-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SwNbe09kEyIbhM1vbh707tBgcsR/903UDBRCWEkKXHyrJiEzwokx/hMrDQb5ll5f Fi7/NRoQ1mutyZ+bP1O0fw== 0000892251-98-000278.txt : 19980901 0000892251-98-000278.hdr.sgml : 19980901 ACCESSION NUMBER: 0000892251-98-000278 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980831 FILED AS OF DATE: 19980831 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CINTAS CORP CENTRAL INDEX KEY: 0000723254 STANDARD INDUSTRIAL CLASSIFICATION: MEN'S & BOYS' FURNISHINGS, WORK CLOTHING, AND ALLIED GARMENTS [2320] IRS NUMBER: 311188630 STATE OF INCORPORATION: WA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 000-11399 FILM NUMBER: 98701739 BUSINESS ADDRESS: STREET 1: 6800 CINTAS BLVD STREET 2: P O BOX 625737 CITY: CINCINNATI STATE: OH ZIP: 45262 BUSINESS PHONE: 5134591200 MAIL ADDRESS: STREET 1: 6800 CINTAS BOULEVARD STREET 2: P O BOX 625737 CITY: CINCINNATI STATE: OH ZIP: 45262 DEF 14A 1 PROXY STATEMENT SCHEDULE 14A SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ___) Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-(e)(2)) [x] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12 Cintas Corporation ------------------------------------------------------- (Name of Registrant as Specified In Its Charter) (Name of Person(s) Filing Proxy Statement if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. 1) Title of each class of securities to which transaction applies: 2) Aggregate number of securities to which transaction applies: 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined) 4) Proposed maximum aggregate value of transaction: [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identity the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: 2) Form, Schedule or Registration Statement No.: 3) Filing Party: 4) Date Filed: FRONT OF CARD CINTAS CORPORATION PROXY FOR ANNUAL MEETING 6800 CINTAS BLVD., P.O. BOX 625737, CINCINNATI, OHIO 45262-5737 The undersigned hereby appoints RICHARD T. FARMER, ROBERT J. KOHLHEPP, and WILLIAM C. GALE, or any of them, proxies of the undersigned, each with the power of substitution, to vote all shares of Common Stock which the undersigned would be entitled to vote at the Annual Meeting of Shareholders of Cintas Corporation to be held October 21, 1998, at 9:00 a.m. (Eastern Time) at The Fifth Third Bank, 38 Fountain Square, Fifth Floor, Cincinnati, Ohio 45202 and at any adjournment of such Meeting as specified below. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS: 1. Authority to establish the number of Directors to be elected at the Meeting at eight. FOR AGAINST ABSTAIN 2. Authority to elect eight nominees listed below. FOR all nominees listed below WITHHOLD AUTHORITY (except as marked to the contrary to vote for all nominees below) listed below Richard T. Farmer; Robert J. Kohlhepp; Gerald V. Dirvin; Scott D. Farmer; James J. Gardner; Roger L. Howe; Donald P. Klekamp; John S. Lillard WRITE THE NAME OF ANY NOMINEE(S) FOR ---------------------- WHOM AUTHORITY TO VOTE IS WITHHELD ---------------------- (Continued on other side) BACK OF CARD 3. Amendment to Articles of Incorporation to increase authorized shares of Common Stock to 300 million shares. FOR AGAINST ABSTAIN 4. In their discretion the proxies are authorized to vote upon such other business as may properly come before the Meeting. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3. ___________________________, 1998 ------------------------------ Important: Please sign exactly as name appears hereon indicating, where proper, official position or representative capacity. In the case of joint holders, all should sign. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS NOTICE OF ANNUAL MEETING OF SHAREHOLDERS Dear Shareholder: We are pleased to invite you to attend our 1998 Annual Shareholders' Meeting. The meeting will be held at 9:00 a.m., Eastern Time, at The Fifth Third Bank, 38 Fountain Square, Fifth Floor, Cincinnati, Ohio, on Wednesday, October 21, 1998. The purposes of this Annual Meeting are: 1. To establish the number of Directors to be elected at eight; 2. To elect eight Directors; 3. To amend the Articles of Incorporation to increase authorized shares of Common Stock to 300 million shares; 4. To transact such other business as may properly come before the meeting or any adjournment thereof. Following the formal meeting, we will discuss the Company's operations during the last year and our plans for the future and answer your questions regarding the Company. Board members and other officers of the Company will also