AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 18, 1997
================================================================================
SECURITIES AND EXCHANGE COMMISSION
-----------------
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
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
[X] Definitive Proxy Statement Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or 14a-12
PRIME SERVICE, INC.
(Name of Registrant as Specified in Its Charter)
Inapplicable
(Name of Persons 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)(1) and 0-11.
1. Title of each class of securities to which transaction applies: Inapplicable
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:
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] 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 identify 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.
Amount Previously Paid:
Form, Schedule or Registration Statement No.:
Filing Party:
Date Filed:
================================================================================
<PAGE>
[PRIME SERVICE, INC. LOGO]
PRIME SERVICE, INC.
16225 Park Ten Place, Suite 200
Houston, Texas 77084
April 18, 1997
Dear Fellow Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
to be held on Friday, May 16, 1997, at 10:00 a.m., at the Houston Marriott
Westside, 13210 Katy Freeway, Houston, Texas 77079.
At the meeting you will be asked to consider and vote upon (1) the
election of six directors, (2) the approval of appointment of the Company's
independent auditors, and (3) such other business as may properly come before
the meeting or any adjournment thereof.
Representation of your shares at the meeting is very important. We urge
each shareholder, whether or not you now plan to attend the meeting, to promptly
date, sign and return the enclosed proxy in the envelope furnished for this
purpose. If you do attend the meeting, you may, if you wish, revoke your proxy
and vote in person. If you are planning on attending the Annual Meeting, please
check the box on the reverse side of the enclosed Proxy Card where indicated.
It is always a pleasure to meet with our shareholders, and I personally
look forward to seeing as many of you as possible at the Annual Meeting.
Sincerely,
/s/ THOMAS E. BENNETT
Thomas E. Bennett
Chairman of the Board, President
and Chief Executive Officer
<PAGE>
[PRIME SERVICE, INC. LOGO]
PRIME SERVICE, INC.
16225 Park Ten Place, Suite 200
Houston, Texas 77084
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FRIDAY, MAY 16, 1997
To the Shareholders of Prime Service, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of
Prime Service, Inc., a Delaware corporation, will be held at the Houston
Marriott Westside, 13210 Katy Freeway, Houston, Texas 77079, on Friday, May 16,
1997, at 10:00 a.m. local time, for the following purposes:
(1) to elect six members to the Board of Directors to serve until the
1998 Annual Meeting of Shareholders;
(2) to ratify the appointment of Coopers & Lybrand, L.L.P. as
independent auditors for the Company for the fiscal year ending December 31,
1997; and
(3) to transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on April 4,
1997, as the record date for the determination of shareholders entitled to
receive notice of and to vote at the Annual Meeting. A list of all shareholders
entitled to vote is on file at the principal offices of the Company, 16225 Park
Ten Place, Suite 200, Houston, Texas 77084, and will be available for inspection
by any shareholder during the meeting.
SO THAT WE MAY BE SURE YOUR SHARES WILL BE VOTED AT THE ANNUAL
MEETING, PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY. For your
convenience, a postpaid return envelope is enclosed for your use in returning
your proxy. If you attend the meeting, you may revoke your proxy and vote in
person.
By Order of the Board of Directors,
/s/ KEVIN L. LOUGHLIN
Kevin L. Loughlin
Director of Finance, Treasurer
and Secretary
April 18, 1997
<PAGE>
[PRIME SERVICE, INC. LOGO]
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 16, 1997
SOLICITATION AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Prime Service, Inc. ("Prime" or the
"Company") to be used at the Annual Meeting of Shareholders to be held at the
Houston Marriott Westside, 13210 Katy Freeway, Houston, Texas 77079, on Friday,
May 16, 1997, at 10:00 a.m. local time, and at any and all adjournments thereof.
This Proxy Statement and the enclosed proxy are being mailed to the shareholders
on or about April 18, 1997.
Unless otherwise indicated thereon, proxies in the accompanying form
which are properly executed and duly returned to the Company and which are not
revoked will be voted:
(1) for each of the six nominees for director to serve as directors
until the 1998 Annual Meeting of Shareholders, and
(2) for ratification of the appointment of Coopers & Lybrand, L.L.P. as
independent auditors for the Company for the year ending December 31, 1997.
Shares represented by proxies marked as abstentions on any matter will
not be voted on that matter, although they will be counted for quorum purposes;
brokers' shares held in "street name" and not voted on behalf of shareholders
will not be counted in tabulating votes. Votes at the Annual Meeting will be
tabulated by an Inspector of Election selected by the Company.
The Board of Directors is not presently aware of other proposals which
may be brought before the Annual Meeting. In the event other proposals are
brought before the Annual Meeting, the persons named in the enclosed form of
proxy will vote in accordance with what they consider to be the best interests
of the Company and its shareholders.
The cost of soliciting proxies will be borne by the Company. In
addition to the Company's solicitation by mail, proxies may be solicited
personally or by telephone by the management of the Company. The Company may
request brokerage houses or other custodians, nominees and fiduciaries to
forward proxies and proxy material to the beneficial owners of the shares held
of record by such persons and will reimburse them for their reasonable
forwarding expenses.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is exercised. Proxies may be revoked by
filing with the Secretary of the Company written notice of revocation, by
executing and delivering a later-dated proxy, or by appearing and voting in
person at the meeting.
