenants.
(a) Capitalization Ratio. The Companies shall not suffer or permit at any time the Capitalization Ratio to exceed 0.40 to 1.00.
(b) Interest Coverage Ratio. The Companies shall not suffer or permit at any time the Interest Coverage Ratio to be less than 3.00 to 1.00.
Section 5.8. Borrowing. No Company (other than Parent, Borrower or a Guarantor of Payment) shall create, incur or have outstanding any Indebtedness of any kind; provided that this Section 5.8 shall not apply to the following:
(a) the Loans, the Letters of Credit or any other Indebtedness under this Agreement;
(b) in addition to other Indebtedness permitted to be incurred pursuant to this Section 5.8, the Indebtedness existing on the Closing Date as set forth in Schedule 5.8 hereto (and any extension, renewal or refinancing thereof so long as the principal amount thereof shall not be increased after the Closing Date);
(c) Indebtedness incurred or assumed in connection with an Acquisition permitted pursuant to Section 5.13 hereof, so long as such Indebtedness existed at the time such Acquisition was consummated and was not created in contemplation of, in connection with, or in the consummation of such Acquisition (and any extension, renewal or refinancing thereof so long as the principal amount thereof shall not be increased);
(d) Indebtedness arising from (i) the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, or (ii) the honoring of a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; or
(e) other Indebtedness not in excess of the aggregate amount at any time outstanding, for all of the Companies, of twenty-five percent (25%) of Consolidated Net Worth.
Section 5.9. Liens. No Company shall create, assume or suffer to exist any Lien upon any of its property or assets, whether now owned or hereafter acquired; provided that this Section shall not apply to the following:
(a) Liens for taxes not yet due or that are being actively contested in good faith by appropriate proceedings and for which adequate reserves shall have been established in accordance with GAAP;
(b) other statutory Liens incidental to the conduct of its business or the ownership of its property and assets that (i) were not incurred in connection with the borrowing of money or the obtaining of advances or credit, and (ii) do not in the aggregate materially detract from the value of its property or assets or materially impair the use thereof in the operation of its business;
(c) easements or other minor defects or irregularities in title of real property not interfering in any material respect with the use of such property in the business of any Company;
(d) any Lien granted to Agent, for the benefit of the Lenders;
(e) the Liens existing on the Closing Date as set forth in Schedule 5.9 hereto and replacements, extensions, renewals, refundings or refinancings thereof, but only to the extent that the amount of debt secured thereby shall not be increased; or
(f) any other Liens securing Indebtedness of the Companies not in excess of, for all of the Companies, twenty-five percent (25%) of Consolidated Net Worth.
Section 5.10. Regulations T, U and X. No Company shall take any action that would result in any non-compliance of the Loans or Letters of Credit with Regulations T, U or X, or any other applicable regulation, of the Board of Governors of the Federal Reserve System.
Section 5.11. Investments and Loans. No Company shall, without the prior written consent of the Required Lenders, (a) create, acquire or hold any Subsidiary, (b) make or hold any investment in any stocks, bonds or securities of any kind, (c) be or become a party to any joint venture or other partnership, or (d) make or keep outstanding any advance or loan to any Person; provided that this Section 5.11 shall not apply to the following:
(i) any endorsement of a check or other medium of payment for deposit or collection through normal banking channels or similar transaction in the normal course of business;
(ii) any investment in Cash Equivalents;
(iii) the holding of each of the Subsidiaries listed on Schedule 6.1 hereto and investments therein, and the creation, acquisition and holding of and the making of investments in any new Subsidiary after the Closing Date so long as such new Subsidiary shall have been created, acquired or held in accordance with the terms and conditions of this Agreement;
(iv) any other investments or loans in an aggregate amount not to exceed, for all of the Companies in any fiscal year, twenty-five percent (25%) of Consolidated Net Worth as of the beginning of such fiscal year; or
(v) Acquisitions may be effected in accordance with the provisions of Section 5.13 hereof.
Section 5.12. Merger and Sale of Assets. No Company shall merge, amalgamate or consolidate with any other Person, or sell, lease or transfer or otherwise dispose of any assets to any Person (other than Borrower or any other Credit Party) other than in the ordinary course of business, except that, if no Default or Event of Default shall then exist or immediately thereafter shall begin to exist:
(a) any Subsidiary of Parent (other than Borrower or a Guarantor of Payment) may merge with or sell, lease, transfer or otherwise dispose of any of its assets to any Company;
(b) any Subsidiary of Borrower may merge with or sell, lease, transfer or otherwise dispose of any of its assets to any other Subsidiary of Borrower;
(c) any Company may sell, lease, transfer or otherwise dispose of any assets that are obsolete or no longer useful in such Companys business;
(d) any Company may sell, lease, transfer or otherwise dispose (whether in one transaction or a series of related transactions) of any of its assets to any other Person, so long as the aggregate fair market value of the assets being sold, leased, transferred or otherwise disposed of, in the aggregate for all Companies, shall not constitute (i) during the twelve (12) month period ending with the month prior to the month in which any such sale, lease, transfer or disposition, a Substantial Portion as determined under subparts (a) and (b) of the definition of Substantial Portion, or (ii) on or after the date of this Agreement, a Substantial Portion as determined under subparts (c) and (d) of the definition of Substantial Portion; and
(e) Acquisitions may be effected in accordance with the provisions of Section 5.13 hereof.
Notwithstanding anything in this Section 5.12 to the contrary, (A) no sale, lease, transfer or other disposition of assets by a Company may be effectuated (other than in the ordinary course or pursuant to subsections (a) or (b) above) if any Default or Event of Default has occurred and is continuing, and (B) all sales, leases, transfers and other dispositions of assets at any time shall be for not materially less than the fair market value of such assets as determined in good faith by Parent.
Section 5.13. Acquisitions. No Company shall effect an Acquisition if the aggregate Consideration paid for such Acquisition exceeds twenty-five percent (25%) of Consolidated Net Worth, as determined for the most recently completed fiscal quarter of Parent, unless, prior to consummation of such Acquisition, Borrower shall have provided to Agent a certificate of a Financial Officer showing pro forma compliance with Section 5.7 hereof after giving effect to the proposed Acquisition.
Section 5.14. Notice. Borrower shall cause a Financial Officer to promptly notify Agent whenever any Default or Event of Default may occur hereunder or any representation or warranty made in Article VI hereof or elsewhere in this Agreement or in any other Loan Document may for any reason cease in any material respect to be true and complete.
Section 5.15. Environmental Compliance. Each Company shall comply in all material respects with any and all Environmental Laws including, without limitation, all Environmental Laws in jurisdictions in which such Company owns or operates a facility or site, arranges for disposal or treatment of hazardous substances, solid waste or other wastes, accepts for transport any hazardous substances, solid waste or other wastes or holds any interest in real property or otherwise. Borrower shall furnish to the Lenders, promptly after receipt thereof, a copy of any notice such Company may receive from any Governmental Authority, private Person or otherwise that any material litigation or proceeding pertaining to any environmental, health or
safety matter has been filed or is threatened against such Company, any real property in which such Company holds any interest or any past or present operation of such Company. No Company shall allow the release or disposal of hazardous waste, solid waste or other wastes on, under or to any real property in which any Company holds any interest or performs any of its operations, in violation of any Environmental Law except to the extent such release or disposal does not or is not reasonably expected to have a Material Adverse Effect. As used in this Section, litigation or proceeding means any demand, claim, notice, suit, suit in equity action, administrative action, investigation or inquiry whether brought by any Governmental Authority, private Person or otherwise. Borrower shall defend, indemnify and hold Agent and the Lenders harmless against all costs, expenses, claims, damages, penalties and liabilities of every kind or nature whatsoever (including attorneys fees) arising out of or resulting from the noncompliance of any Company with any Environmental Law. Such indemnification shall survive any termination of this Agreement.
Section 5.16. Affiliate Transactions. No Company shall, directly or indirectly, enter into or permit to exist any transaction (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate (other than a Company that is a Credit Party) on terms that shall be less favorable to such Company than those that might be obtained at the time in a transaction with a non-Affiliate; provided, however, that the foregoing shall not prohibit the payment of customary and reasonable directors fees to directors who are not employees of a Company or an Affiliate.
Section 5.17. Use of Proceeds. Borrowers use of the proceeds of the Commitment shall be solely for working capital and other general corporate purposes of Parent and its Subsidiaries and for Acquisitions and the repayment of existing Indebtedness.
Section 5.18. Subsidiary Guaranties.
(a) Provision of Subsidiary Guaranties. Each Significant Subsidiary created, acquired or held subsequent to the Closing Date, shall promptly execute and deliver to Agent, for the benefit of the Lenders, a Guaranty of Payment of all of the Obligations, such agreement to be in the form of Exhibit H hereto, along with any such other supporting documentation, corporate governance and authorization documents, and an opinion of counsel as may be deemed reasonably necessary or advisable by Agent.
(b) Release of Non-Significant Subsidiary Guaranties. Borrower may from time to time request that certain Guarantors of Payment (other than Parent) be released from their respective Guaranties of Payment (and Agent is authorized by the Lenders to release such Guarantors of Payment from their Guaranty of Payment); provided that, as of the date of such release, such Subsidiary does not constitute a Significant Subsidiary and no Default or Event of Default shall exist or be caused thereby. In connection with granting any such release, Agent shall be entitled to rely on a representation by Borrower that the conditions to such release are satisfied.
(c) Release of Guarantor Upon Sale or Disposition. Upon the sale or disposition permitted under this Agreement of a Guarantor of Payment other than Parent (by merger or
otherwise) to a Person that is not an Affiliate, and which sale or disposition is otherwise in compliance with the terms of this Agreement, Agent shall release such Guarantor of Payment from its Guaranty of Payment upon the written request of Borrower and, if required by Agent, a certificate of a Financial Officer and an opinion of counsel to the effect that the transaction giving rise to the release of such Guaranty of Payment was made in accordance with the provisions of this Agreement.
(d) Guarantor of Senior Note Indebtedness. Notwithstanding anything herein to the contrary, Borrower shall cause to be executed and delivered to Agent and the Lenders, Guaranties of Payment of each Subsidiary of Parent (other than Borrower or an existing Guarantor of Payment) that is liable at any time, whether as a direct borrower, a Guarantor or otherwise, under the Senior Note Indebtedness, with such Guaranties of Payment to be delivered simultaneously with such Subsidiary becoming so liable under the Senior Note Indebtedness; provided, however, that (a) in the event that any such Subsidiary is only liable for a portion of the Senior Note Indebtedness, the Guaranty of Payment delivered by such Subsidiary shall be limited to an undivided percentage of the Indebtedness created under this Agreement equal to the proportion that the liability of such Subsidiary in respect of the Senior Note Indebtedness bears to the entire amount of the Senior Note Indebtedness; and (b) the foregoing provisions shall not limit the right of Parent to request a release from any such Guaranty of Payment in the event that such Subsidiary ceases to be obligated in respect of the Senior Note Indebtedness or the obligations of the Lenders to grant such a release, in each case in accordance with the terms hereof.
(e) Additions to Guarantors. Borrower may, in its sole and absolute discretion, designate any Subsidiary of Parent (that is not already a Guarantor or Payment) to become a Guarantor of Payment hereunder by executing and delivering a Guaranty of Payment to Agent.
(f) Deliveries. In connection with the delivery of any Guaranty of Payment under this Section 5.18, Borrower shall provide such other documentation to Agent, including, without limitation, one or more opinions of counsel satisfactory to Agent, corporate documents and resolutions, which, in the reasonable opinion of Agent, is necessary or advisable in connection therewith.
(g) Effectiveness of Release. No release of a Guarantor of Payment under this Section 5.18 shall be effective until such release has been given in writing by Agent. Any Guarantor of Payment not so released in writing shall remain liable for the full amount of the Obligations.
Section 5.19. Restrictive Agreements. Except as set forth in this Agreement, the Companies shall not directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Subsidiary to (a) make, directly or indirectly, any Capital Distribution to Borrower, (b) make, directly or indirectly, loans or advances or capital contributions to Borrower or (c) transfer, directly or indirectly, any of the properties or assets of such Subsidiary to Borrower; except for such encumbrances or restrictions existing under or by reason of (i) applicable law, (ii) customary non-assignment provisions in leases or other agreements entered in the ordinary course of business and consistent with past
practices, (iii) customary restrictions in security agreements or mortgages securing Indebtedness or capital leases, of a Company to the extent such restrictions shall only restrict the transfer of the property subject to such security agreement, mortgage or lease, (iv) restrictions with respect to a Subsidiary imposed pursuant to an agreement which has been entered into in connection with the disposition of all or substantially all of the assets or capital stock of such Subsidiary, or (v) any restrictions with respect to any assets subject to a Lien permitted under Section 5.9 hereof.
Section 5.20. Pari Passu Ranking. The Obligations shall, and Borrower shall take all necessary action to ensure that the Obligations shall, at all times, rank at least pari passu in right of payment with all other senior unsecured Indebtedness of Parent and Borrower.
Section 5.21. Amendment of Organizational Documents. No Company shall amend its Organizational Documents to amend its Organizational Documents in any manner which is reasonably expected to have a Material Adverse Effect, without prior notice to Agent and the Lenders.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES
Section 6.1. Corporate Existence; Subsidiaries; Foreign Qualification. Each Company is duly organized, validly existing, and in good standing under the laws of its state or jurisdiction of incorporation or organization and is duly qualified and authorized to do business and is in good standing as a foreign entity in each jurisdiction where the character of its property or business activities makes such qualification necessary, except where a failure to qualify will not result in a Material Adverse Effect. Each Foreign Subsidiary is validly existing under the laws of its jurisdiction of organization. Schedule 6.1 hereto sets forth, as of the Closing Date, each Subsidiary of Parent (and whether such Subsidiary is a Dormant Subsidiary or a Significant Subsidiary), its state of formation, its relationship to Parent, including the percentage of each class of stock owned by a Company, each Person that owns the stock or other equity interest of each Company.
Section 6.2. Corporate Authority. Each Credit Party has the right and power and is duly authorized and empowered to enter into, execute and deliver the Loan Documents to which it is a party and to perform and observe the provisions of the Loan Documents. The Loan Documents to which each Credit Party is a party have been duly authorized and approved by such Credit Partys board of directors or other governing body, as applicable, and are the valid and binding obligations of such Credit Party, enforceable against such Credit Party in accordance with their respective terms, except as enforcement may be limited by bankruptcy or insolvency laws or similar laws affecting the rights of creditors generally or by general principles of equity. The execution, delivery and performance of the Loan Documents will not conflict with nor result in any breach in any of the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 5.9 hereof) upon any assets or property of any Credit Party under the provisions of, such Credit Partys Organizational Documents or any agreement to which a Credit Party is a party or by which such Credit Party or its property is bound.
Section 6.3. Compliance with Laws and Contracts. Each Company:
(a) holds permits, certificates, licenses, orders, registrations, franchises, authorizations, and other approvals from any Governmental Authority necessary for the conduct of its business and is in compliance with all applicable laws relating thereto;
(b) is in compliance with all federal, state, local, or foreign applicable statutes, rules, regulations, and orders including, without limitation, those relating to environmental protection, occupational safety and health, and equal employment practices; and
(c) is not in violation of or in default under any agreement to which it is a party or by which its assets are subject or bound;
except where the failure to hold such permits, certificates, licenses, orders, registrations, franchises, authorizations or approvals, or where any such non-compliance or violation, would not reasonably be expected to have a Material Adverse Effect.
Section 6.4. Litigation and Administrative Proceedings. As of the Closing Date, except as disclosed on Schedule 6.4 hereto, there are (a) no lawsuits, actions, investigations, or other proceedings pending or threatened against any Company, or in respect of which any Company may have any liability, in any court or before any Governmental Authority, arbitration board, or other tribunal, (b) no orders, writs, injunctions, judgments, or decrees of any court or government agency or instrumentality to which any Company is a party or by which the property or assets of any Company are bound, and (c) no grievances, disputes, or controversies outstanding with any union or other organization of the employees of any Company, or threats of work stoppage, strike, or pending demands for collective bargaining, in each case, which would be expected to have a Material Adverse Effect.
Section 6.5. Title to Assets. Each Company has good title to and ownership of all property it purports to own, which property is free and clear of all Liens, except those permitted under Section 5.9 hereof.
Section 6.6. Tax Returns. All federal, state and local tax returns and other reports required by law to be filed in respect of the income, business, properties and employees of each Company have been filed and all taxes, assessments, fees and other governmental charges that are due and payable have been paid, except as otherwise permitted herein or where the failure to do so could not reasonably be expected to cause or result in a Material Adverse Effect. The provision for taxes on the books of each Company is adequate for all years not closed by applicable statutes and for the current fiscal year.
Section 6.7. Environmental Matters. As of the Closing Date, based upon a review of the effect of Environmental Laws on the business of Parent and its Subsidiaries Parent has concluded that there have been no violations of Environmental Laws, and there are no reasonably foreseeable violations of Environmental Laws, that could reasonably be expected to have a Material Adverse Effect. As of the Closing Date, neither Parent nor any Subsidiary has received
any notice to the effect that its operations are not in material compliance with any of the requirements of applicable Environmental Laws or are the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, which non-compliance or remedial action could reasonably be expected to have a Material Adverse Effect.
Section 6.8. Continued Business. There exists no actual, pending, or, to Borrowers knowledge, any threatened termination, cancellation or limitation of, or any modification or change in the business relationship of any Company and any customer or supplier, or any group of customers or suppliers, whose purchases or supplies, individually or in the aggregate, are material to the business of any Company, and there exists no present condition or state of facts or circumstances that would have a Material Adverse Effect or prevent a Company from conducting such business or the transactions contemplated by this Agreement in substantially the same manner in which it was previously conducted.
Section 6.9. Employee Benefits Plans. No ERISA Event is expected to occur with respect to an ERISA Plan. Full payment has been made of all amounts that a Controlled Group member is required, under applicable law or under the governing documents, to have paid as a contribution to or a benefit under each ERISA Plan. The liability of each Controlled Group member with respect to each ERISA Plan has been funded based upon reasonable and proper actuarial assumptions, has been insured, or has been fully reserved for on its financial statements other than any failure to fund or failure to insure or reserve which is not material. No changes have occurred or are expected to occur that would cause a material increase in the cost of providing benefits under the ERISA Plan. With respect to each ERISA Plan that is intended to be qualified under Code Section 401(a), (a) the ERISA Plan and any associated trust operationally comply in all material respects with the applicable requirements of Code Section 401(a); (b) the ERISA Plan and any associated trust have been amended to comply in all material respects with all such requirements as currently in effect, other than those requirements for which a retroactive amendment can be made within the remedial amendment period available under Code Section 401(b) (as extended under Treasury Regulations and other Treasury pronouncements upon which taxpayers may rely); (c) the ERISA Plan and any associated trust have received a favorable determination letter from the Internal Revenue Service stating that the ERISA Plan qualifies under Code Section 401(a), that the associated trust qualifies under Code Section 501(a) and, if applicable, that any cash or deferred arrangement under the ERISA Plan qualifies under Code Section 401(k), unless the ERISA Plan was first adopted at a time for which the above-described remedial amendment period has not yet expired or an application for a favorable determination is pending; (d) the ERISA Plan currently satisfies the requirements of Code Section 410(b), subject to any retroactive amendment that may be made within the above-described remedial amendment period; and (e) no contribution made to the ERISA Plan is subject to an excise tax under Code Section 4972. With respect to any Pension Plan, the accumulated benefit obligation of Controlled Group members with respect to the Pension Plan (as determined in accordance with Statement of Accounting Standards No. 87, Employers Accounting for Pensions) does not exceed the fair market value of Pension Plan assets by any amount which would be material. As used in this Section 6.9 material shall have the meaning ascribed thereto in Section 5.6 hereof.
Section 6.10. Consents or Approvals. No consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority or any other Person is required to be obtained or completed by any Company in connection with the execution, delivery or performance of any of the Loan Documents, that has not already been obtained or completed.
Section 6.11. Solvency. Borrower has received consideration that is the reasonable equivalent value of the obligations and liabilities that Borrower has incurred to Agent and the Lenders. Borrower is not insolvent as defined in any applicable state, federal or relevant foreign statute, nor will Borrower be rendered insolvent by the execution and delivery of the Loan Documents to Agent and the Lenders. Borrower is not engaged or about to engage in any business or transaction for which the assets retained by it are or will be an unreasonably small amount of capital, taking into consideration the obligations to Agent and the Lenders incurred hereunder. Borrower does not intend to, nor does it believe that it will, incur debts beyond its ability to pay such debts as they mature.
Section 6.12. Financial Statements. The audited Consolidated financial statements of Parent for the fiscal year ended May 31, 2003, and the unaudited Consolidated financial statements of Parent for the fiscal quarter ended February 29, 2004, furnished to Agent and the Lenders, are true and complete in all material respects, have been prepared in accordance with GAAP, and fairly present the financial condition of the Companies as of the dates of such financial statements and the results of their operations for the periods then ending. As of the Closing Date, since the dates of such statements, there has been no material adverse change in the financial condition, properties or business of any Company or any change in accounting procedures of any Company except as required by GAAP.