be available to discuss the Company's business with you. Yours truly, David T. Jeanmougin Secretary Dated: August 31, 1998 WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE, SIGN AND PROMPTLY RETURN YOUR PROXY CARD IN THE ENCLOSED ENVELOPE. PROXIES MAY BE REVOKED AT ANY TIME PRIOR TO THE MEETING BY WRITTEN NOTICE OF REVOCATION DELIVERED TO THE COMPANY'S SECRETARY, THE SUBMISSION OF A LATER PROXY OR BY ATTENDING THE MEETING AND VOTING IN PERSON. CINTAS CORPORATION 6800 CINTAS BOULEVARD P.O. BOX 625737 CINCINNATI, OHIO 45262-5737 TELEPHONE (513) 459-1200 -------------------------------------- P R O X Y S T A T E M E N T ANNUAL MEETING OF SHAREHOLDERS OCTOBER 21, 1998 INTRODUCTION The enclosed Proxy is solicited by the Board of Directors of Cintas Corporation for use at the Annual Meeting of Shareholders to be held on October 21, 1998, and at any adjournment of the meeting. The approximate mailing date of the Proxy Statement and the accompanying proxy card is August 31, 1998. VOTING AT ANNUAL MEETING GENERAL - ------- Shareholders may vote in person or by proxy at the Shareholders' Meeting. Proxies given may be revoked at any time prior to the meeting by filing with the Company's Secretary either a written revocation or a duly executed proxy bearing a later date, or by appearing at the meeting and voting in person. All shares will be voted as specified on each properly executed proxy. If no choice is specified, the shares will be voted as recommended by the Board of Directors. As of August 21, 1998, the record date for determining shareholders entitled to notice of and to vote at the meeting, Cintas had 104,879,612 shares of Common Stock outstanding. Each share is entitled to one vote on each matter to be presented at the meeting. Only shareholders of record at the close of business on August 21, 1998, will be entitled to vote at the meeting. A quorum consists of the presence in person or by proxy of a majority of all shares entitled to vote at the meeting. -2- PRINCIPAL SHAREHOLDERS - ---------------------- The following persons are the only shareholders known by the Company to own beneficially 5% or more of its outstanding Common Stock as of the record date: Name and Address of Amount and Nature of Percent of Beneficial Owner Beneficial Ownership Class - -------------------- -------------------- ----------- Richard T. Farmer(1) 25,505,4552 24.3% James J. Gardner(1) 7,663,9653 7.3% Joan A. Gardner(1) 7,663,9653 7.3% - ------------------ (1) The address of Richard T. Farmer, James J. Gardner and Joan A. Gardner is Cintas Corporation, 6800 Cintas Boulevard, P.O. Box 625737, Cincinnati, Ohio 45262-5737. (2) Includes 53,560 shares owned by Mr. Farmer's wife, 3,371,534 shares held in trust for Mr. Farmer's children, 68,580 shares owned by a corporation controlled by Mr. Farmer and 30,000 shares which may be acquired pursuant to stock options which are exercisable within 60 days. (3) Includes the following shares considered to be beneficially owned by both Mr. & Mrs. Gardner: 165,733 shares held by a charitable trust established by Mr. Gardner, 65,582 shares held by a corporation that is controlled by Mr. Gardner, 5,887,422 shares held by a family partnership, 850,000 shares owned by Mrs. Gardner, 210,000 shares held in trust for Mr. Gardner's children and 4,500 shares which may be acquired pursuant to stock options exercisable within 60 days. - 3 - SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS - ------------------------------------------------------ The following table sets forth the beneficial ownership of the Company's Common Stock by its directors, the named executive officers in the Summary Compensation Table of the Proxy Statement and all directors and executive officers as a group, as of August 21, 1998: Amount and Nature of Percent Name of Beneficial Owner Beneficial Ownership of Class - ------------------------ -------------------- -------- Richard T. Farmer 25,505,455 (1) 24.3% Robert J. Kohlhepp 2,436,862 (2) 2.3% Gerald V. Dirvin 15,300 (3) * James J. Gardner 7,663,965 (1) 7.3% Roger L. Howe 702,956 (3)(4) * Donald P. Klekamp 143,236 (3)(5) * John S. Lillard 131,408 (6) * Scott D. Farmer 458,454 (7) * David T. Jeanmougin 40,740 (8) * Robert R. Buck 126,424 (9) * All Directors and Executive Officers as a Group (13 persons) 37,354,220 (10) 35.6% *Less than 1% (1) See Principal Shareholders. (2) Includes 40,000 shares held in trust for members of Mr. Kohlhepp's family, 127,344 shares held by a corporation that is controlled by Mr. Kohlhepp, 1,265,350 shares held