-1-
<PAGE>
VOTING SECURITIES AND RECORD DATE
The Board of Directors of the Company has fixed the close of business
on April 4, 1997, as the Record Date (the "Record Date") for the determination
of shareholders entitled to notice of and to vote at the Annual Meeting and any
adjournments thereof.
The issued and outstanding voting securities of the Company as of the
Record Date consist of 27,991,714 shares of common stock, $0.01 par value per
share ("Common Stock"), each of which is entitled to one vote. Shares of Common
Stock are not entitled to cumulative voting rights in the election of Directors.
The presence in person or by proxy of the holders of a majority of the shares of
Common Stock outstanding on the Record Date will be necessary to constitute a
quorum at the Annual Meeting.
Assuming the presence of a quorum of the Common Stock, the affirmative
vote of the holders of a plurality of the shares of Common Stock represented in
person or by proxy at the meeting is required for the election of Directors, and
the affirmative vote of the holders of a majority of such shares of Common Stock
represented at the meeting is required for ratification of the appointment of
Coopers & Lybrand, L.L.P. as independent auditors for the fiscal year ending
December 31, 1997.
PROPOSAL ONE
ELECTION OF DIRECTORS
The persons designated as proxies in the enclosed proxy card intend,
unless the proxy is marked with contrary instructions, to vote for the following
nominees as directors to serve until the 1998 Annual Meeting of Shareholders and
until their successors have been duly elected and qualified: Mr. Thomas E.
Bennett, Mr. Jon P. Hedley, Mr. Robert M. Howe, Mr. Christopher J. O'Brien, Mr.
Charles J. Philippin, and Mr. Christopher J. Stadler. Each nominee has consented
to serve if elected. The Board of Directors has no reason to believe that any
nominee for election as a director will not be a candidate or will be unable to
serve, but if for any reason one or more of these nominees is unavailable as a
candidate or unable to serve when election occurs, the persons designated as
proxies in the enclosed proxy card, in the absence of contrary instructions,
will in their discretion vote the proxies for the election of any of the other
nominees or for a substitute nominee or nominees, if any, selected by the Board
of Directors. The affirmative vote of a plurality of the votes cast at the
Annual Meeting is required for the election of each nominee for director. THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH OF THE FOLLOWING
NOMINEES FOR DIRECTOR.
The following sets forth information concerning the six nominees for
election as directors at the Annual Meeting, including information as to such
nominee's age as of December 31, 1996, position with the Company and business
experience during the past five years:
THOMAS E. BENNETT, age 51, joined the Company in 1975 as Equipment
Manager. He became a Rental Equipment Yard Manager in 1978 of the Company's
largest distribution location, and was named Regional Manager in 1979. In 1987,
Mr. Bennett was promoted to Vice President of the Southwest Division. In 1988,
he was selected as the Vice President of Operations of the Company and was named
President, Chief Executive Officer and a director in 1990. Mr. Bennett was
elected as Chairman of the Board in 1997. Prior to joining the Company, Mr.
Bennett worked for Tool Crib, Inc. for 11 years.
JON P. HEDLEY, age 35, became a director of Prime in September 1996. He
has been an executive of Investcorp, S.A. ("Investcorp"), its predecessor or one
of more of its wholly-owned subsidiaries since April 1990. Mr. Hedley is a
director of Saks Holdings, Inc., Simmons Company and CSK Auto, Inc.
ROBERT M. HOWE, age 59, became a director of the Company on October 29,
1996. For the last five years prior to his retirement this year, Mr. Howe served
as President, Chief Operating Officer and a director of MAPCO, Inc., a
diversified energy company. Mr. Howe is a director of Carbide Graphite Group,
Inc.
CHRISTOPHER J. O'BRIEN, age 38, became director of Prime in December
1994. He has been an executive of Investcorp, its predecessor or one or more of
its wholly-owned subsidiaries since November 1993. Mr. O'Brien is a director of
Simmons Company and CSK Auto, Inc.
-2-
<PAGE>
CHARLES J. PHILIPPIN, age 45, became a director of Prime in December
1994. He has been an executive of Investcorp, its predecessor or one or more of
its wholly-owned subsidiaries since October 1994. Prior to joining Investcorp,
Mr. Philippin was a partner with Coopers & Lybrand L.L.P. Mr. Philippin is a
director of Saks Holdings, Inc., Simmons Company and CSK Auto, Inc.
CHRISTOPHER J. STADLER, age 32, became a director of Prime in September
1996. He has been an executive of Investcorp, its predecessor or one or more of
its wholly-owned subsidiaries since April 1, 1996. Prior to joining Investcorp,
Mr. Stadler was a Director with CS First Boston Corporation. Mr. Stadler is a
director of CSK Auto, Inc.
COMPENSATION OF DIRECTORS
The Company pays no additional remuneration to its employees or to
executives of Investcorp for serving as directors. Other directors will receive
an annual retainer of $25,000 in cash and incentive compensation, including but
not limited to restricted stock, $1,500 for each regular or special meeting and
reimbursement of out-of-pocket expenses incurred in attending meetings of the
Board of Directors and any committees of the Board on which they serve.
ACTIVITIES OF THE BOARD
The Board of Directors held two meetings during 1996. Each Director
attended at least 75% of the meetings of the Board and of any committee of which
he was a member.
The Board of Directors has two standing committees, Audit and
Compensation. The Board of Directors does not have a nominating committee.
Robert M. Howe is currently the sole member of the Audit Committee.
The Audit Committee was formed in December 1996, and did not meet in 1996.