Section 6.13. Regulations T, U and X. Neither Parent nor any of its Subsidiaries extends or maintains, in the ordinary course of business, credit for the purpose, whether immediate, incidental, or ultimate, of buying or carrying margin stock, and no part of the proceeds of any Loan will be used for the purpose, whether immediate, incidental, or ultimate, of buying or carrying any such margin stock or maintaining or extending credit to others for such purpose in any way that would violate Regulation T, U or X. After applying the proceeds of each Loan, margin stock will not constitute more than twenty-five percent (25%) of the value of the assets (either of Borrower alone or of Parent and its Subsidiaries on a Consolidated basis) that are subject to any provisions of any Loan Document that may cause the Loans to be deemed secured, directly or indirectly, by margin stock. Parent and its Subsidiaries are in compliance with Section 5.17 hereof.
Section 6.14. Material Agreements. Neither Parent nor any Subsidiary is a party to any agreement or instrument or subject to any charter or other corporate restriction that could reasonably be expected to have a Material Adverse Effect. Neither Parent nor any Subsidiary is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in (a) any agreement to which it is a party, which default could reasonably be expected to have a Material Adverse Effect or (b) any Material Indebtedness Agreement.
Section 6.15. Intellectual Property. Each Company owns or has the right to use all of the patents, patent applications, industrial designs, trademarks, service marks, copyrights, licenses,
and rights with respect to the foregoing necessary for the conduct of its business without any known conflict with the rights of others, except to the extent any such conflict would not have a Material Adverse Effect.
Section 6.16. Insurance. Each Company maintains with financially sound and reputable insurers insurance with coverage and limits as required by law and as is customary with Persons engaged in the same businesses as the Companies.
Section 6.17. Accurate and Complete Statements. Neither the Loan Documents nor any written statement made by any Company in connection with any of the Loan Documents contains any untrue statement of a material fact or omits a material fact necessary to make the statements contained therein or in the Loan Documents not misleading in light of the context in which such statements are made. After due inquiry by Borrower, there is no known fact that any Company has not disclosed to Agent and the Lenders that has or is likely to have a Material Adverse Effect.
Section 6.18. Investment Company; Holding Company. No Company is (a) an investment company or a company controlled by an investment company within the meaning of the Investment Company Act of 1940, as amended, or (b) subject to regulation under the Public Utility Holding Company Act of 1935 or the Federal Power Act, each as amended, or any foreign, federal, state or local statute or regulation limiting its ability to incur Indebtedness.
Section 6.19. Defaults. No Default or Event of Default exists hereunder, nor will any begin to exist immediately after the execution and delivery hereof.
ARTICLE VII. EVENTS OF DEFAULT
Each of the following shall constitute an Event of Default hereunder:
Section 7.1. Payments. If (a) the interest on any Loan or any facility, utilization or other fee shall not be paid in full punctually when due and payable or within five Business Days thereafter, or (b) the principal of any Loan or any obligation under any Letter of Credit shall not be paid in full when due and payable.
Section 7.2. Special Covenants. If any Company shall fail or omit to perform and observe Section 5.7, 5.8, 5.9, 5.11, 5.12 or 5.13 hereof.
Section 7.3. Other Covenants. If any Company shall fail or omit to perform and observe any agreement or other provision (other than those referred to in Section 7.1 or 7.2 hereof) contained or referred to in this Agreement or any other Loan Document that is on the part of such Company to be complied with, and that Default shall not have been fully corrected within thirty (30) days after the earlier of (a) any Financial Officer of such Company becomes aware of the occurrence thereof, or (b) the giving of written notice thereof to Borrower by Agent or the Required Lenders that the specified Default is to be remedied.
Section 7.4. Representations and Warranties. If any representation, warranty or statement made in or pursuant to this Agreement or any other Loan Document shall be false or erroneous in any material respect when made.
Section 7.5. Cross Default. If any Company shall default in the payment of principal or interest due and owing under any Material Indebtedness Agreement beyond any period of grace provided with respect thereto or in the performance or observance of any other provision, term or condition contained in such Material Indebtedness Agreement under which such obligation is created, if the effect of such default is to allow the acceleration of the maturity of such Indebtedness or to permit the holder thereof to cause such Indebtedness to become due prior to its stated maturity.
Section 7.6. ERISA Default. The occurrence of one or more ERISA Events that (a) the Required Lenders determine could have a Material Adverse Effect, or (b) results in a Lien on any of the material portion of the assets of any Company (as defined in Section 5.6 hereof).
Section 7.7. Change in Control. If any Change in Control shall occur.
Section 7.8. Money Judgment. A final judgment or order for the payment of money shall be rendered against any Company by a court of competent jurisdiction, that remains unpaid or unstayed and undischarged for a period (during which execution shall not be effectively stayed) of ninety (90) days after the date on which the right to appeal has expired, provided that the aggregate of all such judgments for all such Companies shall exceed Fifteen Million Dollars ($15,000,000).
Section 7.9. Validity of Loan Documents. (a) the validity, binding effect or enforceability of any Material Loan Document against any Credit Party shall be contested by any Credit Party; (b) any Credit Party shall deny that it has any or further liability or obligation under any Loan Document; or (c) any Material Loan Document shall be terminated, invalidated or set aside, or be declared ineffective or inoperative or in any way cease to give or provide to Agent and the Lenders the benefits purported to be created thereby. As used herein Material Loan Documents shall mean this Agreement, each Note and each Guaranty of Payment.
Section 7.10. Solvency. If any Company (other than a Dormant Subsidiary) shall (a) except as permitted pursuant to Section 5.12 hereof, discontinue business, (b) generally not pay its debts as such debts become due, (c) make a general assignment for the benefit of creditors, (d) apply for or consent to the appointment of a receiver, a custodian, a trustee, an interim trustee or liquidator of all or a substantial part of its assets, (e) be adjudicated a debtor or insolvent or have entered against it an order for relief under Title 11 of the United States Code, or under any other bankruptcy insolvency, liquidation, winding-up, corporate or similar statute or law, foreign, federal state or provincial, in any applicable jurisdiction, now or hereafter existing, as any of the foregoing may be amended from time to time, or other applicable statute for jurisdictions outside of the United States, as the case may be, (f) file a voluntary petition in bankruptcy, or have an involuntary proceeding filed against it and the same shall continue undismissed for a period of sixty (60) consecutive days from commencement of such proceeding or case, or file a petition or an answer seeking reorganization or an arrangement with creditors or
seeking to take advantage of any other law (whether federal or state, or, if applicable, other jurisdiction) relating to relief of debtors, or admit (by answer, by default or otherwise) the material allegations of a petition filed against it in any bankruptcy, reorganization, insolvency or other proceeding (whether federal or state, or, if applicable, other jurisdiction) relating to relief of debtors, (g) suffer or permit to continue unstayed and in effect for sixty (60) consecutive days any judgment, decree or order entered by a court of competent jurisdiction, that approves a petition seeking its reorganization or appoints a receiver, custodian, trustee, interim trustee or liquidator of all or a substantial part of its assets, (h) have an administrative receiver appointed over the whole or substantially the whole of its assets, or (i) take any action in order thereby to effect any of the foregoing.
ARTICLE VIII. REMEDIES UPON DEFAULT
Notwithstanding any contrary provision or inference herein or elsewhere:
Section 8.1. Optional Defaults. If any Event of Default referred to in Section 7.1, 7.2, 7.3, 7.4, 7.5, 7.6, 7.7, 7.8, or 7.9 hereof shall occur, Agent may, with the consent of the Required Lenders, and shall, at the request of the Required Lenders, give written notice to Borrower, to:
(a) terminate the Commitment, if not previously terminated, and, immediately upon such election, the obligations of the Lenders, and each thereof, to make any further Loan and the obligation of the Fronting Lender to issue any Letter of Credit immediately shall be terminated; and/or
(b) accelerate the maturity of all of the Obligations (if the Obligations are not already due and payable), whereupon all of the Obligations shall become and thereafter be immediately due and payable in full without any presentment or demand and without any further or other notice of any kind, all of which are hereby waived by Borrower.
Section 8.2. Automatic Defaults. If any Event of Default referred to in Section 7.10 hereof shall occur:
(a) all of the Commitment shall automatically and immediately terminate, if not previously terminated, and no Lender thereafter shall be under any obligation to grant any further Loan, nor shall the Fronting Lender be obligated to issue any Letter of Credit; and
(b) the principal of and interest then outstanding on all of the Loans, and all of the other Obligations, shall thereupon become and thereafter be immediately due and payable in full (if the Obligations are not already due and payable), all without any presentment, demand or notice of any kind, which are hereby waived by Borrower.
Section 8.3. Letters of Credit. If the maturity of the Obligations shall be accelerated pursuant to Section 8.1 or 8.2 hereof, Borrower shall immediately deposit with Agent, as security for the obligations of Borrower and any Guarantor of Payment to reimburse Agent and the Lenders for any then outstanding Letters of Credit, cash equal to the sum of the aggregate
undrawn balance of any then outstanding Letters of Credit. Agent and the Lenders are hereby authorized, at their option, to deduct any and all such amounts from any deposit balances then owing by any Lender (or any affiliate of such Lender) to or for the credit or account of any Company, as security for the obligations of Borrower and any Guarantor of Payment to reimburse Agent and the Lenders for any then outstanding Letters of Credit.
Section 8.4. Offsets. If there shall occur or exist any Event of Default referred to in Section 7.10 hereof or if the maturity of the Obligations is accelerated pursuant to Section 8.1 or 8.2 hereof, each Lender shall have the right at any time to set off against, and to appropriate and apply toward the payment of, any and all of the Obligations then owing by Borrower to such Lender (including, without limitation, any participation purchased or to be purchased pursuant to Section 2.2(b), 2.2(c) or 8.5 hereof), whether or not the same shall then have matured, any and all deposit (general or special) balances and all other indebtedness then held or owing by such Lender (including, without limitation, by branches and agencies or any affiliate of such Lender, wherever located) to or for the credit or account of Borrower or any Guarantor of Payment, all without notice to or demand upon Borrower or any other Person, all such notices and demands being hereby expressly waived by Borrower.
Section 8.5. Equalization Provision. Each Lender agrees with the other Lenders that if it, at any time, shall obtain any Advantage over the other Lenders or any thereof in respect of the Obligations (except as to Swing Loans and Letters of Credit prior to Agents giving of notice to participate and except under Article III hereof), it shall purchase from the other Lenders, for cash and at par, such additional participation in the Obligations as shall be necessary to nullify the Advantage. If any such Advantage resulting in the purchase of an additional participation as aforesaid shall be recovered in whole or in part from the Lender receiving the Advantage, each such purchase shall be rescinded, and the purchase price restored (but without interest unless the Lender receiving the Advantage is required to pay interest on the Advantage to the Person recovering the Advantage from such Lender) ratably to the extent of the recovery. Each Lender further agrees with the other Lenders that if it at any time shall receive any payment for or on behalf of Borrower on any indebtedness owing by Borrower to that Lender (whether by realization upon security, by reason of offset of any deposit or other indebtedness, by counterclaim or cross-action or by the enforcement of any right under any Loan Document), it will apply such payment first to any and all Obligations owing by Borrower to that Lender (including, without limitation, any participation purchased or to be purchased pursuant to this Section or any other Section of this Agreement). Borrower agrees that any Lender so purchasing a participation from the other Lenders or any thereof pursuant to this Section may exercise all of its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender was a direct creditor of Borrower in the amount of such participation.
Section 8.6. Other Remedies. The remedies in this Article VIII are in addition to, not in limitation of, any other right, power, privilege, or remedy, either in law, in equity, or otherwise, to which the Lenders may be entitled. Agent shall exercise the rights under this Article VIII and all other collection efforts on behalf of the Lenders and no Lender shall act independently with respect thereto, except as otherwise specifically set forth in this Agreement.
ARTICLE IX. THE AGENT
The Lenders authorize KeyBank National Association and KeyBank National Association hereby agrees to act as agent for the Lenders in respect of this Agreement upon the terms and conditions set forth elsewhere in this Agreement, and upon the following terms and conditions:
Section 9.1. Appointment and Authorization. Each Lender hereby irrevocably appoints and authorizes Agent to take such action as agent on its behalf and to exercise such powers hereunder as are delegated to Agent by the terms hereof, together with such powers as are reasonably incidental thereto. Neither Agent nor any of its affiliates, directors, officers, attorneys or employees shall (a) be liable for any action taken or omitted to be taken by it or them hereunder or in connection herewith, except for its or their own gross negligence or willful misconduct (as determined by a court of competent jurisdiction), or be responsible in any manner to any of the Lenders for the effectiveness, enforceability, genuineness, validity or due execution of this Agreement or any other Loan Documents, (b) be under any obligation to any Lender to ascertain or to inquire as to the performance or observance or any of the terms, covenants or conditions hereof or thereof on the part of Borrower or any other Company, or the financial condition of Borrower or any other Company, or (c) be liable to any of the Companies for consequential damages resulting from any breach of contract, tort or other wrong in connection with the negotiation, documentation, administration or collection of the Loans or Letters of Credit or any of the Loan Documents.
Section 9.2. Note Holders. Agent may treat the payee of any Note as the holder thereof (or, if there is no Note, the holder of the interest as reflected on the books and records of Agent) until written notice of transfer shall have been filed with it, signed by such payee and in form satisfactory to Agent.
Section 9.3. Consultation With Counsel. Agent may consult with legal counsel selected by it and shall not be liable for any action taken or suffered in good faith by it in accordance with the opinion of such counsel.
Section 9.4. Documents. Agent shall not be under any duty to examine into or pass upon the validity, effectiveness, genuineness or value of any Loan Document or any other Related Writing furnished pursuant hereto or in connection herewith or the value of any collateral obtained hereunder, and Agent shall be entitled to assume that the same are valid, effective and genuine and what they purport to be.
Section 9.5. Agent and Affiliates. With respect to the Loans, Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not Agent, and Agent and its affiliates may accept deposits from, lend money to and generally engage in any kind of business with any Company or any Affiliate.
Section 9.6. Knowledge of Default. It is expressly understood and agreed that Agent shall be entitled to assume that no Default or Event of Default has occurred, unless Agent has been notified by a Lender in writing that such Lender believes that a Default or Event of Default
has occurred and is continuing and specifying the nature thereof or has been notified by Borrower pursuant to Section 5.14 hereof.
Section 9.7. Action by Agent. Subject to the other terms and conditions hereof, so long as Agent shall be entitled, pursuant to Section 9.6 hereof, to assume that no Default or Event of Default shall have occurred and be continuing, Agent shall be entitled to use its discretion with respect to exercising or refraining from exercising any rights that may be vested in it by, or with respect to taking or refraining from taking any action or actions that it may be able to take under or in respect of, this Agreement. Agent shall incur no liability under or in respect of this Agreement by acting upon any notice, certificate, warranty or other paper or instrument believed by it to be genuine or authentic or to be signed by the proper party or parties, or with respect to anything that it may do or refrain from doing in the reasonable exercise of its judgment, or that may seem to it to be necessary or desirable in the premises.
Section 9.8. Notice of Default. In the event that Agent shall have acquired actual knowledge of any Default or Event of Default, Agent shall promptly notify the Lenders and shall take such action and assert such rights under this Agreement as the Required Lenders shall direct and Agent shall inform the other Lenders in writing of the action taken. Agent may take such action and assert such rights as it deems to be advisable, in its discretion, for the protection of the interests of the holders of the Obligations.
Section 9.9. Indemnification of Agent. The Lenders agree to indemnify Agent (to the extent not reimbursed by Borrower) ratably, according to their respective Commitment Percentages, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys fees) or disbursements of any kind or nature whatsoever that may be imposed on, incurred by or asserted against Agent in its capacity as agent in any way relating to or arising out of this Agreement or any Loan Document or any action taken or omitted by Agent with respect to this Agreement or any Loan Document, provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys fees) or disbursements resulting from Agents gross negligence or willful misconduct as determined by a court of competent jurisdiction, or from any action taken or omitted by Agent in any capacity other than as agent under this Agreement or any other Loan Document.
Section 9.10. Successor Agent. Agent may resign as agent hereunder by giving not fewer than thirty (30) days prior written notice to Borrower and the Lenders. If Agent shall resign under this Agreement, then either (a) the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders (with the consent of Borrower so long as an Event of Default has not occurred and which consent shall not be unreasonably withheld), or (b) if a successor agent shall not be so appointed and approved within the thirty (30) day period following Agents notice to the Lenders of its resignation, then Agent shall appoint a successor agent that shall serve as agent until such time as the Required Lenders appoint a successor agent; provided that, notwithstanding the foregoing, any successor Agent shall be a commercial bank organized under the laws of the United States or any state thereof having capital and surplus of at least One Hundred Million Dollars ($100,000,000). Upon its appointment, such successor agent shall succeed to the rights, powers and duties as agent, and the term Agent shall mean such
successor effective upon its appointment, and the former agents rights, powers and duties as agent shall be terminated without any other or further act or deed on the part of such former agent or any of the parties to this Agreement.
Section 9.11. Other Agents. As used in this Agreement, the term Agent shall only include Agent. Neither the Joint Lead Arranger nor any Syndication Agent, Co-Documentation Agent or any other agent (other than Agent) shall have any rights, obligations or responsibilities hereunder in such capacity; provided that the Joint Lead Arranger, when acting in its capacity as joint lead arranger, shall have the right to be indemnified by Borrower and the Lenders in the same manner as Agent has the right to be indemnified.
ARTICLE X. MISCELLANEOUS
Section 10.1. Lenders Independent Investigation. Each Lender, by its signature to this Agreement, acknowledges and agrees that Agent has made no representation or warranty, express or implied, with respect to the creditworthiness, financial condition, or any other condition of any Company or with respect to the statements contained in any information memorandum furnished in connection herewith or in any other oral or written communication between Agent and such Lender. Each Lender represents that it has made and shall continue to make its own independent investigation of the creditworthiness, financial condition and affairs of the Companies in connection with the extension of credit hereunder, and agrees that Agent has no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information with respect thereto (other than such notices as may be expressly required to be given by Agent to the Lenders hereunder), whether coming into its possession before the first Credit Event hereunder or at any time or times thereafter. Each Lender further represents that it has reviewed each of the Loan Documents.
Section 10.2. No Waiver; Cumulative Remedies. No omission or course of dealing on the part of Agent, any Lender or the holder of any Note in exercising any right, power or remedy hereunder or under any of the Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder or under any of the Loan Documents. The remedies herein provided are cumulative and in addition to any other rights, powers or privileges held by operation of law, by contract or otherwise.
Section 10.3. Amendments, Consents. No amendment, modification, termination, or waiver of any provision of any Loan Document nor consent to any variance therefrom, shall be effective unless the same shall be in writing and signed by the Required Lenders and, in the case of amendments or modifications, Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Anything herein to the contrary notwithstanding, unanimous consent of the Lenders shall be required with respect to (a) any increase in the Commitment hereunder (except as specified in Section 2.9(b) hereof), (b) the extension of maturity of the Loans, the payment date of interest or principal thereunder, or the payment date of facility, utilization or other fees or amounts payable hereunder, (c) any reduction in the rate of interest on the Loans (provided that the institution of the Default Rate and a
subsequent removal of the Default Rate shall not constitute a decrease in interest rate of this Section), or in any amount of principal or interest due on any Loan, or the payment of facility, utilization or other fees hereunder or any change in the manner of pro rata application of any payments made by Borrower to the Lenders hereunder, (d) any change in any percentage voting requirement, voting rights, or the Required Lenders definition in this Agreement, (e) the release of any Guarantor of Payment other than any release permitted by the terms hereof, or (f) any amendment to this Section 10.3 or Section 8.5 hereof. Notice of amendments or consents ratified by the Lenders hereunder shall be forwarded by Agent to all of the Lenders. Each Lender or other holder of a Note (or interest in any Loan) shall be bound by any amendment, waiver or consent obtained as authorized by this Section, regardless of its failure to agree thereto.
Section 10.4. Notices. All notices, requests, demands and other communications provided for hereunder shall be in writing and, if to Borrower, mailed or delivered to it, addressed to it at the address specified on the signature pages of this Agreement, if to a Lender, mailed or delivered to it, addressed to the address of such Lender specified on the signature pages of this Agreement, or, as to each party, at such other address as shall be designated by such party in a written notice to each of the other parties. All notices, statements, requests, demands and other communications provided for hereunder shall be given by overnight delivery or first class mail with postage prepaid by registered or certified mail, addressed as aforesaid, or sent by facsimile with telephonic confirmation of receipt, except that all notices hereunder shall not be effective until received.