by a family partnership and options for 44,500 shares which are exercisable within 60 days. (3) Includes options for 4,500 shares which are exercisable within 60 days. (4) Includes 107,648 shares owned by a limited partnership. (5) Includes 118,516 shares owned by Mr. Klekamp's wife. - 4 - (6) Includes options for 3,500 shares which are exercisable within 60 days. Does not include 16,000 shares held in a charitable foundation controlled by Mr. Lillard, of which Mr. Lillard disclaims beneficial ownership. (7) Includes 91,400 shares held in trust for members of Mr. Farmer's family, 2,692 shares owned by his immediate family, 55,920 held by a limited partnership and options for 60,200 shares which are exercisable within 60 days. (8) Includes options for 36,400 shares which are exercisable within 60 days. (9) Includes options for 6,800 shares which are exercisable within 60 days. (10) Includes options for 215,200 shares which are exercisable within 60 days. PROPOSAL NO. 1 AND NO. 2 - ELECTION OF DIRECTORS - ------------------------------------------------ The By-laws of the Company call for the Board of Directors to have at least three members with the specific number to be elected at the meeting established by shareholders. At the present time, the Board consists of eight Directors, and the Board is recommending that this number be retained. The Board is nominating for reelection all current Directors, namely Richard T. Farmer, Robert J. Kohlhepp, Gerald V. Dirvin, Scott D. Farmer, James J. Gardner, Roger L. Howe, Donald P. Klekamp and John S. Lillard. Proxies solicited by the Board will be voted for the election of the eight nominees shown above. All Directors elected at the Annual Shareholders' Meeting will be elected to hold office until the next Annual Meeting or until their successors are elected and qualified. Should any of the nominees become unable to serve, proxies will be voted for any substitute nominee designated by the Board. The Company has no reason to believe that any nominee for election will be unable or unwilling to serve if elected. RECOMMENDATION OF THE BOARD OF DIRECTORS - ---------------------------------------- The Board of Directors recommends a vote in favor of Proposal No.1 and the election of the eight nominees proposed by the Board. VOTE REQUIRED - ------------- THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES VOTING AT THE MEETING IS REQUIRED TO APPROVE PROPOSAL NO. 1. ABSTENTIONS AND BROKER NON-VOTES WILL HAVE NO EFFECT ON THIS VOTE. THE EIGHT NOMINEES RECEIVING THE HIGHEST NUMBER OF VOTES CAST FOR THE POSITIONS TO BE FILLED WILL BE ELECTED. - 5 - PROPOSAL NO. 3 - AMENDMENT TO ARTICLES OF INCORPORATION TO INCREASE AUTHORIZED SHARES OF COMMON STOCK - ----------------------------------------------------------- The Board of Directors of the Company has approved, and is recommending to the shareholders for approval at the Annual Meeting, an amendment to Article Five of the Articles of Incorporation to increase the number of authorized shares of Common Stock from 120 million to 300 million. As of May 31, 1998, 104,610,716 shares were issued and outstanding and the Company had 1,210,700 additional shares reserved for issuance pursuant to stock option plans. At the current level of authorized shares, the Company is unable to declare any meaningful stock split. The Company has regularly utilized Common Stock in acquisitions and intends to continue that practice. The Board of Directors believes that the increase in authorized shares of Common Stock will enable the Company to retain its flexibility in connection with possible future issuances of stock. Holders of Common Stock have no preemptive or other rights to subscribe for additional shares. Additional shares may be issued without shareholder approval. Further issuance of additional shares of Common Stock might dilute, under certain circumstances, either shareholders= equity or voting rights. The authorized but unissued shares of Common Stock could be used to discourage or make more difficult an attempt to effect a change of control of the Company. VOTE REQUIRED - ------------- THE AFFIRMATIVE VOTE OF TWO-THIRDS OF THE SHARES ELIGIBLE TO VOTE ON THE PROPOSED AMENDMENT IS REQUIRED FOR APPROVAL. ABSTENTIONS AND BROKER NON-VOTES HAVE THE SAME EFFECT AS A VOTE AGAINST THE PROPOSAL. OTHER MATTERS - ------------- Any other matters considered at the meeting including adjournment will require the affirmative vote of the majority of shares voting with abstentions and broker non-votes having no effect. VOTING