Functions of the Audit Committee include recommending to the Board of Directors
the independent auditors, approving the estimated fees for such services,
reviewing the audit reports and making such recommendations to the Board of
Directors concerning the audit reports as may be appropriate, meeting with the
independent auditors, financial officers of the Company and other members of
management to review the results of audits, and evaluating the adequacy of the
internal control system of the Company.
Members of the Compensation Committee are Jon P. Hedley, Christopher J.
O'Brien, Charles J. Philippin, and Christopher J. Stadler. The Compensation
Committee was formed in 1997. Prior to such time, the Board of Directors
undertook the duties of the Compensation Committee. Functions of the
Compensation Committee include establishing and reviewing compensation for the
officers of the Company and reviewing all employee benefit programs, including
the recommendation of changes in the benefits.
-3-
<PAGE>
EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth the name, age and position of each of
the executive officers and certain key employees of the Company. Officers of the
Company are elected by the Board of Directors of the Company and serve at the
discretion of the Board of Directors.
NAME AGE POSITIONS
Thomas E. Bennett 51 Chairman of the Board, President and Chief
Executive Officer
Brian Fontana 39 Executive Vice President and Chief
Financial Officer
Kevin L. Loughlin 47 Director of Finance, Treasurer and
Secretary
Peter A. Post 53 Vice President of Operations
James O. York 53 Vice President of Sales and Marketing
Stanton P. Eigenbrodt 31 Corporate General Counsel and Assistant
Secretary
John D. Latimer 51 Controller, Assistant Treasurer and
Assistant Secretary
Gerald E. Lane 57 Director of Central Division
Michael Gordon 45 Director of Eastern Division
Rick L. McCurry 50 Director of Western Division
Mr. Bennett's biography is set forth above.
Brian Fontana joined Prime on April 1, 1996 as Executive Vice
President and Chief Financial Officer. Mr. Fontana was employed previously with
National Convenience Stores, Incorporated (NCS), a company traded on the New
York Stock Exchange until it was acquired by Diamond Shamrock in 1995. Mr.
Fontana joined NCS in 1990 as Assistant Treasurer and was appointed to Treasurer
in February 1992. In August 1993, he was promoted to Vice President and
Treasurer of NCS, a position he held until December 1993, when Mr. Fontana was
named Vice President and Chief Financial Officer of NCS.
Kevin L. Loughlin joined the Company in 1980 as Controller and Vice
President of Finance and held this position until 1990, when he was named
Executive Vice President, Chief Financial Officer, Secretary and Treasurer. Mr.
Loughlin became Director of Finance, Treasurer and Secretary in April 1996. From
1973 to 1979, Mr. Loughlin was employed by W.R. Grace where he served in various
accounting and financial capacities. Prior to joining W.R. Grace, Mr. Loughlin
was an accounting supervisor for Dun & Bradstreet from 1971 to 1973.
Peter A. Post joined the Company in 1979 as a Rental Equipment Yard
Manager. In December 1979, Mr. Post was promoted to Regional Manager for East
Texas, Louisiana and Alabama, where he served until 1988, when he was named Vice
President of Operations for the Southwest Division. In January 1990, Mr. Post
became Vice President, Southwest Division. Mr. Post became Vice President of
Operations in August 1995, and was elected an officer of the Company with the
same title in September 1996.
James O. York joined the Company in April, 1996 as the Vice President
of Sales and Marketing. Prior to joining the Company, Mr. York held similar
positions during the past 17 years with Tate, Inc. and Trak International, both
of which are manufacturers of construction and industrial equipment.
Stanton P. Eigenbrodt joined the Company in February, 1997 as
Corporate General Counsel and Assistant Secretary. Prior to joining the Company,
Mr. Eigenbrodt was an attorney with the Dallas, Texas office of Gibson, Dunn &
Crutcher LLP for the last approximately six and one half years.
John D. Latimer joined the Company in 1979, and served as Assistant
Controller of the Company from 1979 to 1989. In 1982, he was elected to the
office of Assistant Secretary of the Company. In December 1989, he was named
Controller and Assistant Treasurer of the Company.
Gerald E. Lane joined the Company in 1981 as a Rental Equipment Yard
Manager. In 1983, he was promoted to Regional Manager, and in October 1992 was
named Vice President, Southeast Division. Mr. Lane was named Director of the
Central Division in September 1995. Prior to joining the Company, Mr. Lane
worked for Hertz Equipment Rental Company for 18 years.
-4-
<PAGE>
Michael Gordon joined the Company in 1981 as a sales representative.
In 1982, he was promoted to Rental Equipment Yard Manager. In 1988, Mr. Gordon
was promoted to Regional Manager for the Houston area. In 1993 he became
Regional Manager for the Company's California Region. Mr. Gordon was promoted to
Director of the Eastern Division in September 1995. Prior to joining the
Company, Mr. Gordon was employed by JLG Industries for three years.
Rick L. McCurry joined the Company in 1989 as Regional Manager for
North Texas and Oklahoma. He remained in this position until September 1995 when
he was named Director of the Western Division. Prior to joining the Company, Mr.
McCurry served as General Manager at Zuni Rental in Albuquerque, New Mexico for
six years.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1996, the Company had no compensation committee or other committee
of the Board of Directors performing similar functions. Decisions concerning
compensation of executive officers were made by the Company's Board of
Directors.