Section 10.5. Costs, Expenses and Taxes. Borrower agrees to pay on demand all costs and expenses of Agent, including, but not limited to, (a) syndication, administration, travel and out-of-pocket expenses, including but not limited to attorneys fees and expenses, of Agent in connection with the preparation, negotiation and closing of the Loan Documents and the administration of the Loan Documents, the collection and disbursement of all funds hereunder and the other instruments and documents to be delivered hereunder, (b) extraordinary expenses of Agent in connection with the administration of the Loan Documents and the other instruments and documents to be delivered hereunder, and (c) the reasonable fees and out-of-pocket expenses of special counsel for Agent, with respect to the foregoing, and of local counsel, if any, who may be retained by said special counsel with respect thereto. Borrower also agrees to pay on demand all costs and expenses of Agent and the Lenders, including reasonable attorneys fees, in connection with the restructuring or enforcement of the Obligations, this Agreement or any Related Writing. In addition, Borrower shall pay any and all stamp and other taxes and fees payable or determined to be payable in connection with the execution and delivery of the Loan Documents, and the other instruments and documents to be delivered hereunder, and agrees to hold Agent and each Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying or failure to pay such taxes or fees.
Section 10.6. Indemnification. Borrower agrees to defend, indemnify and hold harmless Agent and the Lenders (and their respective affiliates, officers, directors, attorneys, agents and employees) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys fees) or disbursements of any kind or nature whatsoever that may be imposed on, incurred by or asserted against Agent or any Lender in connection with any investigative, administrative or judicial proceeding (whether or
not such Lender or Agent shall be designated a party thereto) or any other claim by any Person relating to or arising out of any Loan Document or any actual or proposed use of proceeds of the Loans or any of the Obligations, or any activities of any Company or its Affiliates; provided that no Lender nor Agent shall have the right to be indemnified under this Section for its own gross negligence or willful misconduct as determined by a court of competent jurisdiction. All obligations provided for in this Section 10.6 shall survive any termination of this Agreement.
Section 10.7. Obligations Several; No Fiduciary Obligations. The obligations of the Lenders hereunder are several and not joint. Nothing contained in this Agreement and no action taken by Agent or the Lenders pursuant hereto shall be deemed to constitute Agent or the Lenders a partnership, association, joint venture or other entity. No default by any Lender hereunder shall excuse the other Lenders from any obligation under this Agreement; but no Lender shall have or acquire any additional obligation of any kind by reason of such default. The relationship between Borrower and the Lenders with respect to the Loan Documents and the Related Writings is and shall be solely that of debtor and creditors, respectively, and neither Agent nor any Lender shall have any fiduciary obligation toward any Credit Party with respect to any such documents or the transactions contemplated thereby.
Section 10.8. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts and by facsimile signature, each of which counterparts when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement.
Section 10.9. Binding Effect; Borrowers Assignment. This Agreement shall become effective when it shall have been executed by Borrower, Agent and each Lender and thereafter shall be binding upon and inure to the benefit of Borrower, Agent and each of the Lenders and their respective successors and assigns, except that Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of Agent and all of the Lenders.
Section 10.10. Lender Assignments.
(a) Assignments of Commitments. Each Lender shall have the right at any time or times to assign to an Eligible Transferee (other than to a Lender that shall not be in compliance with this Agreement), without recourse, all or a percentage of all of the following: (i) such Lenders Commitment, (ii) all Loans made by that Lender, (iii) such Lenders Notes, if any, and (iv) such Lenders interest in any Letter of Credit or Swing Loan, and any participation purchased pursuant to Section 2.2(b), 2.2(c) or 8.5 hereof.
(b) Prior Consent. No assignment may be consummated pursuant to this Section 10.10 without the prior written consent of Borrower and Agent (other than an assignment by any Lender to another Lender or to any affiliate of such Lender which affiliate is an Eligible Transferee and either wholly-owned by a Lender or is wholly-owned by a Person that wholly owns, either directly or indirectly, such Lender), which consent of Borrower and Agent shall not be unreasonably withheld; provided, however, that Borrowers consent shall not be required if, at the time of the proposed assignment, any Default or Event of Default shall then exist. Anything
herein to the contrary notwithstanding, any Lender may at any time make a collateral assignment of all or any portion of its rights under the Loan Documents to a Federal Reserve Bank, and no such assignment shall release such assigning Lender from its obligations hereunder.
(c) Minimum Amount. Each such assignment shall be in a minimum amount of the lesser of Five Million Dollars ($5,000,000) of the assignors Commitment and interest herein or the entire amount of the assignors Commitment and interest herein.
(d) Assignment Fee. Unless the assignment shall be to an affiliate of the assignor or the assignment shall be due to merger of the assignor or for regulatory purposes, either the assignor or the assignee shall remit to Agent, for its own account, an administrative fee of Three Thousand Five Hundred Dollars ($3,500).
(e) Assignment Agreement. Unless the assignment shall be due to merger of the assignor or a collateral assignment for regulatory purposes, the assignor shall (i) cause the assignee to execute and deliver to Borrower and Agent an Assignment Agreement, and (ii) execute and deliver, or cause the assignee to execute and deliver, as the case may be, to Agent such additional amendments, assurances and other writings as Agent may reasonably require.
(f) Non-U.S. Assignee. If the assignment is to be made to an assignee that is organized under the laws of any jurisdiction other than the United States or any state thereof, the assignor Lender shall cause such assignee, at least five Business Days prior to the effective date of such assignment, (i) to represent to the assignor Lender (for the benefit of the assignor Lender, Agent and Borrower) that under applicable law and treaties no taxes will be required to be withheld by Agent, Borrower or the assignor with respect to any payments to be made to such assignee in respect of the Loans hereunder, (ii) to furnish to the assignor Lender (and, in the case of any assignee registered in the Register (as defined below), Agent and Borrower) either (A) U.S. Internal Revenue Service Form W-8ECI or U.S. Internal Revenue Service Form W-8BEN or (B) United States Internal Revenue Service Form W-8 or W-9, as applicable (wherein such assignee claims entitlement to complete exemption from U.S. federal withholding tax on all interest payments hereunder), and (iii) to agree (for the benefit of the assignor, Agent and Borrower) to provide to the assignor Lender (and, in the case of any assignee registered in the Register, to Agent and Borrower) a new Form W-8ECI or Form W-8BEN or Form W-8 or W-9, as applicable, upon the expiration or obsolescence of any previously delivered form and comparable statements in accordance with applicable U.S. laws and regulations and amendments duly executed and completed by such assignee, and to comply from time to time with all applicable U.S. laws and regulations with regard to such withholding tax exemption.
(g) Deliveries by Borrower. Upon satisfaction of all applicable requirements specified in subsections (a) through (f) above, Borrower shall execute and deliver (i) to Agent, the assignor and the assignee, any consent or release (of all or a portion of the obligations of the assignor) required to be delivered by Borrower in connection with the Assignment Agreement, and (ii) to the assignee and the assignor, if applicable, an appropriate Note or Notes. After delivery of the new Note or Notes, the assignors Note or Notes being replaced shall be returned to Borrower marked replaced.
(h) Effect of Assignment. Upon satisfaction of all applicable requirements of set forth in subsections (a) through (g) above, and any other condition contained in this Section 10.10, (i) the assignee shall become and thereafter be deemed to be a Lender for the purposes of this Agreement, (ii) the assignor shall be released from its obligations hereunder to the extent that its interest has been assigned, (iii) in the event that the assignors entire interest has been assigned, the assignor shall cease to be and thereafter shall no longer be deemed to be a Lender and (iv) the signature pages hereto and Schedule 1 hereto shall be automatically amended, without further action, to reflect the result of any such assignment.
(i) Agent to Maintain Register. Agent shall maintain at the address for notices referred to in Section 10.4 hereof a copy of each Assignment Agreement delivered to it and a register (the Register) for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and Borrower, Agent and the Lenders may treat each Person whose name is recorded in the Register as the owner of the Loan recorded therein for all purposes of this Agreement. The Register shall be available for inspection by Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice.
Section 10.11. Sale of Participations. Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time sell participations to one or more Eligible Transferees (each a Participant) in all or a portion of its rights or obligations under this Agreement and the other Loan Documents (including, without limitation, all or a portion of the Commitment and the Loans and participations owing to it and the Note held by it); provided, that:
(a) any such Lenders obligations under this Agreement and the other Loan Documents shall remain unchanged;
(b) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations;
(c) the parties hereto shall continue to deal solely and directly with such Lender in connection with such Lenders rights and obligations under this Agreement and each of the other Loan Documents;
(d) such Participant shall be bound by the provisions of Section 8.5 hereof, and the Lender selling such participation shall obtain from such Participant a written confirmation of its agreement to be so bound; and
(e) no Participant (unless such Participant is itself a Lender) shall be entitled to require such Lender to take or refrain from taking action under this Agreement or under any other Loan Document, except that such Lender may agree with such Participant that such Lender will not, without such Participants consent, take action of the type described as follows:
(i) increase the portion of the participation amount of any Participant over the amount thereof then in effect, or extend the Commitment Period, without the written consent of each Participant affected thereby; or
(ii) reduce the principal amount of or extend the time for any payment of principal of any Loan, or reduce the rate of interest or extend the time for payment of interest on any Loan, or reduce the facility fee or the utilization fee, without the written consent of each Participant affected thereby.
Borrower agrees that any Lender that sells participations pursuant to this Section shall still be entitled to the benefits of Article III hereof, notwithstanding any such transfer; provided, however, that the obligations of Borrower shall not increase as a result of such transfer and Borrower shall have no obligation to any Participant.
Section 10.12. Severability of Provisions; Captions; Attachments. Any provision of this Agreement that shall be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. The several captions to Sections and subsections herein are inserted for convenience only and shall be ignored in interpreting the provisions of this Agreement. Each schedule or exhibit attached to this Agreement shall be incorporated herein and shall be deemed to be a part hereof.
Section 10.13. Investment Purpose. Each of the Lenders represents and warrants to Borrower that it is entering into this Agreement with the present intention of acquiring any Note issued pursuant hereto for investment purposes only and not for the purpose of distribution or resale, it being understood, however, that each Lender shall at all times retain full control over the disposition of its assets.
Section 10.14. Entire Agreement. This Agreement, any Note and any other Loan Document or other agreement, document or instrument attached hereto or executed on or as of the Closing Date integrate all of the terms and conditions mentioned herein or incidental hereto and supersede all oral representations and negotiations and prior writings with respect to the subject matter hereof.
Section 10.15. Legal Representation of Parties. The Loan Documents were negotiated by the parties with the benefit of legal representation and any rule of construction or interpretation otherwise requiring this Agreement or any other Loan Document to be construed or interpreted against any party shall not apply to any construction or interpretation hereof or thereof.
Section 10.16. Governing Law; Submission to Jurisdiction. This Agreement, each of the Notes and any Related Writing shall be governed by and construed in accordance with the laws of the State of Ohio and the respective rights and obligations of Borrower, Agent, and the Lenders shall be governed by Ohio law, without regard to principles of conflict of laws which would result in the application of the law of any other state. Borrower hereby irrevocably
submits to the non-exclusive jurisdiction of any Ohio state or federal court sitting in Cleveland, Ohio, over any action or proceeding arising out of or relating to this Agreement, the Obligations or any Related Writing, and Borrower hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such Ohio state or federal court. Borrower, on behalf of itself and its Subsidiaries, hereby irrevocably waives, to the fullest extent permitted by law, any objection it may now or hereafter have to the laying of venue in any action or proceeding in any such court as well as any right it may now or hereafter have to remove such action or proceeding, once commenced, to another court on the grounds of FORUM NON CONVENIENS or otherwise. Borrower agrees that a final, nonappealable judgment in any such action or proceeding in state or federal court shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.
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Section 10.17. Jury Trial Waiver. TO THE EXTENT PERMITTED BY LAW, BORROWER, AGENT AND EACH LENDER WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWER, AGENT AND THE LENDERS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.
IN WITNESS WHEREOF, the parties have executed and delivered this Credit Agreement as of the date first set forth above.
Address: |
6800 Cintas Boulevard |
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CINTAS CORPORATION NO. 2 | |
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Mason, Ohio 45040 |
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Attn: President |
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By: |
/s/ Scott D. Farmer |
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Scott D. Farmer |
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President |
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Address: |
Key Center |
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KEYBANK NATIONAL ASSOCIATION, | |
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127 Public Square |
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as Agent and as a Lender | |
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Cleveland, Ohio 44114-1306 |
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Attn: Institutional Banking |
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By: |
/s/ Francis W. Lutz |
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Francis W. Lutz |
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Vice President |
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Address: |
One Bank One Plaza |
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BANC ONE CAPITAL MARKETS, INC., | |
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Mail Code IL1-0429 |
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as Joint Lead Arranger | |
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Chicago, Illinois 60670 |
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Attn: Francis Henkel |
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By: |
/s/ Francis Henkel |
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Francis Henkel |
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Managing Director |
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Address: |
One Bank One Plaza |
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BANK ONE, NA, as Syndication Agent and as | |
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Mail Code IL1-0364 |
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a Lender | |
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Chicago, Illinois 60670 |
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Attn: Megan E. Marquardt |
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By: |
/s/ Megan E. Marquardt |
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Megan E. Marquardt |
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Associate Director |
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Address: |
Fifth Third Center |
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FIFTH THIRD BANK, as Co-Documentation | |
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38 Fountain Square Plaza |
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Agent and as a Lender | |
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MD 109046 |
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Cincinnati, Ohio 45202 |
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By: |
/s/ David C. Melin |
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Attn: David C. Melin |
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David C. Melin |
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Vice President |
Signature Page
1 of 2 of the Credit Agreement
Address: |
425 Walnut Street |
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US BANK NATIONAL ASSOCIATION, as | |||
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ML CN-OH-W8 |
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Co-Documentation Agent and as a Lender | |||
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Cincinnati, Ohio 45202 |
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Attn: Michael P. Dickman |
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By: |
/s/ Michael P. Dickman | ||
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Michael P. Dickman | ||
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Assistant Vice President | ||
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Address: |
Chicago Branch |
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THE BANK OF TOKYO-MITSUBISHI, | |||
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Suite 2300 |
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LTD., as Co-Documentation Agent and as a | |||
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227 West Monroe Street |
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Lender | |||
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Chicago, Illinois 60606 |
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Attn: William Murray |
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By: |
/s/ Kazuya Matsushita | ||
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Kazuya Matsushita | ||
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General Manager | ||
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Address: |
201 East Fifth Street |
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PNC BANK, NATIONAL ASSOCIATION | |||
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Cincinnati, Ohio 45202 |
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Attn: Jeffrey L. Stein |
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By: |
/s/ Jeffrey L. Stein | ||
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Jeffrey L. Stein | ||
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Vice President | ||
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Address: |
50 South LaSalle Street |
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THE NORTHERN TRUST COMPANY | |||
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Chicago, Illinois 60675 |
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Attn: Thomas E. Bernhardt |
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By: |
/s/ Thomas E. Bernhardt | ||
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Thomas E. Bernhardt | ||
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Senior Banker | ||
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Address: |
Suite 2900 |
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WELLS FARGO BANK NATIONAL | |||
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230 West Monroe Street |
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ASSOCIATION | |||
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Chicago, Illinois 60606 |
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Attn: Steven Buehler |
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By: |
/s/ Scott Miller | ||
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Scott Miller | ||
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Vice President | ||
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Signature Page
2 of 2 of the Credit Agreement
SCHEDULE 1
LENDERS
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COMMITMENT
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REVOLVING
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MAXIMUM AMOUNT
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KeyBank National Association |
20.00000000% |
$ 60,000,000 |
$ 60,000,000 |
Bank One, NA |
20.00000000% |
$ 60,000,000 |
$ 60,000,000 |
Fifth Third Bank |
13.33333333% |
$ 40,000,000 |
$ 40,000,000 |
US Bank National Association |
13.33333333% |
$ 40,000,000 |
$ 40,000,000 |
The Bank of Tokyo-Mitsubishi, Ltd. |
13.33333333% |
$ 40,000,000 |
$ 40,000,000 |
PNC Bank, National Association |
6.66666667% |
$ 20,000,000 |
$ 20,000,000 |
The Northern Trust Company |
6.66666667% |
$ 20,000,000 |
$ 20,000,000 |
Wells Fargo Bank National Association |
6.66666667% |
$ 20,000,000 |
$ 20,000,000 |
|
100 % |
$ 300,000,000 |
$ 300,000,000 |
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Total Commitment Amount
|
100% |
$ 300,000,000 |
$ 300,000,000 |
SCHEDULE 2
GUARANTORS OF PAYMENT
Cintas Corporation
Cintas Corporation No. 3
Cintas Corp. No. 8, Inc.
Cintas RUS, L.P.
Cintas Corp. No. 15, Inc.
Xpect First Aid Corporation
Cintas First Aid Holdings Corporation
American First Aid Company
Respond Industries, Incorporated
Affirmed Medical, Inc.
LLT, Inc.
SCHEDULE 5.8
Indebtedness
NONE
Schedule 5.9
Liens
Liens on the assets described below securing the payment of the indebtedness listed below:
Description |
Amount as of 4/30/2004 |
Industrial Revenue Bond secured by P.G. Cty facility and a first security interest in the fixtures, equipment, furnishings and other tangible personal property located on the property |
$930,000 |
Industrial Revenue Bond secured by Kansas City facility and a first security interest in the fixtures, equipment, furnishings and other tangible personal property located on the property |
$967,000 |
Industrial Revenue Bond secured by Bath facility and a first security interest in the fixtures, equipment, furnishings and other tangible personal property located on the property |
$1,200,000 |
Industrial Revenue Bond secured by Unitog facility and a first security interest in the fixtures, equipment, furnishings and other tangible personal property located on the property |
$3,000,000 |
Synthetic Lease with General Electric Capital Corporation of Challenger |
$16,237,779 |
Synthetic Lease with Nationsbanc Leasing Corporation of a 1998 Hawker, Model 800XP Aircraft, FAA Registration Mark N61DF and Manufacturers Serial No. 258386 |
$9,085,808 |
Capital Lease secured by a first security interest in the fixtures, equipment, furnishings and other tangible personal property located at a Crystal Linen facility |
$2,226,936 |
Note with Quality Outfitters, Inc. secured by a Rental Uniform Service facility. |
$216,225 |
Schedule 6.1
Corporate Existence: Subsidiaries*
I. Cintas Corporation (Washington)
A. Cintas Corporation No. 3 (Nevada) SIGNIFICANT SUBSIDIARY
1. Cintas Corporation No. 2 (Nevada) SIGNIFICANT SUBSIDIARY
a. Cintas Canada Limited (Ontario)
b. Groupo Cintas de Mexico S.A. de CV (Mexico)1
c. Cintas De Honduras, S.A. (Honduras) 2
d. Empresa Cintas De Mexico S.A. de C.V. (Mexico)3
i. Ensambles De Coahuila S.A. de C.V. (Mexico)4
e. Cintas Cleanroom Resources De Mexico, SA De CV (Mexico)5
f. Smartshred LLC (Ohio)
2. Cintas Corp. No. 8, Inc. (Nevada)
a. Cintas RUS, L.P. (Texas LP)6
3. Cintas Corp. No. 15, Inc. (Nevada)
a. Cintas RUS, L.P. (Texas LP)6
4. Xpect First Aid Corporation (Kansas)
a. Cintas First Aid Holdings Corporation (Nevada)7 DORMANT SUBSIDIARY
5. Cintas Canada Limited (Ontario)
a. Vetements Industriels Miro, Inc. (Quebec)
6. 3065520 Nova Scotia Company (Nova Scotia)
a. Cintas Canada Investment Limited Partnership (Alberta)8
i. Cintas Investment Corp (Ontario)
· 1202327 Ontario Inc (Ontario)
7. 3065521 Nova Scotia Company (Nova Scotia)
a. Cintas Canada Investment Limited Partnership (Alberta)8
i. Cintas Investment Corp (Ontario)
· 1202327 Ontario Inc (Ontario)
B. American First Aid Company (Maryland)
1. Cintas First Aid Holdings Corporation (Nevada) 7 DORMANT SUBSIDIARY
C. Respond Industries, Incorporated (Colorado)
1. Cintas First Aid Holdings Corporation (Nevada) 7 DORMANT SUBSIDIARY
D. Affirmed Medical, Inc. (California)
1. Cintas First Aid Holdings Corporation (Nevada) 7 DORMANT SUBSIDIARY
E. LLT, Inc. (Virginia) DORMANT SUBSIDIARY
F. UTY Canada Ltee. (Quebec)
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*Except as otherwise noted, each Subsidiary is a wholly-owned Subsidiary of the Company one level above the applicable Subsidiary
1 Cintas Corporation No. 3 owns .01% of outstanding shares.
2 <2% of shares held by certain executive officers of Cintas.
3 Cintas Corporation No. 3 owns .002% of outstanding shares.
4 Cintas Corporation No. 2 owns 1% of outstanding shares.
5 Cintas Corporation No. 3 owns .002% of outstanding shares.
6 Cintas Corporation No. 8, Inc. is the general partner of Cintas RUS, L.P. and Cintas Corp. No. 15, Inc. is a limited partner of Cintas RUS, L.P.