BY PROXY - --------------- All proxies properly signed will, unless a different choice is indicated, be voted "FOR" the establishment of the number of Directors at eight, "FOR" the election of all eight nominees proposed by the Board unless authority is withheld to vote for some or all of those nominees, and "FOR" the amendment to the Articles of Incorporation to increase the authorized shares of common stock. If any other matters come before the meeting or any adjournment, each proxy card will be voted in the discretion of the proxies named therein. - 6 - SHAREHOLDER PROPOSALS - --------------------- Shareholders who desire to have proposals included in the Notice for the 1999 Shareholders' Meeting must submit their proposals in writing to Cintas at its offices on or before May 3, 1999. The form of Proxy for the Company's Annual Meeting of Shareholders grants authority to the designated proxies to vote in their discretion on any matters that come before the meeting except those set forth in the Company's Proxy Statement and except for matters as to which adequate notice is received. In order for a notice to be deemed adequate for the 1999 Shareholders' Meeting, it must be received prior to July 19, 1999. APPOINTMENT OF INDEPENDENT AUDITORS - ----------------------------------- The Board of Directors appointed Ernst & Young LLP as its certified public accountants for fiscal 1999. Ernst & Young LLP has served as certified public accountants for the Company in the past. A member of Ernst & Young LLP will be present at the meeting to make a statement if desired and to answer questions of shareholders. - 7 - MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS - -------------------------------- The Directors and Executive Officers of Cintas Corporation are: Name and Age Position - ----------------------- -------------------------------------- Richard T. Farmer(1) Chairman of the Board 63 Robert J. Kohlhepp(1) Chief Executive Officer and Director 54 Gerald V. Dirvin(3) Director 61 James J. Gardner(1)(2) Director 65 Roger L. Howe(2)(3) Director 63 Donald P. Klekamp(2) Director 66 John S. Lillard(3) Director 68 Scott D. Farmer President, Chief Operating Officer 39 and Director Robert R. Buck Senior Vice President and 50 President - Uniform Rental Division Karen L. Carnahan Vice President and Treasurer 44 William C. Gale Vice President and Chief 46 Financial Officer David T. Jeanmougin Senior Vice President and Secretary 57 John S. Kean III Senior Vice President 58 Ages are as of September 1, 1998. (1) Member of the Executive Committee of the Board of Directors. (2) Member of the Audit Committee of the Board of Directors. (3) Member of the Compensation Committee of the Board of Directors. - 8 - Richard T. Farmer has been with the Company and its predecessors since 1957 and has served in his present position with the Company since 1968. Prior to August 1, 1995, Mr. Farmer also served as Chief Executive Officer. He is also a Director of Fifth Third Bancorp and its subsidiary The Fifth Third Bank, Cincinnati, Ohio, a National Market (NASDAQ) company. He is also the Chairman of Summerhill, Inc. Robert J. Kohlhepp has been a Director of the Company since 1979. He has been employed by the Company since 1967 serving in various executive capacities including Vice President - Finance until 1979 when he became Executive Vice President. He served in that capacity until October 23, 1984, when he was elected President, a position he held until July 1997. Mr. Kohlhepp was elected to his present position of Chief Executive Officer on August 1, 1995. He is also a Director of The Mead Corporation, Dayton, Ohio, a New York Stock Exchange (NYSE) company. Gerald V. Dirvin was elected a Director of Cintas in 1993. Mr. Dirvin joined The Procter & Gamble Company, a Cincinnati-based consumer goods marketing company and a NYSE company, in 1959 and served in various management positions. He retired as Executive Vice President and as a Director in 1994. Mr. Dirvin is also a Director of Fifth Third Bancorp, Cincinnati, Ohio, a NASDAQ company, and Northern Telecom Limited, Toronto, Canada, a NYSE company. James J. Gardner served in various management positions with Cintas from 1956 until his retirement in 1988. Mr. Gardner has served as a Director of the Company since 1969. Roger L. Howe has been a Director of Cintas since 1979. He was the Chairman of the Board of U.S. Precision Lens, Inc., a manufacturer of optics for the instrument, photographic and television industries, until his retirement on September 1, 