-5-
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all cash compensation earned in the
previous three years by the Company's Chief Executive Officer and each of the
other four most highly compensated executive officers whose remuneration
exceeded $100,000 (collectively, the "Named Executive Officers"). The current
compensation arrangements for each of these officers are described in
"Employment Arrangements".
<TABLE>
<CAPTION>
PRIME
LTIP (OPTIONS) ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) PAYOUTS(2) (#)(3) COMPENSATION(4)
- -------------------------------------- ---- -------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Thomas E. Bennett ................. 1996 $240,000 $408,000 -- 154,275 $4,750
Chief Executive Officer ........... 1995 225,000 330,000 -- 58,352 4,620
1994 172,500 95,757 $74,000 -- 4,620
Brian Fontana ..................... 1996 120,000 144,000 -- 62,218 --
Executive Vice President
and
Chief Financial Officer (5)
Kevin L. Loughlin ................. 1996 150,000 180,000 -- 25,410 4,750
Director of Finance, .............. 1995 140,000 160,000 -- 19,438 4,620
Treasurer and Secretary ........... 1994 135,600 63,544 47,017 -- 4,620
Peter A. Post ..................... 1996 150,000 180,000 -- 19,965 4,750
Vice President of ................. 1995 130,625 140,000 -- 16,861 4,620
Operations ........................ 1994 110,500 41,387 38,040 -- 4,620
James O. York ..................... 1996 89,022 112,500 -- 32,924 --
Vice President of Sales
and Marketing (5)
</TABLE>
- -----------
(1) Earned in year shown but paid in subsequent year.
(2) Amounts paid upon termination of the phantom stock plan of Artemis,
S.A., the owner of the Company prior to its purchase in 1994 by
Investcorp and a group of international investors (the "1994
Acquisition").
(3) Following the closing of the 1994 Acquisition, certain members of
management were offered the opportunity to purchase shares of Common
Stock from the original investors at a price of $3.86 per share (the
price per share paid by the original participants in the 1994
Acquisition). The number of shares purchased by the Named Executive
Officers offered such opportunity were as follows: Thomas E. Bennett
(58,352); Kevin L. Loughlin (19,438); Peter A. Post (16,861). Upon
starting with the Company in April 1996, Messrs. Fontana and York were
offered the opportunity to purchase shares of Common Stock from the
original investors at the same price of $3.86 per share. Messrs.
Fontana and York purchased 25,918 shares and 12,959 shares,
respectively.
(4) Amounts paid pursuant to the Company's defined contribution 401(k) plan
matching program.
(5) Mr. Fontana and Mr. York started on April 1, 1996, and the information
presented herein is for the 9 month period from April 1, 1996 to
December 31, 1996. Mr. Fontana and Mr. York had base annual salary
rates for 1996 of $160,000 and $125,000, respectively. The bonus
payments for Mr. Fontana and Mr. York were determined by prorating the
bonus that would have been earned had Messrs. Fontana and York worked
all of 1996 based on the actual number of days worked in 1996.
-6-
<PAGE>
The following table provides information with respect to stock options
granted during the fiscal year ended December 31, 1996 to the Named Executive
Officers:
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE
PERCENT VALUE AT
OF TOTAL ASSUMED
OPTIONS ANNUAL
GRANTED RATES
NUMBER OF TO OF STOCK
SECURITIES EMPLOYEES PRICE
UNDERLYING IN EXERCISE OF APPRECIATION
OPTIONS FISCAL BASE PRICE EXPIRATION FOR OPTION
NAME GRANTED YEAR PER SHARE DATE TERM (e)5%(c) 10%(d)
- ------------------------------- ------- ----- ------ ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Thomas E. Bennett ........ 154,275(a) 40.0% $23.50 Nov. 30, 2006 $2,280,185 $5,777,599
Brian Fontana ............ 25,918(b) 6.7 3.86 May 1, 2006 62,981 159,396
36,300(a) 9.4 23.50 Nov. 30, 2006 536,514 1,359,435
Kevin L. Loughlin ........ 25,410(a) 6.6 23.50 Nov. 30, 2006 375,560 951,605
Peter A. Post ............ 19,965(a) 5.2 23.50 Nov. 30, 2006 295,083 747,689
James O. York ............ 12,959(b) 3.4 3.86 May 1, 2006 31,490 79,698
19,965(a) 5.2 23.50 Nov. 30, 2006 295,083 797,689
</TABLE>
- -----------
(a) The options are for shares of Common Stock and were granted on October
31, 1996. The options vest at 20% per year over five years. To the
extent not earlier vested or terminated, all options will vest on the
tenth anniversary of the date of grant and will expire 30 days
thereafter if not exercised. All options will also vest upon certain
changes in control. The options contain a reload feature which provides
that to the extent a Named Executive Officer exercises an option using
previously owned shares of Common Stock to pay the exercise price, such
Named Executive Officer shall receive options for a number of shares of
Common Stock equal to such number of previously owned shares.
(b) The options are for shares of Common Stock and were granted on April 1,
1996. 20% of the options vested on December 31, 1996. The remaining
options will vest 20% at December 31, 1997, and 30% on each of December
31, 1998 and 1999. To the extent not earlier vested or terminated, all
options will vest on the tenth anniversary of the date of grant and
will expire 30 days thereafter if not exercised. All options will also
vest upon certain changes in control.
(c) Represents an assumed market price per share of $6.29 on May 1, 2006,
and $38.28 on November 30, 2006.