7 Each of Xpect First Aid Corporation, American First Aid Corporation, Respond Industries, Incorporated and Affirmed Medical, Inc. owns 25% of the outstanding common stock of Cintas First Aid Holding Corporation.
8 3065521 Nova Scotia Company is the general partner of Cintas Canada Investment Limited Partnership and 3065520 Nova Scotia Company is the limited partner of Cintas Canada Investment Limited Partnership.
Schedule 6.4
Ligitation
1. A class action suit was filed in federal court in the Northern District of California alleging that Cintas violated federal overtime laws and Illinois, New Jersey, California and Michigan state overtime laws applicable to its service sales representatives, which Cintas believes to be exempt employees. In addition, the lawsuit asserts that the alleged overtime and record-keeping violations also constitute separate violations under the Employee Retirement Income Security Act (ERISA) in connection with the Cintas Partners Plan As of April 23, 2003.
2. On December 5, 2003, a class action charge of discrimination was filed by UNITE and the Teamsters with the EEOCs San Francisco District office alleging race, gender and national origin discrimination by Cintas. This charge along with individual charges received by Cintas have been transferred and consolidated in the EEOCs Detroit District office where most were stayed pending the EEOCs investigation of the lawsuit.
3. On January 20, 2004, a class action lawsuit (Ramirez , et. Al. v. Cintas) based on alleged race, gender and national origin discrimination was filed in San Francisco federal court. An Amended Complaint is due June 30, 2004.
EXHIBIT A
FORM OF
REVOLVING CREDIT NOTE
$ |
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May 28, 2004 |
FOR VALUE RECEIVED, the undersigned, CINTAS CORPORATION NO. 2, a Nevada corporation (Borrower), promises to pay, on the last day of the Commitment Period, as defined in the Credit Agreement (as hereinafter defined), to the order of (Lender) at the main office of KEYBANK NATIONAL ASSOCIATION, as Agent, as hereinafter defined, 127 Public Square, Cleveland, Ohio 44114-1306, the principal sum of
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DOLLARS |
or the aggregate unpaid principal amount of all Revolving Loans, as defined in the Credit Agreement made by Lender to Borrower pursuant to Section 2.2(a) of the Credit Agreement, whichever is less, in lawful money of the United States of America.
As used herein, Credit Agreement means the Credit Agreement dated as of May 28, 2004, among Borrower, the Lenders, as defined therein, KeyBank National Association, as joint lead arranger and administrative agent for the Lenders (Agent), Banc One Capital Markets, Inc., as joint lead arranger, Bank One, NA, as syndication agent, Fifth Third Bank, as co-documentation agent, US Bank National Association, as co-documentation agent, and The Bank of Tokyo-Mitsubishi, Ltd., as co-documentation agent, as the same may from time to time be amended, restated or otherwise modified. Each capitalized term used herein that is defined in the Credit Agreement and not otherwise defined herein shall have the meaning ascribed to it in the Credit Agreement.
Borrower also promises to pay interest on the unpaid principal amount of each Revolving Loan from time to time outstanding, from the date of such Revolving Loan until the payment in full thereof, at the rates per annum that shall be determined in accordance with the provisions of Section 2.3(a) of the Credit Agreement. Such interest shall be payable on each date provided for in such Section 2.3(a); provided, however, that interest on any principal portion that is not paid when due shall be payable on demand.
The portions of the principal sum hereof from time to time representing Base Rate Loans and Eurodollar Loans, and payments of principal of any thereof, shall be shown on the records of Lender by such method as Lender may generally employ; provided, however, that failure to make any such entry shall in no way detract from the obligations of Borrower under this Note.
If this Note shall not be paid at maturity, whether such maturity occurs by reason of lapse of time or by operation of any provision for acceleration of maturity contained in the Credit Agreement, the principal hereof and the unpaid interest thereon shall bear interest, until paid, at a rate per annum equal to the Default Rate. All payments of principal of and interest on this Note shall be made in immediately available funds.
This Note is one of the Revolving Credit Notes referred to in the Credit Agreement. Reference is made to the Credit Agreement for a description of the right of the undersigned to anticipate payments hereof, the right of the holder hereof to declare this Note due prior to its stated maturity, and other terms and conditions upon which this Note is issued.
Except as expressly provided in the Credit Agreement, Borrower expressly waives presentment, demand, protest and notice of any kind. This Note shall be governed by and construed in accordance with the laws of the State of Ohio, without regard to conflicts of laws provisions.
JURY TRIAL WAIVER. BORROWER, TO THE EXTENT PERMITTED BY LAW, HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWER, AGENT AND THE LENDERS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.
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CINTAS CORPORATION NO. 2 | |||
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EXHIBIT B
FORM OF
SWING LINE NOTE
$[ ] |
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May 28, 2004 |
FOR VALUE RECEIVED, the undersigned, CINTAS CORPORATION NO. 2, a Nevada corporation (Borrower), promises to pay to the order of KEYBANK NATIONAL ASSOCIATION (Lender) at the main office of KEYBANK NATIONAL ASSOCIATION, as Agent, as hereinafter defined, 127 Public Square, Cleveland, Ohio 44114-1306, the principal sum of
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DOLLARS |
or, if less, the aggregate unpaid principal amount of all Swing Loans, as defined in the Credit Agreement (as hereinafter defined) made by Lender to Borrower pursuant to Section 2.2(c) of the Credit Agreement, in lawful money of the United States of America on the earlier of the last day of the applicable Commitment Period, as defined in the Credit Agreement, or, with respect to each Swing Loan, the Swing Loan Maturity Date applicable thereto.
As used herein, Credit Agreement means the Credit Agreement dated as of May 28, 2004, among Borrower, the Lenders, as defined therein, KeyBank National Association, as joint lead arranger and administrative agent for the Lenders (Agent), Banc One Capital Markets, Inc., as joint lead arranger, Bank One, NA, as syndication agent, Fifth Third Bank, as co-documentation agent, US Bank National Association, as co-documentation agent, and The Bank of Tokyo-Mitsubishi, Ltd., as co-documentation agent, as the same may from time to time be amended, restated or otherwise modified. Each capitalized term used herein that is defined in the Credit Agreement and not otherwise defined herein shall have the meaning ascribed to it in the Credit Agreement.
Borrower also promises to pay interest on the unpaid principal amount of each Swing Loan from time to time outstanding, from the date of such Swing Loan until the payment in full thereof, at the rates per annum that shall be determined in accordance with the provisions of Section 2.3(b) of the Credit Agreement. Such interest shall be payable on each date provided for in such Section 2.3(b); provided, however, that interest on any principal portion which is not paid when due shall be payable on demand.
The principal sum hereof from time to time and the payments of principal and interest thereon, shall be shown on the records of Lender by such method as Lender may generally employ; provided, however, that failure to make any such entry shall in no way detract from the obligation of Borrower under this Note.
If this Note shall not be paid at maturity, whether such maturity occurs by reason of lapse of time or by operation of any provision for acceleration of maturity contained in the Credit Agreement, the principal hereof and the unpaid interest thereon shall bear interest, until paid, at a
rate per annum equal to the Default Rate. All payments of principal of and interest on this Note shall be made in immediately available funds.
This Note is the Swing Line Note referred to in the Credit Agreement. Reference is made to the Credit Agreement for a description of the right of the undersigned to anticipate payments hereof, the right of the holder hereof to declare this Note due prior to its stated maturity, and other terms and conditions upon which this Note is issued.
Except as expressly provided in the Credit Agreement, Borrower expressly waives presentment, demand, protest and notice of any kind. This Note shall be governed by and construed in accordance with the laws of the State of Ohio, without regard to conflicts of laws provisions.
JURY TRIAL WAIVER. BORROWER, TO THE EXTENT PERMITTED BY LAW, HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWER, AGENT AND THE LENDERS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS NOTE OR ANY OTHER NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.
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CINTAS CORPORATION NO. 2 | |||
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EXHIBIT C
FORM OF
NOTICE OF LOAN
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[Date] , 20 |
KeyBank National Association, as Agent
127 Public Square
Cleveland, Ohio 44114-0616
Attention: Institutional Banking
Ladies and Gentlemen:
The undersigned, Cintas Corporation No. 2, refers to the Credit Agreement, dated as of May 28, 2004 (the Credit Agreement, the terms defined therein being used herein as therein defined), among the undersigned, the Lenders, as defined in the Credit Agreement, KeyBank National Association, as joint lead arranger and administrative agent for the Lenders (Agent), Banc One Capital Markets, Inc., as joint lead arranger, Bank One, NA, as syndication agent, Fifth Third Bank, as co-documentation agent, US Bank National Association, as co-documentation agent, and The Bank of Tokyo-Mitsubishi, Ltd., as co-documentation agent, and hereby gives you notice, pursuant to Section 2.5 of the Credit Agreement that the undersigned hereby requests a Loan under the Credit Agreement, and in connection therewith sets forth below the information relating to the Loan (the Proposed Loan) as required by Section 2.5 of the Credit Agreement:
(a) The Business Day of the Proposed Loan is , 20 .
(b) The amount of the Proposed Loan is $ .
(c) The Proposed Loan is to be a Base Rate Loan / Eurodollar Loan / Swing Loan .
(Check one.)
(d) If the Proposed Loan is a Eurodollar Loan, the Interest Period requested is one month , two months , three months , six months .
(Check one.)
The undersigned hereby certifies on behalf of Borrower that the following statements are true on the date hereof, and will be true on the date of the Proposed Loan:
(i) the representations and warranties contained in each Loan Document are correct, before and after giving effect to the Proposed Loan and the application of the proceeds therefrom, as though made on and as of such date (except to the extent such representation or warranty expressly relates to an earlier date); and
(ii) no event has occurred and is continuing, or would result from such Proposed Loan, or the application of proceeds therefrom, that constitutes a Default or Event of Default.
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CINTAS CORPORATION NO. 2 | |||
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EXHIBIT D
FORM OF
COMPLIANCE CERTIFICATE
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For Fiscal Quarter ended |
THE UNDERSIGNED HEREBY CERTIFIES THAT:
(1) I am the duly elected [President or Chief Financial Officer or Treasurer] of CINTAS CORPORATION NO. 2, a Nevada corporation (Borrower);
(2) I am familiar with the terms of that certain Credit Agreement, dated as of May 28, 2004, among Borrower, the Lenders, as defined therein, KeyBank National Association, as joint lead arranger and administrative agent for the Lenders (Agent), Banc One Capital Markets, Inc., as joint lead arranger, Bank One, NA, as syndication agent, Fifth Third Bank, as co-documentation agent, US Bank National Association, as co-documentation agent, and The Bank of Tokyo-Mitsubishi, Ltd., as co-documentation agent (as the same may from time to time be amended, restated or otherwise modified, the Credit Agreement, the terms defined therein being used herein as therein defined), and the terms of the other Loan Documents, and I have made, or have caused to be made under my supervision, a review in reasonable detail of the transactions and condition of Borrower and its Subsidiaries during the accounting period covered by the attached financial statements;
(3) The review described in paragraph (2) above did not disclose, and I have no knowledge of, the existence of any condition or event that constitutes or constituted a Default or Event of Default, at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate; and
(4) Set forth on Attachment I hereto are calculations of the financial covenants set forth in Section 5.7 of the Credit Agreement, which calculations show compliance with the terms thereof.
IN WITNESS WHEREOF, I have signed this certificate the day of , 20 .
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EXHIBIT E
FORM OF
ASSIGNMENT AND ACCEPTANCE AGREEMENT
This Assignment and Acceptance Agreement (this Assignment Agreement) between (the Assignor) and (the Assignee) is dated as of , 20 . The parties hereto agree as follows:
1. Preliminary Statement. Assignor is a party to a Credit Agreement, dated as of May 28, 2004, among Cintas Corporation No. 2 (Borrower), the Lenders, as defined therein, KeyBank National Association, as joint lead arranger and administrative agent for the Lenders (Agent), Banc One Capital Markets, Inc., as joint lead arranger, Bank One, NA, as syndication agent, Fifth Third Bank, as co-documentation agent, US Bank National Association, as co-documentation agent, and The Bank of Tokyo-Mitsubishi, Ltd., as co-documentation agent (as the same may from time to time be amended, restated or otherwise modified, the Credit Agreement). Capitalized terms used herein and not otherwise defined herein shall have the meanings attributed to them in the Credit Agreement.
2. Assignment and Assumption. Assignor hereby sells and assigns to Assignee, and Assignee hereby purchases and assumes from Assignor, an interest in and to Assignors rights and obligations under the Credit Agreement, effective as of the Assignment Effective Date (as hereinafter defined), equal to the percentage interest specified on Annex 1 hereto (hereinafter, Assignees Percentage) of Assignors right, title and interest in and to (a) the Commitment of Assignor as set forth on Annex 1 hereto (hereinafter, the Assigned Amount), (b) any Loan made by Assignor that is outstanding on the Assignment Effective Date, (c) Assignors interest in any Letter of Credit outstanding on the Assignment Effective Date, (d) any Note delivered to Assignor pursuant to the Credit Agreement, and (e) the Credit Agreement and the other Related Writings. After giving effect to such sale and assignment and on and after the Assignment Effective Date, Assignee shall be deemed to have a Commitment Percentage under the Credit Agreement equal to the Commitment Percentage set forth in subpart II.A on Annex 1 hereto.
3. Assignment Effective Date. The Assignment Effective Date (the Assignment Effective Date) shall be [ , ] (or such other date agreed to by Agent). On or prior to the Assignment Effective Date, Assignor shall satisfy the following conditions:
(a) receipt by Agent of this Assignment Agreement, including Annex 1 hereto, properly executed by Assignor and Assignee and accepted and consented to by Agent and, if necessary pursuant to the provisions of Section 10.10(a) of the Credit Agreement, by Borrower;
(b) receipt by Agent from Assignor of a fee of Three Thousand Five Hundred Dollars ($3,500), if required by Section 10.10 of the Credit Agreement;
(c) receipt by Agent from Assignee of an administrative questionnaire, or other similar document, which shall include (i) the address for notices under the Credit Agreement, (ii) the address of its Lending Office, (iii) wire transfer instructions for delivery of funds by Agent, (iv) and such other information as Agent shall request; and
(d) receipt by Agent from Assignor or Assignee of any other information required pursuant to Section 10.10 of the Credit Agreement or otherwise necessary to complete the transaction contemplated hereby.
4. Payment Obligations. In consideration for the sale and assignment of Loans hereunder, Assignee shall pay to Assignor, on the Assignment Effective Date, the amount agreed to by Assignee and Assignor. Any interest, fees and other payments accrued prior to the Assignment Effective Date with respect to the Assigned Amount shall be for the account of Assignor. Any interest, fees and other payments accrued on and after the Assignment Effective Date with respect to the Assigned Amount shall be for the account of Assignee. Each of Assignor and Assignee agrees that it will hold in trust for the other part any interest, fees or other amounts which it may receive to which the other party is entitled pursuant to the preceding sentence and to pay the other party any such amounts which it may receive promptly upon receipt thereof.
5. Credit Determination; Limitations on Assignors Liability. Assignee represents and warrants to Assignor, Borrower, Agent and the Lenders (a) that it is capable of making and has made and shall continue to make its own credit determinations and analysis based upon such information as Assignee deemed sufficient to enter into the transaction contemplated hereby and not based on any statements or representations by Assignor, (b) Assignee confirms that it meets the requirements to be an assignee as set forth in Section 10.10 of the Credit Agreement; (c) Assignee confirms that it is able to fund the Loans and the Letters of Credit as required by the Credit Agreement; (d) Assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement and the Related Writings are required to be performed by it as a Lender thereunder; and (e) Assignee represents that it has reviewed each of the Loan Documents. It is understood and agreed that the assignment and assumption hereunder are made without recourse to Assignor and that Assignor makes no representation or warranty of any kind to Assignee and shall not be responsible for (i) the due execution, legality, validity, enforceability, genuineness, sufficiency or collectability of the Credit Agreement or any Related Writings, (ii) any representation, warranty or statement made in or in connection with the Credit Agreement or any of the Related Writings, (iii) the financial condition or creditworthiness of Borrower or Guarantor of Payment, (iv) the performance of or compliance with any of the terms or provisions of the Credit Agreement or any of the Related Writings, (v) the inspection of any of the property, books or records of Borrower, or (vi) the validity, enforceability, perfection, priority, condition, value or sufficiency of any collateral securing or purporting to secure the Loans or Letters of Credit. Neither Assignor nor any of its officers, directors, employees, agents or attorneys shall be liable for any mistake, error of judgment, or action taken or omitted to be taken in connection with the Loans, the Letters of Credit, the Credit Agreement or the Related Writings, except for its or their own bad faith or willful misconduct. Assignee appoints Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to Agent by the terms thereof.
6. Indemnity. Assignee agrees to indemnify and hold Assignor harmless against any and all losses, cost and expenses (including, without limitation, attorneys fees) and liabilities
incurred by Assignor in connection with or arising in any manner from Assignees performance or non-performance of obligations assumed under this Assignment Agreement.
7. Subsequent Assignments. After the Assignment Effective Date, Assignee shall have the right pursuant to Section 10.10 of the Credit Agreement to assign the rights which are assigned to Assignee hereunder, provided that (a) any such subsequent assignment does not violate any of the terms and conditions of the Credit Agreement, any of the Related Writings, or any law, rule, regulation, order, writ, judgment, injunction or decree and that any consent required under the terms of the Credit Agreement or any of the Related Writings has been obtained, (b) the assignee under such assignment from Assignee shall agree to assume all of Assignees obligations hereunder in a manner satisfactory to Assignor and (c) Assignee is not thereby released from any of its obligations to Assignor hereunder.
8. Reductions of Aggregate Amount of Commitments. If any reduction in the Total Commitment Amount occurs between the date of this Assignment Agreement and the Assignment Effective Date, the percentage of the Total Commitment Amount assigned to Assignee shall remain the percentage specified in Section 1 hereof and the dollar amount of the Commitment of Assignee shall be recalculated based on the reduced Total Commitment Amount.
9. Acceptance of Agent; Notice by Assignor. This Assignment Agreement is conditioned upon the acceptance and consent of Agent and, if necessary pursuant to Section 10.10 of the Credit Agreement, upon the acceptance and consent of Borrower; provided, that the execution of this Assignment Agreement by Agent and, if necessary, by Borrower is evidence of such acceptance and consent.
10. Entire Agreement. This Assignment Agreement embodies the entire agreement and understanding between the parties hereto and supersedes all prior agreements and understandings between the parties hereto relating to the subject matter hereof.
11. Governing Law. This Assignment Agreement shall be governed by the laws of the State of Ohio, without regard to conflicts of laws.
12. Notices. Notices shall be given under this Assignment Agreement in the manner set forth in the Credit Agreement. For the purpose hereof, the addresses of the parties hereto (until notice of a change is delivered) shall be the address set forth under each partys name on the signature pages hereof.
[Remainder of page intentionally left blank.]
13. JURY TRIAL WAIVER. EACH OF THE UNDERSIGNED, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, AMONG AGENT, ANY OF THE LENDERS, AND BORROWER, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS INSTRUMENT OR ANY NOTE OR OTHER AGREEMENT, INSTRUMENT OR DOCUMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH OR THE TRANSACTIONS RELATED HERETO.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment Agreement by their duly authorized officers as of the date first above written.
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Accepted and Consented to this day of , 200 : |
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KEYBANK NATIONAL ASSOCIATION, as Agent |
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ANNEX 1
TO
ASSIGNMENT AND ACCEPTANCE AGREEMENT
On and after the Assignment Effective Date, the Commitment of Assignee, and, if this is less than an assignment of all of Assignors interest, Assignor, shall be as follows:
I. |
INTEREST OF ASSIGNOR BEING ASSIGNED TO ASSIGNEE | ||
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Assignees Percentage |
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Assigned Amount |
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II. |
ASSIGNEES COMMITMENT (as of the Assignment Effective Date) | ||
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Assignees Commitment Percentage |
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the Credit Agreement |
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III. |
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EXHIBIT F
FORM OF
REQUEST FOR EXTENSION
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[ , 20 ] |
KeyBank National Association, as Agent
127 Public Square
Cleveland, Ohio 44114-0616
Attention: Institutional Banking
Ladies and Gentlemen:
The undersigned, Cintas Corporation No. 2 (Borrower), refers to the Credit Agreement, dated as of May 28, 2004 (the Credit Agreement, the terms defined therein being used herein as therein defined), among the undersigned, the Lenders, as defined in the Credit Agreement, KeyBank National Association, as joint lead arranger and administrative agent for the Lenders (Agent), Banc One Capital Markets, Inc., as joint lead arranger, Bank One, NA, as syndication agent, Fifth Third Bank, as co-documentation agent, US Bank National Association, as co-documentation agent, and The Bank of Tokyo-Mitsubishi, Ltd., as co-documentation agent, and hereby gives you notice, pursuant to Section 2.12 of the Credit Agreement that the undersigned hereby requests an extension as set forth below (the Extension) under the Credit Agreement, and in connection with the Extension sets forth below the information relating to the Extension as required by Section 2.12 of the Credit Agreement.