1997. Mr. Howe had held that position in the firm for over five years. Mr. Howe is a Director of Star Banc Corporation, Cincinnati, Ohio, a NYSE company, and its subsidiary Star Bank, National Association; Cincinnati Bell Inc., a NYSE company; and Baldwin Piano and Organ Company, a Loveland, Ohio, based company which is the largest domestic manufacturer of keyboard musical instruments and a NASDAQ company. Donald P. Klekamp was elected a Director of Cintas in 1984. Mr. Klekamp is a senior partner in the Cincinnati law firm of Keating, Muething & Klekamp, P.L.L., which serves as counsel for the Company. John S. Lillard has been a Director of Cintas since 1978. He is Chairman of Wintrust Financial Corporation, a bank holding company in Illinois. He was a Founder of JMB Institutional Realty Corporation, a registered investment advisor, where he served as President from 1978 to 1991. In 1991, he became Chairman-Founder until his retirement in June 1996. He is also a Director of Stryker Corporation, a medical equipment company, and a Director of Lake Forest Bank and Trust Company, a bank holding company. Scott D. Farmer joined Cintas in 1981. He has served in various management positions including President of Cintas Sales Corporation, Vice President - National Account Division and Vice President Marketing and Merchandising. He was elected a Director of Cintas in 1994. In July 1997, he was elected President and Chief Operating Officer of the Company. Robert R. Buck joined Cintas in 1982. He served as Senior Vice President - Finance and Chief Financial Officer from 1982 to 1991, and Senior Vice President - - Midwest Region from 1991 to 1997. In July 1997, he was elected President - Uniform Rental Division. Karen L. Carnahan joined Cintas in 1979. She has held various accounting and finance positions with the Company. In March 1992, she was elected Treasurer of the Company and was elected Vice President of the Company in July 1997. - 9 - William C. Gale joined Cintas in April 1995. He is presently responsible for the areas of finance, accounting and administration. Prior to joining Cintas, Mr. Gale was associated with International Paper, a forest products, paper and packaging company and a NYSE company where he served as auditor since February 1994. Mr. Gale also held various financial executive positions between 1982 and1994 with Occidental Petroleum Corporation, an oil products and chemical concern and a NYSE company. David T. Jeanmougin joined Cintas in August 1991 as Senior Vice President - Finance and was responsible for the areas of finance, accounting and administration. He served in that capacity until April 1995, when he was named Secretary of the Company and Senior Vice President. In this capacity he is responsible for the area of acquisitions and several other key administrative areas. John S. Kean III joined Cintas in August 1986 upon the acquisition of Red Stick Services where he served as President. He was appointed Senior Vice President in 1986 and is responsible for operations in Louisiana, Mississippi, Alabama, Arkansas and Tennessee. James J. Gardner is the brother-in-law of Richard T. Farmer. Scott D. Farmer is the son of Richard T. Farmer. None of the other Executive Officers and Directors are related. BOARD ACTIONS AND COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT - ---------------------------------------------------------------- The Board of Directors met on four occasions in fiscal 1998. The Executive Committee is entitled through authorization by the Board of Directors and by Washington law to perform substantially all of the functions of the Board of Directors between meetings of the Board. The Executive Committee took action by written consent on thirty-seven occasions in fiscal 1998. The Audit Committee reviews the Company's internal accounting operations, monitors relationships between the Company and its independent accountants and recommends the employment of independent auditors. The Audit Committee met on two occasions in fiscal 1998. The Compensation Committee establishes compensation levels for all executives and administers the Company's stock option plans. This Committee met on one occasion and took action by written consent on ten occasions in fiscal 1998. The Company does not have a nominating committee. Outside directors are paid an annual fee of $9,200 plus $1,625 for each Board meeting attended and $900 for each Committee meeting attended. Directors who are executive officers are not paid Directors' fees nor do they participate in the 1994 Directors' Stock Option Plan. Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers, directors and persons who own more than ten percent of a registered class of the Company's equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission. These persons are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based solely on its review of the copies of such forms received by it, or written representation from certain reporting persons that no Form 5's were required for those persons, the Company believes that during the period of June 1, 1997, through May 31, 1998, all filing requirements of such persons were met. - 10 - EXECUTIVE COMPENSATION - ---------------------- The following table summarizes the annual and long-term compensation of the Company's Chief Executive Officer and each of the Company's other four most highly compensated Executive Officers for the years ended May 31, 1998, 1997 and 1996. SUMMARY COMPENSATION TABLE
Annual Long Term Compensation Compensation -------------------- ------------- Shares Other Annual Underlying All Other Name and Principal Salary Bonus Compensation Option Compensation Position Year ($) ($) ($) Grants (#) ($)(1) - ---------------------- ------- -------- -------- ------------ ------------ ------------ Richard T. Farmer 1998 300,000 120,828 48,699(2) -- 179,562 Chairman of the 1997 286,867 188,759 48,522(2) 10,000 195,827 Board 1996 278,512 207,813 61,061(2) 20,000 209,340 Robert J. Kohlhepp 1998 300,000 246,667 58,650(3) -- 52,718 Chief Executive 1997 275,391 207,461 -- 10,000 55,454 Officer and Director 1996 267,370 174,202 -- 100,000 58,277 Scott D. Farmer 1998 250,000 165,556 -- 60,000 7,139 President, Chief 1997 180,000 32,563 -- 10,000 5,738 Operating Officer 1996 150,000 23,866 -- 10,000 6,183 and Director Robert R. Buck 1998 250,000 194,450 -- 40,000 7,019 Senior Vice President 1997 230,000 185,745 -- 10,000 6,210 and President - 1996 200,000 161,869 -- 10,000 6,699 Uniform Rental Division David T. Jeanmougin 1998 229,237 82,780 -- 10,000 6,976 Senior Vice President 1997 220,420 72,518 -- -- 6,068 and Secretary 1996 214,000 69,715 -- 10,000 6,571 (1) The Company maintains a split-dollar life insurance program for Messrs. R. Farmer and Kohlhepp. Under this program, the Company has purchased insurance policies on the lives of Mr. R. Farmer and his wife and Mr. Kohlhepp and his wife. Messrs. R. Farmer and Kohlhepp are responsible for a portion of the premiums and the Company pays the remainder. Upon the death of Messrs. R. Farmer or Kohlhepp and their spouses, the Company will receive that portion of the benefits paid that equals the premiums paid by the Company on that policy. The life insurance trust established by the decedent will receive the remainder of the death benefits. The actuarially projected current dollar value of the benefit to Messrs. R. Farmer and Kohlhepp of the premiums paid to the insurer under these policies for the fiscal years ended May 31, 1998, 1997 and 1996 is $172,046, $189,185 and $202,007, respectively, for Mr. R. Farmer and $45,363, $49,483 and $51,348 respectively, for Mr. Kohlhepp. These amounts are included above. - 11 - The Cintas Partners' Plan is a non-contributory employee stock ownership plan and profit sharing plan with a 401(k) savings feature which covers substantially all employees. Included above are the dollars contributed by the Company pursuant to the Partners' Plan. (2)Represents compensation associated with the use of the Company's aircraft ($18,134, $20,078 and $52,766 in 1998, 1997 and 1996, respectively), financial planning ($20,000 and $18,330 in 1998 and 1997 respectively) and other expense reimbursements. (3)Represents compensation associated with the use of the Company's aircraft ($33,202), financial planning ($15,000) and other expense reimbursements.
STOCK OPTIONS - ------------- The following table sets forth information regarding stock options granted to the executives named in the Summary Compensation Table during the fiscal year ended May 31, 1998: OPTION GRANTS IN LAST FISCAL YEAR
Percent of Total Potential Realizable Options Value at Assumed Number of Granted Annual Rates of Stock Shares to Price Appreciation for Underlying Employees Exercise Option Term ($) Options In Fiscal Price Expiration ----------------------------- Name Granted 1997 ($/Sh.) Date 5% 10% - ------------ ----------- ---------- --------- ----------- ----------- ------ Richard T. __ N/A N/A N/A N/A N/A Farmer Robert J. -- N/A N/A N/A N/A N/A Kohlhepp Scott D. 60,000 5.5% 35.3125 07/28/07 1,332,470 3,376,742 Farmer Robert R. 40,000 3.7% 35.3125 07/28/07 888,314 2,251,161 Buck David T. 10,000 .9% 35.3125 07/28/07 222,078 562,790 Jeanmougin