(d) Represents an assumed market price per share of $10.01 on May 1, 2006,
and $60.95 on November 30, 2006.
(e) The dollar amounts under columns headed 5% and 10% represent the
hypothetical gain or "option spread" that would exist for the options
based on the required assumed 5% and 10% annual compounded rates of
share price appreciation over the full option term.
-7-
<PAGE>
The following table contains certain information regarding options to
purchase shares of Common Stock held as of December 31, 1996 by each of the
Named Executive Officers. None of such Named Executive Officers exercised any
options during fiscal 1996.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
HOLDINGS OPTIONS AT FY-END AT FY-END (a)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE / UNEXERCISABLE
Thomas E. Bennett 23,340 / 189,287 $551,758 / 1,444,784
Brian Fontana 5,183 / 57,035 $122,526 / 635,375
Kevin L. Loughlin 7,775 / 37,073 $183,801 / 377,353
Peter A. Post 6,744 / 30,082 $159,428 / 319,026
James O. York 2,591 / 30,333 $61,251 / 324,960
- -----------
(a) All of the options for each Named Executive Officer are in-the-money
as of December 31, 1996.
EMPLOYEE BENEFIT PLANS
The Company has a noncontributory defined benefit pension plan (the
"Plan") covering substantially all of its employees. The following table sets
forth the estimated annual benefits payable upon retirement under the Plan based
on retirement at age 65 and 1996 covered compensation of $25,920:
<TABLE>
<CAPTION>
YEARS OF SERVICE
REMUNERATION ----------------------------------------------------------------------------------
(I.E. FINAL EARNINGS) 15 20 25 30 35
- -------------------- -------------- -------------- --------------- -------------- -------
<C> <C> <C> <C> <C> <C>
$125,000 ................................. $24,595 $32,794 $40,992 $49,191 $57,389
$150,000 and above ....................... 29,945 39,794 49,742 59,691 69,639
</TABLE>
For each of the individuals listed above, the Plan covers total
compensation as listed in the Summary Compensation Table, but limited to
$150,000 as required by the Employee Retirement Income Security Act of 1974.
Messrs. Bennett, Loughlin and Post have credited service as of December 31, 1996
of 7.3 years, and Messrs. Fontana and York have credited service as of December
31, 1996 of .8 years. Benefits under the Plan are based on (i) final earnings
(the highest five consecutive years' earnings out of the last ten years before
retirement date or average earnings received in the last five full years before
early retirement or termination of employment), (ii) covered compensation (the
average of the Social Security Taxable Wage Bases for the 35-year period ending
at Social Security Retirement Age) and (iii) years of credited service. Benefits
under the Plan are determined by a formula which multiplies (x) the sum of 1% of
final earnings up to covered compensation and 1.4% of final earnings in excess
of covered compensation by (y) the years of credited service up to 35 years.
There is no reduction for early retirement at age 62. The Company's policy is to
fund all current and prior service costs. Plan assets are invested in various
segregated accounts with an insurance company. Benefits under the Plan are not
subject to any offset.
The Company also sponsors a defined contribution 401(k) plan that
covers substantially all employees. The Company matches 50 percent of employee
contributions limited to a maximum equal to three percent of eligible employee
compensation. Company contributions to the plan were approximately $588,000,
$633,000 and $832,000 in 1994, 1995 and 1996, respectively.
-8-
<PAGE>
EMPLOYMENT ARRANGEMENTS
The Company has entered into employment agreements with Thomas E.
Bennett, Brian Fontana, Kevin L. Loughlin, Peter A. Post, and James O. York. Mr.
Bennett's agreement, effective as of December 2, 1994, provides that he shall
serve as President and Chief Executive Officer. Upon the expiration of the
initial seven year term, Mr. Bennett's agreement shall automatically be extended
for an additional term of one year, unless either party has notified the other
party of its election to terminate the agreement, not later than 90 days prior
to the scheduled expiration date. During the term of employment, the agreement
provides for an annual base salary of $225,000 subject to annual review by the
Board provided that the level of base salary shall not be subject to reduction.
Mr. Bennett's current annual base salary is $260,000. Mr. Bennett is entitled to
participate in the management cash incentive bonus program, and in all fringe
benefit programs maintained by the Company. Mr. Bennett's employment agreement
also provides that in the event that the Company terminates his employment or
elects to not renew the agreement other than for cause, Mr. Bennett will receive
monthly one-twelfth of his annual base salary at the time of such termination
for the period ending on the earlier of the expiration date of the employment
agreement or the first anniversary of the date of termination. If Mr. Bennett's
employment is terminated by death, the Company shall pay to Mr. Bennett's estate
or legal representative a lump sum payment equal to 25% of Mr. Bennett's annual
base salary in effect at such time. If Mr. Bennett's employment is terminated
based upon a permanent disability, Prime shall pay to Mr. Bennett a lump sum of
50% of Mr. Bennett's annual base salary in effect at such time.
Mr. Fontana, Mr. Loughlin, Mr. Post and Mr. York's employment
agreements are substantially identical to Mr. Bennett's except that the annual
base salaries differ, and the initial terms expire on December 2, 1999 (Mr.
Bennett's expires on December 2, 2001). The initial annual base salaries for
Messrs. Fontana, Loughlin, Post and York were $160,000, $140,000, $125,000 and
$125,000, respectively. The current annual base salaries for Messrs. Fontana,
Loughlin, Post and York are $160,000, $150,000, $160,000, and $140,000,
respectively.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is designed to help the
Company attract, motivate and retain the key executives of the Company.