The undersigned hereby requests Agent and the Lenders to extend the Commitment Period from , 200 to , 200 .
The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Extension: (a) the representations and warranties contained in each Loan Document are correct, before and after giving effect to the Extension and the application of the proceeds therefrom, as though made on and as of such date (except to the extent such representation or warranty expressly relates to an earlier date); and (b) no event has occurred and is continuing, or would result from such Extension, or the application of proceeds therefrom, which constitutes a Default or an Event of Default.
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CINTAS CORPORATION NO. 2 | |||
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EXHIBIT G
FORM OF
PARENT GUARANTY OF PAYMENT
GUARANTY OF PAYMENT
(Parent Guaranty)
This GUARANTY OF PAYMENT (as the same may from time to time be amended, restated or otherwise modified, this Agreement) is made as of the 28th day of May, 2004 by CINTAS CORPORATION, a Washington corporation (Guarantor) in favor of KEYBANK NATIONAL ASSOCIATION, as the administrative agent under the Credit Agreement, as hereinafter defined (Agent), for the benefit of the Lenders, as hereinafter defined.
1. Recitals.
CINTAS CORPORATION NO. 2, a Nevada corporation (together with its successors and assigns, Borrower) is entering into that certain Credit Agreement, dated as of May 28, 2004, with the lenders listed on Schedule 1 to the Credit Agreement (together with their respective successors and assigns, collectively, the Lenders and, individually, each a Lender), KeyBank National Association, as Agent and joint lead arranger, Banc One Capital Markets, Inc., as joint lead arranger, Bank One, NA, as syndication agent, Fifth Third Bank, as co-documentation agent, US Bank National Association, as co-documentation agent, and The Bank of Tokyo-Mitsubishi, as co-documentation agent (as the same may from time to time be amended, restated or otherwise modified, the Credit Agreement). Guarantor desires that the Lenders grant the financial accommodations to Borrower as described in the Credit Agreement.
Guarantor, the indirect owner of one hundred percent (100%) of the outstanding capital stock of Borrower, deems it to be in the direct pecuniary and business interests of Guarantor that Borrower obtain from the Lenders the Commitment, as defined in the Credit Agreement, and the Loans and Letters of Credit, as defined in the Credit Agreement, provided for in the Credit Agreement.
Guarantor understands that the Lenders are willing to enter into the Credit Agreement only upon certain terms and conditions, one of which is that Guarantor guarantee the payment of the Obligations, as hereinafter defined, and this Agreement is being executed and delivered in consideration of each financial accommodation granted to Borrower by the Lenders and for other valuable considerations.
2. Definitions. Except as specifically defined herein, capitalized terms used herein that are defined in the Credit Agreement shall have their respective meanings ascribed to them in the Credit Agreement. As used in this Agreement, the following terms shall have the following meanings:
Collateral shall mean, collectively, all property, if any, securing the Obligations or any part thereof at the time in question.
Obligations shall mean, collectively, (a) all Indebtedness and other obligations incurred by Borrower or any Guarantor of Payment to Agent, the Fronting Lender, the Swing Line Lender or any Lender pursuant to the Credit Agreement, and includes the principal of and interest on all Loans and all obligations pursuant to Letters of Credit; (b) each extension, renewal or refinancing thereof, in whole or in part; (c) the facility fees, utilization fees, any prepayment fees and any other fees payable pursuant to the Credit Agreement, and all fees and charges in connection with the Letters of Credit; and (d) every other liability, now or hereafter owing to Agent or any Lender by any Company pursuant to the Credit Agreement or any other Loan Document.
Obligor shall mean any Person that, or any of whose property, is or shall be obligated on the Obligations or any part thereof in any manner and includes, without limiting the generality of the foregoing, Borrower or Guarantor, and any other co-maker, endorser, guarantor of payment, subordinating creditor, assignor, grantor of a security interest, pledgor, mortgagor or any hypothecator of property, if any.
3. Guaranty of the Obligations. Guarantor hereby absolutely and unconditionally guarantees (as a guaranty of payment and not merely a guaranty of collection) the prompt payment in full of all of the Obligations as and when the respective parts thereof become due and payable. If the Obligations, or any part thereof, shall not be paid in full when due and payable, Agent, on behalf of the Lenders, in each case, shall have the right to proceed directly against Guarantor under this Agreement to collect the payment in full of the Obligations, regardless of whether or not Agent, on behalf of the Lenders, shall have theretofore proceeded or shall then be proceeding against Borrower or any other Obligor or Collateral, if any, or any of the foregoing, it being understood that Agent, on behalf of the Required Lenders, in its sole discretion, may proceed against any Obligor and any Collateral, and may exercise each right, power or privilege that Agent or the Lenders may then have, either simultaneously or separately, and, in any event, at such time or times and as often and in such order as Agent, on behalf of the Required Lenders, in its sole discretion, may from time to time deem expedient to collect the payment in full of the Obligations. Guarantor agrees that all payments made by Guarantor under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of any Taxes or Other Taxes, in accordance with Section 3.2 of the Credit Agreement.
4. Payments Conditional. Whenever Agent or any Lender shall credit any payment to the Obligations or any part thereof, whatever the source or form of payment, the credit shall be conditional as to Guarantor unless and until the payment shall be final and valid as to all the world. Without limiting the generality of the foregoing, Guarantor agrees that if any check or other instrument so applied shall be dishonored by the drawer or any party thereto, or if any proceeds of Collateral or payment so applied shall thereafter be recovered by any trustee in bankruptcy or any other Person, each Lender, in each case, may reverse any entry relating thereto on its books and Guarantor shall remain liable therefor, even if such Lender may no longer have in its possession any instrument evidencing the Obligations to which the payment in question was applied.
5. Guarantors Obligations Absolute and Unconditional. Regardless of the duration of time, regardless of whether Borrower may from time to time cease to be indebted to the
Lenders and irrespective of any act, omission or course of dealing whatever on the part of Agent or any Lender, Guarantors liabilities and other obligations under this Agreement shall remain in full effect until the payment in full of the Obligations. Without limiting the generality of the foregoing:
5.1. Lenders Have No Duty to Make Advances. Without limiting the obligations of Agent and the Lenders under the Credit Agreement, no Lender shall at any time be under any duty to Guarantor to grant any financial accommodation to Borrower, irrespective of any duty or commitment of any of the Lenders to Borrower, or to follow or direct the application of the proceeds of any such financial accommodation;
5.2. Guarantors Waiver of Notice, Presentment. Guarantor waives (a) notice of the granting of any Loan to Borrower, the issuance of any Letter of Credit or the incurring of any other Indebtedness by Borrower or the terms and conditions thereof, (b) presentment, demand for payment and notice of dishonor of the Obligations or any part thereof, or any other Indebtedness incurred by Borrower to any of the Lenders, (c) notice of any indulgence granted to any Obligor, and (d) any other notice to which Guarantor might, but for this waiver, be entitled;
5.3. Lenders Rights Not Prejudiced by Action or Omission. Agent and the Lenders, in their sole discretion, may, without any prejudice to their rights under this Agreement, at any time or times, without notice to or the consent of Guarantor, (a) grant Borrower whatever financial accommodations that Agent and the Lenders may from time to time deem advisable, even if Borrower might be in default in any respect and even if those financial accommodations might not constitute Indebtedness the payment of which is guaranteed hereunder, (b) assent to any renewal, extension, consolidation or refinancing of the Obligations, or any part thereof, (c) forbear from demanding security, if Agent and the Lenders shall have the right to do so, (d) release any Obligor or Collateral or assent to any exchange of Collateral, if any, irrespective of the consideration, if any, received therefor, (e) grant any waiver or consent or forbear from exercising any right, power or privilege that Agent and the Lenders may have or acquire, (f) assent to any amendment, deletion, addition, supplement or other modification in, to or of any writing evidencing or securing any of the Obligations or pursuant to which any of the Obligations are created, (g) grant any other indulgence to any Obligor, (h) accept any Collateral for, or any other Obligor upon, the Obligations or any part thereof, and (i) fail, neglect or omit in any way to realize upon any Collateral, to perfect any security interest with respect to Collateral, or to protect the Obligations or any part thereof or any Collateral therefor;
5.4. Liabilities Survive Guarantors Dissolution. Guarantors liabilities and other obligations under this Agreement shall survive any dissolution of Guarantor; and
5.5. Liabilities Absolute and Unconditional. Guarantors liabilities and other obligations under this Agreement shall be absolute and unconditional irrespective of any lack of validity or enforceability of the Credit Agreement, any Note, any Loan Document or any other agreement, instrument or document evidencing the Loans or Letters of Credit or related thereto, or any other defense available to Guarantor in respect of this Agreement (other than the payment in full of the Obligations).
6. Representations and Warranties. Guarantor represents and warrants to Agent and each of the Lenders that (a) Guarantor is a duly organized and validly existing corporation, in good standing under the laws of the state of its incorporation (as referenced in the first paragraph of this Agreement), and is qualified to do business in each state where a failure to so qualify would have a Material Adverse Effect; (b) Guarantor has legal power and right to execute and deliver this Agreement and to perform and observe the provisions hereof; (c) the officers executing and delivering this Agreement on behalf of Guarantor have been duly authorized to do so, and this Agreement, when executed, is legal and binding upon Guarantor in every respect; (d) except for matters described or referenced in the Credit Agreement or any Schedule thereto, no litigation or proceeding is pending or threatened against Guarantor before any court or any administrative agency that is reasonably expected to have a Material Adverse Effect; (e) Guarantor has received consideration that is the reasonable equivalent value of the obligations and liabilities that Guarantor has incurred to Agent, for the benefit of the Lenders; (f) Guarantor is not insolvent, as defined in any applicable state or federal statute, nor will Guarantor be rendered insolvent by the execution and delivery of this Agreement to Agent and the Lenders; (g) Guarantor is not engaged or about to engage in any business or transaction for which the assets retained by Guarantor are or will be an unreasonably small amount of capital, taking into consideration the obligations to the Lenders incurred hereunder; and (h) Guarantor does not intend to, nor does Guarantor believe that Guarantor will, incur debts beyond Guarantors ability to pay such debts as they mature.
7. Disability of Obligor. Without limiting the generality of any of the other provisions hereof, Guarantor specifically agrees that upon the occurrence and during the continuance of an Event of Default, Agent and the Required Lenders, in their sole discretion (but subject to the terms of the Credit Agreement), may declare the unpaid principal balance of and accrued interest on the Obligations to be forthwith due and payable in full without notice. Upon the occurrence of any of the events enumerated in the immediately preceding sentence, Guarantor shall, upon demand of Agent, on behalf of the Lenders, whenever made, pay to Agent, for the benefit of the Lenders, an amount equal to the then unpaid principal balance of and accrued interest on the Obligations.
8. Subordination of Guarantors Rights Against Borrower and Collateral. To the extent permitted by law, Guarantor hereby subordinates to payment in full of the Obligations any claim or other right that Guarantor might now have or hereafter acquire against Borrower or any other Obligor that arises from the existence or performance of Guarantors liabilities or other obligations under this Agreement, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, and any right to participate in any claim or remedy of Agent or any Lender against Borrower or any Collateral that Agent or any Lender now has or hereafter acquires, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law.
9. Stay of Acceleration. In the event that acceleration of the time for payment of any of the Obligations are stayed, upon the insolvency, bankruptcy or reorganization of Borrower or any other Person (other than Guarantor), or otherwise, all such amounts shall nonetheless be payable by Guarantor immediately upon demand by Agent.
10. Notice. All notices, requests, demands and other communications provided for hereunder shall be in writing and, if to Guarantor, mailed or delivered to it, addressed to it at the address specified on the signature page of this Agreement, if to Agent or any Lender, mailed or delivered to it, addressed to the address of Agent or such Lender specified on the signature pages of the Credit Agreement, or, as to each party, at such other address as shall be designated by such party in written notice to each of the other parties. All notices, statements, requests, demands and other communications provided for hereunder shall be deemed to be given or made when delivered or two Business Days after being deposited in the mails with postage prepaid by registered or certified mail, addressed as aforesaid, or sent by facsimile with telephonic confirmation of receipt, except that notices pursuant to any of the provisions hereof shall not be effective until received.
11. Successors and Assigns. This Agreement shall bind Guarantor and Guarantors successors and assigns and shall inure to the benefit of Agent and each Lender and their respective successors and assigns, including (without limitation) each holder of any Note evidencing any of the Obligations.
12. Invalidity. If, at any time, one or more provisions of this Agreement is or becomes invalid, illegal or unenforceable in whole or in part, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
13. Entire Agreement. This Agreement constitutes a final written expression of all of the terms of this Agreement, is a complete and exclusive statement of those terms and supersedes all oral representations, negotiations and prior writings, if any, with respect to the subject matter hereof.
14. Relationship of Parties; Setoffs. The relationship between (a) Guarantor and (b) Agent and the Lenders with respect to this Agreement is and shall be solely that of debtor and creditors, respectively, and Agent and the Lenders shall have no fiduciary obligation toward Guarantor with respect to this Agreement or the transactions contemplated hereby. If and to the extent any payment is not made when due hereunder, Agent and each Lender may setoff and charge from time to time any amount so due against any and all of Guarantors accounts or deposits with Agent and each Lender.
15. Headings. The headings and subheadings used herein are for convenience of reference only and shall be ignored in interpreting the provisions of this Agreement.
16. Governing Law; Submission to Jurisdiction. The provisions of this Agreement and the respective rights and duties of Guarantor, Agent and the Lenders hereunder shall be governed by and construed in accordance with Ohio law, without regard to principles of conflict of laws which would result in the application of the law of any other state. Guarantor hereby irrevocably submits to the non-exclusive jurisdiction of any Ohio state or federal court sitting in Cleveland, Ohio, over any action or proceeding arising out of or relating to this Agreement, any Loan Document or any Related Writing, and Guarantor hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such Ohio state or federal court. Guarantor, on behalf of itself and its Subsidiaries, hereby irrevocably waives, to
the fullest extent permitted by law, any objection it may now or hereafter have to the laying of venue in any such action or proceeding in any such court as well as any right it may now or hereafter have to remove such action or proceeding, once commenced, to another court on the grounds of FORUM NON CONVENIENS or otherwise. Guarantor agrees that a final, nonappealable judgment in any such action or proceeding in any state or federal court in the State of Ohio shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.
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17. JURY TRIAL WAIVER. GUARANTOR, TO THE EXTENT PERMITTED BY LAW, HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, AMONG AGENT, THE LENDERS, BORROWER AND GUARANTOR, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER AGREEMENT, INSTRUMENT OR DOCUMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH OR THE TRANSACTIONS RELATED THERETO.
IN WITNESS WHEREOF, the parties have executed and delivered this Guaranty of Payment as of the date first set forth above.
Address: 6800 Cintas Boulvevard |
CINTAS CORPORATION | |
Mason, Ohio 45040 |
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Attn : President |
By: |
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Scott D. Farmer |
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President |
EXHIBIT H
FORM OF
SUBSIDIARY GUARANTY OF PAYMENT
GUARANTY OF PAYMENT
This GUARANTY OF PAYMENT (as the same may from time to time be amended, restated or otherwise modified, this Agreement) is made as of the 28th day of May, 2004 by , a [ ] [corporation] [limited partnership] [limited liability company] (Guarantor) in favor of KEYBANK NATIONAL ASSOCIATION, as the administrative agent under the Credit Agreement, as hereinafter defined (Agent), for the benefit of the Lenders, as hereinafter defined.
1. Recitals.
CINTAS CORPORATION NO. 2, a Nevada corporation (together with its successors and assigns, Borrower) is entering into that certain Credit Agreement, dated as of May 28, 2004, with the lenders listed on Schedule 1 thereto (together with their respective successors and assigns, collectively, the Lenders and, individually, each a Lender), KeyBank National Association, as Agent and joint lead arranger, Banc One Capital Markets, Inc., as joint lead arranger, Bank One, NA, as syndication agent, Fifth Third Bank, as co-documentation agent, US Bank National Association, as co-documentation agent, and The Bank of Tokyo-Mitsubishi, as co-documentation agent (as the same may from time to time be amended, restated or otherwise modified, the Credit Agreement). Guarantor desires that the Lenders grant the financial accommodations to Borrower as described in the Credit Agreement.
Guarantor, an affiliate of Borrower whose financing is provided by the Loans and Letters of Credit, as defined in the Credit Agreement, deems it to be in the direct pecuniary and business interests of Guarantor that Borrower obtain from the Lenders the Commitment, as defined in the Credit Agreement, and the Loans and Letters of Credit provided for in the Credit Agreement.
Guarantor understands that the Lenders are willing to enter into the Credit Agreement only upon certain terms and conditions, one of which is that Guarantor guarantee the payment of the Obligations, as hereinafter defined, and this Agreement is being executed and delivered in consideration of each financial accommodation granted to Borrower by the Lenders and for other valuable considerations.
2. Definitions. Except as specifically defined herein, capitalized terms used herein that are defined in the Credit Agreement shall have their respective meanings ascribed to them in the Credit Agreement. As used in this Agreement, the following terms shall have the following meanings:
Collateral shall mean, collectively, all property, if any, securing the Obligations or any part thereof at the time in question.
Obligations shall mean, collectively, (a) all Indebtedness and other obligations incurred by Borrower or any Guarantor of Payment to Agent, the Fronting Lender, the Swing Line Lender or any Lender pursuant to the Credit Agreement, and includes the principal of and interest on all Loans and all obligations pursuant to Letters of Credit; (b) each extension, renewal or refinancing thereof, in whole or in part; (c) the facility fees, utilization fees, any prepayment fees and any other fees payable pursuant to the Credit Agreement, and all fees and charges in connection with the Letters of Credit; and (d) every other liability, now or hereafter owing to Agent or any Lender by any Company pursuant to the Credit Agreement or any other Loan Document.
Obligor shall mean any Person that, or any of whose property, is or shall be obligated on the Obligations or any part thereof in any manner and includes, without limiting the generality of the foregoing, Borrower or Guarantor, and any other co-maker, endorser, guarantor of payment, subordinating creditor, assignor, grantor of a security interest, pledgor, mortgagor or any hypothecator of property, if any.
3. Guaranty of the Obligations. Guarantor hereby absolutely and unconditionally guarantees (as a guaranty of payment and not merely a guaranty of collection) the prompt payment in full of all of the Obligations as and when the respective parts thereof become due and payable. If the Obligations, or any part thereof, shall not be paid in full when due and payable, Agent, on behalf of the Lenders, in each case, shall have the right to proceed directly against Guarantor under this Agreement to collect the payment in full of the Obligations, regardless of whether or not Agent, on behalf of the Lenders, shall have theretofore proceeded or shall then be proceeding against Borrower or any other Obligor or Collateral, if any, or any of the foregoing, it being understood that Agent, on behalf of the Required Lenders, in its sole discretion, may proceed against any Obligor and any Collateral, and may exercise each right, power or privilege that Agent or the Lenders may then have, either simultaneously or separately, and, in any event, at such time or times and as often and in such order as Agent, on behalf of the Required Lenders, in its sole discretion, may from time to time deem expedient to collect the payment in full of the Obligations. Guarantor agrees that all payments made by Guarantor under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of any Taxes or Other Taxes, in accordance with Section 3.2 of the Credit Agreement.
4. Payments Conditional. Whenever Agent or any Lender shall credit any payment to the Obligations or any part thereof, whatever the source or form of payment, the credit shall be conditional as to Guarantor unless and until the payment shall be final and valid as to all the world. Without limiting the generality of the foregoing, Guarantor agrees that if any check or other instrument so applied shall be dishonored by the drawer or any party thereto, or if any proceeds of Collateral or payment so applied shall thereafter be recovered by any trustee in bankruptcy or any other Person, each Lender, in each case, may reverse any entry relating thereto on its books and Guarantor shall remain liable therefor, even if such Lender may no longer have in its possession any instrument evidencing the Obligations to which the payment in question was applied.