- 12 - The following table sets forth information regarding stock options exercised by the executives named in the Summary Compensation Table during fiscal 1998 and the value of in-the-money unexercised options held by them as of May 31, 1998: AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
Number of Shares Value of Unexercised Underlying Unexercised In-the-Money Options at Shares Option at May 31, 1998 May 31, 1998($)(1) Acquired on Value --------------------------- --------------------------- Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable - -------------------- ------------ ----------- ----------- ------------- ----------- ------------- Richard T. Farmer 20,000 665,000 20,000 20,000 537,344 490,781 Robert J. Kohlhepp 1,500 46,000 30,500 158,000 1,166,594 4,432,750 Scott D. Farmer 7,000 212,042 56,200 102,000 2,094,462 1,794,375 Robert R. Buck --- --- 3,200 74,800 110,200 1,372,175 David T. Jeanmougin --- --- 22,400 77,600 771,200 2,276,050 (1)Value is calculated as the difference between the fair market value of the Common Stock on May 31, 1998 ($45.6875 per share) and the exercise price of the options.
REPORT OF THE COMPENSATION COMMITTEE - ------------------------------------ The Compensation Committee of the Board of Directors is composed of three independent, outside directors. The members of the Committee for fiscal 1998 were Messrs. Dirvin, Howe and Lillard. The Committee has the overall responsibility of reviewing and recommending specific compensation levels for executive officers and key management to the full Board of Directors. The Committee is also charged with reviewing the performance of the executive officers in relation to overall Company performance. The Company's stock option plans are also administered by the Committee. Compensation decisions for fiscal 1998 followed the same pattern as fiscal 1997. The Company's executive compensation policies are designed to support the corporate objective of maximizing the long term value of the Company to its shareholders and employees. To achieve this objective, the Committee believes it is important to provide competitive levels of compensation to attract and retain the most qualified executives, to recognize individuals who exceed expectations and to link closely overall corporate performance and executive pay. The methods by which the Committee believes the Company's long term objectives can be achieved are through incentive compensation plans and the issuance of options to purchase the Company's common stock. - 13 - The Committee has established three primary components of the Company's executive compensation plan. The three components are: - base compensation - performance incentive compensation - stock-based performance compensation through stock option grants The Omnibus Budget Reconciliation Act of 1993 provides that compensation in excess of $1,000,000 per year paid to the chief executive officer of a company as well as the other executive officers listed in the compensation table will no longer be deductible unless the compensation is performance-based and approved by shareholders. This law was not considered by the Committee in determining fiscal 1998 compensation since compensation levels were not in excess of the amounts deductible under the law. BASE COMPENSATION - ----------------- The Committee annually reviews base salaries of executive officers. Factors which influence decisions made by the Committee regarding base salaries are levels of responsibility and potential for future responsibilities, salary levels offered by competitors and overall performance of the Company. The Committee's practice in establishing salary levels is based in part upon overall Company performance and is not based upon any specific objectives or policies but reflects the subjective judgment of the Committee. However, specific annual performance goals are established for each executive officer. Based on the Committee's comparison of the Company's overall compensation levels as a percent of revenues and net income to comparable companies in the industry, the Committee believes its overall compensation levels are in the middle of the range. PERFORMANCE INCENTIVE COMPENSATION - ---------------------------------- The performance incentive compensation, which is paid out in the form of an annual cash bonus, was established by the Committee to provide a direct financial incentive