Compensation for the Company's executive officers, including Mr. Bennett, the
Company's Chairman, President and Chief Executive Officer, has been determined
since December 2, 1994, according to the terms and conditions of each officer's
employment agreement with the Company. Compensation under the employment
agreements consists of a base salary, and a bonus consisting of a percentage of
base salary, within a range based on Company and individual performance. The
range increases based on the spread between actual and targeted earnings. For
1996, at least 90% of the earnings target had to be met for any bonus to be
paid. The earnings target for 1996, which was exceeded by 16.5%, is set forth in
each executive officer's employment agreement. The actual amount paid within the
range for 1996 was determined by the Board of Directors based on such officer's
performance during the year. With the exception of Mr. Bennett, who has a higher
potential bonus, the potential bonus ranges for the Named Executive Officers are
identical.
The Board of Directors does not use a specific formula for weighing
individual performance. Instead, individuals are assessed based on the extent to
which the individual contributed to the Company's business success in his or her
area of responsibility.
In addition to base salary and bonus, the Company also incentivizes
its Named Executive Officers through grants of options to purchase Common Stock
under its Management Incentive Stock Plan and its 1996 Management Incentive
Stock Plan (the "Stock Plans"). The material terms of recent option grants for
each Named Executive Officer are set forth in the option grant table above. The
amount of options granted to each officer vary each year and are based upon what
the Compensation Committee and the Board of Directors believes is appropriate
taking into account the executive's total compensation package, the amount of
stock options previously awarded, and the number of options issued to employees
of the Company as a whole, as well as the Compensation Committee's and the Board
of Directors' desire to encourage equity ownership by the Company's executives
to provide an appropriate link to the interests of the shareholders.
-9-
<PAGE>
In connection with the Company's initial public offering, the Board of
Directors engaged a consultant to review the compensation packages of the
executive officers, and to make recommendations for the compensation program
going forward. As a result of such consultations, which included a comparison of
the compensation of the Company's executive officers with the compensation
generally received in the Company's industry, the Board of Directors and each
executive officer amended the employment arrangements to revise the bonus
program to a level the Board of Directors feels is more comparable to that of
public companies of comparable size. Consequently, target bonuses for 1997 and
following years are expected to be less than in 1996 and 1995. The new bonus
ranges for the executive officers are identical, except for Mr. Bennett, who has
a higher potential bonus. Payment of bonuses for 1997 and following years is
contingent on attaining at least 90% of net income and earnings targets set by
the Board of Directors each year, with bonuses being paid in a range as a
percentage of base salary, depending on Company and individual performance. As
with the prior arrangement, the Board does not anticipate using a specific
formula for weighing individual performance, but rather will assess each
executive officer based on the extent to which such officer contributed to the
Company in his or her area of responsibility.
The Board of Directors believes that the compensation program for the
Named Executive Officers of the Company serves the best interests of the
Company's shareholders.
The Board of Directors
Thomas E. Bennett
Jon P. Hedley
Robert M. Howe
Christopher J. O'Brien
Charles J. Philippin
Christopher J. Stadler
-10-
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the percentage change in the
cumulative total shareholder return on the Company's Common Stock against the
cumulative total return of the Standard and Poor's 500 Stock Index and the
Russell 2000 Index for the period of two months commencing November 1, 1996, and
ending on December 31, 1996. The Company included the Russell 2000 Index because
it contains publicly traded issuers with total market capitalization of between
approximately $160,000,000 and $1,000,000,000, which is similar to the Company's
total market capitalization. The Company does not believe it can reasonably
identify a peer group, given the small number of publicly-traded peer issuers.
The Company has not paid any dividends during the measurement period, and
consequently the cumulative total shareholders' return does not include
reinvestment of dividends. The graph assumes that $100 was invested on November
1, 1996 (the date that the Company's stock was first traded publicly on the New
York Stock Exchange).
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
Prime Service, S&P 500 Russell 2000
Inc. Index Index
11/1/96 .......... $ 100.00 $ 100.00 $ 100.00
11/29/96 ......... $ 112.24 $ 107.56 $ 104.22
12/31/96 ......... $ 112.24 $ 105.20 $ 106.72
-11-
<PAGE>
SECURITY OWNERSHIP OF OFFICERS, DIRECTORS AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding
beneficial ownership of the Common Stock as of April 4, 1997, by (i) each person
who is known by the Company to own beneficially more than 5% of the outstanding
shares of the Common Stock, (ii) each director and executive officer named in
the Summary Compensation Table, and (iii) all executive officers and directors
as a group.
NUMBER
NAME OF BENEFICIAL OWNER OF SHARES PERCENT
Investcorp (1) 7,463,132 26.7 %
SIPCO Limited (2) 7,463,132 26.7 %
Equipment Investments 1,756,887 6.3
Limited (3)
Thomas E. Bennett (4) 86,592 *
Brian Fontana (4) 35,101 *
Kevin L. Loughlin (4) 29,714 *
Peter A. Post (4) 25,575 *
James O. York (4) 16,770 *
Jon P. Hedley 38,107 *
Christopher J. O'Brien 22,222 *
Charles J. Philippin 39,958 *
Christopher J. Stadler 13,500 *
Robert M. Howe 3,170 *
All directors and executive 327,217 1.2
officers as a group (12
people) (4)
- -----------
*Less than 1%.