5. Guarantors Obligations Absolute and Unconditional. Regardless of the duration of time, regardless of whether Borrower may from time to time cease to be indebted to the
Lenders and irrespective of any act, omission or course of dealing whatever on the part of Agent or any Lender, Guarantors liabilities and other obligations under this Agreement shall remain in full effect until the payment in full of the Obligations. Without limiting the generality of the foregoing:
5.1. Lenders Have No Duty to Make Advances. Without limiting the obligations of Agent and the Lenders under the Credit Agreement, no Lender shall at any time be under any duty to Guarantor to grant any financial accommodation to Borrower, irrespective of any duty or commitment of any of the Lenders to Borrower, or to follow or direct the application of the proceeds of any such financial accommodation;
5.2. Guarantors Waiver of Notice, Presentment. Guarantor waives (a) notice of the granting of any Loan to Borrower, the issuance of any Letter of Credit or the incurring of any other Indebtedness by Borrower or the terms and conditions thereof, (b) presentment, demand for payment and notice of dishonor of the Obligations or any part thereof, or any other Indebtedness incurred by Borrower to any of the Lenders, (c) notice of any indulgence granted to any Obligor, and (d) any other notice to which Guarantor might, but for this waiver, be entitled;
5.3. Lenders Rights Not Prejudiced by Action or Omission. Agent and the Lenders, in their sole discretion, may, without any prejudice to their rights under this Agreement, at any time or times, without notice to or the consent of Guarantor, (a) grant Borrower whatever financial accommodations that Agent and the Lenders may from time to time deem advisable, even if Borrower might be in default in any respect and even if those financial accommodations might not constitute Indebtedness the payment of which is guaranteed hereunder, (b) assent to any renewal, extension, consolidation or refinancing of the Obligations, or any part thereof, (c) forbear from demanding security, if Agent and the Lenders shall have the right to do so, (d) release any Obligor or Collateral or assent to any exchange of Collateral, if any, irrespective of the consideration, if any, received therefor, (e) grant any waiver or consent or forbear from exercising any right, power or privilege that Agent and the Lenders may have or acquire, (f) assent to any amendment, deletion, addition, supplement or other modification in, to or of any writing evidencing or securing any of the Obligations or pursuant to which any of the Obligations are created, (g) grant any other indulgence to any Obligor, (h) accept any Collateral for, or any other Obligor upon, the Obligations or any part thereof, and (i) fail, neglect or omit in any way to realize upon any Collateral, to perfect any security interest with respect to Collateral, or to protect the Obligations or any part thereof or any Collateral therefor;
5.4. Liabilities Survive Guarantors Dissolution. Guarantors liabilities and other obligations under this Agreement shall survive any dissolution of Guarantor; and
5.5. Liabilities Absolute and Unconditional. Guarantors liabilities and other obligations under this Agreement shall be absolute and unconditional irrespective of any lack of validity or enforceability of the Credit Agreement, any Note, any Loan Document or any other agreement, instrument or document evidencing the Loans or Letters of Credit or related thereto, or any other defense available to Guarantor in respect of this Agreement (other than the payment in full of the Obligations).
6. Representations and Warranties. Guarantor represents and warrants to Agent and each of the Lenders that (a) Guarantor is a duly organized and validly existing corporation, in good standing under the laws of the state of its incorporation (as referenced in the first paragraph of this Agreement), and is qualified to do business in each state where a failure to so qualify would have a Material Adverse Effect; (b) Guarantor has legal power and right to execute and deliver this Agreement and to perform and observe the provisions hereof; (c) the officers executing and delivering this Agreement on behalf of Guarantor have been duly authorized to do so, and this Agreement, when executed, is legal and binding upon Guarantor in every respect; (d) except for matters described or referenced in the Credit Agreement or any Schedule thereto, no litigation or proceeding is pending or threatened against Guarantor before any court or any administrative agency that is reasonably expected to have a Material Adverse Effect; (e) Guarantor has received consideration that is the reasonable equivalent value of the obligations and liabilities that Guarantor has incurred to Agent, for the benefit of the Lenders; (f) Guarantor is not insolvent, as defined in any applicable state or federal statute, nor will Guarantor be rendered insolvent by the execution and delivery of this Agreement to Agent and the Lenders; (g) Guarantor is not engaged or about to engage in any business or transaction for which the assets retained by Guarantor are or will be an unreasonably small amount of capital, taking into consideration the obligations to the Lenders incurred hereunder; and (h) Guarantor does not intend to, nor does Guarantor believe that Guarantor will, incur debts beyond Guarantors ability to pay such debts as they mature.
7. Disability of Obligor. Without limiting the generality of any of the other provisions hereof, Guarantor specifically agrees that upon the occurrence and during the continuance of an Event of Default, Agent and the Required Lenders, in their sole discretion (but subject to the terms of the Credit Agreement), may declare the unpaid principal balance of and accrued interest on the Obligations to be forthwith due and payable in full without notice. Upon the occurrence of any of the events enumerated in the immediately preceding sentence, Guarantor shall, upon demand of Agent, on behalf of the Lenders, whenever made, pay to Agent, for the benefit of the Lenders, an amount equal to the then unpaid principal balance of and accrued interest on the Obligations.
8. Subordination of Guarantors Rights Against Borrower and Collateral. To the extent permitted by law, Guarantor hereby subordinates to payment in full of the Obligations any claim or other right that Guarantor might now have or hereafter acquire against Borrower or any other Obligor that arises from the existence or performance of Guarantors liabilities or other obligations under this Agreement, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, and any right to participate in any claim or remedy of Agent or any Lender against Borrower or any Collateral that Agent or any Lender now has or hereafter acquires, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law.
9. Maximum Liability of Guarantor. Anything in this Agreement to the contrary notwithstanding, in no event shall the amount of Guarantors liability hereunder exceed the maximum amount that (after giving effect to the incurring of the obligations hereunder and to any rights to contribution of Guarantor from other affiliates of Borrower) would not render the
rights to payment of Agent and the Lenders hereunder void, voidable or avoidable under any applicable fraudulent transfer law.
10. Stay of Acceleration. In the event that acceleration of the time for payment of any of the Obligations are stayed, upon the insolvency, bankruptcy or reorganization of Borrower or any other Person (other than Guarantor), or otherwise, all such amounts shall nonetheless be payable by Guarantor immediately upon demand by Agent.
11. Notice. All notices, requests, demands and other communications provided for hereunder shall be in writing and, if to Guarantor, mailed or delivered to it, addressed to it at the address specified on the signature page of this Agreement, if to Agent or any Lender, mailed or delivered to it, addressed to the address of Agent or such Lender specified on the signature pages of the Credit Agreement, or, as to each party, at such other address as shall be designated by such party in written notice to each of the other parties. All notices, statements, requests, demands and other communications provided for hereunder shall be deemed to be given or made when delivered or two Business Days after being deposited in the mails with postage prepaid by registered or certified mail, addressed as aforesaid, or sent by facsimile with telephonic confirmation of receipt, except that notices pursuant to any of the provisions hereof shall not be effective until received.
12. Successors and Assigns. This Agreement shall bind Guarantor and Guarantors successors and assigns and shall inure to the benefit of Agent and each Lender and their respective successors and assigns, including (without limitation) each holder of any Note evidencing any of the Obligations.
13. Invalidity. If, at any time, one or more provisions of this Agreement is or becomes invalid, illegal or unenforceable in whole or in part, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
14. Entire Agreement. This Agreement constitutes a final written expression of all of the terms of this Agreement, is a complete and exclusive statement of those terms and supersedes all oral representations, negotiations and prior writings, if any, with respect to the subject matter hereof.
15. Relationship of Parties; Setoffs. The relationship between (a) Guarantor and (b) Agent and the Lenders with respect to this Agreement is and shall be solely that of debtor and creditors, respectively, and Agent and the Lenders shall have no fiduciary obligation toward Guarantor with respect to this Agreement or the transactions contemplated hereby. If and to the extent any payment is not made when due hereunder, Agent and each Lender may setoff and charge from time to time any amount so due against any and all of Guarantors accounts or deposits with Agent and each Lender.
16. Headings. The headings and subheadings used herein are for convenience of reference only and shall be ignored in interpreting the provisions of this Agreement.
17. Governing Law; Submission to Jurisdiction. The provisions of this Agreement and the respective rights and duties of Guarantor, Agent and the Lenders hereunder shall be governed by and construed in accordance with Ohio law, without regard to principles of conflict of laws which would result in the application of the law of any other state. Guarantor hereby irrevocably submits to the non-exclusive jurisdiction of any Ohio state or federal court sitting in Cleveland, Ohio, over any action or proceeding arising out of or relating to this Agreement, any Loan Document or any Related Writing, and Guarantor hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such Ohio state or federal court. Guarantor, on behalf of itself and its Subsidiaries, hereby irrevocably waives, to the fullest extent permitted by law, any objection it may now or hereafter have to the laying of venue in any such action or proceeding in any such court as well as any right it may now or hereafter have to remove such action or proceeding, once commenced, to another court on the grounds of FORUM NON CONVENIENS or otherwise. Guarantor agrees that a final, nonappealable judgment in any such action or proceeding in any state or federal court in the State of Ohio shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.
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17. JURY TRIAL WAIVER. GUARANTOR, TO THE EXTENT PERMITTED BY LAW, HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, AMONG AGENT, THE LENDERS, BORROWER AND GUARANTOR, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER AGREEMENT, INSTRUMENT OR DOCUMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH OR THE TRANSACTIONS RELATED THERETO.
IN WITNESS WHEREOF, the parties have executed and delivered this Guaranty of Payment as of the date first set forth above.
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Exhibit 10.2
Published Revolver CUSIP Number: 17259CAB1
Published Transaction CUSIP Number: 17259CAA3
FOURTH AMENDMENT AGREEMENT
This FOURTH AMENDMENT AGREEMENT (this Amendment) is made as of the 27th day of September, 2010 among:
(a) CINTAS CORPORATION NO. 2, a Nevada corporation (Borrower);
(b) the Lenders, as defined in the Credit Agreement, as hereinafter defined;
(c) KEYBANK NATIONAL ASSOCIATION, as joint lead arranger and administrative agent for the Lenders under the Credit Agreement (Agent);
(d) J.P. MORGAN SECURITIES LLC (successor by merger to Banc One Capital Markets, Inc.), as joint lead arranger under the Credit Agreement;
(e) JPMORGAN CHASE BANK, N.A. (successor by merger to Bank One, N.A.), as syndication agent under the Credit Agreement;
(f) THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., as co-documentation agent under the Credit Agreement;
(g) U.S. BANK, NATIONAL ASSOCIATION, as co-documentation agent under the Credit Agreement; and
(h) FIFTH THIRD BANK, as co-documentation agent under the Credit Agreement.
WHEREAS, Borrower, Agent and the Lenders are parties to that certain Credit Agreement, dated as of May 28, 2004, that provides, among other things, for loans and letters of credit aggregating Six Hundred Million Dollars ($600,000,000), all upon certain terms and conditions (as amended and as the same may from time to time be further amended, restated or otherwise modified, the Credit Agreement);
WHEREAS, Borrower, Agent and the Lenders desire to amend the Credit Agreement to modify certain provisions thereof and add certain provisions thereto;
WHEREAS, each capitalized term used herein and defined in the Credit Agreement, but not otherwise defined herein, shall have the meaning given such term in the Credit Agreement; and
WHEREAS, unless otherwise specifically provided herein, the provisions of the Credit Agreement revised herein are amended effective as of the date of this Amendment;
NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Borrower, Agent and the Lenders agree as follows:
1. Amendment to Definitions in the Credit Agreement. Section 1.1 of the Credit Agreement is hereby amended to delete the definitions of Applicable Facility Fee Rate, Applicable Margin, Base Rate, Commitment Increase Period, Commitment Period, Letter of Credit Commitment, Maximum Commitment Amount, Required Lenders, Senior Note Indebtedness and Total Commitment Amount therefrom and to insert in place thereof, respectively, the following:
Applicable Facility Fee Rate shall mean:
(a) for any date prior to the Fourth Amendment Effective Date, the Applicable Facility Fee Rate in effect prior to the Fourth Amendment Effective Date;
(b) effective on the Fourth Amendment Effective Date until the first Margin Adjustment Date after the Fourth Amendment Effective Date, twelve and one-half (12.50) basis points; and
(c) commencing on the first Margin Adjustment Date after the Fourth Amendment Effective Date and on each Margin Adjustment Date thereafter, the number of basis points set forth in the following matrix, based upon the S&P Rating or the Moodys Rating in effect at such time:
Level |
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S&P Rating |
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Moodys Rating |
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Applicable Basis Points for |
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1 |
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A+ or higher |
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A1 or higher |
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12.50 |
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2 |
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A |
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A2 |
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12.50 |
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3 |
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A- |
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A3 |
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15.00 |
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4 |
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BBB+ |
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Baa1 |
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20.00 |
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5 |
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less than BBB+ |
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less than Baa1 |
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32.50 |
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provided that, notwithstanding anything above to the contrary, (i) if the S&P Rating and the Moodys Rating shall at any time be at different Levels in the above chart, and the difference in Levels is only one Level, then the Applicable Facility Fee Rate shall be based upon the higher of the applicable S&P Rating and Moodys Rating, (ii) if the S&P Rating and the Moodys Rating shall at any time be at different Levels in the above chart, and such difference is two Levels or more, then the Applicable Facility Fee Rate shall be based upon the Level immediately below the Level determined based on the higher of the S&P Rating and the Moodys Rating, (iii) if only one of the two ratings (S&P Rating or Moodys Rating) shall exist, then the existing rating shall determine the Level of the
Applicable Facility Fee Rate, and (iv) if neither the S&P Rating nor the Moodys Rating shall exist, then the Applicable Facility Fee Rate shall be set at Level 5. Changes to the Applicable Facility Fee Rate shall be immediately effective on each Margin Adjustment Date. The above matrix does not modify or waive, in any respect, the rights of Agent and the Lenders to charge the Default Rate, or the rights and remedies of Agent and the Lenders pursuant to Articles VII and VIII hereof.
Applicable Margin shall mean:
(a) for any date prior to the Fourth Amendment Effective Date, the Applicable Margin in effect prior to the Fourth Amendment Effective Date;
(b) effective on the Fourth Amendment Effective Date until the first Margin Adjustment Date after the Fourth Amendment Effective Date, one hundred twelve and one-half (112.50) basis points for Eurodollar Loans; and
(c) commencing on the first Margin Adjustment Date after the Fourth Amendment Effective Date and on each Margin Adjustment Date thereafter, the number of basis points set forth in the following matrix, based upon the S&P Rating or the Moodys Rating in effect at such time:
Level |
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S&P Rating |
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Moodys Rating |
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Applicable Basis Points for |
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1 |
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A+ or higher |
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A1 or higher |
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87.50 |
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2 |
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A |
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A2 |
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112.50 |
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3 |
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A- |
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A3 |
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135.00 |
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4 |
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BBB+ |
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Baa1 |
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155.00 |
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5 |
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less than BBB+ |
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less than Baa1 |
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167.50 |
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provided that, notwithstanding anything above to the contrary, (i) if the S&P Rating and the Moodys Rating shall at any time be at different Levels in the above chart, and the difference in Levels is only one Level, then the Applicable Margin shall be based upon the higher of the applicable S&P Rating and Moodys Rating, (ii) if the S&P Rating and the Moodys Rating shall at any time be at different Levels in the above chart, and such difference is two Levels or more, then the Applicable Margin shall be based upon the Level immediately below the Level determined based on the higher of the S&P Rating and the Moodys Rating, (iii) if only one of the two ratings (S&P Rating or Moodys Rating) shall exist, then the existing rating shall determine the Level of the Applicable Margin, and (iv) if neither the S&P Rating nor the Moodys Rating shall exist, then the Applicable Margin shall be set at Level 5. Changes to the Applicable Margin shall be immediately effective on each Margin Adjustment Date. The above matrix does not modify or waive, in any respect, the rights of Agent and the Lenders to charge the Default
Rate, or the rights and remedies of Agent and the Lenders pursuant to Articles VII and VIII hereof.
Base Rate shall mean, for any day, a rate per annum equal to the highest of (a) the Prime Rate, (b) one-half of one percent (.50%) in excess of the Federal Funds Effective Rate, and (c) one hundred (100.00) basis points in excess of the London Interbank Offered Rate for loans in Eurodollars with an Interest Period of one month (or, if such day is not a Business Day, such rate as calculated on the most recent Business Day). Any change in the Base Rate shall be effective immediately from and after such change in the Base Rate.
Commitment Increase Period shall mean the period from the Fourth Amendment Effective Date to (a) the earlier of (i) the date that is thirty (30) days prior to the last day of the Commitment Period, and (ii) the date that the Total Commitment Amount is reduced to less than Two Hundred Million Dollars ($200,000,000) pursuant to Section 2.9(a) hereof; or (b) such later date as shall be agreed to in writing by Agent.
Commitment Period shall mean the period from the Closing Date to September 26, 2014 or such earlier date on which the Commitment shall have been terminated pursuant to Article VIII hereof.
Letter of Credit Commitment shall mean the commitment of the Fronting Lender, on behalf of the Lenders, to issue Letters of Credit in an aggregate face amount of up to One Hundred Fifty Million Dollars ($150,000,000).
Maximum Commitment Amount shall mean Four Hundred Fifty Million Dollars ($450,000,000).
Required Lenders shall mean the holders of more than fifty percent (50%), based upon each Lenders Commitment Percentage, of an amount (the Total Amount) equal to (a) during the Commitment Period, the Total Commitment Amount, or (b) after the Commitment Period, the Revolving Credit Exposure; provided that the portion of the Total Amount held or deemed to be held by any Defaulting Lender or Insolvent Lender shall be excluded for purposes of making a determination of Required Lenders.
Senior Note Indebtedness shall mean the Indebtedness evidenced by the 6% Senior Notes due 2012, the 6 1/8% Senior Notes due 2017 and the 6.15% Senior Notes due 2036, in each case issued by Borrower, or any replacement or refinancing of such Indebtedness or any other Indebtedness created pursuant to a similar type of private debt instrument or agreement as the foregoing.
Total Commitment Amount shall mean the principal amount of Three Hundred Million Dollars ($300,000,000), as such amount may be increased up to the Maximum Commitment Amount pursuant to Section 2.9(b) hereof, or decreased pursuant to Section 2.9(a) hereof.
2. Additions to Definitions in the Credit Agreement. Section 1.1 of the Credit Agreement is hereby amended to add the following new definitions thereto:
Affected Lender shall mean a Defaulting Lender or an Insolvent Lender.
Bankruptcy Code shall mean Title 11 of the United States Code entitled Bankruptcy, as now or hereafter in effect, or any successor thereto, as hereafter amended.
Defaulting Lender shall mean any Lender, as reasonably determined by Agent, that (a) has failed (which failure has not been cured) to fund any Loan or any participation interest in Letters of Credit required to be made hereunder in accordance with the terms hereof (unless such Lender shall have notified Agent and Borrower in writing of its good faith determination that a condition under Section 4.1 hereof to its obligation to fund any Loan shall not have been satisfied); (b) has notified Borrower or Agent in writing that it does not intend to comply with any of its funding obligations under this Agreement or has made a public statement to the effect that it does not intend to comply with its funding obligations under this Agreement or generally under other agreements in which it commits to extend credit; (c) has failed, within three Business Days after receipt of a written request from Agent or Borrower to confirm that it will comply with the terms of this Agreement relating to its obligation to fund prospective Loans or participations in Letters of Credit, and such request states that the requesting party has reason to believe that the Lender receiving such request may fail to comply with such obligation, and states such reason; or (d) has failed to pay to Agent or any other Lender when due an amount owed by such Lender to Agent or any other Lender pursuant to the terms of this Agreement, unless such amount is subject to a good faith dispute or such failure has been cured. Any Defaulting Lender shall cease to be a Defaulting Lender when Agent determines, in its reasonable discretion, that such Defaulting Lender is no longer a Defaulting Lender based upon the characteristics set forth in this definition.
Fourth Amendment Effective Date shall mean September 27, 2010.
Insolvent Lender shall mean a Lender that (a) is not Solvent or is the subsidiary of a Person that is not Solvent; or (b) has become the subject of a proceeding under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, or has had a receiver, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment, or is a subsidiary of a Person that has become the subject of a proceeding under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, or has had a receiver, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment; provided that a Lender shall not be an Insolvent Lender (i) solely by virtue of the ownership or acquisition of an equity interest in such Lender or a parent company thereof by a governmental authority or an instrumentality thereof or (ii) if the Federal Deposit Insurance Corporation (or any other
federal agency that has the backing of the full faith and credit of the United States) has assumed all of such Lenders obligations under this Agreement, in form and substance satisfactory to Agent. Any Insolvent Lender shall cease to be an Insolvent Lender when Agent determines, in its reasonable discretion, that such Insolvent Lender is no longer an Insolvent Lender based upon the characteristics set forth in this definition.
KeyBank shall mean KeyBank National Association, and its successors and assigns.
Non-Consenting Lender shall mean that term as defined in Section 10.3(c) hereof.
Other Agents shall mean that term as defined in Section 9.11 hereof.
Solvent shall mean, with respect to any Person, that (a) the fair value of such Persons assets is in excess of the total amount of such Persons debts, as determined in accordance with the Bankruptcy Code, (b) the present fair saleable value of such Persons assets is in excess of the amount that will be required to pay such Persons debts as such debts become absolute and matured, (c) such Person is able to realize upon its assets and pay its debts and other liabilities (including disputed, contingent and unliquidated liabilities) as such liabilities mature in the normal course of business, (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond its ability to pay as such debts and liabilities mature, and (e) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which its property would constitute an unreasonably small amount of capital. As used in this definition, the term debts includes any legal liability, whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent, as determined in accordance with the Bankruptcy Code.