to achieve corporate and operating goals. The basis for determining performance incentive compensation is strictly quantitative in nature. At the beginning of each fiscal year, the Committee establishes a target bonus for certain executives based on target levels of increases in earnings per share. Cash bonuses paid to other executives are based on a percentage of operating profits of the particular division served by that officer. Those percentages are not disclosed because they could be used to determine divisional operating profits which are otherwise not publicly available. STOCK OPTION GRANTS - ------------------- Executive compensation to reward past performance and to motivate future performance is also provided through stock options granted under the 1992 Stock Option Plan. The purpose of the plan is to encourage executive officers to maintain a long-term stock ownership position in the Company in order that their interests are aligned with those of the Company's shareholders. The Committee in its discretion has the authority to determine participants in the plan, the number of shares to be granted and the option price and term. The Committee has not established specific stock option target awards for participants. Consideration for stock option awards are evaluated on a subjective basis and granted to participants until an ownership position exists which is consistent with the participant's current responsibilities. Options granted to executive officers in Fiscal 1998 can be found on page 11 under the Option Grants Table. - 14 - CHIEF EXECUTIVE OFFICER COMPENSATION - ------------------------------------ The Committee establishes Mr. Kohlhepp's base salary based primarily on a subjective evaluation of the Company's prior year's financial results, past salary levels and compensation paid to other chief executive officers in the Company's industry. Based on the Committee's comparison of the Company's overall compensation level for Mr. Kohlhepp as a percent of revenue and net income to comparable companies in the industry, the Committee believes his overall compensation level is in the middle of the range. The Committee also establishes at the beginning of each year a performance incentive bonus arrangement for Mr. Kohlhepp. Based on the Company's belief that shareholder value is best enhanced by increases in earnings per share, the Committee based this arrangement on target levels of increases in earnings per share. The program provided for no bonus if earnings per share did not exceed a minimum threshold of a 10% increase over the prior year's earnings per share, which was $1.91 (prior to restatement for stock split). The bonus potential ranged from 10% of base salary if earnings per share increased by nineteen cents over the prior year up to a maximum of 90% if earnings per share increased by forty-eight cents over the prior year. John S. Lillard - Chairman Gerald V. Dirvin Roger L. Howe - 15 - COMMON STOCK PERFORMANCE GRAPH - ------------------------------ The following graph summarizes the cumulative return on $100 invested in the Company's Common Stock, the S & P 500 Stock Index and the common stocks of a representative group of companies in the uniform related industry (the "Peer Index"). The companies included in the Peer Index are Angelica Corporation, G & K Services, Inc., UniFirst Corporation and Unitog Company. National Service Industries which is no longer in the same line of business as the peer group is no longer included in the peer group. Total shareholder return was based on the increase in the price of the stock and assumed investment of all dividends. Further, total return was weighted according to market capitalization of each company. The companies in the Peer Index are not the same as those considered by the Compensation Committee. MEASUREMENT CINTAS S&P 500 PEER PERIOD CORP INDEX GROUP (QUARTER END) - ------------- ------ ------- ----- MAY, 93 100 100 100 AUG, 93 106 104 105 NOV, 93 105 104 111 FEB, 94 115 106 116 MAY, 94 114 104 114 AUG, 94 116 109 115 NOV, 94 126 105 109 FEB, 95 139 114 110 MAY, 95 127 125 119 AUG, 95 139 133 133 NOV, 95 169 144 141 FEB, 96 178 153 155 MAY, 96 198 161 180 NOV, 96 224 184 185 FEB, 97 199 193 166 MAY, 97 230 208 169 AUG, 97 259 222 187 NOV, 97 289 237 197 FEB, 98 317 261 216 MAY, 98 341 272 203 OTHER MATTERS Cintas knows of no other matters to be presented at the meeting other than those specified in the Notice. By order of the Board of Directors. David T. Jeanmougin Secretary -----END PRIVACY-ENHANCED MESSAGE-----