(1) Beneficial ownership is as of December 31, 1996, based on a Schedule 13G
filed with the Company. Investcorp does not own any shares of the Common Stock.
The number of shares shown as owned by Investcorp includes all of the shares
owned by Arlington Limited, Ballet Limited, Chase Nominees (Guernsey) Limited,
Denary Limited, Equipment Rental Limited, Equity PEA Limited, Equity PEB
Limited, Equity PEC Limited, Equity PED Limited, Freeport Limited, Gleam
Limited, Highlands Limited, Investcorp Investment Equity Limited, LaPorte
Limited, Noble Limited, Outrigger Limited, Plano Limited, Quill Limited, Radial
Limited, Shoreline Limited and Zinnia Limited. Other than Equipment Rental
Limited and Investcorp Investment Equity Limited, which are indirect wholly
owned subsidiaries of Investcorp, Investcorp owns no stock in such entities.
Investcorp may be deemed to share beneficial ownership of the shares of Common
Stock held by such entities because such entities or their shareholders or
principals have entered into revocable management agreements with a wholly owned
subsidiary of Investcorp pursuant to which each such entity has granted such
subsidiary the authority to direct the voting and disposition of the stock owned
by such entity for so long as such agreement is in effect. Investcorp is a
Luxembourg corporation, with its registered address at 37 rue Notre-Dame,
Luxembourg.
(2) Beneficial ownership is as of December 31, 1996, based on a Schedule 13G
filed with the Company. SIPCO Limited ("SIPCO") does not directly own any Common
Stock. The number of shares shown as owned by SIPCO consists of the shares
Investcorp is deemed to beneficially own. SIPCO may be deemed to control
Investcorp through its ownership of a majority of the stock of a company which
indirectly owns a majority of Investcorp's outstanding stock. SIPCO is a Cayman
Islands corporation with its address at P. O. Box 1111, West Wind Building,
George Town, Grand Cayman, British West Indies.
(3) Beneficial ownership is as of December 31, 1996, based on a Schedule 13G
filed with the Company. Equipment Investments Limited is a Cayman Islands
corporation with its address at P. O. Box 1111, West Wind Building, Georgetown,
Grand Cayman, British West Indies.
-12-
<PAGE>
(4) Includes for each individual the following shares of Common Stock,
purchasable within 60 days of April 4, 1997, upon exercise of Stock Options held
by such individual, and for the directors and executive officers as a group
includes the aggregate of such shares: Thomas E. Bennett (23,340 Shares), Brian
Fontana (5,183 Shares), Kevin L. Loughlin (7,775 Shares), Peter A. Post (6,744
Shares), and James O. York (2,591 Shares).
CERTAIN TRANSACTIONS
In connection with the 1994 Acquisition, Prime paid Investcorp
International, Inc. ("III") fees of $2.7 million for arranging Prime's credit
facility. Prime also entered into an agreement for management advisory,
strategic planning and consulting services (the "Management Agreement") with III
pursuant to which Prime agreed to pay III $1.5 million per year for a five year
term. Prime prepaid III $4.5 million for the first three years of the term and
agreed to make quarterly payments during the fourth and fifth years. In
connection with the 1994 Acquisition, Prime also entered into an agreement with
Investcorp Bank E.C. ("EC") for a term of five years pursuant to which Prime
paid EC approximately $7.6 million in exchange for EC's assistance in arranging
financing for the 1994 Acquisition and for EC's covenant not to arrange or
facilitate the acquisition of a competitor of Prime without Prime's consent.
These two agreements were terminated in October 1996 in connection with the
Company's initial public offering.
In connection with the Company's purchase of the stock of Vibroplant
U.S., Inc. (which did business as American Hi-Lift), Equipment Rental Limited,
Arlington Limited, Freeport Limited, LaPorte Limited and Plano Limited made a
capital infusion of $10.0 million into the Company which, in turn, paid $1.0
million to III on February 26, 1996 for financial advisory services related to
the purchase of American Hi-Lift. This capital contribution, plus borrowing from
Prime's credit facility, provided funds for the completion of the American
Hi-Lift purchase.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission ("SEC") and the New York Stock Exchange initial reports
of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company. Officers, directors and greater than
ten-percent shareholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file.
The Company became subject to Section 16(a) on October 31, 1996, the
effective date of the Company's Registration Statement on Form S-1 for its
initial public offering. Initial statements of ownership on Form 3 were filed
for the following persons on November 12, 1996: Thomas E. Bennett, Brian
Fontana, Jon P. Hedley, Robert M. Howe, Investcorp, S.A., John D. Latimer, Kevin
L. Loughlin, Christopher J. O'Brien, Charles J. Philippin, Peter A. Post, Sipco,
Ltd., Christopher J. Stadler, and James O. York. To the Company's knowledge,
based solely on review of the copies of such reports furnished to the Company
and written reports than no other reports were required, except as set forth
herein all Section 16(a) filing requirements applicable to the Company's
officers, directors, and greater than ten-percent beneficial owners were
complied with during the year ended December 31, 1996.
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Coopers & Lybrand, L.L.P. has been appointed by the Board of Directors
as independent auditors of the Company and its subsidiaries for the fiscal year
ending December 31, 1997. This appointment is being presented to the
shareholders for ratification. Coopers & Lybrand, L.L.P. has served the Company
as independent auditors since December 1994. Although the Company is not
required to obtain shareholder ratification of the appointment of the
independent auditors for the Company for the fiscal year ended December 31,
1997, the Company has elected to do so. The affirmative vote of holders of a
majority of the shares of Common Stock represented in person or by proxy at the
meeting is required for ratification of the appointment of the independent
auditors of the Company.