Supporting Letter of Credit shall mean a standby letter of credit, in form and substance satisfactory to Agent and the Fronting Lender, issued by an issuer satisfactory to Agent and the Fronting Lender.
3. Deletion of Definition in Credit Agreement. Section 1.1 of the Credit Agreement is hereby amended to delete the definition of Applicable Utilization Fee Rate.
4. Additions to Letters of Credit Provisions. Section 2.2(b) of the Credit Agreement is hereby amended to add the following new subsections (viii), (ix), (x) and (xi) at the end thereof:
(viii) Auto-Renewal Letters of Credit. If Borrower so requests, a Letter of Credit shall have an automatic renewal provision; provided that any Letter of Credit that has an automatic renewal provision must permit Agent (or the applicable Fronting Lender if the Fronting Lender is a Lender other than Agent) to prevent any such renewal by giving prior notice to the beneficiary thereof not later than thirty (30) days prior to the renewal date of such Letter of Credit. Once any such Letter of Credit that has automatic
renewal provisions has been issued, the Lenders shall be deemed to have authorized (but may not require) Agent (and the Fronting Lender) to permit at any time the renewal of such Letter of Credit to an expiry date not later than one year after the last day of the Commitment Period.
(ix) Letters of Credit Outstanding Beyond the Commitment Period. If any Letter of Credit is outstanding upon the termination of the Commitment, then, upon such termination, Borrower shall deposit with Agent, for the benefit of the Fronting Lender, with respect to all outstanding Letters of Credit, either cash or a Supporting Letter of Credit, which, in each case, is (A) in an amount equal to one hundred five percent (105%) of the undrawn amount of the outstanding Letters of Credit, and (B) free and clear of all rights and claims of third parties (other than Agent, the Fronting Lender and the depository bank maintaining such deposit). The cash shall be deposited in an escrow account at a financial institution designated by the Fronting Lender. The Fronting Lender shall be entitled to withdraw (with respect to the cash) or draw (with respect to the Supporting Letter of Credit) amounts necessary to reimburse the Fronting Lender for payments to be made under the Letters of Credit and any fees and expenses associated with such Letters of Credit, or incurred pursuant to the reimbursement agreements with respect to such Letters of Credit. Borrower shall also execute such documentation as Agent or the Fronting Lender may reasonably require in connection with the survival of the Letters of Credit beyond the Commitment or this Agreement. After expiration of all undrawn Letters of Credit, the original Supporting Letter of Credit or the remainder of the cash, as the case may be, shall promptly be returned to Borrower.
(x) Requests for Letters of Credit When One or More Lenders are Affected Lenders. If a Letter of Credit is requested at such time that a Lender is an Affected Lender hereunder, then (A) such Letter of Credit may be issued to the extent that Agent (and the Fronting Lender) shall have entered into satisfactory (to Agent) arrangements (including, without limitation, the posting of cash collateral by the Affected Lender) with Borrower or such Affected Lender to eliminate or mitigate the reimbursement risk with respect to such Affected Lender, or (B) Agent may issue a Letter of Credit in an amount that is the amount of the requested Letter of Credit less the Commitment Percentage of such Affected Lender times the amount of the requested Letter of Credit.
(xi) Letters of Credit Issued and Outstanding When One or More Lenders are Affected Lenders. With respect to any Letters of Credit that have been issued and are outstanding at the time any Lender is an Affected Lender, Agent (and the Fronting Lender) shall have the right to request that Borrower or such Affected Lender cash collateralize, in form and substance satisfactory to Agent (and the Fronting Lender), such Letters of Credit so as to eliminate or mitigate the reimbursement risk with respect to such Affected Lender.
5. Additions to Swing Loans Provisions. Section 2.2(c) of the Credit Agreement is hereby amended to add the following new subsections (iv) and (v) at the end thereof:
(iv) Requests for Swing Loans When One or More Lenders are Affected Lenders. If a Swing Loan is requested at such time that a Lender is an Affected Lender hereunder, then (A) such Swing Loan may be issued to the extent that Agent shall have entered into satisfactory (to Agent) arrangements (including, without limitation, the posting of cash collateral by the Affected Lender) with Borrower or such Affected Lender to eliminate or mitigate the reimbursement risk with respect to such Affected Lender, or (B) Agent may issue a Swing Loan in an amount that is the amount of the requested Swing Loan less the Commitment Percentage of such Affected Lender times the amount of the requested Swing Loan.
(v) Swing Loans Outstanding When One or More Lenders are Affected Lenders. With respect to any Swing Loans that are outstanding at the time any Lender is an Affected Lender, Agent shall have the right to request that Borrower or such Affected Lender cash collateralize, in form and substance satisfactory to Agent, such Swing Loans so as to eliminate or mitigate the reimbursement risk with respect to such Affected Lender.
6. Amendment to Interest Provisions. Section 2.3 of the Credit Agreement is hereby amended to delete subsection (c) therefrom and to insert in place thereof the following:
(c) Default Rate. Anything herein to the contrary notwithstanding, if an Event of Default shall occur, upon the election of Agent or the Required Lenders (i) the principal of each Loan and the unpaid interest thereon shall bear interest, until paid, at the Default Rate, (ii) the fee for the aggregate undrawn amount of all issued and outstanding Letters of Credit shall be increased by two percent (2%) in excess of the rate otherwise applicable thereto (as specified in Section 2.2(b)(iii) or (iv) hereof), and (iii) in the case of any other amount not paid when due from Borrower hereunder or under any other Loan Document, such amount shall bear interest at the Default Rate; provided that, during an Event of Default under Section 7.1 or 7.10 hereof, the applicable Default Rate shall apply without any election or action on the part of Agent or any Lender.
7. Addition to Funding of Loans Provisions. Section 2.5 of the Credit Agreement is hereby amended to add the following new subsection (e) at the end thereof:
(e) Advancing of Non Pro-Rata Revolving Loans. Notwithstanding anything in this Agreement to the contrary, if Borrower requests a Revolving Loan pursuant to Section 2.5(a) hereof (and all conditions precedent set forth in Section 4.1 hereof are met) at a time when one or more Lenders are Defaulting Lenders, Agent shall have the option, in its sole discretion, to require (and, at the request of Borrower, shall require) the non-Defaulting Lenders to honor such request by making a non pro-rata Revolving Loan to Borrower in an amount equal to (i) the amount requested by Borrower, minus (ii) the portions of such Revolving Loan that should have been made by such Defaulting Lenders. For purposes of such Revolving Loans, the Lenders that are making such Revolving Loan shall do so in proportion to their Commitment Percentages of the amount requested by Borrower. For the avoidance of doubt, in no event shall the aggregate outstanding principal amount of Loans made by a Lender (other than Swing Loans made
by the Swing Line Lender), when combined with such Lenders pro rata share, if any, of the Letter of Credit Exposure and the Swing Line Exposure, be in excess of the Maximum Amount for such Lender.
8. Additions to Payment Provisions. Section 2.6 of the Credit Agreement is hereby amended to add the following new subsections (e) and (f) at the end thereof:
(e) Affected Lender. To the extent that Agent receives any payments or other amounts for the account of an Affected Lender, at the option of Agent or Borrower, such Affected Lender shall be deemed to have requested that Agent use such payment or other amount (or any portion thereof, at the discretion of Agent) first, to cash collateralize its unfunded risk participation in Swing Loans and the Letters of Credit pursuant to Sections 2.2(b)(vi), 2.2(c)(iii), and 2.5(b) hereof, and, with respect to any Defaulting Lender, second, to fulfill its obligations to make Loans.
(f) Payment of Non Pro-Rata Revolving Loans. Notwithstanding anything in this Agreement to the contrary, at the sole discretion of Agent, in order to pay Revolving Loans that were not advanced pro rata by the Lenders, any payment of any Loan may first be applied to such Revolving Loans that were not advanced pro rata.
9. Amendment to Prepayment Provisions. Section 2.7 of the Credit Agreement is hereby amended to delete subsection (a) therefrom and to insert in place thereof the following:
(a) Right to Prepay.
(i) Borrower shall have the right at any time or from time to time to prepay, on a pro rata basis for all of the Lenders (except with respect to Swing Loans, which shall be paid to the Swing Line Lender), all or any part of the principal amount of the Loans, as designated by Borrower. Such payment shall include interest accrued on the amount so prepaid to the date of such prepayment and any amount payable under Article III hereof with respect to the amount being prepaid.
(ii) Borrower shall have the right, at any time or from time to time, to prepay, for the benefit of the Swing Line Lender (and any Lender that has purchased a participation in such Swing Loan), all or any part of the principal amount of the Swing Loans then outstanding, as designated by Borrower, plus interest accrued on the amount so prepaid to the date of such prepayment.
(iii) Notwithstanding anything in this Section 2.7 or otherwise to the contrary, at the discretion of Agent, in order to prepay Loans that were not advanced pro rata by all of the Lenders, any prepayment of a Loan shall first be applied to Loans made by the Lenders during any period in which a Defaulting Lender or Insolvent Lender shall exist.
10. Amendment to Fees Provisions. Section 2.8 of the Credit Agreement is hereby amended to delete subsection (b) therefrom and to insert in place thereof the following:
(b) Reserved.
11. Amendment to Modification of Commitment Provisions. Section 2.9 of the Credit Agreement is hereby amended to delete subsections (a) and (b) therefrom and to insert in place thereof, respectively, the following:
(a) Optional Reduction of Commitment. Borrower may at any time and from time to time reduce in whole or ratably in part the Total Commitment Amount to an amount not less than the then existing Revolving Credit Exposure, by giving Agent not fewer than three Business Days written notice of such reduction, provided that (i) any such partial reduction shall be in an aggregate amount, for all of the Lenders, of not less than Five Million Dollars ($5,000,000), increased by increments of One Million Dollars ($1,000,000), (ii) there shall be no more than two such reductions during any calendar year, and (iii) any such reduction that reduces the Total Commitment Amount to less than Two Hundred Million Dollars ($200,000,000) shall constitute a permanent reduction of the Total Commitment Amount and shall be effective during the remainder of the Commitment Period. Agent shall promptly notify each Lender of the date of each such reduction and such Lenders proportionate share thereof. After each such reduction, the facility fees payable hereunder shall be calculated upon the Total Commitment Amount as so reduced. If Borrower reduces in whole the Commitment, on the effective date of such reduction (Borrower having prepaid in full the unpaid principal balance, if any, of the Loans, together with all interest and facility, utilization and other fees accrued and unpaid, and provided that no Letter of Credit Exposure or Swing Line Exposure shall exist), all of the Notes shall be delivered to Agent marked Canceled and Agent shall redeliver such Notes to Borrower. Any partial reduction in the Total Commitment Amount shall be effective during the remainder of the Commitment Period (provided that the Total Commitment Amount may thereafter be increased during the Commitment Increase Period pursuant to Section 2.9(b) hereof). Upon each decrease of the Total Commitment Amount, the Maximum Commitment Amount shall be proportionally decreased.
(b) Increase in Commitment. At any time during the Commitment Increase Period, Borrower may request that Agent increase the Total Commitment Amount up to an amount that shall not exceed the Maximum Commitment Amount. Each such request for an increase shall be in an amount of at least Ten Million Dollars ($10,000,000), increased by increments of One Million Dollars ($1,000,000), and may be made by either (i) increasing, for one or more Lenders, with their prior written consent, their respective Revolving Credit Commitments, or (ii) including one or more Additional Lenders, each with a new commitment under the Revolving Credit Commitment, as a party to this Agreement (each an Additional Commitment and, collectively, the Additional Commitments). During the Commitment Increase Period, all of the Lenders agree that Agent, in its sole discretion, may permit one or more Additional Commitments upon satisfaction of the following requirements: (A) each Additional Lender, if any, shall be an
Eligible Transferee and shall execute an Additional Lender Assumption Agreement, (B) Agent shall provide to Borrower and each Lender a revised Schedule 1 to this Agreement, including revised Commitment Percentages for each of the Lenders, if appropriate, at least three Business Days prior to the date of the effectiveness of such Additional Commitments (each an Additional Lender Assumption Effective Date), and (C) Borrower shall execute and deliver to Agent and the Lenders such replacement or additional Revolving Credit Notes as shall be required by Agent (and requested by the Lenders). The Lenders hereby authorize Agent to execute each Additional Lender Assumption Agreement on behalf of the Lenders. On each Additional Lender Assumption Effective Date, the Lenders shall make adjustments among themselves with respect to the Revolving Loans then outstanding and amounts of principal, interest, facility fees and other amounts paid or payable with respect thereto as shall be necessary, in the opinion of Agent, in order to reallocate among such Lenders such outstanding amounts, based on the revised Commitment Percentages and to otherwise carry out fully the intent and terms of this Section 2.9(b) (and Borrower shall pay to the Lenders any amounts that would cause a prepayment of one or more Eurodollar Loans) In connection therewith, it is understood and agreed that the Maximum Amount of any Lender will not be increased (or decreased except pursuant to subsection (a) hereof) without the prior written consent of such Lender. Borrower shall not request any increase in the Total Commitment Amount pursuant to this Section 2.9(b) if a Default or an Event of Default shall then exist, or immediately after giving pro forma effect to any such increase would exist.
12. Amendment to Agency Provisions. Article IX of the Credit Agreement is hereby amended to delete Sections 9.5, 9.6, 9.7, 9.8, 9.9 and 9.11 therefrom and to insert in place thereof, respectively, the following:
Section 9.5. Agent and Affiliates. KeyBank and its affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Companies and Affiliates as though KeyBank were not Agent hereunder and without notice to or consent of any Lender. Each Lender acknowledges that, pursuant to such activities, KeyBank or its affiliates may receive information regarding any Company or any Affiliate (including information that may be subject to confidentiality obligations in favor of such Company or such Affiliate) and acknowledge that Agent shall be under no obligation to provide such information to other Lenders. With respect to Loans and Letters of Credit (if any), KeyBank and its affiliates shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though KeyBank were not Agent, and the terms Lender and Lenders include KeyBank and its affiliates, to the extent applicable, in their individual capacities.
Section 9.6. Knowledge or Notice of Default. Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless Agent has received written notice from a Lender or Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a notice of default. In the event that Agent receives such a notice, Agent shall give notice thereof to
the Lenders. Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all Lenders); provided that, unless and until Agent shall have received such directions, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable, in its discretion, for the protection of the interests of the Lenders.
Section 9.7. Action by Agent. Subject to the other terms and conditions hereof, so long as Agent shall be entitled, pursuant to Section 9.6 hereof, to assume that no Default or Event of Default shall have occurred and be continuing, Agent shall be entitled to use its discretion with respect to exercising or refraining from exercising any rights that may be vested in it by, or with respect to taking or refraining from taking any action or actions that it may be able to take under or in respect of, this Agreement. Agent shall incur no liability under or in respect of this Agreement by acting upon any notice, certificate, warranty or other paper or instrument believed by it to be genuine or authentic or to be signed by the proper party or parties, or with respect to anything that it may do or refrain from doing in the reasonable exercise of its judgment, or that may seem to it to be necessary or desirable in the premises. Without limiting the foregoing, no Lender shall have any right of action whatsoever against Agent as a result of Agents acting or refraining from acting hereunder in accordance with the instructions of the Required Lenders.
Section 9.8. Release of Guarantor of Payment. In the event of a merger or consolidation or similar event, or as otherwise permitted pursuant to this Agreement, Agent, at the request and expense of Borrower, is hereby authorized by the Lenders to release a Guarantor of Payment in connection with such permitted event.
Section 9.9. Indemnification of Agent. The Lenders agree to indemnify Agent (to the extent not reimbursed by Borrower) ratably, according to their respective Commitment Percentages, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys fees) or disbursements of any kind or nature whatsoever that may be imposed on, incurred by or asserted against Agent in its capacity as agent in any way relating to or arising out of this Agreement or any other Loan Document or any action taken or omitted by Agent with respect to this Agreement or any other Loan Document, provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys fees) or disbursements resulting from Agents gross negligence or willful misconduct as determined by a court of competent jurisdiction, or from any action taken or omitted by Agent in any capacity other than as agent under this Agreement or any other Loan Document. No action taken in accordance with the directions of the Required Lenders shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section 9.9. The undertaking in this Section 9.9 shall survive repayment of the Loans, cancellation of the Notes, if any, expiration or termination of the Letters of Credit, termination of the Commitment, any foreclosure under, or modification, release or discharge of, any or all of the Loan
Documents, termination of this Agreement and the resignation or replacement of the agent.
Section 9.11. Other Agents. The financial institutions identified on the cover page of this Agreement or otherwise herein, or in any amendment hereof or other document related hereto, as being a Joint Lead Arranger, Syndication Agent or Bookrunner (collectively, the Other Agents) shall have no rights, powers, obligations, liabilities, responsibilities or duties under this Agreement other than, in the case of a Lender, those applicable to all Lenders as such. Without limiting the foregoing, the Other Agents shall not have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on the Other Agents in deciding to enter into this Agreement or in taking or refraining from taking any action hereunder or pursuant hereto.
13. Additions to Agent Provisions. Article IX of the Credit Agreement is hereby amended to add the following new Sections 9.12, 9.13, 9.14 and 9.15 at the end thereof:
Section 9.12. Delegation of Duties. Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties. Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct, as determined by a court of competent jurisdiction.
Section 9.13. Swing Line Lender. The Swing Line Lender shall act on behalf of the Lenders with respect to any Swing Loans. The Swing Line Lender shall have all of the benefits and immunities (a) provided to Agent in this Article IX with respect to any acts taken or omissions suffered by the Swing Line Lender in connection with the Swing Loans as fully as if the term Agent, as used in this Article IX, included the Swing Line Lender with respect to such acts or omissions, and (b) as additionally provided in this Agreement with respect to the Swing Line Lender.
Section 9.14. Agent May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Credit Party, (a) Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether Agent shall have made any demand on Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise, to (i) file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and Agent and their respective agents and counsel and all other amounts due the Lenders and Agent) allowed in such judicial proceedings, and (ii) collect and receive any monies or
other property payable or deliverable on any such claims and to distribute the same; and (b) any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to Agent and, in the event that Agent shall consent to the making of such payments directly to the Lenders, to pay to Agent any amount due for the reasonable compensation, expenses, disbursements and advances of Agent and its agents and counsel, and any other amounts due Agent. Nothing contained herein shall be deemed to authorize Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize Agent to vote in respect of the claim of any Lender in any such proceeding.
Section 9.15. No Reliance on Agents Customer Identification Program. Each Lender acknowledges and agrees that neither such Lender, nor any of its affiliates, participants or assignees, may rely on Agent to carry out such Lenders or its affiliates, participants or assignees customer identification program, or other obligations required or imposed under or pursuant to the Patriot Act or the regulations thereunder, including the regulations contained in 31 CFR 103.121 (as hereafter amended or replaced, the CIP Regulations), or any other anti-terrorism law, including any programs involving any of the following items relating to or in connection with Borrower, its Affiliates or agents, the Loan Documents or the transactions hereunder: (a) any identity verification procedures, (b) any record keeping, (c) any comparisons with government lists, (d) any customer notices or (e) any other procedures required under the CIP Regulations or such other laws.
14. Amendment to Amendments and Consents Provisions. Article X of the Credit Agreement is hereby amended to delete Section 10.3 therefrom and to insert in place thereof the following:
Section 10.3. Amendments, Consents.
(a) General Rule. No amendment, modification, termination, or waiver of any provision of any Loan Document nor consent to any variance therefrom, shall be effective unless the same shall be in writing and signed by the Required Lenders and, in the case of amendments or modifications, Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
(b) Exceptions to the General Rule. Notwithstanding the provisions of subsection (a) of this Section 10.3:
(i) Unanimous Consent Requirements. Unanimous consent of the Lenders shall be required with respect to (A) any increase in the Commitment hereunder (except as specified in Section 2.9(b) hereof), (B) the extension of maturity of the Loans, the payment date of interest or scheduled principal hereunder, or the payment date of facility fees payable hereunder, (C) any
reduction in the stated rate of interest on the Loans (provided that the institution of the Default Rate or post default interest and a subsequent removal of the Default Rate or post default interest shall not constitute a decrease in interest rate pursuant to this Section 10.3), or in any amount of interest or scheduled principal due on any Loan, or any reduction in the stated rate of facility fees payable hereunder or any change in the manner of pro rata application of any payments made by Borrower to the Lenders hereunder, (D) any change in any percentage voting requirement, voting rights, or the Required Lenders definition in this Agreement, (E) the release of Borrower or any Guarantor of Payment, except as specifically permitted hereunder, or (F) any amendment to this Section 10.3 or Section 8.5 hereof.
(ii) Provisions Relating to Special Rights and Duties. No provision of this Agreement affecting Agent in its capacity as such shall be amended, modified or waived without the consent of Agent. No provision of this Agreement relating to the rights or duties of the Fronting Lender in its capacity as such shall be amended, modified or waived without the consent of the Fronting Lender. No provision of this Agreement relating to the rights or duties of the Swing Line Lender in its capacity as such shall be amended, modified or waived without the consent of the Swing Line Lender.
(c) Replacement of Non-Consenting Lender. If, in connection with any proposed amendment, waiver or consent hereunder, (i) the consent of all Lenders is required, but only the consent of Required Lenders is obtained, or (ii) the consent of Required Lenders is required, but the consent of the Required Lenders is not obtained (any Lender withholding consent as described in subsections (i) and (ii) hereof being referred to as a Non-Consenting Lender), then Agent may (and shall, if requested by Borrower), at the sole expense of Borrower, upon notice to such Non-Consenting Lender and Borrower, require such Non-Consenting Lender to assign and delegate, without recourse (in accordance with the restrictions contained in Section 10.10 hereof) all of its interests, rights and obligations under this Agreement to an Eligible Transferee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that such Non-Consenting Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from such Eligible Transferee (to the extent of such outstanding principal and accrued interest and fees) or Borrower (in the case of all other amounts, including any breakage compensation under Article III hereof).
(d) Generally. Notice of amendments, waivers or consents ratified by the Lenders hereunder shall be forwarded by Agent to all of the Lenders. Each Lender or other holder of a Note, or if there is no Note, the holder of the interest as reflected on the books and records of Agent (or interest in any Loan or Letter of Credit) shall be bound by any amendment, waiver or consent obtained as authorized by this Section 10.3, regardless of its failure to agree thereto.
15. Additions to Miscellaneous Provisions. Article X of the Credit Agreement is hereby amended to add the following new Sections 10.19, 10.20 and 10.21 at the end thereof:
Section 10.19. Replacement of Affected Lenders. Each Lender agrees that, during the time in which any Lender is an Affected Lender, Agent shall have the right (and Agent shall, if requested by Borrower), at the sole expense of Borrower, upon notice to such Affected Lender and Borrower, to require that such Affected Lender assign and delegate, without recourse (in accordance with the restrictions contained in Section 10.10 hereof), all of its interests, rights and obligations under this Agreement to an Eligible Transferee, approved by Borrower (unless an Event of Default shall exist) and Agent, that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that such Affected Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder (recognizing that any Affected Lender may have given up its rights under this Agreement to receive payment of fees and other amounts pursuant to Section 2.6(e) and (f) hereof), from such Eligible Transferee (to the extent of such outstanding principal and accrued interest and fees) or Borrower (in the case of all other amounts, including any breakage compensation under Article III hereof).
Section 10.20. Limitations on Liability of the Fronting Lender. Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letters of Credit. Neither the Fronting Lender nor any of its officers or directors shall be liable or responsible for (a) the use that may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by the Fronting Lender against presentation of documents that do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to such Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except that the account party on such Letter of Credit shall have a claim against the Fronting Lender, and the Fronting Lender shall be liable to such account party, to the extent of any direct, but not consequential, damages suffered by such account party that such account party proves were caused by (i) the Fronting Lenders willful misconduct or gross negligence (as determined by a court of competent jurisdiction) in determining whether documents presented under a Letter of Credit comply with the terms of such Letter of Credit, or (ii) the Fronting Lenders willful failure to make lawful payment under any Letter of Credit after the presentation to it of documentation strictly complying with the terms and conditions of such Letter of Credit. In furtherance and not in limitation of the foregoing, the Fronting Lender may accept documents that appear on their face to be in order, without responsibility for further investigation.
Section 10.21. No Duty. All attorneys, accountants, appraisers, consultants and other professional persons (including the firms or other entities on behalf of which any
such Person may act) retained by Agent or any Lender with respect to the transactions contemplated by the Loan Documents shall have the right to act exclusively in the interest of Agent or such Lender, as the case may be, and shall have no duty of disclosure, duty of loyalty, duty of care, or other duty or obligation of any type or nature whatsoever to Borrower, any other Companies, or to any other Person, with respect to any matters within the scope of such representation or related to their activities in connection with such representation. Borrower agrees, on behalf of itself and its Subsidiaries, not to assert any claim or counterclaim against any such persons with regard to such matters, all such claims and counterclaims, now existing or hereafter arising, whether known or unknown, foreseen or unforeseeable, being hereby waived, released and forever discharged.
16. Amendments to Schedules. The Credit Agreement is hereby amended to delete Schedule 1 (Commitments of Lenders), Schedule 2 (Guarantors of Payment) and Schedule 6.1 (Corporate Existence; Subsidiaries; Foreign Qualification) therefrom and to insert in place thereof, respectively, a new Schedule 1, Schedule 2 and Schedule 6.1 in the form of Schedule 1, Schedule 2 and Schedule 6.1 hereto.
17. Reallocation of Outstanding Amounts. On the Fourth Amendment Effective Date, the Lenders shall make adjustments among themselves with respect to the Loans then outstanding and amounts of principal with respect thereto as shall be necessary, in the opinion of Agent, in order to reallocate among such Lenders such outstanding amounts, based on the revised Commitments as set forth in the revised Schedule 1 hereto.
18. Closing Deliveries. Concurrently with the execution of this Amendment, Borrower shall:
(a) deliver to Agent, for delivery to each Lender requesting a Revolving Credit Note, such Lenders Revolving Credit Note in the amount specified in Schedule 1 to the Credit Agreement (after giving effect to this Amendment);
(b) execute and deliver to Agent, for its sole benefit, the Fourth Amendment Agent Fee Letter, and pay to Agent the fees stated therein;
(c) execute and deliver to J.P. Morgan Securities LLC, for its sole benefit, that certain J.P. Morgan Fee Letter, dated as of the Fourth Amendment Effective Date, and pay to J.P. Morgan Securities LLC the fees stated therein;
(d) execute and deliver to Agent, for the pro rata benefit of the Lenders, the Fourth Amendment Closing Fee Letter, and pay to Agent the fees stated therein;
(e) deliver to Agent an officers certificate (or comparable domestic documents) certifying the names of the officers of each Credit Party authorized to sign this Agreement, together with the true signatures of such officers and (i) certified copies of the resolutions of the board of directors (or comparable domestic documents) of such Credit Party evidencing approval of the execution and delivery of this Agreement, and
(ii) certified copies of the Organizational Documents of such Credit Party or confirmation that such Organizational Documents have not been amended since the Closing Date;
(f) cause each Guarantor of Payment to execute the attached Guarantor Acknowledgement and Agreement; and
(g) pay all legal fees and expenses of Agent in connection with this Amendment and any other Loan Documents.
19. Representations and Warranties. Borrower hereby represents and warrants to Agent and the Lenders that (a) Borrower has the legal power and authority to execute and deliver this Amendment; (b) the officers executing this Amendment have been duly authorized to execute and deliver the same and bind Borrower with respect to the provisions hereof; (c) the execution and delivery hereof by Borrower and the performance and observance by Borrower of the provisions hereof do not violate or conflict with the Organizational Documents of Borrower or any law applicable to Borrower or result in a breach of any provision of or constitute a default under any other agreement, instrument or document binding upon or enforceable against Borrower; (d) no Default or Event of Default exists, nor will any occur immediately after the execution and delivery of this Amendment or by the performance or observance of any provision hereof; (e) each of the representations and warranties contained in the Loan Documents is true and correct in all material respects as of the Fourth Amendment Effective Date as if made on the Fourth Amendment Effective Date, except to the extent that any such representation or warranty expressly states that it relates to an earlier date (in which case such representation or warranty is true and correct in all material respects as of such earlier date); (f) Borrower is not aware of any claim or offset against, or defense or counterclaim to, Borrowers obligations or liabilities under the Credit Agreement or any Related Writing; and (g) this Amendment constitutes a valid and binding obligation of Borrower in every respect, enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy or insolvency laws or similar laws affecting the rights of creditors generally or by general principles of equity.
20. Waiver and Release. Borrower, by signing below, hereby waives and releases Agent, and each of the Lenders, and their respective directors, officers, employees, attorneys, affiliates and subsidiaries, from any and all claims, offsets, defenses and counterclaims arising out of, or relating to, the Credit Agreement and the other Loan Documents of which Borrower is aware, such waiver and release being with full knowledge and understanding of the circumstances and effect thereof and after having consulted legal counsel with respect thereto.
21. References to Credit Agreement and Ratification. Each reference that is made in the Credit Agreement or any other Related Writing to the Credit Agreement shall hereafter be construed as a reference to the Credit Agreement as amended hereby. Except as herein otherwise specifically provided, all terms and provisions of the Credit Agreement are confirmed and ratified and shall remain in full force and effect and be unaffected hereby. This Amendment is a Loan Document.
22. Counterparts. This Amendment may be executed in any number of counterparts, by different parties hereto in separate counterparts and by facsimile signature, each of which,
when so executed and delivered, shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement.
23. Headings. The headings, captions and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment.
24. Severability. Any term or provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the term or provision so held to be invalid or unenforceable.
25. Governing Law. The rights and obligations of all parties hereto shall be governed by the laws of the State of Ohio, without regard to principles of conflicts of laws.
[Remainder of page intentionally left blank.]
JURY TRIAL WAIVER. BORROWER, AGENT AND THE LENDERS, TO THE EXTENT PERMITTED BY LAW, EACH HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWER, AGENT AND THE LENDERS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AMENDMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.
IN WITNESS WHEREOF, the parties have executed and delivered this Amendment as of the date first set forth above.
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CINTAS CORPORATION NO. 2 | |||||
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By: |
/s/ William C. Gale | ||||
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Name: |
William C. Gale | ||||
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Title: |
Senior Vice President and Chief Financial |
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Officer |
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KEYBANK NATIONAL ASSOCIATION, | |||||
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as Agent and as a Lender | |||||
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By: |
/s/ Brian P. Fox | ||||
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Name: |
Brian P. Fox | ||||
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Title: |
Vice President | ||||
Signature Page 1 of 8 to
Fourth Amendment Agreement
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JPMORGAN CHASE BANK, N.A., | |||
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as Syndication Agent and as a Lender | |||
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By: |
/s/ Dana J. Morgan | ||
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Name: |
Dana J. Morgan | ||
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Title: |
Vice President | ||
Signature Page 2 of 8 to
Fourth Amendment Agreement
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THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., |
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as Co-Documentation Agent and as a Lender |
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By: /s/ Thomas Danielson |
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Name: Thomas Danielson |
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Title: Authorized Signatory |
Signature Page 3 of 8 to
Fourth Amendment Agreement
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U.S. BANK, NATIONAL ASSOCIATION, |
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as Co-Documentation Agent and as a Lender |
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By: /s/ Kenneth R. Fieler |
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Name: Kenneth R. Fieler |
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Title: Assistant Vice President |
Signature Page 4 of 8 to
Fourth Amendment Agreement
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FIFTH THIRD BANK, |
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as Co-Documentation Agent and as a Lender |
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By: /s/ Megan S. Szewc |
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Name: Megan S. Szewc |
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Title: Vice President |
Signature Page 5 of 8 to
Fourth Amendment Agreement
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PNC BANK, NATIONAL ASSOCIATION |
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By: /s/ Jeffrey P. Fisher |
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Name: Jeffrey P. Fisher |
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Title: Assistant Vice President |
Signature Page 6 of 8 to
Fourth Amendment Agreement
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WELLS FARGO BANK NATIONAL ASSOCIATION | |
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By: /s/ Peter Martinets | |
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Name: |
Peter Martinets |
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Title: |
Managing Director |
Signature Page 7 of 8 to
Fourth Amendment Agreement
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THE NORTHERN TRUST COMPANY |
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By: /s/ Jeffrey P. Sullivan |
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Name: Jeffrey P. Sullivan |
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Title: Vice President |
Signature Page 8 of 8 to
Fourth Amendment Agreement
SCHEDULE 1
COMMITMENTS OF LENDERS
LENDERS
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COMMITMENT
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REVOLVING
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MAXIMUM
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KeyBank National Association |
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19.5% |
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$58,500,000 |
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$58,500,000 |
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JPMorgan Chase Bank, N.A. |
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19.5% |
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$58,500,000 |
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$58,500,000 |
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The Bank of Tokyo-Mitsubishi UFJ, Ltd. |
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14.0% |
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$42,000,000 |
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$42,000,000 |
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U.S. Bank, National Association |
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13.0% |
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$39,000,000 |
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$39,000,000 |
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Fifth Third Bank |
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13.0% |
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$39,000,000 |
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$39,000,000 |
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PNC Bank, National Association |
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9.0% |
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$27,000,000 |
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$27,000,000 |
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Wells Fargo Bank National Association |
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7.7% |
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$23,000,000 |
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$23,000,000 |
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The Northern Trust Company |
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4.3% |
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$13,000,000 |
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$13,000,000 |
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Total Commitment Amount |
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100% |
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$300,000,000 |
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$300,000,000 |
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SCHEDULE 2
GUARANTORS OF PAYMENT
Cintas Corporation, a Washington corporation
Cintas Corporation No. 3, a Nevada corporation
Cintas Corp. No. 8, Inc., a Nevada corporation
Cintas Corp. No. 15, Inc., a Nevada corporation
Cintas RUS, L.P., a Texas limited partnership
Cintas Corporate Services, Inc., an Ohio corporation
Schedule 6.1
Cintas Corporation (Washington)
(a) Cintas Corporation No. 3 (Nevada) SIGNIFICANT SUBSIDIARY
(1) Cintas Corporation No. 2 (Nevada) SIGNIFICANT SUBSIDIARY
(A) Cintas Corporate Services, Inc. (Ohio)-SIGNIFICANT SUBSIDIARY
(i) Cintas Manufacturing LLC (Ohio)
(ii) Cintas Holdings LLC (Ohio)
(iii) Empresa Cintas de Mexico, S.A. de C.V.1 (Mexico)
¡ Ensambles de Coahuila, S.A. de C.V.2 (Mexico)
(iv) Cintas de Honduras, S.A.3 (Honduras)
(B) Cintas Wholesale First Aid LLC (Ohio)
(C) Cintas Distribution LLC (Ohio)
(D) Cintas Service Transportation LLC (Ohio)
(E) Cintas C.V. Holdings, LLC (Ohio)
(i) Cintas Netherlands Holdings C.V.4 (The Netherlands)
¡ Cintas Netherlands Holdings B.V.5 (The Netherlands)
□ Cintas Document Management Netherlands B.V. (The Netherlands)
· Cintas Document Management-Germany GmbH (Germany)
□ Cintas China Holding Limited (Hong Kong)
· Cintas (Suzhou) Enterprise Services Co., Ltd (China)
□ Cintas Property Holding Belgium NV (Belgium)
□ Cintas Document Management Belgium (Belgium)
□ Cintas Document Management UK Limited (England)
(F) CDS Equipment Holdings, LLC (Ohio)
(G) The Millennium Mat Company, LLC6 (Ohio)
(H) Grupo Cintas de Mexico S.A. de C.V.7 (Mexico)
(I) Cintas Cleanroom Resources de Mexico, S.A. de C.V.8 (Mexico)
(J) Cintas Corporation Hong Kong Limited (Hong Kong)
(i) Cintas Image Apparel Co., Ltd. (China)
(K) Cintas Canada Limited9 (Ontario)
(L) Cintas Macau Limited10 (Macau)
(2) Cintas Corp. No. 8, Inc. (Nevada)
(A) Cintas-R.U.S., L.P.11 (Texas)
(3) Cintas Corp. No. 15, Inc. (Nevada)
(A) Cintas-R.U.S., L.P. (Texas)
(4) 3065520 Nova Scotia Company (Nova Scotia)
(5) 3065521 Nova Scotia Company (Nova Scotia)
(A) Cintas Canada Investment Limited Partnership12 (Alberta)
(b) 3057314 Nova Scotia Company (Nova Scotia)
Except as otherwise noted, each Subsidiary is a wholly-owned Subsidiary of the Company one level above the applicable Subsidiary
1 Shareholders are Cintas Corporate Services, Inc. (49,999 shares) and Cintas Corporation No. 3 (1 share)
2 Shareholders are Empresa Cintas de Mexico, S.A. de C.V. (99 shares) and Cintas Corporate Services, Inc. (1 share)
3Shareholders are Cintas Corporate Services, Inc. (246 shares), R. Kohlhepp (1 share), S. Farmer (1 share), D. Jeanmougin (1 share) and W. Gale (1 share)
4Variable holdings between Cintas Corporation No. 2 and Cintas C.V. Holdings, LLC based on contributions from time to time.
5 Shares held by Cintas C.V. Holdings, LLC for the benefit of Cintas Netherlands Holdings C.V.
650% owned by each of Cintas Corporation No. 2 and Montague, LLC; not a Subsidiary for purposes of the Credit Agreement
7 Shareholders are Cintas Corporation No. 2 (9,999 shares) and Cintas Corporation No. 3 (1 share)
8 Shareholders are Cintas Corporation No. 2 (49,999 shares) and Cintas Corporation No. 3 (1 share)
9 Shareholders are Cintas Corporation No. 2 (all issued common shares), Cintas Investment Corp (all issued Class A Shares) and 3065520 Nova Scotia Limited (all issued Class B Shares)
10Shareholders are Cintas Corporation No. 2 (96%) and Cintas C.V. Holdings, LLC (4%)
11Cintas Corp. No 8, Inc. is the general partner of Cintas R.U.S., L.P. and holds 1% of the partnership interests and Cintas Corp. No 15, Inc. is the limited partner of Cintas R.U.S., L.P. and holds 99% of the partnership interests
123065521 Nova Scotia Company is the general partner of Cintas Canada Investment Limited Partnership and holds 0.1% of the partnership interests and 3065520 Nova Scotia Company is the limited partner of Cintas Canada Investment Limited Partnership and holds 99.9% of the partnership interest
ACKNOWLEDGMENT AND AGREEMENT
The undersigned consent and agree to and acknowledge the terms of the foregoing Fourth Amendment Agreement dated as of September 27, 2010. The undersigned further agree that the obligations of the undersigned pursuant to the Guaranty of Payment executed by the undersigned are hereby ratified and shall remain in full force and effect and be unaffected hereby.
The undersigned hereby waive and release Agent and the Lenders and their respective directors, officers, employees, attorneys, affiliates and subsidiaries from any and all claims, offsets, defenses and counterclaims of any kind or nature, absolute and contingent arising out of, or relating to, the Credit Agreement and the other Loan Documents, of which the undersigned are aware or should be aware, such waiver and release being with full knowledge and understanding of the circumstances and effect thereof and after having consulted legal counsel with respect thereto.
JURY TRIAL WAIVER. THE UNDERSIGNED, TO THE EXTENT PERMITTED BY LAW, HEREBY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWERS, AGENT, THE LENDERS AND THE UNDERSIGNED, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AMENDMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.
CINTAS CORPORATION |
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CINTAS CORPORATION NO. 3 | ||||||
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/s/William C. Gale |
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/s/William C. Gale | ||||
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William C. Gale |
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William C. Gale | ||||
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Sr. VP & Chief Financial Officer |
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Title: |
Sr. VP & Chief Financial Officer | ||||
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CINTAS CORP. NO. 8, INC. |
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CINTAS RUS, L.P. | ||||||
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By: Cintas Corp. No. 8, Inc., its general partner | ||||||
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By: |
/s/William C. Gale |
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By: |
/s/William C. Gale | ||||
Name: |
William C. Gale |
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Name: |
William C. Gale | ||||
Title: |
Sr. VP & Chief Financial Officer |
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Title: |
Sr. VP & Chief Financial Officer | ||||
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CINTAS CORP. NO. 15, INC. |
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By: |
/s/William C. Gale |
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Name: |
William C. Gale |
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Sr. VP & Chief Financial Officer |
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Signature Page to
Guarantor Acknowledgment and Agreement
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO RULE 13a 14(a)
I, Scott D. Farmer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cintas Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a 15(f) and 15d 15 (f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: April 8, 2011 |
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By: |
/s/ Scott D. Farmer |
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Scott D. Farmer |
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Chief Executive Officer |
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(Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULE 13a 14(a)
I, William C. Gale, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cintas Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a 15(f) and 15d 15 (f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: |
April 8, 2011 |
By: |
/s/ William C. Gale |
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William C. Gale |
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Senior Vice-President and Chief Financial Officer |
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(Principal Financial Officer) |
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Pursuant to 18 U.S.C. § 1350, as adopted pursuant to
§ 906 of the Sarbanes-Oxley Act of 2002
In connection with the filing with the Securities and Exchange Commission of the Report of Cintas Corporation (the Company) on Form 10-Q for the period ending February 28, 2011 (the Report), I, Scott D. Farmer, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods presented in the Report.
By: |
/s/ Scott D. Farmer |
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Scott D. Farmer |
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Principal Executive Officer |
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April 8, 2011 |
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EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Pursuant to 18 U.S.C. § 1350, as adopted pursuant to
§ 906 of the Sarbanes-Oxley Act of 2002
In connection with the filing with the Securities and Exchange Commission of the Report of Cintas Corporation (the Company) on Form 10-Q for the period ending February 28, 2011 (the Report), I, William C. Gale, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods presented in the Report.
By: |
/s/ William C. Gale |
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William C. Gale |
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Principal Financial Officer |
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April 8, 2011 |
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