-13-
<PAGE>
Representatives of Coopers & Lybrand, L.L.P. will be present at the
Annual Meeting. While they do not plan to make a statement at the meeting, such
representatives will be available to respond to appropriate questions from
shareholders and will be free to make a statement if they so desire.
In the event that the shareholders do not ratify the appointment of
Coopers & Lybrand, L.L.P. as the independent auditors of the Company, the Board
of Directors will consider the retention of other independent auditors.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED COOPERS
& LYBRAND, L.L.P. AS THE INDEPENDENT AUDITORS FOR THE COMPANY FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1997 AND RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF COOPERS & LYBRAND, L.L.P. AS INDEPENDENT AUDITORS FOR THE COMPANY
FOR SUCH FISCAL YEAR.
SHAREHOLDERS' PROPOSALS FOR 1998 ANNUAL MEETING
Proposals of shareholders of the Company which are intended to be
included in the Company's Proxy Statement and proxy relating to the 1998 Annual
Meeting of the Company must be received at the Company's principal executive
offices no later than December 16, 1997. Such proposals must be in conformity
with all applicable legal provisions, including Rule 14a-8 of the General Rules
and Regulations under the Securities Exchange Act of 1934.
OTHER BUSINESS
The Board of Directors of the Company does not know of any other
matters which are to be presented for action at the meeting. However, if any
other matters properly come before the meeting, it is intended that the enclosed
proxy will be voted in accordance with the recommendation of the Board of
Directors.
By Order of the Board of Directors,
/s/KEVIN L. LOUGHLIN
Kevin L. Loughlin
Director of Finance,
Treasurer and Secretary
Houston, Texas
April 18, 1997
-14-
<PAGE>
PROXY CARD PROXY CARD
PRIME SERVICE, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF THE SHAREHOLDERS TO BE HELD ON MAY 16, 1997
The undersigned hereby (i) acknowledges receipt of the Notice dated
April 18, 1997 of Annual Meeting (the "Annual Meeting") of Shareholders of Prime
Service, Inc., a Delaware corporation (the "Company"), to be held on Friday, May
16, 1997, at 10:00 a.m. local time, at the Houston Marriott Westside, 13210 Katy
Freeway, Houston, Texas 77079, and the Proxy Statement in connection therewith;
and (ii) appoints Brian Fontana and Kevin L. Loughlin, or in the event of their
inability or unwillingness to serve, such other individuals as the Board of
Directors of the Company may designate, as Proxyholders, each with full power of
substitution and resubstitution, and hereby authorizes any Proxyholder to
represent and vote, as designated on the reverse side, all of the shares of
Common Stock, par value $0.01 per share, of the Company, that the undersigned
held on April 4, 1997, at the Annual Meeting, which includes any continuation of
such meeting pursuant to any adjournment of it to another time.
A PROXYHOLDER WILL VOTE THE UNDERSIGNED'S SHARES OF COMMON STOCK IN
THE MANNER DIRECTED ON THIS PROXY CARD. IF THE UNDERSIGNED DOES NOT GIVE
DIRECTIONS ON THIS PROXY CARD WITH RESPECT TO PROPOSAL 1 AND PROPOSAL 2, A
PROXYHOLDER WILL VOTE SUCH SHARES OF COMMON STOCK FOR PROPOSAL 1 AND PROPOSAL 2.
(PLEASE SIGN AND DATE ON REVERSE SIDE)
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS:
Please mark
your votes
as indicated
in this
example [X]
1. PROPOSAL TO ELECT THE FOLLOWING DIRECTORS:
FOR all WITHHOLD TO WITHHOLD AUTHORITY TO VOTE FOR A
nominees AUTHORITY PARTICULAR DIRECTOR, DRAW A LINE THROUGH
listed to to vote SUCH DIRECTOR'S NAME:
the right for all
(except as nominees Thomas E. Bennett; Jon P. Hedley;
marked to listed to Robert M. Howe; Charles J. Philippin;
the contrary) the right Christopher J. O'Brien; Christopher J. Stadler
[ ] [ ]
2. PROPOSAL TO RATIFY THE APPOINTMENT OF
COOPERS & LYBRAND, L.L.P. AS THE
COMPANY'S INDEPENDENT AUDITORS:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PLEASE CHECK THIS BOX IF YOU ARE
PLANNING ON ATTENDING THE ANNUAL MEETING [ ]
3. Any Proxyholder is authorized to vote
upon such other matters (including
procedural matters and matters relating
to the conduct of the meeting) as may
properly come before the Annual Meeting
in accordance with such Proxyholder's
best judgment.
Please sign and date below. When shares
of Common Stock are held by joint
tenants, both joint tenants should sign.
When signing as administrator,
attorney-in-fact, executor, fiduciary,
guardian, officer, trustee, or other
person acting in a representative
capacity, please give your full title.
If a corporation, an authorized officer
should sign in the name of the
corporation. If a partnership, a general
partner should sign in the name of the
partnership.
________________________________________
Signature
________________________________________
Signature if held jointly
Dated:____________________________, 1997
PLEASE MARK, SIGN, DATE, AND RETURN THE
PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE. PLEASE DO NOT FOLD THIS PROXY
CARD.
